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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4437 of 2009

MADHYA PRADESH STATE ROAD TRANSPORT CORPORATION .....APPELLANT(S)

VERSUS

MANOJ KUMAR & ANR. .....RESPONDENT(S)

W I T H

CIVIL APPEAL NO. 8363 OF 2016 (ARISING OUT OF SLP (C) NO. 4697 OF 2008)

CIVIL APPEAL NO. 4438 of 2009

CIVIL APPEAL NO. 4439 of 2009

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CIVIL APPEAL NO. 4442 of 2009

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CIVIL APPEAL NO. 4445 of 2009

CIVIL APPEAL NO. 4446 of 2009

CIVIL APPEAL NO. 8364 OF 2016 (ARISING OUT OF SLP (C) NO. 14522 OF 2010)

Civil Appeal No. 4437 of 2009 & Ors. Page 1 of 34

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CIVIL APPEAL NO. 8365 OF 2016 (ARISING OUT OF SLP (C) NO. 14587 OF 2010)

CIVIL APPEAL NO. 8366 OF 2016 (ARISING OUT OF SLP (C) NO. 14594 OF 2010)

CIVIL APPEAL NO. 8367 OF 2016 (ARISING OUT OF SLP (C) NO. 14595 OF 2010)

CIVIL APPEAL NO. 8368 OF 2016 (ARISING OUT OF SLP (C) NO. 14679 OF 2010)

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CIVIL APPEAL NO. 8371 OF 2016 (ARISING OUT OF SLP (C) NO. 14785 OF 2010)

CIVIL APPEAL NO. 8372 OF 2016 (ARISING OUT OF SLP (C) NO. 14874 OF 2010)

CIVIL APPEAL NO. 8373 OF 2016 (ARISING OUT OF SLP (C) NO. 14877 OF 2010)

CIVIL APPEAL NO. 8374 OF 2016 (ARISING OUT OF SLP (C) NO. 14890 OF 2010)

CIVIL APPEAL NO. 8375 OF 2016 (ARISING OUT OF SLP (C) NO. 14933 OF 2010)

CIVIL APPEAL NO. 8376 OF 2016 (ARISING OUT OF SLP (C) NO. 14964 OF 2010)

CIVIL APPEAL NO. 8377 OF 2016 (ARISING OUT OF SLP (C) NO. 27017 OF 2011)

A N D

CIVIL APPEAL NO. 8378 OF 2016 (ARISING OUT OF SLP (C) NO. 27670 OF 2011)

Civil Appeal No. 4437 of 2009 & Ors. Page 2 of 34

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J U D G M E N T A.K. SIKRI, J.

Leave granted in the special leave petitions.

2) The appellant Madhya Pradesh State Road Transport Corporation

(for short, the 'Corporation') is a public sector undertaking of the

State of  Madhya Pradesh and undertakes the work of  carrying

passengers  from one  place  to  another  within  and  outside  the

State  of  Madhya  Pradesh.   As  the  appellant  Corporation  was

running into losses,  the State Government obtained permission

from  the  Department  of  Road  Transport  &  Highways  of  the

Ministry of Shipping, Road Transport & Highways, Government of

India for winding up of the appellant Corporation.  This permission

was given by the Government of India on March 23, 2005 with the

following directions:

“The State Government shall  ensure and be fully responsible  for  ensuring  compliance  of  any existing/future  orders  passed  by  various  court including  Tribunal  in  any/all  matters  relating  to MPSRTC.  The State Government is also advised to  safe  guard  the  interest  of  employees  of MPSRTC.”

3) Considering  the  closure  of  the  Corporation,  the  Managing

Director, vide S.No. 1452 (Karmik-2)Stha-B/2005, Order No. 28,

introduced a Scheme called as Voluntary Retirement from Service

(for short, 'VRS') for the employees of the Corporation.  The said

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Scheme was to come into force from July 01, 2005.  The relevant

clauses, for the purpose of the instant appeals, are as under:

“4.  Scheme: (i)  All the candidates – employees, shall  be permitted to  give their  option under  this Scheme upto 1.8.2005 in Form (ka), along with in Form Kha.  Nomination Form shall also have to be filled  up.  The  Management  shall  have  this  right, that  they may on the basis of  the reasons to be given in writing, but without intimating any reason to  the  applicant,  may  accept  the  Voluntary Retirement from Service or reject, against which no provision of any appeal, relief shall be vested.

(ii)  In the following matters, on receipt of the option of Voluntary Retirement from Service, on the basis of merits, decision shall be taken for consideration:

(ka)   Whether  against  the  employee concerned of the Corporation, Administrative action is either pending or is 'anudhyat'.

(Kha)   Where,  in  any  criminal  court,  any proceeding is pending, or in any Court, is in process before hand.

(ga)   Employee,  who in  the  normal  course has  given  the  resignation  letter  from  the service of the Corporation, or has given.

(gha)   Employee,  who  against  the Corporation has initiated judicial action, or is going on, and till such action is not rejected or finished by the Court.

(kha)  Application for option presented after dated 1.8.2005.

(iii)  Under the Scheme, the option once given by the employee, shall not be permissible to be changed or taken back.

(iv)   The  Management,  by  accepting  once,  the Voluntary  Retirement  from  Service  of  which employee has  intimated  to  the  employee,  in  this respect,  then  he  shall  not  be  entitled  to

Civil Appeal No. 4437 of 2009 & Ors. Page 4 of 34

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employment on contract, or otherwise in service of the  State  Government,  or  in  the  Service  of  the Corporation,  or  in  its  attached  Company,  active Companies,  i.e.  the employee in  this  scheme,  in the Public Service, as defined, shall not be entitled to ask for employment.

xx xx xx

As per clause 4(1) of the said Scheme, the option was to be given till 1.8.2005.  In other words one month time was given to decide either  to opt  for VRS Scheme or not to opt.

Clause  4(ii)  of  the  order  clearly  provided  that “under the Scheme, the option once given by the employee, shall not be permissible to be changed or taken back.””

4) It becomes manifest from the provisions of the aforesaid Scheme,

it provided certain conditions and also a specific form in which the

application/option for VRS under the Scheme was to be made.

Further, one of the conditions in the VRS Scheme was that once

the application form for opting VRS is submitted, it would not be

open to the applicant to withdraw the same.  This Scheme was

declared open on July 01, 2005 and was to last till  August 01,

2005.  It may also be stated at this stage that though in this VRS

Scheme there was no indication that the last date for submission

of the application can be extended, on October 12, 2006, an order

was passed amending certain provisions of the original Scheme

which was promulgated vide Order No. 28 dated July 01, 2005.

Essentially, there was only one amendment,  namely, extending

Civil Appeal No. 4437 of 2009 & Ors. Page 5 of 34

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the last date of submission of the application upto October 28,

2006.  Other provisions/ conditions of the original Scheme had to

remain unaltered.  With this amendment, those employees who

had not opted under the Scheme by the earlier stipulated date,

i.e. August 01, 2005, were provided another opportunity to give

their option for VRS.  As would be noticed hereinafter, one of the

arguments is as to whether a new Scheme was promulgated or it

was an extension of the earlier Scheme.  This aspect becomes

significant because of the reason that as per the original Scheme

last  date  for  making application was August  01,  2005 and the

Scheme came to an end on that date.  The  'extension'  given is

much thereafter, i.e. on October 12, 2006.  Thus, there was no

Scheme in operation from August 02, 2005 to October 11, 2006.

As this argument needs serious consideration and will have to be

necessarily addressed at the appropriate place, we would like to

reproduce hereunder the Order dated October 12, 2006 by which

the time was extended till October 28, 2006.  The same reads as

under:

“Sl.No. 1919/Karmik/Ek/Swi.Se.Ni/06   Dated 12.10.2006

O R D E R

Subject: Order No. 28 (Voluntary Retirement from Service Scheme 2005) – in connection with.

For giving option in the order No. 28 issued

Civil Appeal No. 4437 of 2009 & Ors. Page 6 of 34

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by the Managing Director, of Part Ka, Kha, in para 4(ii),  (kna)  the  last  date  has  been  given  as 01.08.2005.  After consideration and after consent by  the  State  Government,  this  paragraph  is amended as hereunder:

“(kna)  Application for  option presented after dated 28.10.06”.

 2.  The rest of the provisions/conditions issued vide order No. 28 of the Managing Director, with regard to Voluntary  Retirement  from Service  2005,  shall remain as before.

3.  Those employees, by whom option under this Scheme has not been presented in the past and now  want  to  present  their  option,  under  this Scheme, then they can present the option, about V.R.S. under the conditions of  Managing Director Order No. 28.

Sd/- Managing Director”

5) The respondents/employees in all  these appeals had submitted

their  applications  for  voluntary  retirement  within  the  span  of

original  period  fixed  under  the  Scheme,  i.e.  between  July  01,

2005 and August 01,  2005.  Other common factor  in all  these

appeals is that before their applications could be accepted, they

had  sought  withdrawal  of  their  option.   However,  requests  for

withdrawal of the options were made after August 01, 205, i.e.

after the expiry of the original Scheme.  However, their requests

for  withdrawal  were  not  entertained  and  on  the  contrary

applications  for  VRS  submitted  by  these  employees  were

Civil Appeal No. 4437 of 2009 & Ors. Page 7 of 34

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accepted.  In order to make it abundantly clear, we clarify that this

happened after these respondents had submitted their affidavits

withdrawing  their  options  under  the  VRS  Scheme.   These

respondents were, accordingly, relieved from the organisation on

the afternoon of July 31, 2005.

6) These respondents challenged the aforesaid action by contending

that once they had withdrawn their application for VRS, there was

no question of going ahead with the option of VRS and accepting

the  same.   Therefore,  the  action  of  the  Corporation  was

unwarranted  and  contrary  to  law.   All  these  employees

approached  the  High  Court  of  Madhya  Pradesh  and  filed

respective writ  petitions challenging the aforesaid action of  the

Corporation.

7) While  contesting  these  writ  petitions,  plea  taken  by  the

Corporation was that as per the specific provision contained in the

VRS Scheme itself, there was a clear prohibitory clause putting

an  embargo  on  the  rights,  if  any,  of  these  employees  from

withdrawing their applications and, therefore, move on the part of

these  respondents  to  withdraw  their  option  to  take  voluntary

retirement  was  inconsequential  and  the  Corporation  was

empowered to go ahead by accepting the applications for VRS.

Civil Appeal No. 4437 of 2009 & Ors. Page 8 of 34

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8) The learned Single Judge of the High Court dismissed these writ

petitions accepting the plea of the Corporation.  It was held that

the applications for withdrawal of VRS could only be moved within

the  validity  period  of  the  Scheme  and  in  those  cases  where

applications for withdrawal was submitted after August 01, 2005,

this could not be done by the concerned employees.  Writ appeals

came to be filed before the Division Bench of the High Court by

the  aggrieved  employees.   The  Division  Bench,  vide  the

impugned  judgment,  decided  all  these  appeals  together  and

allowed them holding that it is always permissible for an employee

to withdraw the option under VRS before it is accepted.  The High

Court  has  proceeded  on  the  basis  that  such  a  VRS  Scheme

calling for options is an invitation to offer.  Application submitted

by  an  employee  opting  under  this  Scheme  qua  voluntary

retirement amounts to an officer and only on the acceptance of

such an offer by the employee, a deal gets concluded and such

an offer can, therefore, always be withdrawn before it is accepted.

For this proposition, the High Court referred to and relied upon

judgments  of  this  Court  in  Bank  of  India  &  Ors.  v.  O.P.

Swarnakar etc.1 and concluded as under:

“14.  From the aforesaid enunciation of law, there is 1

(2003) 2 SCC 721

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no  scintilla  of  doubt  that  an  offer  made  by  an employee  ipso  facto  would  not  amount  to resignation  in  praesenti  and  the  offer  can  be withdrawn  during  the  validity  period.   Learned Single  Judge,  as  is  perceivable,  has  dismissed some of the writ petitions and required some of the writ  petitioners  to  seek  redressal  under  the industrial  law  as  the  scheme  was  valid  upto 1.8.2005.   At  this  juncture,  it  is  appropriate  to mention  that  the  conclusion  arrived  at  by  the learned  Single  Judge  in  this  regard  cannot  be found fault with as the scheme in question, at the time  of  delivery  of  judgment,  was  valid  upto 1.8.2005.   Presently,  the  scheme  is  valid  upto 31.7.2007.   The said  fact  is  not  disputed  by  Mr. Shobhit  Aditya,  learned  Counsel  for  the Corporation.  As the validity period of the Scheme has been extended, the said validity would relate back to the date of inception of the Scheme and it cannot be said that jural relationship between the employees and the employer has come to an end. Therefore,  the employees were entitled in law to withdraw their option for voluntary retirement within the validity  period and as the validity  period has been  extended  and  they  have  withdrawn  their option they should be deemed to be in service.  Be it noted that none of the appellants has accepted any kind of benefit under the voluntary retirement scheme.  Some of them are continuing in service. The  employees  who  are  continuing  in  service should  be  allowed  to  continue  till  the  jural relationship  between  the  employees  and  the employer  comes  to  an  end  as  per  law.   The appellants  who  are  not  in  service  should  be reinstated  in  service  and  they  shall  reap  all  the consequential benefits.”

9) It becomes manifest from the reading of the three Judge Bench

judgment  of  this  Court  in  O.P. Swarnakar  that  such  a  VRS

Scheme is held to be contractual in nature.  The Court, thus, held

that  provisions  of  the  Indian  Contract  Act,  1872  would  apply,

Civil Appeal No. 4437 of 2009 & Ors. Page 10 of 34

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which provisions categorically lay down that an offer made by a

person can be withdrawn by him before its acceptance.  However,

an endeavour was made by the learned senior counsel appearing

for the Corporation to argue that the judgment in O.P. Swarnakar

should not have been followed by the High Court in view of the

specific  clause in  the Scheme to the effect  that  an application

once given cannot  be withdrawn.   He submitted that  the High

Court, in the process, ignored the mandate of law laid down by

this Court in State Bank of Patiala v. Romesh Chander Kanoji

& Ors.2 wherein this Court held as under:

“9.   We  do  not  find  any  merit  in  the  above argument. It  is important to bear in mind that the Schemes  in  question  are  basically  funded schemes.  Under such Schemes,  time is given to every employee to opt for voluntary retirement and similarly time is given to the management to work out  the  Scheme.  Clause  (5)  of  SBPVRS  gave fifteen days' time to the employees to opt for the Scheme  and  under  clause  (8)  a  period  of  two months is given to the management to work out the Scheme.  Since  the  said  Schemes  are  funded schemes, the management is required to create a fund. The creation of the fund would depend upon the number of applications; the cost of the Scheme; liability  which  the  Scheme  would  impose  on  the Bank  and  such  other  variable  factors.  If  the employees  are  allowed  to  withdraw  from  the Scheme at any time after its closure, it would not be  possible  to  work  out  the  Scheme  as  all calculations of the management would fail.  In the case of  Bank of India  v. O.P. Swarnakar  [(2003) 2 SCC 721 : 2003 SCC (L&S) 200] SBIVRS is held to be  an  invitation  to  offer.  Following  the  said judgment, we hold that SBPVRS is an invitation to

2 (2004) 2 SCC 651

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offer  and  not  an  offer.  Clause  (5)  of  the  said SBPVRS  inter  alia  states  that  the  Scheme  will remain  open  during  the  period  15-2-2001  to 1-3-2001  whereas  Rule  8  thereof  provides  for mode of  acceptance by the management.  It  is in the  light  of  Rules  5  and 8 that  one has to  read clause (9)(i) which provides for general conditions and under which it is provided that application once made cannot be withdrawn. In Chitty on Contracts (28th Edn., p. 125), the learned author states that:

“an offer may be withdrawn at any time before it  is  accepted.  That  this  rule  applies  even though the offeror has promised to keep the offer  open  for  a  specified  time,  for  such  a promise is unsupported by consideration.”

Therefore,  clause  (5)  of  SBPVRS  gives  locus poenitentiae  to  the  employee  to  withdraw  by 1-3-2001  after  which  the  mode  of  acceptance contemplated  by  clause  (8)  of  SBPVRS  would apply  and  the  Bank  will  proceed  to  vet  the applications. As stated above, the Bank needs time to ascertain its liability; it is required to find out the cost of  creation of  a separate fund which in turn depends on the number of applications and if the employees are permitted to withdraw after the date of closure it  would be impossible for the Bank to implement the Scheme. Therefore, clause (5) gives time to the employee to withdraw by 1-3-2001 and the Bank is given time of two months thereafter to complete the designated mode of acceptance (see Halsbury's  Laws  of  England,  4th  Edn.,  p.  133). Reading clauses (5), (8) and (9)(i), it is clear that employees  are  precluded  from  withdrawing  from SBPVRS  after  the  closure  of  the  Scheme  on 1-3-2001.”

10) On  that  basis,  it  was  argued  that  it  was  not  open  to  the

respondents to withdraw their application after August 01, 2005,

which was the last date stipulated in the application and thereby

disturb the equilibrium and the very creation of the Fund that was

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created depending upon the number of applications; the cost of

the Scheme; liability which the Scheme would impose and other

variable factors etc.  It was also argued that the judgment in O.P.

Swarnakar  related  to  batch  of  matters  of  nationalised  banks

where  the  facts  and  questions  were  different.   The  significant

distinguishing factor was that there was no closure of any of the

nationalised banks, which was the prime motive for introducing

the VRS Scheme by the Corporation.

11) Second  argument,  in  the  alternative,  was  that  even  if  the

judgment in  O.P. Swarnakar  is to be applied, it was specifically

held  in  that  case  that  option  of  voluntary  retirement  can  be

withdrawn  by  the  last  date  on  which  the  application  is  to  be

submitted.   In  the  instant  case,  these  options  were  withdrawn

after the stipulated date.  It was pointed out that the High Court

did not accept this plea on the ground that since the last date was

extended  from August  01,  2005  to  October  28,  2006  and  the

applications for withdrawal were not submitted from the said date,

the  withdrawal  applications  would  be  treated  as  having  been

submitted before the expiry date mentioned in the Scheme.  The

learned senior counsel for the Corporation argued with ardor that

this was an erroneous approach on the part  of the High Court

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inasmuch as the original  VRS Scheme promulgated vide order

No.  28  dated  July  01,  2005  never  mentioned  any  clause  for

extension of the Scheme and once these employees opted under

the said Scheme they were very well informed that the last date is

August 01, 2005.  It was also submitted that the amendment was

carried out  for  specific  purpose,  namely, to  give opportunity  to

those who had not yet opted under the Scheme and, therefore,

such an extension in the date could not enure to the benefit of

those who had already opted and for  whom the last  date was

August 01, 2005.

12) Learned  counsel  who  appeared  for  the  respondents  in  these

appeals submitted that the position in law was crystal  clear as

stated in O.P. Swarnakar and even in Romesh Chander Kanoji,

relied upon by the Corporation, and made a fervent plea to this

court to accept the approach adopted by the High Court in the

impugned  judgment.   They  also  pointed  out  that  Romesh

Chander Kanoji, in fact, specifically referred to and relied upon

O.P. Swarnakar, which was a three Judge Bench judgment.  It

was  also  argued  that  even  thereafter  the  principle  of  O.P.

Swarnakar  has  been  applied  by  this  Court  consistently  and

following judgments are cited in support:

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(i)  Food Corporation of India and others v. Ramesh Kumar3

(ii) New India Assurance Company Limited v. Raghuvir Singh

Narang and another4.

13) To  begin  with,  we  deem  it  appropriate  to  consolidate,  with

required astuteness,  various legal  principles  touching upon the

issue at hand, which are sparged in various judgments, and then

apply those principles to the facts in these cases.  Though much

case law has emerged, reference to few judgments, which take

into consideration the earlier cases as well, would suffice.  Since

the High Court has referred to the judgment in the case of  O.P.

Swarnakar,  we deem it  apt  to  initiate the discussion with  that

judgment,  which  is  also  earliest  of  the  four  judgments  we are

going to refer to.

14) In  O.P. Swarnakar, which was a judgment rendered by a three

Judge Bench of this Court, various nationalised banks were the

appellants and batch of matters pertaining to these banks were

decided.   The State Bank of India, constituted under the State

Bank of India Act,  1955 and other banks taken over under the

Banking Companies (Acquisition  and Transfer  of  Undertakings)

Act,  1970  adopted  in  the  year  2000  separately  but  similar 3 (2007) 8 SCC 141 4 (2010) 5 SCC 335

Civil Appeal No. 4437 of 2009 & Ors. Page 15 of 34

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schemes  known  as  the  “Employees  Voluntary  Retirement

Scheme”.  The question involved in those appeals was whether

an  employee  opting  for  voluntary  retirement  under  the  said

Schemes  was  precluded  from  withdrawing  that  offer.   The

Scheme adopted  by  the  State  Bank of  India  differed  from the

Scheme of the other nationalised banks inasmuch as that scheme

permitted withdrawal of the applications for voluntary retirement

by  February  15,  2001.   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 period

during which the said  Scheme was to  remain operative  varied

from bank  to  bank.   However, in  case  of  the  Punjab  National

Bank,  the  said  Scheme  was  to  remain  in  operation  from

November 1, 2000 to November 30, 2000.  Para 10.5 of the said

Scheme barred an employee from withdrawing the request made

for voluntary retirement after once exercising the option.  Other

sub-paras  of  para  10  provided  that  a  request  for  voluntary

retirement  would  not  take  effect  unless  accepted  by  the

competent authority who would have absolute discretion to accept

or reject that request.  The said Scheme prescribed a particular

procedure  for  making  an  application  for  seeking  voluntary

retirement.   A  large  number  of  employees  submitted  their

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applications, out of whom a small number of employees withdrew

their  offer.   Despite  withdrawal  of  their  offer,  the  same  was

accepted.   In  some  cases,  offers,  despite  withdrawal  thereof,

were  accepted  after  the  expiry  of  the  operation  period  of  the

Scheme.   Writ  petitions  were  filed  in  various  High  Courts  to

challenge the acceptance of the employees' applications by the

banks despite  their  withdrawal.   Before  the Punjab & Haryana

High Court, the validity of the said Scheme also was challenged.

Some writ petitioners sought issuance of a writ of mandamus to

the respective banks to pay unto them their lawful dues strictly in

terms of  the Scheme.  The High Court  held that:   (i) the said

Scheme  was  not  a  valid  piece  of  subordinate  legislation  as

Sections 19(1) and 19(4) of the Banking Companies (Acquisition

and Transfer of Undertakings) Act, 1970 had not been complied

with, (ii) even assuming the said Scheme to be valid, it was open

to an employee to withdraw his option before the same had been

accepted and effectively enforced, and (iii) since the Scheme was

invalid, no relief could be granted in the writ petitions seeking any

benefits under the Scheme.  The Bombay High Court and other

High Courts held that clause 10.5 of the said Scheme was not

operative as the employees had an indefeasible right to withdraw

their offer before the same was accepted.  The Uttarakhand High

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Court dismissed a writ petition as not maintainable on the ground

that the petitioner had bound himself by the terms not to withdraw

the application for voluntary retirement.

15) Eschewing the discussion on other aspects which are not relevant

for these cases, insofar as issue at hand is concerned, the Court

held that the Scheme was floated with a purpose of downsizing all

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

was for the purpose of effective functioning of the banks so as to

enable them to compete with private banks.  On the other hand,

the  Court  also  remarked  that  though  bank  employees  do  not

enjoy  the  'status'  as  in  the  case  of  Government  employees,

nevertheless,  they  do  enjoy  security  of  their  employment

inasmuch as  these  nationalised  banks were  'States'  within  the

meaning of Article 12 of the Constitution.  The banks, therefore,

cannot take recourse to 'hire and fire' for terminating the services

of the employees.  They 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.  Proceeding therefrom,

the Court took the view that a contract of employment is also a

Civil Appeal No. 4437 of 2009 & Ors. Page 18 of 34

Page 19

subject matter of contract and insofar as the question whether the

VRS Scheme was  an  offer/proposal  or  merely  an  invitation  to

offer is essentially a question of fact.  The Court further discussed

the law relating to  'offer'  and  'acceptance'  with the observations

that it could not be stated in simplistic form.  In the context of the

VRS, however, the Court applied this law of contract by deducing

the following conclusions:

(i)  The banks treated the application from the employees as an

offer which could be accepted or rejected.

(ii)   Acceptance  of  such  an  offer  was  required  to  be

communicated in writing.

(iii)  The decision making process involved application of mind on

the part of several authorities.

(iv)  The 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 the 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.

Thus, the nationalised banks in terms of the Scheme had

Civil Appeal No. 4437 of 2009 & Ors. Page 19 of 34

Page 20

secured for themselves an unfettered and unguided right to deal

with  the  jural  relationship  between  themselves  and  their

employees.  It was held that the Scheme constituted invitation to

an offer and not an offer.  As a fortiorari, the application submitted

by  an  employee  was  to  be  treated  as  offer/proposal  of  the

employee, and when accepted by the bank it would constitute a

'promise' within the meaning of Section 2(b) of the Indian Contract

Act,  1872 and only then the promise becomes an enforceable

contract.

On this analogy, the Court held that since employees had

withdrawn their offer before it was accepted, they had a right to do

so.

However, the Court found that the case of State Bank of

India stood slightly on a different footing as it had not amended

the VRS Scheme and even permitted withdrawal of applications

by February 15,  2001.  Also,  the Scheme floated by the State

Bank of India contained clause (7) which laid down the mode and

manner in which application for voluntary retirement was to be

considered and this  clause created  an enforceable  right.   The

Court  noted that  in the event the State Bank of  India failed to

adhere  to  its  preferred  policy,  the  same  could  have  been

subsequently enforced by the Court of law and, therefore, it would

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amount to some consideration.  On this basis, insofar as appeals

of State Bank of India are concerned, the same were allowed but

appeals  of  nationalised  banks  were  dismissed.   Following

passages from this  judgment  capture  the essence of  the legal

principle laid down:

“113.   The  submission  of  the  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 employees concerned 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 (sic)  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 hereinbefore, shall apply to the facts of the present case also.

114.   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.

115.   The Scheme is  contractual  in nature.   The contractual  right  derived  by  the  employees concerned,  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.”

16) Next decision, in the chronology, which we want to refer to is the

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case  of  Romesh  Chander  Kanoji.   This  is  also  a  judgment

rendered  by  a  three  Judge  Bench,  in  which  case  of  O.P.

Swarnakar  was  specifically  referred  to  and  discussed.   The

principle laid down in  O.P. Swarnakar  was explained and in the

process  the  Court  noticed  different  outcomes  insofar  as  State

Bank  of  India  is  concerned vis-a-vis  nationalised  banks.   This

distinction was brought  out  and explained by this  Court  in  the

following manner:

“6.   It  is  evident  from above that  in  the  case of SBIVRS,  where  there  is  a  specific  provision  for withdrawal, the employee must exercise his option within  the  time  specified;  and  in  case  of nationalized banks where there was no provision to withdraw  (and  in  fact  the  Scheme  forbade withdrawal), the withdrawal must be effected prior to acceptance by the Bank.  Therefore, in terms of the ratio laid down by this Court, the employee is ensured  under  SBIVRS  the  right  of  withdrawal within the specified period.”

17) The Court thereafter referred to its earlier judgment of this Court

in State Bank of Patiala v. Jagga Singh5 wherein the Court held

that since State Bank of Patiala was a subsidiary of State Bank of

India  and  the  Schemes  were  similar,  the  decision  in  O.P.

Swarnakar, so far as it related to the State Bank of India, would

be  applicable  to  State  Bank  of  Patiala  as  well.   The  counsel

appearing for  the employees in  this  case sought  to  distinguish

5 (2004) 2 SCC 201

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Jagga Singh.  However, this contention was repelled and in the

process observation which was made by the Court need a glance.

It is, thus, reproduced below:

“9.   We  do  not  find  any  merit  in  the  above argument. It  is important to bear in mind that the Schemes  in  question  are  basically  funded schemes.  Under such Schemes,  time is given to every employee to opt for voluntary retirement and similarly time is given to the management to work out  the  Scheme.  Clause  (5)  of  SBPVRS  gave fifteen days' time to the employees to opt for the Scheme  and  under  clause  (8)  a  period  of  two months is given to the management to work out the Scheme.  Since  the  said  Schemes  are  funded schemes, the management is required to create a fund. The creation of the fund would depend upon the number of applications; the cost of the Scheme; liability  which  the  Scheme  would  impose  on  the Bank  and  such  other  variable  factors.  If  the employees  are  allowed  to  withdraw  from  the Scheme at any time after its closure, it would not be  possible  to  work  out  the  Scheme  as  all calculations of the management would fail.  In the case of  Bank of India  v. O.P. Swarnakar  [(2003) 2 SCC 721 : 2003 SCC (L&S) 200] SBIVRS is held to be  an  invitation  to  offer.  Following  the  said judgment, we hold that SBPVRS is an invitation to offer  and  not  an  offer.  Clause  (5)  of  the  said SBPVRS  inter  alia  states  that  the  Scheme  will remain  open  during  the  period  15-2-2001  to 1-3-2001  whereas  Rule  8  thereof  provides  for mode of  acceptance by the management.  It  is in the  light  of  Rules  5  and 8 that  one has to  read clause (9)(i) which provides for general conditions and under which it is provided that application once made cannot be withdrawn. In Chitty on Contracts (28th Edn., p. 125), the learned author states that

“an offer may be withdrawn at any time before it  is  accepted.  That  this  rule  applies  even though the offeror has promised to keep the offer  open  for  a  specified  time,  for  such  a promise is unsupported by consideration.”

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Page 24

Therefore,  clause  (5)  of  SBPVRS  gives  locus poenitentiae  to  the  employee  to  withdraw  by 1-3-2001  after  which  the  mode  of  acceptance contemplated  by  clause  (8)  of  SBPVRS  would apply  and  the  Bank  will  proceed  to  vet  the applications. As stated above, the Bank needs time to ascertain its liability; it is required to find out the cost of  creation of  a separate fund which in turn depends on the number of applications and if the employees are permitted to withdraw after the date of closure it  would be impossible for the Bank to implement the Scheme. Therefore, clause (5) gives time to the employee to withdraw by 1-3-2001 and the Bank is given time of two months thereafter to complete the designated mode of acceptance (see Halsbury's  Laws  of  England,  4th  Edn.,  p.  133). Reading clauses (5), (8) and (9)(i), it is clear that employees  are  precluded  from  withdrawing  from SBPVRS  after  the  closure  of  the  Scheme  on 1-3-2001.”

18) The aforesaid two judgments pertained to nationalised banks or

State Bank of India/its subsidiaries.  Issue was discussed again in

respect  of  a  public  sector  undertaking  in  the  case  of  Food

Corporation of India & Ors.  v.  Ramesh Kumar6.   In the said

case,  clause VIII  (d)  of  the VRS Scheme framed by the Food

Corporation of India was to the following effect:

“Once  an  employee  submits  his  application  for voluntary  retirement  under  this  scheme  to  the competent authority, it shall be treated as final and it  is  not  open  to  the  employee  to  withdraw  the same.   The  competent  authority  within  notice period (3 months) shall take a decision to accept or reject the request and shall communicate the same to the official concerned.”

6 (2007) 8 SCC 141

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On facts, it was found that the offer of voluntary retirement

given by the employee was withdrawn before its acceptance.  The

Court held that it could be so done following O.P. Swarnakar and

Romesh Chander Kanoji.   Paragraph 8 of  the said  judgment

discusses the position as under:

“8. Now adverting to the present Scheme of Food Corporation,  Para  8  clearly  stipulates  that  the incumbent has no right to revoke the same and the Management  will  decide  the  same  within  three months.  That  means  the  Management  still  has three months' time to consider and decide whether to act upon the offer given by the incumbent or not. But if  the incumbent  revokes his  offer  before the Corporation  accepts  it  then  in  that  case,  the revocation  of  the  offer  is  complete  and  the Corporation  cannot  act  upon  that  offer.  In  the present  case there  is  one more  additional  factor which  is  that  the  Management  has  to  take  a decision within three months. Therefore, once the revocation is made by the incumbent before three months then in that  case the Corporation cannot act upon the offer of voluntary retirement unless it is accepted prior to its withdrawal. In the present case, it  is clear that the incumbent had given an offer for voluntary retirement on 13-9-2004 and he revoked his offer on 27-9-2004 but the same was accepted on 9-11-2004 i.e. after the revocation of his offer. In view of the law laid down by this Court in State Bank of Patiala [(2004) 2 SCC 651 : 2004 SCC  (L&S)  428]  the  incumbent  has  already revoked  his  offer  before  it  could  be  accepted. Therefore, in this view of the matter, the approach of the High Court appears to be correct and does not require any interference. The revocation made by  the  incumbent  on  27-9-2004  of  his  offer  of retirement  cannot  be  acted  upon  as  he  has revoked it before the Corporation could act upon it. Hence, we are of the opinion, that the view taken by the High Court is correct. Consequently, all the three appeals are dismissed but without any order as to costs.”

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19) In  New  India  Assurance  Company  Ltd.  v.  Raghuvir  Singh

Narang & Anr.7,  this Court again reiterated that such schemes

were  contractual  in  nature  and  the  provisions  of  the  Indian

Contract Act, 1872 would apply and the offer could be withdrawn

any time before its acceptance.  What  is  important  is that  this

Court culled out the principles laid down in  O.P. Swarnakar  in

para 22 of its judgment, which we reproduce below:

“22. The effect of the decision in Swarnakar can be summarised thus:

(i)  If  a  contractual  scheme  provides  that  the voluntary retirement  by exercise of  option by the employee  will  come  into  effect  only  on  its acceptance by the employer, it will not create any enforceable  right  in  the  employee  to  claim  SV retirement.  Any  term  in  such  a  scheme  that  the employee shall not withdraw from the option once exercised,  will  be  an  agreement  without consideration and therefore, invalid. Consequently, the employee can withdraw the offer (that is option exercised)  before  its  acceptance.  But  if  the contractual  scheme  gives  the  option  to  an employee  to  voluntarily  retire  in  terms  of  the scheme and if there is no condition that it will be effective only on acceptance by the employer, the scheme gives an enforceable right to the employee to  retire,  by  exercising  his  option.  In  such  a situation, a provision in the contractual scheme that the employee will  not  be entitled to withdraw the option once made,  will  be valid  and binding and consequently, an employee will  not  be entitled to withdraw from the option exercised.

(ii) Where the scheme is statutory in character, its terms  will  prevail  over  the  general  principles  of contract  and  the  provision  of  the  Contract  Act.

7 (2010) 5 SCC 335

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Further,  there  will  be  no  question  of  any “consideration” for the condition in the scheme that the  employee  will  not  withdraw  from  the  option exercised. Subject to any challenge to the validity of  the  scheme  itself,  the  terms  of  the  statutory scheme  will  be  binding  on  the  employees concerned, and once the option is exercised by an employee  to  voluntarily  retire  in  terms  of  the retirement package contained in the scheme, the employee will not be entitled to withdraw from the exercise of the option, if there is a bar against such withdrawal.

20) Reading of  the aforesaid judgments  would  clearly  demonstrate

that in those cases where the Scheme is contractual  in nature

(and  not  statutory  in  character  as  was  seen  in  State  Bank  of

India's case), provisions of the Indian Contract Act would apply.

The VRS Scheme floated by the employer would be treated as

invitation to offer and the application submitted by the employees

pursuant thereto is an offer which does not amount to resignation

in praesenti  and the offer  can be withdrawn during the validity

period.  This would be the position even when there is a clause in

the  Scheme that  offer  once  given  cannot  be  withdrawn at  all.

However, exception to this principle is that in such cases offer is

to be withdrawn during the validity period of the Scheme and not

thereafter even when if it is not accepted during the period of the

Scheme.  That is the clear mandate of Romesh Chander Kanoji.

The  rational  which  is  given  for  carving  out  this  exception  is

Civil Appeal No. 4437 of 2009 & Ors. Page 27 of 34

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contained in para 9 of the said judgment, which has already been

reproduced above.   To put  it  pithily, what  is  highlighted is  that

such schemes are funded schemes and time is given to every

employee  to  opt  for  voluntary  retirement.   Because  these  are

funded schemes, the Management is required to create a fund.

The creation of this fund depends upon a number of applications;

the cost of the Scheme; liability which this Scheme would impose

on the employer and such other variable factors.  In this situation,

if the employees are allowed to withdraw from the Scheme at any

time even after its closure, it would not be possible to work out the

Scheme as all calculations of the employer would fail.

21) In  the  present  case,  the  Corporation  had  floated  the  Scheme

because  of  the  reason  that  it  has  virtually  stopped  transport

business and the purpose of the Scheme was to benefit itself by

shrinking  the  strength  of  the  employees  as  with  no  transport

business need for such employees is not there.  Here also, the

Scheme provided that once the option is given, the same cannot

be withdrawn.  Following the dicta in the aforesaid judgments, as

noted  above,  it  is  clear  that  notwithstanding  this  clause,  the

employees had a right  to  withdraw the offer  during the validity

period but not thereafter.  This legal principle is even taken note of

Civil Appeal No. 4437 of 2009 & Ors. Page 28 of 34

Page 29

by the High Court as well in the impugned judgment.

The High Court has, however, held that though the Scheme

was valid up to August 01, 2005, but validity was extended up to

July 31, 2007, the employees could withdraw their offers before

July 31, 2007.  Further, as in all these cases where the offer was

withdrawn before July 31, 2007, the High Court has dismissed the

appeals of the Corporation herein.

22) At this juncture, therefore, other issue that gains importance and

needs  to  be  decided  is:  whether  validity  of  the  Scheme  was

extended up to July 31, 2007 and the employees could withdraw

their offer before this date or the date on which the initial scheme

expired, i.e. August 01, 2005 and the withdrawal thereafter was

not permissible?

23) To decide  this  question,  let  us  recapitulate  some salient  facts.

Scheme in the first  instance was floated on July 01,  2005.   It

clearly  mentioned that  those  interested  to  opt  for  the  Scheme

would give their options by August 01, 2005 and not thereafter.  It

was categorically provided that  application for option presented

after August 01, 2005 shall not be considered.  Para 4(iii)  also

provided that the option once given by the employee shall not be

permitted to be changed or taken back.  Sub para (viii) of para 4

Civil Appeal No. 4437 of 2009 & Ors. Page 29 of 34

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provided for settlement of dues of the employee on acceptance of

such an Scheme.  This Scheme came to an end on August 01,

2005.  There was no extension of the Scheme during its currency

or even immediately thereafter.  More than one year thereafter,

i.e. on October 12, 2006, the appellant Corporation gave another

opportunity  to  those  who  had  not  submitted  the  applications

earlier,  to  submit  the  options by  October  28,  2006.   We have

already reproduced, in toto, the order dated October 12, 2006.  In

the first blush, it may give an impression that the initial date of

August 01, 2005 stands extended till October 28, 2006.  However,

a  little  closer  scrutiny  and  analysis  of  the  factual  background

narrated  above  amply  demonstrates  that  it  is  not  a  case  of

extension of the original Scheme.  Reason is simple and can be

found in the fact that there was a big gap/hiatus between August

01, 2005 and October 12, 2006.  Earlier Scheme had come to an

end on August  01,  2005,  naturally  no employees submitted or

could  submit  applications  after  August  01,  2005  under  the

Scheme.  There was no VRS Scheme in operation from August

02, 2005 to October 11, 2006.  It  is only on October 12, 2006,

another  opportunity  was given to the rest  of  the employees to

submit  their  applications  and  the  period  during  which  such  an

application for voluntary retirement could be submitted was from

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October 12, 2006 to October 28, 2006.  This small window was

opened for a period of 17 days for those employees who had not

submitted  their  applications  and  they  were  afforded  another

chance.  At the same time, the main reason was to attract more

such employees to opt for VRS as the Corporation had decided to

close down its operations and wanted its employees to take an

honorable exit  with  'golden handshake'.   Therefore, there is an

acquity and sharpness in the submissions of the Corporation that

it cannot be treated as extension of the earlier Scheme.  In fact,

instead of  promulgating the VRS Scheme all  over  again,  easy

way  was  found  by  making  amendment  in  a  particular  clause

stating that application presented after October 28, 2006 shall not

be considered.  Another significant feature which has to be kept in

mind is  that  between August  01,  2005 and October  12,  2006,

applications of many employees had been accepted and many

out of them had even been offered their terminal dues.  Thus, we

find  that  there  are  two  distinct  groups  of  employees  who  had

submitted their  applications for  VRS.  First  group was the one

which exercised its option between July 01, 2005 to August 01,

2005.  Second set of employees are those who submitted their

options  when  another  chance  was  given  to  them,  i.e.  from

October 12, 2006 to October 28, 2006.  In view thereof, insofar as

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first set of employees are concerned, they could withdraw their

option,  before  it  was  accepted,  by  August  01,  2005  and  not

thereafter.   Likewise,  those  who submitted  their  options  in  the

second phase could withdraw the same before October 28, 2006.

A  chart  was  submitted  before  us  giving  the  status  of  the

applications  that  were  submitted  by  various

employees/respondents  in  these appeals.   This  chart  indicates

that  some  of  the  employees  belonging  to  the  first  group  had

withdrawn their offer before August 01, 2005.  They had right to

do so.  Acceptance of their offer after the withdrawal would be of

no consequence.  However, those employees who withdrew their

offers after August 01, 2005 could not do so and, therefore, the

Corporation was within its right to accept their offers.  Likewise,

those  employees  belonging  to  the  second  category  who  had

withdrawn their offers before October 28, 2006 were entitled to

withdraw their  offers as those were not  accepted by that  date.

However, the withdrawal after October 28, 2006 when Scheme

was closed would be of no consequence.

24) When we apply the aforesaid test to the facts of this case, we find

that insofar as those employees who fall in the first category are

concerned, they had withdrawn their offer after August 01, 2005,

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except one Mr. Dinesh Chand Yadav, who is respondent No.1 in

the Civil Appeal arising out of Special Leave Petition (Civil) No.

14874 of 2010.  Therefore, from this batch, only he is entitled for

reinstatement  with  back  wages,  as  he  has  also  filed  an

undertaking, in terms of this Court's order dated May 12, 2016, to

the effect  that  he is not  gainfully  employed during the relevant

period.  Likewise, employees falling in the second category had

withdrawn their offer after October 28, 2006, except Mr. Sukhram

and  Mr.  Ram  Sharan  Rathore,  both  respondents  in  the  Civil

Appeal  arising  out  Special  Leave  Petition  (Civil)  No.  14594 of

2010.   However,  these  respondents  failed  to  comply  with  this

Court's order dated May 12, 2016.  They are, therefore, entitled

for reinstatement without back wages.

25) Accordingly,  Civil  Appeal  arising  out  of  Special  Leave  Petition

(Civil) No. 14874 of 2010 qua Mr. Dinesh Chand Yadav and Civil

Appeal arising out of Special Leave Petition (Civil) No. 14594 of

2010 are dismissed.  In the case of all other respondents, their

application for withdrawal post the tenure of the Scheme would be

of no consequence.  The direction of the High Court reinstating

these respondents/employees is, therefore, found to be contrary

to law and is hereby set aside,  resulting into allowing all  other

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appeals of the Corporation.

In the facts and circumstances of this case, there shall be

no order as to costs.

.............................................J. (A.K. SIKRI)

.............................................J. (R.K. AGRAWAL)

NEW DELHI; AUGUST 29, 2016.

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