Merely Because An Employee Retires While On Deputation Does Not Entitle Higher Pension Based On Deputation Allowance: Bombay High Court

Deputation Allowance Not To Be Included For Pension Fixation: - Bombay High Court delivered a significant ruling regarding pensionary rights of employees retiring while on deputation. The Court categorically held that deputation allowance cannot be treated as part of "pay" for calculating pension and retirement benefits. The Division Bench comprising Justices Ravindra V. Ghuge and Ashwin D. Bhobe emphasized that pension must be fixed based on substantive pay drawn in the parent organization, not on higher pay structures enjoyed during deputation.

The Petitioners, retired bank officers, were deputed to various banks as Chief Vigilance Officers (CVOs) under orders from the Central Government. During their deputation, they drew an additional 15% deputation allowance. Upon superannuation, they claimed that their pensions should be calculated considering the deputation allowance as part of their final pay. The parent banks, however, excluded the deputation allowance in pension fixation, prompting the Petitioners to approach the High Court.

The primary issue was whether the deputation allowance drawn during deputation should be included for calculating "average emoluments" under the Bank Pension Regulations.

The Court underscored: "It is unassuming that an Employee on deputation who superannuated while on deputation, could be held eligible for pension calculated on the addition of the deputation allowance @ 15%."

The Court clarified that, according to Regulation 2(d) and 2(e) of the Bank Pension Regulations, "average emoluments" must mean the average of pay drawn during the last ten months in the parent bank.

The Court noted: "Merely because a deputationist attains the age of superannuation while on deputation, would not entitle him to treat such a higher pay scale as a foundation for calculating the pension fixation."
Referring to the clarificatory letter issued by the Ministry of Finance dated 27th November 1998, the Bench affirmed that "substantive pay" in the parent bank — and not the pay in the loanee bank — must be considered for pension purposes.

The Court meticulously reviewed the terms of deputation and pointed out that deputation allowance was only a temporary financial benefit and did not alter the basic service conditions. It further observed:
"If a mistake is committed by the Loanee Bank, the same would not create a vested right in the Petitioners."

Citing precedents like EPFO v. Vivekananda Vidyamandir, Bhagwan Dass v. State of Punjab, and U.K. Walia v. Punjab National Bank, the Court emphasized that temporary monetary incentives on deputation could not elevate the pension rights of an employee.

Additionally, the Court directed the parent banks to refund to the petitioners any provident fund contributions made on deputation allowance along with statutory interest.

The Bombay High Court dismissed all the writ petitions filed by the retired officers, holding that deputation allowance cannot be reckoned for pension fixation. It reiterated that pensionary rights are governed strictly by the substantive pay scale applicable in the parent organization.

Date of Decision: 25th April 2025