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The Supreme Court has held that service rendered by employees on contract, ad hoc, daily-wage or work-charge basis prior to their regularization must be counted as qualifying service for retiral and pensionary benefits, particularly where the breaks in service are merely notional, artificial or caused by administrative circumstances or court orders.

Holding thus, a bench of Justice Prashant Kumar Mishra and Justice Shree Chandrashekhar dismissed the Punjab School Education Board's (PSEB) appeal, affirming the Punjab & Haryana High Court's judgment which directed the State to grant the pensionary benefits to the Respondent-employees, who had initially entered service during the 1990s and were regularized in August 2004, saying that the State could not treat them as fresh recruits merely because their appointment letters used the expression "appointment". Their engagement, the Court found, was, in substance, regular.

“…the Single Judge and Division Bench had rightly held that the services by respondent-employees rendered on contract/ad hoc/daily wage basis prior to regularization must be computed as qualifying service for the purpose of retiral and pension benefits.”, the Court observed.

The respondents had initially been engaged by the PSEB between 1993 and 1996 as clerks and peons on contract, ad hoc, daily-wage and work-charge arrangements, generally for periods of 89 days. Some were subsequently promoted as Junior and Senior Assistants.

Their services went through several rounds of litigation and interruptions. In 1995, the services of 224 ad hoc clerks were terminated, following which 184 employees were re-engaged on contractual terms.

The PSEB subsequently undertook a recruitment process, but the employees continued to litigate over their continuation and regularization. A Government policy for regularization was issued on January 23, 2001.

Although the High Court had earlier held that the PSEB, being an autonomous body, was not automatically bound by the Government's regularization policy, the Board eventually decided in July 2004 to adopt the policy.

Following the Board's decision, a public notice was issued on July 18, 2004 and appointment letters were subsequently issued to the employees in August 2004.

The dispute arose because the Defined Contributory Pension Scheme (new scheme) had been introduced with effect from January 1, 2004. The Respondent-employees claimed that their service should be treated as having commenced before the cut-off date and that they should consequently remain entitled to the old pension scheme.

The Single bench and Division bench of the High Court held in Respondent-employees favour, prompting the State Education board to appeal to the Supreme Court.

Before the Supreme Court, the Appellant-board argued that, as an autonomous body, it was not automatically bound by Punjab Government policies in service matters.

Rejecting the board's argument, the judgment authored by Justice Mishra said that the High Court had earlier recognized the Board's freedom either to adopt or reject the Government's regularization policy. Having subsequently chosen to adopt the policy, the Board could not disregard the consequences of that decision.

“The fact that the appellant-Board is an autonomous body cannot come to its rescue; in fact, the High Court on 14.12.2001 had upheld that it was free to adopt or reject the Government Policy dated 23.01.2001, despite it being made expressly applicable to public sector undertakings, corporations, boards, local authorities and other autonomous bodies in the State of Punjab. The appellant-Board had thereafter voluntarily adopted the policy mutatis mutandis.”, the Court observed.

Further, the Court also approved the High Court's reliance on its earlier decision in Harbans Lal v. State of Punjab (2010). In that case, an employee had worked as a Pump Operator on daily-wage basis from 1988 before being regularized in 2005. The Court had held that his daily-wage service prior to regularization had to be counted for pension and that the subsequent regularization did not make him a new entrant for purposes of determining the applicable pension regime.

Applying that principle, the Court held that the respondents' service prior to regularization had to be taken into account.

Also, reference was drawn from the Constitution Bench decision in D.S. Nakara v. Union of India 1982 INSC 103, emphasizing the nature of pension as a social-welfare benefit earned through service. The Court found that denying pensionary benefits to employees who had served continuously for years merely because their formal regularization took place later would elevate technicalities over the substance of their service relationship.

“When an employee has rendered long and continuous service, and stands ultimately regularized, denial of pensionary benefits based on technicalities or artificialities is generally unjustified.”, the Court said.

In terms of the aforesaid, the appeal was dismissed.

Cause Title: PUNJAB SCHOOL EDUCATION BOARD AND ANOTHER VERSUS SATNAM SINGH AND OTHERS

Citation : 2026 LiveLaw (SC) 914

Click here to download judgment

Appearance:

For Appellant(s) : Mr. Rohit Sharma, Adv. Mr. Jatin Lalwani, Adv. Mr. Nikhil Purohit, Adv. Mr. Jay Rawat, Adv. Mr. Kumar Dushyant Singh, AOR

For Respondent(s) : Mr. P S. Patwalia, Sr. Adv. Mr. Shadan Farasat, Aag, Sr. Adv. Ms. Natasha Dalmia, AOR Ms. Anisha Jain, Adv. Ms. Shambhavi Singh, Adv. Ms. Prerna Cheema, Adv. Mr. Karan Sharma, AOR Mr. Arkaprava Das, Adv. Mr. Chetan Manchanda, Adv.

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