Bank of India & ANR.
Vs. K. Mohandas & Ors.  INSC 632 (27 March 2009)
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 1942 OF 2009 (Arising
out of S.L.P. ) No. 22704/2005) Bank of India & Anr. .. Appellants Versus
K. Mohandas & Ors. ..Respondents WITH CIVIL APPEAL NO. 1943 OF 2009
(Arising out of S.L.P. ) No. 18215/2006) N.U. Kurup & Ors. .. Appellants
Versus Union Bank of India & Ors. ..Respondents WITH CIVIL APPEAL NO. 1944
OF 2009 (Arising out of S.L.P. ) No. 19463/2007) Punjab & Sind Bank &
Ors. .. Appellants Versus Baldev Singh ..
Respondent WITH 1
CIVIL APPEAL NO. 1945 OF 2009 (Arising out of S.L.P. ) No. 14406/2007) Punjab
& Sind Bank & Ors. .. Appellants Versus Baldev Singh ..Respondent WITH CIVIL
APPEAL NO. 1946 OF 2009 (Arising out of S.L.P. ) No. 8772/2008) Sr.Regional
Manager, Punjab National Bank .. Appellant Versus C.J. Singh & Ors.
..Respondents WITH CIVIL APPEAL NO. 1947 OF 2009 (Arising out of S.L.P. ) No.
8902/2008) Punjab National Bank .. Appellant Versus Balwant Rai Girdhar &
APPEAL NO. 1948 OF 2009 (Arising out of S.L.P. ) No. 9029/2008) Punjab National
Bank .. Appellant Versus Anita Garg & Anr. ..Respondents 2 WITH CIVIL
APPEAL NO. 1949 OF 2009 (Arising out of S.L.P. ) No. 10846/2008) Punjab &
Sind Bank & Ors. .. Appellants Versus Ranbir Singh & Ors. ..Respondents
WITH CIVIL APPEAL NO. 1950 OF 2009 (Arising out of S.L.P. ) No. 11112/2008)
Punjab & Sind Bank & Ors. .. Appellants Versus Gurcharan Singh Rein
& Ors. ..Respondents WITH CIVIL APPEAL NO. 1951 OF 2009 (Arising out of
S.L.P. ) No. 11114/2008) Punjab & Sind Bank & Ors. .. Appellants Versus
Harminder Singh & Ors. ..Respondents WITH
3 CIVIL APPEAL NO. 1952 OF 2009 (Arising out of S.L.P. ) No. 11115/2008)
Punjab & Sind Bank & Ors. .. Appellants Versus Kulbir Singh Bhatia
..Respondent WITH CIVIL APPEAL NO. 1953 OF 2009 (Arising out of S.L.P. ) No.
11190/2008) Punjab & Sind Bank & Ors. .. Appellants Versus Arvinder
Kaur Bedi ..Respondent WITH CIVIL APPEAL NO. 1954 OF 2009 (Arising out of
S.L.P. ) No. 11324/2008) Punjab & Sind Bank & Ors. .. Appellants Versus
Bhupinder Singh Sachdeva & Ors. ..Respondents WITH 4 CIVIL APPEAL NO. 1955
OF 2009 (Arising out of S.L.P. ) No. 13428/2008) Punjab & Sind Bank &
Ors. .. Appellants Versus Chanan Singh Sidhu ..
Respondent WITH CIVIL
APPEAL NO. 1956 OF 2009 (Arising out of S.L.P. ) No.23585/2005) Subhas Chandra
De & Ors. .. Appellants Versus United Bank of India & Ors.
..Respondents AND CIVIL APPEAL NO. 1957 OF 2009 (Arising out of S.L.P. ) No.
8050/2006) Amitava Mitra & Ors. .. Appellants Versus Zonal Manager, Punjab
National Bank & Ors. ..Respondents JUDGEMENT R.M. LODHA, J.
sixteen appeals arise from the judgments of Punjab and Haryana High Court,
Calcutta High Court and Kerala High Court and relate to different banks but
since the common issues are involved, it is appropriate that these appeals are
dealt with and disposed of by the common judgment.
the month of May, 2000, Government of India, Ministry of Finance (Banking
Division), advised the nationalized banks to carry out detailed manpower
planning as these banks were found to have 25% of its manpower as surplus. A
Human Resource Management Committee was constituted to examine the said issue
and to suggest suitable remedial measures. The committee so constituted
observed that high established cost and low productivity in public sector banks
affect their profitability and it was necessary for these banks to convert
their human resources into assets compatible with business strategies. Inter
alia, the committee placed the draft Voluntary Retirement Scheme with the
Central Government that would assist the banks in their efforts to optimize
their human resources and achieve a balanced age and skills profile in keeping
with their business strategies. With the approval of the central government,
Indian Bank Association (IBA) circulated salient features of the draft scheme
to the nationalized banks for consideration and adoption by their respective
boards vide its letter dated August 31, 2000. The Board of Directors of each of
the nationalized banks, keeping in view the objectives, considered the draft
scheme and adopted it separately.
the present batch of appeals, the Voluntary Retirement Scheme brought out by
the Punjab National Bank, Punjab & Sind Bank, Bank of India, Union Bank of
India and United Bank of India is in issue.
scheme adopted by these banks, although separately, is identical and bears
similar salient features with some variation in certain respects. It is not
necessary to consider them individually. For the sake of brevity, we shall
refer the scheme as VRS 2000.
objective of VRS 2000 has been:
-to transform the organizational as more efficient as well as for controlling
-to improve the
prospects and career growth and skills upgradation for employees by
rationalizing the manpower;
-to help the bank to
rightsize the growth.
7. We may, at this stage,
summarise the salient features of VRS 2000. These are :
(i) All permanent
employees of the bank who have put in minimum 15 years of service or completed
40 years of age on the date of coming into force of the scheme are eligible for
(ii) In addition to
the normal retirement benefits available to an employee , according to the
terms and conditions of his employment in the bank, an employee whose
application for voluntary retirement is accepted will be paid a lump sum amount
equivalent to 60 days salary for each completed year of service.
(III) The competent
authority may accept or reject the application of an employee for voluntary
retirement and the decision of the competent authority shall be final.
(IV) No voluntary
retirement shall come into effect unless competent authority has passed orders
accepting the applications of the employees to retire voluntarily under the
(V) The scheme can be
withdrawn at the discretion of the bank at any time without assigning any reason.
(VI) It shall be open
to the bank to alter/amend the conditions of the scheme. (In the scheme framed
by Punjab National Bank such provision is not there).
8 (VII) The
applications made under the scheme will be irrevocable and the employee will
not have the right to withdraw the application once submitted.
(VIII) An employee
whose application for voluntary retirement is accepted and relieved from the
bank shall be eligible for :
(i) gratuity as per
Gratuity Act/service gratuity as the case may be;
(ii) own contribution
of provident fund and bank contribution towards provident fund, in case of
those who have opted for Contributory Provident Fund or own contribution of
provident fund and pension in terms of Employees Pension Regulations, 1995, in
case of those who have opted for pension and have put in 20 completed years of
service in the bank (emphasis supplied) and (iii) leave encashment as per
period during which VRS 2000 was to remain in operation in respect of the banks
with which we are concerned is as follows:
Punjab and Sind Bank
01.12.2000 to 31.12.2000 Punjab National Bank 01.11.2000 to 30.11.2000 Bank of
India 15.11.2000 to 14.12.2000 Union Bank of India 01.12.2000 to 31.12.2000 9
United Bank of India 01.01.2001 to 31.01.2001
19 of the Banking Companies (Acquisition and Transfer of Undertakings) Act,
1970 (for short ` Act 1970') empowers the Board of Directors to make
regulations consistent with the provisions of the Act or any Scheme made
thereunder after consultation with the Reserve Bank and with the previous
sanction of the Central Government in respect of matters provided therein.
Section 19 (2)(f)
particular, and without prejudice to the generality of the foregoing power, the
regulations may provide for all or any of the following matters, namely:-- (f)
the establishment and maintenance of superannuation, pension, provident or
other funds for the benefit of officers or other employees of the corresponding
new bank or of the dependants of such officers or other employees and the
granting of superannuation allowances, annuities and pensions payable out of
banks have made their regulations in respect of pension separately. Since they
bear identical provisions; we shall refer them as Pension Regulations, 1995
generally. On the date of the commencement of the VRS 2000, Regulations 28 and
29 read as follows:
Superannuation Pension:- Superannuation pension shall be granted to an employee
who has retired on his attaining the age of superannuation specified in the
Service Regulations or Settlements.
29. Pension on
Voluntary Retirement:- (1) On or after the 1st day of November, 1993 at any
time, after an employee has completed twenty years of qualifying service he may,
by giving notice of not less than three months in writing to the appointing
authority retire from service.
Provided that this
Sub-regulation shall not apply to an employee who is on deputation or on study
leave abroad unless after having been transferred or having returned to India
he has resumed charge of the post in India and has served for a period of not
less than one year:
Provided further that
this Sub-regulation shall not apply to an employee who seeks retirement from
service for being absorbed permanently in an autonomous body or a public sector
undertaking or company or institution or body, whether incorporated or not to
which he is on deputation at the time of seeking voluntary retirement;
Provided that this
Sub-regulation shall not apply to an employee who is deemed to have retired in
accordance with Clause (1) of regulation
(2) The notice of
voluntary retirement given under sub-regulation (1) shall require acceptance by
the appointing authority:
Provided that where
that appointing authority does not refuse to grant the permission for
retirement before the expiry of the period specified in the said notice, the
retirement shall become effective from the date of expiry of the said period.
(3)(a). An employee
referred to in sub-regulation (1) may make a request in writing to the
appointing authority to accept notice of voluntary retirement of less than
three months giving reasons therefor.
11 (b) On receipt of
a request under Clause (a), the appointing authority may, subject to the
provisions of Sub-regulation (2) , consider such request for the curtailment of
the period of notice of three months on merits and if it is satisfied that the
curtailment of the period of notice will not cause any administrative
inconvenience, the appointing authority may relax the requirement of notice of
three months on the condition that the employee shall not apply for commutation
of a part of his pension before the expiry of the notice of three months.
(4) An employee, who
has elected to retire under this regulation and has given necessary notice to
that effect to the appointing authority, shall be precluded from withdrawing
his notice except with the specific approval of such authority;
Provided that the
request for such withdrawal shall be made before the intended date of his
(5) The qualifying
service of an employee retiring voluntarily under this regulation shall be
increased by a period not exceeding five years, subject to the condition that
the total qualifying service rendered by such employee shall not in any case
exceed thirty three years and it does not take him beyond the date of
(6) The pension of an
employee retiring under this regulation shall be based on the average
emoluments as defined under clause (d) of regulation 2 of these regulations and
the increase, not exceeding five years in his qualifying service, shall not
entitle him to any notional fixation of pay for the purpose of calculating his
11. It appears that
the benefits provided under Regulation 29 were not found to be attractive by
the employees and did not help these banks in rightsizing their manpower; thus,
arose a necessity of special scheme. VRS 2000 is, in a way, special scheme
launched for a very limited period.
12. VRS 2000 came up
for consideration before this Court in the case of Bank of India & Ors. vs
O.P. Swarnakar & Ors., (2003) 2 SCC 721. The question under consideration
in that case was whether an employee who opts for voluntary retirement pursuant
to or in furtherance of a scheme floated by the nationalized banks would be
precluded from withdrawing the said offer.
This Court culled out
the following aspects:
(i) The banks treated
the application from the employees as an offer which could be accepted or
(ii) Acceptance of
such an offer is required to be communicated in writing.
decision-making process involved application of mind on the part of several
process was to be formed at various levels.
(v) The process of
acceptance of an offer made by an employee was in the discretion of the
(vi) The request for
voluntary retirement would not take effect in present but in future.
13 (vii) The bank
reserved its right to alter/rescind the conditions of scheme.
13. In O.P.
Swarnakar, it has been held that scheme is contractual in nature. It amounted
to an invitation to offer and not an offer or proposal itself; the application
made by the employees was an offer.
14. The statement of
law with regard to nature of voluntary retirement scheme expounded in O.P.
Swarnakar has been
reiterated in HEC Voluntary Retd.
Society v. Heavy Engineering Corporation Ltd. (2006) 3 SCC 708; albeit a
different voluntary retirement scheme.
15. The admitted
factual position in this batch of appeals is that each of the employees had
completed 20 years of service.
16. It may be noticed
that at the fag end of the operation of VRS 2000, at the instance of IBA and
with the approval of the Central Government, Regulation 28 was proposed to be
amended. The amendment in fact was carried out in the year 2002 with
retrospective effect from September 1, 2000. By way of amendment, a proviso has
been inserted to Regulation 28, which reads as follows:
pension shall also be granted to an employee who opts to retire before
attaining the age of superannuation, but after having served for a minimum
period of 15 years in terms of any scheme that may be framed for the purpose by
the Bank's Board with the concurrence of the Government."
17. The optees have
been given retiral benefits by the respective banks under VRS 2000 save and
except the benefit of pension under Regulation 29(5). Their representation in
this regard did not yield any result and that necessitated them to approach
various High Courts for redressal of their grievance.
18. The views of High
Courts differ. Punjab and Haryana High Court has held that employees are
entitled to add a period of qualifying service not exceeding five years in
terms of the Regulation 29(5); the total qualifying service rendered by an
employee seeking voluntary retirement in any case shall not exceed 33 years.
With regard to the amendment in Regulation 28, Punjab and Haryana High Court
has held that by the said amendment, the provision contained in Regulation
29(5) of the Regulations does not get affected so as to disentitle the
employees the benefit provided therein.
19. There are two
views in so far as Kerala High Court is concerned. In the case of K. Mohandas
(Civil Appeal arising out of SLP (c) 22704/2005), the Division Bench in the
Writ Appeal held that the employees seeking voluntary retirement under VRS 2000
were entitled to benefit under Regulation 29(5) of Pension Regulations, 1995.
However, in the case of N.U. Kurup, the single Judge held otherwise. The single
Judge took the view that the employees seeking voluntary retirement under VRS
2000 were entitled to pension under Regulation 28 and that they are not
entitled to benefit of addition of five years service as provided in Regulation
29(5). The view of the Division Bench of Calcutta High Court is on the lines of
the view of the single Judge of Kerala High Court that the optees of voluntary
retirement under VRS 2000 are not entitled to benefit of addition of five years
service under Regulation 29(5).
20. We have heard the
senior counsel, counsel for the respective parties and Baldev Singh who
appeared in person at quite some length. The written submissions have also been
filed by the parties which we considered thoughtfully.
21. The submissions
on behalf of the banks may be summarised thus : (i) that Pension Regulations,
1995, as were existing during the operation of VRS 2000, did not cover the
class of employees retiring under the Scheme which is contractual in nature.
Regulation 28 came to be amended by insertion of proviso thereto to cover the
employees retiring under the Scheme inasmuch as by the said amendment, the
employees having completed 15 years of service or more became entitled to
pension on pro-rata basis; (ii) that voluntary retirement under VRS 2000 cannot
be compared or equated with voluntary retirement under Pension Regulations,
VRS 2000 is
completely different and distinct scheme from voluntary retirement contemplated
under Regulation 29 of the Pension Regulations, 1995; (iii) that Regulation
29(5) of Pension Regulations, 1995, read: "the qualifying service of an
employee retiring voluntarily under this regulation shall be increased by a
person not exceeding ...
words "under this regulation" would mean `under Regulation 29' and no
other interpretation to the meaning could be attributed to these words; (iv)
that during operation of VRS 2000, the concerned banks had brought out
circulars to bring to the notice of the concerned employees the proposed
amendment and, thus, the employees were aware of the proposed amendment of
Pension Regulations and could have withdrawn their offer but in the absence of
such withdrawal and after having accepted the benefits under VRS 2000, they are
estopped under law from challenging the Scheme or claiming benefit of addition
of five years of notional service in calculating the length of service for the
purposes of pension and (v) that Regulation 29 does not cover persons retiring
under VRS 2000 which is de hors the statutory scheme for voluntary retirement.
22. On the other
hand, on behalf of the employees, it was contended: (i) that Pension
Regulations, 1995, were framed and notified in the year 1995 that provides for
different classes of pension which might be available to a pension optee, inter
alia, two classes of these pension are; superannuation pension (Regulation 28)
and pension on Voluntary Retirement (Regulation 29); that VRS 2000 was brought
out with the object of optimizing human resources at various levels for
achieving the balanced age and skills profile in keeping with business
strategies and the banks allowed its employees to retire voluntarily under the
Scheme with an intention to confer attractive benefits in addition to ex-
gratia and such additional benefits also included pension as per Pension
Regulations, 1995; (ii) that VRS 2000 is not statutory in nature; rather, it is
an invitation to treat by the bank to its employees to offer for voluntary retirement.
The offer for
voluntary retirement was founded on the terms of scheme. By acceptance of the
said offer made by the employees, the concluded contract came into existence
between the bank and the employee which could not have been altered; (iii) that
on the date of the relieving the concerned employees, Regulation 28 had not
been amended and, therefore, the entitlement to the pension could not have been
decided in terms of that Regulation and the pension benefits to the optees
could only be given under Regulation 29; (iv) that by making provision in the
Scheme that optees would be eligible for the benefits in addition to the
ex-gratia amount, inter alia, pension as per Pension Regulations, 1995, the
employees understood that what was contemplated was pension under Regulation
29. Any ambiguity in VRS 2000 ought to be construed that harmonized with the
intention of the parties; (v) that the amendment in Regulation 28 was
introduced for a class of employees who had put in more than 15 years but less
than 20 years of service. In terms of Pension Regulations, 1995, as it stood
before amendment to Regulation 28, an employee although a pension optee under
VRS having not completed 20 years service was not entitled to any pension. In
order to take care of this anomalous position and to confer pensionary benefits
on such employees, the amendment was brought into effect in Regulation 28 which
cannot affect the subject employees who undisputedly have put in more than 20
years of service; (vi) that the employees made the offer to retire from service
in terms of the Scheme which was accepted by the banks without any reservation.
In terms of the Scheme under the head `other benefits', the optees are eligible
for benefit of pension as per Pension Regulations, 1995. Regulation 29 was the
only regulation under the Pension Regulations,1995, applicable to voluntary
retirement and, therefore, Regulation 29, ipso facto, became the term of the
contract and (vii) that each and every paragraph of Regulation 29 can be made
applicable to an optee of more than 20 years of service without coming into
conflict with any provision of the Scheme; the notice period of three months in
Regulation 29(3) can be waived at the discretion of the banks.
23. The principal
question that falls for our determination is : whether the employees (having
completed 20 years of service) of these banks (Bank of India, Punjab National
Bank, Punjab & Sind Bank, Union Bank of India and United Bank of India) who
had opted for voluntary retirement under VRS 2000 are entitled to addition of
five years of notional service in calculating the length of service for the
purpose of the said Scheme as per Regulation 29(5) of Pension Regulations, 1995
24. As noticed above,
Pension Regulations, 1995, came to be framed by each of the afore-referred
banks separately in exercise of the powers conferred by clause(f) of
sub-Section 2 of Section 19 of the Act, 1970. In the interpretation clause
various expressions have been defined.
25. Regulation 2(t)
includes the basic pension and additional pension referred to in Chapter VI of
means cessation from bank's service "(a).....................
(b) on voluntary retirement
in accordance with provisions contained in Regulations 29 of these Regulations.
26. Chapter V of
Pension Regulations deals with the various classes of pension:
pension (Regulations 28);
pension (Regulation 29);
(Regulation 30); premature retirement pension (Regulation 32) and compulsory
retirement pension (Regulation 33).
27. In view of the
admitted position that VRS 2000 was a contractual scheme; that it was an
invitation to offer containing a term that optee will also be eligible for
pension as per Pension Regulations; that an application by an employee for
voluntary retirement was a proposal or offer and that upon acceptance of the
application for voluntary retirement made by the employee and a communication
of acceptance to him, the concluded contract came into existence and the
offeree was relieved from the employment, for consideration of the question
posed herein, the court need to examine the contract and the circumstances in
which it was made in order to see whether or not from the nature of it, the 23
parties must have made their bargain on the footing that a particular thing or
state of things would continue to exist.
28. The true
construction of a contract must depend upon the import of the words used and
not upon what the parties choose to say afterwards. Nor does subsequent conduct
of the parties in the performance of the contract affect the true effect of the
clear and unambiguous words used in the contract. The intention of the parties
must be ascertained from the language they have used, considered in the light
of the surrounding circumstances and the object of the contract. The nature and
purpose of the contract is an important guide in ascertaining the intention of
29. In Ottoman Bank
of Nicosia vs. Ohanes Chakarian, AIR 1938 PC 26, Lord Wright made these weighty
"----- that if
the contract is clear and unambiguous, its true effect cannot be changed merely
by the course of conduct adopted by the parties in acting under it."
30. In Ganga Saran
vs. Firm Ram Charan Ram Gopal, AIR 1952 SC 9, a four Judge bench of this Court
"Since the true
construction of an agreement must depend upon the import of the words used and
not upon what the parties choose to say afterwards, it is unnecessary to refer
to what the parties have said about it."
31. It is also a
well-recognized principle of construction of a contract that it must be read as
a whole in order to ascertain the true meaning of its several clauses and the
words of each clause should be interpreted so as to bring them into harmony
with the other provisions if that interpretation does no violence to the
meaning of which they are naturally susceptible. [(The North Eastern Railway
Company vs. L. Hastings) (1900 AC 260)].
32. The fundamental
position is that it is the banks who were responsible for formulation of the
terms in the contractual Scheme that the optees of voluntary retirement under
that Scheme will be eligible to pension under Pension Regulations, 1995, and,
therefore, they bear the risk of lack of clarity, if any. It is a well-known
principle of construction of contract that if the terms applied by one party
are unclear, an interpretation against that party is preferred. [Verba
Chartarum Fortius Accipiuntur Contra Proferentum].
33. What was, in
respect of pension, the intention of the banks at the time of bringing out VRS
2000? Was it not made expressly clear therein that the employees seeking
voluntary retirement will be eligible for pension as per Pension Regulations?
If the intention was not to give pension as provided in Regulation 29 and
particularly sub- regulation (5) thereof, they could have said so in the scheme
itself. After all much thought had gone into the formulation of the VRS 2000
and it came to be framed after great deliberations. The only provision that
could have been in mind while providing for pension as per Pension Regulations
was Regulation 29. Obviously, the employees, too, had benefit of Regulation
29(5) in mind when they offered for voluntary retirement as admittedly
Regulation 28 as was existing at that time was not applicable at all. None of
the regulations 30 to 34 was attracted. It appears that VRS 2000 evoked huge
response, much more than expected and then began the second thought. At the fag
end of operation of VRS 2000, at the instance of NBA, the banks proposed
amendment in the Pension Regulations and a circular came to be issued. But, by
that time, ball had gone out of the hands of the employees; they had already
made their offers which were irrevocable; it was not open to them to withdraw
the offers as per specific condition incorporated in the scheme (albeit this
court in O.P. Swarnakar held that offer could be withdrawn before acceptance)
and their offers were accepted and they were relieved. We are afraid, it would
be unreasonable if amended Regulation 28 is made applicable, which had not seen
the light of the day and which was not the intention of the bank when scheme
was framed. The banks in the present batch of appeals are public sector banks
and are `State' within the meaning of Article 12 of the Constitution and their
action even in contractual matters has to be reasonable, lest, as observed in O.P.
Swarnakar, it must attract the wrath of Article 14 of the Constitution.
interpretation of the terms of VRS 2000, although contractual in nature, must
meet the test of fairness. It has to be construed in a manner that avoids
arbitrariness and unreasonableness on the part of the public sector banks who
brought out VRS 2000 with an objective of rightsizing its manpower. The banks
decided to shed surplus manpower. By formulation of the Special Scheme (VRS
2000), the banks intended to achieve its objective of rationalizing its force
as they were overstaffed. The Special Scheme was, thus, oriented to lure the
employees to go in for voluntary retirement. In this background, the
consideration that was to pass between the parties assumes significance and a
harmonious construction to the Scheme and Pension Regulations, therefore, has
to be given.
35. The amendment to
Regulation 28 can, at best, be said to have been intended to cover the
employees with 15 years of service or more but less than 20 years of service.
This intention is reflected from the communication dated September 5, 2000 sent
by the Government of India, Ministry of Finance, Department of Economic Affairs
(Banking Division) to the Personnel Advisor, Indian Banks' Association. The said
letter may be set out as it is which reads thus:
Government of India Ministry of Finance Department of Economic Affairs (Banking
Division) New Delhi, the 5th Sept.2000 To The Personnel Advisor, Indian Bank's
Sub: Amendment to
Regulation 29 of the Pension Regulations.
Sir, I am directed to
refer to this Division's letter No. 11/1/99 IR dated 29th August, 2000
conveying Government's no objection for circulation of Voluntary Retirement
Scheme in Public Sector Banks. The scheme, inter-alia, provides that employees
with 15 years of service or 40 years of age shall be eligible to take voluntary
retirement under the scheme. As per provisions contained in Regulation 29 of
Pension Regulations an employee can take voluntary retirement after 20 years of
qualifying service and thereafter becomes eligible for pension. Thus employees
having rendered 15 years of service or completing 40 years of age but not
having completed 20 years of service shall not be eligible for pensionary
benefits on taking voluntary retirement under the scheme.
In order to ensure
that such employees do not lose the benefit of pension, IBA may work out 29
modalities and suggest amendments, if any, required to be made in the pension
regulations to ensure that these employees also get the benefit of pension.
Sd/- (U.P. Singh) Director (IR)"
36. Two things
immediately become noticeable from the said communication. One is that as per
Regulation 29 of Pension Regulations, 1995, an employee can take voluntary
retirement after 20 years of qualifying service and become eligible for
pension. The other thing is that the Scheme provides that the employees with 15
years of service or 40 years of age shall be eligible to take voluntary
retirement under the Scheme and under Regulation 29, the employees having
rendered 15 years of service or completed 40 years of age but not completed 20
years of service shall not be eligible for pensionary benefits on taking
voluntary retirement under the Scheme.
The use of the words
`such employees' in the communication is referable to employees having rendered
15 years of service but not completed 20 years of service and, therefore, it
was decided to bring in amendment in the Regulations so that employees having
not completed 20 years service do not loose the benefit of pension. The
amendment in Regulation 28, as is reflected from the afore-referred
communication, was intended to cover the employees who had rendered 15 years
service but not completed 20 years service. It was not intended to cover the
optees who had already completed 20 years service as the provisions contained
in Regulation 29 met that contingency.
37. Even if it be
assumed that by insertion of the proviso in Regulation 28 (in the year 2002 with
effect from September 1, 2000), all class of employees under VRS 2000 were
intended to be covered, such amendment in Regulation 28, needs to be harmonized
with Regulation 29, particularly Regulation 29(5) which provides for addition
of qualifying service by five years for the optees who had put in 20 years
service or more subject to the condition that total qualifying service rendered
by such employee shall not in any case exceed 33 years. This would be in tune
and consonance with the explanatory note appended to the amendment in
Regulation 28 wherein it is stated that the amendment with retrospective effect
would not adversely affect any employee or officer of the respondent- bank.
That would also meet the test of fairness.
38. The contention
was raised on behalf of the banks that if Regulation 29(5) of the Pension
Regulations, 1995, is applied for the purposes of VRS 2000, the same would
create an anomalous situation inasmuch as two different classes of employees
for the purpose of granting pension would be created, namely, a class of
employees who had completed 15 years of service but less than 20 years of
service and this class would not be entitled to receive benefits under
Regulation 29(5) while the employees who had completed 20 years service or more
would be entitled to receive the benefit under Regulation 29(5). It was
submitted that by such construction a class within the class would be created
which is impermissible.
We do not agree. If a
special benefit under Regulation 29(5) is available to the employees who had
completed 20 years of service or more, by no stretch of imagination, can it be
said that it is discriminatory to those employees who had completed 15 years of
service but not completed 20 years. In view of the provision contained in
Regulation 29 (5), if the optees who have not completed 20 years get excluded
from the weightage of five years which has been given to optees who have
completed 20 years of service or more, it is no discrimination. Such provision
can neither be said to be arbitrary nor can be held to be violative of any
constitutional or statutory provisions. The weightage of five years under
Regulation 29(5) is applicable to the optees having service of 20 years or
more. There is, thus, basis for additional benefit.
Merely because the
employees who have completed 15 years of service but not completed 20 years of
service are not entitled to weightage of five years for qualifying service
under Regulation 29(5), the employees who have completed 20 years of service or
more cannot be denied such benefit.
39. On behalf of the
banks, it was contended that Pension Regulations, 1995, are statutory in nature
and these Regulations cannot be altered, amended or read down in view of any
contract or a contractual scheme. It was submitted that any contract (or
contractual scheme), contrary to a statutory law would be hit by Section 23 of
the Contract Act and, therefore, it is the contract or the scheme which has to
be modified, altered or read down to bring it in tune with the provisions of
statutory Regulations and not the other way round. The contention does not
impress us. It is misplaced assumption that by reading Regulation 29(5) in the
Scheme, the Pension Regulations would get altered or amended. Can it be said
that statutory relationship of employee and employer brought to an end
prematurely by contractual VRS 2000 amounted to alteration or amendment in the
statutory Regulations. Surely, answer has to be in negative and that must
answer this contention. The precise effect of Pension Regulations, for the
purposes of pension, having been made part of scheme, is that Pension
Regulations, to the extent, these are applicable, must be read into the Scheme.
It is pertinent to bear in mind that interpretation clause of VRS-2000 states
that the words and expressions used in the scheme but not defined and defined
in the Rules/Regulations shall have the same meaning respectively assigned to
them under Rules/Regulations. The Scheme does not define the expression
`retirement' or `voluntary retirement'. We have, therefore, to fall back on the
definition of `retirement' given in Regulation 2(y) whereunder voluntary
retirement under Regulation 29 is considered to be retirement.
Regulation 29 uses
the expression, `voluntary retirement under these Regulations'. Obviously, for
the purposes of the Scheme, it has to be understood to mean with necessary
changes in points of details. Section 23 of the Contract Act has no application
to the present fact situation.
40. It was submitted
on behalf of the banks that amendment to Regulation 28 has neither been
challenged nor the said Regulation has been declared ultra vires and,
therefore, that provision cannot be rendered otiose by taking recourse to
Regulations 29. It is true that validity and legality of Regulation 28 has not
been put in issue. It was apparently not done because, according to the
employees, amended Regulation 28 although made retrospective could not have
affected the concluded contract. We have already indicated above as to how the amendment
in Regulation 28 in the year 2002 with effect from September 1, 2000 could not
have applied to the optees under the Scheme who had completed service of 20
years. Lack of challenge to the Regulation 28 by the employees is, therefore,
not very material. It is not correct to say that by taking recourse to
Regulation 29, the amendment to Regulation 28 is rendered otiose.
41. It was vehemently
contended on behalf of the banks that VRS 2000 was a self-contained Scheme and
it provided for special benefits in the form of ex-gratia. It was submitted
that ex-gratia was not available to the employees claiming voluntary retirement
under Pension Regulations and it was because of that, that Scheme did not
envisage granting of pension benefits under Regulation 29(5) of the Pension
Regulations, 1995, along with the payment of ex-gratia which was a substantial
amount. It is true that VRS 2000 is a complete package in itself and
contractual in nature. However, in that package, it has been provided that the
optees, in addition to ex-gratia payment, will also be eligible to other
benefits inter alia pension under the Pension Regulations. The only provision
in the Pension Regulations at the relevant time during the operation of VRS
2000 concerning voluntary retirement was Regulation 29 and clause(5) thereof
provides for weightage of addition of five years to qualifying service for
pension to those optees who had completed 20 years service. It, therefore,
cannot be accepted that VRS 2000 did not envisage grant of pension benefits
under Regulation 29(5) of the Pension Regulations, 1995, to the optees of 20
years service along with payment of ex-gratia. The whole idea in bringing out
VRS 2000 was to rightsize workforce which the banks had not been able to
achieve despite the fact that the statutory Regulations provided for voluntary
retirement to the employees having completed 20 years service. It was for this
reason that VRS 2000 was made more attractive.
accordingly, was an attractive package for the employees to go in for as they
were getting special benefits in the form of ex-gratia and in addition thereto,
inter alia pension under the Pension Regulations which also provided for
weightage of five years of qualifying service for the purposes of pension to the
employees who service for the purposes of pension to the employees who had
completed 20 years service.
42. In support of
their contention that the employees, who have sought voluntary retirement under
VRS 2000, are not entitled to benefit of Regulation 29(5) of Pension
Regulations, 1995, on behalf of banks, heavy reliance was placed on a decision
of this Court in the Deora, 2009 (1) Scale 168. As a matter of fact, it was
submitted that the decision of this Court in the case of Bank of Baroda concludes
the controversy and the legal position is no more res integra. Reliance in this
connection was placed on the following observations:
"15. The only
question which is required to be determined in the instant case is whether
Regulation 29 of the Pension Regulations, 1995, could have been applied in the
case of the respondent or whether Regulation 14 has been rightly applied both
by the Tribunal and the High Court.
18. However, we are
inclined to agree with Ms. Bhati that Regulation 29 does not contemplate
voluntary retirement under the Voluntary Retirement Scheme and applies only to
such employees who themselves wish to retire de hors any Scheme of Voluntary
Retirement, after having completed 15 years of qualifying service for the said
purpose. There is a distinct difference between the two situations and Regulation
29 would not cover the case of an employee opting to retire on the basis of a
Voluntary Retirement Scheme.
Regulations 2 of the Voluntary Retirement Scheme, 2001, of the appellant-Bank
merely prescribes a period of qualifying service for an employee to be eligible
to apply for voluntary retirement. On the other hand, Regulations 14 and 29 of
the Pension Regulations, 1995, relate to the period of qualifying service for
pension under the said Regulations, in two different situations. While
Regulations 14 provides that in order to be eligible for pension an employee
would have to render a minimum of 10 years service, Regulation 29 is applicable
to the employees choosing to retire from service pre-maturely, and in their
case the period of qualifying service would be 15 years. The facts of this
case, however, do not attract the provisions of Regulation 29 since the
respondent accepted the offer of voluntary retirement under the Scheme framed
by the Bank and not on his own volition de hors any Scheme of Voluntary
Retirement. In such a case, Regulaion14 read with Regulation 32 providing for
premature retirement would not also apply to the case of the respondent. While
Regulation 2 of the BOBEVRS -2001 speaks of eligibility for applying under the
Scheme, Regulation 14 of the Pension Regulations, 1995, contemplates a
situation whereunder an employee would be eligible for premature pension. The
two provisions are for two different purposes and for two different situations.
28 of the Pension Regulations, 1995, after amendment made provision for
situations similar to the one in the instant case. In the absence of any
particular provision for payment of pension to those who opted for BOBEVRS-2001
other than Regulation 11(ii) of the Scheme, we are once again left to fall back
on the Pension Regulations, 1995, and the amended provisions of Regulation 28
which brings within the scope of Superannuation Pension employees who opted for
the Voluntary Retirement Scheme, which will be clear from the Explanatory
Memorandum. However, the period of qualifying service has been retained as 15
years for those opting for BOBEVRS-2001 and is treated differently from
premature retirement where the minimum period of qualifying service has been
fixed at 10 years in keeping with Regulation 14 of the Pension Regulations,
43. A word about
precedents, before we deal with the aforesaid observations. The classic
statement of Earl of Halsbury , L.C. in Quinn vs. Leathem, 1901 AC 495, is
worth recapitulating first:
discussing Allen v. Flood (1898) AC 1 and what was decided therein, there are
two observations of a general character which I wish to make; and one is to
repeat what I have very often said before -that every judgment must be read as
applicable to the particular facts proved, or assumed to be proved, since the
generality of the expressions which may be found there are not intended to be
expositions of the whole law, but are governed and qualified by the particular
facts of the case in which such expressions are to be found. The other is that
a case is only an authority for what it actually decides. I entirely deny that
it can be quoted for a proposition that may seem to follow logically from it.
Such a mode of reasoning assumes that the law is necessarily a logical code,
whereas every lawyer must acknowledge that the law is not always logically at
44. This Court has in
long line of cases followed the aforesaid statement of law. In State of Orissa
Misra, AIR 1968 SC 647, it was observed:
40 ".... A
decision is only an authority for what it actually decides. What is of the
essence in a decision is its ratio and not every observation found therein nor
what logically follows from the various observations made in it."
45. In the words of
depends on its own facts and a close similarity between one case and another is
not enough because even a single significant detail may alter the entire
aspect, in deciding such cases, one should avoid the temptation to decide cases
(as said by Cardozo) by matching the colour of one case against the colour of
another. To decide therefore, on which side of the line a case falls, the broad
resemblance to another case is not at all decisive."
46. It was
highlighted by this Court in Ambica Quarry "18....The ratio of any
decision must be understood in the background of the facts of that case. It has
been said long time ago that a case is only an authority for what it actually
decides, and not what logically follows from it."
47. In Bhavnagar
University vs. Palitana Sugar Mill (P) Ltd., (2003) 2 SCC 111, this Court held
that a little difference in facts or additional facts may make a lot of
difference in the precedential value of a decision.
48. This Court in
Bharat Petroleum Corporation Ltd. vs. N.R. Vairamani, (2004) 8 SCC 579,
emphasized that the Courts should not place reliance on decisions without
discussing as to how the factual situation fits in with the fact situation of
the decision on which the reliance is placed. It was further observed that the
judgments of courts are not to be construed as statutes and the observations
must be read in the context in which they appear to have been stated. The Court
went on to say that circumstantial applicability, one additional or different
fact may make a word of difference between conclusions in two cases.
49. It is true that
the controversy in the case of Bank of Baroda arose out of the same voluntary
retirement scheme with which we are concerned in this group of appeals.
However, there is vital factual difference in that case and this group of
appeals. Pertinently that was a case where the employee had completed only 13
years of service( not even 15 years of service much less 20 years' service)
although he completed 40 years of age at the time he offered for voluntary
retirement. The employee's application therein for voluntary retirement was
accepted by the Bank of Baroda and he was paid all retiral benefits.
However, his request
for grant of pension in addition to the other retiral benefits was not acceded
to by the bank.
It was so because he
had not completed even 15 years of service. The employee pursued industrial
adjudicatory process for redressal of his grievance in respect of non-grant of
pension by the bank. The employee's claim was opposed by the Bank of Baroda
contending that in terms of Regulations 14, 28 and 29 of the Pension Regulations,
1995, the employee was not entitled to pension. The observations made by this
Court in Bank of Baroda which have been quoted above and relied upon by the
banks in support of their contention have to be understood in the factual
backdrop namely, that the employee had completed only 13 years of service and,
was not eligible for the pension under the Pension Regulations,1995 and for the
benefit of addition of five years to qualifying service under Regulation 29(5),
an employee must have completed 20 years of service. The question therein was
not identical in form with the question here to be decided. The following
observations in paragraph 11 of the report in Bank of Baroda are significant:
both the Tribunal as well as the High Court appear not to have considered or
taken note of the fact that the respondent was not eligible for pension as he
had not completed 15 years of qualifying service......
50. The decision of
this Court in Bank of Baroda is, thus, clearly distinguishable as the employee
therein had not completed qualifying service much less 20 years of service for
being eligible to the weightage under Regulation 29(5) and cannot be applied to
the present controversy nor does that matter decide the question here to be
decided in the present group of matters.
51. On behalf of
banks it was submitted that the employees, having taken benefits under the
scheme (VRS 2000), are estopped from raising any issue that their entitlement
to pension would not be covered by amended Regulation 28. It was suggested that
the employees having taken benefit of the scheme cannot insist for pension
under Regulation 29(5). O.P. Swarnakar was relied upon in this regard wherein
it has been held that an employee, having taken the ex-gratia payment, or any
other benefit under the scheme cannot be allowed to resile from the scheme.
52. Insofaras the
present group of appeals is concerned, the employees are not seeking to resile
from the Scheme. They are actually seeking enforcement of the clause in the
Scheme that provides that the optees will be eligible for pension under the
Pension Regulations, 1995.
According to them,
they are entitled to the benefits of Regulation 29(5). In our considered view,
plea of estoppel is devoid of any substance; as a matter of fact it does not
arise at all in the facts and circumstances of the case.
53. We hold, as it
must be, that the employees who had completed 20 years of service and were
pension optees and offered voluntary retirement under VRS 2000 and whose offers
were accepted by the banks are entitled to addition of five years of notional
service in calculating the length of service for the purposes of that Scheme as
per Regulation 29(5) of the Pension Regulations, 1995. The contrary view
expressed by some of the High Courts do not lay down the correct legal
54. The only question
now remains to be seen is whether the concerned employees are entitled to
interest on unpaid pension.
55. Although it has
been held by us that the subject employees are entitled to the weightage in
terms of Regulation 29(5) of Pension Regulations, 1995, but we are satisfied
that any award of interest on unpaid pension would not be in the interest of
justice. It is so because different High Courts did not have unanimous judicial
opinion on the issue. Punjab and Haryana High Court and the Division Bench of
the Kerala High Court upheld the contention of the employees with regard to
applicability of Regulation 29(5) to the optees who had completed 20 years of
service while the Division Bench of the Calcutta High Court and a single Judge
of the Kerala High Court took exactly an opposite view. The stance of the
banks, although found not meritorious, cannot be said to be totally frivolous.
We, accordingly, hold that the subject employees are not entitled to interest
on unpaid pension.
56. The result of the
foregoing discussion is that the appeals preferred by the banks must fail and
are dismissed while the appeals of the employees deserve to be allowed and are
allowed accordingly. The respective banks shall now recalculate, within one
month from today, the pension payable to the concerned employees by giving them
the benefit of Regulation 29(5). However, the employees shall not be entitled
to interest on unpaid pension. The pending applications in these
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