Full Judgment Text
REPORTABLE
2025 INSC 1033
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2025
(Arising out of SLP (C) No. 8223 of 2020)
MUKUND K. PAI & ORS. Appellant (s)
VERSUS
PUNJAB NATIONAL BANK & ORS. Respondent(s)
O R D E R
1) Leave granted.
2) The instant appeal has been preferred by the ex-
servicemen, challenging the impugned order dated
1
07.02.2020 , whereby the writ appeal was allowed and the
2
order dated 11.04.2019, allowing the writ petition was
set-aside.
3) The appellants after their retirement from Indian
Navy, were re-employed with the respondent-bank as Single
Window Operator-A (SWOA) in the Clerical Cadre. The
discord between the parties arose when the respondent-
Bank re-fixed the pay of the appellants at an amount
Signature Not Verified
lower than what they were re-employed at. This was
Digitally signed by
NIDHI AHUJA
Date: 2025.08.23
13:52:10 IST
Reason:
1 passed by Division Bench of Kerala High Court in W.A. No. 2094/2019.
2 passed by Single Bench in WP (C) No. 26946 of 2018.
1
challenged before the Single Bench in the writ petition,
which was allowed, however in appeal, the judgment of the
Single Bench was set-aside by Division Bench. Hence, the
present appeal.
4) The facts in brief are that, post-retirement from the
Indian Navy, the appellants were re-employed with the
respondent-Bank in between 2015-2017. On re-employment,
appellants nos. 1-4 were initially allowed to draw a
basic pay of Rs. 40,710/- and appellant No. 5 was of Rs.
34,160/-. Subsequently, the Indian Banks Association,
vide letter dated 17.05.2018, (hereinafter, “IBA
Clarification” ), issued a clarification regarding ‘pay-
fixation of ex-servicemen’ advising that maximum basic
pay for ex-servicemen be fixed at Rs. 31,540/-. In this
view, the respondent-bank vide HRMD Circular No. 413/2018
dated 22.06.2018 (in short “HRMD circular” ), directed
that the pay-fixation of all ex-servicemen/ex-
commissioned officers be made accordingly. Thereafter,
vide letters dated 24.07.2018 and 25.07.2018, basic pay
of all the appellants was re-fixed at Rs. 31,540/-.
5) Being aggrieved, the appellants challenged the re-
fixation before the Single Bench of the High Court,
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inter-alia asking the following reliefs:
“a. To call for the records leading to Exhibit P 21 to
P 25 .
b. To issue a writ of Certiorari setting aside Exhibit
P 21 to P 25 .
c. To declare that Exhibit P 20 is not applicable to
Petitioners for the purpose of fixing Petitioners pay.
d. To declare that Petitioner No. 1 to 5 are entitled
st
and eligible to the pay initially fixed by the 1
respondent as per Exhibit P 15 , 16 , 17 , 18 and 19
respectively in consonance with the Exhibit P1 and
other relevant statutory provisions.
e. To issue a writ of Mandamus or any other
st
appropriate writ order or direction directing the 1
Respondent to refund the amount deducted from the
salary of Petitioner No.1 to 5 in furtherance of
Exhibit P21 to P25 respectively.
AND
f. Pass such other orders as this Hon’ble Court may
deem fit to grant in the circumstances of the case.”
6) The assertion of the respondent-Bank is that the pay
fixation of appellant nos. 1 to 4 was inadvertently made
th
at the 27 stage of the cadre and that of appellant no. 5
nd
at 22 stage at the time of re-employment. The pay scale
th
beyond 20 stage is applicable only to the employees who
have reached stagnation. In compliance with the HRMD
circular, the pay of the appellant was re-fixed to the
th
20 stage of the cadre with a basic pay of Rs. 31,540/-.
Additionally, the basic pay being drawn by the appellants
at the time of re-employment was exceeding the minimum of
3
the scale of pay of the General Manager in the
respondent-Bank and was in contravention to Clause
3
2.1(iii) of the guidelines dated 17.02.2014 (in short
“2014 guidelines” ) issued by Department of Financial
Services (Welfare). As such, it was contended that the
Bank was justified in their action of re-fixation.
7) Heard the learned counsels for the parties at length
and perused the material placed on record. It is not in
dispute that 2014 guidelines govern the re-fixation of
pay of ex-servicemen on re-employment. As such, learned
Single Judge as well as Division Bench both have
interpreted those guidelines vis-à-vis the applicability
of the IBA Clarification and the HRMD circular in the
present matter.
8) Learned Single Judge, considered the question whether
last scale of ex-servicemen need to be protected in re-
employment and while interpreting the 2014 guidelines,
opined that the IBA Clarification cannot override the
2014 guidelines. Learned Single Judge appraised as under
–
a)
As held by Apex Court’s in ‘State Bank of India
3 Guidelines for fixation of pay of ex-servicemen/ex-ECOs/SSCOs, re-employed in
Public Sector Banks etc. on or after 01.01.2006 – guidelines, regarding.
4
4
and Others Vs. K. P. Subbaiah’ , the intention of
the government was to ensure that the ex-
serviceman at the time of employment in the
public sector bank does not get an amount as pay
lesser than what he was drawing while in defence
service.
b)
The aggregate of re-employed pay and pension on
re-employment of ex-servicemen should not exceed
the minimum of the scale of pay of the General
Manager in the Bank.
c)
The instructions and clarifications issued by an
Association like IBA cannot supersede the
orders/instructions/guidelines issued by the
Government of India, especially when it is by
way of a benevolent welfare measure.
With the above, the learned Single Judge allowed the Writ
Petition and by quashing the order of re-fixation,
directed the Bank to disburse the arrears of withheld
salary within a period of two months.
9) On filing of the Writ Appeal, the Division Bench on
re-appraisal of the 2014 guidelines, set-aside the order
4
(2003) 11 SCC 646
5
passed by the learned Single Judge while noting as thus –
a) That the IBA guidelines cannot override the
instructions of the Government of India. A
combined reading of Sub-clause (ii) & (iii) of
2014 guidelines, makes it clear that during pay
fixation of ex-serviceman re-employed in public
sector banks, his 1ast pay drawn has to be
protected, however such pay fixed, plus the
pension drawn should not exceed the minimum of the
scale of pay of the General Manager.
b) The pay of the appellants was fixed at the maximum
of the scale of the Clerical cadre, which is at
Rs. 31,540/- with D.A. of Rs. 14,382/-; which
totals to Rs. 45,922/-. The Bank was obliged to
pay to the appellants the amount last drawn by
them at the time of their discharge from the
Indian Navy, subject to the limit of the pay on
re-employment added to the pension, which comes to
Rs. 81,438/- [Rs. 45,922 + 35,516], which is above
the minimum of the time scale of pay applicable to
the General Manager, i.e., Rs. 76,520/-.
c) In such circumstances, the order passed by the
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learned Single Judge was set-aside.
10) Learned counsel for the appellants has emphatically
contended in the lines of observations made by learned
Single Judge and urged that in light of provisions
contained in 2014 guidelines, re-fixation of their pay
and the subsequent reduction in their salary is wholly
unjustified, therefore the judgment passed by the
Division Bench is liable to be set-aside. In support of
this contention, reliance has been placed on the judgment
of this Court in K.P. Subbaiah (supra).
11) Per contra, Mr. Dhruv Mehta, learned senior counsel
and Mr. Rajesh Kumar Gautam, learned Advocate on Record
for the respondent-Bank, have submitted that the
interpretation as made by the Division Bench is in
consonance with the spirit of the 2014 guidelines,
rightly accepting the fixation done by the Bank. The
judgment of the learned Single Bench has rightly been
set-aside by the Division Bench, and no interference is
called for by this Court.
12) After considering the submissions of learned counsel
for both the parties, the following questions fall for
our consideration:
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(i) Whether in the facts of the present case, IBA
Clarification and HRMD Circular can override
the 2014 guidelines for the purpose of pay
fixation of ex-servicemen during re-employment
of ex-servicemen?
(ii) Whether re-fixation as done by the respondent-
Bank pursuant to the IBA Clarification is in
consonance with the guidelines dated 17.02.2014
and whether the High Court was justified in
confirming such re-fixation by impugned
judgment?
(iii) If not, in what manner can the fixation of pay
of ex-servicemen may be made on their re-
employment? And what reliefs can be granted to
the appellants?
13) Since the questions as posed hereinabove for
discussion are inter-connected and primarily based on the
contents of 2014 circular, therefore, all the issues are
being appreciated simultaneously.
14) It is to be noted here that as per the findings
recorded by the learned Single Judge in para 15 and
confirmed by Division Bench in para 10 in the impugned
judgment, it is clear that the IBA Clarification and the
8
subsequent HRMD Circular do not override the 2014
guidelines and neither of the parties have disputed the
said fact. During hearing, the parties have conceded to
the applicability of the 2014 guidelines qua the lis and
the finding on this issue does not require any re-look or
re-appreciation in detail except to acknowledge its
conclusion.
15) In the facts, since the interpretation of the 2014
guidelines is in question, therefore, the relevant
portion of the said guidelines is reproduced as thus:
“ xxx xxx xxx
Guidelines for Pay Fixation of ex-Servicemen/Ex-
ECOs/SSCOs Re-employed in Public Sector Banks on or
after 01.01.2006.
Fixation of pay of ex-servicemen in Public Sector
Banks is governed by the guidelines/instructions
issued by the Government of India from time to time.
Accordingly, based on the Government
Guidelines/instructions in force, issued vide DoPT
th
O.M. No. 3/19/2009 – Estt(pay II) dated the 5 April,
2010 and clarification given vide O.M. No. 3/19/2009-
th
Estt, (Pay-II) dated the 8 November, 2010, fitment of
pay of ex-servicemen/ex-ECOs/SSCOs, who have been
appointed in the Bank on or after 01.01.2006 is to be
done as under:
2.1 Ex-Servicemen joining in workmen cadre:
Pay fixation of an ex-serviceman would be through
protection of pay plus DA drawn by him at the time
of released from, Armed Forces. As per the
instructions issued by the Ministry of Defence vide
their letter No.1/69/2008/D(Pay/Service) dated the
th
24 July, 2009 and advised by DoPT vide OM No.
9
th
3/19/2009 – Estt. (Pay II) dated the 8 November,
2010, pre-retirement pay has been defined as under:
-
(i)
In respect of re-employment taking place on or
after 1.1.2006, pre-retirement pay for those
who retired after 1.1.2006, means the pay in
the pay band plus grade pay but inclusive of
non-practicing Allowance (NPA) if any, last
drawn before retirement.
(ii) In case of officer who retired before 1.1.2006
and also those who retired after 1.1.2006 in
the pre-revised pay scales without opting for
the revised pay scales promulgated on or after
1.1.2006 the pay will be basic pay including
stagnation increment and Rank Pay plus
Dearness Pay and Dearness Allowance drawn at
the time of retirement. As such, the figure
of pay plus D.A. admissible in the Bank will
be fixed with reference to this protection
i.e. pay as mentioned above plus DA and
relevant stage of the basic pay in the re-
employed scale will be determined after
deducting DA admissible in the Bank from the
figure protected. For the purpose of fixation
of pay on re-employment, the pay would mean
the basic pay plus the special
allowance/special pay as the case may be,
attached to the re-employed post (where
applicable). As the MSP has not been included
in pre-retirement pay as per the definition
given by the Ministry of Defence vide letter
No.1/69/2008/D (Pay/Service) dated 24.07.2009,
the protection of the component of MSP in re-
fixation of pay in Bank has been excluded.
Moreover, the ex-servicemen on re-fixation of
pay in Bank has been excluded. Moreover, the
ex-servicemen on re-employment in the banks
are allowed to draw entire pension i.e.,
entire pension is ignored and not reduced from
the re-fixed pay. As such, they will get the
benefit of the component of Military Service
Pay (MSP), if any, in their pension from the
Government.
(iii)
In addition to the pay so fixed, as aforesaid,
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pension and other retirement benefits may be
allowed to be drawn. This will, however be
subject to limitation that the aggregate of
re-employed pay and pension on re-employment
of ex-servicemen would not exceed the minimum
of the scale of pay of the General Manager in
the Bank as per Ministry of Finance letter
No.F4/1/98-SCT(B) dated 02.09.1998.
xxx xxx xxx”
16) On perusal of aforementioned guidelines, it is clear
that on re-employment prior to or after 01.01.2006, the
ex-servicemen in Public Sector Banks are governed by the
instructions issued by the Government of India from time
to time. By way of Government guidelines/instructions
issued vide DOPT O.M. No.3/19/2009-Estt. (Pay II) dated
05.04.2010 and its clarification O.M. dated 08.11.2010,
fitment of pay of ex-servicemen/ex-ECOs/SSCOs who have
been appointed in the Bank prior to or after 01.01.2006
ought to be done as per 2014 guidelines. As per Clause
2.1, it is clear that an ex-serviceman would have
protection of pay plus DA drawn at the time of release of
from the Armed Forces.
17) In the 2014 guidelines, pre-retirement pay has also
been defined. However, the present case relates to clause
2.1(ii), whereby officers who retire either before or
after 01.01.2006, their pay fixation ought to be made as
11
specified. The Government has clarified that the pay plus
DA admissible in Bank will be fixed in reference to the
protection of pay plus DA as mentioned, and relevant
stage of the basic pay in the re-employed scale will be
determined after deducting DA admissible in the Bank from
the figure protected.
18) It has been further clarified that for the purpose of
fixation of pay on re-employment, the pay would mean
basic pay plus special allowance/special pay as the case
may be, attached to the re-employed post. On re-
employment in the Bank, the ex-servicemen are also
allowed to draw the entire pension. They are also
entitled to get the benefit of component of Military
Service Pay (MSP), if any, in their pension from the
Government.
19) In the backdrop of the above and looking to the issue
at hand, Clause 2.1(iii) also assumes relevance, whereby
in case of ex-servicemen, the pay as directed while
fixing on re-employment and the pension allowed to them
would not exceed the minimum of the pay scale of the
General Manager in the Bank in terms of the guidelines
issued by the Ministry of Finance vide letter No.F4/1/98-
12
SCT(B) dated 02.09.1998. In view of the foregoing, the
three essentials can be broadly carved out for re-
fixation of the pay of an ex-serviceman on re-employment
in the public sector bank;
(i) They would be entitled to protection of pay plus
DA drawn by them at the time of release from
Armed Forces; and would further be entitled for
entire pension and benefit of MSP, if any, in
their pension from the Government on re-
employment;
(ii) During fixation of pay in re-employment, the pay
would mean Basic Pay plus Special
Allowance/Special Pay, as the case may be, to
the re-employed post;
(iii) While fixing the pay of ex-servicemen, the pay
protected plus pension would not exceed the
minimum of the scale of pay of the General
Manager in the Bank in terms of the guidelines
issued by the Ministry of Finance.
As such, the fixation of pay of the appellants ought to
be made applying the abovesaid three broad guidelines.
20) In the case at hand, the justification of re-fixation
made by the Bank is required to be appreciated in the
13
light of three essentials as summed up above. As per
refixation letters dated 24.07.2018 and 25.07.2018, it is
clear that the Bank has referred to pay fixation made on
the date of re-employment, and later referring the IBA
clarification and HRMD circular, reduced the pay of
appellant nos. 1 to 4 from Rs. 40,710/- to Rs. 31,540/-
and of appellant no. 5 from Rs. 34,160/- to Rs. 31,540/-
respectively, citing that their pay deserves to be
th
protected only to the extent of 20 stage. Since the
th
appellants’ pay were fixed over and above the 20 stage
th
of their cadre in re-employment at 27 stage (appellant
nd
nos. 1 to 4) and 22 stage (appellant no. 5), therefore,
on the pretext of re-fixation, applying the guideline
which were not applicable, the re-fixation has been
directed.
21) Learned Single Judge while appreciating the
applicability of the IBA clarification and the HRMD
circular has recorded the finding that 2014 guidelines
have overriding effect and the Division Bench has
affirmed that finding. The bank has not assailed that
finding taking recourse as permissible. In addition, it
is relevant to note that 2014 guidelines were issued by
14
Department of Financial Services (Welfare), Government of
India. While discussing the issue in para 14 above, it is
conceded on behalf of the bank that 2014 guidelines would
have an overriding effect qua the lis in hand. Looking to
all these aspects, in our view, refixation done by the
bank ignoring 2014 guidelines in applying IBA
clarification and the HRMD circular deserves to be
quashed.
22) The learned counsel for the appellants placed
reliance on the judgment of this Court in the case of
K.P. Subbaiah (supra), wherein the distinction of ‘pay’
and ‘pay scale’ and the distinction of ‘pay fixation’ and
‘fixation of pay scale’ have been elaborated to indicate
the general principles and factors to be taken into
consideration. In our view, in the facts of the case,
wherein re-fixation was in blatant violation of the
applicable 2014 guidelines while relying upon the IBA
clarification and HRMD circular, therefore, the reliance
on the said judgment is of no help to the appellants.
23) Be that as it may, by the order of re-fixation of pay
the appellants’ pay were reduced in the wake of
refixation. The deductions in the pay scale recurring
15
reductions of salary affects the civil consequences to an
ex-serviceman. This is urged that such refixation cannot
be directed without observance of the principle of
natural justice. In support thereto, reliance has been
placed on the judgment of this Court in the case of
5
‘Bhagwan Shukla Vs. Union of India and Others’ , wherein
while dealing with question of reduction of basic pay of
appellant, this Court held thus:
“ 3 . We have heard learned counsel for the parties. That
the petitioner's basic pay had been fixed since 1970
at Rs 190 p.m. is not disputed. There is also no
dispute that the basic pay of the appellant was
reduced to Rs 181 p.m. from Rs 190 p.m. in 1991
retrospectively w.e.f. 18-12-1970. The appellant has
obviously been visited with civil consequences but he
had been granted no opportunity to show cause against
the reduction of his basic pay. He was not even put on
notice before his pay was reduced by the department
and the order came to be made behind his back without
following any procedure known to law. There has, thus,
been a flagrant violation of the principles of natural
justice and the appellant has been made to suffer huge
financial loss without being heard. Fair play in
action warrants that no such order which has the
effect of an employee suffering civil consequences
should be passed without putting the (sic employee)
concerned to notice and giving him a hearing in the
matter. Since, that was not done, the order
(memorandum) dated 25-7-1991, which was impugned
before the Tribunal could not certainly be sustained
and the Central Administrative Tribunal fell in error
in dismissing the petition of the appellant. The order
of the Tribunal deserves to be set aside. We,
accordingly, accept this appeal and set aside the
order of the Central Administrative Tribunal dated 17-
9-1993 as well as the order (memorandum) impugned
5
(1994) 6 SCC 154
16
before the Tribunal dated 25-7-1991 reducing the basic
pay of the appellant from Rs 190 to Rs 181 w.e.f. 18-
12-1970. ”
24) After going through the facts of this case, it is not
in dispute that the order of re-fixation has been passed
without affording an opportunity to the appellants.
Observance of the principles of natural justice in cases
of re-fixation of pay leading to financial loss is sine
qua non . Considering the aforesaid, we have no hesitation
to hold that the Bank while re-fixing the pay had
violated the principles of natural justice and reduced
the pay of appellants without hearing them.
25) In view of the discussion made above, we answer
question no. 1 that the IBA clarification and HRMD
circular are not in consonance with the 2014 guidelines
for pay fixation of ex-servicemen and for purpose of
fixation of pay, the 2014 guidelines shall prevail over
the IBA clarification and HRMD circular. Similarly,
question no. 2 is answered that the re-fixation applying
IBA clarification and HRMD circular by ignoring the 2014
guidelines is not justified. We have already held that
that by virtue of passing order of re-fixation, the
appellants have suffered civil consequences, therefore,
17
without affording an opportunity, re-fixation so done,
was in violation of principle of natural justice hence,
it is set-aside. In view of the above, question no. 3 is
also answered.
26) As per the discussion made, we further make it clear
that the relief prayed by the appellants in the writ
petition in clauses (a) to (c) deserves to be allowed in
their favour. Simultaneously, in view of the reliefs
prayed in clauses (d) and (e), we direct the Bank to
apply the 2014 guidelines and re-fix the pay of the
appellants on the principles broadly culled out and
discussed hereinabove. We further direct that the
recovery and refund, if any, shall stand quashed and the
refund which has been made during the pendency of the
writ petition/writ appeal, or the present appeal also
stands quashed. In view of the above discussion
refixation be made afresh. While fixing the pay, in case,
the pay of the appellants is reduced from initial
fixation, the bank shall observe the principle of natural
justice.
27) Accordingly, in view of the above, the present appeal
stands allowed to the extent indicated above. Parties to
18
bear their own cost. Pending application, if any, shall
stand disposed of.
……………………………………………………………., J.
[ J.K. MAHESHWARI ]
……………………………………………………………., J.
[ VIJAY BISHNOI ]
New Delhi;
th
30 July, 2025.
19