Dear Mr Awasthi,
Referring to your WhatsApp message, I wish to respond as follows:
At the outset, let me confess that I am not also a qualified person with legal expertise and whatever I write is based on the knowledge gathered from my interactions with legal experts and through taking a logical perspective.
LIC is bound to stand by the arguments they placed before the Delhi High Court. They have effectively misled the DHC against the petitioners. Our Civil Appeals are exactly to contest the Delhi High Court judgment even including the partial relief granted by DHC. On the points stated by you, my response is as follows:
1. The Rule no is not 95, but 35. It is true that there is no provision for revision of basic pension and additional pension. That was the position as at 28/6/1995 when even the Central Government pensioners were not getting revision pension. Our Pension Rules are patterned on the CCS Pension Rules 1972 as admitted in the Minutes in the LIC Board Meeting held on 24/11/2001. (The Minutes have been quoted in the Dipak Misra judgment of the Supreme Court dated 31/3/2016). Rule 56 of LIC Pension Rules 1995, state that where no express provisions in "these rules", the provisions of the CCS(Pension) Rules 1972 (since repealed by the CCS (Pension) Rules 2021). Even though there is no provision in the CCS Pension Rules 1972 for revision of pension, on the implementation of the 5th Central Pay Commission Recommendations, effective from 1/1/1996, Central Government pensioners were granted upward revision of pension on the principle of modified parity. In the absence of any provision for revision in the CCS Pension Rules, revision of pension was implemented by issue of Office Memoranda by the Personnel department of the Central Government. (It is only in Rule 66 of the CCS Pension Rules 2021, a provision has been introduced for upward revision of pension with implementation of every Central Pay Commission Recommendations). Rule 56 is however being implemented for Chairmen and Managing Directors of the Corporation retired after 1/1/1996 by virtue of Rule 55 B inserted in LIC Pension Rules 1995 on 13/8/2001 by a Gazette Notification. It is significant to note that the Chairmen and Managing Directors who have risen from lower cadres of LIC are whole time officers of the Corporation-receiving salary and pension from LIC (from the same Fund as for other employees covered by LIC Pension Rules 1995). This discrimination is violation of Articles 14 and 21 of the Corporation attracting the ratio of D S Nakara case judgment.
2. Commercial liability cannot override the legal and statutory liability of LIC. Pension is held as deferred wage by the Apex Court and a compensation for past services rendered. So it follows that when wages are revised every five years, pension should also be revised correspondingly. So right to pension includes right to upgradation of pension whenever wages are revised for pension- optees in service. If upgradation of pension will affect the financial health of LIC, then 5 wage revisions (excluding the latest one w e f 1/8/2022) for employees should have affected the financial health of LIC, which is not the case. LIC has been achieving phenomenal growth in competition. Also Salary Expenses and other benefits to employees are 16 times the actual pension outgo by monthly annuities( without pension upgradation).
a) Solvency arises only in the context of the assessment of ability of the life insurers to meet the policy liabilities under all the policies in their books. All outgoes out of the premiums play a part in generating valuation surplus, like policy payments (72.3%), and management expenses(15.6%). Salary expenses which include Additional Contribution to pension constitute only 8.5% of total premium income, while the cost of pension by way of additional contribution to pension fund is only 3.3% of the Total Premium income. Upgradation of pension will increase this ratio only by another 2% immediately, but will be reduced gradually as the group of beneficiaries is a closed group of 148000 which will only reduce from year to year.
b) The bonus rates will not be affected merely by upgradation of pension, but by other factors like lapsation of policies, increase in surrenders, adverse death claim experience and possible reduction in investment returns of the life fund.
c) On expense ratio breaching statutory limits, LIC had successfully hidden from the DHC the fact that IRDAI had issued Regulations on management expenses in 2016, whereby it was stipulated that wherever any life insurer exceeds the statutory limit on expenses, such excess should be charged only to the shareholders and not to the policyholders. The statutory limit on expenses will not be exceeded by upgradation of pension alone as the additional contribution to pension fund works out to 3.9% of total outgoes and 3.3% of the total premium income.
d) The image of the Corporation will never suffer a loss on account of equitable compensation by pension for senior citizen retirees. The image will suffer only if the customer service is not satisfactory or they don't get value for their money. The image may also suffer if the shareholders do not get return on their investments. This assumes importance in the context of IPO whereby 3.5% of Central Government's stake has been divested to the public.
I am sending a rough note prepared by me for use in our arguments. I will be updating the same as required from time to time based on fresh inputs. I shall share the same with you.
Kind regards.
C H Mahadevan
(1) POINTS FOR ARGUEMENTS
(2) IRDAI NOTIFICATION
https://drive.google.com/file/d/13tZvs2rK1SLM9DSgLqrGgDbbg6hVsvuN/view?usp=drivesdk
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