Mukund K. Pai vs Punjab National Bank

REPORTABLE 2025 INSC 1033 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. OF 2025 (Arising out of SLP (C) No. 8223 of 2020)

MUKUND K. PAI & ORS. Appellant (s) VERSUS PUNJAB NATIONAL BANK & ORS. Respondent(s)

O R D E R

1) Leave granted.

2) The instant appeal has been preferred by the ex-

servicemen, challenging the impugned order dated

07.02.20201, whereby the writ appeal was allowed and the

order dated 11.04.2019,2 allowing the writ petition was

set-aside.

3) 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. The

discord between the parties arose when the respondent-

Bank re-fixed the pay of the appellants at an amount Signature Not Verified

lower Digitally signed by NIDHI AHUJA than what they were re-employed at. This was Date: 2025.08.23 13:52:10 IST Reason:

1 passed by Division Bench of Kerala High Court in W.A. No. 2094/2019. 2 passed by Single Bench in WP (C) No. 26946 of 2018. 1 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 Division Bench. Hence, the

present appeal.

4) The facts in brief are that, post-retirement from the

Indian Navy, the appellants were re-employed with the

respondent-Bank in between 2015-2017. On re-employment,

appellants nos. 1-4 were initially allowed to draw a

basic pay of Rs. 40,710/- and appellant No. 5 was of Rs.

34,160/-. Subsequently, the Indian Banks Association,

vide letter dated 17.05.2018, (hereinafter, “IBA

Clarification”), 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 respondent-bank vide HRMD Circular No. 413/2018

dated 22.06.2018 (in short “HRMD circular”), directed

that the pay-fixation of all ex-servicemen/ex-

commissioned officers be made accordingly. Thereafter,

vide letters dated 24.07.2018 and 25.07.2018, basic pay

of all the appellants was re-fixed at Rs. 31,540/-.

5) Being aggrieved, the appellants challenged the re-

fixation before the Single Bench of the High Court,

2 inter-alia asking the following reliefs:

“a. To call for the records leading to Exhibit P21 to P25.

b. To issue a writ of Certiorari setting aside Exhibit P21 to P25.

c. To declare that Exhibit P20 is not applicable to Petitioners for the purpose of fixing Petitioners pay. d. To declare that Petitioner No. 1 to 5 are entitled and eligible to the pay initially fixed by the 1 st respondent as per Exhibit P15, 16, 17, 18 and 19 respectively in consonance with the Exhibit P1 and other relevant statutory provisions. e. To issue a writ of Mandamus or any other appropriate writ order or direction directing the 1st Respondent to refund the amount deducted from the salary of Petitioner No.1 to 5 in furtherance of Exhibit P21 to P25 respectively.

AND f. Pass such other orders as this Hon’ble Court may deem fit to grant in the circumstances of the case.”

6) The assertion of the respondent-Bank is that the pay

fixation of appellant nos. 1 to 4 was inadvertently made

at the 27th stage of the cadre and that of appellant no. 5

at 22nd stage at the time of re-employment. The pay scale

beyond 20th stage is applicable only to the employees who

have reached stagnation. In compliance with the HRMD

circular, the pay of the appellant was re-fixed to the

20th stage of the cadre with a basic pay of Rs. 31,540/-.

Additionally, the basic pay being drawn by the appellants

at the time of re-employment was exceeding the minimum of

3 the scale of pay of the General Manager in the

respondent-Bank and was in contravention to Clause

2.1(iii) of the guidelines3 dated 17.02.2014 (in short

“2014 guidelines”) issued by Department of Financial

Services (Welfare). As such, it was contended that the

Bank was justified in their action of re-fixation.

7) Heard the learned counsels for the parties at length

and perused the material placed on record. It is not in

dispute that 2014 guidelines govern the re-fixation of

pay of ex-servicemen on re-employment. As such, learned

Single Judge as well as Division Bench both have

interpreted those guidelines vis-à-vis the applicability

of the IBA Clarification and the HRMD circular in the

present matter.

8) Learned Single Judge, considered the question whether

last scale of ex-servicemen need to be protected in re-

employment and while interpreting the 2014 guidelines,

opined that the IBA Clarification cannot override the

2014 guidelines. Learned Single Judge appraised as under

–

a) As held by Apex Court’s in ‘State Bank of India

3 Guidelines for fixation of pay of ex-servicemen/ex-ECOs/SSCOs, re-employed in Public Sector Banks etc. on or after 01.01.2006 – guidelines, regarding. 4 and Others Vs. K. P. Subbaiah’4, the intention of

the government was to ensure that the ex-

serviceman at the time of employment in the

public sector bank does not get an amount as pay

lesser than what he was drawing while in defence

service.

b) The aggregate of re-employed pay and pension on

re-employment of ex-servicemen should not exceed

the minimum of the scale of pay of the General

Manager in the Bank.

c) The instructions and clarifications issued by an

Association like IBA cannot supersede the

orders/instructions/guidelines issued by the

Government of India, especially when it is by

way of a benevolent welfare measure.

With the above, the learned Single Judge allowed the Writ

Petition and by quashing the order of re-fixation,

directed the Bank to disburse the arrears of withheld

salary within a period of two months.

9) On filing of the Writ Appeal, the Division Bench on

re-appraisal of the 2014 guidelines, set-aside the order

4 (2003) 11 SCC 646 5 passed by the learned Single Judge while noting as thus –

a) That the IBA guidelines cannot override the

instructions of the Government of India. A

combined reading of Sub-clause (ii) & (iii) of

2014 guidelines, makes it clear that during pay

fixation of ex-serviceman re-employed in public

sector banks, his 1ast pay drawn has to be

protected, however such pay fixed, plus the

pension drawn should not exceed the minimum of the

scale of pay of the General Manager.

b) The pay of the appellants was fixed at the maximum

of the scale of the Clerical cadre, which is at

Rs. 31,540/- with D.A. of Rs. 14,382/-; which

totals to Rs. 45,922/-. The Bank was obliged to

pay to the appellants the amount last drawn by

them at the time of their discharge from the

Indian Navy, subject to the limit of the pay on

re-employment added to the pension, which comes to

Rs. 81,438/- [Rs. 45,922 + 35,516], which is above

the minimum of the time scale of pay applicable to

the General Manager, i.e., Rs. 76,520/-.

c) In such circumstances, the order passed by the 6 learned Single Judge was set-aside.

10) Learned counsel for the appellants has emphatically

contended in the lines of observations made by learned

Single Judge and urged that in light of provisions

contained in 2014 guidelines, re-fixation of their pay

and the subsequent reduction in their salary is wholly

unjustified, therefore the judgment passed by the

Division Bench is liable to be set-aside. In support of

this contention, reliance has been placed on the judgment

of this Court in K.P. Subbaiah (supra).

11) Per contra, Mr. Dhruv Mehta, learned senior counsel

and Mr. Rajesh Kumar Gautam, learned Advocate on Record

for the respondent-Bank, have submitted that the

interpretation as made by the Division Bench is in

consonance with the spirit of the 2014 guidelines,

rightly accepting the fixation done by the Bank. The

judgment of the learned Single Bench has rightly been

set-aside by the Division Bench, and no interference is

called for by this Court.

12) After considering the submissions of learned counsel

for both the parties, the following questions fall for

our consideration:

7

(i) Whether in the facts of the present case, IBA

Clarification and HRMD Circular can override

the 2014 guidelines for the purpose of pay

fixation of ex-servicemen during re-employment

of ex-servicemen?

(ii) Whether re-fixation as done by the respondent-

Bank pursuant to the IBA Clarification is in

consonance with the guidelines dated 17.02.2014

and whether the High Court was justified in

confirming such re-fixation by impugned

judgment?

(iii) If not, in what manner can the fixation of pay

of ex-servicemen may be made on their re-

employment? And what reliefs can be granted to

the appellants?

13) Since the questions as posed hereinabove for

discussion are inter-connected and primarily based on the

contents of 2014 circular, therefore, all the issues are

being appreciated simultaneously.

14) 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

8 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.

15) In the facts, since the interpretation of the 2014

guidelines is in question, therefore, the relevant

portion of the said guidelines is reproduced as thus:

“ xxx xxx xxx

Guidelines for Pay Fixation of ex-Servicemen/Ex- ECOs/SSCOs Re-employed in Public Sector Banks on or after 01.01.2006.

Fixation of pay of ex-servicemen in Public Sector Banks is governed by the guidelines/instructions issued by the Government of India from time to time.

Accordingly, based on the Government Guidelines/instructions in force, issued vide DoPT O.M. No. 3/19/2009 – Estt(pay II) dated the 5th April, 2010 and clarification given vide O.M. No. 3/19/2009- Estt, (Pay-II) dated the 8th November, 2010, fitment of pay of ex-servicemen/ex-ECOs/SSCOs, who have been appointed in the Bank on or after 01.01.2006 is to be done as under:

2.1 Ex-Servicemen joining in workmen cadre:

Pay fixation of an ex-serviceman would be through protection of pay plus DA drawn by him at the time of released from, Armed Forces. As per the instructions issued by the Ministry of Defence vide their letter No.1/69/2008/D(Pay/Service) dated the 24th July, 2009 and advised by DoPT vide OM No. 9 3/19/2009 – Estt. (Pay II) dated the 8 th November, 2010, pre-retirement pay has been defined as under:

-

(i) In respect of re-employment taking place on or after 1.1.2006, pre-retirement pay for those who retired after 1.1.2006, means the pay in the pay band plus grade pay but inclusive of non-practicing Allowance (NPA) if any, last drawn before retirement.

(ii) In case of officer who retired before 1.1.2006 and also those who retired after 1.1.2006 in the pre-revised pay scales without opting for the revised pay scales promulgated on or after 1.1.2006 the pay will be basic pay including stagnation increment and Rank Pay plus Dearness Pay and Dearness Allowance drawn at the time of retirement. As such, the figure of pay plus D.A. admissible in the Bank will be fixed with reference to this protection i.e. pay as mentioned above plus DA and relevant stage of the basic pay in the re-

employed scale will be determined after deducting DA admissible in the Bank from the figure protected. For the purpose of fixation of pay on re-employment, the pay would mean the basic pay plus the special allowance/special pay as the case may be, attached to the re-employed post (where applicable). As the MSP has not been included in pre-retirement pay as per the definition given by the Ministry of Defence vide letter No.1/69/2008/D (Pay/Service) dated 24.07.2009, the protection of the component of MSP in re- fixation of pay in Bank has been excluded. Moreover, the ex-servicemen on re-fixation of pay in Bank has been excluded. Moreover, the ex-servicemen on re-employment in the banks are allowed to draw entire pension i.e., entire pension is ignored and not reduced from the re-fixed pay. As such, they will get the benefit of the component of Military Service Pay (MSP), if any, in their pension from the Government.

(iii) In addition to the pay so fixed, as aforesaid, 10 pension and other retirement benefits may be allowed to be drawn. This will, however be subject to limitation that the aggregate of re-employed pay and pension on re-employment of ex-servicemen would not exceed the minimum of the scale of pay of the General Manager in the Bank as per Ministry of Finance letter No.F4/1/98-SCT(B) dated 02.09.1998.

xxx xxx xxx”

16) On perusal of aforementioned guidelines, it is clear

that on re-employment prior to or after 01.01.2006, the

ex-servicemen in Public Sector Banks are governed by the

instructions issued by the Government of India from time

to time. By way of Government guidelines/instructions

issued vide DOPT O.M. No.3/19/2009-Estt. (Pay II) dated

05.04.2010 and its clarification O.M. dated 08.11.2010,

fitment of pay of ex-servicemen/ex-ECOs/SSCOs who have

been appointed in the Bank prior to or after 01.01.2006

ought to be done as per 2014 guidelines. As per Clause

2.1, it is clear that an ex-serviceman would have

protection of pay plus DA drawn at the time of release of

from the Armed Forces.

17) In the 2014 guidelines, pre-retirement pay has also

been defined. However, the present case relates to clause

2.1(ii), whereby officers who retire either before or

after 01.01.2006, their pay fixation ought to be made as

11 specified. The Government has clarified that the pay plus

DA admissible in Bank will be fixed in reference to the

protection of pay plus DA as mentioned, and relevant

stage of the basic pay in the re-employed scale will be

determined after deducting DA admissible in the Bank from

the figure protected.

18) It has been further clarified that for the purpose of

fixation of pay on re-employment, the pay would mean

basic pay plus special allowance/special pay as the case

may be, attached to the re-employed post. On re-

employment in the Bank, the ex-servicemen are also

allowed to draw the entire pension. They are also

entitled to get the benefit of component of Military

Service Pay (MSP), if any, in their pension from the

Government.

19) In the backdrop of the above and looking to the issue

at hand, Clause 2.1(iii) also assumes relevance, whereby

in case of ex-servicemen, the pay as directed while

fixing on re-employment and the pension allowed to them

would not exceed the minimum of the pay scale of the

General Manager in the Bank in terms of the guidelines

issued by the Ministry of Finance vide letter No.F4/1/98-

12 SCT(B) dated 02.09.1998. In view of the foregoing, the

three essentials can be broadly carved out 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.

As such, the fixation of pay of the appellants ought to

be made applying the abovesaid three broad guidelines.

20) In the case at hand, the justification of re-fixation

made by the Bank is required to be appreciated in the 13 light of three essentials as summed up above. As per

refixation letters dated 24.07.2018 and 25.07.2018, it is

clear that the Bank has referred to pay fixation made on

the date of re-employment, and later referring the IBA

clarification and HRMD circular, reduced the pay of

appellant nos. 1 to 4 from Rs. 40,710/- to Rs. 31,540/-

and of appellant no. 5 from Rs. 34,160/- to Rs. 31,540/-

respectively, citing that their pay deserves to be

protected only to the extent of 20th stage. Since the

appellants’ pay were fixed over and above the 20 th stage

of their cadre in re-employment at 27th stage (appellant

nos. 1 to 4) and 22nd stage (appellant no. 5), therefore,

on the pretext of re-fixation, applying the guideline

which were not applicable, the re-fixation has been

directed.

21) Learned Single Judge while appreciating the

applicability of the IBA clarification and the HRMD

circular has recorded the finding that 2014 guidelines

have overriding effect and the Division Bench has

affirmed that finding. The bank has not assailed that

finding taking recourse as permissible. In addition, it

is relevant to note that 2014 guidelines were issued by

14 Department of Financial Services (Welfare), Government of

India. While discussing the issue in para 14 above, it is

conceded on behalf of the bank that 2014 guidelines would

have an overriding effect qua the lis in hand. Looking to

all these aspects, in our view, refixation done by the

bank ignoring 2014 guidelines in applying IBA

clarification and the HRMD circular deserves to be

quashed.

22) 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. In our view, in the facts of the case,

wherein re-fixation was in blatant violation of the

applicable 2014 guidelines while relying upon the IBA

clarification and HRMD circular, therefore, the reliance

on the said judgment is of no help to the appellants.

23) Be that as it may, by the order of re-fixation of pay

the appellants’ pay were reduced in the wake of

refixation. The deductions in the pay scale recurring

15 reductions of salary affects the civil consequences to an

ex-serviceman. This is urged that such refixation cannot

be directed without observance of the principle of

natural justice. In support thereto, reliance has been

placed on the judgment of this Court in the case of

‘Bhagwan Shukla Vs. Union of India and Others’5, wherein

while dealing with question of reduction of basic pay of

appellant, this Court held thus:

“3. We have heard learned counsel for the parties. That the petitioner's basic pay had been fixed since 1970 at Rs 190 p.m. is not disputed. There is also no dispute that the basic pay of the appellant was reduced to Rs 181 p.m. from Rs 190 p.m. in 1991 retrospectively w.e.f. 18-12-1970. The appellant has obviously been visited with civil consequences but he had been granted no opportunity to show cause against the reduction of his basic pay. He was not even put on notice before his pay was reduced by the department and the order came to be made behind his back without following any procedure known to law. There has, thus, been a flagrant violation of the principles of natural justice and the appellant has been made to suffer huge financial loss without being heard. Fair play in action warrants that no such order which has the effect of an employee suffering civil consequences should be passed without putting the (sic employee) concerned to notice and giving him a hearing in the matter. Since, that was not done, the order (memorandum) dated 25-7-1991, which was impugned before the Tribunal could not certainly be sustained and the Central Administrative Tribunal fell in error in dismissing the petition of the appellant. The order of the Tribunal deserves to be set aside. We, accordingly, accept this appeal and set aside the order of the Central Administrative Tribunal dated 17- 9-1993 as well as the order (memorandum) impugned 5 (1994) 6 SCC 154 16 before the Tribunal dated 25-7-1991 reducing the basic pay of the appellant from Rs 190 to Rs 181 w.e.f. 18-

12-1970.”

24) 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.

25) In view of the discussion made above, we answer

question no. 1 that the 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. Similarly,

question no. 2 is answered that 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,

17 without affording an opportunity, re-fixation so done,

was in violation of principle of natural justice hence,

it is set-aside. In view of the above, question no. 3 is

also answered.

26) As per the discussion made, we further make it clear

that the relief prayed by the appellants in the writ

petition in clauses (a) to (c) deserves to be allowed in

their favour. Simultaneously, in view of the reliefs

prayed in clauses (d) and (e), we direct the Bank to

apply the 2014 guidelines and re-fix the pay of the

appellants on the principles broadly culled out and

discussed hereinabove. 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.

27) Accordingly, in view of the above, the present appeal

stands allowed to the extent indicated above. Parties to

18 bear their own cost. Pending application, if any, shall

stand disposed of.

……………………………………………………………., J.

[ J.K. MAHESHWARI ]

……………………………………………………………., J.

[ VIJAY BISHNOI ]

New Delhi;

30th July, 2025.

19