Once You Accept a Pension Scheme, You Cannot Pick and Choose Its Terms: Supreme Court Upholds RBI’s Cut-Off Date for Pension Eligibility

“Policy Decisions Based on Financial Viability Are Not Arbitrary — Cut-Off Dates Must Be Respected Unless Blatantly Unconstitutional”: In a decisive ruling Supreme Court of India upheld the Reserve Bank of India’s 2020 pension policy that denied retrospective pension benefits to CPF-optee retirees who opted into the pension scheme under the last window. The apex court ruled that “the scheme must be accepted as a whole; one cannot approbate and reprobate” and set aside the Kerala High Court's order that had granted the respondent pension arrears from his date of retirement in 2014.

“Respondent Cannot Blow Hot and Cold — Once He Accepted the 2020 Pension Scheme, He Cannot Claim Benefits Outside It”

The Court, speaking through Justice Augustine George Masih, was categorical that Respondent No.1, who retired in 2014 and chose to remain with the CPF scheme throughout his career, had no legal right to claim retrospective pension benefits after opting into the 2020 pension switch-over scheme. The Court stated:

“The respondent, therefore, cannot be permitted to choose a particular aspect of the Scheme that makes it unworkable, and that too for his own financial benefit. Approbation and reprobation would not be permissible in such schemes.”

The Court emphasized that once the respondent accepted the conditions of the new scheme, including the stipulation that pension would be paid prospectively from July 1, 2020, he could not selectively challenge the clause that denied arrears from his retirement date (November 30, 2014).

“Fixing of a Cut-Off Date Based on Financial Burden Is Not Arbitrary — Courts Must Exercise Judicial Restraint”

Responding to the High Court’s finding that denying arrears was discriminatory, the Supreme Court held that policy decisions — especially those involving fiscal implications — fall within the executive domain. Quoting Mohammad Ali Imam v. State of Bihar and State of Punjab v. Amar Nath Goyal, the Court reiterated:

“There may be other considerations in the mind of the executive authority while fixing a particular date — economic conditions, financial constraints, administrative and other circumstances… Such matters ought to be left to the executive authorities.”

The RBI and Government of India had explicitly calculated the 2020 scheme to avoid a financial liability exceeding ₹900 crores. The Court held that such a massive fiscal impact justified the decision to make pension payments only prospective.

“Each Administrative Circular Is a Separate Scheme — No Right to Arrears Flows from Prior Policies”

The Court dissected the history of RBI’s pension options, noting that the respondent had refused four opportunities—in 1990, 1992, 1995, and 2000—to switch from CPF to pension. The 2020 circular was a new and final chance, with its own terms.

“Each circular had its own specific terms and conditions… When the latest circular of the year 2020 was issued, it was a complete package… Once accepted, the benefits of earlier options cannot be claimed.”

The respondent, despite being fully informed, waited until after retirement to challenge the terms of the scheme he voluntarily accepted. This, the Court held, is impermissible.

“Granting Retrospective Pension to One Would Break the Financial Back of the Scheme”

The apex court underscored that retrospective benefits were intentionally excluded from the 2020 scheme because:

“The financial burden and the liability were prominent aspects taken into consideration… Retrospective liability would have resulted in an unjustified liability of over ₹900 crores.”

By endorsing this rationale, the Court upheld the RBI’s right to frame and enforce such schemes without judicial interference unless they are manifestly arbitrary.

Setting aside the Kerala High Court’s judgment dated December 18, 2023, the Supreme Court restored the earlier decision of the Single Judge that had denied retrospective pension. The Court held that there was no violation of constitutional, statutory, or common law principles, and that a policy scheme must be accepted in full or not at all.

Date of Decision: May 23, 2025