# BANK OF INDIA AND ORS v. O.P. SWARANAKAR ETC

- **Citation:** [2002] Supp. 5 S.C.R. 438
- **Court:** Supreme Court of India
- **Decided:** 2002-12-17
- **Bench:** G.B. Pattanaik, H.K. Sema, S.B. Sinha
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bank-of-india-and-ors-v-o-p-swaranakar-etc-18858
- **Pages:** 53

## Headnote

Service Law:
State Bank of India Act, 1955-Banking Companies (Acquisition and
C Transfer of Undertaking) Act, 1970-Contract Act, 1872-Sections 2{a), (b),
(g), (h) and 5-Voluntary Retirement Scheme.floated by Nationalised Bauks
and State Bank of India-Whether application for VRS irrevocable and
applicant has right to withdraw the application of voluntary retiremen/-
Held: Scheme having regard to its provisions is an invitation to treat and
D not an offer which on acceptance by employee would fructifY into a concluded
contract-Application for voluntary retirement by employees would constitute
an 'offer' thus it could be withdrawn before it is accepted -However, employee
having accepted part of benefit cannot be permitted to aprobate or reprobate
nor permitted to resi/e therefrom.
E
Voluntaiy Retirement Scheme by Banks-Jura/ relationship between
employer and employee-Discussed.
Banking Companies (Acquisition and Transfer of Undertaking) Act,
1970-Section 19(4)-Voluntary Retirement Scheme floated by banks-Bank
employee challenging validity-High Court holding scheme ultra vires-On
F appeal held: Since scheme is not part of statutory regulation but in realm
of contract it was not necessary for Central Government to place it before
the Parliament-Even if same was regulatory, the laying down rule is merely
directory and not mandatory-Thus scheme not bad in law and High Court
erred in striking down the scheme.
G
H
Constitution of India, 1950-Artic/es 226, 12, 14, and 21-Writ Petition
challenging validity of Voluntary Retirement Scheme floated by banks and
provision barring withdrawal of request of voluntary retiremenlMaintainability of-Held: Writ Petition is maintainable since banks are
State under Article 12, thus could be raised under Article 226-ln the event
438
BANK OF INDIA v. O.P. SWARANAKAR
439
the action of bank is arbitrary and unreasonable it would attract Article A
14-Further, right of employee to continue in employment is a fundamental
right under Article 21 which cannot be taken away except in accordance
with law.
Due to surplus staff, the State Bank of India as well as Nationalised
Banks adopted "Employees Voluntary Rc:_tirement Scheme". It was applicable B
to employees who on the date of application had completed 15 years of service
or 40 years of age. Employees were specified who were not eligible to seek
voluntary retirement. Period of operation of scheme varied from bank to bank.
In terms of the scheme those who sought voluntary retirement were entitled
to ex-gratia payments and other benefits. Under the scheme bank reserved C
with itself the right to withdraw scheme at any time it thinks fit and its decision
in this behalf was to be final.
Large number of employees submitted applications under the Scheme,
out of which small number of them withdrew their applications. Despite their
withdrawal their applications were accepted. In some cases it was accepted D
within the period during which the scheme was operated and in some cases,
beyond the period. Aggrieved applicants filed Writ petitions in various High
Courts challenging the action of the banks in accepting the applications of
the concerned employees despite their withdrawal. Writ applications were also
filed by some employees seeking issuance of writ of mandamus directing the
respective banks to pay their lawful dues strictly in terms of the scheme. E
Punjab and Haryana High Court held the scheme ultra vires as the same was
not laid before the Parliament Bombay High Court and other High Court held
that clause I 0.5 of scheme or the scheme framed by the other banks is not
operative as the employees have indefeasible right to withdraw their offer
before the same is accepted. Hence the present batch of appeals.
F
Various banks inter alia contended that the scheme if read in its entirety
would clearly show that the same was an offer and not invitation to treat; that
clause 10.5 of the scheme is not illegal, the concerned employees must be
held to have resigned in pra

## Text

_Characters 0–39,424 of 123,191. This is a partial read: ask again with offset=39424 for what follows._

A
BANK OF INDIA AND ORS.
v.
O.P. SWARANAKAR ETC.
DECEMBER 17, 2002
B
[G.B. PATTANAIK, CJ., H.K. SEMA AND S.B. SINHA, JJ.]
Service Law:
State Bank of India Act, 1955-Banking Companies (Acquisition and
C Transfer of Undertaking) Act, 1970-Contract Act, 1872-Sections 2{a), (b),
(g), (h) and 5-Voluntary Retirement Scheme.floated by Nationalised Bauks
and State Bank of India-Whether application for VRS irrevocable and
applicant has right to withdraw the application of voluntary retiremen/-
Held: Scheme having regard to its provisions is an invitation to treat and
D not an offer which on acceptance by employee would fructifY into a concluded
contract-Application for voluntary retirement by employees would constitute
an 'offer' thus it could be withdrawn before it is accepted -However, employee
having accepted part of benefit cannot be permitted to aprobate or reprobate
nor permitted to resi/e therefrom.
E
Voluntaiy Retirement Scheme by Banks-Jura/ relationship between
employer and employee-Discussed.
Banking Companies (Acquisition and Transfer of Undertaking) Act,
1970-Section 19(4)-Voluntary Retirement Scheme floated by banks-Bank
employee challenging validity-High Court holding scheme ultra vires-On
F appeal held: Since scheme is not part of statutory regulation but in realm
of contract it was not necessary for Central Government to place it before
the Parliament-Even if same was regulatory, the laying down rule is merely
directory and not mandatory-Thus scheme not bad in law and High Court
erred in striking down the scheme.
G
H
Constitution of India, 1950-Artic/es 226, 12, 14, and 21-Writ Petition
challenging validity of Voluntary Retirement Scheme floated by banks and
provision barring withdrawal of request of voluntary retiremenlMaintainability of-Held: Writ Petition is maintainable since banks are
State under Article 12, thus could be raised under Article 226-ln the event
438
BANK OF INDIA v. O.P. SWARANAKAR
439
the action of bank is arbitrary and unreasonable it would attract Article A
14-Further, right of employee to continue in employment is a fundamental
right under Article 21 which cannot be taken away except in accordance
with law.
Due to surplus staff, the State Bank of India as well as Nationalised
Banks adopted "Employees Voluntary Rc:_tirement Scheme". It was applicable B
to employees who on the date of application had completed 15 years of service
or 40 years of age. Employees were specified who were not eligible to seek
voluntary retirement. Period of operation of scheme varied from bank to bank.
In terms of the scheme those who sought voluntary retirement were entitled
to ex-gratia payments and other benefits. Under the scheme bank reserved C
with itself the right to withdraw scheme at any time it thinks fit and its decision
in this behalf was to be final.
Large number of employees submitted applications under the Scheme,
out of which small number of them withdrew their applications. Despite their
withdrawal their applications were accepted. In some cases it was accepted D
within the period during which the scheme was operated and in some cases,
beyond the period. Aggrieved applicants filed Writ petitions in various High
Courts challenging the action of the banks in accepting the applications of
the concerned employees despite their withdrawal. Writ applications were also
filed by some employees seeking issuance of writ of mandamus directing the
respective banks to pay their lawful dues strictly in terms of the scheme. E
Punjab and Haryana High Court held the scheme ultra vires as the same was
not laid before the Parliament Bombay High Court and other High Court held
that clause I 0.5 of scheme or the scheme framed by the other banks is not
operative as the employees have indefeasible right to withdraw their offer
before the same is accepted. Hence the present batch of appeals.
F
Various banks inter alia contended that the scheme if read in its entirety
would clearly show that the same was an offer and not invitation to treat; that
clause 10.5 of the scheme is not illegal, the concerned employees must be
held to have resigned in praesenti and thus the contractual bar contained
therein cannot be held to be bad in law; that as each of the employees had G
made irrevocable and unconditional offer of terms and conditions laid down
in scheme, they could not have withdrawn therefrom and as some of them
accepted ex-gratia payment they were estopped from questioning the same and
the employees who accepted ex-gratia payment could not have been permitted
by High Court to approbate or reprobate; that a contract of employment can H
440
SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.
A be terminated unilaterally; that even a tenure of contract of employment can
be curtailed by an agreement and in that view of the matter voluntary
retirement scheme cannot be said to be illegal; that High Court erred in
holding that scheme being a regulation it was necessary for the Central
Government to lay it before Parliamegt; and that as the writ petitions involved
B enforcement of contract qua contract, they were not maintainable.
Employees of the various banks interalia contended that law is laid down
that an offer of resignation can be withdrawn before the same is accepted;
that scheme is merely an invitation to offer and option pursuant thereto on
the part of employee would constitute an offer; that having regard to Section
C 5 of the Contract Act, employee had an absolute right to withdraw the same
before a concluded contract is arrived at, thus clause I 0.5 of the Scheme is
ultra vires Section 5; that clause 10.5 would not amount to a contractual bar
as it was not based on consideration; that when employee has voluntarily
withdrawn the offer, doctrine of option will have no application as by reason
thereof employee has not received the benefit in one part of the contract and
D then questioned the rest thereof; that the procedure of the scheme shows that
irrevocable nature of option would be relevant only ifthe same culminates
into an acceptance; that mere declaration given by an offer or that he would
not withdraw or cancel the offer would not destroy his locus; that even after
acceptance the offer could be withdrawn, such an action on the part of the
E optioner is permissible and thus the application of contractual bar must be
held to be applicable only in a case where offeror has been relieved from his
part not prior thereto; that it cannot be said that the statutory regulation has
nothing to do with the Scheme as pension was to be calculated in terms thereof;
that after the offer had been made, concerned banks amended the scheme and
instead and in place of full pension the principle of pro-rata pension was
F introduced by which employees were gravely prejudiced, thus the concerned
employees derived a legal right to withdraw from the scheme; and that as the
scheme is contractual in nature, benefits which were otherwise available to
the employees under the scheme could not have been curtailed.
G
Disposing of the appeals, the Court
HELD: I.I. Voluntary Retirement Scheme admittedly being contractual
in nature, provisions of the Contract Act, 1872 shall apply. In the instant case,
banks have not expressed their willingness to do or abstain from doing anything
with a view to obtaining assent of the employees to such act. Bank could accept
H ot reject application for voluntary retirement and it could also amend or
BANK OF INDIA v. O.P. SW ARANAKAR
441
rescind the scheme. There was no reasonable certainty that the scheme would A
be acted upon. Banks when floating the scheme did not signify that on the
employees assenting thereto a concluded contract would come into being in
terms whereof they would be permitted to retire voluntarily and get the benefits
thereunder. Furthermore, even by opting for the scheme as floated by the
banks, no consideration is passed far less amounting to reciprocal promise. B
Therefore, scheme merely constituted invitation to treat and not an offer which,
on acceptance by employee, would fructify into a concluded contract and
applications filed by the employees constituted 'offer'. Once the application
filed by employees is held to be an 'offer', section 5 would come into play, in
absence of any other independent binding contract or statute or statutory rules
to the contrary. Thus the applicant has right to withdraw the application for C
voluntary retirement before it is accepted. (471-F-G; 472-A(
Devi Krishan Goyal v. District Inspector of Schools, Ghaziabad and Ors.
J. T., (1988) 4 SC 201, referred to.
Gibson v. Manchester City Council, (1979) All. E.R. 972, referred to. D
Cheshire, Fifoot & Furmston 's Law of Contract (14th Edition) p. 62;
Chitty on Contract; Treitel's Law of Contract; Hamilton, Rau and Winthraub
on Contracts; Halsbury's Laws of England, 4th Edition, Volume-9, para 227,
p. 98, referred to.
E
1.2. In the instant case it is not a case where on mere making of option
on the part of employee the offer is to be accepted or even there will be
reasonable certainty that some norms should be maintained. There is no
consideration for the contractual bar clause. Submission that the proposal to
the effect that the option made by an employee would be considered, is a
consideration cannot be accepted. (471-B)
F
1.3. The submission that offer was made by bank by floating scheme
and once an application is filed, same would amount to acceptance of offer
taking recourse to the doctrine of option, proceeds on total misconception.
This could be applicable only at the instance of the offeror who in the instant G
case would be employee. By reason of making such option or firm offer the
offeror must get some benefit or the offeree must incur some detriment. The
contracts in which the said principle can be applied would be a case where
there would usually be a money payment. (474-B, C, D(
Anson's Law of Contract 28th Edition, p 51and53; Halsbury's Laws of H ·
442
SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.
A England 4th Ed. para 235 p. 160; Chitty on Contract 28th Edition, para 3161, referred to. .
2.1. A large number of employees withdrew their offer only when a
proviso was sought to be added to Regulation 28. In terms of the Scheme the
employees, who expected to get benefits of clause 4 of Regulation 29 would be
B deprived therefrom. It is not in dispute that the qualifying period for receiving
pension was 20 years and upon completion of20 years, as per the statutory
regulation contained in Regulation.29, an employee could opt for voluntary
retirement and in terms thereof, he' would be entitled to the benefits specified
therein. The said regulation had specifically been mentioned for the purpose
C of computation which would include invocation of sub-regulation 4 of
Regulation 29 providing for relaxation of 5 years towards the qualifying
period. The employees must have proceeded on the basis that despite the fact
that they have merely rendered 15 years of service which was not a qualifying
service under the regulations, they would be entitled to the pensionary benefits
in terms of the scheme. By introducing the proviso to Regulation 28 pension
D was sought to be made pro rata in place of full pension. 1478-B-DI
E
2.2. The basic concept of the scheme, underwent a change which also
goes to show that the banks had sought to invoke the power of amending the
scheme. Once the scheme is amended and/or an apprehension is created in
the mind of the employees that they would not even receive the entire benefits
as envisaged under the scheme, they were entitled to revoke their offers. Their
action is reasonable. It may be that some of the employees only opted for the
provident fund benefit which did not undergo any amendment but the same
would not change the attitude on the part of the banks. 1478-E-Fl
F
2.3. State Bank of India had not amended the scheme. It even permitted
withdrawal of the applications after 15th February. The scheme floated by State
Bank of India contained clause 7 laying down the mode and manner in which
the application for voluntary retirement shall be considered. The relevant
clause creates an enforceable right. In the event, State Bank of India failed to
adhere to its preferred policy, same could have been specifically enforced by
G a court of law and would amount to some consideration. (478-G, H; 479-AI
2.4. High Court failed to take into consideration the provisions of State
Bank of India Act, 1955 and also that the matter relating to grant of pension
was not covered by any statutory regulation. Furthermore the submission that
by reason of the scheme, the tenure of service has been curtailed to some
H extent which is permissible in law, cannot be accepted. (479-B, q
...
BANK OF INDIA v. O.P. SWARANAKAR
443
2.5. The submission that as soon as an offer is made by an employee, A
the same would amount to resignation in praesenti cannot be accepted. The
scheme was in force for a fixed period. A decision by the authority was required
to be taken and till a decision was taken, the jural relationship of employer
and employee continued and the concerned employees would have been entitled
to payment of all salaries and allowances etc. Thus it cannot be said to be a B
case where the offer was given in praesenti but the same would be prospective
in nature keeping in view the fact that it was to come into force at a later date
and that too subject to acceptance thereof by the employer. 1484-E-GI
Union of India and Ors. v. Gopal Chandra Misra and Ors., (19781 2
SCC 301; Jai Ram v. Union of India, AIR 119541 SC 584; Raj Kumar v. Union C
of India, (196813 SCR 857; Bairam Gupta v. Union of India and Anr., (1987(
Supp. SCC 228; Punjab National Bank v. P.K. Mittal, 119891 Supp. 2 SCC
175; Power Finance Corporation Ltd. v. Pramod Kumar Bhatia, (1997( 4 SCC
280; JN. Srivastava v. Union of India and Anr., (199819 SCC 559; Union of
India and Anr. v. Wing Commander T. Parthasarathy, 1200111 SCC 158 and
Shambhu Murari Singh v. Project and Development India ltd and Anr., 120021 D
3 sec 437, referred to.
2.6. The Scheme is contractual in nature. The contractual right derived
by the concerned employees, therefore, could be waived. Employees concerned
having accepted ex gratia payment or any other benefit could not be permitted
to approbate and reprobate nor can they be permitted to resile from their E
earlier stand.1485-A(
Shri lachoo Mal v. Shri Radhey Shyam, 1197111SCC619 and Bijendra
Nath Bhargava and Anr. v. Harsh Wardhan and Ors., (1988( 1 SCC 454,
referred to.
Halsbury's laws of England, 4th Edition, Vol.16 (Reissue) para 957
p.844; American Jurisprudence, 2nd Edition, Volume 28, 1966, p 677-680,
referred to
F
2.7, The submission that the appellants could not have accepted the offer G
of voluntary retirement after expiry of the scheme is accepted. All actions by
banks were required to be taken strictly in terms of the scheme. (487-81
3. Voluntary Retirement Scheme is not a part of the statutory regulation
but was in the realm of contract. That being so it was not necessary for the
Central Government to place the same before Parliament. Even ifthe same H
444
SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.
A was a regulation, the laying down rule is merely a directory one and not
mandatory. Order of Punjab and Haryana High Court that Voluntary
Retirement Scheme is ultra vires being violative of section 19(4) of the 1970
Act is not correct and hence the Scheme cannot be said to be bad in law.
1487-H; 488-A; 489-BJ
B
Jan Mohammad Noor Mohammad Begban v. State of Gujarat and Anr.,
11966) l SCR 505 and Mis. Atlas Cycle Industries Ltd. and Ors. v. The State
of Haryana, 119791 2 SCC 196, referred to.
4. The submission that the writ petitions are not maintainable as writ
petitioners intended to enforce a contract cannot be accepted. Writ petitioners
C questioned the validity of clause 10.5 of Voluntary Retirement Scheme.
Appellants herein are 'State' within the meaning of Article 12 of the
Constitution of India. The questions raised by writ petitioners thus could be
raised in a proceeding under Article 226. Furthermore, in the event it be
held that the action of appellants was arbitrary and unreasonable, the same
D would attract the wrath of Article. The right of the employee to continue in
employment, which is a fundamental right under Article 21 could not have
been taken away except in accordance with law. 1487-C-El
E
Har Shankar and Ors. v. The Dy. Excise and Taxation Commr. and Ors,,
11975) l sec 737, distinguished
5. In respect of such of the employees who despite acceptance of a part
of the retirement benefit under the scheme had continued under the orders
of High Court and has retired on attaining the age of superannuation, this
order shall not apply. In respect of the orders of the Punjab and Haryana High
Court refusing to grant the relief to the employees of Punjab and Sind Bank
F on the ground that the Scheme was not enforceable, the matters are remitted
to the High Court for consideration afresh on merits and in accordance with
law.1489-F, 489-H; 490-AI
CIVIL APPELLATE JURISDitTION : Civil Appeal No. 854 of2002.
From the Judgment and Order dated 29.3.2001 of the Rajasthan High
G Court in DBCSA 1984 of2001.
WITH
C.A.Nos.855,870,874,877,878,879,883, 7353-7354, 7355, 7356,873,
876, 880, 3552-60, 4067, 5380-81, 875, 881, 8467, 8499, 8511, 7314-35, 3561H 65, 896, 955, 8500, 8500A, 85008 of2002.
BANK OF INDIA v. O.P. SWARANAKAR [S.B. SINHA, J.)
445
Mukul Rohtagi, Additional Soliciter General, Soli J. Sorabjee, Attorney A
General, V.R. Reddy, Ashok Kumar Panda, L.N. Rao, Gopal Subramanian,
Rakesh Dwivedi, Rajeev Dhawan, Jagdeep Dhankar, Ms. Nina Gupta,
Ms. Arpita Mahanan, Navin Giri, Saurav Agrawal, Laksh Yadav, Ms. Bina
Gupta, Dhruv Mehta, Mohit Chaudhary, Jos Chiramel, S.B. Upadhyay, R.K.
Tripathi, Shailendra Bhardwaj, Pale Ram Dhania, Anil Kumar Sangal, Pradeep B
Gupta, Ms. Geetanjali Mohan, C.M. Kennedy, S.M, Jadhav, Himanshu
Gupta, Ms. Ruby Singh Ahuja, Meenakshi Arora, Ms. S. Srivastava, Sanjay
Kapur, Ms. Shubhra Kapur, Sushil Balwada, Anil Hooda, Alok Sangwan,
Devendra Singh, D.N. Goburdhan, Geeta Luthra, Ms. Pinky Anand, Bhupinder
Yadav, S.S. Shamsher, Babita Yadav, R.C. Kohli, Pradeep Gupta, K.K. Mohan,
Bhupinder Singh, Shiv Kant Arora, Sanjeev Sahay, Ms. Pratibha Jain, C
Sanjiv Sharma, A.P. Dhamija, Y.P. Sharma, Raj Kumar, K.K. Gupta,
Ms. Kawaljit Kochar, S.C. Paul, Ms. Kusuin Cha~dhary, Jagat Arora, Rajat
Arora, Ms. Ritu Arora, Aditya Kumar Chaudhary, U.S. Prasad, O.P. Gaggar,
Shree Pal Singh and Rajiv Nanda, for the appearing parties.
The Judgment of the Court was delivered by
S.B. SINHA, J. Leave granted in the special leave petitions.
D
A common question, as to whether an employee who opts for the
voluntary retireinent pursuant to or in furtherance of a scheme floated by the
Nationalised Banks and the State Bank of India would be precluded from E
withdrawing the said offer, is. involved in this batch of appeals which arise
out of the judgments of various High Courts.
The State Bank of India has been constituted under the State Bank of
India Act, 1955 whereas the other banks (hereinafter referred to as 'the
Nationalized Banks, for the sake of brevity) were taken over in terms of the F
provisions of the Banking Companies (Acquisition and Transfer of
Undertakings), Act, 1970 (hereinafter referred to as ' 1970 Act').
The banks were said to be over-staffed. For the purpose of effective
management , man power planning was contemplated by the Ministry of G
Finance, Government of India, pursuant whereto and in furtherance whereof,
the Government considered the desirability of introducing voluntary retirement
scheme to help the banks to right-size their force. In a letter dated 22.5.200,
the Director (IR & BOii), Ministry of Finance, intimated to the concerned
banks that different committees and experts opined that most of the banks
have 25% surplus manpower. It was observed :
.~
H
"
• *
446
A
B
c
SUPREME COURT REPORTS [2002] SUPP. S S.C.R.
"While there is a need for inducting new workforce, which had adequate
knowledge ofnew skills such as modem technology, foreign exchange,
venture capital, e-commerce, money management, etc. it is also essential
to rationalize the existing manpower. In doing so, it has to be ensured
that there should be adequate opportunities for promotions for all and
proper balance between promoted and direct recruit officers at entry
level. Sufficient promotional opportunities should be created for the
entrants in non-executive grades by creating graded scales within the
cadre and giving age relaxation and special coaching to enable them
to compete for direct recruitment also. Thus for entry in officers cadre,
50% quota for promotion should suffice. That will enable banks to
recruit 50% officers from open market in accordance with the needs
of the hanks to ensure continuous intake of persons with desired
qualifications in accordance with the changing skill needs."
It was, therefore, requested that the concerned banks should undertake
the exercise of man-power planning on priority basis and send the same to
D the Banking Division for approval of the Board. A Committee was constituted
by the Central Government for consideration of various issues as specified
in the report of the Committee on Human Resource Management in Public
Sector Banks. The said Committee in its report, inter alia, observed :-
E
F
G
H
"3.15.1 The Committee feels that the high establishment cost and low
business per employee are important contributory factors for the low
profitability of several public sector banks. The Committee feels that
without right-sizing the staff, it would be difficult for public sector
banks to compete with other banks operating in the country and their
profitability will remain under severe strain. Optimising the existing
work force is also necessary to facilitate recruitment of personnel with
specialised skills required for appropriate use of infonnation technology
in banking transaction, compliance with prudential norms and
consequent emphasis on improved risk management and assert liability
management, as also Banks' foray into new business areas such as
insurance, capital markets, etc.
3.15.2 Different committees and experts have in the recent past
perceived excess staff in banks especially in the public sector banks.
The extent of surplus may however differ from bank to bank. Banks
are at various stages of making a proper assessment of human resource
including man-power planning exercise.
BANK OF INDIA v. 0.P. SWARANAKAR (S.B. SINHA, J.]
447
3.15.4 The Committee further reiterates that the Government may A
consider rolling back the age of retirement for officers from 60 years
to 58 years. This will not only reduce the man-power in the age group
of 58 to 60 but will also resuit in considerable savings."
Pursuant to or in furtherance of the said purported policy decision, the
State Bank of India as well as the Nationalised Banks adopted separately but B
almost identical scheme known as "Employees Voluntary Retirement Scheme".
We may, however, observe that the scheme adopted by the State Bank of
India (hereinafter referred to 'SBIVRS') in certain respects differ from the
scheme of the Nationalised Banks (hereinafter referred to the 'said scheme').
For our purpose, we would consider them separately.
The said scheme was applicable in relation to employees who on the
c
date of application had completed 15 years of service or 40 years of age. The
employees specified therein including specialised officers were not eligible to
seek voluntary retirement. However, in certain scheme they were ordinarily
ineligible for being considered. The period during which the said scheme was D
to remain operative varies from bank to bank. However, as far as Punjab
National Bank was concerned, the said scheme was to remain in operation
from 1.11.2000 to 30.11.2000. In terms of the said scheme those who sought
for voluntary retirement were entitled to ex-gratia payments as specified
therein as also other benefits which are as follows :-
"AMOUNT OF EX-GRATIA
An employee seeking voluntary retirement under the scheme will be
entitled to the ex-gratia amount mentioned below in para (a) or (b ),
whichever is less :-
(a) 60 days salary (pay plus stagnation increments plus special pay
plus dearness relief) for each completed year of service;
OR
(b)
salary for the number of months service left;
OTHER BENEFITS
An employee seeking voluntary retirement under the scheme will be
eligible for the following benefits in addition to the ex-gratia amount mentioned
in para 6 above of this scheme :-
E
F
G
H
448
SUPREME COURT REPORTS [2002) SUPP. 5 S.C.R.
A
(Q
Gratuity as per Payment of Gratuity Act, 1972 or Gratuity payable
B
under the Service Rules as the case may be, as per existing rules;
(ii)
(a) Pension (including commuted value of pension) as per PNB
(Employees') Pension Regulations, 1995.
OR
(b) Bank's contribution towards PF as per existing rules.
(iii) Leave encashment as per existing rules."
·The Scheme contained an eligibility criteria, namely, that employees
against whom disciplinary proceedings were contemplated or pending would
C not be eligible for seeking voluntary retirement. It states that the employees
seeking voluntary retirement were eligible for all other retirement benefits.
Under the existing said scheme the bank has reserved with itself the right to
withdraw the scheme at any time it thinks fit and its decision in this behalf
was to be final.
D
E
F
G
Para 9 of the said scheme specifies different competent authorities for
accepting voluntary retirement of different categories of officers and workmen.
The following general conditions now need be noticed :-
"I o.4. A mere request of an employee seeking voluntary retirement
under the Scheme will not take effect until and unless it is accepted
in writing by the Competent Authority.
10.5. It will not be open for an employee to withdraw the request made
for voluntary retirement under the scheme after having exercised such
option.
I 0.6. The Competent Authority shall have absolute discretion either
to accept or reject the request of an employee seeking Voluntary
Retirement under the scheme depending upon the requirement of the
bank. The reasons for rejection of request of an employee seeking
voluntary retirement shall be recorded in writing by the competent
authority. Acceptance or otherwise of the request of an employee
seeking voluntary retirement will be communicated to him in writing.
I 0.11. An employee who would seek voluntary retirement under this
scheme will not be eligible for re-employment in the bank or any of
H
its subsidiaries.
BANK OF INDIA v. O.P. SWARANAKAR (S.B. SINHA, J.]
449
10.13. The benefits payable under this scheme shall be in full and final A
settlement of all claims of whatsoever nature, whether arising under
the scheme or otherwise to the employee (or to his nominee in case
of death). An employee who voluntarily retired under this scheme will
not have any claim against the bank of whatsoever nature and no
demand or dispute or difference will be raised by him or on his behalf, B
whether for re-employment or compensation or back wages including
employment of any of his relative on compassionate grounds in the
service of the bank or for any other benefit whatsoever.
10.14. The vacancy caused by voluntary retirement shall not be filled
up by new recruitment.
10.15. The ex-gratia payable to an employee on opting for Voluntary
Retirement under this scheme would be paid to him within 45 days
from the date of his relieving.
PROCEDURE
An employee eligible to seek voluntary retirement under this scheme
should make a request on the prescribed application enclosed with
this scheme as Annexure-A or Annexure A-1 as the case may be
through proper channel addressed to the Competent Authority before
c
D
the last date prescribed under this Scheme. Further one copy of the
application be directly sent to the Dy. General Manager (P) at Head E
Office New Delhi."
Annexure-A appended to the said Scheme is the format of an application for
offer to seek voluntary retirement which reads thus :-
"Application for Offer to seek voluntary retirement from the service F
of the Bank.
(For workmen employees & officers upto scale-lll)
The Dy. General Manager
Personnel Division
Head Office
New Delhi.
(Through proper channel)
Sir,
G
H
450
A
SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.
SUB: VOLUNTARY RETIREMENT.
I hereby offer to seek voluntary retirement from the serviCes of
the Bank in accordance with the terms and conditions stipulated in the
PNB Employees Voluntary Retirement Scheme 2000 circulated vide
Personnel Division Circular No.1755 dated 29.9.2000, which I have
B
carefully read and understood the contents of the same.
2. I. accept the terms and conditions stipulated in PNB Employees
Voluntary Retirement Scheme 2000 unconditionally and irrevocably.
3. I. furnished the required particulars in the APPENDIX enclosed for
C
consideration of my offer to seek voluntary retirement from the service
of the Bank under the above scheme.
D
Yours faithfully,
Signature of the Employee
Place:
Name ------
Date :
Designation ____ _
BO/Division ----
A large number of employees (1,01,000 employees approx.) submitted
their applications out of whom a small number of employees (200 employees
E approx.) withdrew their offer. Despite withdrawal of their offer the same was
accepted. In some cases offers despite withdrawal thereof were accepted
within the period during which the scheme was operative and in some beyond
the same.
The scheme was introduced by the banks with the approval of the
F Board of Directors.
G
H
Questioning the action on the part of the banks, in accepting the
applicat!ons of the concerned employees despite their withdrawal, writ petitions
were filed in the Punjab & Haryana High Court, Bombay High Court, Uttaranchal
High Court etc.
Before the Punjab & Haryana High Court, the legality or validity of the
said scheme also came to be questioned. Writ applications were also filed by
some employees seeking for issuance of writ of mandamus directing the
respective banks to pay unto them their lawful dues strictly in terms of the
scheme.
)
BANK OF INDIA v. 0.1~. SWARANAKAR (S.B. SINHA, J.]
451
The Punjab & Haryana High Court by reason of its judgment impugned A
herein dated 3.4.2002, inter alia, held :-
"That the V .R. Scheme as framed is not a valid piece of
subordinate legislation inasmuch as the provision of Section 19 sub
clause (1) and sub clause (4) of the Act have not been complied with
and has, therefore, to be set aside.
Even if it is assumed for the sake of arguments that the scheme
is validly framed, it would be open to an employee to withdraw his
option before the same has been accepted and effectively enforced.
B
For the reasons recorded above, we allow 71 writ petitions i.e c
C.W.P. Nos.1458, 1472 of2001 and C.W.PNos. 303 and 1765 of2002
etc. etc. in which the petitioners have made a prayer for the withdrawal
of their options and the impugned orders accepting the options of
voluntary. retirement stand quashed. All these petitioners shall be
reinstated in service with all consequential benefits. It is however, D
made clear that those petitioners who have received the benefits
under the scheme including the ex-gratia payment whether with or
without protest, shall return the entire amount received by them with
interest at the rate of 9% per annum from the date of the receipt of
the said amount till the date of return. On return of the aforesaid
amount the consequential benefits regarding the payment of arrears E
of salary and allowances from the date of their release to the date of
reinstatement shall be given to them by the respondents. These
petitioners shall also have the benefit of continuity of service and the
interregnum period shall be regularised in accordance with law and
regulations.
F
Since we have already declared this scheme as bad, therefore,
we are not in a position to give any relief to the writ petitioners of
IO writ petitions i.e. C.W.P. Nos.6072, 7277, 7448, 9191, 14325, 15686,
15689, 19393, 19711 and 19803 of the year 2001, and in our opinion,
these writ petitions are liable to be dismissed. When all rights flow G
from a valid scheme and the moment the s~heme is declared bad on
account of statutory restrictions then the petitioners· of these 10 writ
petitions cannot ask for any advantage or benefit.
Now we want to make some observations with regard to those
employees who had taken the benefit under the YRS. Scheme but they H
452
SUPREME CO_URT REPORTS [2002] SUPP. 5 S.C.R.
A
have not approached this court as they appear to be satisfied/ with
the amount/benefits already received by them. With regard to them we
want to make it clear that the Banks are not obliged to recall these
employees for employment"
The Bombay High Court and the other High Courts, on the other hand,
B held that clause I 0.5 of the scheme or the scheme framed by the other banks
is not operative as the employees have indefeasible rights to withdraw their
offer before the same is accepted. In arriving at its aforementioned finding,
the High Courts, inter alia, relied on the following decisions of this Court in
Union of India and Ors. v. Gopal Chandra Misra and Ors .. [1978] 2 SCC 301,
C Bairam Gupta v. Union of India and Anr., [1987] Supp. SCC 228, Punjab
National Bank v. P.K. Miua/, [1989] Supp. 2 SCC 175, Union of India and
Anr. v. Wing Commander T. Parthasarathy, [200 l] 1 SCC 158 and Shambhu
Murari Sinha v. Project and Development India Ltd. and Anr., [2002] 3 SCC
437.
D
Assailing the judgment of the High Courts, Mr. Soli J. Sorabjee, learned
Attorney General for India, inter alia, submitted that having regard to the
purport and object sought to be achieved by the scheme, clause 10.5 of the
General Conditions cannot be said to be illegal as by submitting themselves
thereto, the concerned employees must be held to have resigned in prasenti
and in that view of the matter the contractual bar contained therein cannot
E be held to be bad in law. The learned Attorney General would urge that the
High Court proceeded on a wrong premise insofar as it failed to take into
consideration that the scheme would amount to a regulation which would
attract the provision of Section 19 of 1970 Act. It was submitted that power
to fix the terms and conditions of service of their employees by the Banks
F is provided for under Section 7 of the said Act. The learned counsel would
contend that it is not the case of the writ petitioner-respondents that the
aforementioned clause 10.5 is arbitrary or otherwise opposed to public policy
or suffers from lack of mutuality and, thus, the High Court must be held to
have arrived at a wrong conclusion. Such a clause being an offer, the learned
Attorney General would contend, is not violative of any provisions of the
G Indian Contract Act, 1872 or the Constitution of India. Taking us through the
decisions of this Court in Gopa/ Chandra Misra (supra), T. Parthasarthy
(supra), Bairam Gupta (supra) as also Shambhu Murari Sinha (supra), the
learned Attorney General would urge that therein this Court has laid down
that such a provision leads to laudable object and only in absence of such
H a provision prospective resignation can be withdrawn before its acceptance.
BANK OF INDIA v. O.P. SWARANAKAR [S.B. SINHA, J.]
453
It was further submitted that as each of the employees had made irrevocable A
and unconditional offer of terms and conditions laid down in the scheme, they
could not have withdrawn therefrom and particularly as some of them accepted
the ex-gratia payment and, thus, they having elected for the scheme and thus,
were estopped and precluded from questioning the same. Those employees,
Mr.Sorabjee would submit, who accepted the ex-gratia payment could not B
have been permitted by the High Court to approbate or reprobate. In support
of the said contention, reliance has been placed in Brijendra Nath Bhargava
and Anr. v. Harsh Wardhan and Ors., [1988] I SCC 454, Shri lachoo Mal v.
Shri Radhey Shyam, [1971] l SCC 619, Halsbury's Laws of England, Fourth
Edition, Volume 16, para 957 and American Jurisprudence, 2d, Volume 28,
pages 677 to 680.
C
As regards the finding of the Punjab & Haryana High Court that the
scheme is ultra vires having regard to the fact that the same was not laid
before the Parliament as required under Section 19(4) of 1970 Act, it was
contended that such a provision being directory one, failure on the part of
the Central Government to lay the said scheme before the Parliament could D
not vitiate the scheme itself. Strong reliance, in this connection, has been
placed in Jan Mohammad Noor Mohammad Begban v. State of Gujarat and
Anr., [1966] I SCR 505 and Mis. Atlas Cycle Industries ltd. and Ors. v. The
State of Ha1yana, [1979] 2 SCC 196. It was urged that the entire scheme was
offered to the employees as a package and the same had to be treated as such E
and in that view of the matter, it being within the realm of contract, statutory
regulations cannot be said to have any application whatsoever.
Mr. V.R. Reddy who appeared for the Punjab National Bank in the
matters arising out the judgment and orders passed by the Bombay High
Court, inter alia, would submit that the High Court erred in proceeding on the p
basis as if the employees are the Government servants and enjoy a status.
According to the learned counsel, having regard to the provisions of the 1970
Act, the terms and conditions of services of the employees of the Nationalised
Banks are governed by contract. Mr. Reddy would urge that the purpose of
the scheme being down sizing of the employees, the same was required to
be considered having regard to the age profile, skill profile, the extent of the G
response received from the employees and several other relevant factors. In
the aforementioned situation, the learned counsel would submit that clause
I 0.5 was inserted so that in the event, those who had opted for the scheme
resile therefrom, the banks may not face practical difficulties. The requirement
of the bank, the learned counsel would submit, must prevail over the H
454
SUPREME COURT REPORTS [2002) SUPP. 5 S.C.R.
A requirement of the individual employees.
As regards the validity of clause I 0.5, the learned counsel would submit
that the same was at the threshold stage leading to a major contract. Strong
reliance, in this connection, has been placed Anson's Law of Contract, 28th
Edition, paras 235 and Chitty on Contracts, 28th Edition (1999) pages 3 -160
B and 3-161 and Halsbury's Laws of England, 4th Edition, Volume 9, para 235
at page 106.
Mr. Mukul Rohtagi appearing on behalf of the Bank of India would
contend that as the writ petitions involved enforcement of contract qua
C contract, they were not maintainable. The learned counsel placed strong
reliance in Har Shankar and Ors. v. The Dy. Excise and Taxation Commr and
Ors., [1975] l SCC 737.
Dr. Rajeev Dhawan and Mr. Harish Salve, appearing on behalf of. the
State Bank of India, submitted that the High Court completely misdirected
D itself insofar as it failed to take into consideration that the provisions of the
State Bank of India Act, 1955 materially differ from 1970 Act. According to
the learned counsel, the terms and conditions of employment are governed
under Sections 17 and 43 of 1955 Act.