Case: ASSISTANT GENERAL MANAGER STATE BANK OF INDIA &amp; ORS Vs. RADHEY SHYAM PANDEY

In this background, the consideration that was to pass between the parties assumes significance and a harmonious construction to the Scheme, and the Pension Regulations, therefore, has to be given. 37. The amendment to Regulation 28 can, at best, be said to have been intended to cover the employees with 15 years of service or more but less than 20 years of service. This intention is reflected from the communication dated 5-9-2000 sent by the Government of India, Ministry of Finance, Department of Economic Affairs (Banking Division) to the Personnel Advisor, Indian Banks Association. (emphasis supplied) It opined that the amendment to Regulation 28 of 1995 Regulation intended to cover 15 years of service, i.e., employees with 15 years of service who have not completed 20 years of service. A similar action to amend the Rule was required to be taken by the SBI, but it failed to take it after having floated a similar scheme. It kept it uncertain what would be the position of the rule as on the appointed date, i.e., 31.3.2001. Be that as it may. But it was crystal clear that the incumbent with 15 years of service was eligible for the benefit as provided in the scheme itself. The benefit clause has to be read with the eligibility criteria. Once VRS was formulated and adopted by the SBI in toto, it constituted a complete contractual package in itself. 62. As urged on behalf of SBI if section 23 of the Contract Act is applied, then how it is helpful to the bank, is not understandable. In case it is held that the very scheme was opposed to the law/rules, the entire scheme would fall down. Once it adopted the scheme, invited applications and the employees acted upon it and retired on the basis of the scheme, they cannot be left in lurch. In case its submission is accepted, the Scheme becomes violative of Section 23 of Contact Act, the bank would have to suffer the consequences of striking down of the very scheme and would be required to reinstate the employees and to pay them the salary and other benefits. However, SBI accepted the scheme, it was incumbent upon it to bring the rules in consonance with the similar VRS scheme as was done by other banks. The SBI accepted the scheme on 27.12.2000 without any ifs and buts. Thus, the anomaly was the outcome of the banks inaction to propose and make amendment of rules. In such a scenario, the action of SBI is violative of Articles 14, 16 and 21 of the Constitution. The situation created by itself is not going to benefit the bank to lend support to arbitrary action. The bank was bound to extend the benefits by amending the rules, if necessary, to salvage the situation for itself. Breach of law has been committed by the SBI itself, its action is arbitrary and it cannot be permitted to take advantage of its own wrong. 63. The pension cannot be dealt with arbitrarily and cannot be denied in an unfair manner. The concept of pension was considered in D.S. Nakara & Ors. v. Union of India, (1983) 1 SCC 305 . The right to a pension can be enforced through the court, it observed : 20. The antequated notion of pension being a bounty, a gratuitous payment depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced through Court has been swept under the carpet by the decision of the Constitution Bench in Deokinandan Prasad v. State of Bihar (1971) 2 SCC 330 wherein this Court authoritatively ruled that pension is a right and the payment of it does not depend upon the discretion of the Government but is governed by the rules and a government servant coming within those rules is entitled to claim pension. It was further held that the grant of pension does not depend upon anyones discretion. It is only for the purpose of quantifying the amount having regard to service and other allied matters that it may be necessary for the authority to pass an order to that effect but the right to receive pension flows to the officer not because of any such order but by virtue of the rules. This view was reaffirmed in State of Punjab v. Iqbal Singh, (1976) 2 SCC 1 . 22. In the course of transformation of society from feudal to welfare and as socialistic thinking acquired respectability. State obligation to provide security in old age, an escape from undeserved want was recognised and as a first step pension was treated not only as a reward for past service but with a view to helping the employee to avoid destitution in old age. The quid pro quo was that when the employee was physically and mentally alert, he rendered unto master the best, expecting him to look after him in the fall of life. A retirement system, therefore, exists solely for the purpose of providing benefits. In most of the plans of retirement benefits, everyone who qualifies for normal retirement receives the same amount (see Retirement Systems for Public Employees by Bleakney, p. 33). This Court observed that the principal aim of the socialist State as envisaged in the Preamble is to eliminate inequality. The basic framework of socialism is to provide security in the fall of life to the working people and especially provides security from the cradle to the grave when employees have rendered service in heydays of life, they cannot be destituted in old age, by taking action in an arbitrary manner and for omission to complete obligation assured one. Though there cannot be estoppel against the law but when a bank had the power to amend it, it cannot take shelter of its own inaction and SBI ought to have followed the pursuit of other banks and was required to act in a similar fair manner having accepted the scheme.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]So, it assumes significance that what was approved and conveyed, in terms of the IBA scheme, the Banks Boards were permitted to specify any other category as ineligible. The SBI considering its requirement proposed to exclude the Watch and Ward staff as these positions could not be reduced. It was also proposed to exclude the highly skilled and qualified staff from the scheme18. IBAs letter dated 31.8.2000 makes clear the salient features of the VRS scheme that all permanent employees with 15 years of service were eligible to retire. Ineligible persons have also been specified. In unqualified terms, it was mentioned in the annexures that such employees would be entitled to the amount of ex gratia of 60 days salary for each completed year of service or salary for the number of months service is left, whichever is less. Other benefits admissible were gratuity, pension including the commuted value of pension, banks contribution towards provident fund, and leave encashment as per rules. Thus, scheme was to grant pension to all such employees who opted for VRS on completion of 15 years of service and other benefits as specified in the scheme. The Government of India, Ministry of Finance, Department of Economic Affairs, (Banking Division), that it communicated approval vide letter dated 29.8.2000 to IBA, it was sent to the SBI also21. Most significantly, the scheme of the IBA, accepted by the Board on 27.12.2000, was for providing pension on completion of 15 years of service. The pension specified in clause 6 of scheme was to be worked out in terms of the Pension Fund Rules including the commuted value of the pension. It was not mentioned in the VRS adopted by the SBI that the person on completion of 15 years would not be entitled to the benefit of pension. On the other hand, proposal of IBA, as approved by the Government of India, was accepted in toto by SBI. When gauged in terms of the proposals of the IBA, the essential feature was that an employee was entitled to get pension on completion of 15 years of service. The meaning of the expression pension in terms of the rules would be proportionate pension on completion of 15 years of service as per the terms of calculation provided in Rule 23 of the Pension Rules. VRS is an independent contract and the background in which it was floated, pension on completion of 15 years of service was an essential part of the scheme of VRS 2000, as approved by the Government and floated by the IBA and adopted by all the Banks, and Pension Rules were to be amended accordinglyIt is clear from answer that the staff circular dated 30.12.2000 was reiterated. Payment of pension to an employee retiring under VRS would be governed by rules on the relevant date, i.e., 31.3.2001. At the same time, the position of the existing rule was indicated that those employees who had not completed 20 years of pensionable service were not eligible for a pension. It was not clarified what was the meaning and purport of para 6(c) of the scheme. It was not mentioned that an employee would not be entitled to pension on 15 years of service as per the scheme approved by the Government of India and floated by the IBA and adopted by the Central Board of SBI. The above clarification being in form of opinion, could not be said to have caused a modification, amendment, or cancellation of any of the clauses of VRS or resolution passed by the Board, nor it was so stated. It was necessary to state that on completion of 15 years of service, employees would not be paid pension. The existing rule position was known to everybody, whereas the scheme was framed for providing pension on completion of 15 years of service39. In our opinion, the reference in the SBI VRS to the admissible benefits, like pension shall be as per the pension rules, was for the purpose of computation of pension. It is apparent from a reading of the scheme that proportionate pension was admissible to employees as noted in para 49 of O.P. Swarnakar & Ors. (supra). A similar expression was used in the schemes of nationalised banks also. This Court has noted expression in the scheme that pension as per rules to mean for computation of pension. The formula for computation for a pension is provided in Rule 23 of the SBI Pension Rules40. It is of utmost significance that the Central Board in its meeting dated 27.12.2000 accorded approval for the proposals contained in the Memorandum. A bare perusal of the memorandum makes it clear that the letter of IBA dated 31.8.2000 was enclosed as part of the memorandum submitted to the Central Board. In the memorandum, it was mentioned that the Government of India conveyed that they had no objection to the banks placing before their respective Boards of Directors proposals for adopting and implementing the Voluntary Retirement Scheme. It advised that Banks may adopt the scheme after obtaining their Boards approval and implement it in right earnest. The memorandum also contained that the employees who completed 15 years of service were to be the beneficiaries of VRS as approved by the Government of India and conveyed by the IBA. The approval by Government of India and scheme, conveyed by IBA, was to provide for the benefit of pension on completion of 15 years of service. The same was an essential condition of the scheme. The Annexure, which was part of the memorandum, provided inter alia the benefit of pension, including the commuted value of pension without any rider of completion of 20 years period of service. Once SBI accepted the proposals contained in the memorandum, when we gauge the scheme in the light of the subject matter of the memorandum which was unconditionally approved, it became clear and beyond the pale of doubt that in VRS (Annexure B) inasmuch as the expression to provide the benefit of pension as per rules was only for providing the proportionate pensionary benefit of the qualifying service on and above 15 years, rendered by an employee41. The IBA advised the banks for amending the rules. The Government of India, Ministry of Finance, also issued a letter dated 5.9.2001 to the Bank to amend the rules. There was a proposal to amend the rules. After the scheme was implemented in 2000, the nationalised banks, including the Punjab National Bank, amended their rules in 2002 with retrospective effect. However, the fact remains the VRS schemes were implemented by banks governed by the Banking Companies Act, 1970, by making payment of pension though Regulation 28 of Regulation of 1995 provided for 20 years of qualifying service at the relevant time. Once a particular scheme of VRS, based on the recommendations of Committee formed by Government of India, was formulated and floated by IBA. In all fairness, it was required to be implemented in right earnest in that form in which it was approved and adopted by the Board of Directors of SBI on 27.12.2000. In case the Board of Directors were of the opinion that the scheme was not acceptable to them, they could have rejected it or could have stated they reject the proposal for paying pension on completion of 15 years of service which was the essence of a scheme formed to reduce workforce of Bank and for achieving other objectives. Nonetheless, on the contrary, resolution dated 27.12.2000 indicates that the proposals of IBA/Government was approved unconditionally. Thus, in case it was so necessary to amend the pension rules as done by other banks, it was incumbent upon the State Bank of India to amend its rules either after implementation of the scheme as was done by other banks or before giving effect to VRS42. It is also significant to mention that SBI accepted the scheme as approved by the Government and floated by IBA. In case SBI had declined to accept or wanted to modify, it was necessary for it to take approval of Government of India as to its scheme43. Thus, it is apparent that the Central Board of SBI could not have framed a scheme different than the one approved by the Central Government on its own, nor could have implemented it without approval of the Central Government. In case it wanted to modify or amend the scheme, as approved by the Government of India, it was incumbent upon it to send its modified scheme to the Central Government for approval. No scheme for VRS could have been framed without approval of the Government of India. In fact, the Central Board accepted the proposal of IBA, as approved by the Government of India. In case SBIs stand is accepted, its scheme would have been valid as no modification could have been made without approval of the Government of India. In fact, no such modification was made, as held above44. Once it approved the Scheme SBI being an instrumentality of State under Article 12, is bound by the principle of fairness and representation made that it accepted the contents of memorandum and the scheme floated by IBA and invited the applications based on approving the memorandum which contained proposal of pension on rendering 15 years of permanent pensionable service, it could not later on wriggle out of its obligation taking a rigmarole by claiming shelter of the Rules or by not amending the Rules or by issuing a clarification which was fanciful, irrational and contrary to the spirit of the resolution of the Board. It would amount to an unfair and unreasonable action to deprive the employees of the benefit of pension because of the decision taken by the Central Board of Directors45. SBI is bound by resolution of Central Board of Directors. The Scheme was with the approval of the Government of India and accepted, implemented by all the banks in true spirit except by SBI. It cannot be permitted to act unfairly by virtue of having superior bargaining power by issuing vague clarification to the detriment of the economic interest of the employees. Clarification did not have the effect of re-writing or superseding the resolution of the Central Board nor effect of making modifications in the resolution passed by the Central Board of the SBI46. The VRS scheme was not floated by the SBI on its own volition. It was pursuant to an exercise that was undertaken by the IBA in view of the recent developments of modern technology considering the age group of the employees in the bank, the need to have a new skill, and to rationalise the manpower; a decision was taken. It was decided at the Government level to provide pension after completion of 15 years of service as a special measure, the banks were bound to implement it in that manner or not at all. The Central Board of Directors of the SBI accepted the VRS proposal of Government and IBA without any reservation of not providing pension along with other benefits, as mandated in the VRS scheme. The action of the instrumentality of the State cannot be violative of Article 14. It cannot be permitted to act arbitrarily. Articles 15 and 16 provide for equality and provide for an umbrella against discrimination47. Though the Deputy General Manager was authorised by the Central Board of Directors to amend, modify or cancel the VRS. The Rules were amended by other banks later in 2002. It was not stated in answer to the query that under the VRS scheme, a person who has rendered 15 years of qualifying service would not be entitled to a pension. Nor it was so stated in resolution dated 27.12.2000 of the Central Board of SBI. That apart, Deputy General Manager tried to interpret VRS scheme in isolation without considering what was approved by the Board. Not only the scheme but also the memorandum have to be read together to understand resolution of Board. Once the memorandum containing the IBAs proposal of providing pension was approved in absolute terms, the clarification could not be of any value to dilute the otherwise clear and unambiguous resolution of the Board of Directors. The Deputy General Manager did not have any such wide and arbitrary power to defeat the claim of the employees for pension on completion of 15 years of permanent service, which was their right. The action of D.G.M. could not be said to be in accordance with the resolution. The pension was the essence of the scheme, depriving it could not be said to be authorised, such action can only be termed as unfair and unreasonable and patently violative of Articles 14, 16, and 21 of the Constitution of India48. Yet another aspect which cannot be lost sight is that the bank mentioned in the scheme that the benefit would be admissible as per the rule which prevails on the appointed day, i.e., 31.3.2001. Thus, it is apparent that when VRS scheme was floated, it was in contemplation of amendment of rules which was suggested by the IBA and the Government of India in its communication dated 5.9.2001 so that employees were not deprived of the benefit of pension49. The question arises in case the bank accepts the proposal of VRS, and does not alter its rules, can employees be deprived of the benefit of pension in such an unconscionable manner over an event on which they had no control.It would be nothing, but an outcome of unfair and arbitrary act in case the SBI never intended to act upon the scheme it ought not to have accepted it, and once it approved VRS, it was incumbent upon it to amend its rule, if necessary, as was done by other banks in 2002 after scheme worked out in the year 2000. Even otherwise once it accepted the proposal of the Government of India, it would be violative of provisions of Articles 14 and 16 to permit it to wriggle out of its obligation under the guise that the bank did not amend its rules or pension was not admissible as per existing rules, mainly when the scheme provided for eligibility for pension on completion of 15 years, that formed independent contract. If the bank is permitted to get rid of the scheme due to Rule position, then the scheme itself would become void and unenforceable. Bank cannot act in a fanciful manner, particularly with respect to retirement under VRS which was contractual and deny benefit of pension, a right accrued to the employees for receiving the pension in view of the memorandum and the resolution passed by the Central Board of Directors adopting memorandum and the SBI-VRS53. On the basis of aforesaid principles, it is apparent that once the Central Board of Directors accepted the memorandum for making payment of pension, in case it was not accepting the proposal in the memorandum, it ought to have said clearly that it was not ready to accept the proposals of the Government and the IBA and rejects the same. Once it approved the proposals referred to in the memorandum, which were on the basis of IBAs letter and Government of Indias decision it was bound to implement it in true letter and spirit. By accepting the same, binding obligation was created upon the SBI to make payment of pension on completion of 15 years of service. It cannot invalidate its own decision by relying on fact it failed to amend the rule, whereas other Banks did it later on with retrospective effect. They cannot invalidate otherwise valid decision by virtue of exclusive superior power to amend or not to amend the rule and act unfairly and make the entire contract unreasonable based on misrepresentation. It was open to the Board of Directors to reject the proposal. Once it accepted the proposal to make payment of pension on completion of 15 years of service as proposed in the memorandum, though the scheme is tried to be interpreted by the SBI that pension was to be admissible as provided in the rule that refers to proportionate pension as noted by this Court in O.P. Swarnakar & Ors., (supra), and what was decided by Government of India/IBA, was not taken away rather adopted by the Central Board of Directors. The scheme of contractual nature has to be read in the context and in the backdrop of facts and what has been resolved by the Board of Directors. There is no ambiguity with respect to the admissibility of pension when the memorandum and the scheme are read together. In case of ambiguity and even if two interpretations are possible in the backdrop of facts of the case, one in favour of the employees has to be adopted and so-called clarification dated 11.1.2000 even if considered in the manner so as to deny the benefit of pension, has to be held to be unenforceable, illegal and contrary to law54. It is apparent from the eligibility clause of the VRS scheme that eligibility is provided for the employees having 15 years of pensionable service and they will be entitled for benefits as provided in the scheme. The eligibility clause, when read with clauses providing the benefit, i.e., clauses 5 and 6 of the scheme, leaves no room for any doubt and makes it clear that employees with 15 years of service were treated as eligible to claim the benefit of the scheme floated by SBI. It was not the provision in the VRS scheme that incumbents having completed 20 years of service would be entitled for pensionary benefits. The scheme was carved out specially for attracting the employees by providing pension and other benefits to eligible persons like ex gratia, gratuity, pension and leave encashment. Deprivation of pension would make them ineligible for the benefits and would run repugnant to the eligibility clause55. The submission raised on behalf of the SBI that the draft scheme nowhere stipulated that 15 years service would be the eligibility or that on completion of 15 years service, the incumbent would be eligible for pension, is factually incorrect. It is apparent from the material circumstances, documents, and correspondence that the decision was taken at all levels including the one by the Central Board of Directors of SBI, that the benefit of pension was to be given to the employees on completion of 15 years of service. In that perspective, vagueness of scheme of SBI, if any, can be of no advantage as it is clear beyond the pale of doubt that pension was heart and soul of the scheme with ex gratia on completion of 15 years of service. It is due to the reason that the benefit was to be accorded to the incumbents having completed 15 years of service, Regulation 28 as applicable to other nationalised banks was proposed to be modified as reflected in the letter of IBA dated 11.12.2000 and Government of India letter dated 5.9.2000. Later on, the regulation was amended in 2002 after the scheme had already been implemented in right earnest. There was not even an iota of doubt that VRS was to give benefits to all eligible employees having completed 15 years of service. It was apparent from the letter dated 29.12.2000 of SBI that the guidelines of IBA were approved by the Central Board of Directors in its meeting dated 27.12.200062. As urged on behalf of SBI if section 23 of the Contract Act is applied, then how it is helpful to the bank, is not understandable. In case it is held that the very scheme was opposed to the law/rules, the entire scheme would fall down. Once it adopted the scheme, invited applications and the employees acted upon it and retired on the basis of the scheme, they cannot be left in lurch. In case its submission is accepted, the Scheme becomes violative of Section 23 of Contact Act, the bank would have to suffer the consequences of striking down of the very scheme and would be required to reinstate the employees and to pay them the salary and other benefits. However, SBI accepted the scheme, it was incumbent upon it to bring the rules in consonance with the similar VRS scheme as was done by other banks. The SBI accepted the scheme on 27.12.2000 without any ifs and buts. Thus, the anomaly was the outcome of the banks inaction to propose and make amendment of rules. In such a scenario, the action of SBI is violative of Articles 14, 16 and 21 of the Constitution. The situation created by itself is not going to benefit the bank to lend support to arbitrary action. The bank was bound to extend the benefits by amending the rules, if necessary, to salvage the situation for itself. Breach of law has been committed by the SBI itself, its action is arbitrary and it cannot be permitted to take advantage of its own wrong63. The pension cannot be dealt with arbitrarily and cannot be denied in an unfair mannerThe concept of pension was considered in D.S. Nakara & Ors. v. Union of India, (1983) 1 SCC 305 . The right to a pension can be enforced through the court, it observed :20. The antequated notion of pension being a bounty, a gratuitous payment depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced through Court has been swept under the carpet by the decision of the Constitution Bench in Deokinandan Prasad v. State of Bihar (1971) 2 SCC 330 wherein this Court authoritatively ruled that pension is a right and the payment of it does not depend upon the discretion of the Government but is governed by the rules and a government servant coming within those rules is entitled to claim pension. It was further held that the grant of pension does not depend upon anyones discretion. It is only for the purpose of quantifying the amount having regard to service and other allied matters that it may be necessary for the authority to pass an order to that effect but the right to receive pension flows to the officer not because of any such order but by virtue of the rules. This view was reaffirmed in State of Punjab v. Iqbal Singh, (1976) 2 SCC 1 . 22. In the course of transformation of society from feudal to welfare and as socialistic thinking acquired respectability. State obligation to provide security in old age, an escape from undeserved want was recognised and as a first step pension was treated not only as a reward for past service but with a view to helping the employee to avoid destitution in old age. The quid pro quo was that when the employee was physically and mentally alert, he rendered unto master the best, expecting him to look after him in the fall of life. A retirement system, therefore, exists solely for the purpose of providing benefits. In most of the plans of retirement benefits, everyone who qualifies for normal retirement receives the same amount (see Retirement Systems for Public Employees by Bleakney, p. 33)This Court observed that the principal aim of the socialist State as envisaged in the Preamble is to eliminate inequality. The basic framework of socialism is to provide security in the fall of life to the working people and especially provides security from the cradle to the grave when employees have rendered service in heydays of life, they cannot be destituted in old age, by taking action in an arbitrary manner and for omission to complete obligation assured one. Though there cannot be estoppel against the law but when a bank had the power to amend it, it cannot take shelter of its own inaction and SBI ought to have followed the pursuit of other banks and was required to act in a similar fair manner having accepted the scheme