1616-1684 Arrears - Commutation
The matter concerns, refixation of pension and consequential arrears with respect to the bank employees who retired or died while in service on or after 1.4.1998 and before 31.10.2002.
Let’s look the operative part of the the various judgements.
Operative part of Karnataka High Court Judgement dated 21.04.2011.
# 13…..bank shall pay the differential amount of pension and commutation value of pension to the petitioners on that basis,within a period of eight weeks, if not earlier and in the event of failure to make the payment as above, the banks shall be liable to pay interest at the rate of 10% on the said amounts till the date of payment.
Operative part of SC Judgement dated 13.02.2018.
“# 34. Thus, we set aside the judgment rendered by the High Court of Delhi and affirm that of High Courts of Karnataka at Bangalore and the High Court of Madras. The appeals filed by the Banks are dismissed and the appeal filed by the Association is allowed. Resultantly, let the amount which was due and payable be paid with 9% interest, be calculated and paid within four months from today.
From the above judgements it is clear that commutation is the important part of the arrears to be paid to the concerned employees.
Thus the arrears to be paid will have the following three components.
Arrears = Difference of (Basic Pension + DA) with interest @9% plus (+) Commutation Value with interest @9% minus (-) monthly recovery of commutation amount (⅓ of difference of Basic Pension) for 15 years from the date of retirement.
Now the moot point in payment of arrears of commutation is the recovery of commutation amount (⅓ of difference of Basic Pension) for 15 years from the date of retirement.
Here I wish to draw attention towards relevant portions of Regulation 41, of Pension Regulations which reads as under:-
# 41(2) An employee shall indicate the fraction of pension, which he desires to commute, and may either indicate the maximum limit of one-third pension or such lower limit, as he may desire to commute.
# 41(4) Notes (2) An employee who had commuted the admissible portion of pension is entitled to have the commuted portion of the pension restored after the expiry of a period of fifteen years from the date of commutation.
# 41(4) Notes (6) The commutation of pension shall become absolute in the case of an employee, (a) retiring on superannuation or voluntary retirement who submits an application for commutation of pension before the date of retirement, on the date following the date of retirement:
# 41(6) An applicant who is authorized a superannuation pension, voluntary retirement pension, premature retirement pension, compulsory retirement pension, invalid pension or compassionate allowance shall be eligible to commute a fraction of his pension under these regulations.
Provided that on and from 1.7.2003, in case of an applicant in whose case the commuted
value of pension becomes payable on the day following the date of his retirement or from the
date from which the commutation becomes absolute, the reduction in the amount of pension on account of commutation shall become operative from its inception. Where, however, payment of commuted value of pension could not be made within the first month after the date of retirement or within the first month after the date when the commutation becomes absolute as the case may be, the difference between the normal monthly pension and the commuted pension shall be paid for the period between the date on which commutation becomes absolute and the date preceding the date on which commuted value of pension is deemed to have been paid.
(AMENDMENT NOTIFIED IN GAZETTE OF GOVERNMENT OF INDIA DATED 24.7.2004)
In the present case, as the commutation value is being paid after 01.07.2003 and a period of more than 15 years have already passed from the date commutation had become absolute, banks are not entitled to make any recovery on account of commutation (⅓ of difference of Basic Pension).
However, even if one takes a very narrow interpretation of the Regulation 41(6) which is operative w.e.f. 01.07.2003, banks at the maximum can recover commutation amount (⅓ of difference of Basic Pension), only from the date of retirement upto 30.06.2003.
I understand that most of the banks have not paid the arrears on account of commutation, which is high handedness ,disregard of Pension Regulations and importantly Contempt of the Court, on the part of bank managements.
I recall from memory, the similar high handedness attitude of the bank managements, while making payment of arrears of pension for 5 years notional service to retirees under Voluntary Retirement Scheme (EVRS-2000) allowed by SC in 2009. At that time also banks recovered commutation amount (⅓ of difference of BP), from the date of voluntary retirement upto the date of payment of arrears in 2009, blatantly disregarding the Pension Regulation 41.6, as above.
The matter concerns, refixation of pension and consequential arrears with respect to the bank employees who retired or died while in service on or after 1.4.1998 and before 31.10.2002.
Let’s look the operative part of the the various judgements.
Operative part of Karnataka High Court Judgement dated 21.04.2011.
# 13…..bank shall pay the differential amount of pension and commutation value of pension to the petitioners on that basis,within a period of eight weeks, if not earlier and in the event of failure to make the payment as above, the banks shall be liable to pay interest at the rate of 10% on the said amounts till the date of payment.
Operative part of SC Judgement dated 13.02.2018.
“# 34. Thus, we set aside the judgment rendered by the High Court of Delhi and affirm that of High Courts of Karnataka at Bangalore and the High Court of Madras. The appeals filed by the Banks are dismissed and the appeal filed by the Association is allowed. Resultantly, let the amount which was due and payable be paid with 9% interest, be calculated and paid within four months from today.
From the above judgements it is clear that commutation is the important part of the arrears to be paid to the concerned employees.
Thus the arrears to be paid will have the following three components.
Arrears = Difference of (Basic Pension + DA) with interest @9% plus (+) Commutation Value with interest @9% minus (-) monthly recovery of commutation amount (⅓ of difference of Basic Pension) for 15 years from the date of retirement.
Now the moot point in payment of arrears of commutation is the recovery of commutation amount (⅓ of difference of Basic Pension) for 15 years from the date of retirement.
Here I wish to draw attention towards relevant portions of Regulation 41, of Pension Regulations which reads as under:-
# 41(2) An employee shall indicate the fraction of pension, which he desires to commute, and may either indicate the maximum limit of one-third pension or such lower limit, as he may desire to commute.
# 41(4) Notes (2) An employee who had commuted the admissible portion of pension is entitled to have the commuted portion of the pension restored after the expiry of a period of fifteen years from the date of commutation.
# 41(4) Notes (6) The commutation of pension shall become absolute in the case of an employee, (a) retiring on superannuation or voluntary retirement who submits an application for commutation of pension before the date of retirement, on the date following the date of retirement:
# 41(6) An applicant who is authorized a superannuation pension, voluntary retirement pension, premature retirement pension, compulsory retirement pension, invalid pension or compassionate allowance shall be eligible to commute a fraction of his pension under these regulations.
Provided that on and from 1.7.2003, in case of an applicant in whose case the commuted
value of pension becomes payable on the day following the date of his retirement or from the
date from which the commutation becomes absolute, the reduction in the amount of pension on account of commutation shall become operative from its inception. Where, however, payment of commuted value of pension could not be made within the first month after the date of retirement or within the first month after the date when the commutation becomes absolute as the case may be, the difference between the normal monthly pension and the commuted pension shall be paid for the period between the date on which commutation becomes absolute and the date preceding the date on which commuted value of pension is deemed to have been paid.
(AMENDMENT NOTIFIED IN GAZETTE OF GOVERNMENT OF INDIA DATED 24.7.2004)
In the present case, as the commutation value is being paid after 01.07.2003 and a period of more than 15 years have already passed from the date commutation had become absolute, banks are not entitled to make any recovery on account of commutation (⅓ of difference of Basic Pension).
However, even if one takes a very narrow interpretation of the Regulation 41(6) which is operative w.e.f. 01.07.2003, banks at the maximum can recover commutation amount (⅓ of difference of Basic Pension), only from the date of retirement upto 30.06.2003.
I understand that most of the banks have not paid the arrears on account of commutation, which is high handedness ,disregard of Pension Regulations and importantly Contempt of the Court, on the part of bank managements.
I recall from memory, the similar high handedness attitude of the bank managements, while making payment of arrears of pension for 5 years notional service to retirees under Voluntary Retirement Scheme (EVRS-2000) allowed by SC in 2009. At that time also banks recovered commutation amount (⅓ of difference of BP), from the date of voluntary retirement upto the date of payment of arrears in 2009, blatantly disregarding the Pension Regulation 41.6, as above.
Good write up. You can also write about issues of us pensioners vis a vis pension being paid in other PSUs.
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