LIC BOARD RESOLUTION dated 24.11.2001

LET US BE CLEAR-LIC BOARD RESOLUTION DATED 24/11/2001 ENVISAGED UPGRADATION OF PENSION BOTH IN INTENT AND SOME ACTIONS

There had been for quite some time a doubt in the minds of pensioners as to whether the LIC Board Resolution passed on 24/11/2001 with subsequent recommendations made by LIC to the Ministry of Finance had indeed envisaged upgradation of pension.

It all started with the anomaly in DR for pre-August 1997 retirees being detected after the wage revision w e f 1/8/1997 which was notified on 22/6/2000   when Para 3A was inserted in Appendix IV of  the LIC Pension Rules 1995 whereby the rate of Dearness Relief for employees retired after 1/8/1997 was fixed at 0.23% of basic pension on par with the Dearness Allowance fixed for serving employees on the basic pay on 100% neutralisation of DA. This amendment sharply contrasted with the Para 3 of Annexure IV of LIC Pension Rules 1995 which not only provided for rates of DR for Para 1 retirees {  of the period 1/1/1986 to 31/7/1992(31/3/1993 in case of Class I Officers) } and Para 2 retirees { of the period 1/8/1992 (1/4/1993 in case of Class I Officers) and 31/7/1997} with reduced boundaries of basic  pension slabs compared to   boundaries of basic pay slabs  .The rates of DA  for serving employees were at the same percentages, while slabs of basic pension in Appendix IV were found to have been slashed to half the basic pay of serving employees. Thus there was not only no 100%  neutralisation of  DA/DR   for serving/retired employees respectively, but there was no equitable DA/DR formulae for serving employees and retirees, while such equity was ensured w e f 1/8/1997 after the wage revision at 0.23% of Basic Pay/Basic Pension. This anomaly awakened the pre-August 1997 retirees that they were dispensed an inadequate pension due to substantially  lower DR from 1/11/1993 by a double cut, namely with basic pension being 50% of the average monthly emoluments and the rate of DR working out  to a  reduced amount. This loss is also of a recurring nature till date only partially reduced by the DHC judgment dated 27/4/2017 when the HC bench modified the DR formulae albeit in an arbitrary manner. 

When this anomaly in DR was taken up by the Pensioners' Representative bodies with the LIC Management in 2001, LIC considered the matter and submitted a Note to the Board giving the entire background for the meeting held on 24/11/2001, when the following Minutes of the meeting were recorded:

"LIFE INSURANCE CORPORATION OF INDIA

CENTRAL OFFICE, MUMBAI

MINUTES OF THE 492nd MEETING OF THE LIFE INSURANCE CORPORATION OF INDIA HELD ON 24.11.2001 AT 11.30 A.M.AT HOTEL LE MERIDIAN, NEW DELHI

Amendment to LIC of India (Employees) Pension Rules,1995-UPGRADING OF BASIC PENSION TO AICIPI 1740 Points and 100% DA neutralization thereon in respect of Retirees prior to 01.08.1997

-------------------------------------------------------------------

Executive Director (Personnel) introducing the subject mentioned that there were three different rates for different groups of pensioners at present depending on their dates of retirement, which cause considerable administrative inconvenience. Chairman pointed out that he has since received a communication from Dr. S. Ram Khanna, Board Member, which refers to his meeting with the Retirees Federation and requested examining the proposal in detailed. The Note is in line with the demands made by the Federation, viz., giving effect to the proposal from 1.11.1993 and upgradation by giving weightage of 11.25% as in the case of in service employees. Chairman pointed out that these have been considered before placing the matter to the Board and it was felt that the same would increase the financial burden very substantially and may be unaffordable for the Corporation. Chairman pointed out that the implications of the proposal made have been actuarially determined at Rs.51.37 crores and the annual outlay be in the region of 6 to 8 crores. After some discussion the Board approved the proposal and suggested that it should be implemented prospectively and after obtaining Government approval."

The recommendations were sent by the LIC Central Office to the Ministry of Finance for approval.

The intent of this Board decision is clear. The pension should be upgraded

 w e f 1/8/1997 by providing weightage of 11.25% ( after merger of Basic Pay and DA).But when it came to sending illustrations to the Ministry on the methodology to be adopted, in August 2003, LIC sent the illustrative chart to MoF by arriving at the revised pension as at 1/8/1997 by  merging the existing DR with the basic pension. Even though the decision in the Board Resolution was for OROP as at 1/8/1997, what was adopted in the illustration was one of modified parity according to LIC's own perception of upgradation leaving out  removal of DR anomaly from 1/11/1993 and also leaving out the weightage of 11.25% mentioned in the Board Resolution. The Board Resolution is still a pending matter for decision before the MoF for approval notwithstanding all the developments on the legal front that took place since litigation was launched in 1998 and pending in Supreme Court till date.

The same methodology was adopted when LIC on the directions of the Supreme Court paid arrears of pension on account at Jaipur Registry of the Rajasthan HC, similar payment at the Chandigarh Registry of Punjab & Haryana HC, payment of 20% IR as per SC directions dt 7/5/2015 and also 40% IR to all the eligible pensioners as per para 3A as per the directions of the SC in its judgment dated 31/3/2016.

If LIC had no intent of upgrading pension, but to only remove the DR anomaly, all that they needed to do was change the DR formulae in Appendix IV identical with that applicable to DA formula used for serving employees with only the difference that in case of pensioners it was Basic Pension whereas it was Basic Pay for calculating DR/DA as the reference parameter for calculating DR/DA slabs. But it was not done that way.

From the above, it emerges clearly that LIC accepted the principle of upgradation of pension as at 1/8/1997 in its calculation made in the illustrations 'according to the Board Resolution' and the interim relief paid as per various orders of the SC, although these calculations were not strictly as per the  letter and spirit of the Board Resolution dated 24/11/2001.

We also need to remember that when this Board Meeting took place, only the wage revision effective from 1/8/1997 had been notified on 22/6/2000 and the subsequent wage revision due from 1/8/2002 was notified only in 2005.So while upgradation as at 1/8/1997 was specified in the Board Resolution , what was unsaid and what was implied was that the same methodology should be followed for pre -August 1997 retirees as at 1/8/2002 as well and  as at all subsequent wage revision dates upto 1/8/2017 in chain and also whenever wage revisions occur in future.

As a corollary all employees retired after 1/8/1997 in various generations should also get upgraded pension in chain from 1/8/2002 to 1/8/2017 and also whenever wage revisions occur in future.

All this leads to one inescapable conclusion. The Board Resolution envisages upgradation of pension with every wage revision with appropriate weightage. LIC has accepted the principle of upgradation through some of its actions in a selective manner and confined it to pre-August 1997 retirees only and restricted it as an  one time measure .

The Board Resolution had been passed in the context of DR anomalies that arose in respect of pre-August 1997, but the manner in which the Board Resolution was passed, illustrations were sent to the MoF and the manner it was applied in the matter of payments of interim relief establishes clearly that LIC accepted the principle of upgradation of pension albeit selectively.

Let us therefore make no mistake about it.  LIC decided on upgradation of pension although it was applicable then for pre-August 1997 retirees. By a logical extension, today the decision taken by the Board as per its Resolution entitles all retirees after 1/8/1997 to upgraded pension with effect from the subsequent wage revision dates in chain. Only approval of the Central Government is pending.

 And LIC is fighting  in the court against its own decision taken by its Board!

THIS NEEDS TO BE IMPRESSED UPON THE SUPREME COURT.

C H Mahadevan