CWP No. 15458 of 2007 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No. 15458 of 2007 Date of Decision 8.09.2010 K.K. Puri -----Petitioner Versus Union of India and others ---Respondents CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MS. JUSTICE RITU BAHRI Present: Mr. G.S. Sandhawalia, Advocate for the petitioner. Mr. Rajiv Sharma, Advocate for respondent No.1. Mr. T.S. Gujral, Advocate for respondent No.2. Mr. D.R. Bansal, Advocate for respondent Nos. 3 & 5. Mr. V. Ramswaroop, Advocate for respondent No.4. 1. To be referred to the Reporters or not? 2. Whether the judgment should be reported in the Digest? M.M. Kumar, J. The petitioners are retired employees of the Oriental Insurance Co. Ltd.-respondent No.2, National Insurance Co. Ltd.- respondent No.3, the New India Assurance Co. Ltd.-respondent No.4 and United India Insurance Co. Ltd.-respondent No.5. These companies were established by an Act of Parliament known as the General Insurance Business (Nationalisation) Act of 1972 (for brevity CWP No. 15458 of 2007 -2- 'the Nationalisation Act). These are wholly owned by the Central Government, which has powers to lay down service conditions for their employees of the aforesaid companies by virtue of provisions made under Section 17-A of the Nationalisation Act. In pursuance of power conferred under Section 17-A of the Act, the Central Government notified a Special Voluntary Retirement Scheme (for short 'the SVRS') to downsize the manpower in those companies. The Scheme made separate provisions for officers and staff (Annexure P-1 and P-2). It was to remain in force for 60 days, unless it was closed prematurely. Two separate gazette notifications with almost identical terms, conditions and contents were published on 1.1.2004. The petitioners opted for Special Voluntary Retirement Scheme and were paid numerous benefits such as Ex-gratia, Gratuity, Provident Fund, Leave Encashment and Pension etc. The Scheme came into force w.e.f. 1.8.2002 and the petitioners were relieved on 31.03.2004. The petitioners are aggrieved by proviso to Sub Para 3 of Para 1 of the Scheme which provides that the officers whose resignation have been accepted or whose services had been terminated during the period of 1.8.2002 and the date of publication of this Scheme i.e. 22.12.2005 were not to be eligible for the arrears on account of revision under the Scheme. The other proviso further stipulated that the officers were not eligible for any benefit arising from the Scheme other than that provided for by paragraph 5 (2) of the Scheme. The petitioners having sought voluntary retirement CWP No. 15458 of 2007 -3- under the aforesaid Scheme have approached this Court with a prayer that they should be paid arrears of the salary with effect from the date this Scheme has come into operation till the date of their relieving i.e. 1.8.2002 to 31.3.2004. They have submitted that once the Rule provides that those who had already sought voluntary retirement before issuance of notification of the Scheme then such Officers were entitled to benefit of revised pay except for the purpose of payment of Ex-gratia. Accordingly, the petitioners have approached this Court with a prayer for declaring the proviso II, Sub Para 3 of Para 1 of the Scheme as ultra vires of the Constitution claiming that the petitioners have actually rendered service during that period and they cannot be excluded for grant of benefit of revision of pay-scale and arrears from that date. The stand of the respondent No.5-United India Insurance Co. Ltd. in their written statement is that with a view to rationalise the working of the Insurance Company and to rationalise their workforce to make them economically, the Central Government notified two SVRSs in 2004. One of the Scheme was meant for officers and the other was for Supervisory, Clerical and Subordinate staff. The Scheme was to remain in operation for a period of 60 days from 1.1.2004. All permanent full time employees who have attained the age of 40 years and who had completed 10 years of qualifying service as on the date of notification were eligible to seek voluntary retirement under the Scheme. Those who were under suspension or facing disciplinary action or on deputation abroad were CWP No. 15458 of 2007 -4- not entitled for the same. A provision was made in para 5 of the scheme for the purposes of payment of ex-gratia amount payable to an employee seeking Special Voluntary Retirement under the Scheme. It made him entitled to receive the ex-gratia on the basis of 60 days salary for every completed year of service or salary for the remaining months of service left, whichever is lower. According to Sub para 2 of para 5, the ex-gratia to be paid as above was to be calculated on the basis of salary on the date of relieving, if any, pay revision has been effected from a date prior to the date of notification of the SVRS then the benefit of revised pay for the purposes of ex-gratia was to be allowed and not for any other purpose. The other benefit admissible to an employee seeking SVRS has been provided in para 6 which includes Provident Fund, Gratuity as per Payment of Gratuity Act, 1972, Pension including commutation as per Pension Scheme, 1995, if otherwise eligible. Apart from above, the leave encasement was also payable. The general conditions have been laid in para 8 providing that the benefit payable under the Scheme was to be considered as full and final settlement of all claims arising under the Regulations and no employee who seeks SVRS, was to make any claim against the company for compensation, re-employment or any other benefit. The Scheme is statutory in nature as it has been framed in pursuance of the power vested in the Central Government under Section 17-A of the Nationalisation Act, 1972. Once an employee applies for the SVRS then he is bound by the terms and conditions contained therein. The CWP No. 15458 of 2007 -5- applications of the petitioners who had applied for SVRS were accepted by the competent authority and in pursuance thereof they were relieved from service on 31.3.2004 in terms of para 8(ix) of the Scheme, which have been accepted by them as full and final settlement provided for para 8(xvi). The additional benefit sought to be now claimed are not admissible. The petitioners have also been paid difference of ex-gratia on account of revised pay in pursuance of second amendment made in the Scheme in 2005. Similar stand has been taken by respondent Nos. 1, 2 and 4 in their respective written statements. We have heard learned counsel for the parties at a considerable length. The first question which arises for determination is whether Second proviso of Clause 1 Sub Clause 3 of para 1 of the Scheme (Annexure P-8) and similar clause in the scheme dated 21.12.2005 (Annexure P-9) could be regarded as ultra vires of the Constitution. It is profitable to set out the aforesaid clause which reads thus: “(1) This Scheme may be called the General Insurance (Rationalisation of Pay Scales and Other Conditions of service of Development Staff) Amendment Scheme, 2005. (2) Save as otherwise provided in this scheme, this scheme shall be deemed to have come into force from 1st day of August, 2002. (3) This Scheme shall be applicable to those officers CWP No. 15458 of 2007 -6- who were in the service of the Corporation/ Company as on, or after the Ist day of August, 2002; Provided that the officers, whose resignation had been accepted or whose services had been terminated during the period from the Ist day of August, 2002 and the date of publication of the Scheme, shall not be eligible for the arrears on account of revision under this Scheme. Provided further that the officers, who had sought Special Voluntary Retirement under: (a) The General Insurance Officer's Special Voluntary Retirement Scheme, 2004 (S.O/t (E) dated the Ist January, 2004) in the case of Company; or (b) The General Insurance Corporation of India Officer's Special Voluntary Retirement Scheme, 2004 (S.O., 455(E), dated Ist April, 2004), in the case of Corporation. And have been relieved there under prior to the date of this notification, shall not be eligible for any benefit arising from this Scheme other than that provided for by sub- paragraph 2 of Paragraph 5 of the General Insurance Officer's Special Voluntary CWP No. 15458 of 2007 -7- Retirement Scheme, 2004, or, the General Insurance Corporation of India Officer's Special Voluntary Retirement Scheme, 2004, as the case may be.” Similar clause has been incorporated in the identical scheme which is applicable to supervisory, clerical and subordinate staffs (Annexure P-9). A perusal of the aforesaid impugned clause of the Scheme would show that it has been made applicable from 1.8.2002 and it would take into its sweep all those who have retired on or after that date. According to proviso, those officers who have tendered resignation that has been accepted or those whose services had been terminated during the period from 1.8.2002 to 1.1.2004 were not eligible for payment of any arrears accruing from the revision of pay-scale. Under the Scheme, those officers who have sought SVRS were not to be given any other benefit arising from the Scheme other than the one provided for by Sub-para 2 of para 5 of the Scheme. It is further pertinent to notice that para 5(2) of the Scheme provides as under: “5. Amount of ex-gratia:- (1) .............. (2) The ex-gratia shall be computed on the basis of his/ her as on the date of relieving. In case, wage revision is effected from a date CWP No. 15458 of 2007 -8- prior to the date of this notification, the benefit of revised pay for the purpose of payment of ex-gratia will be allowed.” Thus, only for the purpose of payment of ex-gratia amount, the benefit of revised pay is to be allowed. The Scheme has been enforced from a retrospective date and the arrears of pay have been denied to those who have resigned and their resignations stood accepted or whose services had been terminated during the period from 1.8.2002 to 1.1.2004 i.e. the date of publication of the Scheme. Even those officers who have availed retirement under the Scheme and were relieved prior to the date of notification issued on 21.12.2005 were not eligible for any benefit arising from the Scheme other than the one provided in para 5(2) of the Scheme. The notification has produced two distinct classes of retirees, one who have retired during the retrospective operation of the Scheme from 1.8.2002 to 21.12.2005 and the others who have retired after 21.12.2005. A similar issue was raised before Hon'ble Supreme Court in the case of HEC Voluntary Retd. Emps. Welfare Soc. and Anr. v. Heavy Engineering Corporation Ltd. AIR 2006 SC 1420. It has been held that an offer for SVRS once accepted, leads to a concluded contract between the employer and the employee. Once the Scheme is purely voluntary, in terms whereof the tenure of service is curtailed then there is no escape from the conclusion that the other terms of the Scheme would be binding. In that regard reliance may be placed in para 11 of the judgment, which reads as CWP No. 15458 of 2007 -9- under: “11. An offer for voluntary retirement in terms of a scheme, when accepted, leads to a concluded contract between the employer and the employee. In terms of such a scheme, an employee has an option either to accept or not to opt therefor. The Scheme is purely voluntary, in terms whereof the tenure of service is curtailed which is permissible in law. Such a scheme is ordinarily floated with a purpose of downsizing the employees. It is beneficial both to the employees as well as to the employer. Such a scheme is issued for effective functioning of the industrial undertakings. Although the Company is a “State” within the meaning of Article 12 of the Constitution of India, the terms and conditions of service would be governed by the contract of employment. Thus, unless the terms and conditions of such a contract are governed by a statute or statutory rules, the provisions of Contract Act would be applicable both at the formulation of the contract as also the determination thereof. By reason of such a scheme only an invitation of offer is floated. When pursuant to or in furtherance of such a voluntary retirement scheme an employee opts therefor, he CWP No. 15458 of 2007 -10- makes an offer which upon acceptance by the employer gives rise to a contract. Thus, as the matter relating to voluntary retirement is not governed by any statute, the provisions of Indian Contract Act, 1872, therefore, would be applicable to” The other reasons given for making the VRS binding is that the financial implication would arise and it would be impossible to work out the Scheme, if such a challenge is sustained. In that regard significant observations have been made in paras 12 and 22: 12. It is also common knowledge that a scheme of voluntary retirement is preceded by a financial planning. Finances for such purpose, either in full or in part, might have been provided for by the Central Government. Thus financial implications arising out of implementation of a scheme must have been borne in mind by the Company, particularly when it is a sick industrial undertaking. Offers of such number of employees for voluntary retirement, in that view of the matter, were to be accepted by the Company only to the extent of finances available therefor. 22. Financial considerations are, thus, a relevant factor both for floating a scheme of voluntary retirement as well as for revision of pay. Those CWP No. 15458 of 2007 -11- employees who opted for voluntary retirement, make a planning for the future. At that point of time they did not anticipate that they would get the benefit of revision in the scales of pay. They prepared themselves to contract out of the jural relationship by resorting to “golden handshake”. They are bound by there own act. The parties are bound by the terms of contract of voluntary retirement. We have noticed hereinbefore that unless a statute or statutory provision interdict, the relationship between the parties to act pursuant to or in furtherance of the voluntary retirement scheme, is governed by contract. By such contract, they can opt for such other terms and conditions as may be agreed upon. In this case the terms and conditions of the contract are not governed by a statute or statutory rules.” The view of Hon'ble the Supreme Court is when the impugned clause is examined in the light of the aforesaid principles it becomes evident that the challenge of the petitioner is without any merit. The Scheme offers a package deal and once offer is accepted it cannot be challenged by seeking additions of some more benefit. The Scheme is also voluntary in nature and making any additions would result in financial implications which may affect even the viability of the 'Scheme'. Therefore, a provision refusing to grant CWP No. 15458 of 2007 -12- the benefits of arrear of pay on account of revision of pay would not suffer from any illegality or violate Articles 14 or 16(1) of the Constitution. On facts precedent and principles, the petition lacks merit and it does not warrant admission. Consequently, the same is liable to be dismissed For the reasons aforementioned, the writ petition fails and the same is dismissed. (M.M. KUMAR) JUDGE (RITU BAHRI) JUDGE September 8, 2010 Atul