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AMITY BUSINESS SCHOOL

AMITY UNIVERSITY

UTTAR PRADESH

LAW PROJECT

GURMAIL SINGH DAHALDI & OTHERS


Vs.
UNION OF INDIA

Submitted to: Submitted By:

Mrs.Monica Suri Sudhanshu Bala 02


Surbhi Sharma 07
Namita Nijhawan 21
Jyotsna Singh 24
Swati Sharma 48
Khushboo Sethi 49

MBA-HR (2011)
Sec-D
TABLE OF CONTENTS

s.NO. TOPIC pAGE NO.

1 Introduction 3

2 Objectives of the Case 3

3 What is law? 3

4 Indian Contract Act 4

5 Pension 5

6 Types of Pensions 5

7 Facts of the case 8

8 Case 9

The Honorable Court


9 16
Held

10 Student Analysis 17

11 Group Learnings 20

12 Interview with thr HR 21

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INTRODUCTION

In India, pension is on of the emoluments paid to the public servants in some specific
industries. Though it has been abolished for the new joinees but for the old birds still
continue to enjoy this benefit.

Employment itself is a contract between the employer and the employee agreeing upon
specific tasks and duties to be performed by the employee in lieu of lawful consideration
in the form of salary and other perks and benefits. However in the case of public sector
the employer is the union of India ,which from time to time revises the lawful
consideration i.e the salary and other benefits on the basis of the increased rate of
inflation on the recommendation of the pay commission of India, and government forms
various pay scales for a particular grade of its servants.

However whenever the pay scales are revised by the government, the government gives
arrears from the date of the announcement of the revision of the pay scale to the present
date. Union of India usually pays compensation to its employees on the basis of his
grade/rank, and the years of service, thus if an employee joins at a particular designation,
he is paid the remuneration keeping in mind the pay scale as per his designation and the
years of service, every year the salary is increased with the particular amount until the
employee reaches a maximum prescribed in his scale, pension is paid 50% of the last
salary drawn by the employee for the last 10 months of continuous service. The case
discussed here primarily revolves around the dispute regarding the revision of pension as
per the revised pays as recommended by the 5th pay commission.

OBJECTIVES OF THE CASE

1. To understand the process of compensation after the retirement for the public
servants in the form of pension.

2. To understand the formalities and legal issues involved in the revision of the pay
scales on the recommendation of the pay commission.

3. To find out how employment is a contract between the employer and the
employee, and in case of breach what can be the remedies.

WHAT IS LAW?

Law denotes rules and principles either enforced by an authority or self imposed by the
members of a society to control and regulate people’s behavior with a view to securing
justice, peaceful living and social security.

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Mercantile law is that branch of law which comprises law concerning trade, industry and
commerce.

INDIAN CONTRACT ACT, 1872

A contract is an exchange of promises between two or more parties to do or refrain from


doing an act which is enforceable in a court of law. Section 2(h) defines a contract an
agreement enforceable by law.

Contract = Agreement + Enforceability at law

Section2 (e) defines every promise and every set of promise forming consideration for
each other as an agreement.

Agreement= Offer+ Acceptance

Agreement=Social agreement + Legal agreement

Essential Elements of Contract -

• Offer and acceptance – Section 10 provides that all agreements are contracts if
they are made by free consent of parties , competent to contract , for a lawful
consideration , and with a lawful object , and are not expressly declared by law to
be void. To constitute a contract, there must be an agreement between two or
more than two parties. The party making the offer (or proposal) is known as the
offerer or proposer; the party to whom the offer is made is known as the offeree.

When the offeree gives his assent to the offer, then he is known as acceptor.

• Legal relationship – further, there must be an intention on the part of the parties
to create a legal relationship.

• Lawful consideration – any give and take relationship is called consideration.


The term consideration is used in the sense of quid pro que, i.e., something in
return .section 2 (d) defines consideration as: “when at the desire of the promiser,
the promise or any other person has done or abstained from doing, or does or
abstains from doing, or promises to do or to abstain from doing, something, such
act or abstinence or promise is called a consideration for the promise”.

• Competency capacity – any one cannot enter into a contract: he must be


competent to contract according to the law. every person is competent to contract

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if he (I) is of the age of majority , (ii) is of sound mind , and (iii) is not
disqualified from contracting by any law to which he is subject .thus there may be
a flaw in the capacity of parties to the contract . The flaw in capacity may be due
to minority, lunacy, idiocy, drunkenness, drug addiction or status. If a party to a
contract suffers from any of these flaws the contract may not be a valid one.

• Free consent –for a contract to be valid it is not only necessary that the parties
consent but also that they consent freely. Where there is consent but no free
consent the contract is voidable at the option of the party whose consent was not
free. Thus, free consent is one of the essentials of a valid contract.

• Restraint of legal proceedings – every person has a right to have recourse to the
usual legal proceedings. Therefore, s.28 renders void an agreement by which a
party is restricted absolutely from enforcing his legal rights arising under a
contract by the usual legal proceedings in the ordinary tribunals.

• Performance of contracts –performance of contract means the carrying out of


obligations under it. The parties to contract must either perform or offer to
perform their respective promises unless such performance is dispensed with or
excused under the provisions of the Indian contract act, or some law (s.37).

PENSION

In general, a pension is an arrangement to provide people with an income when they are
no longer earning a regular income from employment. It is a tax deferred savings vehicle
that allows for the tax-free accumulation of a fund for later use as a retirement income.

The common use of the term pension is to describe the payments a person receives upon
retirement, usually under pre-determined legal and/or contractual terms. A recipient of a
retirement pension is known as a pensioner or retiree.

Types of pensions:

Employment-based pensions (retirement plans)

A retirement plan is an arrangement to provide people with an income during retirement


when they are no longer earning a steady income from employment. Often retirement
plans require both the employer and employee to contribute money to a fund during their
employment in order to receive defined benefits upon retirement. Funding can be
provided in other ways, such as from labor unions, government agencies, or self-funded
schemes. Pension plans are therefore a form of "deferred compensation".

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Social / state pensions

Many countries have created funds for their citizens and residents to provide income
when they retire (or in some cases become disabled). Typically this requires payments
throughout the citizen's working life in order to qualify for benefits later on.

Disability pensions

Some pension plans will provide for members in the event they suffer a disability. This
may take the form of early entry into a retirement plan for a disabled member below the
normal retirement age.

Current Employees' Pension Scheme (EPS) in India

The EPS, established in 1995, provides for the payment of a member’s pension upon the
member’s superannuation/retirement, disability, and widow/widower pension, and
children's pension upon the member’s death. The EPS program has replaced the erstwhile
Family Pension Scheme (FPS). Employers that are not mandated to be covered may
voluntarily apply for coverage. The new scheme, known, as the Employees’ Pension
Scheme (EPS), is essentially a defined-benefit program providing earnings related
pension on superannuation, disability or death. Thus, EPF members are now eligible for
two benefit streams on superannuation – a lump sum EPF accumulation upon retirement
and a monthly pension from the EPS.

The amount of the pension benefit is based on the employee's average salary during the
final year of employment and the total number of years of employment. Under the EPS,
members must have completed a minimum of ten years of service and must be at least 58
years old. However, if an employee has completed twenty years of service, he/she may
obtain an early pension from age 50. Under this provision, the amount of pension benefit
is reduced by 3 per cent for every year falling short of 58. Exemption from the EPS is
allowed, but in this event, the employer will have to cover the government's contribution.

Conceptual Explanations

Under a Defined-contribution plan, workers build up either explicit or implicit


retirement accounts that fund retirement. The benefit is determined by (1) the level and
timing of contributions, (2) the rate of return on the retirement accounts and (3) the form
in which benefits are realised, including annuitization, programmed withdrawals and
lump-sum distribution. The relationship between contributions and benefits is
transparent, which may improve compliance incentives.

In a Defined-benefit system, benefits are usually determined by multiplying a


replacement rate by a pension base.

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The Replacement rate is typically an accrual factor times the years of service, and the
pension base is a function of a worker's earnings history. Since this type of system often
ignores the time path of contributions in calculating the replacement rate and the pension
base, the tie between benefits and contributions can be quite loose.
In a pay-as-you-go system; pension payments are made using the taxes collected from
the younger taxpaying generation. Their pension payments in turn are made from the
taxes collected subsequently.

In a Funded System, pension payments are invested in a variety of financial assets.


Funding provides an opportunity to capitalise from investment in financial markets,
where the rate of return is likely to be higher than the implicit rate of return to
contributions in a pay-as-you-go pension system. The benefits of funding can be
enhanced by investment diversification. Funded systems can reduce-though arguably not
eliminate-the vulnerability of a pension system to adverse demographic trends and
political pressures.

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CASE: GURMAIL SINGH DAHALDI & OTHERS Vs. UNION OF INDIA

Facts of the case

• The plantiffs are the persons below officers rank of the Indian Air Force,
and all the plantiffs are pre 1.1.1996 retirees.

• Plantiffs state that the 5th central pay commission was constituted to
examine the pay structure of the civil servants including the armed forces
and the recommendations of the commission were accepted by the
Government of India , as stated in the circular issued on 07.06.1999,
relating to the pension benefits of the officers and persons below officers
rank , and such benefits were revised with effect from 1.1.1996.However
there was anomaly in the recommendations of the 5th pay commission for
the persons below the officer’s rank. Thus Government of India formed a
committee of Group of ministers to look into the issue.The Group of
ministers agreed that there was injustice done to the people below the
officers rank, and agreed to pay the pension as per 5th pay commission
regulations,with effect from 1.2.2006.

• The plantiff argue that the recommendations of the group of minsters is


illegal and the date fixed by them is very arbitary, and they should be paid
pension as per the 5th pay commission from the date when the
commissioned officers are receiving the revised pension i.e 1.1.1996.

• The case was presented before the high court of Punjab.

The recommendations of the 5th pay commission for the person’s below officers
rank:

The pension will be calculated 50% of the total emoluments reckonable for the persons
below officer’s rank and it shall be the maximum emoluments granted for the scale and
not the last salary drawn in the preceding 10 moths before retirement, however , this is
applicable only to the JCOs and other People below officers rank except Naik, Havaldar
and Subedar.

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CASE:

Civil Writ Petition No. 6223 of 2007 [1]

IN THE HIGH COURT OF PUNAJB AND HARYANA AT


CHANDIGARH

Date of Decision: May 26, 2008

Gurmail Singh Dahdli and others ............ Petitioners


Versus

Union of India and others ............. Respondents

CORAM
HON'BLE MR.JUSTICE HEMANT GUPTA.
HON'BLE MR.JUSTICE MOHINDER PAL

1.Whether Reporters of local papers may be allowed to see the judgment ?


2. To be referred to the Reporters or not ?
3.Whether the judgment should be reported in the Digest ?

Present: Shri Bhim Sen Sehgal, Advocate for the petitioner


Ms. Ranjana Shahi, Central Govt. Standing Counsel
for the respondents.

HEMANT GUPTA, J.
The petitioners are former Personnel Below Officers Rank (hereinafter to be referred as
“PBOR”) of the Indian Air Force. All the petitioners are pre 01.01.1996 retirees. The
grievance of the petitioners is that 5th Central Pay Commission was constituted to
examine the pay and pension structure of the civil servants, including armed forces. The
recommendations made by the said Pay Commission were accepted by the Government
of India and circular was issued on 07.06.1999 relating to pensionary benefits in respect
of commissioned officers and PBOR.

Such pensionary benefits were revised w.e.f. 01.01.1996. There was an anomaly in
respect of pensionary benefits payable to PBOR which led to widespread resentment and
ultimately a committee of Group of Ministers was constituted by the Government of
India in January, 2005 to look into the issue. The Group of Ministers agreed that there is
justification for improving the pensionary benefits of the PBOR, particularly the three
lowest ranks i.e., Sepoy, Naik and Havildar, who had been completely neglected. In
pursuance of the recommendations of the Group of Ministers,Government of India,
Ministry of Defence, issued a circular on 01.02.2006 regarding the improvement in

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person of PBOR but w.e.f. 01.01.2006. The petitioners claim that pensionary benefit
circulated vide circular dated 01.02.2006 is illegal to the extent of restricting the benefit
from 01.01.2006 as the same to that extent is arbitrary, discriminatory, without any
rational basis and, thus, the petitioners are entitled to the benefit of pay fixation in terms
of circular dated 01.02.2006 from the date all other ranks have got their pension revised
i.e. w.e.f. 01.01.1996.Learned counsel for the petitioners have pointed out that
Reckonable emoluments for the purposes of pensionary benefits in respect of PBOR is
not the actual pay drawn but the maximum pay of the pay scale, including 50% of the
highest classification allowance, if any, of the rank held and group in which paid
continuously for at least 10 months at the time of discharge.

That was the decision taken in respect of PBOR while accepting the recommendations of
3rd and 4th Pay Commission and while accepting the pay recommendation of 5th Pay
Commission which is evident from circular dated 03.02.1998. The relevant extract from
circular dated 03.02.1998 communicating acceptance of recommendations of 5th Central
Pay Commission by the Government of India to the Chief of Army Staff, the Chief of
Naval Staff and the Chief of the Air Staff, reads as under:-

3. Reckonable emoluments:-

3.1 The term 'Reckonable Emoluments' will mean:


Pay, Non-Practising Allowance, Classification Allowance, Rank Pay and Stagnation
increment.

3.2 I. The term reckonable emoluments shall mean:-

(a) Officers:-

(b) PBORs including Ncs ( E):- Maximum of scale of pay of the rank and group in the
pre-revised scales plus 50% of the highest classification pay appropriate to the paygroup
plus actual Dearness Allowance upto AICII 1436 and Interim Relief I & II. For
calculation of gratuity and family pension, basic pay, Classification Pay actually drawn
will be included in computing reckonable emoluments”. However, while issuing circular
on 7th June, 1999 in respect of implementation of Government's decision on the
recommendations of 5thPay Commission allowing pensionary benefits in respect of
commissioned officers and PBOR, it was circulated as under:-

“ 2.1 COMMISSIONED OFFICERS

Post & Pre 1.1.96 cases

(a) Pension shall continue to be calculated at 50% of the average emoluments in all cases
and shall be subject to a minimum of Rs.1275/- p.m and a maximum of upto 50% of the
highest pay applicable to Armed Forces personnel but the full pension in no case shall be
less than 50% of the minimum of the revised scale of pay introduced w.e.f. 1.1.96 for the
rank last held by the Commissioned at the time of his/ her retirement. However, such

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pension shall be reduced pro rata, where the pensioner has less than the maximum
required service for full pension.
(b) and ( c)

2.2. P.B.O.R.

Post and pre 1.1.96 cases

(a) The revision of service pension in terms of these modified orders in respect of PBOR
retirees will not be beneficial except for the rank of JCOs granted Hony. Commission of
Lt. and Captain as the service pension is calculated at the maximum of the pay scale
including 50% of highest classification allowance, if any of the rank and group in which
paid.

(b) and ( c) In terms of clause 2.2 of the above circular, the revision in the service pension
was not beneficial for PBOR retirees except for the rank of JCO granted honorary
commission. It is the case of the petitioners that three lowest ranks of the Air Force, such
as Sepoy, Nail and Havildar, were t not getting any benefit of revision of pension as
circulated by the Government of India itself. The Group of Ministers examined the
demand of exservicemen claiming same pension for the same rank etc found that there
was justification in improving the pensionary benefits of PBOR, particularly three lowest
ranks. While accepting the recommendations of the Group of Ministers on 01.02.2006, it
was inter alia circulated as under:-

“ 2. Finally, GOM unanimously recommended that the pension of pre 1.1.1996 retiree
PBOR may be revised with reference to the maximum of post 1.1.1996 pay scale. In
addition, the weightage of Sepoy, Naik and Havildar ranks for past as well as future
retirees be increased to 10, 8 and 6 years respectively subject to a maximum qualifying
service of 30 years. The benefit would be given only in respect of service pension.

3. The above recommendations of the GOM have been accepted by the Government.
Sanction of the President is hereby accorded to the modifications to the extent specified
in this letter in the relevant Rules Regulations / Instructions concerning pensionary
benefits of the PBOR.

4. xx xx xx xx xx

5. The following is added after Para 2.2 (a) of this Ministry's letter No.
1(1)/99/D/D(Pen/Services) dated 7.6.1999 relating to revision of pension of post and pre
1.1.1996:

“ With effect from 1.1.2006, pension of pre 1.1.1996 retirees in all ranks of PBOR in
Army, Navy and Air Force for 33 years of qualifying service shall not be less than 50%
of the maximum pay in the revised scales of pay introduced with effect from 1.1.1996
including 50% of highest classification allowance, if any, of the rank and group held
continuously for 10 months preceding retirement subject to a minimum pension of

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Rs.1913/- per month. Such pension shall be reduced pro rata where the pensioner has less
than the maximum qualifying service for full pension that is 33 years.

6 to 8 xx xx xx xx

9. These orders are effective from 1.1.2006. No arrears are to be given”.

Learned counsel for the petitioners has contended that pension of pre 01.01.1996 is to be
fixed with reference to the maximum of the pay scale of the post as on 01.01.1996. Since
there was anomaly in respect of pensionary benefits payable to PBOR, grant of benefit
from 01.01.2006 is wholly unjustified and without any reasonable basis or nexus with the
objective to be achieved. Learned counsel for the petitioner relies upon Division Bench
judgment of this Court in Joginder Singh Saini vs. State of Punjab, 1998

(7) Services Law Reporter 699; Harvinder Singh vs. State of Punjab and others,
2000(3) Services Law Reporter, 333; judgement of this Bench in Jai Narayan Jakhar
vs. Union of India and another, CWP No. 15400 of 2006 decided on 14.01.2008 and
Single Bench judgment of this Court in A.R. Lamba, Ex-Assistant Director vs. Khadi
and Village Industries Commission and others, 2004(7) Services Law Reporter
743;Punjab State Cooperative Agricultural Development Bank
Pensioners'Association and others vs. State of Punjab and others, 2006(1) SCT633;
and Mrs. Suveena Chaudhary vs Chandigarh Industrial &Tourism Development
Corporation Limited, 1998(4) SCT 620 to contend that if there is anomaly in respect of
pensionary benefits, the samecan not be restricted from an artificial date fixed by the
respondents.

On the other hand, learned counsel for the respondents relied upon Union of India vs.
P.N. Menon and others, (1994) 4 Supreme Court Cases 68 and P.K. Kapur vs. Union
of India and others, (2007) 9 Supreme Court Cases 425 to contend that cut off date
fixed cannot be said to be arbitrary as the Government has to manage its affairs out of its
own resources which are limited. Thus, cut off date for grant of additional benefits has to
be allowed within the financial resources available with the Government. It was also
pointed out that on the basis of the recommendations of the Group of Ministers, a
conscious decision was taken to improve the pensionary benefits of PBOR w.e.f.
1.1.2006 and liberalisation of pensionary benefits is an ongoing process and the
Government has to consider and decide from which date a particular benefit has to be
given, therefore, such date cannot be said to be arbitrary.Pay Commissions are
constituted by the Government of India regarding revision of pay scales and pensionary
benefits to the employees of the Central Government including armed forces. While
accepting the recommendations of 5th Pay Commission, no pensionary benefit accrued to
PBOR which is apparent from circular dated 07.06.1999 which is reproduced above.

It would be totally unfair and illogical that while other employees of the Central
Government got the benefit of recommendations of 5th Pay Commission but the lowest
ranks of the Armed Forces were deprived of any increase in pensionary benefits. Though
it is the stand of the Government of India that a Group of Ministers was constituted to

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examine the demands of ex-servicemen for one rank one pension but the fact remains that
the Group of Ministers found an anomaly in respect of pensionary benefits payable to
PBOR.

The recommendation of the Group of Ministers was that the pension of pre 01.01.1996
retiree PBOR is to be revised with reference to maximum of post 01.01.1996 pay scales
meaning thereby that pension was to be revised in terms of the maximum of post
01.01.1996 pay scales. Once in respect of pre 01.01.1996, pension was required to be
redetermined with respect to maximum scale of the post w.e.f. 01.01.1996,the cut off
dated 01.01.2006 loses its reasonableness. There is no explanation to pick up date
01.01.2006 for the grant of revised pensionary benefits to PBOR except that date has
been fixed keeping in view the financial condition of the Government but the fact that it
was an anomaly in the pensionary benefits payable to PBOR could not be disputed.

Once there was anomaly in respect of pensionary benefits, pensionary benefits are
payable from the date of creation of anomaly and that interpretation will alone serve the
purpose and the object of removing anomaly.In P.N. Menon's case (supra), the question
was consideration of Dearness Allowance as part of pay for determining pensionary
benefits.Such merger of Dearness Allowance with pay was contemplated in respect of
government servants who retired on or after 30.09.1977. Since the right of merger of
Dearness Allowance with pay was created for the first time by the Government of India
in terms of Office Memorandum dated 25.05.1977,such benefit could be restricted to the
retirees after the cut off date. In P.K.Kapur's case (supra), the petitioner was claiming
weightage over and above the recommendations of 5th Pay Commission, wherein
pension was to be fixed on the basis of last rank held by an officer.

It was held that the weightage granted in terms of acceptance of 5th Pay Commission has
nexus with the last rank and the period of 33 years of qualifying service was the outer
limit of qualifying service, therefore, there is no violation of Article 14 of the
Constitution of India. Both the aforementioned judgements do not deal with anomaly
which arises on account of implementation of the recommendations of the Pay
Commission.Para 2.2 of circular dated 07.06.1999 itself recites that revision of service
pension is not beneficial to PBOR retirees. Para 5 of circular dated 01.02.2006 is a
clarification to Para 2.2(a) of circular dated 7.6.1999.Therefore, addition of said
paragraph in circular dated 7.6.1999 shows that the issue regarding pension was clarified
by adding the paragraph after the recommendations of the Group of Ministers.

Such benefit was not being conferred for the first time. Still further, the said addition was
as a consequence of anomaly arising in implementation of the recommendations of the
Pay Commission and, thus, the anomaly has to be removed from the day it arises.Though
financial constraint is a valid criteria for fixing cut off date for grant of benefits but in the
present case, neither the respondents had given any data in respect of financial constraints
nor such financial constraints can be relevant when anomaly in the pensionary benefit is
sought to be removed. If all other retirees of Government of India have got the benefit of
revised pension then why the lowest rank of Armed Forces have been deprived the
benefit of revised pension. Since anomaly is sought to be removed in pursuance of the

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recommendations of the Group of Ministers, PBOR would be entitled to revised pension
from the date other employees of the Central Government have got the revised
pensionary benefits. The plea of financial constraints has been raised in respect of lowest
paid employees of the Armed Forces, when all other categories of employees including
services have been given the benefit. Such discriminatory treatment is wholly arbitrary.In
Joginder Singh Saini's case (supra), the Court held that having accepted the factum of
anomaly and having taken decision to remove the same, the Government cannot
arbitrarily fix the date with effect from which the benefit of revised pay scale is to be
given to the petitioners. In Harwinder Singh's case (supra), the service of the petitioner
was not regularised though 13 other persons were given the benefit. It was found that
once an approval has been sought, the same will relate back to the date of the original
decision.

If it is not so, the action of the respondents would result in invidious discrimination. In
Jai Narayan Jakhar's case (supra), a Division Bench of this Court held to the following
effect:-

“ Having heard the learned counsel for the parties, we are of the opinion that the stand of
the respondents that the petitioner is not entitled to the benefit of removal of anomaly in
the Pay Commission is wholly unjustified. It was during the implementation of 5th Pay
Commission report, it was found by the respondents that there is anomaly in the pay
scales. Once the anomaly in the pay scales is found and sought to be removed then it has
to be removed from the implementation of the recommendation of the Pay Commission
i.e. 01.01.1996.There is no explanation as to why the said anomaly is sought to be
removed from 10.10.1997. In the absence of any explanation of removal of anomaly from
10.10.1997, we do not find the action of the respondents fixing such date as justified.

Consequently, we hold that the petitioner is entitled to the revised pay scale of Rs.5220-
140-8140/- w.e.f. 01.01.1996.Thus the petitioner shall be entitled to the retiral benefits on
the said pay scale”.In Punjab State Cooperative Agricultural Development

Bank Pensioners' Association's case (supra), this Court held to the following effect:-

“ ....... It is further appropriate to mention that when anomaly is removed in the pay scale
of a set of employees then it is recognition of a fact that earlier some mistake has been
committed, which has been rectified later on. In other words, the concerned set of
employees have suffered on account of delay in payment which rightly belong to them
and in fact that has been paid to others. They cannot be made to suffer further by
imposing an embargo on the arrears of pay from a date different than the one anomaly
has been removed”.In Suveena Chaudhary's case (supra), this Court was seized of
anomaly in the pay scale of the post of House Keeper. The Court held to the following
effect:-

“...... It is true that it is always open to an employer to revise the salaries/ pay scales of its
employees and also specify a date from which the revision of pay scales shall take effect
but where an anomaly if pointed out in the revision of pay scales of any post and that

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anomaly is sought to be removed then it cannot be allowed to be removed from the date
when the employer decides to remove it. In the very nature of things it must relate back to
the date when it existed.

There would be no meaning in removing an anomaly from a date subsequent to the date
when the grades were revised. In other words, if new grades had to be given by way of
removing an anomaly such grades should take effect from the date when the grades were
originally revised”.Mr. Hemen Aggarwal, learned Central Government Standing Counsel
appearing for the respondents in some of the cases, relied upon Single Bench decision of
this Court reported as K.C. Thakur vs. State of Haryana, 2004 L.I.C. 2240. However,
the said case relates to introduction of a new scheme for pension and, thus, it was held
that the scheme dated 31.05.1999 will not be applicable to the retirees who retired prior
to the applicability of the aforesaid scheme.

It was held that once the employees, who are governed by Contributory Provident Fund
Scheme, have retired but new Pension Scheme is introduced, they have no vested right to
be covered by the new Pension Scheme and any relevant date could be fixed for
applicability of the scheme. However, in the present case, it is not a new scheme which is
being introduced but an anomaly which was noticed in the circular granting revised
pensionary benefits alone which is sought to be removed by the recommendations of the
Group of Ministers. Such recommendations have to be given effect from the date
anomaly arises and not from any other date.In view of the above, we allow the present
writ petition and quash the cut off date 01.01.2006 and clause (9) of circular dated
1.2.200 and direct the respondents to grant revised pensionary benefits to all
thepetitioners and similarly situated PBOR within a period of six months from today.

(HEMANT GUPTA)
JUDGE

May 26, 2008 (MOHINDER PAL)


Ks JUDGE

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THE HONORABLE COURT HELD:

The stand of the respondents of the government that the plantiffs are not entitled to the
benefit of removal of anomaly in the Pay Commission is wholly unjustified. It was during
the implementation of 5th Pay Commission report, it was found by the respondents that
there is anomaly in the pay scales. Once the anomaly in the pay scales is found and
sought to be removed then it has to be removed from the implementation of the
recommendation of the Pay Commission i.e. 01.01.1996.There is no explanation as to
why the said anomaly is sought to be removed from 10.10.1997. In the absence of any
explanation of removal of anomaly from 10.10.1997, the court thus does not find the
action of the respondents fixing such date as justified. Consequently, it was held that the
petitioner is entitled to the revised pay scale of Rs.5220-140-8140/- w.e.f. 01.01.1996.
Thus the petitioner shall be entitled to the retiral benefits on the
said pay scale.

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STUDENT’S ANALYSIS

OFFER AND ACCEPTANCE

Offer and acceptance: there must be two parties to an agreement, i.e., one party
making the offer and the other party accepting it. The terms of the offer must be
definite and the acceptance of the offer must be absolute and unconditional. The
acceptance must also be according to the mode prescribed and must be
communicated to the offeror.

The deal was offered by Govrnment of India and finally accepted the plantiffs who are
the personnel below officers rank of the Indian Air Force, and all the plantiffs are pre
1.1.1996 retirees.

OFFER BY GOVERNMENT OF INDIA ACCEPTANCE BY PBOR

LEGAL RELATIONSHIP

Intention to create legal relationship: When the two parties enter into an agreement, their
intention must be to create a legal relationship between them. If there is no such intention
on the part of the parties, there is no contract between them.

Both the parties have the intention to create legal Relationship between.

LAWFUL CONSIDERATION

Lawful consideration: An agreement to be enforceable by law must be supported by


consideration. ‘Consideration’ means an advantage or benefit moving from one party to
another. It is the essence of a bargain. In simple words, it means ‘something in return’.
The agreement is legally enforceable only when both the parties give something and get
something in return. Consideration need not necessarily be in cash or kind. It may be an
act, abstinence, or promise to do or not to do something. It may be past, present or future.
But it must be real and lawful.

Consideration is lawful and the plaintiffs have been paid their salary

CAPACITY OR COMPETENCY OF PARTIES

Capacity of parties-competency: The parties to the agreement must be capable of entering


into a valid contract. Every person is competent to contract if he (a) is the age of

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majority, (b) is of sound mind, and (c) is not disqualified from contracting by any law to
which he is subject.

There are three conditions that are required for a party to become competent to contract
were fulfilled:-

-Both the parties attains the age of majority at the time of contract.
-Both the parties are of sound mind
-Both Govt of India and PBOR were not disqualified by any law from signing any
contract.

FREE CONSENT

Free and genuine consent: It is essential to the creation of every contract that there must
be free and genuine consent of the parties to the agreement. The consent of the parties is
said to be free when they are of the same mind on all the material terms of the contract.
The parties are said to be of the same mind when they agree about the subject matter of
the contract in the same sense and at the same time.

There is absence of free consent if the agreement is induced by coercion, undue


influence, fraud, misinterpretation, etc.

In this case the consent of both the parties are free i.e. It is not caused by-
• Coercion
• Undue influence
• Fraud
• Misinterpretation

LEGALITY OF OBJECT

Lawful object: The object of the agreement must be lawful. In other words, it means that
the object must not be (a) illegal, (b) immoral, or (c) opposed to public policy. If an
agreement suffers from any legal flaw, it would not be enforceable by law.

In this case nothing was illegal, immoral or opposed to public policy hence legality
of object criteria also got fulfilled.

POSSIBILITY OF PERFORMANCE

Certainty and possibility of performance: The agreement must be certain and not vague
or indefinite. If it is vague and it is not possible to ascertain its meaning, it cannot be
enforced. The term of the agreement must also be such as are capable of performance.
Agreement to do an act impossible in itself cannot be enforced.

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In this case both the parties performed their respective promises.

LEGAL FORMALITIES

Legal formalities: A contract may be made by words spoken or written. As regards


the legal effects, there is no difference between a contract by writing and a contract made
by word of mouth. It is in the interest of the parties that the contract should be in the
writing. There are some other formalities also which have to be complied with in order to
make an agreement legally enforceable. In some cases, the document in which the
contract is incorporated is to be stamped. In some other cases, a contract, besides being a
written one, has to be registered. Thus, where there is a statutory requirement that a
contract should be made in writing or should be made in the presence of witnesses or
registered, the required statutory formalities must be compiled with.

In this contrat all the legal formalities like accaeptance of the offer letter by the plantiffs
and their consent to work under Air Force etc. are fulfilled hence the contrat is
successful.

Thus, all the elements which are essential for an agreement to become a contract are
present.

THUS CONTRACT IS A VALID CONTRACT

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GROUP LEARNINGS

1. The employer can not do any bias in revising the pay scales of different grades of
employees working in the organization, any anomaly or biasness results in the breach
of contract between the employer and the employee and the employee is liable to file
a suit for the damages.

2. Whenever the employer is making any rule and regulation with regards to the revision
in the pay scales and is paying some employees such increased pay from a previous
date, other employees are also liable to be paid from back date only, as the employer
can not unjustifiably fix dates for different employees.

3. In case of public servants, the pension paid to the armed forces on the
recommendations of 5th pay commission is on the basis of one rank one pay, and not
on the basis of the last salary drawn.

4. Employment is a valid contract between the employer and the employee as it covers
all the essential elements of the contract and in case of breach by any party , the other
party is liable to file a suit for the breach of contract as mentioned in the remedies of
breach of contract.

5. The fact that the employer does not have enough resources to pay the arrears of the
pay from the past date especially to the employees of lower grade is not a legal reason
for the fact that it can revise the pays from a later date. The employer needs to
consider all its resources before announcing the date from which the increment of the
pay has to be implemented; such date is legally universal for all the employees of the
organization.

6. Employer and employees are two parties executing the contract thus the ignorance of
law on the part of either is not a valid reason for any sort of breach.

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INTERVIEW WITH THE HR:

R.K.Industries 205/1166
Village Rajokri, New Delhi

We are the budding managers of tomorrow’s corporate world so we are supposed to know
the law of land to be an efficient professional. We were assigned to take an interview of an
HR manager to make a clear understanding of the practical knowledge of laws Practiced by
them. We took interview of Mr.Rajesh Magon,CEO,R.K.Industries

He has done his M.Tech IITGuwahati from and has work experience of 15 years. It was
great earning experience for us as he gave proper attention to all our queries and was
encouraging us to ask for more questions.

We asked the following question:

Q: What are the contracts signed by HR Manager?

Ans: He told the main function of HR manager is recruitment and selection so the major
contracts signed by a manager is the employment contract. A contract of employment is
usually defined to mean the same as a “contract of service.” A contract of service has
historically been distinguished from a "contract for service”, the expression altered to
imply the dividing line between a person who is "employed" and someone who is "self
employed".

The purpose of the dividing line is to attribute rights to some kinds of people who work
from others. This could be the right to a minimum wage,holiday pay, sick leave, fair
dismissal, a written statement of the contract, the right to organise in a union, and so on.
The assumption is that genuinely self employed people should be able to look after their
own affairs, and therefore work they do for others should not carry with it an obligation
to look after these rights.The terminology is complicated by the use of many other sorts
of contracts involving one person doing work for another. Instead of being considered an
"employee", the individual could be considered a worker (which could mean less
employment legislation protection) or as having an "employment relationship" (which
could mean protection somewhere in between) or a "professional" or a "dependent
entrepreneur", and so on.Different countries will take more or less sophisticated or
complicated approaches to the question The focus of most employment contracts is
wages for work.

Essential terms might be notice periods in the event of dismissal, holiday pay rights, the
place of work and pension schemes. Many jurisdictions require these factors to be set out
in a written contract.In terms of pay, the employee may be compensated through wages, a
salary, or by commission. In addition to monetary compensation, the employment
contract often specifies a fringe benefit package, including a retirement plan, employee
stock options, holiday entitlement, required hours of work, and (especially in the US)
health insurance benefits.Normally, such contracts provide for termination of

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employment, by either party, and include associated matters such as notice period,
compensation arrangements and, sometimes, garden leave. Some employers use non-
disclosure and non-compete clauses to protect their trade secrets from being dispersed
when employees leave.

Depending on where people live, the laws regarding enforceability of these clauses vary
widely.UK law holds that employment contracts have implied terms (assumed,
unspoken,essential terms ), as well as explicit terms (typically those in writing). Legal
precedent provides for example that there is an implied contractual term of trust and
confidence,meaning each party to the contract is expected to behave in a manner allowing
the other to maintain trust and confidence in the other.The terms and conditions of an
Employment contract signify the working style and culture of an organization. While
employing a person in your organization or commercial set up, you need to define the
relationship in a fair and unambiguous manner. Our Employment contract helps you
protect the interests of the organization while being fair to the employee.

Q: What are the negotiable instruments used in an organization?

ANS: The negotiable instruments used in a company are for following purpose

• Job Description;
• Probation;
• Place of work;
• Salary and perquisites;
• Medical; Retirement;
• Training and work outside the country of employment;
• Working and Holidays;
• Intellectual Property;
• Confidentiality
• Notice Period;
• Summary Termination;
• Governing law;

Negotiable instrument

Unconditional order or promise to pay an amount of money, easily transferable from one
person to another. Examples: check, promissory note, draft (bill of exchange). The
Uniform Commercial Code requires that for an instrument to be negotiable it must be
signed by the maker or drawer, must contain an unconditional promise or order to pay a
specific amount of money, must be payable on demand or at a specified future time,and
must be payable to order or to the bearer. . When a person cashes a check, he negotiates
the check by signing his name on the back and presenting it to a bank,thereby becoming
the legal owner of funds represented by the writing on the face of the check. He may take
the funds as cash or deposit the money into an account. Checks are negotiable by

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endorsement and delivery (also called PRESENTMENT) to the paying bank, which is
then obligated to pay the check. If an instrument is payable to the bearer,
for example, a bearer stock or bearer bond, negotiation is done by simply presenting the
instrument.Under Article 3 of the Uniform Commercial Code (UCC) , an instrument is
negotiable if it is: (1) a written instrument signed by the endorser or maker; (2) an
unconditional promise to pay a certain amount of money, either on demand or at a future
date; and (3) payable to the holder or bearer.person who becomes a holder in due course
of a negotiable instrument by delivery, or by delivery and endorsement, has an
unrestricted claim to the instrument, and can sue other people in his or her own name..
When a person cashes a check, he negotiates the check by signing his name on the back
and presenting it to a bank, thereby becoming the legal owner of funds represented by the
writing on the face of the check. He may take the funds as cash or deposit the money into
an account. Checks are negotiable by endorsement and delivery (also called
PRESENTMENT) to the paying bank, which is then obligated to pay the check. If an
instrument is payable to the bearer, for example, a bearer stock or bearer bond,
negotiation is done by simply presenting the instrument.Under Article 3 of the Uniform
Commercial Code (UCC), an instrument is negotiable if it is:

(1) A written instrument signed by the endorser or maker;


(2) An unconditional promise to pay a certain amount of money, either on demand or at a
future date; and
(3) Payable to the holder or bearer. Person who becomes a holder in due course of a
negotiable instrument by delivery, or by delivery and endorsement, has an unrestricted
claim to the instrument, and can sue other people in his or her own name.

Q: Wheather the HR Head participate in meeting of board of directors?

ANS: He answered “yes the head of HR department plays crucial role in the decision
making process of company”. In his views the strategic importance of human resource
department has grown manifolds and especially in present situations.

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