Supreme Court Denies Pension Benefits to Dairy Federation Employees Absorbed from State Service

The Supreme Court of India recently ruled in State of Rajasthan & Ors. vs. Dr. Hamir Singh Chouhan (Dead) by LRs & Ors. regarding pension benefits claimed by employees who were initially in government service but later absorbed into the Rajasthan Cooperative Dairy Federations. The Court held that these employees were not entitled to pensionary benefits from the State Government after their absorption into the Dairy Federations.

Background of the Case

The case involved employees who were initially appointed in the Animal Husbandry Department of the State of Rajasthan. Between 1976 and 1978, these employees were selected and transferred to work in the Rajasthan Cooperative Dairy Federations. Upon their selection, they were informed that their service conditions would change, and their employment would be considered fresh in the Dairy Federations.

These employees continued working in the Dairy Federations until their superannuation, receiving promotions and retirement benefits from their respective Milk Unions under the Dairy Federations. After six to nine years of their retirement, they filed writ petitions before the Rajasthan High Court, claiming additional pensionary benefits from the State Government.

Key Issues Before the Court

Whether the respondents continued to have a lien on their government jobs even after being permanently absorbed in the Dairy Federations.
Whether the State of Rajasthan was liable to provide pension benefits to employees who had been absorbed into another organization.
Whether the Rajasthan Service Rules, 1951, allowed for dual liens on government service and Dairy Federation employment.

Arguments by the State of Rajasthan

The State of Rajasthan, represented by Senior Counsel Dr. Manish Singhvi, made the following key arguments:

The employees were permanently absorbed in the Dairy Federations and continued their service there until retirement.
The 1976 Government Order (G.O.) explicitly stated that the lien for employees joining Dairy Federations would be maintained only for two years or until their confirmation in the new role, whichever was earlier.
Once confirmed in the Dairy Federations, they ceased to be government employees and were no longer eligible for state pension benefits.
Under Rule 18(2) of the Rajasthan Service Rules, 1951, a government servant’s lien on a post is terminated upon acquiring a lien in a permanent post outside the government cadre.
As per the judgment in State of Rajasthan & Anr. vs. S.N. Tiwari & Ors. (2009) 4 SCC 700, an employee cannot hold a lien on two substantive posts simultaneously.
Since the employees had received full retirement benefits from the Dairy Federations, claiming additional benefits from the State Government was unjustified.

Arguments by the Respondents (Retired Dairy Federation Employees)

The respondents, represented by Advocate Uday Gupta, argued:

They were initially appointed as government employees and should continue to be considered as such.
Their transfers to the Dairy Federations were on deputation, and they continued to hold lien with the State Government.
Rule 15 and Rule 18 of the Rajasthan Service Rules, 1951, should be interpreted in their favor, as their lien was not explicitly terminated.
The 1976 Government Order was merely a guideline and could not override established service rules.
The termination of their lien was illegal, and they should be entitled to pensionary benefits as government servants.

Supreme Court’s Observations

The Supreme Court bench, comprising Justices M.R. Shah and C.T. Ravikumar, analyzed the facts and made the following key observations:

“Once the respondents were absorbed into the Dairy Federations and continued working there, they ceased to have a lien with the State Government.”
“The 1976 Government Order clearly mentioned that the lien would exist for two years or until confirmation in the Dairy Federations, whichever was earlier.”
“Under Rule 18 of the Rajasthan Service Rules, 1951, a government servant’s lien on a post stands terminated upon acquiring a lien on a permanent post outside the government cadre.”
“Allowing pensionary benefits from both the State Government and the Dairy Federations would lead to an inequitable situation where employees would be drawing double benefits.”

Final Judgment

The Supreme Court ruled:

The Rajasthan High Court’s decision to grant pension benefits to the respondents was quashed.
The appeals filed by the State of Rajasthan were allowed.
The respondents were not entitled to any pensionary benefits from the State Government.
The ruling of the Division Bench and Single Judge of the High Court was set aside.

Implications of the Judgment

This ruling sets a crucial precedent in service jurisprudence:

Finality of Absorption: Employees permanently absorbed into other organizations cannot claim government benefits post-retirement.
Rule-Based Determination: The judgment reinforces the applicability of Rule 18 of the Rajasthan Service Rules, 1951, concerning lien termination.
Preventing Dual Benefits: The ruling ensures that employees cannot claim multiple pension benefits for the same period of service.
State Control Over Public Resources: It prevents misuse of government funds by ensuring pension benefits are given only to eligible employees.

Conclusion

The Supreme Court’s ruling in State of Rajasthan & Ors. vs. Dr. Hamir Singh Chouhan (Dead) by LRs & Ors. reinforces key service law principles and prevents the misinterpretation of government employment rules. By clarifying the issue of lien termination and pension benefits, the Court has provided a landmark ruling that will guide similar cases in the future.

Petitioner Name: State of Rajasthan & Ors..
Respondent Name: Dr. Hamir Singh Chouhan (Dead) by LRs & Ors..
Judgment By: Justice M.R. Shah, Justice C.T. Ravikumar.
Place Of Incident: Rajasthan.
Judgment Date: 28-04-2023.

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