Punjab & Haryana High Court Grants Pension Commutation Relief to Employees Hit by Higher Interest Regime; Holds State Cannot Discriminate Between Similarly Placed Retirees

Case Name: Gian Chand and Others v. State of Punjab and Others

Date of Judgment: 23 December 2025

Citation: CWP-15554-2007 and connected cases

Bench: Hon’ble Mr. Justice Anoop Chitkara and Hon’ble Ms. Justice Sukhvinder Kaur

Held: The Punjab and Haryana High Court allowed a large batch of writ petitions filed by government employees who retired during the interregnum period when a higher pension commutation interest rate was applied. The Court held that the State could not create an artificial classification among similarly placed pensioners by enhancing the discount rate for a limited period and then restoring it without retrospective effect. Such differential treatment was held to violate Article 14 of the Constitution. The Court further held that an executive circular cannot amend or override statutory pension rules. Relief, however, was confined strictly to the petitioners before the Court.

Summary: The petitioners were government employees who retired during a defined window when the State of Punjab enhanced the discount rate for pension commutation from 4.75% to 8%, drastically reducing the lump sum payable on commutation while retaining the same recovery period. Shortly thereafter, the State restored the earlier rate but did not extend the benefit retrospectively, resulting in a distinct class of retirees who suffered substantial financial loss solely due to the timing of their retirement.

The High Court examined the statutory scheme governing pension commutation under the Punjab Civil Services Rules and noted that the interest rate of 4.75% formed part of a welfare-oriented statutory framework. The impugned circular, issued by executive fiat, was found to have substituted the statutory commutation table without authority of law. The Court reiterated that executive instructions cannot amend, alter, or supplant statutory rules.

Rejecting the State’s plea of financial exigency, the Court held that no credible data was produced to demonstrate that the temporary enhancement of the discount rate was necessitated by a genuine fiscal crisis or that restoration of the lower rate was prompted by improved financial health. The burden of the State’s alleged financial constraints was unfairly shifted onto retirees at the most vulnerable stage of their lives.

Applying the principle of equality, the Court held that once the petitioners were part of the class entitled to pension commutation, they could not be denied the benefit later restored to the same class. The argument that petitioners had “accepted” the higher rate by not withdrawing their commutation request was rejected, as informed consent could not be presumed in the absence of clear awareness and a realistic alternative.

At the same time, the Court declined to strike down the circular in rem, holding that relief should be confined only to those employees who actively approached the Court and asserted their rights. The Court emphasised that it would not suo motu extend relief to fence-sitters who never raised any grievance.

Decision: The writ petitions were allowed to the extent that the impugned circular enhancing the discount rate would not apply to the petitioners. The State was directed to recalculate the pension commutation of the petitioners by applying the earlier statutory table and to pay the excess amount within the stipulated time.