SUPREME COURT CLARIFIES PENSION LIABILITY FOR GRANT-IN-AID INSTITUTIONS

The Judgment in the Case of Nutan Bharti Gram Vidyapith Versus Government of Gujarat and Anr. (2024 INSC 935), Arising out of S.L.P.(C) No. 11733-11734 of 2023 was delivered by a Division Bench of the Supreme Court of India, comprising Hon’ble Justice Rajesh Bindal, and J.K. Maheshwari, on 02 December 2024. This case addresses whether a private college under the Grant-in-Aid scheme or the State Government is responsible for paying retiral benefits to an employee under the Pension Scheme and examines the reasonableness of the college’s actions in dismissing the employee.

FACTS

The Appellant, Nutan Bharti Gram Vidyapith, a private college which was covered under the Grant-in-Aid scheme of the Government of Gujarat, appointed Respondent No. 2 as a lecturer. In 1993, Respondent No. 2 was charged with several allegations of misconduct, including instigating students to strike, improper behavior with colleagues, and violating institutional rules. Following an inquiry, the college dismissed Respondent No. 2 from service on June 6, 1994. Aggrieved by the dismissal, Respondent No. 2 appealed to the Joint Director of Higher Education, the Appellate authority, which rejected the appeal on November 15, 1994, citing lack of maintainability. Subsequently, Respondent No. 2 approached the Gujarat High Court through a Writ Petition. In March 1996, the High Court held the Appeal as maintainable and directed the Appellate Authority to hear it.

The Appellate Authority allowed the Appeal in August 1996, ordering the reinstatement of Respondent No. 2 on the grounds that dismissal was an excessive punishment. The Appellant college challenged this decision in the High Court, which set aside the order and directed a fresh hearing. Following this, in March 2000, the Appellate Authority reaffirmed its earlier decision, directing the reinstatement of Respondent No. 2.The college filed another Writ Petition before the High Court. The Single Judge, noting that Respondent No. 2 had already reached superannuation, upheld the order of reinstatement but reduced back wages to 75%. On Appeal, the Division Bench modified this, denying back wages but holding that Respondent No. 2’s service was continuous, entitling him to all retiral benefits. Dissatisfied with the decision of the High Court, both the Appellant and the State filed Review Petitions. The High Court, in April 2023, modified its earlier decision, placing the sole liability of paying the retiral benefits on the college, contrary to the pension scheme under which the State was liable for such payments. This modification led the Appellant College to file an appeal before the Supreme Court.

ISSUES

1. Whether the liability for payment of retiral benefits to Respondent no. 2 lies with the Appellant institution or the State Government under the Grant-in-Aid pension scheme.
2. Whether the Appellant’s actions over the Respondent’s dismissal was reasonable.

CONTENTIONS BY BOTH PARTIES

APPELLANT CONTENTIONS

The Appellant contended that the Pension Scheme (1990 Resolution) explicitly places the liability for retiral benefits on the State Government, not the Grant-in-Aid institutions and the High Court erred in directing the college to bear the liability for retiral dues. The college’s actions were based on genuine concerns about maintaining institutional discipline and should not attract additional liability.

RESPONDENT (STATE GOVERNMENT’S) CONTENTIONS

The Respondent reasoned that the college’s actions contributed to the delay and further complicated the matter, justifying the imposition of liability for retiral benefits on the Appellant. The ruling in Educational Society, Tumsar v. State of Maharashtra, reinforced the idea that liability could be determined based on the Appellant’s conduct.

RESPONDENT (EMPLOYEE’S) CONTENTIONS

According to the Respondent (Employee), As he was an employee of a Grant-in-Aid institution, the Respondent’s retiral benefits were governed by the Pension Scheme, making the State liable for payment.

HIGH COURT

The High Court directed the Appellant College and the State to jointly pay retiral dues. Upon review, it modified the order, placing sole liability on the college, reasoning that its conduct justified this burden.

SUPREME COURT

The Apex Court reversed the High Court’s modified order and held; the State Government solely liable for retiral benefits under the Pension Scheme. It emphasized the fact that the Scheme explicitly places the responsibility for pension and gratuity on the State and the college’s actions were legitimate attempts to uphold discipline and did not warrant deviation from the Scheme.The Supreme Court also said that the judgment in Educational Society, Tumsar (Supra) didn’t apply because there was no proof that the Appellant overstepped their authority.

CONCLUSION

The Supreme Court clarified the interpretation of the Pension Scheme for Grant-in-Aid institutions and reiterated the State’s responsibility for retiral benefits. The appeals were allowed, and the High Court’s order imposing liability on the appellant was set aside.

Baddam Parichaya Reddy

The Indian Lawyer and Allied Services

Associate