Apex Court Rules Out Uniformity in Dearness Allowance among Bank Retirees



The present case “United Bank of India and others v. United Bank of India Retirees’ Welfare Association and others etc” Civil Appeal Nos. 5252-5255 Of 2018 is directed against a 2016 decision of Calcutta High Court wherein it had held that there was no justification for making a distinction between pre November, 2002 retirees and post November, 2002 retirees and the appellant must pay dearness relief to all pensioners at the same rate.

The present case was adjudicated by a Division Bench of the Hon’ble Supreme Court of India comprising of Justice Adarsh Kumar Goel and Justice Uday Umesh Lalit on 16th May 2018 wherein the High Court Judgement was overruled.


The story begins in 1993 when the managements of 58 banks and their workmen through their registered associations signed a “Memorandum of Settlement” to introduce pension scheme in banks for the workmen/employees in lieu of employers’ contribution to the provident fund broadly on Central Government/Reserve Bank of India pattern and provide “Dearness relief” or “Dearness Allowance” to pensioners.

It is to be determined in line with the dearness allowance formulae in operation in RBI. Dearness Relief shall be granted on compassionate allowance( these are medical conditions that meet Social Security standards for disability benefits) or family pension or invalid Pension or on  basic pension.

Dearness Allowance ranges from 3 categories of workers who retired from 1992 to 2005, was based upon the basic pension of the workers and their pay and the allowance ranged from Rs. 1250 to even above Rs. 6010.

Reserve Bank of India, which initially was not giving full compensation against price rise on dearness relief to employees who retired prior to 01.11.2002 started giving full compensation.

Since some retirees of United Bank of India who had retired prior to 01.11.2002 were not entitled to this compensation, they filed a Writ Petition in 2012 in the High Court at Calcutta. The court held the classification denying the benefit of full dearness relief to retirees prior to 01.11.2002 was arbitrary, discriminatory and irrational.


In “D.S. Nakara v. Union of India” (1983) 1 SCC 305 the Supreme court had held that the pensioners retiring on different days must be placed on equal footing and any discrimination between the workers on the basis of the day of retirement was a violation of Article 14 of the Constitution Of India enshrining Right To Equality. Classification between such a homogeneous class, if any, should necessarily be based upon some rational principle having nexus to the object that is to be achieved.

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In “State of Punjab v. Justice S.S. Dewan (Retired Chief Justice ) and
Others” (1997) 4 SCC 569 the decision in D.S. Nakara was distinguished and it was held that the State was entitled to distinguish between the sets of retirees if it was not a case of liberalization of the existing scheme but introduction of a new retiral benefit. In this case, it happened to be the years put in by a judicial officer as an advocate prior to his induction in judicial service that were to be added for the purpose of pension. 


The court observed that the parity that is sought in the petition is based upon a “flat rate” idea. Thus what is prayed for in the petition is not the same rate but the same principle which will be achieved only when a flat rate of 0.24% is adopted for all the employees.

“The tapering formula undoubtedly begins with 0.24% for the first segment of Rs.3550/- of basic pension and then progressively steps down and finally reaches the level of 0.06% where the basic pension is in excess of Rs.6010/-. What is devised by way of such tapering formula is higher rate at the lower levels of segments so that larger number of peoples would get maximum advantage and the rate thereafter keeps stepping down.”

The court added

“If we adopt a flat rate of 0.24% as is being prayed for, the class of retirees who retired before 01.11.2002 will stand conferred better rate than those employees who retired after 01.11.2002.”

“Each class is governed by distinct and different parameters. These are all matters of policy making. The conferral of advantages of benefits on two different classes of retirees has a completely distinct formula and rates and it would not be possible to have a synthesis on any count or to put both the sets of retirees on any common parameters….It is not a case of creating a class within a class.”


This article is penned by Gunjeet Singh Bagga.


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