Britannia directed to pay pensioners within 2 months

Pensioners of Britannia Industries, who have been fighting a seven-year battle with their former employers, have registered a crucial victory.

The City Civil Court in Bangalore has upheld the demand of pensioners that trustees of Britannia have been incorrect in not paying them pension according to the approved Pension Fund rules from 2003. The court has now directed Britannia to pay the pensioners within the next two months, said Ashit K Sarkar, retired senior vice-president-HR and representative of Britannia’s Pensioners Welfare Association (PWA).

The court, according to Sarkar, has said the payment is to be done after adjusting the interim payments already made according to its January 2009 order and has called for a compliance report from the defendents.

This is the second time the City Civil Court has decided in favour of the pensioners, around eighteen of whom have passed away. The PWA has around 200 members.

Britannia’s PWA said it would look through the court order carefully and chart out the future course of action. However, the association has decided to file a caveat at the high court to ensure that no ex-parte interim orders are issued on any appeal by the defendants against this judgment. When contacted, a spokesperson for Britannia sent an e-mail statement saying, “We are yet to receive the court order and will determine any action thereafter.”

In January, after protracted hearings over a period of time, the City Civil Court in Bangalore had directed Britannia Industries to pay interim pensions to its retired officers and managers, whose pensions had been on hold since 2003.

The court had ruled that Britannia must pay the pensions, “from the dates of their (officers and managers) entitlement and go on paying till any interim order or final order in this case is taken, without affecting their entitlement of pension as per rules”.

Britannia at that time had stated: “In an interim order, the City Civil Court, Bangalore has accepted Britannia’s proposal for payment of pension consistent with the company’s stated position on the issue. While the matter is sub-judice, Britannia welcomes this judgment, which is in line with the company’s offer to every eligible pensioner, and is payable based on defined contribution.”

The battle between the two, dates back to 2003 after Britannia’s PWA said Britannia is trying to change its pension rules from defined benefit to defined contribution, retrospectively. It also said the proposed changes were against the objectives and rules of the Pension Fund.

The defined contribution, which Britannia is pushing for, is a pension plan which provides an individual account for every participant and the benefits are based on the annuity that can be purchased from annual 15 per cent contributions and interest thereon, similar to the provident fund.

A defined benefit plan, which the pensioners are pursuing, promises an employee a specific monthly benefit at retirement based on final salary and years of service (for which variable contribution on actuaries periodic valuation is necessary for the entire group and not individually), at a cost provided by LIC, which alters from time to time.

The pensioners argue that the defined contribution model would significantly lower the pension amount, in many cases to less than a quarter of the amount due.

It is also learnt that the proposed fund rule changes were rejected by the Commissioner of Income Tax, after a detailed hearing in June 2008.