Judgment:
1. When this writ petition had come up for hearing before our learned brother RAMANUJULU NAIDU, J., it was felt that this should be decided by a Division Bench of this Court as it involved interpretation of the guidelines issued by the Government of India under Regulation 8(1) of the Andhra Bank (Officers') Service Regulations, 1982 (hereinafter referred to as '1982 Regulations') which is a substantial question of law. So it had come up before this Bench for consideration.
2. Andhra Bank is one of the Banks which was nationalised under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (hereinafter referred to as 'Act 40 of 1980'). As per Section 1(2) of Act 40 of 1980 it was given retrospective effect from April 15, 1980' though the said Act received the assent of the President on July 11, 1980.
3. Andhra Bank (Officers') Service Regulations, 1982 were made by the Board of Directors of Andhra Bank by virtue of the powers conferred by Section 19 read with Section 12(2) of Act 40 of 1980. The 1982 Regulations had come into force on January 1, 1983. Inter alia, as per the said Regulations the Pay Scales of Officers of Andhra Bank are revised.
4. As per the guidelines issued by the Government in terms of Regulation 8 of 1982 Regulations, the notional pay of the Officers had to be fixed as on July 1, 1979 in the new scale. After the necessary increments are given the notional pay had to be again fixed on January 1, 1983 the date on which the 1982 Regulations had come into effect. As per the guidelines issued in terms of Regulation 8 of 1982 Regulations, an adhoc amount equivalent to Rs. 150/- p.m. shall be payable by way of arrears for the period from July 1, 1979 to April 14, 1980 for those officers' whose scales of pay were not revised on or after July 1, 1979, and arrears shall be paid for all the Officers for the period from April 15, 1980 to December 31, 1982 being the difference between the aggregate of notional basic pay and D.A. arrived at in the manner stipulated in those guidelines and i the actual basic pay and D.A. drawn by the Officer, if the former is higher than the latter. The ad hoc or interim relief if any given during the said period had to be adjusted in calculating the arrears.
5. The petitioners herein are the Officers of the Andhra Bank who retired between July 1, 1979 and January 1, 1983. The respondent-Bank had taken the stand that as 1982 Regulations had come into effect on January 1, 1983 they are not applicable to those who retired prior to January 1, 1983, and hence they are not entitled to either to the Scales referred to therein or the arrears of pay or other consequential benefits. On the basis of the representation of the Officers who retired prior to January 1, 1983 the benefit of payment of arrears in terms of para 8 of the guidelines of the Government under Regulation 8(1) of 1982 Regulations was extended to those officers who retired prior to January 1, 1983. In view of the same the arrears of pay as per the above guidelines were given to the petitioners and others who retired prior to January 1, 1983.
6. For payment of arrears, the notional pay from July 1, 1979 to the date of retirement had to, be fixed. The petitioners claim that the said notional pay as on the date of retirement of each of those Officers had to be taken into consideration for calculating the gratuity payable as per the Rules, and the respondent-Bank had to pay its contribution towards Provident Fund on the basis of notional pay from July 1, 1979 to the date of retirement of each of those Officers who retired prior to January 1, 1983.
7. The learned counsel for the respondent-Bankurged that 1982 Regulations had come into effectfrom January 1, 1983 they are not applicable tothe Officers who retired prior to January 1, 1983.Even the arrears were paid to those who continuedin service after January 1, 1983, only as ex-gratia.When that benefit was extended to those Officerswho retired prior to January 1, 1983, the paymentof arrears to them should be held as act of grace.So the difference between the actual pay and thenotional pay cannot be held as arrears of pay. Thusthe notional pay cannot be taken into considerationfor calculating either gratuity or contributiontowards provident fund.
8. Section 2(s) of the Payment of Gratuity Act, 1972 defines 'Wages' as meaning all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance, but does not include any bonus, commission, house rent allowance, overtime wages for calculating the gratuity.
9. It suggests that all emoluments payable in accordance with the terms and conditions of employment other than the allowance, bonus, commission and overtime wages referred to therein form part of the wages for calculating the gratuity.
10. While it was urged for the respondent-Bank that the difference between the actual pay drawn and the notional pay was paid as a grace and thus it does not form part of the wages, it was submitted for the petitioners that the guidelines issued under Regulations 8 of 1982 Regulation do not suggest or indicate that the arrears are paid to the Officers who continued to be in service on or after January 1, 1983 as a grace and hence there is no basis to treat the same as ex-gratia as referred to in PD/77/665(a)/1959, dated, May 24, 1983. The notional pay should be treated as actual pay when the Officers were entitled to the arrears as a matter of right as per the guidelines issued by the Government under Regulation 8.
11. To appreciate the rival contentions it is convenient to read the following guidel ines and proceedings.
12. Guide-line 8 in relation to the Regulation 8 of 1982 Regulations reads as follows : .
'8. Payment of arrears:
a) In the case of officers whose scales of pay were not revised on or after July 1, 1979 an adhoc amount equivalent to Rs. 150/- per month shall be payable by way of arrears for the period from July 1, 1979 till April 14, 1980, subject to the adjustment of any amount received by way of interim/adhoc allowance.
(b) In the case of all officers the arrears shall be calculated and paid on the following basis for the period April 15, 1980 to December 31, 1982.
Where the aggregate of notional basic pay and the D. A. arrived at the manner stipulated above is higher than the actual basic pay and D.A. drawn by him, the difference shall be paid by way of arrears. However, in calculating the arrears, adhoc-interim relief, if any, given during the period, shall be adjusted.
13. The proceedings No. PD/76/665(a)/l 059, dated May 24, 1983 reads as follows:
' I am directed to refer to your letter No. PD/ 85/665(a)/618 dated March 14, on the above subject and to say that the Officers' Service Regulations have been introduced in the six newly nationalised Banks w.e.f. January 1, 1983. The Officers have to be fitted in either of the seven scales as contained in the Regulations, on January 1, 1983. It is, therefore, amply clear that no benefit under the Regulation can be given to Officers who were not in service on the appointed date either because of their retirement or otherwise. It is only for the purpose of fitment of officers in the new pay scales that a formula has been devised whereunder the Banks are required to go back to their pay as on June 30, 1979, and to give them notional increments upto December 31, 1982 so as to fit them at an appropriate stage in the new pay scale as on January 1, 1983. It would be just and proper to confine the benefit of arrears-which is in the nature of ex-gratia to only such of officers to whom the Regulations apply.'
14. The proceedings No. PD/76/665 (a)/1078, dated, May 30, 1983 reads as follows :
'I am directed to refer to this Department's letter of even number dated May 3, 1983 on the above subject and to say that the matter has been reconsidered by the Government in the light of various representatives received in this regard from the Officers who have retired from the service before the appointed date. It has now been decided that the benefit of payment of arrears in terms of paragraph 8 of the guidelines of the Government under Regulation 8(1) may also be extended to cover those officers who ceased to be in the service 3 of the bank due to retirement etc. prior to the appointed date. I am, therefore, to request you to suitably advise the banks under intimation to this department.'
15. The guideline 8 does not indicate that the said arrears were paid as ex-gratia or grace. The attention of this Court is not drawn to any other guidelines to indicate or suggest that the said arrears were paid as ex gratia or grace. Even the proceedings dated May 24, 1983 do not refer to any regulation or guidelines to show that these arrears are paid as ex-gratia.
16. Whenever revised pay scales were given with retrospective effect, it is open to the Government or concerned authority either not to pay or to pay in full or part, the arrears from the date from which they were given retrospective effect till the date on which they are published. But when once these arrears, are given in toto or in part, it cannot be held that they were given as ex-gratia or grace. It may be noted that the revision of pay scales is not an unilateral act. On the basis of negotiations and discussions with the concerned employees the revised pay scales will b announced. So it is more in the nature of settlement. As a part of the settlement if the difference in pay either in toto or in part is agreed to be paid it cannot be held that it was paid as ex-gratia or grace. In such a case it should be treated as a part of the settlement. So there is force in the contention for the petitioners that the arrears payable under para 8 of the guidelines in relation to Regulation 8 can be claimed by the Officers as of right and it is not a payment by grace or ex-gratia.
17. As per Regulation 1 (2) of 1982 Regulations, they shall come into force on January 1, 1983. Thus the benefits under the said Regulations can be claimed only by those who continued or joined in service on or after January 1, 1983. Hence it was argued for the respondent-Bank that as these petitioners retired from service even by January 1, 1983 they cannot claim benefits under the above Regulations.
18. But the arrears are payable for the period from July 1, 1979 to December 31, 1982. Whether in regard to the arrears payable for the period prior to January 1, 1983 can there be a reasonable classification between those who retired prior to or after January 1, 1983. To illustrate, A and B may be drawing the same pay as on July 1, 1979. A retired from service on December 31, 1982 while B retired from service on January 1, 1983. Assuming that the notional pay and D.A. as per guidelines was higher than the actual basic pay and D.A. drawn by them, whether there is any justification for not allowing the said difference to A when it was being allowed to B when they were drawing same pay and discharging same duties from July 1, 1979 to December 31, 1982 for which period the arrears were payable to B.
19. Article 14 of the Constitution forbids class legislation, but permits reasonable classification if the same is founded on an intelligible differentia which distinguishes persons or things that are grouped together from those that are left out of the group and that differentia must have a rational basis (sic) to the object sought to be achieved by the statute in question.
20. In D.S. Nakara v. Union of India, (1983-I-LLJ-104) the revised pension formula as per Central Civil Services (Pension) Rules was considered. The same was made applicable to the employees who retired on or after March 31, 1979. Jt was held therein that there was no justification for disallowing the benefit arising from the said formula for the period subsequent to April 1, 1979 even for those who retired prior to April 1, 1979. So it was held that the portion 'being in service on the specified date and retiring subsequent to that date' in the memoranda, referred in that decision, violated Article 14 and is unconstitutional and liable to be struck down.
21. In this case also there is no justification for disallowing the difference in pay referred to, to those who retired from service prior to January 1, 1983. If in fact the benefit of the same was not extended to those officers who retired prior to January 1, 1983, and if they approached this Court on the ground of discrimination, they could have succeeded on their claim for the difference in pay which was being given to those who retired after January 1, 1983.
22. Anyhow when the payment of arrears upto January 1, 1983 in regard to those who continued in service on or after January 1, 1983 cannot be held as ex-gratia payment, the payment of the same to those who retired prior to January 1, 1983 cannot be held as ex-gratia payment.
23. It may be further stated that pending revision of pay scales, an amount of Rs. 100/-p.m. was paid to the Officers as adhoc payment. Later the same was enhanced to Rs. 150/- per month for the period from July 1, 1979 to April 15, 1980 the date on which Act 40 of 1980 was given retrospective effect for those Officers whose pay scales were not revised on or after July 1, 1979. Anyhow when the adhoc payment was paid pending consideration of revision of pay it has to be held that the ad hoc payment is part of pay for calculating the gratuity. Similarly the notional pay from January 15, 1980 to December 31, 1982 has also to be taken as part of the pay for calculating gratuity.
24. As per Circular No. 248, Ref. No. Stf/51 dated September 28, 1979, it was made clear that no provident fund deduction should be made from the adhoc payment of Rs 100/-. It is manifest from the additional affidavit filed by the respondent that deduction was made even for the officers who are in service even after January 1, 1983 towards their contribution of provident fund only in regard to pay from April 15, 1980 when the arrears were paid to them. So it means that the respondent Bank contributed its share on the difference between the actual pay and the notional pay to the Officers who continued in service even after January 1, 1983, from April 15, 1980. So when paid notional pay was taken as basis for calculating the amount to be contributed by the respondent for the period from April 15, 1980 to those who continued to be in service even after January 1, 1983, the notional pay has to be taken as basis from April 15, 1980 even for those who retired prior to January 1, 1983 .
25. In the result, the writ petition is allowed as follows.
26. The notional pay has to be taken as basis for calculating the gratuity payable to petitioners. The notional pay is the pay which was arrived at while paying arrears to those petitioners as per proceedings No. PD/76/665(a)/1078, dated May 30, 1983 of the Indian Bank's Association, Personnel/Department, Bombay. The notional pay from April 15, 1980 has to be taken as basis for calculation of the respondent-Bank's contribution to Provident Fund. No costs. The respondents have to pay the difference in gratuity and provident fund amount, as per this judgment within 3 months from this date.