Himachal Pradesh HC Invalidates Open-Ended Pay And Pension Arrears Deferrals, Orders Two Instalments And 6% Interest For Retiree-Petitioners From June 2022

The lead petitioner, a retired Lecturer, sought payment of salary arrears and revised pensionary benefits arising from the Himachal Pradesh Civil Services (Revised Pay) Rules, 2022, which gave revised pay retrospective effect from 1 January 2016.

The Rules provided that arrears would be paid as and when approved by the Government; a subsequent Office Memorandum similarly deferred payment of arrears of revised pension, gratuity, commutation and family pension.

The State released benefits in instalments and prioritised certain groups, including older retirees and Class-IV employees, citing financial constraints.

The petitioner challenged the provisions permitting deferred payment and sought the outstanding benefits with interest.

Article 14 prohibits arbitrary State action and requires any classification to rest on an intelligible differentia rationally connected to its objective; Article 300-A protects property from deprivation except by authority of law.

The Court applied the CCS (Pension) Rules, 1972, including Rules 9, 50, 68, 83 and 85, concerning withholding of pension or gratuity, entitlement to gratuity, interest on delayed gratuity, pension payment and lump-sum payment of gratuity; Rule 39 of the CCS (Leave) Rules, 1972, which provides for lump-sum leave encashment subject to specified exceptions; and Rules 5 and 10 of the CCS (Commutation of Pension) Rules, 1981, concerning commutation and payment of the difference following retrospective enhancement.

The Court relied on Deokinandan Prasad v. State of Bihar and State of Jharkhand v. Jitendra Kumar Srivastava for the protection of pension as property and the principle that executive instructions cannot override statutory rules; All Manipur Pensioners Association v. State of Manipur for the prohibition on unjustified differentiation within a class of pensioners;

and S.K. Dua v. State of Haryana, State of A.P. v. Dinavahi Lakshmi Kameswari and Bihar State Ardh Sarkari Arajpati Karamchari Maha Sangh v. State of Bihar for the availability of reasonable interest as compensation for delayed monetary entitlements.

The State had conferred retrospective pay and retiral-benefit entitlements through the 2022 Rules and Office Memorandum; it could not then make their payment depend indefinitely on unguided executive discretion.

The Court found that the deferment provisions conflicted with statutory rules requiring, among other things, lump-sum gratuity and leave encashment, and could not defeat accrued entitlements protected as property.

It also held that prioritising retirees by age or employment category lacked a sufficient justification to treat members of the same class differently.

Although the State relied on financial constraints, the Court held that those constraints did not justify withholding entitlements already conferred under the applicable rules.

Given the delay and the petitioners’ loss of use of money that had become payable, the Court awarded simple interest at 6% per annum from 1 June 2022.

Rule 13 of the 2022 Revised Pay Rules was read down and declared inoperative to the extent it permitted unguided deferment of arrears; paragraph 10 of the Office Memorandum dated 25 February 2022 was quashed, as was paragraph 8.2 insofar as it authorised phased payment of commuted-pension arrears.

The State and relevant Boards or Corporations were directed to release the applicable arrears of revised pay and retiral benefits in two equal instalments, by 15 December 2026 and 28 February 2027, with simple interest at 6% per annum from 1 June 2022 until payment.

The directions apply mutatis mutandis to the connected cases.

Retirees who had not filed petitions by the date of judgment were held entitled to substantive benefits, but not interest; the specified appeals and miscellaneous applications were dismissed, and the execution petitions were de-tagged for separate listing.