Thursday, 11 April 2013

High Powered Committee Report

Encl 215/A
Report of the High Powered Committee Constituted to
Assess the Financial Impact in the Implementation of the
Order dated 8.3.2010 of the Hon’ble Supreme Court in
Writ Petition (C) 96/2009 – Sunil Kumar Chand & Ors Vs Union of India & Others

                        This High Powered Committee was constituted vide Ministry of Defence O.M. No. 34 (1)/2006 – D (Pay/Services) dated 5.4.2010 to assess the financial implications arising from implementation of the Hon’ble Supreme Court’s Order dated 8.3.2010 in W.P. (C) No. 96/2009 – Col. Sunil Kumar & Ors Vs Union of India & Ors and Transfer Petition (C) No. 56/2007 – Union of India vs. N.K. Nair & Ors. in the matter of Rank Pay. The Committee met on 7.4.2010 in the Chamber of Defence Secretary.

2.                  The Committee was apprised of the brief background of the case. One Major A.K. Dhanapalan (Retd) filed a writ petition in the Hon’ble Kerala High Court in 1996 challenging the process of revision of pay w.e.f. 1.11986. His main pleas was that Rank Pay must not be deducted while revising the pay. The writ petition was allowed by the Single Judge vide judgment dated 5.10.1998. A writ appeal filed by the Union of India against the Order of the Single Judge was dismissed by the Division Bench vide its judgment dated 4.7.2003. An SLP filed by the Union of India in the Hon’ble Supreme Court against the decision of the Hon’ble High Court was dismissed on ground of delay vide Order dated 12.7.2005. The decision was then implemented in favour of the sole petitioner, Maj. A. K. Dhanapalan (Retd).

3.                  Thereafter, on the advice of the Learned Additional Solicitor General of India, Transfer Petition (C) No. 56/2007 seeking transfer of 11 writ petitions filed in different High Courts on the same issue was filed in the Hon’ble Supreme Court in 2007. The Hon’ble Supreme Court granted stay in the matter vide Order sated 5.2.2007. In 2009, two more writ petitions as mentioned above were filed in the Hon’ble Supreme Court in the similar matter. Ministry of Defence filed a Counter Affidavit in the Hon’ble Supreme Court. The Transfer Petition filed by the Union of India and the two writ petitions were tagged together. All these cases were taken for hearing on 8.3.2010 when the Hon’ble Supreme Court allowed all the writ petitions, agreeing with the judgment of the Single Judge as well as that of the Division Bench of the Hon’ble Kerala High Court. The Hon’ble Supreme Court also directed the Government to pay interest @ 6% per annum thereon.

4.                  The point under contention in all these interconnected matters is the methodology for pay revision/fixation as recommended by the Fourth Central Pay Commission and accepted by the Government. The Pay Commission gave its recommendation on pay fixation in para 28.113 of its report which was accepted by the Government. The relevant para of the Pay Commission Report is reproduced hereunder:             

            Fixation of pay in the proposed scales

28.113.            ‘In Chapter 30 we have recommended the method for fixation of pay in the proposed scales for civilian employees, we recommend that the same method may be adopted for fixation of pay of armed forces personnel also. Since rank pay is a separate element for officers upto the rank of Brigadier and equivalent, the same may be taken into account while fixing pay in the integrated scale of pay recommended by us. An illustration showing the pay in the integrated scale of pay for army officers of different ranks is given in Annexe 28.1. The following illustration indicate the manner in which pay should be fixed for armed forces personnel.
Illustration No. 1
1. Rank                                                            Captain
2. Existing Basic pay                                       Rs . 1300.00  
3.DP/ADA on basic pay at the index
Average 608 and interim relief                       Rs 1650.00
4. Existing emoluments                                  Rs 2950.00
5. Add 20% of basic pay                                  Rs 260.00
Total                                                                Rs 3210.00
6. Pay to be fixed in                                        Rs 3100 + Rank Pay Rs200  
Integrated scale                                               

5.                  Till 31.12.1985 (i.e. prior to 4th Central Pay Commission), the Service Officers had distinct pay scales for the various ranks and there was no separate rank pay. The 4th Central Pay Commission introduced for the first time for the Armed Forces Officers an integrated pay scale from the rank of 2nd Lieutenant to the rank of Brigadier. To differentiate between ranks, rank pay was carved out for the ranks of Captain to Brigadier. The 4th Pay Commission specifically mentioned that the method of pay fixation adopted for civilian employees may also be adopted for Armed Forces personnel. Four illustrations on the manner of fixation of pay of Commissioned Officers were given in the Report itself. Pay fixation was done strictly in accordance with the recommendations of the Commission accepted by the Government and the illustrations given in the Commission’s Report.

6.                  Going ahead with the above recommendations which were accepted by the Government, Ministry of Defence issued Special Army Instruction (SAI) dated 23.6.1987. Relevant portions of the SAI reads as follows:

Fixation of Initial Pay in the Revised Scales
6. Fixation of initial pay in the revised scales will be regulated as follows:-

(a) (i) An amount representing 20 percent of the basic pay in the existing scale shall be added to the existing emoluments of the officer. 

(ii) After the existing emoluments have been so increased, an amount equivalent to the rank pay, if any, appropriate to the rank held by the officer on 01 January, 1986 at the rates prescribed in para 3 (a) (ii) above will be deducted. Thereafter, the officer’s pay will be fixed in the revised scale at the next stage above the amount thus computed.    

In addition to the pay so fixed in the revised scale, officers were eligible for Rank Pay.

7.                              This deduction of rank pay during the process of fixation of pay has been challenged in the above court cases. The Hon’ble Supreme Court vide Order dated 8.3.2010 has upheld the decisions of Hon’ble Kerala High Court that Rank Pay must not be deducted.

8.                              Controller General of Defence Accounts (CGDA) was requested to work out the financial implications of implementation of the above Order of Hon’ble Supreme Court. CGDA made a detailed calculation and submitted their report on 6.4.2010. The Committee, after detailed deliberations, assessed the financial impact on the basis of report of CGDA dated 6.4.2010. The Committee noted that 46,480 serving officers (estimated) are covered and arrears amounting to around Rs 426 crore are required to be paid to them. On Pension side, arrears amounting to around Rs 83 crore are required to be paid to retired officers. Calculations by CGDA reveal that interest @ 6 % per annum as ordered by the Hon’ble Supreme Court on these arrears on Pay and Pension comes to around Rs 932.94 crore and Rs 181.77 crore respectively. Thus, the total financial impact calculated by CGDA is rs 1623.71 crore approximately. The repercussions on similar situations in subsequent pay fixations will have additional financial implications.    

9. Apart from the enormous financial implications, actual implementation of the Hon’ble Court’s order would involve the following stages: -

§         Revision of pay of officers on 1.1.1986, 1.1.1996 and 1.1.2006 with simultaneous revision of all pay linked allowances/benefits. Enormous efforts are required to extract data from all backed up resources, including information relating to promotion, annual increment, stagnation increment, details of forfeiture, admissibility, discontinuation of relevant allowances, calculation of Income tax and apportioning the same over the years;

§         Calculation of DA on slab basis from 1.1.1986 to 31.12.1995 is time consuming;

§         Revision of retirement benefits (gratuity, leave encashment) of officers retiring after 1.1.1986;

§         Revision of pension on 1.1.1986, 1.1.1996 and 1.1.2006;

§         In several cases, family pensions would have to be revised on the basis of revised pay/pension of the officer;

§         In some cases, payments may have to be made to legal heirs of the deceased retired officers; and

§         Interest at the rate of 6% per annum for upto 24 years in each case will have to be calculated and paid.

This would be a protracted exercise taking a lot of time and involving huge manpower as each case will have to be examined/calculated individually.

10. Financial implications of around 1623.71 crores arising out of implementation of the Hon’ble Supreme Court   order dated 8-3-2010 would create a substantial impact on the public exchequer. This impact in only one time. In addition, it would also lead to enhanced recurring expenditure from Consolidated Fund of India. It would further nullify the recommendation of the Pay Commission as well as the decision of the Government thereon. The Committee, therefore, is of the view that the financial implications and above facts and in the present matter may be submitted to the Hon’ble Supreme Court   for considerations.”

Sd/-----------------                                  Sd/------------------------------                 Sd/--------------------------
Indu Liberhan                                                  Sushama Nath                       Pradeep Kumar
Secretary                                                        Secretary                              Defence Secretary
Defence (Finance)                                           D/o Expenditure
M/o Defence                                                   M/o Finance


Foot notes (not part of the HPC report but for quick co-relating)

From Annexure I to UoI Additional Affidavit filed on 21.4.2011

1.                  Extracts from MoD Resolution No. 1(E) dated 18.3.1987

            “The decisions of the Government of India on the recommendations of the Fourth Pay Commission relating to personnel below Officer rank of the Armed Forces were notified in the Ministry of Defence Resolution No. 1-E dated 4th October 1986. Government have now given careful consideration to the recommendations of the Commission relating to structure of emoluments and allowances of Commissioned Officers and have decided that recommendations of the Commission in respect of these shall be accepted broadly, subject to the modifications mentioned below: -

Pay Scales:

            Integrated Pay scale for officers upto the rank of Brigadiers (including AMC, ADC and RVC officers, but, excluding Military Nursing Service Officers) and equivalents in the Navy and the Air Force would be Rs 2300-100-3900-150-4200-EB-150-5100. In addition to pay in the integrated scale, rank pays will be admissible as follows: -

                        Rank                                                                Amount of Rank Pay
                                                                                                (Rs. Per month)
                        Captain and equivalent                                               -200
                        Major and equivalent                                                  -600
                        Lt Col (Selection) and equivalent                                -800
                        Colonel and equivalent                                               -1000
                        Brigadier and equivalent                                            -1200

2.                  Pay Fixation in Integrated Pay scale of Services (Rs 2300-100-3900-150-4200-EB-150-5100) and corresponding Civilian Pay Scales
Services Pay Fixation in the rank of Captain (Rs 1100-50-1550) as per SAI 1/S/1987 dated 23.06.1987

1. Existing Basic Pay                             Rs 1300
2. DA/AD on basic pay etc                  Rs 1650
3. Existing emoluments                      Rs 2950
4. Add 20% of Basic Pay                      Rs  260
     Total                                                 Rs 3210
5. Deduct Rank Pay Rs    200             Rs 3010
6. Pay to be fixed in integrated scale
                                    Rs 3100 + Rank Pay Rs 200
Total emoluments                             Rs 3300
Civilian pay fixation in the pay scale of Rs 1100-1600 (MoF Notification No. F.15 (1)-IC/86 dated 13.09.1986
1. Existing scale of Pay      Rs 1100-50-1600        
2. Revised scale of Pay  Rs 3000-100-3500-
3. Existing basic pay                           Rs 1300
2. DP/ADA/Ad hoc DA etc                 Rs 1650
3. Existing emoluments                     Rs 2950
4. Add 20% of Basic Pay                    Rs   260
5. Total                                                Rs 3210

Pay to be fixed in revised scale       Rs 3300
Services Pay Fixation in the rank of Major (Rs 1450-50-1800) as per SAI 1/S/1987 dated 23.06.1987

1. Existing Basic Pay                             Rs 1600
2. DA/AD on basic pay etc                  Rs 1740
3. Existing emoluments                      Rs 3340
4. Add 20% of Basic Pay                      Rs  320
     Total                                                 Rs 3660
5. Deduct Rank Pay Rs    200             Rs 3060
6. Pay to be fixed in integrated scale
                                    Rs 3400 + Rank Pay Rs 600
Total emoluments                             Rs 4000
Civilian pay fixation in the pay scale of Rs 1500-2000 (MoF Notification No. F.15 (1)-IC/86 dated 13.09.1986
1. Existing scale of Pay      Rs 1500-60-1800
2. Revised scale of Pay  Rs 3700-125-4700-
3. Existing basic pay                           Rs 1600
2. DP/ADA/Ad hoc DA etc                 Rs 1740
3. Existing emoluments                     Rs 3340
4. Add 20% of Basic Pay                    Rs   320
5. Total                                                Rs 3660
Pay to be fixed in revised scale       Rs 3700

2.From Part III of the Reply dated 3.4.2013 to RTI

                                                                                                                                                Encl 66/A
Most Immediate
Court Case
Ministry of Defence
D (Pay/Services)

Sub: Implementation of Supreme Court order dated 4.9.2012 in the rank pay case.

            With reference to the discussions held in the office of the AS (A) on 4.12.2102 on the subject, it is requested that a revised DGL may be furnished regarding the modalities and methodology of payment in the Supreme Court Rank Pay Judgment dated 4.9.2012, which should address the following issues:

“…………………….. (vi) Whether the Affidavit filed by the Committee of Three Secretaries in the Supreme Court will have any impact on the re-fixation of pay in the Rank Pay case…..”

(Praveen Kumar)
Director (AG.I)
Jt CDGA (AT.I) Shri Mohinder Singh
MoD ID No. 34(6)2012-D (Pay/Services) dated 6.12.2012

 Encl 71/A
Urgent/Court case

Office of the CGDA, Ulan Batar Road, Palam, Delhi Cantt-10

Subject: Implementation of Hon’ble Supreme Court order dated 4/9/2012
in IA No. 9 of 2010 in Transfer Petition No. 56 of 2007 filed by UoI v/s N.K. Nair & Ors on the matter of Rank Pay.

Reference: MoD, D (Pay/Services) two IDs both bearing No. 34 (6)/2012 – D(Pay/Services) dated 06/12/2012 addressed to this HQ office and copy to your office.

            As desired in MoD Ids cited above, the revised DGL addressing the issues regarding minimum pay for each rank, integrated scale, method of fixation of pay from 01/01/1996 and admissibility of Grade Pay is forwarded herewith for consideration.

2.                  Regarding Dearness Allowance, Interim Relief and Dearness Pay and Non-Practising Allowance in r/o AMC/ADC/RVC there is already provision in Para 2 (e) of the DGL.
3.                  Following is submitted for consideration regarding method/procedures if the pay crosses the maximum of the pay scale after requisite fixation and whether the excess amount should be treated as personal pay or otherwise in Para 1(iv) of MoD ID dated 06/12/2012……...

4.                  The DGL has been prepared by this HQ office as per the Hon’ble Supreme Court order dated 04/09/2012. The DGL caters for the affidavit filed by the Committee of Three Secretaries in Supreme Court. However, Secretary Defence (Finance) being one of the signatories, views of MoD (Finance) may be obtained in this regard.

5.         The details of rank-wise calculations of the minimum and the maximum of the pay scales as per proposed revised DGL have been called for from the PCDA (O) Pune. The same will follow shortly. 

(K L Mound)
Phone No.011-25665581
Sh. B. K. Mukhopadhyay
JS & Addl FA (M)
MoD (Finance) (AG/PA)
New Delhi


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