On September 15, 2013, the then Chief Minister of Gujarat Narendra Modi spoke passionately at a rally in Rewari to honour retired members of the armed forces:
“Today, I publicly demand from the government of India on behalf of the army men and ex-service men of this country, to publish a white paper on the status of the ‘one rank, one pension’ scheme.”
A year into being Prime Minister, he has pleaded that the government be given more time to implement the One Rank One Pension, or OROP, scheme given the complexities of the issues involved. If he fails to implement the scheme, he will not only invite the ire of army veterans and renege on a campaign promise, but will be in contempt of the highest court in the land.
Equality of treatment
In the landmark case of DS Nakara, the Supreme Court declared that any legal dispute relating to pensions would have to be considered in the milieu of a welfare State. The petitioners in the case had retired from the civil service and the armed forces respectively in the year 1972.
In 1979, the government liberalised the formula for computing pensions. Under the new formula, only those who retired on or after March 31, 1979, in the case of civil servants, and September 23, 1979, in the case of armed forces personnel, would receive the benefit of the liberalised pension scheme.
What this essentially meant was that those who retired before the aforementioned dates could conceivably receive a lower pension than those who retired after this date, despite having retired with the exact same designation or rank. The petitioners contended before the Supreme Court that the differential treatment accorded to those who had retired prior to the specified date clearly violated Article 14 of the Constitution.
Article 14 mandates that the State shall not deny to any person equality before the law or the equal protection of the laws. In the case of Maneka Gandhi v Union of India, the Supreme Court held that Article 14 strikes at arbitrariness in State action, thereby ensuring equality of treatment.
The Supreme Court has however clarified that this “equal protection” does not mean that all laws must be general in character and have universal application. The State retains the power to distinguish and classify persons or things for the purposes of legislation.
Tests for valid classification
In order, however, to pass the test of permissible classification, the Supreme Court has held that two conditions must be fulfilled:
(i) the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from those that are left out of the group; and
(ii) the differentia must have a rational relation to the objects sought to be achieved by the legislation.
The constitutional scholar MP Singh uses Section 11 of the Indian Contract Act, 1872, to illustrate the point. According to Section 11, minors cannot enter into a contract. Can minors claim that this is a violation of their Article 14 right to equality? Section 11 differentiates between two classes: adults and minors. The basis of the classification is age. The object of the classification is the “capacity” to contract. This classification is valid as an individual’s age has a direct bearing on his or her capacity to contract.
In the backdrop of this two-fold test, the Supreme Court in DS Nakara set out to answer the following questions: Is the date of retirement a relevant consideration for eligibility when a revised formula for computation of pension is ushered in and made effective from a specified date? Would differential treatment to pensioners related to the date of retirement via the revised formula for computation of pension violate Article 14?
A distinction without a difference
According to the Attorney General, the Government of India’s position was not that the date of retirement was the basis of the classification. As the Supreme Court put it:
“What is suggested (by the Government) is that when a pension scheme undergoes a revision and is enforced effective form a certain date…those who retire prior to that date form one class and those who retire on a subsequent date form a distinct and separate class…”
The Attorney General contended that this differentiation was grounded on a rational principle and it had a direct correlation to the object sought to be achieved by liberalised pension formula. The Supreme Court strongly disagreed.
The Government conceded that the pre-liberalised pension scheme did not provide adequate protection in old age and that further liberalisation was necessary as a measure of economic security. The Government also took into account rising inflation and the diminishing purchasing power of rupee in devising the upward revision of pension.
According to the Court, if those who were to retire subsequent to the specified date would feel the pangs in their old age, of lack of adequate security, by what stretch of the imagination could the same be denied to those who retired earlier with lower emoluments and yet were exposed to the vagaries of rising prices and the falling purchasing power of the rupee.
The Court ruled that all pensioners were entitled to pension as computed under the liberalised pension scheme’s new formula, irrespective of the date of retirement.
Contempt of Court
In the case of SPS Vains, the Supreme Court had to consider whether there could be a disparity in payment of pension to officers of the same rank in the armed forces, who had retired prior to the introduction of the revised pay scales effective from January 1, 1996, with those who retired thereafter.
This anomaly had arisen as a result of the acceptance by the Government of the recommendations of the Fifth Pay Commission. Those Major Generals who had retired prior to January 1, 1996, would now get a lower pension as compared to the other set of Major Generals who retired after that date, since they would not be entitled to the benefit of the revision of pay scales.
Relying on DS Nakara, the Court held that the object sought to be achieved was not to create a class within a class, but to ensure that the benefits of pension were made available to all persons of the same class, namely all Major Generals, equally. They held in favour of Major General Vains and stated emphatically that individuals who retired with the same rank should get the same pension.
In February, some six years after obtaining a judgement in his favour, Major General Vains filed a contempt petition in the Supreme Court, requesting it to order the Government to implement the OROP scheme. The Court obliged and stated in no uncertain terms that the Government would face contempt proceedings:
“This was part of your manifesto for the Lok Sabha elections. You must keep your word.”
So, will the Prime Minister keep his word? And far more importantly, should he?
Roll of honour
A leading financial daily has called the OROP scheme unconscionable, stating that it will add Rs 8400 Crore annually to the budget, with this amount set to rise drastically in January 2016 once the Sixth Pay Commission’s recommendations are implemented. Proponents of the scheme claim that the three-decade long wait for the OROP, since the judgement in DS Nakara, is hurting army morale. For supporters of the scheme, this is the least that we as a nation can do for the brave soldiers who “gave their today for our tomorrow”.
One would think that former US President Grover Cleveland would agree with such sentiments, as he considered the pension list of the republic “a roll of honour”. But Cleveland himself vetoed hundreds of pension Bills, as he fully understood the need to draw the line between sentiment and fiscal responsibility.
Unfortunately, the Prime Minister does not have the luxury of “drawing the line” that Cleveland did. He finds himself in the unenviable position of being hemmed in by a Supreme Court order and a disillusioned group of army veterans who expect him to fulfil his election promise. A far cry from those heady days on the campaign trail in Rewari.