Artificial Breaks Cannot Erase Years of Service: Supreme Court Holds Pre-Regularisation Employment Must Count for Pension and Gives Employees the Right to Choose the Old Pension Scheme

Case Name: Punjab School Education Board and Another v. Satnam Singh and Others

Date of Judgment: 8 September 2026

Citation: 2026 INSC 965

Bench: Justice Prashant Kumar Mishra and Justice Shree Chandrashekhar

Held: The Supreme Court held that service rendered on a contractual, ad hoc, daily-wage or work-charge basis before regularisation must be counted as qualifying service for pension where the employment was long and substantially continuous. Artificial, notional or administrative breaks—including breaks occasioned by court orders—cannot be used to deprive employees of pensionary benefits. The substance of the employment relationship must prevail over the nomenclature used in appointment letters. Since the respondent-employees had entered service before 1 January 2004 and were subsequently regularised, they were entitled to be treated as having entered service before the cut-off date and could opt for the old General Provident Fund pension scheme or the new pension scheme.

Summary: The respondent-employees were initially engaged by the Punjab School Education Board between 1993 and 1996 as clerks and peons on contractual, ad hoc, daily-wage or work-charge arrangements. Their engagements continued for several years because of the Board’s administrative and operational requirements. In 2004, after adopting the Punjab Government’s regularisation policy dated 23 January 2001 as a one-time humanitarian measure, the Board issued letters placing the eligible employees in regular service. The Board later denied them coverage under the old pension scheme on the ground that their regular appointment letters had been issued after the Defined Contributory Pension Scheme came into force on 1 January 2004.

The Supreme Court rejected the Board’s attempt to treat the 2004 exercise as a fresh appointment rather than regularisation. It observed that the Government policy, the committee’s recommendation, the Board’s resolution, the public notice and even the Board’s own correspondence consistently demonstrated that the employees had been regularised after rendering long service. Mere use of the word “appointment” in the letters could not override the true nature and effect of the exercise.

Relying upon the principle laid down in D.S. Nakara v. Union of India that pension is neither a bounty nor an ex gratia payment but a deferred wage for past service, the Court held that denial of pensionary benefits on technical or artificial grounds would be unjustified. It approved the Punjab and Haryana High Court’s reliance on Harbans Lal v. State of Punjab, which had held that daily-wage service rendered before regularisation must be counted for pension and that an employee who commenced such service before 1 January 2004 would be treated as having entered service before the cut-off date.

The Court further held that the Board’s status as an autonomous body did not assist it. Although it was initially free to adopt or reject the State Government’s regularisation policy, it had voluntarily adopted and implemented that policy. It could not thereafter deny the natural pensionary consequences of the regularisation. The Court also found that excluding the respondents while similarly placed employees in other departments had received the same benefit would be prima facie discriminatory.

Decision: The Supreme Court dismissed the Punjab School Education Board’s appeal and affirmed the judgments of the Single Judge and Division Bench of the Punjab and Haryana High Court. It directed that the respondents’ pre-regularisation service be treated as qualifying service for pension, ignoring artificial or administrative breaks. The employees were held entitled to choose between the old GPF pension scheme and the new pension scheme.