VERY IMPORTANT POINT
Voluntary Retirement Schemes introduced by Nationalised Banks and State Bank of India are contractual in nature. They are invitation to an offer. Application by an employee is an offer. It can be withdrawn before acceptance by employer Bank though the scheme makes it irrevocable.

Headnote:(i) Indian Contract Act, 1872-Sections 2 and 5-Employees Voluntary Retirement Schemes of Nationalised Banks and State Bank of India-Applicable to employees who on the date of application had completed 15 years of service or 40 years of age-Bank reserved with itself the right to withdraw the scheme at any time-Large number of employees opting for VRS-A few withdrew-Despite withdrawal, the same was accepted-Some during the period during which the scheme was operative and in some beyond the same-Writ petitions-P & H High Court holding V.R.S. not a valid piece of Subordinate legislation-Other High Courts holding clause 10.5 of VRS is not operative as the employees have indefeasible right to withdraw their offer before the same is accepted-Appeals to Supreme Court-Whether in the VRS by Banks they intended to make an offer or merely issued an invitation to treat-(The later)-Affect-Application by employee is an offer-It can be revoked before acceptance-Banks could not have accepted the offer of VRS after expiry of the scheme-Writ petitions were maintainable because Articles 14 and 21 were attracted.
       Held : 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Whether an application by an employee to secure voluntary retirement under the Voluntary Retirement Scheme (VRS) can be withdrawn by such an employee before the same is accepted by the Competent Authority though the scheme contained an express stipulation that an application made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. (Paras 44 and 45)
       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 statue 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. (Para 50)
       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. (Para 65)
       Held consequently : We, therefore, have no hesitation in coming to the conclusion that the voluntary scheme was not a proposal or an offer but merely an invitation to treat and the applications filed by the employees constituted offer . (Para 75)
       Once the application filed by the employees is held to be an offer ; Section 5, in absence of any other independent binding contract or statute or statutory rules to the contrary would come into play. (Para 76)
       We, therefore, do not find any error in the judgment of the High Court on this score. (Para 91)
       Held further : However, the case of the State Bank of India stand slightly on a different footing. (Para 92)
       The submission of learned Attorney General that as soon as an offer is made by an employee, 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 case where the offer was given in praesenti but the same would be prospective in nature keeping in view of the fact that it was come into force at a later date and that too subject to acceptance thereof by the employer. We, therefore, are of the opinion that the decisions of this Court, as referred to herein before, shall apply to the facts of the present case also. However, it is accepted that a group of employees accepted the ex gratia payment. Those who accepted the ex gratia payment or any other benefit under the scheme, in our considered opinion, could not have resiled therefrom. The Scheme is contractual in nature. The contractual right derived by the concerned employees, therefore, could be waived. The employees concerned having accepted a part of the benefit could not be permitted to approbate and reprobate nor can they be permitted to resile from their earlier stand. (Paras 112, 113 and 114)
       We also accept the contention raised by the learned counsel for the respondents that the concerned appellants could not have accepted the offer of voluntary retirement after expiry of the scheme. All actions by the Banks were required to be taken strictly in terms of the said scheme. We are furthermore not in a position to accept the arguments of Mr. Mukul Rohtagi to the effect that writ petitions were not maintainable as thereby the writ petitioners intended to enforce a contract. The writ petitioners filed the writ petitions, inter alia, questioning the validity of the scheme. In any event validity of clause 10.5 of the said scheme was in question. The appellants herein are State within the meaning of Article 12 of the Constitution of India. The questions raised by the writ petitioners thus could be raised in a proceeding under Article 226 of the Constitution of India. Furthermore, in the event it be held that the action of the appellants was arbitrary and unreasonable, the same would attract the wrath of Article 14 of the Constitution of India. Furthermore, the right of the employee to continue in employment, which is a fundamental right under Article 21 of the Constitution of India could not have been taken away except in accordance with law. (Paras 119 and 120)
       (ii) Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970-Sections 19(1)(4)-Voluntary Retirement Schemes of Nationalised Banks and SBI-P & H High Court holding that entire scheme was bad in law as scheme is ultra vires being violative of Section 19(4)-Appeal to Supreme Court-Whether P & H High Court was right? (No)-Result-Case remanded for fresh determination.
       Held : We may now deal with that part of the order of the Punjab & Haryana High Court whereby it has been held that the entire scheme is ultra vires being violative of sub-regulation 4 of Regulation 19 of the Regulations. We do not agree with the decision of the High Court on that count for more than one reason. Firstly, the scheme is not a part of the statutory regulation. It was in the realm of contract. That being so it was not necessary for the Central Government to place the same before the Parliament. Secondly, even if the same was a regulation, the laying down rule is merely a directory one and not mandatory. (Paras 121, 122, 123 and 124)
       Held consequently : We, therefore, are of the opinion that the scheme in question cannot be said to be bad in law. The Punjab and Haryana High Court in its impugned judgment has refused to grant any relief in ten writ petitions, wherein prayers were made to the effect that the bank should be directed to act in terms of the said scheme. The relief prayed for by the concerned petitioners were denied by the High Court on the ground that the same was not enforceable. We have not accepted that part of the judgment of the High Court. In that view of the matter, the High Court must now consider the claim of the said writ petitioners on merits and pass an appropriate order in accordance with law. The said matters are, therefore, remitted to the High Court for consideration thereof afresh. (Paras 126 and 127)
       Held finally as all appeals : For the reasons aforementioned, we direct that:
        1. The appeals preferred by the Nationalised Banks arising from the High Courts are dismissed except the cases where the concerned employees have accepted a part of the benefit under the scheme; However, 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 the High Court and has retired on attaining the age of superannuation, this order shall not apply;
        2. The appeals filed by the State Bank of India are allowed;
        3. The appeals arising from the judgments of the Uttaranchal High Court are allowed and the judgments of the said High Court are set aside;
        4. The appeals arising from the judgments of the Punjab and Haryana High Court in relation to ten writ petitions which were filed by the employees for a direction upon the Bank that the benefits under the scheme be paid to them are set aside and the matters are remitted to the High Court for consideration thereof afresh on merits and in accordance with law;
       These appeals are disposed of on the above terms. However, in the facts and circumstances of the case, the parties shall pay and bear their own costs throughout. (Paras 128 and 129)

Judgement Key Points

Key Points from the Judgment

Voluntary Retirement Schemes (VRS) of Nationalised Banks and State Bank of India are contractual in nature, constituting an invitation to treat rather than a direct offer or proposal. [judgement_subject] (!) [1000075830044][1000075830045][1000075830051]

An employee's application under the VRS constitutes an offer, which can be revoked or withdrawn by the employee before acceptance by the competent authority, notwithstanding any clause in the scheme declaring the application irrevocable. [VERY IMPORTANT POINT][judgement_subject][judgement_act_referred] (!) (!) [1000075830009][1000075830011][1000075830043][1000075830044][1000075830050][1000075830051]

Provisions of the Indian Contract Act, 1872 (Sections 2 and 5) apply to VRS schemes, as contracts of employment are governed by contract law unless superseded by statute or statutory rules. [judgement_act_referred][1000075830037][1000075830049][1000075830050]

The employer bank does not acquire unilateral authority to determine the employer-employee relationship merely upon receipt of the employee's VRS application; acceptance in writing by the competent authority is required for the retirement to take effect. (!) (!) [1000075830009][1000075830043][1000075830046]

Banks cannot accept VRS applications after the expiry of the scheme's operative period, as all actions must strictly adhere to the scheme's terms. [1000075830011][1000075830032][1000075830046]

Writ petitions challenging VRS acceptance despite withdrawal are maintainable under Article 226, as banks are 'State' under Article 12, and actions may violate Articles 14 (arbitrariness) and 21 (right to livelihood). [1000075830013][1000075830015][1000075830047][1000075830048]

Employees who accept ex-gratia or other benefits under the VRS cannot later withdraw or challenge the scheme, as they waive contractual rights and are estopped from approbating and reprobating. [1000075830015] (!) [1000075830047]

The VRS schemes are not statutory regulations but contractual, so they are not ultra vires Section 19(1) or (4) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970; the laying requirement before Parliament is directory, not mandatory. [judgement_act_referred] (!) [1000075830015][1000075830037][1000075830038][1000075830040]

For State Bank of India VRS, the scheme differs slightly; appeals by SBI are allowed, distinguishing it from nationalised banks. [1000075830002][1000075830005][1000075830022][1000075830041][1000075830042]

Final directions: Appeals by nationalised banks dismissed (except where benefits accepted); SBI appeals allowed; certain Punjab & Haryana High Court matters remanded; Uttaranchal High Court judgments set aside. (!) [1000075830016]

Scheme eligibility limited to employees with 15 years' service or 40 years' age (excluding certain categories like those in disciplinary proceedings or specialists); benefits include ex-gratia (lesser of 60 days' salary per year or remaining service months), gratuity, pension/PF, leave encashment. [1000075830006] (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) [1000075830007][1000075830041] (!) (!) (!)

Competent authority has discretion to accept/reject based on bank requirements, with reasons recorded for rejection; acceptance communicated in writing. (!) [1000075830009][1000075830041] (!) (!)

JUDGMENT

S.B. Sinha, J.- Leave granted in the special leave petitions.

2. 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.

3. 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 ).

4. 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 22-5-2000, 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."

5. 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

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2002 Supreme(SC) 1244

Key Points from the Judgment

Cases Referred (22)