# ASSISTANT GENERAL MANAGER, STATE BANK OF INDIA & ORS v. RADHEY SHYAM PANDEY

- **Citation:** [2020] 4 S.C.R. 814
- **Court:** Supreme Court of India
- **Decided:** 2020-03-02
- **Case number:** Civil Appeal No. 2463 of 2015
- **Bench:** Arun Mishra, M. R. Shah, B. R. Gavai
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/assistant-general-manager-state-bank-of-india-ors-v-radhey-shyam-pandey-34455
- **Pages:** 73

## Headnote

Service Law - Voluntary Retirement Scheme - Whether the
respondent employees are entitled to pension on completion of 15
years of service as per the State Bank of India Voluntary Retirement
Scheme (VRS framed in 2000) - Held: The Central Board of
Directors of the SBI accepted the memorandum for making payment
of pension, in case it was not accepting the proposal, in the
memorandum it ought to have said clearly that it was not ready to
accept the proposals of the Government and the Indian Bank
Association (IBA) and rejects the same - However, once it approved
the proposals referred to in the memorandum which were on the
basis of IBA's letter and Government of India's decision it was bound
to implement it in true letter and spirit - By accepting the same,
binding obligation was created upon the SBI to make payment of
pension on completion of 15 years of service - It cannot invalidate
its own decision by relying on fact it failed to amend the rule, whereas
other Banks did it later on with the retrospective effect - They cannot
invalidate otherwise valid decision by virtue of exclusive superior
power to amend or not to amend the rule and act unfairly and make
the entire contract unreasonable based on misrepresentation - The
scheme of contractual nature has to be read in the context and in
the backdrop of facts and what has been resolved by the Board of
Directors - There is no ambiguity with respect to the admissibility of
pension when the memorandum and the scheme are read together -
In case of ambiguity and even if two interpretations are possible in
the backdrop of facts of the case, one in favour of the employee
has to be adopted and any clarification, if it denies the benefit of
pension, has to be held to be unenforceable, illegal and contrary to
law - In the instant case, the eligibility clause, when read with clauses
providing the benefit, i.e., clauses 5 and 6 of the scheme, leaves no
[2020] 4 S.C.R. 814
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room for any doubt and makes it clear the employee with 15 years
of service were treated as eligible to claim the benefit of the scheme
floated by SBI - Therefore, the employees who completed 15 years
of service or more as on cut-off date were entitled to proportionate
pension under SBI-VRS to be computed as per SBI Pension Fund
Rules.
Disposing of the appeals, the Court
HELD: 1. It is apparent that once the Central Board of
Directors accepted the memorandum for making payment of
pension, in case it was not accepting the proposal in the
memorandum, it ought to have said clearly that it was not ready
to accept the proposals of the Government and the IBA and rejects
the same. Once it approved the proposals referred to in the
memorandum, which were on the basis of IBA's letter and
Government of India's decision it was bound to implement it in
true letter and spirit. By accepting the same, binding obligation
was created upon the SBI to make payment of pension on
completion of 15 years of service. It cannot invalidate its own
decision by relying on fact it failed to amend the rule, whereas
other Banks did it later on with retrospective effect. They cannot
invalidate otherwise valid decision by virtue of exclusive superior
power to amend or not to amend the rule and act unfairly and
make
the
entire
contract
unreasonable
based
on
misrepresentation. It was open to the Board of Directors to reject
the proposal. Once it accepted the proposal to make payment of
pension on completion of 15 years of service as proposed in the
memorandum, though the scheme is tried to be interpreted by
the SBI that pension was to be admissible as provided in the rule
that refers to proportionate pension as noted by this Court in
O.P. Swarnakar & Ors., and what was decided by Government of
India/IBA, was not taken away rather adopted by the Central
Board of Directors. The scheme of contractual nature has to be
read in the context and in the backdrop of facts and what has
been resolved by the Board of Directors. There is no ambigui

## Text

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ASSISTANT GENERAL MANAGER,
STATE BANK OF INDIA & ORS.
v.
RADHEY SHYAM PANDEY
(Civil Appeal No. 2463 of 2015)
MARCH 02, 2020
[ARUN MISHRA, M. R. SHAH AND B. R. GAVAI, JJ.]
Service Law - Voluntary Retirement Scheme - Whether the
respondent employees are entitled to pension on completion of 15
years of service as per the State Bank of India Voluntary Retirement
Scheme (VRS framed in 2000) - Held: The Central Board of
Directors of the SBI accepted the memorandum for making payment
of pension, in case it was not accepting the proposal, in the
memorandum it ought to have said clearly that it was not ready to
accept the proposals of the Government and the Indian Bank
Association (IBA) and rejects the same - However, once it approved
the proposals referred to in the memorandum which were on the
basis of IBA's letter and Government of India's decision it was bound
to implement it in true letter and spirit - By accepting the same,
binding obligation was created upon the SBI to make payment of
pension on completion of 15 years of service - It cannot invalidate
its own decision by relying on fact it failed to amend the rule, whereas
other Banks did it later on with the retrospective effect - They cannot
invalidate otherwise valid decision by virtue of exclusive superior
power to amend or not to amend the rule and act unfairly and make
the entire contract unreasonable based on misrepresentation - The
scheme of contractual nature has to be read in the context and in
the backdrop of facts and what has been resolved by the Board of
Directors - There is no ambiguity with respect to the admissibility of
pension when the memorandum and the scheme are read together -
In case of ambiguity and even if two interpretations are possible in
the backdrop of facts of the case, one in favour of the employee
has to be adopted and any clarification, if it denies the benefit of
pension, has to be held to be unenforceable, illegal and contrary to
law - In the instant case, the eligibility clause, when read with clauses
providing the benefit, i.e., clauses 5 and 6 of the scheme, leaves no
[2020] 4 S.C.R. 814
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room for any doubt and makes it clear the employee with 15 years
of service were treated as eligible to claim the benefit of the scheme
floated by SBI - Therefore, the employees who completed 15 years
of service or more as on cut-off date were entitled to proportionate
pension under SBI-VRS to be computed as per SBI Pension Fund
Rules.
Disposing of the appeals, the Court
HELD: 1. It is apparent that once the Central Board of
Directors accepted the memorandum for making payment of
pension, in case it was not accepting the proposal in the
memorandum, it ought to have said clearly that it was not ready
to accept the proposals of the Government and the IBA and rejects
the same. Once it approved the proposals referred to in the
memorandum, which were on the basis of IBA's letter and
Government of India's decision it was bound to implement it in
true letter and spirit. By accepting the same, binding obligation
was created upon the SBI to make payment of pension on
completion of 15 years of service. It cannot invalidate its own
decision by relying on fact it failed to amend the rule, whereas
other Banks did it later on with retrospective effect. They cannot
invalidate otherwise valid decision by virtue of exclusive superior
power to amend or not to amend the rule and act unfairly and
make
the
entire
contract
unreasonable
based
on
misrepresentation. It was open to the Board of Directors to reject
the proposal. Once it accepted the proposal to make payment of
pension on completion of 15 years of service as proposed in the
memorandum, though the scheme is tried to be interpreted by
the SBI that pension was to be admissible as provided in the rule
that refers to proportionate pension as noted by this Court in
O.P. Swarnakar & Ors., and what was decided by Government of
India/IBA, was not taken away rather adopted by the Central
Board of Directors. The scheme of contractual nature has to be
read in the context and in the backdrop of facts and what has
been resolved by the Board of Directors. There is no ambiguity
with respect to the admissibility of pension when the memorandum
and the scheme are read together. In case of ambiguity and even
if two interpretations are possible in the backdrop of facts of the
case, one in favour of the employees has to be adopted and soASSISTANT GENERAL MANAGER, STATE BANK OF INDIA &
ORS. v. RADHEY SHYAM PANDEY
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called clarification dated 11.1.2000 even if considered in the
manner so as to deny the benefit of pension, has to be held to be
unenforceable, illegal and contrary to law. [Para 53][877-G-H;
878-A-E]
2. It is apparent from the eligibility clause of the VRS
scheme that eligibility is provided for the employees having 15
years of pensionable service and they will be entitled for benefits
as provided in the scheme. The eligibility clause, when read with
clauses providing the benefit, i.e., clauses 5 and 6 of the scheme,
leaves no room for any doubt and makes it clear that employees
with 15 years of service were treated as eligible to claim the
benefit of the scheme floated by SBI. It was not the provision in
the VRS scheme that incumbents having completed 20 years of
service would be entitled for pensionary benefits. The scheme
was carved out specially for attracting the employees by providing
pension and other benefits to eligible persons like ex gratia,
gratuity, pension and leave encashment. Deprivation of pension
would make them ineligible for the benefits and would run
repugnant to the eligibility clause. [Para 54][878-E-H]
3. The submission raised on behalf of the SBI that the draft
scheme nowhere stipulated that 15 years' service would be the
eligibility or that on completion of 15 years' service, the incumbent
would be eligible for pension, is factually incorrect. It is apparent
from the material circumstances, documents, and correspondence
that the decision was taken at all levels including the one by the
Central Board of Directors of SBI, that the benefit of pension
was to be given to the employees on completion of 15 years of
service. In that perspective, vagueness of scheme of SBI, if any,
can be of no advantage as it is clear beyond the pale of doubt that
pension was heart and soul of the scheme with ex gratia on
completion of 15 years of service. It is due to the reason that the
benefit was to be accorded to the incumbents having completed
15 years of service, Regulation 28 as applicable to other
nationalised banks was proposed to be modified as reflected in
the letter of IBA dated 11.12.2000 and Government of India letter
dated 5.9.2000. Later on, the regulation was amended in 2002
after the scheme had already been implemented in right earnest.
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There was not even an iota of doubt that VRS was to give benefits
to all eligible employees having completed 15 years of service.
It was apparent from the letter dated 29.12.2000 of SBI that the
guidelines of IBA were approved by the Central Board of
Directors in its meeting dated 27.12.2000. [Para 55][879-A-E]
4. This Court observed that the principal aim of the socialist
State as envisaged in the Preamble is to eliminate inequality. The
basic framework of socialism is to provide security in the fall of
life to the working people and especially provides security from
the cradle to the grave when employees have rendered service
in heydays of life, they cannot be destituted in old age, by taking
action in an arbitrary manner and for omission to complete
obligation assured one. Though there cannot be estoppel against
the law but when a bank had the power to amend it, it cannot take
shelter of its own inaction and SBI ought to have followed the
pursuit of other banks and was required to act in a similar fair
manner having accepted the scheme. [Para 63][885-F-H]
Bank of India & Ors. v. O.P. Swarnakar & Ors. (2003)
2 SCC 721 : [2002] 5 Suppl. SCR 438 ; Delhi Transport
Corporation v. D.T.C. Mazdoor Congress & Ors. (1991)
Supp 1 SCC 600 : [1990] 1 Suppl. SCR 142 ; Central
Inland Water Transport Corporation Ltd. & Anr. v. Brojo
Nath Ganguly & Anr. (1983) 3 SCC 156 : [1986] 2
SCR 278 ; Bank of India & Anr. v. K. Mohandas &
Ors. (2009) 5 SCC 313 : [2009] 5 SCR 118 ; D.S.
Nakara & Ors v. Union of India (1983) 1 SCC 305 :
[1983] 2 SCR 165 - relied on.
HEC Voluntary Retd. Employees Welfare Society v. Heavy
Engineering Corporation Ltd. (2006) 3 SCC 708 :
[2006] 2 SCR 678 ; Jan Mohd. Noor Mohd. Bagban v.
State of Gujarat, AIR 1966 SC 385 : [1966] 1 SCR
505 ; Atlas Cycle Industries Ltd. v. State of Haryana
(1979) 2 SCC 196 : [1979] 1 SCR 1070; S.G.
Jaisinghani v. Union of India, AIR 1967 SC 1427 :
[1967] 2 SCR 703 - referred to.
ASSISTANT GENERAL MANAGER, STATE BANK OF INDIA &
ORS. v. RADHEY SHYAM PANDEY
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A. Schoroeder Music Publishing Co. Ltd. v. Macaulay
(formerly Instone) (1974) 1 WLR 1308 ; Levison v.
Patent Steam Carpet Co. Ltd; (1949) 2 All ER 584 -
referred to.
Case Law Reference
[2002] 5 Suppl. SCR 438
relied on
Para 30
[2006] 2 SCR 678
referred to
Para 30
[1966] 1 SCR 505
referred to
Para 37
[1979] 1 SCR 1070
referred to
Para 37
[1990] 1 Suppl. SCR 142
relied on
Para 51
[1986] 2 SCR 278
relied on
Para 50(a)
[1967] 2 SCR 703
referred to
Para 52(f)
[2009] 5 SCR 118
relied on
Para 58
[1983] 2 SCR 165
relied on
Para 63
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2463
of 2015.
From the Judgment and Order dated 23.11.2006 of the High Court
of Judicature at Allahabad in Special Appeal No. 904 of 2006.
With
Civil Appeal Nos. 2287-2288 of 2010, 5035-5037 of 2012, 10813
of 2013.
Vikas Singh, N.K. Kaul, Pradeep Kant, Sr. Advs., Sanjay Kapur,
V.M. Kannan, Harshal Narayan, Kauser Husain, Bharath Gangadharan,
Sanjay Kapur, Ms. Hansa Kaul, Divyanshu Sahay, Ms. Shradha Narayan,
Vishnu Shankar Jain, Sanjaye Goel, Jagjit Singh Chhabra, Saksham
Maheshwari, Ms. Kamini Jaiswal, Ms. Rani Mishra, Jatinderpal Singh,
Hari Shankar Jain, Pankaj Kr. Verma, Ms.Vaishnavi Ranjana, Vinay
Rajput, Ankur S. Kulkarni, Mrs. K. Sarada Devi, M/s. Mitter & Mitter,
Advs. for the appearing parties.
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The Judgment of the Court was delivered by
ARUN MISHRA, J.
1. The question involved is whether the respondent-employees
are entitled to pension on completion of 15 years of service as per the
State Bank of India Voluntary Retirement Scheme (for short, "the VRS
framed in 2000").
2. The matter has been referred to larger Bench due to conflict of
opinion between the Judges as to the admissibility of pension under the
VRS.
3. After obtaining approval of the Government of India, the Indian
Bank Association (IBA) evolved a Voluntary Retirement Scheme. The
Central Board of Directors of the State Bank of India (in short 'the
SBI') adopted and approved the scheme in its meeting held on 27.12.2000
for implementing the VRS for the employees of the bank by retiring
them on completion of 15 years of service with the benefit provided in
the scheme. The scheme had been drawn up, keeping in view the
guidelines issued by the IBA. "Memorandum" dated 26.12.2000 was
submitted by the Deputy Managing Director and the Corporate
Development Officer for according approval to the proposals contained
in the Memorandum as also for adopting the scheme as Annexure 'B' to
the Memorandum.
4. The basis of Memorandum dated 26.12.2000, was the advice
by IBA vide letter dated 31.8.2000 in which it was pointed out that they
deliberated with the Government of India, Ministry of Finance (Banking
Division), at its meeting with the Finance Minister, with Chief Executives
of public sector banks on 13.6.2000. The human resource and manpower
planning in public sector banks were reviewed, and a Committee was
constituted to examine the issues concerned to public sector banks and
to suggest suitable remedial measures. The Committee considered the
economic reforms set in motion in the year 1990, the high establishment
cost and low productivity in public sector banks. It was felt that the
banks convert their human resource into assets compatible with the
business strategies through a variety of measures. The data available
indicated that 43% of the employees in public sector banks were in the
46 + age group, and only 12% were in the 25-35 age group. It was felt
that this pattern has severe implications for the banks regarding mobility,
training, development of skills, and succession plans for higher-level
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positions. The workforce was in excess. In order to remedy the situation,
the Committee placed before the Government two schemes, viz.,
Sabbatical Leave, and a Voluntary Retirement Scheme. The IBA vide
letter dated 13.7.2000 sought no objection from the Government for
circulating the schemes to the banks for consideration and adoption by
their Boards. The Government conveyed on 29.8.2000 that it did not
have any objection for adopting and implementing the scheme by the
respective Board of Directors. It advised that the banks may adopt these
schemes for sabbatical leave and voluntary retirement based on the
essential features of the schemes given in the annexure to the letter.
The scheme provided eligibility for all permanent employees with 15
years of service. It provided for amount of ex gratia and other benefits
accepted by the Government of India which were to be provided (i)
gratuity as per the Gratuity Act/service gratuity, as the case may be; (ii)
pension (including commuted value of pension)/bank's contribution
towards provident fund; and (iii) leave encashment as per rules.
5. After the Central Board of SBI approved the proposals
contained in the memorandum on 27.12.2000, a circular was issued on
29.12.2000 in which it was mentioned that the IBA advised that as the
Committee constituted by the Finance Ministry recommended introduction
of a VRS in order to rationalise the manpower, the Government of India
has no objection for adopting and implementing the VRS. It was clearly
stated in the Circular dated 29.12.2000 that the Central Board of Directors
accorded approval for adopting and implementing the SBI voluntary
Retirement Scheme drawn up, "keeping in view the guidelines issued by
the IBA." Copy of the scheme was placed as Annexure B. The scheme
was open from 15.1.2001 till 31.1.2001. Specimen applications and other
related forms inter alia for pension were also circulated, which formed
part of the circular. The circular also made it clear that gratuity, provident
fund contribution as per the Provident Fund Rules, pension in terms of
the SBI Employees' Pension Fund Rules, leave encashment to be provided
beside the amount of ex gratia.
6. The heart and soul of the scheme were that benefits to be
given on completion of 15 years of service. The eligibility for benefits
was provided to those who had completed 15 years of service as on
31.12.2000.
7. The SBI submitted that it reserved a right under the scheme to
modify, amend or cancel it or any of the clauses and to give effect to it
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from any date deemed fit. The Deputy Managing Director-cum-CDO
was the competent authority for the purpose. As specific queries were
raised, a clarification was issued by the Deputy Managing Director on
15.1.2001, in which about a query whether an employee on completing
15 years of pensionable service as on the relevant date of retirement,
would be entitled to pensionary benefits, in response, para 6(c) of the
scheme was reiterated, and it was also mentioned that as per the existing
rules, employees who had not completed 20 years of pensionable service,
were not eligible for pension.
8. The clarification issued by the Deputy General Manager was
not in the form of modification or amendment of the scheme. The Deputy
General Manager in clarification quoted the provisions and simply stated
the position of a rule that the pensionable service was 20 years. The
communication was clarificatory and did not have the effect of modifying
the SBI VRS scheme as approved and adopted.
9. (a) Radhey Shyam Pandey questioned the refusal of the bank
to pay pension, vide communication dated 26.9.2006 in the writ application
filed in the High Court at Allahabad. He retired on 31.3.2001 under the
SBI VRS. On 18.3.2001, the bank accepted the offer of the employee
to retire him voluntarily. He was aged 59 years three months and had
nine months service still to go before attaining the age of superannuation.
On 31.3.2001, when the VRS became effective, he had put in 19 years,
nine months, and 18 days of pensionable service. He had to retire on
completion of 60 years, and would have put in a little more than 20 years
of pensionable service.
(b) The High Court held that the case of the employee fell under
the Second Part of Rule 22(i)(a). He was in service of the bank on and
after 11.11.1993 and completed ten years of pensionable service, and
further, he attained the age of 58 years before the date he retired. The
High Court opined that the clarification was not part of the VRS scheme.
The employee retired outside rule as per the contractual retirement
scheme. The contract had to prevail. In Pension Fund Rules, Clause (a)
in Rule 22(i) was inserted to give the employees the benefit of pension
after ten years of pensionable service even if they had joined late. The
High Court found that the matter was covered by Rule 22(i)(a). The
admissible benefit cannot be denied. If a contracting party is entitled to
take benefit of a permissible clause, then it cannot be denied to him.
ASSISTANT GENERAL MANAGER, STATE BANK OF INDIA &
ORS. v. RADHEY SHYAM PANDEY [ARUN MISHRA, J.]
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(c) In the Chairman, State Bank of India & Ors. v. Mihir Kumar
Nandi & Anr. (C.A. Nos. 5035-5037/2012), a Division Bench of the
High Court of Calcutta dismissing the intra-court appeal, affirmed the
order of the learned Single Judge and directed to make the payment of
pension. The employee was appointed on 21.5.1988. He opted for VRS
on 15.1.2001. The acceptance was conveyed on 17.3.2001 by which he
was informed that he would be relieved of his duties on 31.3.2001. Vide
letter dated 2.8.2001, the employee was granted a pension at the rate of
Rs.1024 per month. However, vide communication dated 30.8.2001, the
pension payment order, together with payment of commuted value, was
stopped in view of the amendment of Rule 22 of the Pension Fund Rules.
Though the amendments in Pension Fund Rules were made effective
with effect from 31.3.2001, and the age of retirement had been raised
from 58 years to 60 years, w.e.f. 22.5.1998, this had necessitated increase
in age for admission to Pension Fund to 58 years specified in Rule 22(i)(a)
of the Rules so that the employees who have retired/are retiring on
attaining the age of 60 years after completing ten years of pensionable
service on or after 22.5.1998 are eligible for pension.
(d) The Central Board of the SBI in its meeting held on 30.1.2001
accorded approval to the amendment in Rules 8 and 22(i)(a) of the Rules
as set out in Annexure 1. The Trustees of the SBI Employees' Pension
Fund in their meeting on 30.10.2001 adopted the amended rules.
Consequently, a Circular was issued on 8.11.2001. The amendment was
given effect from 31.3.2001, the date on which it was notified, though it
was adopted by the Trustees of the SBI Trust Pension Fund in October
2001.
(e) A Division Bench of the High Court held respondent-employee,
as per rules on 17.3.2001, the date on which his offer was accepted,
was eligible to get the pension. On 31.3.2001, the amended rules were
published, which took away the existing right to get the pension. In VRS
Scheme, it was mentioned that the pension would be payable in
accordance with the rules as on 31.3.2001. The employee had no means
of knowing about the future amendment of the Pension Rules, which
would be detrimental to his interest. If he had known the fact, then he
would not have opted for the scheme. The silence maintained by the
employer in such a situation amounted to a fraud on its part. The High
Court relied upon section 17 of the Contract Act and Illustration (d) to
section 19 of the Contract Act. The High Court further held that it was
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the duty of the employer to disclose that there would be a future
amendment on the last date of their service by which their right to pension
would be taken away. The same cannot but be said to be unfair and
arbitrary. Thus, the High Court held that action is violative of Article 14
of the Constitution of India. The employee is entitled to the relief of
pension along with interest.
10. Ramesh Prasad Nigam (supra) had joined the services in
1984 in the clerical cadre and was confirmed on 2.3.1985. He had applied
for VRS, having completed 15 years of service and 57 years of age.
The clarification was internal circulation. It was not within the knowledge
of employees; as such, he was entitled to the pension.
11. (a) In C.A. Nos.2287-88/2010, M.P. Hallan joined the services
of the bank on 18.5.1981 as a clerk. The acceptance under VRS was
communicated on 17.3.2001. On 27.3.2001, he applied to withdraw his
request made under VRS as retirement was w.e.f. 31.3.2001. The Bank
declined application on 18.4.2001 on the ground that the last date of
withdrawal of the application was 15.2.2001. The employee claimed
pension under Pension Fund Rules in terms of SBI Employees' Pension
Fund Rules (hereinafter referred to as 'Pension Rules'). By writing a
letter on 12.4.2001, the claim of the employee for withdrawal of
application for voluntary retirement, pension, and leave encashment was
again declined on 4.7.2001. Thereafter, he filed a writ petition in the
High Court of Punjab & Haryana.
(b) The High Court rejected the claim concerning the withdrawal
from VRS. As the last date for withdrawal was over, and acceptance
had been communicated, however, considering Rule 22 of the Pension
Rules, the High Court opined that as the employee completed more than
19 years and ten months of service on 31.3.2001, therefore, the first part
of clause one of Rule 22 is not applicable. Further, the third part of
clause (a) is not applicable as he has completed ten years of service but
not attained the age of 60 years. The case of the employee was covered
under the second part of clause (a) of Rule 22, which enabled the member
to get a pension if an employee in the service of the bank on or after
1.11.1993, and completed ten years pensionable service and attained 58
years age. The employee applied in terms of the Pension Rules prevailing
in January 2001. Alternatively, if an employee was in service of the bank
on or after 1.11.1993, having completed ten years of pensionable service
and on attaining the age of 58 years, shall be entitled to a pension. Thus,
ASSISTANT GENERAL MANAGER, STATE BANK OF INDIA &
ORS. v. RADHEY SHYAM PANDEY [ARUN MISHRA, J.]
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he fulfilled the requirement of second part of clause (a) of Rule 22 as he
was in service of the bank on 1.11.1993 and completed ten years of
pensionable service, and the age of 58 years, therefore, in terms of Rule
22, he was entitled to pension as well as leave encashment dues along
with interest at the rate of 9 percent per annum.
12. On behalf of the bank, it was submitted that VRS 2000
stipulated that the pension in terms of SBI Pension Fund Rules on the
relevant date, i.e., 31.3.2001, was to be provided. In other words, in
case the employee was entitled to a pension in terms of Pension Rules
and not otherwise. A provision was added in Rule 22(1) of the Pension
Rules in the year 1986, accordingly, the pension was to be granted in all
cases relating to voluntary retirement on completion of 20 years of
service. The employees opting for the SBI-VRS would be governed
only by Rule 22(i)(c) as it falls under the category of voluntary retirement.
Under Rule 22(iii), a member who has been permitted to retire under
clause 22(i)(c) shall be entitled to a proportionate pension, which is on
completion of 20 years of pensionable service. Eligibility clause 3 has
nothing to do with the admissibility of the pension. It was further submitted
that the employees who completed ten years of pensionable service and
were 60 years of age were entitled to pension; while employees under
the VRS on completion of 15 years would not get pension and for that
20 years' service was necessary, the submission of employees that it
would be discriminatory is based on incorrect premise. There is no
challenge to the SBI Pension Rules or SBI-VRS. The bank provided the
pensionable service period of 10 years on attaining the age of 60 years
in terms of reservation policy. The bank appoints late entrants like exservicemen who, after serving in Armed Forces, join the bank and are
left only with about ten years of service before they attain the age of
superannuation. It is to grant benefit to such a particular category of
employees that a period of 10 years on attaining the age of superannuation
of 60 years was provided in Rule 22(i)(a).
13. The appellants further submitted that 20 years' period is
provided in case of voluntary retirement to ensure that an employee on
whom the bank has spent a considerable amount during training, works
for a substantial period before he seeks retirement. It is a uniform policy
followed by the bank. Regulation 28 was amended in 2002 providing for
15 years of service. It applies to the employees who are governed by
the Bank Employees' Pension Regulations, 1995. These regulations do
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not apply to SBI employees as the SBI Pension Rules govern them. SBI
employees are entitled to Provident Fund, gratuity and pension in terms
of the Rules on completion of 20 years of service. Thus, there cannot be
any comparison of SBI employees with the employees of other
nationalised banks. The clarification dated 11.01.2000 has also been relied
on by the bank. Now more than 19 years have passed and to grant a
pension to all those who have retired, w.e.f. 1.4.2001 would cast a huge
financial liability on the bank.
14. It was submitted on behalf of the employees that the decision
rendered by the High Court is appropriate. No case for interference is
made out in appeals. The very essence of the VRS was the admissibility
of pension on completion of 15 years of service and other benefits. Once
the scheme was adopted and approved by the Central Board of SBI, the
clarification could not have been made to the detriment of employees.
The clarification did not have effect of the amendment, modification, or
cancellation of the VRS scheme as approved and adopted by Board.
The amendment in the Pension Regulations of 1995 was carried out by
other public sector banks with retrospective effect in 2002, though the
scheme was floated and implemented in the year 2000-2001. However,
the benefits were extended on the strength of the VRS scheme even
before amending the Regulations of 1995. The SBI adopted the Scheme
in toto and Pension Rule 22 providing eligibility of 20 years applies only
to those cases where employees seek retirement in the ordinary course
of completion of 10 years or 20 years, as the case may be. The VRS
was taken in the specific scheme providing eligibility and benefits on
completion of 15 years of service, and that constituted a concluded
contract. It was not open to the bank to alter the terms. In case the
bank's submission is accepted, it would lead to a situation that employees
who have already reached the age of superannuation, would have been
entitled to take VRS. The bank has misled the employees, and the action
could not be said to be fair. Once an offer was accepted and after that
to amend the rules or not to amend the rules till 31.3.2000 depended on
exercise of power by SBI which may have the effect to deprive the
pension when the option was not available even to withdraw the offer as
it was the last day of the employment. Rule 22 was amended, that too
with retrospective effect. Thus, the employees who joined service after
retirement from other services, have completed the age of 58 years and
were in employment as on 1.11.1993 were entitled to a pension. They
have also been deprived of the benefit of pension, which would have
ASSISTANT GENERAL MANAGER, STATE BANK OF INDIA &
ORS. v. RADHEY SHYAM PANDEY [ARUN MISHRA, J.]
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been otherwise available to them. In case pension was not to be paid, it
was not a profitable bargain for them to forego pension only for ex
gratia benefit. It was incumbent upon the SBI to amend the Rule, in
case it was necessary to do so. Otherwise, also, the meaning of the
expression "pension" to be paid as per rules was that proportionate pension
to be awarded to the employees with 15 years' service who were eligible
for benefits granted as specified in the circular and the VRS scheme.
The clarification issued on 11.1.2000 only pointed out the provisions of
the VRS scheme as well as the existing position of the rule. It could not
have effect to take away the benefit in any manner which became
available to the employees of obtaining the pension on completion of 15
years of permanent pensionable service. On the one hand, employees
who served for ten years and attained the age of superannuation were
entitled to pension and to deprive the same to a permanent employee
who rendered the service for 15 years, would be per se discriminatory,
unfair and arbitrary. Once the scheme was floated and approved, the
bank being State within the purview of Article 12 of the Constitution of
India, it would not be permissible for it to discriminate and act unfairly.
The VRS constituted an independent contract and was binding upon the
bank. The benefits could not have been taken away from eligible
employees who accepted VRS, which was implemented by the bank for
its benefit to induct new skills as well as to rationalise the workforce.
Thus, appeals being bereft of merit, deserve dismissal.
15. The main question is whether, under the scheme as approved
and adopted by the Central Board of SBI, the pension is admissible to
the employees on completion of 15 years of permanent service.
Connected question is whether employees have been denied benefit of
pension unfairly and arbitrarily contrary to the essential terms of the
scheme.
16. Firstly, it is necessary to consider the nature of the package,
which was accepted in the resolution by the Central Board of Directors
of SBI in its meeting dated 27.12.2000. As already mentioned, exercise
was done in order to rationalise the workforce as it was felt that banks
were overstaffed. The IBA advised the SBI regarding the issues
confronting the public sector banks. In the memorandum submitted to
the Central Board of Directors of SBI, the following facts were mentioned
as to the adoption of Scheme in right earnest and requirement of
manpower planning:
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"The data available with IBA indicates that 43% of employees in
Public Sector Banks are in the 46+ age group, and only 12% are
in the 25-35 age group. This pattern has serious implications for
the Banks with reference to mobility, training, development of
skills, and succession plans for higher-level positions. This, coupled
with excess manpower wherever it exists, would come in the
way of induction of new skills and proper career progression.
The Committee has recommended the introduction of a Voluntary
Retirement Scheme that would assist the Banks in their effort to
optimise their human resources and achieve a balanced age and
skills profile in keeping with their business strategies. IBA has
advised that the Government of India has conveyed that they have
no objection to the banks' placing before their respective Boards
of Director's proposals for adopting and implementing the
Voluntary Retirement Scheme. It has been advised that Banks
may adopt the scheme after obtaining their Boards' approval and
implement it in right earnest." (emphasis supplied)
"a) The high establishment costs of the Bank vis-à-vis the foreign
banks and new private sector banks have been a matter of concern.
The percentage of staff expenses to total expenses in the Bank is
21.85 against the percentage of 7.66 and 3.04 for foreign banks
and new private sector banks, respectively. Even if we compare
it with other Public Sector Banks, our ratio is adverse.
d) With the computerisation of accounting and other work at a
large number of branches, manpower, which was needed for
balancing of books, is now rendered surplus. This indicates an
imperative need to rationalize the manpower at these branches.
While we have already initiated steps for the productive
redeployment of staff at these branches through shift banking
and seven-day banking, there still exists scope for improvement
in this area. Most of these branches are situated in metropolitan
and urban centers. Incidentally, the experience of other banks in
respect of voluntary retirement schemes shows that a maximum
number of applications have been received from these centers.
f) As against the average of 43% of employees in Public Sector
Banks in the 46+ age group, we have 47% of the employees in
this age group. Of this, 1/5th are in the age group of 56 and above.
ASSISTANT GENERAL MANAGER, STATE BANK OF INDIA &
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To put it simply, 21,824 employees will reach the age of
superannuation and retire by March 2005.
In the light of the above-mentioned factors, it will be seen that the
manpower of the Bank will undergo major changes in the ensuing
years in number and deployment. Further, considering the variety
of business the Bank undertakes, and its special role in the banking
sector, over-emphasis on quantitative parameters would be
inappropriate. An approach paper on Manpower Planning is placed
at Annexure-'A'.
Considering the various aspects of Manpower Planning, we are
of the view that the Voluntary Retirement Scheme should be
employed as a moderate tool to right-size the manpower in State
Bank of India."
In the light of aforesaid, it is clear that the VRS scheme was
devised as a tool to reduce overstaffing. The memorandum submitted to
the Central Board contained the following significant aspects:
"Keeping in view the above, the IBA guidelines and the feedback
received from other Banks, the draft 'SBI Voluntary Retirement
Scheme (SBIVRS)' is prepared and placed for approval at
Annexure-'B.'
It is proposed to introduce SBIVRS for employees who have as
on 31-12-2000, completed 40 years of age or 15 years of service
as approved by the Government of India and conveyed by IBA.
In terms of the IBA scheme, the Banks' Boards may specify any
other category as ineligible. We propose to exclude the Watch
and Ward staff as these positions cannot be reduced. We also
propose to exclude highly skilled and qualified staff from the
Scheme.
SBIVRS will be voluntary in nature. The decision to seek
retirement under the Scheme rests with the employee only. The
management will retain the discretion as to whether to accept or
not the request for voluntary retirement under the Scheme. We
have to ensure that while, on the one hand, our Bank benefits by
the rightsizing of the staff strength, on the other, any sudden exodus
of a very large number of staff does not destabilise the normal
operations of the Bank. Considering the attractive features of the
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Scheme, in terms of ex-gratia payment, etc., a large number of
applications are expected. However, the Bank will have to control
the outflow according to its requirements. Towards this end, it
will be necessary to retain the discretion with the management of
the Bank to limit the number of employees allowed to retire in
each category of staff to be covered under SBIVRS, and we
propose to retain such discretion."
(emphasis supplied)
It was proposed to introduce a VRS for employees who on
31.12.2000, completed 15 years of service as approved by the Government
of India and conveyed by IBA. So, it assumes significance that what
was approved and conveyed, in terms of the IBA scheme, the Banks'
Boards were permitted to specify any other category as ineligible. The
SBI considering its requirement proposed to exclude the Watch and Ward
staff as these positions could not be reduced. It was also proposed to
exclude the highly skilled and qualified staff from the scheme.
Funds outlay was also proposed in the memorandum submitted to
the Central Board as under:
"FUNDS OUTLAY
As per the estimate received from Bank's actuary, an outlay of
approximately Rs. 2100 crores would be required for the
implementation of SBIVRS if 10% of the employees opt for
retirement. The break-up being as under:
Ex-gratia
Rs. 1300.00 crores
Leave encashment
Rs. 180.00 crores
Additional Provision for Gratuity
Rs. 140.00 crores
Additional Provision for Pension
Rs. 480.00 crores
(These estimates may undergo a change on receipt of clarification
from Government of India as to the components of 'Pay' for the
purpose of Ex-gratia)"
A provision was made for the pension. The bank reserved the
right to modify, amend or cancel any or all the clauses. The Deputy
Managing Director and CDO would be the competent authority. Following
is the relevant clause regarding modification of the scheme:
ASSISTANT GENERAL MANAGER, STATE BANK OF INDIA &
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"MODIFICATION OF THE SCHEME
Bank reserves the right to modify, amend or cancel any or all the
clauses of the Scheme and to give effect thereto from any date it
may deem fit. The Dy. Managing Director and CDO would be
the Competent Authority for the purpose."
The effective date of retirement was 31.3.2001. The relevant
clause is extracted hereunder:
"EFFECTIVE DATE OF RETIREMENT
While the SBIVRS will be open to employees from 15th January
2001 to 31st January 2001 (both days included), the retirement
under SBIVRS is proposed to be given effect from 31st March
2001."
17. The letter dated 31.8.2000 annexed to memorandum submitted
to the Central Board of the SBI is also of utmost significance in order to
understand what was accepted by the Central Board. The relevant portion
of the letter dated 31.8.2000 of IBA is extracted hereunder:
"Attention is invited to letter DO No. 11/1/99-IR dated 22.05.2000,
addressed to the Chief Executive of public sector banks by the
Government of India, Ministry of Finance (Banking Division),
wherein banks have been advised to carry out detailed manpower
planning in order to adopt measures to have optimum human
resource at various levels in keeping with the business strategies
and requirements of each bank.
At the meeting the Finance Minister had with Chief Executives
of public sector banks on 13th June 2000, the human resource and
man-power planning in public sector banks were reviewed, and a
Committee was constituted to examine the issues confronting public
sector banks in that regard and suggest suitable remedial
measures."
"In order to remedy this situation with the urgency that
circumstances demand, the Committee has placed before the
Government two schemes, viz., Sabbatical Leave and a Voluntary
Retirement Scheme that would assist the banks in their effort to
optimise their human resource and achieve a balanced age and
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skills' profile in keeping with their business strategies.