Bank of India & Ors Vs. O.P. Swarnakar [2002] Insc 557 (17 December 2002)
Sb Sinha, J :
Appeal (civil) 855 of 2002 Appeal (civil) 870 of 2002 Appeal (civil) 874 of 2002 Appeal (civil) 877 of 2002 Appeal (civil) 878 of 2002 Appeal (civil) 879 of 2002 Appeal (civil) 883 of 2002 Appeal (civil) 7353 of 2002 Appeal (civil) 7354 of 2002 Appeal (civil) 7355 of 2002 Appeal (civil) 7356 of 2002 Appeal (civil) 873 of 2002 Appeal (civil) 876 of 2002 Appeal (civil) 880 of 2002 Appeal (civil) 3552-60 of 2002 Appeal (civil) 4067 of 2002 Appeal (civil) 5380-81 of 2002 Appeal (civil) 875 of 2002 Appeal (civil) 881 of 2002 Appeal (civil) 8467-8499 of 2002 Special Leave Petition (civil) 19373-405 of 2002 Appeal (civil) 8511 of 2002 Special Leave Petition (civil) 12322 of 2002 Appeal (civil) 7314-35 of 2002 Appeal (civil) 3561-65 of 2002 Appeal (civil) 896 of 2002 Appeal (civil) 955 of 2002 Appeal (civil) 8500 of 2002 Special Leave Petition (civil) 7966 of 2002
CJI, H.K. Sema & S.B. Sinha. Punjab National Bank & Ors. Allahabad Bank etc. etc. Dena Bank Punjab & Sind Bank & Ors. Union Bank of India & Ors. State Bank of Patiala State Bank of India & Anr. etc. Virender Kumar Goel Shri Harprit Singh Chhabra Bhupinder Singh Sachdeva & Ors. Jai Singh Chauhan etc. etc. Raminder Singh Arora etc. etc. Mr. Netaji D. Karande & Ors. etc. Mohinder Pal Singh & Ors. A.Q. Beg Virender Kumar Sharma & Ors. Sanjeev Kalra etc. Punjab National Bank & Ors. etc. Bank of India & Ors. Chairman, Punjab & Sind Bank & Ors.
Leave granted in the special leave petitions.
A common question, as to whether an employee who opts for the voluntary retirement pursuant to or in furtherance of a scheme floated by the Nationalised Banks and the State Bank of India would be precluded from 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 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 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 :
"While there is a need for inducting new workforce, which had adequate knowledge of new skills such as modern 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 banks 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 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 :- "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 information 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.
3.15.4 The Committee further reiterates that the Government may 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 result 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 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 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 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 :- i) Gratuity as per Payment of Gratuity Act, 1972 or Gratuity payable 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 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.
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 :- "10.4 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.
10.6. 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.
10.11. An employee who would seek voluntary retirement under this scheme will not be eligible for re-employment in the bank or any of its subsidiaries.
10.13. The benefits payable under this scheme shall be in full and final 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, 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 the last date prescribed under this Scheme. Further one copy of the application be directly sent to the Dy. General Manager (P) at Head 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 of the Bank.
(For workmen employees & officers upto scale-III) The Dy. General Manager Personnel Division Head Office New Delhi.
(Through proper channel) Sir, 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 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 consideration of my offer to seek voluntary retirement from the service of the Bank under the above scheme.
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 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 Board of Directors.
Questioning the action on the part of the banks, in accepting the applications 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.
The Punjab & Haryana High Court by reason of its judgment impugned 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.
For the reasons recorded above, we allow 71 writ petitions i.e C.W.P. Nos.1458, 1472 of 2001 and C.W.P Nos. 303 and 1765 of 2002 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, 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 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.
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 10 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 from a valid scheme and the moment the scheme 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 VRS Scheme but they 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, held that clause 10.5 of the scheme or the scheme framed 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 & Ors. v. Gopal Chandra Misra & Ors. [(1978) 2 SCC 301], Balram Gupta v. Union of India & Anr. [(1987) Supp.SCC 228], Punjab National Bank v. P.K. Mittal [(1989) Supp. 2 SCC 175], Union of India & Anr. v. Wing Commander T. Parthasarathy [(2001) 1 SCC 158] and Shambhu Murari Sinha v. Project & Development India Ltd. & Anr. [(2002) 3 SCC 437].
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 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 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 Indian Contract Act, 1872 or the Constitution of India. Taking us through the decisions of this Court in Gopal Chandra Misra (supra), T. Parthasarthy (supra), Balram 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 a provision prospective resignation can be withdrawn before its acceptance. It was further submitted that as each of the employees had made irrevocable 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 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 & Anr. v. Harsh Wardhan & Ors.[(1988) 1 SCC 454], Shri Lachoo Mal v. Shri Radhey Shyam [(1971) 1 SCC 619], Halsbury's Laws of England, Fourth Edition, Volume 16, para 957 and American Jurisprudence, 2d, Volume 28, pages 677 to 680.
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 not vitiate the scheme itself. Strong reliance, in this connection, has been placed in Jan Mohammad Noor Mohammad Begban v. State of Gujarat & Anr. [(1966) 1 SCR 505] and M/s Atlas Cycle Industries Ltd. & Ors. v. The State of Haryana [(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 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 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 response received from the employees and several other relevant factors. In the aforementioned situation, the learned counsel would submit that clause 10.5 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 requirement of the individual employees.
As regards the validity of clause 10.5, 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 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 contract, they were not maintainable. The learned counsel placed strong reliance in Har Shankar & Ors. v. The Dy. Excise and Taxation Commr & Ors. [(1975) 1 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 itself insofar as it failed to take into consideration that the provi sions 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.
It has been pointed out that having regard to the difficulties which may be faced by some of the employees, although the scheme dated 27.12.2000 was to remain in force for a short time, implementation thereof was contemplated in a time-bound manner i.e. :-
a) Opportunity to the employees to apply for voluntary retirement during the period 15.1.2001 to 31.1.2001;
b) Opportunity to the employees to withdraw, if so desired by 15.2.2001;
c) Employees whose request for voluntary retirement is accepted, were to stand retired on 31.3.2001 and paid accordingly.
Having regard to the difficulties which may be faced by some of the employees, by a circular a cut-off date of 15.2.2001 was fixed; thereby granting opportunities to the employee to withdraw the option exercised by him. The logic and necessity therefor, inter alia, was :-
i) the purpose of the SBIVRS was inter alia to have overall reduction in the existing strength of the employees. However, the bank were also required to control the outflow according to its requirements, for which the bank retained the discretion to limit the number of employees allowed to retire.
ii) A decision was taken by the bank that around 10% employees may be allowed to retire under the VRS; the petitioner bank had to process the applications of all the employees who had opted for VRS. This ratio of 10% could be achieved only after the bank receives a definite figure about the number of persons opting for VRS and withdrawing later.
iii) Further the final decision of the category of persons eligible under VRS could be taken only after the petitioner bank had the final tally regarding the last and final figure of number of persons who had opted under the VRS.
iv) The scheme was purely voluntary and the conscious decision of the employee, hence there could be no reason for his withdrawal of application at a later date. However, keeping in view the interest of the employee, it was decided that the employee might be permitted to withdraw the application on or before 15.2.2001.
v) It was a time bound scheme whereunder the employee was to be relieved and paid entire monetary benefits by 31.3.2001, for which arrangements were to be made.
It has been pointed out that around 35,380 employees had applied under the said scheme and around 1,996 employees had withdrawn before the cut off date.
Around 21,000 employees had been granted voluntary retirement under the scheme, excluding the ineligible.
It was contended that the scheme if read in its entirety would clearly show that the same was an offer and not an invitation to offer and in terms thereof an enforceable rights and duties had been conferred upon both employer and employee which would, subject to certain exception, be enforceable. It was contended that as the concerned employee did not exercise his option of withdrawal within the specified date, namely, 15.2.2001, his case had been considered on the premise that he has not withdrawn his offer. The learned counsel would contend that a contract of employment can be terminated unilaterally; 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. Reliance, in this connection, has been placed on 'Chitty on Contract' paras 37-114 and 37-115.
Mr. Nageshwar Rao, learned senior counsel appearing on behalf of the respondents in civil appeal arising out of SLP (C) CC No.7966, inter alia, would submit that the decisions of this Court in Balram Gupta (supra) and Parathasary (supra) in no unmistakable terms laid down the law that an offer of resignation can be withdrawn before the same is accepted. According to the learned counsel, the matter relating to the scheme is merely an invitation to offer and option pursuant thereto on the part of an employee would constitute an offer. Such an offer, the learned counsel would contend, had been made by the concerned employee on dotted lines. In any event, the learned counsel would submit, that having regard to the provision contained in Section 5 of the Contract Act, the concerned employee had an absolute right to withdraw the same before a concluded contract is arrived at. Clause
10.5 of the Punjab National Bank VRS is, thus, ultra vires Section 5 of the Contract Act.
Strong reliance, in this connection, has been placed on Rajendra Kumar Verma v. State of Madhya Pradesh & Ors. [AIR 1972 MP 131], Abdus Salam Choudhury v. The State of Assam & Ors. [AIR 1991 Gauhati 9] and Devi Krishan Goyal v. District Inspector of Schools, Ghaziabad & Ors. [ J.T. 1988 (4) SC 201].
Mr. Gopal Subramanium, learned senior counsel appearing on behalf of the respondent in Civil Appeal arising out of SLP (C) Nos.19373-404 of 2002, would submit that the scheme formulated by other public sector banks including Punjab & Sind Bank is identical to that of Punjab National Bank. According to the learned counsel, the entire scheme has be read as a whole. It was pointed out that the scheme had a limited duration from 1.12.2000 to 31.12.2000, and a cumulative consideration of the relevant clauses would clearly show that the relationship between the master and servant comes to an end only upon acceptance of the offer. It was pointed out that the offer is required to be considered at the level of the Branch Manager and Zonal Manager and upon their recommendation the same was ultimately to be taken up by the Personnel Department will clearly go to show that irrevocable nature of option would be relevant only if the same culminates into an acceptance. The learned counsel would submit that mere declaration given by an offerer that he would not withdraw or cancel the offer would not destroy his locus. Strongly relying upon the decisions of this Court in J.N. Srivastava v. Union of India & Anr. [(1998) 9 SCC 559], Gopal Chandra Misra (supra), Parthasarathy (supra), Shambhu Murari Sinha (supra), Balram Gupta (supra), the learned counsel would submit that even after acceptance, the offer could be withdrawn, such an action on the part of the optioner is permissible even after the acceptance of the offer and in that view of the matter the application of contractual bar must be held to be applicable only in a case where offerer has been relieved from his part not prior thereto.
The decisions of this Court, Mr. Suramanium would submit, lay down the following principles :
(1) Juridical relationship of employer and employee continues till the employee is relieved from his duties
(2) It is a bilateral action,
(3) Offer being not in prasenti its acceptance is necessary,
(4) only exception to the said rule would be where prejudice may be caused.
Mr. Subramanium would urge that in the instant case, it cannot be said that the statutory regulation has nothing to do with the Scheme as pension was to be calculated in terms thereof. The learned counsel pointed out that after the offer had been made, the concerned banks had issued a circular, pursuant whereto or in furtherance whereof a proviso to Regulation 28 was sought to be added; in terms whereof the concerned employees were deprived of the benefit of additional five years of service towards qualifying service so as to get pension in terms of clause (4) of Regulation 19 as thereby instead and in place of full pension the principle of pro- rata pension was introduced. Such amendment in the scheme as a result whereof the employees were gravely prejudiced, the concerned employees derived a legal right to withdraw from the said scheme.
Mr. Rakesh Dwivedi, learned senior counsel appearing on behalf of the respondents in Civil Appeals arising out of SLP (C) Nos.19373-405 of 2002, would contend that the offending clause having been unilaterally prescribed would not amount to a contractual bar. Such a contractual bar, the learned counsel would submit, must be based on consideration. A contractual scheme must not offend the right of the employee under Section 5 of the Indian Contract Act , in terms whereof the offeror is entitled to revoke his proposal/offer at any time before the communication of the acceptance. Relying upon or on the basis of a large number of decisions by different High Courts, namely, Zoravarmal v. Gopal Das [AIR 1922 Mad. 486, 491], Secretary of State v. Bhaskar Krishnaji [AIR 1925 Bom. 485,487, 488], Somu Sundram Pillai v. Provincial Government [AIR 1947 Mad. 366, 368], Raghunandan v. State of Hyderabad [AIR 1963 AP 110, 113], T. Linga Godar v. State of Madras [AIR 1971 Mad. 28], Rajendra K. Verma v. State of M.P. [AIR 1972 M.P. 131], Sri Durga Saw Mills v. State of Orissa [AIR 1978 Orissa 41,43], Managing Committee v. State of Bihar [AIR 1981 Patna 271, 272], Janardhan Misra v. State of U.P. [AIR 1981 Allahabad 213, 216-217], M/s Suraj Besan & Rice Mills v. FCI [AIR 1988 Delhi 224], A.S. Khongphai v. Special Judicial Officer [AIR 1981 Gau, 9], it was argued that in absence of any statute or statutory rules governing the field, Section 5 of the Indian Contract Act would be attracted and in that view of the matter clause 10.5 is neudum pactum and thus being a nullity is not enforceable.
According to the learned counsel, the terms and conditions of service of employees being governed by a statute or statutory regulations, they enjoy a status. It was urged that as such voluntary retirement scheme affects the status of an employee, a contractual bar cannot be imposed. Reliance, in this connection, has been placed on Delhi Transport Corporation v. D.T.C. Mazdoor Congress & Ors. [(1991) Supp.(1) SCC 600]. In a case, Mr. Dwivedi would urge when the employee has voluntarily withdrawn the offer, the doctrine of election will have no application as by reason thereof the employee has not received the benefit in one part of the contract and then questioned the rest thereof.
Mr. Jagdeep Dhankar would, inter alia, submit that in some cases the letters of withdrawal reached before the option. In any event, as the orders had been passed in many cases on 8.1.2001 i.e. well after the expiry of the period of the scheme, namely, 31.1.2.2000, the competent authority had no jurisdiction to accept the same.
Mr. Panda appearing for the Appellant in Civil Appeal No.955 of 2002 would draw the attention of this Court to the fact of the matter and submitted that the concerned respondent had withdrawn his offer on the very next day of filling his application but despite the same, he had been relieved from his duties on 30.12.2000.
The learned counsel would contend that the offending clause seeks to obliterate the right of the employee to which he would have been otherwise entitled to in terms of Regulation 19(4) and thus the same must be held to be illegal. Reliance, in this connection, has been placed in V.T. Khanzode & Ors. v. Reserve Bank of India & Anr.[(1982) 2 SCC 7]. Mr. Panda contended that by reason of the impugned judgment, the Uttaranchal High Court dismissed a writ petition filed by an employee, inter alia, on the ground that as he is bound himself by the terms not to withdraw the application for voluntary retirement, the writ petition was not maintainable.
According to the learned counsel, for the reasons stated by the Punjab & Haryana High Court and Bombay High Court and the other High Courts, the said decision cannot be sustained.
Mr. D. Goburdhan, appearing on behalf of the respondent-employee of the State Bank of India would submit that his client, who had completed 19 years, 10 months of service, had made the offer as he wanted pensionary benefits having regard to the circular issued by the Indian Banks' Association of which the State Bank of India is manager, namely, that who had completed 15 years of service may opt therefor, but withdrew the same as he was informed that he would not get his pensionary benefits.
Mr. Pradeep Gupta appearing in Civil Appeal Nos.5380-81 of 2002 on behalf of the concerned employees of Allahabad Bank, would submit that as the respondent therein was working in a foreign exchange branch, and having been doing a specialised job, would not have ordinarily come within the purview of the scheme. It was pointed out that his letter of withdrawal was strongly recommended by the Branch Manager but despite the same, by reason of the writ petition, the competent authority accepted the same without assigning any reason. The said order, contends the learned counsel, suffers from vice of non-application of kind inasmuch as in a case of this nature, the concerned authority should have passed a speaking order.
The learned counsel appearing in SLP (C) CC No.7966 would submit that the Punjab & Haryana High Court had rejected ten writ petitions filed by the petitioners, inter alia, on the ground that as the scheme is ultra vires, no relief can be granted in their favour. The learned counsel contended, that as the scheme is contractual in nature, the benefits which were otherwise available to them in terms of the scheme could not have been curtailed.
Before we advert to the rival contentions, we may take note of the relevant provisions of 1970 Act.
Sections 7(2), 19(1), 19(2)(f) and 19(4) of 1970 Act read as follows :- "7(2) The general superintendence, direction and management of the affairs and business of a corresponding new bank shall vest in a Board of Directors which shall be entitled to exercise all such powers and do all such acts and things as the corresponding new bank is authorised to exercise and do."
"19. Power to make regulations. - (1) The Board of Directors of a corresponding new bank may, after consultation with the Reserve Bank and with the previous sanction of the Central Government, by notification in the Official Gazette, make regulations, not inconsistent with the provisions of this Act or any scheme made thereunder, to provide for all matters for which provision is expedient for the purpose of giving effect to the provisions of this Act." "19(2) In particular, and without prejudice to the generality of the foregoing power, the regulations may provide for all or any of the following matters, namely, :- (a) (b) (c) (d) (e) (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 such funds;" 19(4) Every regulation shall, as soon as may be after it is made under this Act by the Board of Directors of a corresponding new bank, be forwarded to the Central Government and that Government shall cause a copy of the same to be laid before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation or both Houses agree that the regulation should not be made, the regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be, so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation." Pursuant to or in furtherance of the power conferred upon the 'Bank' under clause (f) of sub-section (2) of Section 19 of 1970 Act, the Punjab National Bank (Employees') Pension Regulation, 1995 was framed; the relevant provisions being Regulations 28 and 29 thereof read thus :- "28. 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;
2) 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;
3) 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.
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;" It is not in dispute that on or about 23.12.2000 a proviso to Regulation 28 was sought to be introduced, which is as follows :- "Provided that, 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".
The said amendment, however, has been carried into effect recently in 2002..
The relevant portion of the SBI Voluntary Retirement Scheme is as follows :
"SBI VOLUNTARY RETIREMENT SCHEME (SBIVRS)
1. xxx 2. Objectives :
I. To have a balanced age profile providing for mobility, training, development of skills and succession plans for higher-level positions.
II. To provide an exit for employees who have an honest feeling that they should now retire and take rest or that there are better opportunities elsewhere.
III. To have over all reduction in the existing strength of the employees and to increase productivity and profitability.
3. Eligibility :
The scheme will be open to all permanent employees of the Bank, except those specifically mentioned as 'ineligible', who have put in 15 years of service or have completed 40 years of age as on 31st December, 2000.
Age will be reckoned on the basis of the date of birth as entered in service record.
Ineligible :
The following categories of employees are ineligible under the scheme;
i. Staff members who have executed bonds and have not completed it; staff members serving abroad under the special arrangements/bonds. The Board of Directors may, however, waive this, subject to fulfillment of the bond/other requirements.
ii. Employees against whom Disciplinary Proceedings are contemplated/pending or who are under suspension. This will also include employees against whom action has been initiated by Government Agencies/other law enforcing agencies.
iii. Employees appointed on contract basis.
iv. Watch and ward staff.
v. Specialist Officers.
vi. Highly skilled and qualified staff.
4. xxx
5. Amount of Ex-gratia :
The staff members whose request for retirement under SBIVRS has been accepted by Competent Authority will be paid an amount of ex-gratia of 60 days' salary (pay plus stagnation increments plus special pay plus dearness allowance for each completed year of service (for this purpose fraction of service of six months and above will be taken as one year and accordingly service of less than six months will not be counted) or salary for the number of months service is left, whichever is less. Fraction of a month, if any, will be ignored.
6. Other benefits :
a) Gratuity as payable under the extent instructions on the relevant date.
b) Provident Fund contribution as per State Bank of India Employees' Provident Fund Rules as on relevant date.
Pension in terms of State Bank of India Employees' Pension Fund Rules on the relevant date (including commuted value of pension).
c) Encashment of balance of Privilege Leave, as applicable, on the relevant date.
d) Respective facilities extended to officers/others such as retention of accommodation, telephone, car, continuation of housing loan etc. will be extended to officers/others retiring under SBIVRS as per present dispensation, at the discretion of Competent Authority.
However, in such cases of retention of physical facilities, 50% of the amount of ex-gratia payable will be released only after the employee surrenders the facility. No interest, however, will be paid for the amount so withheld. All other outstanding loans/advances will have to be repaid before date of retirement under SBI VRS, failing which the amount of ex-gratia and other terminal benefits payable to the employee will be appropriated towards the outstanding loans/advances and the balance amount only will be payable to the employee.
7. Other features :
The Bank intends to control the outflow according to its requirements. Towards this end, the Bank retains the discretion to limit the number of employees allowed to retire in each category of staff viz. officer/clerical - cash/subordinate, to be covered under SBIVRS. As such the Bank will have the sole discretion as to the acceptance or the rejection of the request for retirement under SBIVRS depending upon the requirements of the Bank. For the purpose of exercising discretion in this regard, category wise lists of eligible applicants would be prepared in descending order of their age and applications of employees coming in higher age groups above cut-off age would be accepted, the cut-off age in each category will of course depend upon the acceptable number of employees who can be permitted to retire.
No voluntary retirement shall be deemed to have come into effect unless the decision of the Competent Authority has been communicated in writing.
General conditions :
i. Staff members desirous of availing benefits under the scheme will have to submit a written application to the Competent Authority, through proper channel, in the specified format, within the period for which the Scheme is kept open.
ii. A staff member retired under the scheme will not be eligible for re-employment in the Bank or its subsidiaries/Associates joint ventures (including offices outside India).
iii. The employees seeking retirement under SBIVRS will not be entitled to dispute the payments received under the scheme on any ground whatsoever. The retiring staff member and/or their nominees or legal heirs shall have no right/claim demands against the Bank on any matter relating to the scheme.
iv. As SBIVRS is voluntary, it shall not be negotiable and shall not be deemed or construed as a subject matter of right or contract of service. It will not be a subject matter of any industrial disputes under the provisions of the Industrial Disputes Act, 1947 and shall not be cited as precedent, custom, convention, usage or practice any time in future.
v. As SBIVRS is voluntary in nature, the employee seeking retirement under the SBIVRS will not be eligible for any retrenchment compensation payable under the provisions of the Industrial Disputes Act.
vi. SBIVRS is independent of and without prejudice to the rights of the Bank to dispense with the services of an employee either under the contract of employment, service rules, awards or under the applicable Standing Orders/Law/Rules/terms and conditions of service as may be applicable to the employee concerned.
vii. The SBIVRS shall not be construed as a revision of any of the previous retirement schemes of the Bank and as such no claim from the employee who has retired/will be retiring under the existing schemes shall be entertained.
viii. In case of disputes as to the interpretation of any of the terms and conditions of the scheme, the decision of the Bank shall be final and binding on all the parties concerned.
ix. Bank reserves the right to modify, amend or cancel any or all of the aforesaid clauses and to give effect thereto from any dates it may deem fit.
Pursuant to in furtherance of the powers conferred under Section 50(3), the Reserve Bank of India with the previous sanction of the Central Government made the State Bank of India General Regulations, 1955. It is also not in dispute that in exercise of the power conferred under Section 43(1) of the State Bank of India Act, 1955 the Central Board of the State Bank of India made the State Bank of India Officers Service Rules determining the terms and conditions of the appointment and services of officers in the Bank.
Following legal issues arise for determination in these appeals :
A. Whether an application by an employee to secure voluntary retirement under the Voluntary Retirement Scheme (VRS) can be withdrawn by such an employee before the same is accepted by the Competent Authority though the scheme contained an express stipulation that an application made thereunder is irrevocable and the employee will have no right to withdraw the application once submitted? B. Whether upon making an application under VRS the employer bank secures the authority to unilaterally determine one way or the other the jural relationship of master and servant between the parties? The moot question which is required to be posed and answered is whether the voluntary retirement scheme is an offer/proposal or merely an invitation to offer.
The question is whether the banks intended to make an offer or merely issued an invitation to treat is essentially a question of fact.
As would appear from the discussions made hereinafter there appears to be some difference in the schemes floated by the State Bank of India and the nationalized banks.
We may consider the cases of nationalized bank first. The circular dated 20.8.2000 and the scheme framed by the banks are required to be read together for the purpose of ascertaining the true intendment thereof. The scheme essentially was floated as has been mentioned herein before with a purpose of downsizing the employees. Such a scheme although may incidentally be beneficial also to the employees but was primarily beneficial to the banks. The ultimate aim and object of floating such a scheme as has been stated in the circular letter issued by the Ministry of Finance was for the purpose of effective functioning of the banks so as to enable them to compete with the private banks.
The employees of the nationalized bank may not enjoy a 'status' as is the case of government employees or the statutory authorities whose terms and conditions of service are governed by the constitutional provisions and/or the statutes and the statutory rules; but there is no gainsaying that the employees of the Nationalized banks enjoy security of their employment. So far as the employees of the State Bank of India are concerned their terms and conditions of service, as noticed hereinbefore, are governed by statutory rules. However, so far as the employees of the nationalized banks are concerned except for the matter of grant of pension which is covered by the regulations framed in terms of Section 19 of the 1970 Act, other terms and conditions of their service are not statutory in nature. But the State Bank of India as also the nationalized banks are 'States' within the meaning of Article 12 of the Constitution of India. The services of the workman are also governed by several standing orders and bipartite settlements which have the force of law. The banks, therefore, cannot take recourse to 'hire & fire' for the purpose of terminating the services of the employees. The banks are required to act fairly and strictly in terms of the norms laid down therefor. Their actions in this behalf must satisfy the test of Articles 14 and 21 of the Constitution of India. Having regard to the intendment of the scheme each and every employee would not be entitled to the benefit of the said scheme. Those who are facing disciplinary proceedings or working in a particular class of employment are not eligible therefor.
An offer indisputably can be made to a group of persons collectively which is capable of being accepted individually but the question which has to be posed and answered is as to whether having regard to the service jurisprudence; the principles of Indian Contract Act would be applicable in the instant case. It is the specific case of the 'Banks' that the schemes had been floated by way of contract. It does not have any statutory flavour. Reference to the pension scheme framed under the regulations was made for computation of the pension.
It is difficult to accept the contention raised in the Bar that a contract of employment would not be governed by the Indian Contract Act. A contract of employment is also a subject matter of contract. Unless governed by a statute or statutory rules the provisions of the Indian Contract Act would be only applicable at the formulation of the contract as also the determination thereof. Subject to certain just exceptions even specific performance of contract by way of a direction for reinstatement of a dismissed employee is also permissible in law.
It is in the aforementioned backdrop, the questions are required to be answered. It is now well-known that the use of the term 'offer' or 'proposal' is not decisive. It, as noticed, would depend upon the fact involved in the matter.
In Anson's Law of Contract, 26th Edn. at p.25 it is stated:
"Offers and Invitations to Treat: It is sometimes difficult to distinguish statements of intention which cannot, and are not intended to result in any binding obligation from offers which admit of acceptance, and so become binding promises. A person advertises goods for sale in a newspaper, or announces that he will sell them by tender or by auction; a shopkeeper displays goods in a shop window at a certain p rice; or a bus company advertises that it will carry passengers from A to Z and will reach Z and other intermediate stops at certain times. In such cases it may be asked whether the statement made is an offer capable of acceptance or merely an invitation to make offers, and do business. An invitation of this nature, if it is not intended to be binding, is known as an 'invitation to treat." Chitty on Contract states the law thus:
"Tenders A statement that goods are to be sold by tender is not normally an offer to sell to the person making the highest tender; it merely indicates a readiness to receive offers. Similarly, an invitation for tenders for the supply of goods or for the execution of works is, generally, not an offer, even though the preparation of the tender may involve very considerable expense. The offer comes from the person who submits the tender and there is no contract until the person asking for the tenders accepts one of them. These rules, may, however, be excluded by evidence of contrary intention: e.g. where the person who invites the tenders states in the invitation that he binds himself to accept the highest offer to buy (or as the case may be, the lowest offer to sell or to provide the specified services). In such cases, the invitation for tenders may be regarded either as itself an offer or as an invitation to submit offers coupled with an undertaking to accept the highest (or, as the case may be, the lowest) offer; and the contract is concluded as soon as the highest offer to buy (or lowest offer to sell, etc.) is communicated." In Treitel's 'The Law of Contract, it has been stated thus:
"When parties negotiate with a view to making a contract, many preliminary communications may pass between them before a definite offer is made. One party may simply respond to a request for information (e.g. by stating the price at which he might be prepared to sell a house), or he may invite the other to make an offer; he is then said to make an "invitation to treat". The question whether a statement is an offer or an invitation to treat depends primarily on the intention with which it was made." It has also been stated in the said book:
"The question whether a statement is an offer or an invitation to treat depends primarily on the intention with which it was made. A statement is only an offer if the person making it intends to be bound as soon as the person reasonably believes that it was made with this intention. It follows that a statement is not an offer, if it expressly provides that the person making it is not to be bound merely by the other party's notification of assent, but only when he himself has signed the document in which the statement is contained." The law relating to 'offer' and 'acceptance' is not simple.
In Hamilton, Rau and Winthraub on Contracts, the learned authors referred purported offer "I want $ 2.25 cent per cent for this seed fobcowell," was held not be an offer on the ground that the defendant did not say "I offer to sell you.
At page 346 of the said treatise, it is stated:
"The rules of offer and acceptance are usually favourites of law students; they are easily stated and tend to be rather mechnical in their operation. They also involve situations that are relatively easy to grasp and in which various policy consideration are close to the surface. However, one should not assume that one has mastered the law of contracts simply because one is conversant with rules of offer and acceptance. In deed the writings of modern contracts scholars tend to deprecate the importance of the rules of offer and acceptance. See Geneally G Gilmore, the Death of Contract (1974): L. Freidman, Contract Law in America (1965)".
In Halsbury's Laws of England, 4th Edition, Volume-9, meaning of 'offer' has been stated in paragraph 227 at page 98 in the following terms:
"227; Meaning of offer. An offer is an expression by one person or group of persons or by agents on his behalf, made to another, of his willingness to be bound to a contract with that other on terms either certain or capable of being rendered contain.
An offer may be made to an individual or to a group of persons or to the world at large. It may be made expressly by words, or it may be implied from the product of the offerer." The request of employees seeking voluntary retirement was not to take effect until and unless it was accepted in writing by the competent authority. The Competent Authority had the absolute discretion whether to accept or reject the request of the employee seeking voluntary retirement under the scheme. A procedure has been laid down for considering the provisions of the said scheme to the effect that an employee who intends to seek voluntary retirement would submit duly completed application in duplicate in the prescribed form marked "offer to seek voluntary retirement" and the application so received would be considered by the competent authority on first come first serve basis. The procedure laid down therefor suggests that the applications of the employee would be an offer which could be considered by the bank in terms of the procedure laid down therefor. There is no assurance that such an application would be accepted without any consideration.
Acceptance or otherwise of the request of an employee seeking voluntary retirement is required to be communicated to him in writing. This clause is crucial in view of the fact that therein the acceptance or rejection of such request has been provided. The decision of the authority rejecting the request is appealable to the Appellate authority. The application made by an employee as an offer as well as the decision of the bank thereupon would be communicated to the respective General Managers. The decisions making process shall take place at various levels of the banks.
The following, therefore, can be deduced:
(i) The banks treated the application from the employees as an offer which could be accepted or rejected.
(ii) Acceptance of such an offer is required to be communicated in writing.
(iii) The decision making process involved application of mind on the part of several authorities.
(iv) Decision making 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 competent authority.
(vi) The request of voluntary retirement would not take effect in praesenti but in future.
(vii) The Bank reserved its right to alter/rescind the conditions of the scheme.
From what has been noticed herein before, it is apparent that the Nationalized banks in terms of the scheme had secured for themselves an unfettered and unguided right to deal with the jural relationship between themselves and their employees.
It is not a case where on mere making of option on the part of the 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. The submission of the learned counsel appearing on behalf of the banks that the proposal to the effect that the option made by an employee would be considered, is a consideration cannot be accepted.
Once it is held that the provisions of the Indian Contract Act, 1872 would be applicable, the scheme admittedly being contractual in nature, the provisions of the Act shall apply. The Scheme having regard to its provisions as noticed hereinbefore would merely constitute invitation to treat and not an offer.
A proposal is made when one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of the other to such act or abstinence (See Section 2(a)). Herein the banks by reason of the scheme or otherwise have not expressed their willingness to do or abstain from doing anything with a view to obtaining assent of the employees to such act. It will bear repetition to state that not only the power of the bank to accept or reject such application is absolutely discretionary, it, as noticed herein before, could also amend or rescind the scheme. The Scheme, therefore, cannot be said to be an offer which, on the acceptance by the employee, would fructify in a concluded contract.
The proposal of the employee when accepted by the Bank would constitute a promise within the meaning of Section 2(b) of the Act. Only then the promise becomes an enforceable contract. In the instant case the 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, in terms of the said scheme no consideration passed so as to constitute an agreement. Once it is found that by giving their option under the scheme, the employees did not derive an enforceable right, the same in absence of any consideration would be void in terms of Section 2(g) of the Contract Act as opposed to Section 2(h) thereof.
Furthermore, even by opting for the scheme as floated by the banks, no consideration is passed far less amounting to reciprocal promise.
Once it is found, as would appear from the position rendered by this court that the employees do not have an enforceable right upon making an option the same would be void in terms of Section 2(g) of the Contract Act as opposed to Section 2(h) thereof.
The distinction between an offer and invitation to treat has been dealt with some clarity in Gibson v. Manchester City Council reported in 1979 All.E.R. 972.
In that case the council adopted a policy of selling council's house to Mr. Gibson. The council wrote a letter to Mr. Gibson that "it may be prepared to sell the house to you at the purchase price of Pounds 2,725 less 20% = Pounds 2180 (free hold)". He was invited to make a formal application which he did. Before the documents could be executed the control of the council changed hands as a result whereof policy of selling the council house was reversed.
When it was claimed by Mr. Gibson that the transaction amounted to a binding contract, the House of Lords negativing the same held that the letter in question was an invitation to treat and Mr. Gibson's application was an offer and not an acceptance.
In the instant case, there was even no reasonable certainty that the scheme would be acted upon. Furthermore terms and conditions thereof could be amended and even the scheme itself could be rescinded.
We, therefore, have no hesitat
