In a significant judgment, the Bombay High Court invalidated Clause 7(b) of the MOIL Group Superannuation Cash Accumulation Scheme, deeming it discriminatory and violative of Article 14 of the Indian Constitution. This clause had excluded employees who resigned from service from receiving pension benefits, restricting such benefits solely to those who retired upon reaching the age of superannuation.
Background of the Case
Chandrabhan Atulkar, an employee of Manganese Ore (India) Limited (MOIL Ltd) since 1988, ascended to the position of Executive Director (Technical) in 2019. Although he was scheduled to retire in May 2023, Atulkar tendered his resignation in March 2023 due to health concerns, which was accepted effective April 8, 2023. Subsequently, while he received benefits such as gratuity and leave encashment, his claim for pensionary benefits under MOIL's Superannuation Cash Accumulation Scheme was denied. The denial was based on Clause 7(b) of the scheme, which stipulated that employees who resign are ineligible for pension benefits, a provision that applied exclusively to those retiring upon superannuation. Challenging this clause as arbitrary and discriminatory, Atulkar filed a writ petition, asserting that it violated the constitutional guarantee of equality under Article 14.
Arguments Presented
Atulkar contended that Clause 7(b) created an unjustifiable distinction between employees who resign and those who retire upon reaching the age of superannuation. He argued that this differentiation lacked a rational basis, especially when an employee met all other eligibility criteria for pension benefits. Citing the Supreme Court's decision in Shayara Bano v. Union of India [(2017) 9 SCC 1], he emphasized that any arbitrary classification that leads to discrimination is unconstitutional. Atulkar further noted that the Service Regulations governing MOIL employees did not differentiate between resignation and superannuation concerning pension eligibility. Given that his resignation was due to health reasons and he fulfilled all other conditions under the amended scheme, he asserted that denying him pension benefits was arbitrary and discriminatory.
In defense, MOIL Ltd argued that resignation and superannuation are fundamentally different, warranting distinct treatment under the pension scheme. They referenced the Supreme Court's ruling in Senior Divisional Manager, LIC v. Shree Lal Meena [(2019) 4 SCC 479], where an employee's resignation led to the forfeiture of pension benefits, to justify the scheme's distinction. MOIL maintained that the classification had a reasonable nexus with the policy's objectives and was therefore justified.
Court's Analysis and Judgment
The Division Bench, comprising Justices Avinash G. Gharote and Abhay J. Mantri, examined the validity of Clause 7(b) in light of constitutional principles. The court observed that the MOIL Scheme had been amended in 2018 to remove superannuation and length of service as criteria for pension eligibility, indicating an intent to broaden the scope of beneficiaries. This amendment suggested that the manner of separation from service should not impact pension entitlement, provided other eligibility conditions are met.
The court further noted that the Service Regulations did not distinguish between resignation and superannuation regarding pension benefits. This absence of differentiation in the governing regulations undermined the rationale for such a distinction in the pension scheme. The judges emphasized that any classification that leads to unequal treatment must have a reasonable basis and should not be arbitrary.
Citing the Supreme Court's stance that pension is not a bounty but a right of the employee, the court underscored that denying pension benefits based solely on the nature of exit from service, without a reasonable basis, is arbitrary and discriminatory. The court concluded that Clause 7(b) failed to meet the test of reasonableness and violated the principle of equality enshrined in Article 14.
Implications of the Judgment
This judgment has significant implications for employment and pension policies, particularly in public sector undertakings. By striking down a clause that arbitrarily differentiated between resignation and superannuation, the court has reinforced the principle that employment benefits, especially pensions, should be administered equitably. The ruling serves as a precedent that any classification within employment benefit schemes must have a rational basis and align with constitutional mandates of equality.
For MOIL Ltd and similar organizations, this judgment necessitates a review and possible revision of pension schemes to ensure compliance with constitutional principles. It underscores the need for policies that do not arbitrarily exclude employees from benefits they are otherwise entitled to, based on the nature of their exit from service.
Conclusion
The Bombay High Court's decision to invalidate Clause 7(b) of the MOIL Group Superannuation Cash Accumulation Scheme marks a pivotal step towards ensuring equitable treatment of employees concerning pension benefits. By declaring the distinction between resignation and superannuation as arbitrary and discriminatory, the court has upheld the constitutional guarantee of equality, reinforcing that pension is a right that should not be unjustly withheld.
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