Supreme Court Issues Notice In Plea Challenging 15-Year Pension Commutation Restoration Rule; Issues Notice To Andhra Pradesh Govt.

The Supreme Court issued notice in the SLP filed against the order of the Andhra Pradesh High Court upholding the validity of the Rule 18 of the Andhra Pradesh Civil Pensions (Commutation) Rules, 1944 which stipulates a 15-year period for the restoration of the commuted portion of pension.

The Petitioners contended that the said Rule was arbitrary, unjust and leads to unjust enrichment of the state.

The Bench of Justice J.K Maheshwari and Justice Vijay Bishnoi heard the matter and issued notice.

AOR Venkata Raghuvamsy D. represented the Petitioner.

Case Brief

A batch of Writ Petitions were filed at the High Court by all retired Government Employees contending that the Rule 18 of the Andhra Pradesh Civil Pensions (Commutation) Rules, 1944 was arbitrary, unjust and leads to unjust enrichment of the state. They retired from service on attaining the age of superannuation of 58 years.

The petition was with regard to all those employees who had joined the government service before 1st of September 2004. The Andhra Pradesh Civil Pension (Commutation) Rules, 1944 prescribes the relevant provisions for commutation of pension. As per Rule 2(a), a government servant to whom Rules, 1944 apply, would be allowed to commute, for a lump sum payment, any portion not exceeding 40 percent of the pension granted to him by the State Government which was enhanced from one third of the pension with effect from April 1, 1999.

Further, as per the scheme of the Rules, it was made clear to a retiring employee that upon receipt of the lump sum amount representing the commuted value of the pension calculated as per the prescribed mechanism, the full pension would be restored only after 15 years from the date of commutation of the pension.

The High Court held, “The fact that even after 15 years, receipt of a lump sum amount by a pensioner if invested rightly earns better returns as compared to receiving full pension on a monthly basis, goes to show that the scheme framed by the Government, even when it envisages restoration of full pension upon completion of 15 years, is not detrimental to the interest of the petitioner. Moreover, whereas the pensioner is liable to pay income tax on the monthly pension which he receives at the end of the year, the amount if paid in lump sum upon commutation is not liable to be taxed at all.”

Resultantly, the High Court was of the opinion that the said Rule does not suffer from any perversity or arbitrariness.

In light of the above and upon hearing the submissions, the Supreme Court issued notice in the SLP.

Cause Title: B Appa Rao V. The State of Andhra Pradesh

Click here to read/download Order