Court holds combined service pensioners under IDA scale cease to be Government servants post-absorption and are governed by PSU rules and PRC recommendations, denying entitlement to pension revision under Central Pay Commission framework.
In a landmark judgment dated July 1, 2026, the Delhi High Court (Division Bench) overturned a Central Administrative Tribunal (CAT) order directing the Union of India to grant pension revision under the 7th Central Pay Commission (CPC) to employees absorbed in Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) from the Department of Telecommunications (DoT).
The writ petitions were filed by the Union of India challenging the CAT order that had allowed pension revision claims by the All India Retired Bharat Sanchar Nigam Limited Executive Welfare Association and others. These claimants were erstwhile DoT employees absorbed into BSNL/MTNL on permanent basis and drawing combined service pension under Rule 37A of the Central Civil Services (Pension) Rules, 1972 ("CCS (Pension) Rules").
The Court examined the statutory scheme embodied in Rule 37A, which was introduced concurrent with the corporatization of DoT services into BSNL and MTNL. Rule 37A explicitly provides that upon permanent absorption into a PSU, employees cease to be Government servants and are deemed to have retired from Government service. Post absorption, these employees are governed by the PSU’s rules, including pay scales under the Industrial Dearness Allowance (IDA) pattern, distinct from the Central Dearness Allowance (CDA) scale applicable to Central Government employees.
The critical question before the Court was whether these combined service pensioners could claim pension revision under the 7th CPC, which applies to Central Government employees under the CDA pay scale, despite their absorption into BSNL/MTNL and being governed by PSU rules and Pay Revision Committee (PRC) recommendations.
The Court held that Rule 37A grants these employees only the right to have their pension calculated at the time of retirement using the formula applicable to Central Government employees but does not confer any right to subsequent pension revisions arising from later CPC recommendations. The Court emphasized that pension revision is intrinsically linked to pay revision, and since BSNL/MTNL have not implemented the 3rd PRC due to financial constraints, pension revision under the 7th CPC cannot be extended to these pensioners.
Further, the Court noted that various Office Memoranda (OMs) cited by the respondents, including OMs dated 05.07.1989, 25.09.2000, 09.11.2000, 15.03.2011, and 20.07.2016, only reiterated the fixation formula at retirement and did not guarantee perpetual parity with Central Government employees for pension revision. While some benefits of the 6th and 7th CPCs, such as death gratuity, were extended, the pension revision formula remains unchanged for absorbees under IDA scale.
The Court observed that the CAT’s finding that the respondents would continue to be governed by Central Government rules post-absorption was contrary to the statutory framework and the express provisions of Rule 37A. The Tribunal's direction to revise pension on par with Central Government employees was therefore unsustainable.
In conclusion, the Delhi High Court set aside the CAT order, holding that the BSNL/MTNL combined service pensioners are not entitled to pension revision under the 7th CPC. Their pension is governed by the IDA scale and PRC framework, and the Government’s liability to pay pension does not extend to granting revision benefits applicable only to Central Government employees under CDA scale.
The judgment reiterates the legal distinction between Central Government employees and PSU employees absorbed from Government service and underscores judicial restraint in interfering with the expert bodies such as CPC and PRC in matters involving economic and financial policy.
Bottom line:-
Employees of DoT permanently absorbed in BSNL/MTNL cease to be Government servants and are governed by the IDA scale and PRC recommendations; they are entitled only to pension calculation formula as per Rule 37A at retirement, not to subsequent pension revisions under the 7th CPC applicable to Central Government employees under CDA scale.
Statutory provision(s):
Rule 37A CCS (Pension) Rules, 1972, CCS (Pension) Rules, 1972, Article 14 of the Constitution of India
