2006 (2) TMI 661 - SC - Indian Laws

Voluntary retirement scheme - Entitlement to benefits of revised scale of pay - whether in view of the fact that the employees who had opted for voluntary retirement having not been excluded from the purview of Clause 3.3 of the Circular No.5/97, would be treated to be included or the benefits thereof would be available to only such employees who come within the purview of Clause 3.2 thereof ? - HELD THAT - We have indicated hereinbefore that before floating such a scheme both the employer as also the employee take into account financial implications in relation thereto. When an invitation to offer is floated by reason of such a scheme, the employer must have carried out exercises as regard the financial implication thereof. If a large number of employees opt therefor, having regard to the financial constraints an employer may not accept offers of a number of employees and may confine the same to only a section of optees. Similarly when an employer accepts the recommendations of a Pay Revision Committee, having regard to the financial implications thereof it may accept or reject the whole or a part of it. The question of inclusion of employees who form a special class by themselves, would, thus, depend upon the object and purport thereof. The appellants herein do not fall either in clauses 3.2 or 3.3 expressly. They would be treated to be included in clause 3.2, provided they are considered at par with superannuated employee. They would be excluded if they are treated to be discharged employee. We have noticed that admittedly thousands of employees had opted for voluntary retirement during the period in question. They indisputably form a distinct and different class. Having given our anxious consideration thereto, we are of the opinion that neither they are discharged employees nor are superannuated employees. The expression superannuation connotes a distinct meaning. It ordinarily means, unless otherwise provided for in the statute, that not only he reaches the age of superannuation prescribed therefor, but also becomes entitled to the retiral benefits thereof including pension. Voluntary retirement could have fallen within the afore-mentioned expression, provided it was so stated expressly in the scheme. We are of the opinion that it cannot be said that the Company intended to extend the said benefits to those who had opted for voluntary retirement. Clause 3.2 of the circular includes only those who were on the rolls of the Corporation as on 1.1.1992, as also those who ceased to be in service on that date on account of superannuation or death. The appellants do not come in the said category. In view of the fact that they have not been expressly included within the purview thereof, we are of the opinion that although they have not been excluded by clause 3.3, they would be deemed to be automatically excluded. We are, however, of the opinion that the same would not advance the case of the appellants for more than one reason. Firstly, the said office memorandum dated 5th May, 2000 cannot be considered by us as the same had been filed for the first time with the written submissions. No opportunity therefore had been given to the respondents to respond thereto. Secondly, the same is a general circular whereas the circular letter dated 24th May, 1993 issued by the Union of India deals with the particular problem wherein it has categorically been stated that the Central Government shall nor undertake the financial responsibility therefor. In any event, the said letter refers to the schemes which might have come into force after 2000. It evidently, does not refer to the 1987 Scheme vis- -vis the revision of the pay scales. The appeals, thus, being devoid of any merit are dismissed.

Issues Involved:
1. Applicability of revised pay scales to employees who opted for voluntary retirement.
2. Interpretation of Voluntary Retirement Scheme (VRS) and its implications.
3. Legal relationship between employer and employee post voluntary retirement.
4. Financial implications and planning associated with VRS.
5. Distinction between superannuation and voluntary retirement.

Issue-wise Detailed Analysis:

1. Applicability of revised pay scales to employees who opted for voluntary retirement:
The appellants, who opted for voluntary retirement under the scheme dated 22.10.1990 and retired between 1.1.1992 and 31.12.1996, contended that they were entitled to the benefits of the revised pay scales as per Circular No.5/97 dated 9th October 1997, which had retrospective effect from 1.1.1992. However, the High Court dismissed their writ petition, stating that the appellants had no legal right to the revised pay scales since they had voluntarily retired before the issuance of the circular. The Supreme Court upheld this view, noting that the appellants did not fall within the categories specified in Clause 3.2 of the circular, which included only those who superannuated or died while in service.

2. Interpretation of Voluntary Retirement Scheme (VRS) and its implications:
The VRS was floated as a measure for the revival of the sick company, Heavy Engineering Corporation Limited, and offered several benefits to employees opting for voluntary retirement. The scheme was purely voluntary, and employees had the option to accept or reject it. The Supreme Court emphasized that the VRS led to a concluded contract between the employer and the employee, governed by the provisions of the Indian Contract Act, 1872, as it was not regulated by any statute or statutory rules. The court highlighted that such schemes are beneficial for both employees and employers, aiming to downsize the workforce and improve the company's financial health.

3. Legal relationship between employer and employee post voluntary retirement:
The court noted that voluntary retirement results in the cessation of the jural relationship between the employer and the employee. Once an employee opts for voluntary retirement, they cannot claim a higher salary unless entitled by statute or company policy. The court stated that the appellants, having opted for voluntary retirement, were bound by the terms of the contract and could not claim benefits under the revised pay scales, which were applicable only to those in service or who superannuated or died while in service.

4. Financial implications and planning associated with VRS:
The Supreme Court recognized that a VRS is preceded by financial planning, considering the financial implications for the company, especially when it is a sick industrial undertaking. The company accepts offers for voluntary retirement based on available finances. The court observed that the appellants, having accepted the benefits under the VRS, could not anticipate additional benefits from the revised pay scales, which were not considered at the time of their retirement. The court also noted that the Central Government's clarification did not bind the company to bear the financial burden of the revised pay scales for those who opted for voluntary retirement.

5. Distinction between superannuation and voluntary retirement:
The court distinguished between superannuation and voluntary retirement, stating that superannuation generally means reaching the age of retirement and becoming entitled to retiral benefits, including pension. Voluntary retirement, on the other hand, is a distinct concept and does not automatically entitle the employee to benefits applicable to superannuated employees. The court emphasized that the VRS was a special scheme and did not become part of the general terms and conditions of employment, even though it was extended over ten years.

Conclusion:
The Supreme Court dismissed the appeals, concluding that the appellants, having voluntarily retired under the VRS, were not entitled to the benefits of the revised pay scales. The court upheld the High Court's judgment, stating that the appellants did not fall within the categories specified in the circular for the revised pay scales and were bound by the terms of the voluntary retirement contract. The court also noted the financial implications and planning associated with the VRS and the distinction between superannuation and voluntary retirement.

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