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Informist, Thursday, Jul. 2, 2026

 

NEW DELHI – The Delhi High Court has held that erstwhile employees of the Department of Telecommunication who had chosen to be permanently absorbed in public-sector undertakings Bharat Sanchar Nigam Ltd. and Mahanagar Telephone Nigam Ltd. are not entitled to revision of pension in accordance with the recommendations of the 7th Central Pay Commission. Allowing appeals by the department, the court set aside the Central Administrative Tribunal's order directing the government to revise the pension of the employees in accordance with the central pay commission recommendations.

 

Rule 37A of the Central Civil Services (Pension) Rules, 1972, prescribes a special statutory framework governing erstwhile government servants who were permanently absorbed in public-sector undertakings, the court noted. Upon such absorption, the employees in the current case ceased to be government employees, their posts under the government stood abolished, and they were fitted in the industrial dearness allowance scale, it said. Accordingly, they shall be governed by the rules of the undertakings concerned and be subject to recommendations of the Pay Revision Committee, the court said. They cannot now claim the benefit of recommendations of the Central Pay Commission, it said.

 

Under Rule 37A, once a government employee opts to be absorbed by a public-sector undertaking, the employee ceases to be a government servant and is deemed to have retired from service. While the government bears the employee's pensionary liability, Sub-rule 8 applies for calculation of the pension, the court said. The source of payment does not determine the nature or extent of the employee's rights, it said.

 

The court said Sub-rule 8 is nothing but a promise to extend the same formula to absorbed employees that is applied to central government employees for calculation of pension. The formula referred to is the one that was in force at the time of retirement of the employee, it said. The rule neither preserves the status of the absorbed employee as a government servant nor creates a continuing right to claim every future benefit that may be extended to central government pensioners, it said.

 

"We accordingly hold that neither Rule 37A nor any of the office memoranda relied upon by the respondents confer a right upon combined service pensioners governed by the IDA (industrial dearness allowance) regime to claim revision of pension pursuant to the recommendations of the 7th CPC (Central Pay Commission)," the bench of Justice Om Prakash Shukla and Justice C. Hari Shankar said. This is because the recommendations of the pay commission only apply to central government employees and absorbed employees of BSNL and MTNL who draw pension on a pro-rata basis from the government, the bench said. The employees in the current case do not fall in either category, it said. Moreover, since the underlying pay structure applicable to the respondents has not been revised as per the 3rd Pay Revision Committee, the question of consequential revision of pension does not arise, the bench added.

 

The case has its genesis from the government, in the interest of efficiency and corporatisation of telecommunication services, transferring the service provision and commercial functions of the telecommunication department into two separate entities, MTNL and BSNL. The seed of the controversy stems from the en masse transfer of department employees to the two corporations on an "as is where is" basis, on deemed deputation without deputation allowance.

 

Following the en masse transfer, the deputed employees were granted the option to either seek permanent absorption in the public-sector undertakings or return to government service. The officers who opted for the former are governed by Rule 37A alone. The ones who chose to return continue to be governed by the standard framework under the Central Pay Commission rules.

 

The employees in the current case chose to opt for absorption because service in the public-sector undertakings was more lucrative since the industrial dearness allowances pay scale was higher and there were greater chances of career progression than in government service. However, pensions of central government employees have been revised a few times according to pay commission recommendations, while pensions of the employees in the case have plateaued after 2007 because the 3rd Pay Revision Committee for Public-Sector Undertakings did not come into effect. So, the respondents claimed entitlement under the 7th Central Pay Commission for revision of their pensions.

 

Thursday, shares of Mahanagar Telephone Nigam Ltd. ended at INR 30.44 on the National Stock Exchange, up nearly 2% from Wednesday.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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