The Supreme Court held that pay fixation of re-employed ex-servicemen is governed solely by government guidelines, which banks cannot override. It ruled that reducing pay without providing an opportunity of hearing violates principles of natural justice, rendering such an administrative action legally unsustainable.
Facts Of The Case:
After retiring from the Indian Navy, the appellants were re-employed by Punjab National Bank between 2015-2017 as Single Window Operators. Their initial pay was fixed at a higher amount, with four appellants receiving ₹40,710 and one receiving ₹34,160. However, following a 2018 clarification from the Indian Banks’ Association (IBA) that capped the maximum basic pay for ex-servicemen at ₹31,540, the bank issued a circular and subsequently reduced the appellants’ pay to this capped amount in July 2018. The bank justified this reduction by stating the initial fixation was erroneous and that the new pay, combined with their pension, exceeded the mandated limit not to surpass the minimum pay scale of a General Manager. The ex-servicemen challenged this pay reduction in the Kerala High Court. A Single Judge ruled in their favour, quashing the bank’s order, but this decision was overturned by a Division Bench. The Division Bench agreed with the bank’s reasoning that the total of their re-fixed pay and pension exceeded the General Manager’s pay scale minimum, making the reduction necessary. This conflicting outcome led the ex-servicemen to appeal to the Supreme Court for a final resolution.
Procedural History:
The appellants, former Indian Navy personnel, challenged the pay reduction before a Single Judge of the Kerala High Court via a writ petition (WP (C) No. 26946 of 2018). The Single Judge, in an order dated 11.04.2019, allowed the petition, quashed the bank’s re-fixation orders, and directed the payment of arrears. The respondent bank then filed a writ appeal (W.A. No. 2094/2019). The Division Bench of the Kerala High Court, in its impugned order dated 07.02.2020, allowed the appeal and set aside the Single Judge’s order, upholding the bank’s right to refix the pay. The aggrieved ex-servicemen then filed a Special Leave Petition (SLP (C) No. 8223 of 2020) before the Supreme Court of India, which granted leave and culminated in the present civil appeal.
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Court Observation:
In its observations, the Supreme Court meticulously analyzed the 2014 government guidelines governing pay fixation for re-employed ex-servicemen. The Court found that the Indian Banks’ Association (IBA) clarification and the subsequent bank circular, which mandated the pay cut, could not override the statutory force of the central government’s welfare guidelines. It was established that the bank’s action of refixing the pay by applying these external circulars, while ignoring the specific 2014 guidelines, was fundamentally flawed and unjustified.Furthermore, the Court made a crucial observation on due process, noting that the reduction of the appellants’ pay constituted a severe civil consequence. It held that such an administrative action, which resulted in a recurring financial loss, could not be carried out without affording the employees a prior opportunity to be heard. Consequently, the bank’s decision was also found to be in blatant violation of the principles of natural justice.
Final Decision & Judgement:
The Supreme Court allowed the appeal, setting aside the Division Bench’s order and restoring the relief granted by the Single Judge. The Court quashed the bank’s re-fixation orders for violating the overriding 2014 government guidelines and the principles of natural justice. It directed the bank to re-fix the appellants’ pay afresh in strict accordance with the 2014 guidelines, applying the correct principles of protecting their last drawn pay plus dearness allowance. The Court also quashed all recoveries made pursuant to the illegal pay reduction and mandated that any future refixation resulting in a pay cut must be preceded by a hearing in compliance with natural justice. Parties were ordered to bear their own costs.
Case Details:
Case Title: Mukund K. Pai & Ors. vs Punjab National Bank & Ors. Citation: 2025 INSC 1033 Appeal Number: (Arising out of SLP (C) No. 8223 of 2020) Date of Judgement: 30th July, 2025 Judges/Justice Name: Justice J.K. Maheshwari and Justice Vijay Bishnoi
Download The Judgement Here