BANK OF INDIA vs OP SWARANKAR Case deals with the issue of companies using Voluntary Retirement Schemes to reduce surplus employees. Since Indian labor laws prohibit direct retrenchment of unionized employees, this mode has emerged. The banks introduced the scheme with the Board of Directors’ approval. Many employees of different nationalized banks, such as Punjab National bank, Union Bank of India, Allahabad Bank, the State Bank of India. applied for the Voluntary Retirement Scheme. Later, about 2000 employees withdrew from their applications. However, the applications which were withdrawn were accepted by the bank employers. Thus, these employees filed Writ petitions against the Nationalized banks in different High Courts. The High Courts ruled in favor of the petitioners and the banks appealed in the Supreme Court.
BENCH: B. Pattanaik, C.J., Justice K. Sema, Justice B. Sinha
RELEVANT PROVISIONS:
- Section 5 of the Indian Contract Act
- Section 2(g) of the Indian Contract Act
FACTS
- With the approval of the Board of Directors, the Nationalised banks implemented the Voluntary Retirement Scheme. (V.R. Scheme). It had an eligibility criterion, a reservation clause, which stated that employees who were facing disciplinary action would not be eligible for voluntary retirement. Employees who choose to retire voluntarily will be eligible for all other retirement benefits, according to the document. The bank may withdraw the scheme it sees fit under the existing scheme, and its decision is final.
- About 1,01,000 employees applied for the V.R. Scheme, and a small number (approximately 2000 employees) withdrew their application. Although their offer had been withdrawn, the same was accepted. Despite withdrawal, some offers were accepted during the scheme’s operational period, while others were accepted after the period had expired.
- The petitioners filed writ petitions under Article 226 against several Nationalised banks, including the State Bank of India, Punjab National Bank, and Bank of India, challenging the validity of their Voluntary Retirement Scheme, which stated that an offer made by an employee could not be withdrawn once it was made.
- The Writ petitions were filed by the employees in different High Courts of the country, including the Punjab & Haryana High Court, Bombay High Court, Uttaranchal High Court, etc. The Nationalised banks and the State Bank of India appealed against the decision of the various High Courts in the Supreme court of India.
ISSUES
- Whether the voluntary retirement scheme an offer or an invitation to offer?
- Whether an employee could withdraw a Voluntary Retirement Scheme (VRS) application before it was accepted by the Competent Authority?
- Whether the employer bank gets the authority to unilaterally determine the jural relationship of master and servant between the parties after applying under VRS?
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CONTENTIONS
The respondent argued that the appellant’s actions and policies regarding the Voluntary Retirement Scheme were arbitrary, and violated Article 14 of the Constitution of India. The respondent contended that the right of the employee to continue working, which falls under the purview of ‘Right to livelihood’ enshrined in Article 21 of the Constitution of India, could not be infringed except according to the procedure established by law.
RATIO DECIDENDI
Justice S.B. Sinha: The scheme does not fall under the purview of statutory regulation. It was a contractual issue. Therefore, the Central Government did not need to bring the matter before Parliament.
Even if it were a regulation, the establishing rule is merely a guideline and not a requirement. As a result, we believe that the scheme in question cannot be said to be bad in law.
The court referred to the case of Gibson v. Manchester City Council (1979) All. E.R. 972 which dealt with the matter of distinction between Offer and Invitation to Offer. The case of Power Finance Corporation Ltd. v. Pramod Kumar Bhatia (1997) was cited wherein a voluntary retirement scheme was floated and the respondent applied for it, but the Corporation withdrew the scheme although the offer had been accepted.
INDIAN CONTRACT ACT, 1872 (Bare Act) (Latest Edition)
DECISION
The Supreme Court held that the Voluntary Retirement Scheme was not an offer, but an ‘invitation to offer‘, with the employees’ applications making up the ‘offer.’
In the absence of any other independent contract, statute, or statutory rules to the contrary, the application filed by the employees will be considered an ‘offer’ under Section 5 of the Indian Contract Act.
When the Bank accepts the proposal, it will be considered a promise under Section 2(b) of the Indian Contract Act. The apex court ruled that an offer can be revoked even before it is accepted. Employees had the right to revoke their offers if they believed they would not receive the full benefits as promised under the Scheme after it was amended. Accepting an employee’s offer was left to the discretion of the competent authority.
The Court observed that the Nationalized banks had secured an unrestricted and unguided right to deal with the jural relationship between themselves and their employees. The court ruled that because the employee’s offer to voluntarily retire was conditional on the amount owed to him being adjusted; it did not reach finality.
This decision establishes that the scheme can be withdrawn even after the employee has accepted the offer and that the employee does not gain any vested rights if this happens.
CONCLUSION
Except where the affected employees have accepted a portion of the benefit under the scheme, the appeals by the Nationalised Banks were dismissed.
The appeals from the Punjab and Haryana High Court judgments concerning ten writ petitions filed by employees are dismissed, and the cases were remitted to the High Court for consideration of the merits and under the law.
Bank of India v. OP Swarankar was an important case dealing with the distinction between ‘Offer’ and ‘Invitation to Offer’ and the rule laid down, in this case, helps to decide cases involving acceptance of offer under a Voluntary Retirement Scheme.
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