Supreme Court holds pre-regularization service counts for pension in PSEB employees' case
A Bench of Justices Prashant Kumar Mishra and Shree Chandrashekhar dismissed the Board's appeal, holding that contract service before August 2004 counts as qualifying service for pension.
The Supreme Court has upheld the right of Punjab School Education Board employees to have their pre-regularization service counted as qualifying service for pension, placing them within the old pension regime rather than the Defined Contributory Pension Scheme introduced on 01.01.2004. Deciding the appeal in Punjab School Education Board and Another v. Satnam Singh and Others, a Bench of Justice Prashant Kumar Mishra and Justice Shree Chandrashekhar dismissed the Board's challenge to a Punjab and Haryana High Court judgment of 14.01.2020. The Court found that the employees, first engaged in the 1990s on contract and daily-wage terms and later regularized with effect from August 2004, must be treated as having entered service before the cut-off date. Breaks in their service were treated as notional or administrative and ignored. The appeal was dismissed with no order as to costs.
How the dispute reached the Court
The respondents were first engaged by the Board as Clerks and Peons between 1993 and 1996 on contract, ad hoc, daily wage or work-charge terms, initially for periods of 89 days. The Board is an autonomous body established under the Punjab School Education Board Act, 1969.
The litigation history was long. In CWP No. 1046 of 1994 the High Court directed on 30.05.1994 that contractual appointments would not continue beyond six months or until regular appointments were made. Services of 224 ad hoc Clerks were terminated on 31.01.1995, after which 184 employees were re-engaged on contract due to work exigencies. A batch of writ petitions was dismissed on 12.07.2000, with the High Court observing that continuation was “purely fortuitous” and conferred no service benefits. A challenge in SLP (C) No. 12819 of 2000 was dismissed on 28.08.2000.
The Government of Punjab then issued a notification dated 23.01.2001 revising its regularization policy for work-charged and daily-wage employees. Four writ petitions filed on that basis were dismissed on 14.12.2001, the High Court holding the Board a distinct autonomous body not automatically bound by Government instructions.
From appointment letters to a pension claim
A Board committee met on 09.07.2004 and recommended adopting the Government policy of 23.01.2001 as a one-time humanitarian measure on a mutatis mutandis basis. The Board accepted this on 13.07.2004, and a public notice issued on 18.07.2004 stated the Board had decided to appoint work-charge, daily-wage and other workers “on Regular Basis” against permanent vacant posts. Appointment letters followed from August 2004, and regular pay scales were granted with effect from that month.
The employees then sought pension under the old scheme. The Board referred the matter to the State Government on 28.11.2011, but the Government declined on 09.12.2011, citing the Defined Contributory Pension Scheme in force from 01.01.2004. The Board's Finance Committee recommended mandatory applicability of the new scheme on 26.06.2013.
The employees' writ petitions raised two claims: that pre-regularization service counted as qualifying service, and that having been regularized under the 2001 policy, they fell under the old pension regime. Both the Single Judge, on 13.02.2017, and the Division Bench, on 14.01.2020, ruled in their favour.
Substance over form in regularization
The Court rejected the Board's plea of res judicata, holding that the earlier rounds concerned regularization while the present dispute concerned its pensionary consequences, making the cause of action and relief distinct. The fifth round had concluded because the Board voluntarily regularized the employees.
On the merits, the Court held that the substance of the engagement must prevail over its form. Though the letters used the term “appointment”, the Board's intent to regularize was clear from the policy, the committee's recommendation, the Board's decision and the public notice referring to appointment on a regular basis. The notice was not open to the general public but merely conveyed a decision to appoint those already working against permanent posts.
The Court relied on the Board's own letter to the State Government dated 20.10.2011, which described the employees as regularized after long service and not newly recruited after 01.01.2004. Given this written commitment, the Court found no doubt the Board had regularized the employees.
Qualifying service and the pension principle
The Court examined the Punjab School Education Board (Employees' Pension, Provident Fund and Gratuity) Regulations, 1991, under which qualifying service includes all periods spent on duty without interruption. Citing the Constitution Bench in D.S. Nakara v. Union of India, the Court reiterated that pension is a deferred wage and a payment for past service, not a bounty. Denial of pensionary benefits on technicalities after long and continuous service was held generally unjustified.
The Court found the Division Bench had correctly relied on Harbans Lal v. State of Punjab, affirmed by this Court in SLP (C) No. 23578 of 2012, where daily-wage service before regularization was counted as qualifying service, taking the employee outside the new scheme. That decision itself relied on the Full Bench ruling in Kesar Chand v. State of Punjab.
The breaks in the respondents' service were held to be notional, administrative or caused by Court orders, and were to be ignored so that the service was treated as continuous. The Court held that the Board's autonomous status could not save it, since it had voluntarily adopted the policy. The mutatis mutandis adoption also negatived arguments that requirements like a typewriting test, probation and medical certificate indicated fresh appointment.
Order
The Court held the decisions of the Courts below legally sound, finding the employees were regularized and entitled to be treated as having entered service prior to 01.01.2004, falling under Tier II of the Defined Contributory Pension Scheme with discretion to choose either the old GPF pension scheme or the new scheme. The appeal was dismissed with no order as to costs.