SC OBSERVES PENSION CANNOT BE CURTAILED ARBITRARILY, MUST FOLLOW THE PROCEDURE

INTRODUCTION:

The Hon’ble Supreme Court, on 15.07.2025, delivered a thoughtful and empathetic Judgment. The Bench comprising of Justice P.S Narasimha and Justice Joymalya Bagchi, in the case of Vijay Kumar v. Central Bank of India & Ors (2025 INSC 848) reiterated the principle that pension is not a matter of discretion, but a protected right rooted in the Constitution. The case involved a retired Chief Manager whose pension was unilaterally reduced by the bank after superannuation without hearing him and without consulting the Board of Directors, as the regulations clearly require. The Court’s ruling makes it clear that an employee’s pension, once earned, cannot be tampered.

FACTS OF THE CASE:

While serving as Chief Manager at the Central Bank of India, the Appellant was issued a Memorandum of Charge for irregularities during his tenure as Branch Manager of the Dhanbad branch. The charges involved sanctioning loans in 12 accounts without proper income appraisal, KYC verification, or post-sanction inspections, exposing the bank to financial risk. A Grade V Officer was appointed as Inquiry Authority. Despite the Appellant attaining superannuation(retirement), the inquiry continued under Regulation 20(3)(iii) of the Central Bank of India (Officers’) Service Regulations, 1979. The Officer submitted a report holding the Appellant guilty of misconduct. The disciplinary authority accepted the inquiry findings and imposed the penalty of compulsory retirement under Rule 4(h) of the Discipline and Appeal Regulations, 1976, that was to take effect from the Appellant’s date of superannuation. The Appellant filed an Appeal before the Field General Manager (FGM). While the Appeal was pending, the Regional Manager of Purnea, recommended the minimum pension payable under compulsory retirement is two-thirds. This recommendation was accepted by the FGM. Subsequently, the same FGM, acting as the appellate authority, dismissed the appeal and upheld the penalty.

The Appellant approached the High Court challenging the constitutional validity of Regulation 20(3)(iii), which allows continuation of disciplinary proceedings post-superannuation. However, he later limited his challenge to the issue of reduced pension benefits. It was submitted during the hearing that the bank had not forfeited gratuity but had decided to award only two-thirds of the pension. The High Court directed the release of gratuity but upheld the reduction in pension. Aggrieved by this one-third reduction in pension, the appellant filed an appeal before the Supreme Court.

CONTENTIONS OF THE PARTIES:

The Appellant argued that pension is not a discretionary benefit. It is protected right under Article 300A of the Constitution, which can’t be taken away without proper procedure. He contended that the High Court was wrong in holding that no pension is payable after compulsory retirement unless specifically granted under Regulation 33(1). It was further put forth that, Regulations 33(1) and 33(2) should be read together to mean that in cases of compulsory retirement, an officer is entitled to at least two-thirds of the pension, and any reduction beyond that requires prior consultation with the Board of Directors.

While the Respondents argued that Regulations 33(1) and 33(2) shouldn’t be read together, they contended that under Clause (1), a higher authority than the one who imposed the penalty may grant pension, not being less than two-thirds, without needing Board approval. On the other hand, clause (2) applies when the authority imposing the penalty itself decides to reduce the pension, in which case prior consultation with the Board is mandatory. Since the FGM (a Grade VII Officer) reduced the pension and is senior to the disciplinary authority (a Grade VI Officer), there was no requirement to consult the Board, and therefore, the decision was valid.

ANALYSIS:

The Court observed that Clause (1) of Regulation 33 allows a higher authority to grant between two-thirds and full pension without needing the approval of the Board, while Clause (2) requires Board consultation only when the authority reducing the pension is acting in its original, appellate, or review capacity. Since FGM was both senior to the disciplinary authority and the appellate authority, he was empowered under both clauses to reduce the pension without consulting the Board.

The Court held that the Respondents’ contention that prior consultation with the Board was not required since the FGM acted under Regulation 33(1) as a superior authority was flawed. It observed that Clause (2) allows the Competent Authority to reduce pension not only while imposing punishment but also when acting as an appellate or reviewing authority, where Board consultation is mandatory. Limiting “Competent Authority” to just the disciplinary authority would make the appellate and review powers under Clause (2) meaningless. Therefore, the Court held that if a higher authority is also acting as an appellate or reviewing authority, prior consultation with the Board is essential.

The Court reiterated that that pension is a constitutionally protected property right and can only be curtailed through lawful authority. Therefore, when an authority reduces pension below the full amount under the Pension Regulations, all procedural safeguards, including prior consultation with the Board, must be strictly followed. It further observed that the word “may” in Clause (1) is not discretionary. It merely clarifies that an employee is not entitled to pension if he hasn’t completed the required qualifying service thereby holding that Clauses (1) and (2) of Regulation 33 must be read together. It also further noted that Regulation 33 clearly requires prior consultation with the Board before reducing pension. Since it involves curtailing an employee’s constitutional right to pension, prior consultation with the Board of Directors is absolutely necessary. In this regard the Court place reliance on IAS (SCS) Association v. Union of India.

When the Respondents urged the Court to use its powers under Article 142 to uphold the reduction of pension in the interest of justice, the Court noted that although the Bank claimed the Appellant caused a loss of Rs. 3.26 crores, no evidence supporting the same was considered by the disciplinary or appellate authority. Moreover, the Appellant wasn’t given a hearing before his pension was reduced. Finding no exceptional circumstances to invoke its extraordinary powers, the Court allowed the Appeal, set aside the High Court’s Judgment, and quashed the FGM’s order reducing pension without prior consultation of the Board.

Conclusion:

This Judgment by the Supreme Court is a reminder that pension isn’t a favour granted by the employer. It is a constitutional right, protected under Article 300A. The Court rightly held that if pension is to be reduced, it can’t be done behind closed doors or without following due process. The employee must be heard, and the bank’s highest decision-making body must be consulted beforehand. In a time when trust in administrative fairness is often questioned, this decision is a much-needed reaffirmation of the rule of law.

 

SOUJANYA KULKARNI

INTERN

ICFAI LAW SCHOOL, HYDERABAD

 

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