Calcutta HC allows review petition of IIM Calcutta faculty; Confirms automatic inclusion in the new pension system in accordance with the 1987 Memorandum

background

Ambujaksha Mahanti, a former IIM faculty member in Kolkata, was employed under the Contributory Provident Fund (CPF) program before 1985. In 1987, the IIM issued a notification based on the recommendations of the 4th Pay Commission (“1987 Memorandum”) and introduced a new pension system. Employees had to withdraw from the CPF scheme within six months if they wanted to remain under the CPF scheme. otherwise they would automatically migrate to the new GPF with pensions with tips system (“New System”). Although Mahanti did not exercise any option, IIM continued to treat him as a CPF beneficiary.

In 2020, a division bench rejected Mahanti’s application to join the pension scheme saying he had not opted for it. Mahanti filed a petition for review, arguing that the 1987 memorandum created a legal fiction that automatically placed him in the pension system unless he opted out. A review was requested both on the grounds that the judgment of February 14, 2020 was manifestly erroneous and in light of new facts and documents submitted by Mahanti.

Arguments

Mahanti’s lawyer argued that the 1987 memorandum and subsequent communications expressly stated that employees who did not withdraw from the contract would be considered members of the new pension system. Mahanti relied on the Supreme Court judgment in Union of India v. SL Verma ((2006) 12 SCC 53) and argued that the notification created a legal fiction that automatically transferred employees who had not opted out. He submitted that the previous division bench erred by not applying the same. This, he argued, was in accordance with Order XXXXVII Rule 1A of the Code of Civil Procedure, which allows for review for obvious errors in the file.

However, IIM’s lawyer argued that Mahanti continued to withdraw benefits under the CPF scheme and questioned his classification only much later. They claimed that his actions contradicted his claim and argued that his silence amounted to an acceptance of the CPF system.

Justification of the court

First, the court noted that the 1987 memorandum clearly stated that workers who did not leave within six months would automatically transition to the new pension system. It was held that Mahanti’s failure to exercise an option in 1987 meant that he was automatically subject to the GPF-cum-pension-cum-gratuity system under the legal fiction created by the memorandum.

In addition, the court relied on the Supreme Court ruling SL Vermawhich took into account very similar situations and concluded that workers who had not deregistered should be considered members of the new pension system. The court held that the previous Division Bench had overlooked this binding precedent, resulting in an error that was “prima facie obvious.”

The court noted that the most glaring error in the 2020 order was the finding that Mahanti “did not elect to be covered by the GPF and therefore will not receive a pension.” The court observed that this finding is inconsistent with the memorandum and the Division Bench’s own finding that Mahanti is governed by the 4th Pay Commission, which prescribes the pension.

Finally, the court noted the new documents submitted during the audit, including meeting minutes and financial reports. It concluded that these documents further corroborated and strengthened Mahanti’s case. Therefore, the court granted the review motion and reversed the dismissal of Mahanti’s appeal. It directed IIM Calcutta to treat him as a member of the new GPF-cum-Pension-cum-Gratuity scheme from July 1987.

Decided: 12/10/2024

Case no.: RVW 173 of 2021 | Ambujaksha Mahanti v. Indian Institute of Management, Calcutta

Plaintiff’s attorney: Mr. Anindya Kumar Mitra, Senior Advocate; Mr. Shamit Sanyal and Mr. Dip Jyoti Chakraborty

Counsel for the defendant: Mr. LK Gupta, Senior Advocate; Mr. DN Ray, Mr. Bhaskar Mukherjee and Ms. Debadrita Dutta

Click here to read/download the order