Punjab and Haryana High Court upholds withdrawal of cooperative bank pension scheme

Holding that cooperative banks cannot be treated as “State” under the Constitution and that their shareholders — mostly small agriculturists — cannot be saddled with unsustainable financial liabilities, the Punjab and Haryana High Court has upheld the withdrawal of the 2005 Cooperative Bank Employees Pension Scheme. The bench concluded that the scheme was neither statutory nor financially viable, adding that retired employees continue to receive statutory entitlements under central laws, besides being offered a replacement pension model.

The assertions came as Justice Harpreet Singh Brar dismissed a bunch of petitions filed by retired employees of Punjab State Cooperative Bank (PSCB) and District Central Cooperative Banks across Punjab challenging the withdrawal of the 2005 pension scheme. The bench added that the cooperative banks could not be burdened at the risk of closure.

The petitioners, all beneficiaries of the discontinued scheme, had sought quashing of the order dated November 20, 2015, by the Registrar, Department of Cooperative Societies, upholding the repeal of the scheme. They argued that the decision to discontinue the scheme was illegal and arbitrary.

Rejecting the plea, Justice Brar made it clear at the outset that the banks were run by cooperative societies which were accountable to their shareholders –– predominantly small time agriculturists with limited resources. As such, these banks could not be considered to be instrumentalities of State in terms of Article 12 of the Constitution of India.

Justice Brar observed that the pension scheme, introduced in 2005, had been replaced by the New Pension Scheme in 2012 pursuant to a Board resolution and later approved by the Registrar. “However, the same cannot be considered statutory in nature since participation was not mandated by the applicable service rules.”

Justice Brar, at the same time, asserted that retired employees were not left without recourse: “The employees of PSCB and the other cooperative banks referred to are also receiving their statutory entitlements of pension under the Employees’ Pension Scheme, 1995, Contributory Provident Fund under Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, Gratuity under Payment of Gratuity Act, 1972, and Leave Encashment in terms of the Government Instructions. Additionally, they are also getting statutory pension under Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. As such, the petitioners are not rendered helpless by withdrawal of the pension scheme.”

Justice Brar added that the scheme, by design, was not viable for the long term. “Clearly, the continuation of the pension scheme was directly dependent on the availability of requisite funds, the inflow of which did not match the outflow while the number of new beneficiaries kept increasing over the years… Regrettably, the financial viability of this scheme was not assessed by experts at the time of its implementation or else this model would have been perhaps discouraged for being non-viable in the long term.”