Pension Scheme of Cooperative Bank Employees Ends, High Court dismissed Petitions

The Punjab and Haryana High Court has dismissed multiple petitions challenging the discontinuation of the Cooperative Bank Employees Pension Scheme, 2005. The petitions were filed by retired employees of the Punjab State Cooperative Bank (PSCB) and several district central cooperative banks.

Background of the Pension Scheme

The pension scheme was introduced in 2005, with retrospective effect from January 1, 1996. It was voluntary in nature and primarily aimed at providing tax benefits to employees. A dedicated trust was responsible for managing contributions under the scheme.

However, in August 2012, the Board of Directors of PSCB resolved to discontinue the scheme citing financial unsustainability. It was replaced with a defined contributory pension plan managed by the Life Insurance Corporation of India (LIC).

The petitioners, led by Vijay Kumar Kapil and others, argued that scrapping the scheme was illegal. They said:

• Their pensions were reduced to nearly one-third of the original amount.
• They were not given an opportunity to be heard, violating principles of natural justice.
• The discontinuation was the result of mismanagement by the banks and the pension trust.
• Having contributed to the scheme, they had a legitimate expectation of lifelong benefits.
• The board did not have authority to completely scrap the scheme, only to amend it under its clauses.

What Court Said

The High Court rejected these arguments and upheld the discontinuation, making the following key observations:

• The pension scheme was not statutory and did not form part of employees’ service conditions under the Punjab Cooperative Societies Act, 1961.
• Participation was voluntary, and the scheme was more of a benevolent initiative than a statutory entitlement.
• Approval from the Registrar of Cooperative Societies did not grant the scheme statutory status.
• The scheme had become financially unviable, as LIC had indicated in 2012 that sustaining it required an upfront infusion of ₹351–361 crore and annual contributions that the trust could not afford.
• Around 90% of beneficiaries had already opted for the new LIC-managed scheme, with 2,462 in-service employees supporting it against 1,425 retirees.

The court also stressed the limited financial capacity of cooperative banks. Justice Brar observed that shareholders of these banks are mainly small farmers with scarce resources. Imposing additional financial obligations could push these banks toward closure. The judgment also clarified that cooperative banks cannot be treated as “state instrumentalities” under Article 12 of the Constitution.

Citing precedents like Chairman & MD, Kerala SRTC vs. K O Varghese (2007), the bench reaffirmed that autonomous institutions such as cooperative banks are entitled to revise policies according to their financial conditions. Such decisions do not amount to arbitrariness or violation of Article 14 of the Constitution.

The High Court further noted that retired employees continue to receive other statutory benefits such as:

• Provident Fund (PF)
• Gratuity
• Leave encashment

Therefore, the court held that the retirees were not left without support. The High Court has disposed of 13 connected writ petitions, including contempt cases, and upheld the 2015 order of the Registrar of Cooperative Societies, which had validated the discontinuation of the scheme.