http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 32

CASE NO.:

Appeal (civil) 854 of 2002

Appeal (civil) 855 of 2002

Appeal (civil) 870 of 2002

Appeal (civil) 874 of 2002

Appeal (civil) 877 of 2002

Appeal (civil) 878 of 2002

Appeal (civil) 879 of 2002

Appeal (civil) 883 of 2002

Appeal (civil) 7353 of 2002

Appeal (civil) 7354 of 2002

Appeal (civil) 7355 of 2002

Appeal (civil) 7356 of 2002

Appeal (civil) 873 of 2002

Appeal (civil) 876 of 2002

Appeal (civil) 880 of 2002

Appeal (civil) 3552-60 of 2002

Appeal (civil) 4067 of 2002

Appeal (civil) 5380-81 of 2002

Appeal (civil) 875 of 2002

Appeal (civil) 881 of 2002

Appeal (civil) 8467-8499 of 2002

Special Leave Petition (civil) 19373-405 of 2002

Appeal (civil) 8511 of 2002

Special Leave Petition (civil) 12322 of 2002

Appeal (civil) 7314-35 of 2002

Appeal (civil) 3561-65 of 2002

Appeal (civil) 896 of 2002

Appeal (civil) 955 of 2002

Appeal (civil) 8500 of 2002

Special Leave Petition (civil) 7966 of 2002

PETITIONER:

Bank of India & Ors.

RESPONDENT:

O.P. Swarnakar etc.

DATE OF JUDGMENT: 17/12/2002

BENCH:

CJI, H.K. Sema & S.B. Sinha.

JUDGMENT:

Punjab National Bank & Ors.

Allahabad Bank etc. etc.

Dena Bank

Punjab & Sind Bank & Ors.

Union Bank of India & Ors.

State Bank of Patiala

State Bank of India & Anr. etc.

Virender Kumar Goel

Shri Harprit Singh Chhabra

Bhupinder Singh Sachdeva & Ors.

Vs.

Jai Singh Chauhan etc. etc.

Raminder Singh Arora etc. etc.

Mr. Netaji D. Karande & Ors. etc.

Mohinder Pal Singh & Ors.

A.Q. Beg

Virender Kumar Sharma & Ors.

Sanjeev Kalra etc.

Punjab National Bank & Ors. etc.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 32

Bank of India & Ors.

Chairman, Punjab & Sind Bank & Ors.

J U D G M E N T

SB SINHA, J :

Leave granted in the special leave petitions.

A common question, as to whether an employee who opts for the voluntary

retirement pursuant to or in furtherance of a scheme floated by the Nationalised

Banks and the State Bank of India would be precluded from withdrawing the said

offer, is involved in this batch of appeals which arise out of the judgments of various

High Courts.

The State Bank of India has been constituted under the State Bank of India

Act, 1955 whereas the other banks (hereinafter referred to as 'the Nationalized

Banks, for the sake of brevity) were taken over in terms of the provisions of the

Banking Companies (Acquisition and Transfer of Undertakings), Act, 1970

(hereinafter referred to as '1970 Act').

The banks were said to be over-staffed. For the purpose of effective

management , man power planning was contemplated by the Ministry of Finance,

Government of India, pursuant whereto and in furtherance whereof, the Government

considered the desirability of introducing voluntary retirement scheme to help the

banks to right-size their force. In a letter dated 22.5.200, the Director (IR & BOII),

Ministry of Finance, intimated to the concerned banks that different committees and

experts opined that most of the banks have 25% surplus manpower. It was

observed :

"While there is a need for inducting new

workforce, which had adequate knowledge of new

skills such as modern technology, foreign exchange,

venture capital, e-commerce, money management,

etc. it is also essential to rationalize the existing

manpower. In doing so, it has to be ensured that

there should be adequate opportunities for

promotions for all and proper balance between

promoted and direct recruit officers at entry level.

Sufficient promotional opportunities should be

created for the entrants in non-executive grades by

creating graded scales within the cadre and giving

age relaxation and special coaching to enable them

to compete for direct recruitment also. Thus for

entry in officers cadre, 50% quota for promotion

should suffice. That will enable banks to recruit

50% officers from open market in accordance with

the needs of the banks to ensure continuous intake

of persons with desired qualifications in accordance

with the changing skill needs."

It was, therefore, requested that the concerned banks should undertake the

exercise of man-power planning on priority basis and send the same to the Banking

Division for approval of the Board. A Committee was constituted by the Central

Government for consideration of various issues as specified in the report of the

Committee on Human Resource Management in Public Sector Banks. The said

Committee in its report, inter alia, observed :-

"3.15.1 The Committee feels that the high

establishment cost and low business per employee

are important contributory factors for the low

profitability of several public sector banks. The

Committee feels that without right-sizing the staff,

it would be difficult for public sector banks to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 32

compete with other banks operating in the country

and their profitability will remain under severe

strain. Optimising the existing work force is also

necessary to facilitate recruitment of personnel with

specialised skills required for appropriate use of

information technology in banking transaction,

compliance with prudential norms and consequent

emphasis on improved risk management and assert

liability management, as also Banks' foray into new

business areas such as insurance, capital markets,

etc.

3.15.2 Different committees and experts have in

the recent past perceived excess staff in banks

especially in the public sector banks. The extent of

surplus may however differ from bank to bank.

Banks are at various stages of making a proper

assessment of human resource including man-power

planning exercise.

3.15.4 The Committee further reiterates that the

Government may consider rolling back the age of

retirement for officers from 60 years to 58 years.

This will not only reduce the man-power in the age

group of 58 to 60 but will also result in considerable

savings."

Pursuant to or in furtherance of the said purported policy decision, the State

Bank of India as well as the Nationalised Banks adopted separately but almost

identical scheme known as "Employees Voluntary Retirement Scheme". We may,

however, observe that the scheme adopted by the State Bank of India (hereinafter

referred to 'SBIVRS') in certain respects differ from the scheme of the Nationalised

Banks (hereinafter referred to the 'said scheme'). For our purpose, we would

consider them separately.

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 employees

specified therein including specialised officers were not eligible to seek voluntary

retirement. However, in certain scheme they were ordinarily ineligible for being

considered. The period during which the said scheme was to remain operative varies

from bank to bank. However, as far as Punjab National Bank was concerned, the

said scheme was to remain in operation from 1.11.2000 to 30.11.2000. In terms of

the said scheme those who sought for voluntary retirement were entitled to ex-gratia

payments as specified therein as also other benefits which are as follows :-

"AMOUNT OF EX-GRATIA

An employee seeking voluntary retirement under the

scheme will be entitled to the ex-gratia amount mentioned

below in para (a) or (b), whichever is less :-

a) 60 days salary (pay plus stagnation increments plus

special pay plus dearness relief) for each completed

year of service;

OR

b) salary for the number of months service left;

OTHER BENEFITS

An employee seeking voluntary retirement under the

scheme will be eligible for the following benefits in

addition to the ex-gratia amount mentioned in para 6 above

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 32

of this scheme :-

i) Gratuity as per Payment of Gratuity Act, 1972 or

Gratuity payable under the Service Rules as the case

may be, as per existing rules;

ii) a) Pension (including commuted value of pension) as per

PNB (Employees') Pension Regulations, 1995.

OR

b) Bank's contribution towards PF as per existing rules.

iii) Leave encashment as per existing rules."

The Scheme contained an eligibility criteria, namely, that employees against

whom disciplinary proceedings were contemplated or pending would not be eligible

for seeking voluntary retirement. It states that the employees seeking voluntary

retirement were eligible for all other retirement benefits. Under the existing said

scheme the bank has reserved with itself the right to withdraw the scheme at any

time it thinks fit and its decision in this behalf was to be final.

Para 9 of the said scheme specifies different competent authorities for

accepting voluntary retirement of different categories of officers and workmen.

The following general conditions now need be noticed :-

"10.4 A mere request of an employee seeking

voluntary retirement under the Scheme will not take

effect until and unless it is accepted in writing by

the Competent Authority.

10.5 It will not be open for an employee to

withdraw the request made for voluntary retirement

under the scheme after having exercised such

option.

10.6. The Competent Authority shall have absolute

discretion either to accept or reject the request of an

employee seeking Voluntary Retirement under the

scheme depending upon the requirement of the

bank. The reasons for rejection of request of an

employee seeking voluntary retirement shall be

recorded in writing by the competent authority.

Acceptance or otherwise of the request of an

employee seeking voluntary retirement will be

communicated to him in writing.

10.11. An employee who would seek voluntary

retirement under this scheme will not be eligible for

re-employment in the bank or any of its

subsidiaries.

10.13. The benefits payable under this scheme shall

be in full and final settlement of all claims of

whatsoever nature, whether arising under the

scheme or otherwise to the employee (or to his

nominee in case of death). An employee who

voluntarily retired under this scheme will not have

any claim against the bank of whatsoever nature and

no demand or dispute or difference will be raised by

him or on his behalf, whether for re-employment or

compensation or back wages including employment

of any of his relative on compassionate grounds in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 32

the service of the bank or for any other benefit

whatsoever.

10.14. The vacancy caused by voluntary retirement

shall not be filled up by new recruitment.

10.15. The ex-gratia payable to an employee on

opting for Voluntary Retirement under this scheme

would be paid to him within 45 days from the date

of his relieving.

PROCEDURE

An employee eligible to seek voluntary retirement

under this scheme should make a request on the

prescribed application enclosed with this scheme as

Annexure-A or Annexure A-1 as the case may be

through proper channel addressed to the Competent

Authority before the last date prescribed under this

Scheme. Further one copy of the application be

directly sent to the Dy. General Manager (P) at

Head Office New Delhi."

Annexure-A appended to the said Scheme is the format of an application for offer to

seek voluntary retirement which reads thus :-

"Application for Offer to seek voluntary retirement from

the service of the Bank.

(For workmen employees & officers upto scale-III)

The Dy. General Manager

Personnel Division

Head Office

New Delhi.

(Through proper channel)

Sir,

SUB: VOLUNTARY RETIREMENT.

I hereby offer to seek voluntary retirement from

the services of the Bank in accordance with the terms and

conditions stipulated in the PNB Employees Voluntary

Retirement Scheme 2000 circulated vide Personnel

Division Circular No.1755 dated 29.9.2000, which I have

carefully read and understood the contents of the same.

2. I accept the terms and conditions stipulated in PNB

Employees Voluntary Retirement Scheme 2000

unconditionally and irrevocably.

3. I furnished the required particulars in the

APPENDIX enclosed for consideration of my offer to

seek voluntary retirement from the service of the Bank

under the above scheme.

Yours faithfully,

Signature of the Employee

Place: Name _______________

Date : Designation___________

BO/Division __________"

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 32

A large number of employees (1,01,000 employees approx.) submitted their

applications out of whom a small number of employees (200 employees approx.)

withdrew their offer. Despite withdrawal of their offer the same was accepted. In

some cases offers despite withdrawal thereof were accepted within the period during

which the scheme was operative and in some beyond the same.

The scheme was introduced by the banks with the approval of the Board of

Directors.

Questioning the action on the part of the banks, in accepting the applications

of the concerned employees despite their withdrawal, writ petitions were filed in the

Punjab & Haryana High Court, Bombay High Court, Uttaranchal High Court etc.

Before the Punjab & Haryana High Court, the legality or validity of the said

scheme also came to be questioned. Writ applications were also filed by some

employees seeking for issuance of writ of mandamus directing the respective banks

to pay unto them their lawful dues strictly in terms of the scheme.

The Punjab & Haryana High Court by reason of its judgment impugned

herein dated 3.4.2002, inter alia, held :-

"That the V.R. Scheme as framed is not a

valid piece of subordinate legislation inasmuch as

the provision of Section 19 sub clause (1) and sub

clause (4) of the Act have not been complied with

and has, therefore, to be set aside.

Even if it is assumed for the sake of

arguments that the scheme is validly framed, it

would be open to an employee to withdraw his

option before the same has been accepted and

effectively enforced.

For the reasons recorded above, we allow 71

writ petitions i.e C.W.P. Nos.1458, 1472 of 2001

and C.W.P Nos. 303 and 1765 of 2002 etc. etc. in

which the petitioners have made a prayer for the

withdrawal of their options and the impugned

orders accepting the options of voluntary retirement

stand quashed. All these petitioners shall be

reinstated in service with all consequential benefits.

It is however, made clear that those petitioners who

have received the benefits under the scheme

including the ex-gratia payment whether with or

without protest, shall return the entire amount

received by them with interest at the rate of 9% per

annum from the date of the receipt of the said

amount till the date of return. On return of the

aforesaid amount the consequential benefits

regarding the payment of arrears of salary and

allowances from the date of their release to the date

of reinstatement shall be given to them by the

respondents. These petitioners shall also have the

benefit of continuity of service and the interregnum

period shall be regularised in accordance with law

and regulations.

Since we have already declared this scheme

as bad, therefore, we are not in a position to give

any relief to the writ petitioners of 10 writ petitions

i.e. C.W.P. Nos.6072, 7277, 7448, 9191, 14325,

15686, 15689, 19393, 19711 and 19803 of the year

2001, and in our opinion, these writ petitions are

liable to be dismissed. When all rights flow from a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 32

valid scheme and the moment the scheme is

declared bad on account of statutory restrictions

then the petitioners of these 10 writ petitions cannot

ask for any advantage or benefit.

Now we want to make some observations

with regard to those employees who had taken the

benefit under the VRS Scheme but they have not

approached this court as they appear to be satisfied/

with the amount/benefits already received by them.

With regard to them we want to make it clear that

the Banks are not obliged to recall these employees

for employment"

The Bombay High Court and the other High Courts, on the other hand, held

that clause 10.5 of the scheme or the scheme framed framed by the other banks is not

operative as the employees have indefeasible rights to withdraw their offer before the

same is accepted. In arriving at its aforementioned finding, the High Courts, inter

alia, relied on the following decisions of this Court in Union of India & Ors. v. Gopal

Chandra Misra & Ors. [(1978) 2 SCC 301], Balram Gupta v. Union of India & Anr.

[(1987) Supp.SCC 228], Punjab National Bank v. P.K. Mittal [(1989) Supp. 2 SCC

175], Union of India & Anr. v. Wing Commander T. Parthasarathy [(2001) 1 SCC

158] and Shambhu Murari Sinha v. Project & Development India Ltd. & Anr.

[(2002) 3 SCC 437].

Assailing the judgment of the High Courts, Mr. Soli J. Sorabjee, learned

Attorney General for India, inter alia, submitted that having regard to the purport

and object sought to be achieved by the scheme, clause 10.5 of the General

Conditions cannot be said to be illegal as by submitting themselves thereto, the

concerned employees must be held to have resigned in prasenti and in that view of

the matter the contractual bar contained therein cannot be held to be bad in law. The

learned Attorney General would urge that the High Court proceeded on a wrong

premise insofar as it failed to take into consideration that the scheme would amount

to a regulation which would attract the provision of Section 19 of 1970 Act. It was

submitted that power to fix the terms and conditions of service of their employees by

the Banks is provided for under Section 7 of the said Act. The learned counsel

would contend that it is not the case of the writ petitioner-respondents that the

aforementioned clause 10.5 is arbitrary or otherwise opposed to public policy or

suffers from lack of mutuality and, thus, the High Court must be held to have arrived

at a wrong conclusion. Such a clause being an offer, the learned Attorney General

would contend, is not violative of any provisions of the Indian Contract Act, 1872 or

the Constitution of India. Taking us through the decisions of this Court in Gopal

Chandra Misra (supra), T. Parthasarthy (supra), Balram Gupta (supra) as also

Shambhu Murari Sinha (supra), the learned Attorney General would urge that

therein this Court has laid down that such a provision leads to laudable object and

only in absence of such a provision prospective resignation can be withdrawn before

its acceptance. It was further submitted that as each of the employees had made

irrevocable and unconditional offer of terms and conditions laid down in the scheme,

they could not have withdrawn therefrom and particularly as some of them accepted

the ex-gratia payment and, thus, they having elected for the scheme and thus, were

estopped and precluded from questioning the same. Those employees, Mr.Sorabjee

would submit, who accepted the ex-gratia payment could not have been permitted by

the High Court to approbate or reprobate. In support of the said contention, reliance

has been placed in Brijendra Nath Bhargava & Anr. v. Harsh Wardhan & Ors.

[(1988) 1 SCC 454], Shri Lachoo Mal v. Shri Radhey Shyam [(1971) 1 SCC 619],

Halsbury's Laws of England, Fourth Edition, Volume 16, para 957 and American

Jurisprudence, 2d, Volume 28, pages 677 to 680.

As regards the finding of the Punjab & Haryana High Court that the scheme

is ultra vires having regard to the fact that the same was not laid before the

Parliament as required under Section 19(4) of 1970 Act, it was contended that such

a provision being directory one, failure on the part of the Central Government to lay

the said scheme before the Parliament could not vitiate the scheme itself. Strong

reliance, in this connection, has been placed in Jan Mohammad Noor Mohammad

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 32

Begban v. State of Gujarat & Anr. [(1966) 1 SCR 505] and M/s Atlas Cycle

Industries Ltd. & Ors. v. The State of Haryana [(1979) 2 SCC 196]. It was urged

that the entire scheme was offered to the employees as a package and the same had

to be treated as such and in that view of the matter, it being within the realm of

contract, statutory regulations cannot be said to have any application whatsoever.

Mr. V.R. Reddy who appeared for the Punjab National Bank in the matters

arising out the judgment and orders passed by the Bombay High Court, inter alia,

would submit that the High Court erred in proceeding on the basis as if the

employees are the Government servants and enjoy a status. According to the learned

counsel, having regard to the provisions of the 1970 Act, the terms and conditions of

services of the employees of the Nationalised Banks are governed by contract. Mr.

Reddy would urge that the purpose of the scheme being down sizing of the

employees, the same was required to be considered having regard to the age profile,

skill profile, the extent of the response received from the employees and several

other relevant factors. In the aforementioned situation, the learned counsel would

submit that clause 10.5 was inserted so that in the event, those who had opted for the

scheme resile therefrom, the banks may not face practical difficulties. The

requirement of the bank, the learned counsel would submit, must prevail over the

requirement of the individual employees.

As regards the validity of clause 10.5, the learned counsel would submit that

the same was at the threshold stage leading to a major contract. Strong reliance, in

this connection, has been placed Anson's Law of Contract, 28th Edition, paras 235

and Chitty on Contracts, 28th Edition (1999) pages 3 -160 and 3-161 and Halsbury's

Laws of England, 4th Edition, Volume 9, para 235 at page 106.

Mr. Mukul Rohtagi appearing on behalf of the Bank of India would contend

that as the writ petitions involved enforcement of contract qua contract, they were

not maintainable. The learned counsel placed strong reliance in Har Shankar & Ors.

v. The Dy. Excise and Taxation Commr & Ors. [(1975) 1 SCC 737].

Dr. Rajeev Dhawan and Mr. Harish Salve, appearing on behalf of the State

Bank of India, submitted that the High Court completely misdirected itself insofar as

it failed to take into consideration that the provi sions of the State Bank of India Act,

1955 materially differ from 1970 Act. According to the learned counsel, the terms

and conditions of employment are governed under Sections 17 and 43 of 1955 Act.

It has been pointed out that having regard to the difficulties which may be faced by

some of the employees, although the scheme dated 27.12.2000 was to remain in

force for a short time, implementation thereof was contemplated in a time-bound

manner i.e. :-

a) Opportunity to the employees to apply for voluntary retirement during

the period 15.1.2001 to 31.1.2001;

b) Opportunity to the employees to withdraw, if so desired by 15.2.2001;

c) Employees whose request for voluntary retirement is accepted, were

to stand retired on 31.3.2001 and paid accordingly.

Having regard to the difficulties which may be faced by some of the

employees, by a circular a cut-off date of 15.2.2001 was fixed; thereby granting

opportunities to the employee to withdraw the option exercised by him. The logic

and necessity therefor, inter alia, was :-

i) the purpose of the SBIVRS was inter alia to have overall reduction in

the existing strength of the employees. However, the bank were also

required to control the outflow according to its requirements, for

which the bank retained the discretion to limit the number of

employees allowed to retire.

ii) A decision was taken by the bank that around 10% employees may

be allowed to retire under the VRS; the petitioner bank had to process

the applications of all the employees who had opted for VRS. This

ratio of 10% could be achieved only after the bank receives a definite

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 32

figure about the number of persons opting for VRS and withdrawing

later.

iii) Further the final decision of the category of persons eligible under

VRS could be taken only after the petitioner bank had the final tally

regarding the last and final figure of number of persons who had

opted under the VRS.

iv) The scheme was purely voluntary and the conscious decision of the

employee, hence there could be no reason for his withdrawal of

application at a later date. However, keeping in view the interest of

the employee, it was decided that the employee might be permitted to

withdraw the application on or before 15.2.2001.

v) It was a time bound scheme whereunder the employee was to be

relieved and paid entire monetary benefits by 31.3.2001, for which

arrangements were to be made.

It has been pointed out that around 35,380 employees had applied under the

said scheme and around 1,996 employees had withdrawn before the cut off date.

Around 21,000 employees had been granted voluntary retirement under the scheme,

excluding the ineligible.

It was contended that the scheme if read in its entirety would clearly show

that the same was an offer and not an invitation to offer and in terms thereof an

enforceable rights and duties had been conferred upon both employer and employee

which would, subject to certain exception, be enforceable. It was contended that as

the concerned employee did not exercise his option of withdrawal within the

specified date, namely, 15.2.2001, his case had been considered on the premise that

he has not withdrawn his offer. The learned counsel would contend that a contract

of employment can be terminated unilaterally; even a tenure of contract of

employment can be curtailed by an agreement and in that view of the matter

voluntary retirement scheme cannot be said to be illegal. Reliance, in this

connection, has been placed on 'Chitty on Contract' paras 37-114 and 37-115.

Mr. Nageshwar Rao, learned senior counsel appearing on behalf of the

respondents in civil appeal arising out of SLP (C) CC No.7966, inter alia, would

submit that the decisions of this Court in Balram Gupta (supra) and Parathasary

(supra) in no unmistakable terms laid down the law that an offer of resignation can

be withdrawn before the same is accepted. According to the learned counsel, the

matter relating to the scheme is merely an invitation to offer and option pursuant

thereto on the part of an employee would constitute an offer. Such an offer, the

learned counsel would contend, had been made by the concerned employee on dotted

lines. In any event, the learned counsel would submit, that having regard to the

provision contained in Section 5 of the Contract Act, the concerned employee had an

absolute right to withdraw the same before a concluded contract is arrived at. Clause

10.5 of the Punjab National Bank VRS is, thus, ultra vires Section 5 of the Contract

Act.

Strong reliance, in this connection, has been placed on Rajendra Kumar

Verma v. State of Madhya Pradesh & Ors. [AIR 1972 MP 131], Abdus Salam

Choudhury v. The State of Assam & Ors. [AIR 1991 Gauhati 9] and Devi Krishan

Goyal v. District Inspector of Schools, Ghaziabad & Ors. [ J.T. 1988 (4) SC 201].

Mr. Gopal Subramanium, learned senior counsel appearing on behalf of the

respondent in Civil Appeal arising out of SLP (C) Nos.19373-404 of 2002, would

submit that the scheme formulated by other public sector banks including Punjab &

Sind Bank is identical to that of Punjab National Bank. According to the learned

counsel, the entire scheme has be read as a whole. It was pointed out that the scheme

had a limited duration from 1.12.2000 to 31.12.2000, and a cumulative consideration

of the relevant clauses would clearly show that the relationship between the master

and servant comes to an end only upon acceptance of the offer. It was pointed out

that the offer is required to be considered at the level of the Branch Manager and

Zonal Manager and upon their recommendation the same was ultimately to be taken

up by the Personnel Department will clearly go to show that irrevocable nature of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 32

option would be relevant only if the same culminates into an acceptance. The

learned counsel would submit that mere declaration given by an offerer that he

would not withdraw or cancel the offer would not destroy his locus. Strongly relying

upon the decisions of this Court in J.N. Srivastava v. Union of India & Anr. [(1998)

9 SCC 559], Gopal Chandra Misra (supra), Parthasarathy (supra), Shambhu Murari

Sinha (supra), Balram Gupta (supra), the learned counsel would submit that even

after acceptance, the offer could be withdrawn, such an action on the part of the

optioner is permissible even after the acceptance of the offer and in that view of the

matter the application of contractual bar must be held to be applicable only in a case

where offerer has been relieved from his part not prior thereto.

The decisions of this Court, Mr. Suramanium would submit, lay down the

following principles : (1) Juridical relationship of employer and employee continues

till the employee is relieved from his duties (2) It is a bilateral action, (3) Offer being

not in prasenti its acceptance is necessary, (4) only exception to the said rule would

be where prejudice may be caused.

Mr. Subramanium would urge that in the instant case, it cannot be said that

the statutory regulation has nothing to do with the Scheme as pension was to be

calculated in terms thereof. The learned counsel pointed out that after the offer had

been made, the concerned banks had issued a circular, pursuant whereto or in

furtherance whereof a proviso to Regulation 28 was sought to be added; in terms

whereof the concerned employees were deprived of the benefit of additional five

years of service towards qualifying service so as to get pension in terms of clause (4)

of Regulation 19 as thereby instead and in place of full pension the principle of pro-

rata pension was introduced. Such amendment in the scheme as a result whereof the

employees were gravely prejudiced, the concerned employees derived a legal right to

withdraw from the said scheme.

Mr. Rakesh Dwivedi, learned senior counsel appearing on behalf of the

respondents in Civil Appeals arising out of SLP (C) Nos.19373-405 of 2002, would

contend that the offending clause having been unilaterally prescribed would not

amount to a contractual bar. Such a contractual bar, the learned counsel would

submit, must be based on consideration. A contractual scheme must not offend the

right of the employee under Section 5 of the Indian Contract Act, in terms whereof

the offeror is entitled to revoke his proposal/offer at any time before the

communication of the acceptance. Relying upon or on the basis of a large number of

decisions by different High Courts, namely, Zoravarmal v. Gopal Das [AIR 1922

Mad. 486, 491], Secretary of State v. Bhaskar Krishnaji [AIR 1925 Bom. 485,487,

488], Somu Sundram Pillai v. Provincial Government [AIR 1947 Mad. 366, 368],

Raghunandan v. State of Hyderabad [AIR 1963 AP 110, 113], T. Linga Godar v.

State of Madras [AIR 1971 Mad. 28], Rajendra K. Verma v. State of M.P. [AIR 1972

M.P. 131], Sri Durga Saw Mills v. State of Orissa [AIR 1978 Orissa 41,43],

Managing Committee v. State of Bihar [AIR 1981 Patna 271, 272], Janardhan Misra

v. State of U.P. [AIR 1981 Allahabad 213, 216-217], M/s Suraj Besan & Rice Mills

v. FCI [AIR 1988 Delhi 224], A.S. Khongphai v. Special Judicial Officer [AIR 1981

Gau, 9], it was argued that in absence of any statute or statutory rules governing the

field, Section 5 of the Indian Contract Act would be attracted and in that view of the

matter clause 10.5 is neudum pactum and thus being a nullity is not enforceable.

According to the learned counsel, the terms and conditions of service of employees

being governed by a statute or statutory regulations, they enjoy a status. It was urged

that as such voluntary retirement scheme affects the status of an employee, a

contractual bar cannot be imposed. Reliance, in this connection, has been placed on

Delhi Transport Corporation v. D.T.C. Mazdoor Congress & Ors. [(1991) Supp.(1)

SCC 600]. In a case, Mr. Dwivedi would urge when the employee has voluntarily

withdrawn the offer, the doctrine of election will have no application as by reason

thereof the employee has not received the benefit in one part of the contract and then

questioned the rest thereof.

Mr. Jagdeep Dhankar would, inter alia, submit that in some cases the letters

of withdrawal reached before the option. In any event, as the orders had been passed

in many cases on 8.1.2001 i.e. well after the expiry of the period of the scheme,

namely, 31.1.2.2000, the competent authority had no jurisdiction to accept the same.

Mr. Panda appearing for the Appellant in Civil Appeal No.955 of 2002

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 32

would draw the attention of this Court to the fact of the matter and submitted that the

concerned respondent had withdrawn his offer on the very next day of filling his

application but despite the same, he had been relieved from his duties on 30.12.2000.

The learned counsel would contend that the offending clause seeks to obliterate the

right of the employee to which he would have been otherwise entitled to in terms of

Regulation 19(4) and thus the same must be held to be illegal. Reliance, in this

connection, has been placed in V.T. Khanzode & Ors. v. Reserve Bank of India &

Anr.[(1982) 2 SCC 7]. Mr. Panda contended that by reason of the impugned

judgment, the Uttaranchal High Court dismissed a writ petition filed by an employee,

inter alia, on the ground that as he is bound himself by the terms not to withdraw the

application for voluntary retirement, the writ petition was not maintainable.

According to the learned counsel, for the reasons stated by the Punjab & Haryana

High Court and Bombay High Court and the other High Courts, the said decision

cannot be sustained.

Mr. D. Goburdhan, appearing on behalf of the respondent-employee of the

State Bank of India would submit that his client, who had completed 19 years, 10

months of service, had made the offer as he wanted pensionary benefits having

regard to the circular issued by the Indian Banks' Association of which the State

Bank of India is manager, namely, that who had completed 15 years of service may

opt therefor, but withdrew the same as he was informed that he would not get his

pensionary benefits.

Mr. Pradeep Gupta appearing in Civil Appeal Nos.5380-81 of 2002 on

behalf of the concerned employees of Allahabad Bank, would submit that as the

respondent therein was working in a foreign exchange branch, and having been

doing a specialised job, would not have ordinarily come within the purview of the

scheme. It was pointed out that his letter of withdrawal was strongly recommended

by the Branch Manager but despite the same, by reason of the writ petition, the

competent authority accepted the same without assigning any reason. The said

order, contends the learned counsel, suffers from vice of non-application of kind

inasmuch as in a case of this nature, the concerned authority should have passed a

speaking order.

The learned counsel appearing in SLP (C) CC No.7966 would submit that the

Punjab & Haryana High Court had rejected ten writ petitions filed by the petitioners,

inter alia, on the ground that as the scheme is ultra vires, no relief can be granted in

their favour. The learned counsel contended, that as the scheme is contractual in

nature, the benefits which were otherwise available to them in terms of the scheme

could not have been curtailed.

Before we advert to the rival contentions, we may take note of the relevant

provisions of 1970 Act.

Sections 7(2), 19(1), 19(2)(f) and 19(4) of 1970 Act read as follows :-

"7(2) The general superintendence, direction and

management of the affairs and business of a

corresponding new bank shall vest in a Board of

Directors which shall be entitled to exercise all such

powers and do all such acts and things as the

corresponding new bank is authorised to exercise

and do."

"19. Power to make regulations. - (1) The Board of

Directors of a corresponding new bank may, after

consultation with the Reserve Bank and with the

previous sanction of the Central Government, by

notification in the Official Gazette, make

regulations, not inconsistent with the provisions of

this Act or any scheme made thereunder, to provide

for all matters for which provision is expedient for

the purpose of giving effect to the provisions of this

Act."

"19(2) In particular, and without prejudice to the

generality of the foregoing power, the regulations

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 32

may provide for all or any of the following matters,

namely, :-

(a)

(b)

(c)

(d)

(e)

(f) the establishment and maintenance of

superannuation, pension, provident or other funds

for the benefit of officers or other employees of the

corresponding new bank or of the dependants of

such officers or other employees and the granting of

superannuation allowances, annuities and pensions

payable out of such funds;"

19(4) Every regulation shall, as soon as may be after

it is made under this Act by the Board of Directors

of a corresponding new bank, be forwarded to the

Central Government and that Government shall

cause a copy of the same to be laid before each

House of Parliament, while it is in session, for a total

period of thirty days which may be comprised in one

session or in two or more successive sessions, and if,

before the expiry of the session immediately

following the session or the successive sessions

aforesaid, both Houses agree in making any

modification in the regulation or both Houses agree

that the regulation should not be made, the

regulation shall thereafter have effect only in such

modified form or be of no effect, as the case may be,

so, however, that any such modification or

annulment shall be without prejudice to the validity

of anything previously done under that regulation."

Pursuant to or in furtherance of the power conferred upon the 'Bank' under

clause (f) of sub-section (2) of Section 19 of 1970 Act, the Punjab National Bank

(Employees') Pension Regulation, 1995 was framed; the relevant provisions being

Regulations 28 and 29 thereof read thus :-

"28. Superannuation Pension

Superannuation pension shall be granted to an

employee who has retired on his attaining the age of

superannuation specified in the Service Regulations

or Settlements."

29. Pension on voluntary Retirement

1) On or after the 1st day of November, 1993, at

any time after an employee has completed

twenty years of qualifying service he may, by

giving notice of not less than three months in

writing to the appointing authority retire from

service;

2) Provided that this sub-regulation shall not apply

to an employee who is on deputation or on study

leave abroad unless after having been

transferred or having returned to India he has

resumed charge of the post in India and has

served for a period of not less than one year;

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 32

3) Provided further that this sub-regulation shall

not apply to an employee who seeks retirement

from service for being absorbed permanently in

an autonomous body or a public sector

undertaking or company or institution or body,

whether incorporated or not to which he is on

deputation at the time of seeking voluntary

retirement;

Provided that this sub-regulation shall not apply

to an employee who is deemed to have retired in

accordance with clause (1) of regulation 2.

4) An employee, who has elected to retire under

this regulation and has given necessary notice to

that effect to the appointing authority, shall be

precluded from withdrawing his notice except

with the specific approval of such authority;"

It is not in dispute that on or about 23.12.2000 a proviso to Regulation 28

was sought to be introduced, which is as follows :-

"Provided that, pension shall also be granted

to an employee who opts to retire before attaining

the age of superannuation, but after having served

for a minimum period of 15 years in terms of any

scheme that may be framed for the purpose by the

Bank's Board with the concurrence of the

Government".

The said amendment, however, has been carried into effect recently in 2002.

.

The relevant portion of the SBI Voluntary Retirement Scheme is as follows :

"SBI VOLUNTARY RETIREMENT SCHEME (SBIVRS)

1. xxx

2. Objectives :

I. To have a balanced age profile providing for mobility,

training, development of skills and succession plans

for higher-level positions.

II. To provide an exit for employees who have an honest

feeling that they should now retire and take rest or that

there are better opportunities elsewhere.

III. To have over all reduction in the existing strength of

the employees and to increase productivity and

profitability.

3. Eligibility :

The scheme will be open to all permanent employees of the

Bank, except those specifically mentioned as 'ineligible', who

have put in 15 years of service or have completed 40 years of

age as on 31st December, 2000.

Age will be reckoned on the basis of the date of birth as

entered in service record.

Ineligible :

The following categories of employees are ineligible under the

scheme;

i. Staff members who have executed bonds and have not

completed it; staff members serving abroad under the special

arrangements/bonds. The Board of Directors may, however,

waive this, subject to fulfillment of the bond/other

requirements.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 32

ii. Employees against whom Disciplinary Proceedings are

contemplated/pending or who are under suspension. This will

also include employees against whom action has been initiated

by Government Agencies/other law enforcing agencies.

iii. Employees appointed on contract basis.

iv. Watch and ward staff.

v. Specialist Officers.

vi. Highly skilled and qualified staff.

4. xxx

5. Amount of Ex-gratia :

The staff members whose request for retirement under

SBIVRS has been accepted by Competent Authority will be

paid an amount of ex-gratia of 60 days' salary (pay plus

stagnation increments plus special pay plus dearness

allowance for each completed year of service (for this purpose

fraction of service of six months and above will be taken as

one year and accordingly service of less than six months will

not be counted) or salary for the number of months service is

left, whichever is less. Fraction of a month, if any, will be

ignored.

6. Other benefits :

a) Gratuity as payable under the extent instructions on the

relevant date.

b) Provident Fund contribution as per State Bank of India

Employees' Provident Fund Rules as on relevant date.

Pension in terms of State Bank of India Employees'

Pension Fund Rules on the relevant date (including

commuted value of pension).

c) Encashment of balance of Privilege Leave, as

applicable, on the relevant date.

d) Respective facilities extended to officers/others such as

retention of accommodation, telephone, car,

continuation of housing loan etc. will be extended to

officers/others retiring under SBIVRS as per present

dispensation, at the discretion of Competent Authority.

However, in such cases of retention of physical

facilities, 50% of the amount of ex-gratia payable will

be released only after the employee surrenders the

facility. No interest, however, will be paid for the

amount so withheld. All other outstanding

loans/advances will have to be repaid before date of

retirement under SBI VRS, failing which the amount of

ex-gratia and other terminal benefits payable to the

employee will be appropriated towards the outstanding

loans/advances and the balance amount only will be

payable to the employee.

7. Other features :

The Bank intends to control the outflow according to its

requirements. Towards this end, the Bank retains the

discretion to limit the number of employees allowed to retire

in each category of staff viz. officer/clerical -

cash/subordinate, to be covered under SBIVRS. As such the

Bank will have the sole discretion as to the acceptance or the

rejection of the request for retirement under SBIVRS

depending upon the requirements of the Bank. For the

purpose of exercising discretion in this regard, category wise

lists of eligible applicants would be prepared in descending

order of their age and applications of employees coming in

higher age groups above cut-off age would be accepted, the

cut-off age in each category will of course depend upon the

acceptable number of employees who can be permitted to

retire.

No voluntary retirement shall be deemed to have come into

effect unless the decision of the Competent Authority has

been communicated in writing.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 32

General conditions :

i. Staff members desirous of availing benefits under the scheme

will have to submit a written application to the Competent

Authority, through proper channel, in the specified format,

within the period for which the Scheme is kept open.

ii. A staff member retired under the scheme will not be eligible

for re-employment in the Bank or its subsidiaries/Associates

joint ventures (including offices outside India).

iii. The employees seeking retirement under SBIVRS will not be

entitled to dispute the payments received under the scheme on

any ground whatsoever. The retiring staff member and/or

their nominees or legal heirs shall have no right/claim

demands against the Bank on any matter relating to the

scheme.

iv. As SBIVRS is voluntary, it shall not be negotiable and shall

not be deemed or construed as a subject matter of right or

contract of service. It will not be a subject matter of any

industrial disputes under the provisions of the Industrial

Disputes Act, 1947 and shall not be cited as precedent,

custom, convention, usage or practice any time in future.

v. As SBIVRS is voluntary in nature, the employee seeking

retirement under the SBIVRS will not be eligible for any

retrenchment compensation payable under the provisions of

the Industrial Disputes Act.

vi. SBIVRS is independent of and without prejudice to the rights

of the Bank to dispense with the services of an employee

either under the contract of employment, service rules, awards

or under the applicable Standing Orders/Law/Rules/terms and

conditions of service as may be applicable to the employee

concerned.

vii. The SBIVRS shall not be construed as a revision of any of the

previous retirement schemes of the Bank and as such no claim

from the employee who has retired/will be retiring under the

existing schemes shall be entertained.

viii. In case of disputes as to the interpretation of any of the terms

and conditions of the scheme, the decision of the Bank shall

be final and binding on all the parties concerned.

ix. Bank reserves the right to modify, amend or cancel any or all

of the aforesaid clauses and to give effect thereto from any

dates it may deem fit.

Pursuant to in furtherance of the powers conferred under Section 50(3), the

Reserve Bank of India with the previous sanction of the Central Government made

the State Bank of India General Regulations, 1955. It is also not in dispute that in

exercise of the power conferred under Section 43(1) of the State Bank of India Act,

1955 the Central Board of the State Bank of India made the State Bank of India

Officers Service Rules determining the terms and conditions of the appointment and

services of officers in the Bank.

Following legal issues arise for determination in these appeals :

A. Whether an application by an employee to secure voluntary

retirement under the Voluntary Retirement Scheme (VRS) can

be withdrawn by such an employee before the same is

accepted by the Competent Authority though the scheme

contained an express stipulation that an application made

thereunder is irrevocable and the employee will have no right

to withdraw the application once submitted?

B. Whether upon making an application under VRS the employer

bank secures the authority to unilaterally determine one way

or the other the jural relationship of master and servant

between the parties?

The moot question which is required to be posed and answered is whether the

voluntary retirement scheme is an offer/proposal or merely an invitation to offer.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 32

The question is whether the banks intended to make an offer or merely issued an

invitation to treat is essentially a question of fact.

As would appear from the discussions made hereinafter there appears to be

some difference in the schemes floated by the State Bank of India and the

nationalized banks.

We may consider the cases of nationalized bank first. The circular dated

20.8.2000 and the scheme framed by the banks are required to be read together for

the purpose of ascertaining the true intendment thereof. The scheme essentially was

floated as has been mentioned herein before with a purpose of downsizing the

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 as has been stated in the circular letter issued by the Ministry

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

them to compete with the private banks.

The employees of the nationalized bank may not enjoy a 'status' as is the

case of government employees or the statutory authorities whose terms and

conditions of service are governed by the constitutional provisions and/or the statutes

and the statutory rules; but there is no gainsaying that the employees of the

Nationalized banks enjoy security of their employment. So far as the employees of

the State Bank of India are concerned their terms and conditions of service, as

noticed hereinbefore, are governed by statutory rules. However, so far as the

employees of the nationalized banks are concerned except for the matter of grant of

pension which is covered by the regulations framed in terms of Section 19 of the

1970 Act, other terms and conditions of their service are not statutory in nature. But

the State Bank of India as also the nationalized banks are 'States' within the meaning

of Article 12 of the Constitution of India. The services of the workman are also

governed by several standing orders and bipartite settlements which have the force of

law. The banks, therefore, cannot take recourse to 'hire & fire' for the purpose of

terminating the services of the employees. The banks 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 of the Constitution of India. Having regard to

the intendment of the scheme each and every employee would not be entitled to the

benefit of the said scheme. Those who are facing disciplinary proceedings or

working in a particular class of employment are not eligible therefor.

An offer indisputably can be made to a group of persons collectively which

is capable of being accepted individually but the question which has to be posed and

answered is as to whether having regard to the service jurisprudence; the principles

of Indian Contract Act would be applicable in the instant case. It is the specific case

of the 'Banks' that the schemes had been floated by way of contract. It does not

have any statutory flavour. Reference to the pension scheme framed under the

regulations was made for computation of the pension.

It is difficult to accept the contention raised in the Bar that a contract of

employment would not be governed by the Indian Contract Act. A contract of

employment is also a subject matter of contract. Unless governed by a statute or

statutory rules the provisions of the Indian Contract Act would be only applicable at

the formulation of the contract as also the determination thereof. Subject to certain

just exceptions even specific performance of contract by way of a direction for

reinstatement of a dismissed employee is also permissible in law.

It is in the aforementioned backdrop, the questions are required to be

answered. It is now well-known that the use of the term 'offer' or 'proposal' is not

decisive. It, as noticed, would depend upon the fact involved in the matter.

In Anson's Law of Contract, 26th Edn. at p.25 it is stated:

"Offers and Invitations to Treat: It is sometimes

difficult to distinguish statements of intention which

cannot, and are not intended to result in any binding

obligation from offers which admit of acceptance, and

so become binding promises. A person advertises

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 32

goods for sale in a newspaper, or announces that he

will sell them by tender or by auction; a shopkeeper

displays goods in a shop window at a certain p rice; or

a bus company advertises that it will carry passengers

from A to Z and will reach Z and other intermediate

stops at certain times. In such cases it may be asked

whether the statement made is an offer capable of

acceptance or merely an invitation to make offers, and

do business. An invitation of this nature, if it is not

intended to be binding, is known as an 'invitation to

treat."

Chitty on Contract states the law thus:

"Tenders A statement that goods are to be sold by

tender is not normally an offer to sell to the person

making the highest tender; it merely indicates a

readiness to receive offers. Similarly, an invitation for

tenders for the supply of goods or for the execution of

works is, generally, not an offer, even though the

preparation of the tender may involve very

considerable expense. The offer comes from the

person who submits the tender and there is no contract

until the person asking for the tenders accepts one of

them. These rules, may, however, be excluded by

evidence of contrary intention: e.g. where the person

who invites the tenders states in the invitation that he

binds himself to accept the highest offer to buy (or as

the case may be, the lowest offer to sell or to provide

the specified services). In such cases, the invitation

for tenders may be regarded either as itself an offer or

as an invitation to submit offers coupled with an

undertaking to accept the highest (or, as the case may

be, the lowest) offer; and the contract is concluded as

soon as the highest offer to buy (or lowest offer to sell,

etc.) is communicated."

In Treitel's 'The Law of Contract, it has been stated thus:

"When parties negotiate with a view to making a

contract, many preliminary communications may pass

between them before a definite offer is made. One

party may simply respond to a request for information

(e.g. by stating the price at which he might be

prepared to sell a house), or he may invite the other to

make an offer; he is then said to make an "invitation to

treat". The question whether a statement is an offer or

an invitation to treat depends primarily on the

intention with which it was made."

It has also been stated in the said book:

"The question whether a statement is an offer or an

invitation to treat depends primarily on the intention

with which it was made. A statement is only an offer

if the person making it intends to be bound as soon as

the person reasonably believes that it was made with

this intention. It follows that a statement is not an

offer, if it expressly provides that the person making it

is not to be bound merely by the other party's

notification of assent, but only when he himself has

signed the document in which the statement is

contained."

The law relating to 'offer' and 'acceptance' is not simple.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 32

In Hamilton, Rau and Winthraub on Contracts, the learned authors referred

to a decision of Habaska Seed Co. Vs. Harsh 98 Nob 89, 152 NW 310 wherein the

purported offer "I want $ 2.25 cent per cent for this seed fobcowell," was held not be

an offer on the ground that the defendant did not say "I offer to sell you.

At page 346 of the said treatise, it is stated:

"The rules of offer and acceptance are usually

favourites of law students; they are easily stated and

tend to be rather mechnical in their operation. They

also involve situations that are relatively easy to grasp

and in which various policy consideration are close to

the surface. However, one should not assume that one

has mastered the law of contracts simply because one

is conversant with rules of offer and acceptance. In

deed the writings of modern contracts scholars tend to

deprecate the importance of the rules of offer and

acceptance. See Geneally G Gilmore, the Death of

Contract (1974): L. Freidman, Contract Law in

America (1965)".

In Halsbury's Laws of England, 4th Edition, Volume-9, meaning of 'offer'

has been stated in paragraph 227 at page 98 in the following terms:

"227; Meaning of offer. An offer is an expression by

one person or group of persons or by agents on his

behalf, made to another, of his willingness to be bound

to a contract with that other on terms either certain or

capable of being rendered contain.

An offer may be made to an individual or to a group of

persons or to the world at large. It may be made

expressly by words, or it may be implied from the

product of the offerer."

The request of employees seeking voluntary retirement was not to take effect

until and unless it was accepted in writing by the competent authority. The

Competent Authority had the absolute discretion whether to accept or reject the

request of the employee seeking voluntary retirement under the scheme. A

procedure has been laid down for considering the provisions of the said scheme to

the effect that an employee who intends to seek voluntary retirement would submit

duly completed application in duplicate in the prescribed form marked "offer to seek

voluntary retirement" and the application so received would be considered by the

competent authority on first come first serve basis. The procedure laid down

therefor suggests that the applications of the employee would be an offer which

could be considered by the bank in terms of the procedure laid down therefor. There

is no assurance that such an application would be accepted without any

consideration.

Acceptance or otherwise of the request of an employee seeking voluntary

retirement is required to be communicated to him in writing. This clause is crucial in

view of the fact that therein the acceptance or rejection of such request has been

provided. The decision of the authority rejecting the request is appealable to the

Appellate authority. The application made by an employee as an offer as well as the

decision of the bank thereupon would be communicated to the respective General

Managers. The decisions making process shall take place at various levels of the

banks.

The following, therefore, can be deduced:

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 32

could be accepted or rejected.

(ii) Acceptance of such an offer is required to be communicated in writing.

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

several authorities.

(iv) 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 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.

From what has been noticed herein before, it is apparent that the Nationalized

banks in terms of the scheme had secured for themselves an unfettered and unguided

right to deal with the jural relationship between themselves and their employees.

It is not a case where on mere making of option on the part of the employee

the offer is to be accepted or even there will be reasonable certainty that some norms

should be maintained. There is no consideration for the contractual bar clause. The

submission of the learned counsel appearing on behalf of the banks that the proposal

to the effect that the option made by an employee would be considered, is a

consideration cannot be accepted.

Once it is held that the provisions of the Indian Contract Act, 1872 would be

applicable, the scheme admittedly being contractual in nature, the provisions of the

Act shall apply. The Scheme having regard to its provisions as noticed hereinbefore

would merely constitute invitation to treat and not an offer.

A proposal is made when one person signifies to another his willingness to do

or abstain from doing anything with a view to obtaining the assent of the other to

such act or abstinence (See Section 2(a)). Herein the banks by reason of the scheme

or otherwise have not expressed their willingness to do or abstain from doing

anything with a view to obtaining assent of the employees to such act. It will bear

repetition to state that not only the power of the bank to accept or reject such

application is absolutely discretionary, it, as noticed herein before, could also amend

or rescind the scheme. The Scheme, therefore, cannot be said to be an offer which,

on the acceptance by the employee, would fructify in a concluded contract.

The proposal of the employee when accepted by the Bank would

constitute a promise within the meaning of Section 2(b) of the Act. Only then the

promise becomes an enforceable contract. In the instant case the banks when

floating the scheme did not signify that on the employees assenting thereto a

concluded contract would come into being in terms whereof they would be

permitted to retire voluntarily and get the benefits thereunder.

Furthermore, in terms of the said scheme no consideration passed so as to

constitute an agreement. Once it is found that by giving their option under the

scheme, the employees did not derive an enforceable right, the same in absence of

any consideration would be void in terms of Section 2(g) of the Contract Act as

opposed to Section 2(h) thereof.

Furthermore, even by opting for the scheme as floated by the banks, no

consideration is passed far less amounting to reciprocal promise.

Once it is found, as would appear from the position rendered by this court

that the employees do not have an enforceable right upon making an option the same

would be void in terms of Section 2(g) of the Contract Act as opposed to Section

2(h) thereof.

The distinction between an offer and invitation to treat has been dealt with

some clarity in Gibson v. Manchester City Council reported in 1979 All.E.R. 972.

In that case the council adopted a policy of selling council's house to Mr.

Gibson. The council wrote a letter to Mr. Gibson that "it may be prepared to sell the

house to you at the purchase price of Pounds 2,725 less 20% = Pounds 2180 (free

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 32

hold)". He was invited to make a formal application which he did. Before the

documents could be executed the control of the council changed hands as a result

whereof policy of selling the council house was reversed.

When it was claimed by Mr. Gibson that the transaction amounted to a

binding contract, the House of Lords negativing the same held that the letter in

question was an invitation to treat and Mr. Gibson's application was an offer and not

an acceptance.

In the instant case, there was even no reasonable certainty that the scheme

would be acted upon. Furthermore terms and conditions thereof could be amended

and even the scheme itself could be rescinded.

We, therefore, have no hesitation in coming to the conclusion that the

voluntary scheme was not a proposal or an offer but merely an invitation to treat and

the applications filed by the employees constituted 'offer'.

Once the application filed by the employees is held to be an 'offer'; Section

5, in absence of any other independent binding contract or statute or statutory rules to

the contrary would come into play.

In Cheshire, Fifoot & Furmston's Law of Contract (14th edition) at Page 62

the law is stated as under:-

"It has been established ever since the case of Payne v

Cave in 1789 that recovation is possible and effective

at any time before acceptance: up to this moment ex

hypothesi no legal obligation exists. Nor, as the law

stands, is it relevant that the offeror has declared

himself ready to keep the offer open for a given period.

Such an intimation is but part and parcel of the original

offer, which must stand or fall as a whole. The offeror

may, of course, bind himself, by a separate and

specific contract, to keep the offer opn; but the offeree,

if such is his allegation, must provide all the elements

of a valid contract, including assent and consideration.

In Routledge v Grant the defendant offered on 18

March to buy the plaintiff's house for a certain sum, 'a

definite answer to be given within six weeks from the

date'. Best CJ held that the defendant could withdraw

at any moment before acceptance, even though the

time limit had not expired. The plaintiff could only

have held the defendant to his offer throughout the

period, if he had bought the option by a separate and

binding contract."

This principle, as noticed herein before, has been accepted in a large number

of decisions relied upon by Mr. Nageshwar Rao and Mr. Dwivedi (supra). We may,

however, only refer to Devi Krishan Goyal (supra).

The relevant rule, interpretation whereof fell for consideration of this Court

therein is as under:

"These rules shall be applicable to the Teachers of

those State Government Aided Higher Secondary

Schools which are working under any local body or

any nonadministrative management, within the ambit

of Salary Disbursement Act, 1971 on 30th June, 1978

or thereafter and who will give their option in favour

of retirement at the age of 58 years, within six months

of the Publication of these Rules. An option, once

used will be deemed to be final. The date of retirement

shall be the end of session".

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 32

Interpreting the said rule this court held:

"we are of the view that the High Court should not have

rejected the writ application. It has not been disputed

anywhere that option stood withdrawn before it was

accepted. The provision in the rule "an option once used

will be deemed to be final" would not mean that when an

offer made it is not open to be withdrawn before it is

accepted. The respondent No.1 obviously acted under the

wrong notion and the High Court did not appreciate this

aspect. We would accordingly hold that the appellant was

entitled to withdraw the option".

We may at once point out that the stands of the learned counsel appearing on

behalf of banks is inconsistent and self-contradictory. Whereas once it was argued

that the offer was made by the bank by floating the scheme and once an application

is filed, the same would amount to acceptance of offer; on the same breath they took

recourse to the 'doctrine of option' which is applicable only at the instance of the

offeror, who in this case would be the employees.

The submission in our considered opinion proceed on a total misconception.

By reason of making such option or firm offer the offeror must get some benefit or

the offeree must incur some detriment.

The contracts in which the said principle can be applied would be a case

where there would usually be a money payment. In the instant case apart from the

fact that no consideration is passed, the banks standing in the category of offeree

either expressly or impliedly had not promised to do or refrain from doing something

in exchange for the offeror's promise not to revoke the offer. In all fairness to Mr.

Reddy, we may set out hereunder the authorities relied upon by him.

In Anson's Law of Contract (28th edition page 53), it is stated:

"Firm Offers: It will be noted that in Offord v. Davies,

discussed above, the mere fact that the defendants

promised to guarantee payment for 12 months did not

preclude that from revoking before that period had

elapsed. It is a rule of English law that a promise to

keep an offer open needs consideration to make it

binding and would thus only become so if the offeror

gets some benefit, or the offeree incurs some

detriment, in respect of the promise to keep the offer

open. The offeree in such a case is said to 'purchase

an option'; that is, the offeror, in consideration usually

of a money payment, sometimes nominal, makes a

separate contract not to revoke the offer during a stated

period. The position is similar where the offeree

expressly or impliedly promises to do or refrain from

doing something in exchange for the offeror's promise

not to revoke the offer. For example, the offeree may

promise not to negotiate with anyone else for a fixed

period. Again, a building tendering for a construction

contract may have invited quotations for a fixed period

(i.e. firm offers) from electricity or carpentry sub-

contractors and expressly or impliedly promised to use

the figures contained in those offers in its tender. In

these cases the offeror by its promise precludes itself

from exercising its right to revoke the offer; but where

it receives no consideration for keeping the offer open,

it says in effect, 'You may accept within such and such

a time, but this limitation is entirely for my benefit,

and I make no binding promise not to revoke my offer

in the meantime'. The Law Revision Committee

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 32

recommended that 'an agreement to keep an offer open

for a definite period of time or until the occurrence of

some specified event shall not be unenforceable by

reason of the absence of consideration'. Despite this

criticism, subject to two exceptions, it seems to be

good law".

In Chitty on Contract, it is stated:

"Firm offers. By a "firm" offer is meant one containing a

promise not to revoke it for a specified time. The mere

fact that such a promise has been made does not prevent

the offeror from revoking the offer within that period since

normally the promise will be unsupported by

consideration. Most obviously such consideration will be

provided if the offeree pays (or promises to pay) a sum of

money for the promise and so buys an option.

Consideration may also be provided by some other

promise; for example, in the case of an offer to sell a

house, the offeree may provide consideration for the

offeror's promise not to revoke the offer for a specified

time by promising not to dispose of those shares elsewhere

during that time. The performance of the offeree's

promise to keep the offer open. In one case a vendor of

land entered into a so-called "lock-out" agreement by

which he promised a prospective purchaser not to consider

other offers if that purchaser would exchange contracts

within two weeks; and it was said that "the promise by the

[purchaser] to get on by limiting himself to just two

weeks" constituted consideration for the vendor's promise

not to consider other offers. The case is not strictly one of

a firm offer since the vendor's promise would not in terms

have prevented him from simply deciding not to sell at all;

but the practical effect of a binding "lock-out" agreement

may be to prevent the vendor from withdrawing his offer;

and the reasoning quoted above could apply to the case of

a firm offer. The reasoning gives rise to some difficulty in

that it does not appear that the purchaser made any

promise to exchange contracts within two weeks. It seems

more plausible to say that the vendor's promise had

become binding as a unilateral contract under which the

purchaser had provided consideration by actually making

efforts to meet the deadline, even though he had not

promised to do so. Similar reasoning can apply if a seller

of land promises to keep an offer open for a month, asking

the buyer during that period to make efforts to raise the

necessary money. If the buyer makes such efforts

(without promising to do so), it is arguable that he has by

part performance accepted the seller's offer of a unilateral

contract to keep the principal offer open. Similarly, it is

possible for a person, to whom a promise not to revoke an

offer for the sale of a house has been made, to provide

consideration for that promise by incurring the expense of

a survey. On the other hand, the equitable principle

applied in Hughes v. Metropolitan Ry. and in the High

Trees case will not avail the offeree since it only operates

defensively and does not create new causes of action

where none existed before. Nor does it seem probably that

the offeree will be able to claim damages in tort under the

principles laid down in Hedley Byne & Co. Ltd v. Heller

& Partners Ltd.

In Halsbury's Laws of England (4th Ed.), Para 235 at Page 160, the law is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 32

stated as under:

"235. Options. A contract of option is one whereby

the grantor of the option offers to enter into what may be

called a "major" contract with a second person and makes

a separate contract to keep his offer open. Usually, but not

necessarily, the person to whom the grantor of the option

binds himself to keep the offer open is that second person,

who may be conveniently referred to as the "option-

holder". The contract of option may make it possible for

the rights of the option-holder to be assigned.

The contract of option may be unilateral or bilateral. It

may exist either as a separate option contract, or as part of

a larger contract such as one of the following: a lease with

an option in the lessee to renew the lease or but the

reversion; a hire purchase agreement; a sale with an option

of repurchase granted to either the seller or the buyer; a

sale with an option for the buyer to make further purchases

on similar terms; a service or agency agreement with an

option in either party to renew. Certain contracts of option

have been made void or illegal by statute.

With regard to the envisaged major contract, the effect of

the contract of option is to create an irrevocable offer and

a power of acceptance. The offer is irrevocable in the

sense that it is a breach of the contract of option to revoke

it, and its effect is to create a power of acceptance in the

option-holder good against the grantor of the option and

sometimes also against third parties. Thus the grantor of

the option is under a conditional duty, and the option-

holder has a conditional right of performance of the option

offer, that condition being the exercise of the power of

acceptance by the option-holder; as the envisaged major

contract may be bilateral or unilateral, that condition may

be an acceptance or other act by the option-holder.

Furthermore, the exercise of the option may itself be

subject to certain conditions precedent, such as a time

limit, or the occurrence of a certain event, or the duration

of a major contract of which it forms a part, or the mode in

which it may be exercised."

In Chitty on Contract (28th edition para 3-161) it is stated that the position

being uncertain as the rule can still cause hardship; a legislation limiting the right to

withdraw firm offers is desirable.

In Anson's Law of Contracts it is stated at page 51:

"(a) Revocation of the Offer: The law relating to the

revocation of an offer may be summed up in two rules;

(1) an offer may be revoked at any time before

acceptance, and (2) an offer is made irrevocable by

acceptance.

(i) Revocable before acceptance: The first of these

rules may be illustrated by the case of Offord v.

Davies:

D made a written offer to O that, if he would discount

bills for another firm, they (D) would guarantee the

payment of such bills to the extent of Pound 600

during a period of twelve calendar months. Some bills

were discounted by O, and duly paid, but before the

twelve months had expired D, the guarantors, revoked

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 24 of 32

their offer and notified O that they would guarantee no

more bills. O continued to discount bills, some of

which were not paid, and then sued D on the

guarantee.

It was held that the revocation was a good defence to

the action. The alleged guarantee was an offer, for a

period of 12 months, of promises for acts, of

guarantees for discounts. Each discount turned the

offer into a promise, pro tanto, but the entire offer

could at any time be revoked except as regards

discounts made before notice of revocation."

The learned author, as noticed from the passage quoted herein before, clearly

stated that an offer may be revoked even before it is accepted.

Furthermore, a large number of employees have withdrawn their offer only

when a proviso is sought to be added to Regulation 28 aforementioned. In terms of

the Scheme the employees, who expected to get benefits of clause 4 of Regulation 29

would be deprived therefrom. It is not in this dispute that the qualifying period for

pension qualifying for receiving pension was 20 years. Only upon completion of 20

years, in terms of the statutory regulation contained in Regulation 29, an employee

could opt for voluntary retirement and in terms thereof, he would be entitled to the

benefits specified therein. The said regulations had specifically been mentioned for

the purpose of computation which would include invocation of Sub-regulation 4 of

Regulation 29 providing for relaxation of 5 years towards the qualifying period. The

employees must have proceeded on the basis that despite the fact that they have

merely rendered 15 years of service which was not a qualifying service under the

regulations, they would be entitled to the pensionary benefits in terms of the scheme.

By introducing the proviso to Regulation 28 pension was sought to be made pro rata

in place of full pension.

The basic concept of the scheme, therefore, underwent a change which also

goes to show that the banks had sought to invoke its power of amending the scheme.

Once the scheme is amended and/or an apprehension is created in the mind of the

employees that they would not even receive the entire benefits as envisaged under

the scheme, they were entitled to revoke their offers. Their action in our considered

opinion is reasonable. It may be that some of the employees only opted for the

provident fund benefit which did not undergo any amendment but the same would

not change the attitude on the part of the banks.

We, therefore, do not find any error in the judgment of the High Court on this

score.

However, the case of the State Bank of India stand slightly on a different

footing. Firstly, the State Bank of India had not amended the scheme. It, as noticed

here before, even permitted withdrawal of the applications after 15th February. The

scheme floated by the State Bank of India contained a clause (clause 7) laying down

the mode and manner in which the application for voluntary retirement shall be

considered. The relevant clause as referred to herein before creates an enforceable

right. In the event the State Bank failed to adhere to its preferred policy, the same

could have been specifically enforced by a court of law. The same would, therefore,

amount to some consideration.

Furthermore in the case of State Bank of India, the Punjab and Haryana High

Court failed to take into consideration the provisions of the State Bank of India Act,

1955 It further failed to take into consideration that the matter relating to grant of

pension was not covered by any statutory regulation.

We are, however, not prepared to accept the submission of Mr. Salve to the

effect that by reason of the said scheme, merely the tenure of service has been

curtailed to some extent which is permissible in law.

Mr. Harish Salve in support of its contention has relied upon para 37-115

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 25 of 32

from Chitty on Contracts.

The said paragraph itself shows that for bringing into a change in the tenure

of contract, the existing contract of service must be substituted or amended by

another contract. The later contract also must be an enforceable contract. Once it is

held the later contract is not a contract within the meaning of the provisions of the

Indian Contract Act, the question of invoking this aforementioned principle would

not arise.

We may at this juncture notice the decisions of this court covering the

subject.

In Gopal Chandra Misra's case (supra) this court was considering a question

where a Judge of a High Court in terms of Article 217 of the Constitution of India

withdraw the resignation submitted by him. Resignation by a constitutional

authority is a unilateral act. In the case of resignation by a constitutional authority, it

is governed by the constitutional provisions as resignation of a constitutional

authority does not require an express acceptance. The same being unilateral in

character, it was observed:

"The substantive body of this letter (which has been

extracted in full in a foregoing part of this judgment) is

comprised of three sentences only. In the first

sentence, it is stated : "I beg to resign my office as

Judge, High Court of Judicature at Allahabad". Had

this sentence stood alone, or been the only content to

his letter, it would operate as a complete resignation in

praesenti, involving immediate relinquishment of the

office and termination of his tenure as Judge. But this

is not so. The first sentence is immediately followed

by two more, which read : "I will be on leave till July

31, 1977. My resignation shall be effective on August

1, 1977". The first sentence cannot be divorced from

the context of the other two sentences and construed in

isolation. It has to be read along with the succeeding

two which qualify it. Construed as a whole according

to its tenor, the letter dated May 7, 1977, is merely an

intimation or notice of the writer's intention to resign

his office as Judge, on a future date, viz., August 1,

1977".

In that case, thus, a resignation which was not in praesenti has been held to be

capable of being withdrawn. It did not constitute a juristic act.

We may notice that in Jai Ram v. Union of India (AIR 1954 SC 584) it was

held:

"It may be conceded that it is open to a servant, who

has expressed a desire to retire from service and

applied to his superior officer, to give him the requisite

permission, to change his mind subsequently and ask

for cancellation of the permission thus obtained; but,

he can be allowed to do so as long as he continues in

service and not after it has terminated."

Yet again in Raj Kumar v. Union of India [(1968) 3 SCR 857] it was held:

"When a public servant has invited by his letter of

resignation determination of his employment, his

services normally stand terminated from the date on

which the letter of resignation is accepted by the

appropriate authority, and in the absence of any law or

rule governing the conditions of his service to the

contrary, it will not be open to the public servant to

withdraw his resignation after it is accepted by the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 26 of 32

appropriate authority. Till the resignation is accepted

by the appropriate authority in consonance with the

rules governing the acceptance, the public servant

concerned has locus poenitentiae but not thereafter".

In Balram Gupta's case this court was dealing with Central Civil Services

(Pension) Rules, 1972 which is a statutory rule. Sub-rule (4) of Rule 48-A prevented

withdrawal of resignation letter except with the approval of the authority. The

validity of the said rule was not in question. In that case the approval of the

authority to withdraw was not given. It was in the aforementioned situation

observed:

"That has been done. The approval of the authority

was, however, not given. Therefore, the normal rule

which prevails in certain cases that a person can

withdraw his resignation before it is effective would

not apply in full force to a case of this nature because

here the government servant cannot withdraw except

with the approval of such authority".

Having regard to the fact that the issue involved therein stood on a different

footing, this Court made a mere observation to the following effect:

"It may be a salutary requirement that a government

servant cannot withdraw a letter of resignation or of

voluntary retirement at his sweet will and put the

government into difficulties by writing letters of

resignation or retirement and withdrawing the same

immediately without rhyme or reason. Therefore, for

the purpose of appeal we do not propose to consider

the question whether sub-rule (4) of Rule 48-A of the

Pension Rules is valid or not".

Validity of such a rule was, therefore, not in question. As indicated

hereinbefore, the bar of withdrawing the resignation was contained in the statutory

rule and, thus Section 5 of the Indian Contract Act would not have been applicable in

that case. However, it is advantageous to notice the following observations made in

the said decision:

"We do not see how this could not be a good and valid

reason. It is true that he was resigning and in the

notice for resignation he had not given any reason

except to state that he sought voluntary retirement. We

see nothing wrong in this. In the modern age we

should not put embargo upon people's choice or

freedom. If, however, the administration had made

arrangements acting on his resignation or letter of

retirement to make other employee available for his

job, that would be another matter but the appellant's

offer to retire and withdrawal of the same happened in

such quick succession that it cannot be said that any

administrative set up or arrangement was affected".

It was further observed:

"In the modern and uncertain age it is very difficult to

arrange one's future with any amount of certainty; a

certain amount of flexibility is required, and if such

flexibility does not jeopardize government or

administration, administration should be graceful

enough to respond and acknowledge the flexibility of

human mind and attitude and allow the appellant to

withdraw his letter of retirement in the facts and

circumstances of this case".

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 27 of 32

In P.K. Mittal's case (supra), a question arose as to whether in contravention

of Rule 20 of the Punjab National Bank (Officers) Service Rules, 1979, the bank can

reduce the notice period. Ranganathan, J. speaking for the bench held that the same

could not have been done and the concerned employee was entitled to withdraw his

resignation before it became effective.

In Power Finance Corporation Ltd. v. Pramod Kumar Bhatia [(1997) 4 SCC

280] a scheme of voluntary retirement was floated and pursuant thereto the

Respondents therein had applied for voluntary retirement but subsequently the

Corporation had withdrawn the scheme although the offer had been accepted. Such

acceptance was to take effect from 31-12-1994. This court held that the acceptance

of his offer to voluntarily retire being subject to adjustment of the amount payable to

him, the same did not attain finality. It was held:

"It is now settled legal position that unless the

employee is relieved of the duty, after acceptance of

the offer of voluntary retirement or resignation, jural

relationship of the employee and the employer does

not come to an end. Since the order accepting the

voluntary retirement was a conditional one, the

conditions ought to have been complied with. Before

the conditions could be complied with, the appellant

withdrew the scheme. Consequently, the order

accepting voluntary retirement did not become

effective. Thereby no vested right has been created in

favour of the respondent. The High Court, therefore,

was not right in holding that the respondent has

acquired a vested right and, therefore, the appellant has

no right to withdraw the scheme subsequently".

This decision is an authority for the proposition that even after acceptance of

the offer made by the employee, the scheme can be withdrawn and, if it is so done,

the employee does not acquire any vested right.

In J.N. Srivastava's case(supra), it was held :

"It is now well settled that even if the voluntary

retirement notice is moved by an employee and gets

accepted by the authority within the time fixed, before

the date of retirement is reached, the employee has

locus poenitentiae to withdraw the proposal for

voluntary retirement.

In Wg. Cdr T. Parthasarathy's case the fact of the matter was as follows:

The Respondent submitted an application on 21-7-1985 praying for

premature retirement with effect from 31-8-1986. He also furnished a certificate

stating that he was aware that any request made by him for cancellation of his

application for premature retirement would not be accepted. On 6-11-1985 he

moved an amendment to earlier application stating that the actual date of his release

could be decided taking into account the pensionary recommendations/ requirements

of the Fourth Pay Commission's Report which was expected to come in November,

1985. He subsequently withdrew his offer on 19-2-1986.

The Respondent received a letter dated 20th February, 1986 that he would

prematurely retire from service with effect from 31-8-1986. On a Writ Petition

moved by the Respondent before the Karnataka High Court, it was held that having

regard to the offer made on 19-2-1986, the subsequent action taken by the

Department on 20th February, 1986 had no effect. In this Court an argument was

advanced that having regard to the policy decision to which the Respondent was

aware and having given a certificate at the time of submission of application for

premature retirement that he was aware of the fact that his request for withdrawal or

cancellation subsequently would not be accepted, the impugned judgment of the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 28 of 32

High Court was erroneous but rejecting the same this court held :

"We have carefully considered the submissions of the

learned counsel appearing on either side. The reliance

placed for the appellants on the decision reported in

Raj Kumar Case is in appropriate to the facts of this

case. In that case this Court merely emphasized the

position that when a public servant has invited by his

letter of resignation determination of his employment

his service clearly stands terminated from the date on

which the letter of resignation is accepted by the

appropriate authority and in the absence of any law or

rule governing the condition of the service to the

contrary, it will not be open to the public servant to

withdraw his resignation after it is accepted by the

appropriate authority and that till the resignation is

accepted by the appropriate authority in consonance

with the rules governing the acceptance, the public

servant concerned had locus poenitentiae but not

thereafter".

In Shambhu Murari Sinha's case it was held:

"Coming to the case in hand the letter of acceptance

was a conditional one inasmuch as, though option of

the appellant for the voluntary retirement under the

Scheme was accepted but it was stated that the "release

memo along with detailed particulars would follow".

Before the appellant was actually released from the

service, he withdrew his option for voluntary

retirement by sending two letters dated 7-8-1997 and

24-9-1997, but there was no response from the

respondent. By office memorandum dated 25-9-1997

the appellant was released from the service and that too

from the next day. It is not disputed that the appellant

was paid his salaries etc. till his date of actual release

i.e. 26-9-1997, and, therefore, the jural relationship of

employee and employer between the appellant and the

respondents did not come to an end on the date of

acceptance of the voluntary retirement and the said

relationship continued till 26-9-1997. The appellant

admittedly sent two letters withdrawing his voluntary

retirement before his actual date of release from

service. Therefore, in view of the settled position of

the law and the terms of the letter of acceptance, the

appellant had locus poenitentiae to withdraw his

proposal for voluntary retirement before the

relationship of employer and employee came to an

end".

It may be that therein there did not exist a clause to the effect that once an

option to voluntary retirement is accepted, the employee cannot withdraw the same,

but the law laid down therein would apply herein also.

The submission of learned Attorney General that as soon as an offer is made

by an employee, the same would amount to resignation in praesenti cannot be

accepted. The scheme was in force for a fixed period. A decision by the authority

was required to be taken and till a decision was taken, the jural relationship of

employer and employee continued and the concerned employees would have been

entitled to payment of all salaries and allowances etc. Thus it cannot be said to be a

case where the offer was given in praesenti but the same would be prospective in

nature keeping in view of the fact that it was come into force at a later date and that

too subject to acceptance thereof by the employer. We, therefore, are of the opinion

that the decisions of this Court, as referred to herein before, shall apply to the facts of

the present case also.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 29 of 32

However, it is accepted that a group of employees accepted the ex gratia

payment. Those who accepted the ex gratia payment or any other benefit under the

scheme, in our considered opinion, could not have resiled therefrom.

The Scheme is contractual in nature. The contractual right derived by the

concerned employees, therefore, could be waived. The employees concerned having

accepted a part of the benefit could not be permitted to approbate and reprobate nor

can they be permitted to resile from their earlier stand.

In Lachoo Mal's case (supra) the law is stated in following terms:

"The general principle is that every one has a right to

waive and to agree to waive the advantage of a law or

rule made solely for the benefit and protection of the

individual in his private capacity which may be

dispensed with without infringing any public right or

public policy. Thus the maxim which sanctions the

non-observance of the statutory provision is cuilibet

licet renuntiare juri pro se introducto. (See Maxwell on

Interpretation of Statutes, Eleventh Edition, pages 375

and 376). If there is any express prohibition against

contracting out of a statute in it then no question can

arise of any one entering into a contract which is so

prohibited but where there is no such prohibition it will

have to be seen whether an Act is intended to have a

more extensive operation as a matter of public policy.

In Halsbury's Laws of England, Volume 8, Third

Edition, it is stated in Paragraph 248 at page 1432:

As a general rule, any person can enter into a

binding contract to waive the benefits conferred upon

him by an Act of Parliament, or, as it is said, can

contract himself out of the Act, unless it can be shown

that such an agreement is in the circumstances of the

particular case contrary to public policy. Statutory

conditions may, however, be imposed in such terms

that they cannot be waived by agreement, and, in

certain circumstances, the Legislature has expressly

provided that any such agreement shall be void."

In Brijendra Nath Bhargava's case (supra), the law is stated in following terms:

"It clearly goes to show that if a party gives up the

advantage he could take of a position of law it is not

open to him to change and say that he can avail of that

ground. In Dawsons Bank Ltd. case their Lordships

were considering the question of waiver as a little

different from estoppel and they observed as under:

On the other hand, waiver is contractual, and may

constitute a cause of action; it is an agreement to

release or not to assert a right. If an agent, with

authority to make such an agreement on behalf of his

principal agrees to waive his principal's rights then

(subject to any other question such as consideration)

the principal will be bound, but he will be bound by

contract.

But in the context of the conclusion that we have

reached on the basis of circumstances indicated above

that it could not be held that the tenant had constructed

this dochatti or balcony a wooden piece without the

consent express or implied of the landlord, in our

opinion, it is not necessary for us to dilate on the

question of waiver any further and in this view of the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 30 of 32

matter we are not referring to the other decisions on

the question of waiver."

In Halsbury's Laws of England, 4th Edition, Vol.16 (Reissue) para 957 at

page 844 it is stated:

"On the principle that a person may not approbate and

reprobate a special species of estoppel has arisen. The

principle that a person may not approbate and

reprobate express two propositions:

(1) That the person in question, having a choice between

two courses of conduct is to be treated as having made

an election from which he cannot resile.

(2) That he will be regarded, in general at any rate, as

having so elected unless he has taken a benefit under

or arising out of the course of conduct, which he has

first pursued and with which his subsequent conduct is

inconsistent."

In American Jurisprudence, 2nd Edition, Volume 28, 1966, Page 677-680 it is

stated:

"Estoppel by the acceptance of benefits: Estoppel

is frequently based upon the acceptance and retention,

by one having knowledge or notice of the facts, of

benefits from a transaction, contract, instrument,

regulation which he might have rejected or contested.

This doctrine is obviously a branch of the rule against

assuming inconsistent positions.

As a general principle, one who knowingly accepts the

benefits of a contract or conveyance is estopped to

deny the validity or binding effect on him of such

contract or conveyance.

This rule has to be applied to do equity and must not

be applied in such a manner as to violate the principles

of right and good conscience."

We also accept the contention raised by the learned counsel for the

respondents that the concerned appellants could not have accepted the offer of

voluntary retirement after expiry of the scheme. All actions by the Banks were

required to be taken strictly in terms of the said scheme.

We are furthermore not in a position to accept the arguments of Mr. Mukul

Rohtagi to the effect that writ petitions were not maintainable as thereby the writ

petitioners intended to enforce a contract. The writ petitioners filed the writ

petitions, inter alia, questioning the validity of the scheme. In any event validity of

clause 10.5 of the said scheme was in question. The appellants herein are 'State'

within the meaning of Article 12 of the Constitution of India. The questions raised

by the writ petitioners thus could be raised in a proceeding under Article 226 of the

Constitution of India. Furthermore, in the event it be held that the action of the

appellants was arbitrary and unreasonable, the same would attract the wrath of

Article 14 of the Constitution of India. Furthermore, the right of the employee to

continue in employment, which is a fundamental right under Article 21 of the

Constitution of India could not have been taken away except in accordance with law.

The decision of this Court in Har Shankar and Ors. v. The Dy. Excise and Taxation

Commr. and Ors. [(1975) 1 SCC 737] is not apposite. In that case, this Court was

concerned with the question as to whether enforcing the terms and conditions of a

contract of supply of liquor which is a privilege would be permissible in a writ

proceeding? In the aforementioned situation, the writ was held to be not

maintainable. Such is not the position herein

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 31 of 32

We may now deal with that part of the order of the Punjab & Haryana High

Court whereby it has been held that the entire scheme is ultra vires being violative of

sub-regulation 4 of Regulation 19 of the Regulations.

We do not agree with the decision of the High Court on that count for more

than one reason.

Firstly, the scheme is not a part of the statutory regulation. It was in the

realm of contract. That being so it was not necessary for the Central Government to

place the same before the Parliament.

Secondly, even if the same was a regulation, the laying down rule is merely a

directory one and not mandatory.

In Jan Mohammad's case (supra), the law is stated in following terms:

"Finally, the validity of the rules framed under the

Bombay Act 22 of the 1939 was canvassed. By

s.26(1) of the Bombay Act the State Government was

authorised to make rules for the purpose of carrying

out the provisions of the Act. It was provided by sub-

s. (5) that the rules made under s.26 shall be laid before

each of the Houses of the Provincial Legislature at the

session thereof next following and shall be liable to be

modified or rescinded by a resolution in which both

Houses concur and such rules shall, after notification

in the Official Gazette, be deemed to have been

modified or rescinded accordingly. It was argued by

the petitioner that the rules framed under the Bombay

Act, 22 of 1939 were not placed before the Legislative

Assembly or the Legislative Council at the first session

and therefore they had no legal validity. The rules

under Act 22 of 1939 were framed by the Provincial

Government of Bombay in 1941. At that time there

was no Legislature in session, the Legislature having

been suspended during the emergency arising out of

World War II. The session of the Bombay Legislative

Assembly was convened for the first time after 1041

on May 20, 1946 and that session was prorogued on

May 24, 1946. The second session of the Bombay

Legislative Assembly was convened on July 15, 1946

and that of the Bombay Legislative Council on

September 3, 1946 and the rules were placed on the

Assembly Table in the second session before the

Legislative Assembly on September 2, 1946 and

before the Legislative Council on September 3, 1946.

Section 26(5) of Bombay Act 22 of 1939 does not

prescribe that the rules acquired validity only from the

date on which they were placed before the Houses of

Legislature. The rules are valid from the date on

which they are made under s. 26(1). It is true that the

Legislature has prescribed that the rules shall be placed

before the Houses of Legislature, but failure to place

the rules before the Houses of Legislature does not

affect the validity of the rules, merely because they

have not been placed before the Houses of the

Legislature. Granting that the provisions of sub-s. (5)

of s.26 by reason of the failure to place the rules before

the Houses of Legislature were violated, we are of the

view that sub-s.(5) of s. 26 having regard to the

purposes for which it is made, and in the context in

which it occurs, cannot be regarded as mandatory.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 32 of 32

The rules have been in operation since the year 1941

and by virtue of s.64 of the Gujarat Act 20 of 1964

they continue to remain in operation."

In Atlas Cycle Industries' case (supra) the same view has been reiterated.

We, therefore, are of the opinion that the scheme in question cannot be said

to be bad in law.

The Punjab and Haryana High Court in its impugned judgment has refused to

grant any relief in ten writ petitions, wherein prayers were made to the effect that the

bank should be directed to act in terms of the said scheme. The relief prayed for by

the concerned petitioners were denied by the High Court on the ground that the same

was not enforceable. We have not accepted that part of the judgment of the High

Court. In that view of the matter, the High Court must now consider the claim of the

said writ petitioners on merits and pass an appropriate order in accordance with law.

The said matters are, therefore, remitted to the High Court for consideration thereof

afresh.

For the reasons aforementioned, we direct that :

1. The appeals preferred by the Nationalised Banks arising from the

High Courts are dismissed except the cases where the concerned

employees have accepted a part of the benefit under the scheme;

However, in respect of such of the employees who despite acceptance

of a part of the retirement benefit under the scheme had continued

under the orders of the High Court and has retired on attaining the

age of superannuation, this order shall not apply;

2. The appeals filed by the State Bank of India are allowed;

3. The appeals arising from the judgments of the Uttaranchal High Court

are allowed and the judgments of the said High Court are set aside;

4. The appeals arising from the judgments of the Punjab and Haryana

High Court in relation to ten writ petitions which were filed by the

employees for a direction upon the Bank that the benefits under the

scheme be paid to them are set aside and the matters are remitted to

the High Court for consideration thereof afresh on merits and in

accordance with law;

These appeals are disposed of on the above terms. However, in the facts and

circumstances of the case, the parties shall pay and bear their own costs throughout.