Life Insurance Corporation Of India vs Manoj.P.G

A.K. Jayasankaran Nambiar, J.

The Life Insurance Corporation of India [LIC] and its Senior Divisional Manager are the appellants before us aggrieved by the common judgment dated 25.8.2022 of a learned Single Judge in W.P. (C).No.32144 of 2017 and connected cases. The brief facts necessary for disposal of these writ appeals are as follows:

The writ petitioners were ex-servicemen who got appointment in the LIC in the cadre of Assistants. Their appointments were through direct recruitment against a quota earmarked for ex-servicemen. After their discharge from the Defence service, they were appointed as Assistants in the LIC on various dates between 2009 and 2010, and at the time of their joining service of LIC, their pay was fixed by reckoning their last drawn defence salary in the manner stipulated under the O.M's issued by the Central Government in the Department of Personnel and Training, and thereafter other allowances such as Dearness Allowance, House Rent Allowance, City Compensatory Allowance etc. were added thereto to arrive at the gross salary payable to them. The writ petitioners were drawing the said salary till 2017.

In 2017, a re-fixation of the pay of the writ petitioners was effected based on instructions issued by the Central Government in regard to fixation of pay of ex-servicemen re-employed in public sector banks and like organisations. While re-fixing the pay of the writ petitioners, the appellants found that, as per the instructions issued by the Central Government, the component of Military Service Pay [MSP] that was paid to the writ petitioners when they were in Defence service was not to be reckoned in the computation of pay at the time of their re-employment with LIC. Assuming that the MSP component had been erroneously reckoned while fixing the pay and gross salary of the writ petitioners at the time of their initial appointment as Assistants, the appellants issued communications to the writ petitioners pointing out that the re-fixation of pay was done as per the Central Government instructions in force, and that certain amounts were liable to be recovered from them towards alleged excess pay drawn by them consequent to the MSP component of their military pay having been reckoned at the time of fixing their pay in the LIC at the time of their initial appointment in 2009/2010. It was the said communication that was impugned by the writ petitioners in the writ petitions referred above.

The learned Single Judge, who considered the issue, found that the re-fixation effected by the appellants in 2017 could not be said to be illegal since it was pursuant to Government instructions issued in this regard. The learned Judge however found that the re-fixation could only have prospective effect from 6.1.2017, the date of the decision taken by the appellants on the directions of the Central Government. The learned Judge however set aside the recovery steps attempted by the appellants from the arrears of pay due to the writ petitioners on account of retrospective operation of the re-fixation, and directed a release of the withheld amounts. The directions of the learned Single Judge read as follows:

“5. Having considered the contentions advanced, I am of the opinion that though the judgment in W.A.No.2094 of 2019 was in respect of re-employed Ex-servicemen in the Punjab National Bank, the principles as well as the circulars which were considered are identical in this case as well. On a writ petition being filed by re-employed ex-servicemen, the learned single Judge had set aside the orders which directed re-fixation of pay. However, after considering the contentions of the parties and other factual aspects of the matter, the Division Bench came to the conclusion that the revision of pay, as carried out by the impugned orders in question was perfectly legal and valid. However, it was held that the orders and circulars could have only prospective effect and that recovery from anterior dates would not be justified.

In the instant cases also, the LIC had passed orders on 6.1.2017 refixing the pay drawn by the petitioners with effect from the date of their entry in service, which is under challenge. The contentions are also identical. I find no reason to depart from the findings of the Division Bench in W.A.No.2094/2019.

In the result, the writ petitions are allowed in part. The impugned orders to the extent they direct refixing of the petitioners' basic pay with retrospective effect from the date of their appointments is set aside. The refixation shall be prospective and can have effect only from the date of the decision taken by the LIC on the directions of the Central Government, that is, 6.1.2017. The amounts recovered from the arrears of pay due to the petitioners on account of the retrospective operation of the refixation shall be duly released to the petitioners. Any refixation which is found necessary consequent to these directions shall be carried out by the LIC, without fail, within a period of three months from the date of receipt of a copy of this judgment and all benefits of this declaration shall also be released to the petitioners within the said time limit. With regard to the contention raised in these writ petitions that the directions of the Government are not binding on them and that there can be no refixation of pay at all, the said contentions are repelled since there is no challenge raised to the directions on any sustainable grounds.”

In the appeals before us, the contention of Sri. S.Easwaran, the learned Standing counsel appearing on behalf of the appellants is essentially that the last pay of all the writ petitioners in the Armed Forces was calculated by including the components like MSP, X-pay, Grade Pay, Dearness Allowance etc. and the LIC had fixed their basic pay taking into account all the ingredients which they were entitled to as per their last pay in the Armed Forces. He contends that it was on this basis that the basic pay of the petitioners was fixed and communicated to them at the time when they joined the service of LIC

in 2009/2010. It is his further contention that since the Central Government had directed that the component of MSP will not form part of the last drawn salary of the ex-servicemen, instructions had to be issued to all public sector undertakings to re-fix the salary of such ex-servicemen who were re-employed. The contention, in other words, is that the writ petitioners were not justified in challenging the re-fixation. As regards the arrears of pay due to the writ petitioners consequent to the revision of pay, it is contended that while the petitioners were entitled for arrears of salary consequent to the pay fixation, the appellants had kept the amount in a suspense account, since the question of recovery consequent to the erroneous fixation of initial pay was pending consideration before the writ court. It is the stand of the appellants that the writ petitioners had drawn excess pay/gross salary from the appellants during the period between 2009/2010 to 2017 when the re-fixation was done, on account of the accidental inclusion of the MSP component while reckoning their pay at the time of entering into the service of the appellants.

Per contra, it is the submission of Sri. C.E. Unnikrishnan, Sri. Manoj Ramaswamy as also Sri. Varghese P. Chacko, the learned counsel appearing for the writ petitioners that, in view of the judgment of the Supreme Court in State of Punjab and others v. Rafiq Masih (White Washer) – [2014 KHC 4818], the re-fixation and recovery attempted by the appellants was wholly incorrect. Although the learned Single Judge had upheld the re-fixation of salary, the release of withheld amounts was directed by the learned Single Judge following the principles laid down in Rafiq Masih (supra).

On a consideration of the rival submissions and on going through the material produced before us, we are of the view that for the reasons that are to follow, these writ appeals must necessarily fail. When the writ appeals came up for hearing before us on 11.1.2023, we had requested the learned counsel for the appellants to produce the relevant Circulars issued by the appellants that formed the basis for the fixation of pay of the writ petitioners at the time of their initial entry into service of the appellants as Assistants in 2009/2010. We had sought for the said documents so as to ascertain whether the component of MSP, which the appellants claimed, had in fact entered into the reckoning of pay of the writ petitioners at the time of their entry into service as Assistants. The learned counsel for the appellants has since produced a copy of the Circular dated 17.11.2012, which reads as follows:

LIFE INSURANCE CORPORATION OF INDIA

CENTRAL OFFICE, MUMBAI

'Yogakshema',

Jeevan Bima Marg,

Mumbai – 400 021.

Department : Personnel/ER/A

Circular No : CO/PER/ER-A/009/2012 Date : 17/11/2012

ALL H.O.D.s OF CENTRAL OFFICE,

ALL ZONAL MANAGERs-IN-CHARGE OF ZONES AND

SR./DIVISIONAL MANAGERs-IN-CHARGE OF THE DIVISIONS.

Re: Fixation of Pay of Ex-servicemen re-employed with LIC of India

This is further to instructions contained in CO circular letter ref:CO/ER/Pen/10-11/L001 dated 19/11/2010 (copy enclosed). It was informed that the fixation of pay shall be governed by instructions contained in CO circular ref:ZD/687/ASP/89 dated 2.6.1989 and 'Pay' in para 3.3(i) of the said circular shall include only 'Pay in Pay Band'. It was also informed that revised instructions will be issued after receipt of further directions from the Government of India.

Now, we are in receipt of the directions from the Department of Financial Services, Ministry of Finance, Government of India clarifying that 'Pay' in 'Last drawn defence salary (X)' is to be taken as 'Pay in the Pay Band' plus 'Grade Pay' in respect of those Ex-servicemen who were released from the defence services on or after 1.1.2006 and re-employed with the Corporation. Therefore, 'Pay in the Pay Band' and 'Grade Pay' shall be considered for the purpose of pay fixation of ex-servicemen who were released from the defence services on or after 1.1.2006. As such, Military Service Pay (MSP) and X Group Pay shall not be considered for the purpose of pay fixation.

Hence, 'X' i.e. last drawn gross salary in the Defence Service at the time of release in para 3.3 of the above circular shall be the aggregate of the following components.

(i) Pay as defined in sub-para 3(ix) of the Dept. of Personnel & Training O.M. No.3/1/85-Estt (P II) dated 31-7-1986 (Pay shall include 'Pay in the Pay Band' plus 'Grade Pay'. However, Pay shall not include Military Service Pay (MSP) and Group Pay);

(ii) Dearness Allowance on “Pay as per Pay Band” and “Grade Pay” but excluding Dearness Allowance on Military Service Pay (MSP) and Group Pay;

(iii) Interim Relief, if any;

(iv) Compensation in lieu of Quarters (C.I.L.Q)/House Rent Allowance;

(v) Ration Allowance

Further, 'Y' i.e. gross salary in L.I.C. in para 3.4 of the above circular shall be the aggregate of the following:

(i) Basic salary in which the Ex-serviceman is re-employed;

(ii) Dearness Allowance;

(iii) House Rent Allowance;

(iv) City Compensatory Allowance.

It may also be noted that the other guidelines for pay fixation of Ex-serviceman contained in CO circular ref:ZD/687/ASP/89 dated 2.6.1989 shall remain unchanged. The above instructions are applicable in respect of Ex-servicemen who were released from the defence services on or after 1.1.2006 and re-employed with the Corporation. Hence, you may review past cases of pay fixation of Ex-servicemen who were released from the defence services on or after 1.1.2006 and the pay, upon their re-employment with the Corporation, was fixed with reference to our earlier instructions contained in CO circular letter ref:CO/ER/Pen/10-11/L001 dated 19/11/2010. These instructions may be brought to the notice of all the offices under your jurisdiction.

Sd/-

Executive Director (Personnel)

Encl: as above

It can be seen from the said Circular, that refers to the earlier Circulars of the LIC of 1989 and 2010, that the MSP and Group Pay had not been considered for the purposes of pay fixation of persons like the writ petitioners. If that be the case, it is evident that the communication issued to the writ petitioners that was impugned in the writ petitions, and which contemplated a recovery of alleged excess amounts drawn by the writ petitioners was on a wrong premise and wholly misconceived. Since the MSP component had never entered into the fixation of pay of the writ petitioners when they entered service under the appellants in 2009/2010, the re-fixation effected in 2017 also did not change the basis of the fixation of pay in relation to the writ petitioners. In other words, while the writ petitioners were entitled to the benefit of re-fixation effected in 2017, there was no occasion whatsoever for seeking a recovery of alleged amounts paid in excess to the writ petitioners for the period between 2009/2010 and 2017. We find therefore that the directions issued by the learned Single Judge, albeit without taking note of the aforesaid aspects, does not require to be interfered with in these appeals.

We might however add that, as it has become clear from the documents produced before us at the time of hearing of the writ appeals that the entire proposal for recovery of alleged excess amounts that was communicated to the writ petitioners was misconceived, and it was the said communication that led the writ petitioners to approach this Court and wage a long drawn legal battle with the appellants between 2017 and 2022, the appellants should be made liable to pay costs to the writ petitioners. As observed in the judgment of the Supreme Court in Uflex Ltd. v. Government of Tamil Nadu & Others – [(2022) 1 SCC 165], the principle of 'costs following cause' is being followed in many countries but with hesitancy in India. Under the 'costs following cause' principle, a losing party in a dispute has to pay the succeeding party the legal cost incurred on the litigation. The court also observed that the common thread in the judicial pronouncements are the reiteration of salutary principles-- costs should ordinarily follow the event, realistic costs ought to be awarded keeping in view of the ever increasing litigation expenses and the costs should serve the purpose of curbing frivolous and vexatious litigation. The said observations apply with added rigour in these cases when we notice that the amounts due to the writ petitioners, consequent to the pay fixation, were withheld by the appellants on the specious plea that there were amounts that were due from the writ petitioners to the appellants towards alleged excess amounts drawn by the former. Under the circumstances, while dismissing the writ appeals by upholding the directions issued by the learned Single Judge with regard to release of the amounts due to the writ petitioners, which are currently kept by the appellants in a suspense account, and directing the appellants to disburse the same to the writ petitioners within one month from the date of receipt of a copy of this judgment, we also deem it appropriate to direct the appellants herein to pay an amount of Rs.7,500/- [Rupees seven thousand five hundred only] by way of costs, to each of the writ petitioners, within the aforesaid period of one month from the date of receipt of a copy of this judgment.

The Writ Appeals are thus dismissed with costs.