The Department of Pension and Pensioners Welfare (DoPPW) has issued a significant amendment to the Central Civil Services (Pension) Rules, 2021, introducing a provision that could lead to the forfeiture of retirement benefits for certain ex-government employees. This rule change applies specifically to those who were absorbed into public sector undertakings (PSUs) after their tenure with the central government.

The amendment inserts a new clause in Sub-rule 29 of Rule 37 of the CCS (Pension) Rules, 2021. It states that a government servant, who was absorbed into a PSU, can now lose their pension and retirement benefits from their government service if found guilty of misconduct or wrongdoing leading to dismissal or removal from the PSU.

This marks a departure from the earlier framework, which protected retirement benefits of such individuals even in the event of their dismissal from the PSU.

What the New Rule Says

The notification dated 22 May clearly mentions that if a PSU employee is dismissed or removed for misconduct after their absorption into the PSU, the employee shall also forfeit retirement benefits accrued during their government service.

Additionally, in such cases of dismissal, the decision of the PSU shall be subject to review by the concerned administrative ministry overseeing the public sector undertaking.

This amendment, which now forms part of Rule 37(29)(c), brings tighter scrutiny and accountability for ex-government employees continuing their careers in PSUs. The goal is to ensure disciplinary actions in the PSU role carry consequences that extend to past government service as well.

What Was the Rule Earlier

Previously, Clause (c) of Sub-rule 29 of Rule 37 explicitly protected government retirement benefits. It stated that dismissal or removal from a PSU after absorption would not lead to loss of pension or retirement benefits for the service rendered under the central government.

Moreover, the earlier rule also allowed the decisions of the PSU to be reviewed by the administrative ministry but maintained a clear separation between the two tenures — PSU employment and previous government service.

Supreme Court Ruling Led to the Change

This policy shift is a direct result of the Supreme Court judgment in the case titled Suraj Pratap Singh vs CMD BSNL and Others under SLP No. 4817/2020, dated 9 January 2023. The court observed that an individual cannot continue to enjoy benefits from previous public service if their conduct in the current PSU role is found to be in breach of service integrity.

Citing this verdict, the DoPPW has carried out the amendment to align pension rules with the principles laid down by the apex court.

Applicability of Other Rules

The new clause in Rule 37(29)(c) also clarifies that the relevant provisions of Rule 7 and Rule 8, along with Rule 41 and Rule 44(5)(a) and (b) of the CCS (Pension) Rules will be applicable by analogy. These rules cover disciplinary proceedings, penalties, and conditions for withholding or withdrawing pension in case of misconduct.

Rule 37A and 37B: Background on Absorption

Rules 37A and 37B of the CCS (Pension) Rules lay out the framework for government employee absorption in PSUs and Central Autonomous Bodies, respectively.

Under Rule 37A, when a government department is converted into a PSU, all employees are transferred en masse to the PSU on foreign service terms, without any deputation allowance. Once absorbed, their employment terms are defined by the PSU, and pension continues as per existing government norms until otherwise specified.

Rule 37B, on the other hand, applies to the conversion of a government department into a Central Autonomous Body. In this scenario as well, employees are transferred on foreign service terms until formal absorption.

Both these rules are now indirectly affected by the latest amendment, as it changes the retirement benefit scenario post-absorption.

Significance of the Change

This amendment sends a clear message: continued ethical conduct and service integrity are crucial even after shifting to a PSU. The government is strengthening accountability mechanisms to ensure public trust in PSU institutions is maintained.

With this amendment, an employee’s past government service is no longer insulated from actions in their new PSU role. Any misconduct post-absorption can now trigger full denial of pension benefits, a powerful deterrent to malpractices in public sector undertakings.

Government’s Push for Transparency and Discipline

The amendment fits into the broader efforts by the government to enhance discipline, transparency, and ethical accountability in the functioning of public sector entities. It ensures that individuals who have served in the government cannot take immunity from prior service benefits for granted.

Such provisions also align with broader reforms in government service, including performance-linked incentives, stricter service evaluation, and disciplinary actions for non-performance or wrongdoing.

What Affected Employees Must Note

All existing and future government employees absorbed into PSUs must be aware of the revised pension rules and the possible risks to their retirement benefits in case of misconduct. The rule will likely apply prospectively, meaning it affects conduct and dismissals occurring after the amendment date.

Any PSU dismissal decisions that lead to forfeiture of benefits will also be subject to ministry-level review, ensuring fair application and prevention of arbitrary actions.

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