IBA Clarification & HRMD Circular Can’t Override 2014 Guidelines: Supreme Court Directs PNB To Re-Fix Pay Of Ex-Servicemen

The Supreme Court has directed the Punjab National Bank (PNB) to re-fix the pay of ex-servicemen, holding that the Indian Banks Association (IBA) Clarification and Human Resource Management Development (HRMD) Circular cannot override the 2014 Government Guidelines.

A Civil Appeal was filed by the ex-servicemen against the Order of the Kerala High Court’s Division Bench, which allowed a Writ Appeal.

The two-Judge Bench of Justice J.K. Maheshwari and Justice Vijay Bishnoi held, “It is to be noted here that as per the findings recorded by the learned Single Judge in para 15 and confirmed by Division Bench in para 10 in the impugned judgment, it is clear that the IBA Clarification and the subsequent HRMD Circular do not override the 2014 guidelines and neither of the parties have disputed the said fact. During hearing, the parties have conceded to the applicability of the 2014 guidelines qua the lis and the finding on this issue does not require any re-look or re-appreciation in detail except to acknowledge its conclusion.”

The Bench was of the view that refixation done by the bank ignoring 2014 guidelines in applying IBA clarification and the HRMD circular deserves to be quashed.

Senior Advocate Gautam Narayan appeared for the Appellants while Senior Advocate Dhruv Mehta and AOR Rajesh Kumar Gautam appeared for the Respondents.

Case Background

The Appellants after their retirement from Indian Navy, were re-employed with the Respondent-Bank as Single Window Operator-A (SWOA) in the Clerical Cadre. in between 2015-2017. The IBA vide letter issued a clarification regarding “pay fixation of ex-servicemen” advising that maximum basic pay for ex-servicemen be fixed at Rs. 31,540/-. In this view, the Bank vide HRM circular directed that the pay-fixation of all ex-servicemen/ex commissioned officers be made accordingly.

Thereafter, basic pay of all the Appellants was re-fixed at Rs. 31, 540/-. The discord between the parties arose as the Bank re-fixed the pay of the Appellants at an amount lower than what they were re-employed at. This was challenged before the Single Bench in the Writ Petition, which was allowed. However, in Appeal, the Judgment of the Single Bench was set aside by the Division Bench. Hence, the case was before the Apex Court.

Reasoning

The Supreme Court in the above context of the case, carved out three essentials for re-fixation of the pay of an ex-serviceman on re-employment in the public sector bank –

(i) They would be entitled to protection of pay plus DA drawn by them at the time of release from Armed Forces; and would further be entitled for entire pension and benefit of MSP, if any, in their pension from the Government on re employment;

(ii) During fixation of pay in re-employment, the pay would mean Basic Pay plus Special Allowance/Special Pay, as the case may be, to the re-employed post;

(iii) While fixing the pay of ex-servicemen, the pay protected plus pension would not exceed the minimum of the scale of pay of the General Manager in the Bank in terms of the guidelines issued by the Ministry of Finance.

The Court said that as such, the fixation of pay of the Appellants ought to be made applying the above three broad guidelines.

“In the case at hand, the justification of re-fixation made by the Bank is required to be appreciated in the light of three essentials as summed up above. … The learned counsel for the appellants placed reliance on the judgment of this Court in the case of K.P. Subbaiah (supra), wherein the distinction of ‘pay’ and ‘pay scale’ and the distinction of ‘pay fixation’ and ‘fixation of pay scale’ have been elaborated to indicate the general principles and factors to be taken into consideration”, it noted.

The Court added that the case wherein re-fixation was in blatant violation of the applicable 2014 guidelines while relying upon the IBA clarification and HRMD circular, the reliance on the said Judgment is of no help to the Appellants.

“After going through the facts of this case, it is not in dispute that the order of re-fixation has been passed without affording an opportunity to the appellants. Observance of the principles of natural justice in cases of re-fixation of pay leading to financial loss is sine qua non. Considering the aforesaid, we have no hesitation to hold that the Bank while re-fixing the pay had violated the principles of natural justice and reduced the pay of appellants without hearing them”, it further held.

The Court also held that IBA clarification and HRMD circular are not in consonance with the 2014 guidelines for pay fixation of ex-servicemen and for purpose of fixation of pay, the 2014 guidelines shall prevail over the IBA clarification and HRMD circular.

“… the re-fixation applying IBA clarification and HRMD circular by ignoring the 2014 guidelines is not justified. We have already held that that by virtue of passing order of re-fixation, the appellants have suffered civil consequences, therefore, without affording an opportunity, re-fixation so done, was in violation of principle of natural justice hence, it is set-aside”, it added.

Conclusion

The Court, therefore, directed the Bank to apply the 2014 guidelines and re-fix the pay of the Appellants on the principles broadly culled out and discussed.

“We further direct that the recovery and refund, if any, shall stand quashed and the refund which has been made during the pendency of the writ petition/writ appeal, or the present appeal also stands quashed. In view of the above discussion refixation be made afresh. While fixing the pay, in case, the pay of the appellants is reduced from initial fixation, the bank shall observe the principle of natural justice”, it concluded.

Accordingly, the Apex Court allowed the Appeal to the above extent.

Cause Title- Mukund K. Pai & Ors. v. Punjab National Bank & Ors. (Neutral Citation: 2025 INSC 1033)

Appearance:

Appellants: Senior Advocate Gautam Narayan, AORs James P. Thomas, Asmita Singh, Advocates Liju V Stephen, Indu Susan Jacob, and Ravi Sagar.

Respondents: Senior Advocate Dhruv Mehta, AOR Rajesh Kumar Gautam, Advocates Anant Gautam, Deepanjal Choudhary, and Likivi Jakhalu.

Click here to read/download the Judgment