SUPREME COURT UPHOLDS PROSPECTIVE IMPLEMENTATION OF RBI’S 2020 PENSION SCHEME
The Judgment in the Case of “The Reserve Bank of India v. M.T. Mani and Another” CIVIL APPEAL NO. 13962 OF 2024was delivered by a Division Bench of the Supreme Court of India, comprising Hon’ble Justice Abhay S. Oka and Justice Augustine George Masih on 23rd May 2025.
Facts of the Case:
In this Case, The Reserve Bank of India’s (RBI) challenged Kerala High Court decision that granted retrospective pension arrears to a retired employee, M.T. Mani. Prior to 1990, RBI employees were covered under the Contributory Provident Fund (CPF) and the Payment of Gratuity Act, 1972. On October 29, 1990, the RBI introduced the Pension Regulations, 1990, giving existing employees the option to switch to the new Pension Scheme or continue under the CPF. Employees in service as of January 1, 1986, and retired before November 1, 1990, were allowed to opt into the pension scheme if they refunded the CPF contribution with interest, but pension would only accrue from November 1, 1990, without any arrears. Subsequent administrative circulars in 1992 and 1995 provided further opportunities for existing employees to switch to the pension scheme under revised terms. In 2020, after receiving approval from the Government of India, RBI issued another circular allowing a final opportunity for CPF optees who were in service between November 1, 1990, and November 15, 2000, to opt into the Pension Scheme. This option, however, made pension payable only from July 1, 2020, explicitly excluding arrears for the earlier period.
Respondent No. 1, M.T. Mani, joined the RBI in 1981 and retired as a Manager on November 30, 2014, under the CPF scheme. Despite having four opportunities between 1990 and 2000 to switch to the Pension Scheme, he chose to remain under CPF and accepted all dues upon retirement. In 2020, before the latest option was announced, he filed a Writ Petition seeking a direction to allow him to opt for the Pension Scheme and receive pension from the date of retirement with arrears and interest. Following the issuance of the 2020 circular, he exercised the option and began receiving pension from July 1, 2020. However, he amended his petition to challenge the denial of arrears from November 30, 2014. The Single Judge of the High Court dismissed the petition, holding that he had voluntarily accepted the scheme’s conditions. On appeal, the Division Bench ruled in his favor, calling the denial of arrears arbitrary and discriminatory, and directed RBI to pay arrears with 6% interest. RBI then challenged this decision before the Supreme Court.
Issues:
The case raised two key legal issues: (i) Whether fixing July 1, 2020, as the cut-off date for pension benefits under the 2020 scheme, and denying arrears for the period before that date, was arbitrary or discriminatory; and (ii) Whether an employee who has voluntarily accepted the terms of a pension scheme can later challenge a specific condition, such as the denial of retrospective pension benefits.
Contentions by the Appellant (RBI):
The RBI argued that the 2020 Pension Scheme was a comprehensive policy package approved by the Government of India after three prior proposals were rejected due to financial constraints. The cut-off date of July 1, 2020, was clearly specified, and no arrears were to be paid for the earlier period. RBI submitted that allowing arrears now would impose an unanticipated financial burden of over ₹900 crores, making the scheme financially unviable. The nominal 3% interest on refunded CPF contributions was not intended to compensate for full retrospective benefits but merely to adjust for administrative and inflationary factors. Further, RBI contended that Respondent No. 1 had voluntarily accepted all conditions of the scheme and cannot now selectively challenge one aspect. Each previous circular (1990, 1992, 1995, and 2000) was a separate and distinct scheme with its own terms, and the 2020 circular was similarly self-contained. They emphasized that policy decisions involving economic factors and cut-off dates are within the employer’s prerogative and should not be interfered with by courts unless proven to be arbitrary or irrational.
Contentions by the Respondent (M.T. Mani):
The Respondent supported the Division Bench’s order and argued that RBI’s denial of arrears was arbitrary and discriminatory. He contended that in past instances where employees switched to the Pension Scheme, they were granted arrears from their retirement date. After refunding the CPF amount with interest, denying him 67 months of pension was unjust and created an unreasonable classification among similarly situated retirees. He also pointed out that the RBI had consistently pursued another pension switch option with the Government, indicating its recognition of employee demands. Moreover, he asserted that the financial burden argument was unconvincing as the scheme was ultimately approved by the Ministry of Finance. The Respondent maintained that the pension regulations did not contain any clause prohibiting arrears, and the denial lacked a reasonable basis in law or equity.
Judgment of the Supreme Court:
The Supreme Court analyzed the facts, relevant policies, and arguments of both sides. It held that the respondent had multiple earlier opportunities to switch to the Pension Scheme but voluntarily chose not to and received all CPF benefits. The Court noted that each circular issued by the RBI created a distinct and standalone scheme with its own eligibility, financial terms, and limitations. The 2020 scheme was introduced after a long gap of two decades and was framed with careful consideration of financial liability, leading the Government of India to approve it only with the clear provision that pension would be paid prospectively from July 1, 2020. The Court emphasized that courts should not interfere with policy decisions unless they are manifestly arbitrary or discriminatory. Citing past judgments, the Court reaffirmed that fixing a cut-off date based on financial and administrative considerations is permissible and does not violate Article 14 of the Constitution.
Accordingly, the Supreme Court held that the RBI’s decision to deny arrears was not arbitrary, as it was a crucial condition of the approved scheme. It observed that permitting the respondent to accept favorable terms while contesting unfavorable ones would amount to selective enforcement of a contract, which is impermissible. The scheme was designed as a complete package, and altering its components would undermine its financial and legal structure. Concluding that the High Court’s Division Bench erred in granting arrears, the Supreme Court set aside its decision and restored the Single Judge’s order, thereby upholding RBI’s implementation of the 2020 pension scheme without retrospective pension benefits.
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