Holding

The VRS is an invitation to treat; the employee’s application is a revocable offer under Section 5 of the Contract Act, making clause 10.5 void and the scheme not ultra vires.

Summary

The Supreme Court examined the validity of Voluntary Retirement Schemes (VRS) introduced by State Bank of India and other nationalised banks, focusing on whether an employee’s application for retirement could be withdrawn before the bank’s acceptance despite a clause stating the request was irrevocable. The Court held that the schemes were merely invitations to treat, not offers, so the employee’s application constituted an offer that could be revoked under Section 5 of the Indian Contract Act. Consequently, clause 10.5 of the VRS was held void and the schemes were not ultra vires of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970. The Court also affirmed that the banks, being ‘States’ under Article 12, could be challenged under Article 226, and that any arbitrary action would violate Articles 14 and 21. Appeals by nationalised banks were largely dismissed, while those by the State Bank of India and the Uttaranchal High Court were allowed, and the Punjab & Haryana High Court decisions were set aside with matters remitted for fresh consideration.

Issues considered

Whether an employee can withdraw an application for voluntary retirement before it is accepted, notwithstanding a contractual clause stating the request is irrevocable.
Whether the Voluntary Retirement Scheme constitutes a statutory regulation subject to Section 19(4) of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970, and thus is ultra vires.
Whether the scheme is an offer or an invitation to treat under the Indian Contract Act, 1872.

Legislation cited

Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970s. 19(1), s. 19(2)(t), s. 19(4), s. 7(2)
Indian Contract Act, 1872s. 2(a), s. 2(b), s. 2(g), s. 2(h), s. 5
Payment of Gratuity Act, 1972
State Bank of India Act, 1955

Subjects

voluntary retirement schemeoffer and acceptanceinvitation to treatcontract lawemployee withdrawalbanking regulationsSection 5 Indian Contract Actultra viresArticle 12Article 14Article 21public sector banks

Judgment

A BANK OF INDIA AND ORS.
v.
O.P. SWARANAKAR ETC.

DECEMBER 17, 2002

B [G.B. PATTANAIK, CJ., H.K. SEMA AND S.B. SINHA, JJ.]

Service Law:

State Bank of India Act, 1955-Banking Companies (Acquisition and
C Transfer of Undertaking) Act, 1970-Contract Act, 1872-Sections 2{a), (b),
(g), (h) and 5-Voluntary Retirement Scheme.floated by Nationalised Bauks
and State Bank of India-Whether application for VRS irrevocable and
applicant has right to withdraw the application of voluntary retiremen/-
Held: Scheme having regard to its provisions is an invitation to treat and
D not an offer which on acceptance by employee would fructifY into a concluded
contract-Application for voluntary retirement by employees would constitute
an 'offer' thus it could be withdrawn before it is accepted -However, employee
having accepted part of benefit cannot be permitted to aprobate or reprobate
nor permitted to resi/e therefrom.

E Voluntaiy Retirement Scheme by Banks-Jura/ relationship between
employer and employee-Discussed.

Banking Companies (Acquisition and Transfer of Undertaking) Act,
1970-Section 19(4)-Voluntary Retirement Scheme floated by banks-Bank
employee challenging validity-High Court holding scheme ultra vires-On
F appeal held: Since scheme is not part of statutory regulation but in realm
of contract it was not necessary for Central Government to place it before
the Parliament-Even if same was regulatory, the laying down rule is merely
directory and not mandatory-Thus scheme not bad in law and High Court
erred in striking down the scheme.
G Constitution of India, 1950-Artic/es 226, 12, 14, and 21-Writ Petition
challenging validity of Voluntary Retirement Scheme floated by banks and
provision barring withdrawal of request of voluntary retiremenl-
Maintainability of-Held: Writ Petition is maintainable since banks are
State under Article 12, thus could be raised under Article 226-ln the event
H 438
BANK OF INDIA v. O.P. SWARANAKAR 439
the action of bank is arbitrary and unreasonable it would attract Article A
14-Further, right of employee to continue in employment is a fundamental
right under Article 21 which cannot be taken away except in accordance
with law.

Due to surplus staff, the State Bank of India as well as Nationalised
Banks adopted "Employees Voluntary Rc:_tirement Scheme". It was applicable B
to employees who on the date of application had completed 15 years of service
or 40 years of age. Employees were specified who were not eligible to seek
voluntary retirement. Period of operation of scheme varied from bank to bank.
In terms of the scheme those who sought voluntary retirement were entitled
to ex-gratia payments and other benefits. Under the scheme bank reserved C
with itself the right to withdraw scheme at any time it thinks fit and its decision
in this behalf was to be final.

Large number of employees submitted applications under the Scheme,
out of which small number of them withdrew their applications. Despite their
withdrawal their applications were accepted. In some cases it was accepted D
within the period during which the scheme was operated and in some cases,
beyond the period. Aggrieved applicants filed Writ petitions in various High
Courts challenging the action of the banks in accepting the applications of
the concerned employees despite their withdrawal. Writ applications were also
filed by some employees seeking issuance of writ of mandamus directing the
respective banks to pay their lawful dues strictly in terms of the scheme. E
Punjab and Haryana High Court held the scheme ultra vires as the same was
not laid before the Parliament Bombay High Court and other High Court held
that clause I 0.5 of scheme or the scheme framed by the other banks is not
operative as the employees have indefeasible right to withdraw their offer
before the same is accepted. Hence the present batch of appeals. F
Various banks inter alia contended that the scheme if read in its entirety
would clearly show that the same was an offer and not invitation to treat; that
clause 10.5 of the scheme is not illegal, the concerned employees must be
held to have resigned in praesenti and thus the contractual bar contained
therein cannot be held to be bad in law; that as each of the employees had G
made irrevocable and unconditional offer of terms and conditions laid down
in scheme, they could not have withdrawn therefrom and as some of them
accepted ex-gratia payment they were estopped from questioning the same and
the employees who accepted ex-gratia payment could not have been permitted
by High Court to approbate or reprobate; that a contract of employment can H
440 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.

A be terminated unilaterally; that 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; that High Court erred in
holding that scheme being a regulation it was necessary for the Central
Government to lay it before Parliamegt; and that as the writ petitions involved
B enforcement of contract qua contract, they were not maintainable.

Employees of the various banks interalia contended that law is laid down
that an offer of resignation can be withdrawn before the same is accepted;
that scheme is merely an invitation to offer and option pursuant thereto on
the part of employee would constitute an offer; that having regard to Section
C 5 of the Contract Act, employee had an absolute right to withdraw the same
before a concluded contract is arrived at, thus clause I 0.5 of the Scheme is
ultra vires Section 5; that clause 10.5 would not amount to a contractual bar
as it was not based on consideration; that when employee has voluntarily
withdrawn the offer, doctrine of option will have no application as by reason
thereof employee has not received the benefit in one part of the contract and
D then questioned the rest thereof; that the procedure of the scheme shows that
irrevocable nature of option would be relevant only ifthe same culminates
into an acceptance; that mere declaration given by an offer or that he would
not withdraw or cancel the offer would not destroy his locus; that even after
acceptance the offer could be withdrawn, such an action on the part of the
E optioner is permissible and thus the application of contractual bar must be
held to be applicable only in a case where offeror has been relieved from his
part not prior thereto; that it cannot be said that the statutory regulation has
nothing to do with the Scheme as pension was to be calculated in terms thereof;
that after the offer had been made, concerned banks amended the scheme and
instead and in place of full pension the principle of pro-rata pension was
F introduced by which employees were gravely prejudiced, thus the concerned
employees derived a legal right to withdraw from the scheme; and that as the
scheme is contractual in nature, benefits which were otherwise available to
the employees under the scheme could not have been curtailed.

Disposing of the appeals, the Court
G
HELD: I.I. Voluntary Retirement Scheme admittedly being contractual
in nature, provisions of the Contract Act, 1872 shall apply. In the instant case,
banks have not expressed their willingness to do or abstain from doing anything
with a view to obtaining assent of the employees to such act. Bank could accept
H ot reject application for voluntary retirement and it could also amend or
BANK OF INDIA v. O.P. SW ARANAKAR 441
rescind the scheme. There was no reasonable certainty that the scheme would A
be acted upon. 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, even by opting for the scheme as floated by the
banks, no consideration is passed far less amounting to reciprocal promise. B
Therefore, scheme merely constituted invitation to treat and not an offer which,
on acceptance by employee, would fructify into a concluded contract and
applications filed by the employees constituted 'offer'. Once the application
filed by employees is held to be an 'offer', section 5 would come into play, in
absence of any other independent binding contract or statute or statutory rules
to the contrary. Thus the applicant has right to withdraw the application for C
voluntary retirement before it is accepted. (471-F-G; 472-A(

Devi Krishan Goyal v. District Inspector ofSchools, Ghaziabad and Ors.
J. T., (1988) 4 SC 201, referred to.

Gibson v. Manchester City Council, (1979) All. E.R. 972, referred to. D
Cheshire, Fifoot & Furmston 's Law of Contract (14th Edition) p. 62;
Chitty on Contract; Treitel's Law ofContract; Hamilton, Rau and Winthraub
on Contracts; Halsbury's Laws of England, 4th Edition, Volume-9, para 227,
p. 98, referred to.
E
1.2. In the instant case it is not a case where on mere making of option
on the part of 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. Submission that the proposal to
the effect that the option made by an employee would be considered, is a
consideration cannot be accepted. (471-B) F
1.3. The submission that offer was made by bank by floating scheme
and once an application is filed, same would amount to acceptance of offer
taking recourse to the doctrine of option, proceeds on total misconception.
This could be applicable only at the instance of the offeror who in the instant G
case would be employee. 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. (474-B, C, D(

Anson's Law ofContract 28th Edition, p 51and53; Halsbury's Laws of H ·
442 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.

A England 4th Ed. para 235 p. 160; Chitty on Contract 28th Edition, para 3-
161, referred to. .

2.1. A large number of employees withdrew their offer only when a
proviso was sought to be added to Regulation 28. In terms of the Scheme the
employees, who expected to get benefits of clause 4 of Regulation 29 would be
B deprived therefrom. It is not in dispute that the qualifying period for receiving
pension was 20 years and upon completion of20 years, as per 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 regulation had specifically been mentioned for the purpose
C 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
D was sought to be made pro rata in place of full pension. 1478-B-DI
...
2.2. The basic concept of the scheme, underwent a change which also
goes to show that the banks had sought to invoke the 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
E as envisaged under the scheme, they were entitled to revoke their offers. Their
action 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. 1478-E-Fl

F 2.3. State Bank of India had not amended the scheme. It even permitted
withdrawal of the applications after 15th February. The scheme floated by State
Bank of India contained clause 7 laying down the mode and manner in which
the application for voluntary retirement shall be considered. The relevant
clause creates an enforceable right. In the event, State Bank of India failed to
adhere to its preferred policy, same could have been specifically enforced by
G a court of law and would amount to some consideration. (478-G, H; 479-AI

2.4. High Court failed to take into consideration the provisions of State
Bank of India Act, 1955 and also that the matter relating to grant of pension
was not covered by any statutory regulation. Furthermore the submission that
by reason of the scheme, the tenure of service has been curtailed to some
H extent which is permissible in law, cannot be accepted. (479-B, q
BANK OF INDIA v. O.P. SWARANAKAR 443

2.5. The submission that as soon as an offer is made by an employee, A
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 B
case where the offer was given in praesenti but the same would be prospective
in nature keeping in view the fact that it was to come into force at a later date
and that too subject to acceptance thereof by the employer. 1484-E-GI

Union of India and Ors. v. Gopal Chandra Misra and Ors., (19781 2
SCC 301; Jai Ram v. Union of India, AIR 119541 SC 584; Raj Kumar v. Union C
of India, (196813 SCR 857; Bairam Gupta v. Union of India and Anr., (1987(
Supp. SCC 228; Punjab National Bank v. P.K. Mittal, 119891 Supp. 2 SCC
175; Power Finance Corporation Ltd. v. Pramod Kumar Bhatia, (1997( 4 SCC
280; JN. Srivastava v. Union of India and Anr., (199819 SCC 559; Union of
India and Anr. v. Wing Commander T. Parthasarathy, 1200111 SCC 158 and
Shambhu Murari Singh v. Project and Development India ltd and Anr., 120021 D
3 sec 437, referred to.

2.6. The Scheme is contractual in nature. The contractual right derived
by the concerned employees, therefore, could be waived. Employees concerned
having accepted ex gratia payment or any other benefit could not be permitted
to approbate and reprobate nor can they be permitted to resile from their E
earlier stand.1485-A(

Shri lachoo Mal v. Shri Radhey Shyam, 1197111SCC619 and Bijendra
Nath Bhargava and Anr. v. Harsh Wardhan and Ors., (1988( 1 SCC 454,
referred to.
F
Halsbury's laws of England, 4th Edition, Vol.16 (Reissue) para 957
p.844; American Jurisprudence, 2nd Edition, Volume 28, 1966, p 677-680,
referred to

2.7, The submission that the appellants could not have accepted the offer G
of voluntary retirement after expiry of the scheme is accepted. All actions by
banks were required to be taken strictly in terms of the scheme. (487-81

3. Voluntary Retirement Scheme is not a part of the statutory regulation
but was in the realm of contract. That being so it was not necessary for the
Central Government to place the same before Parliament. Even ifthe same H
444 SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.

A was a regulation, the laying down rule is merely a directory one and not
mandatory. Order of Punjab and Haryana High Court that Voluntary
Retirement Scheme is ultra vires being violative of section 19(4) of the 1970
Act is not correct and hence the Scheme cannot be said to be bad in law.
1487-H; 488-A; 489-BJ

B Jan Mohammad Noor Mohammad Begban v. State of Gujarat and Anr.,
11966) l SCR 505 and Mis. Atlas Cycle Industries Ltd. and Ors. v. The State
of Haryana, 119791 2 SCC 196, referred to.

4. The submission that the writ petitions are not maintainable as writ
petitioners intended to enforce a contract cannot be accepted. Writ petitioners
C questioned the validity of clause 10.5 of Voluntary Retirement Scheme.
Appellants herein are 'State' within the meaning of Article 12 of the
Constitution of India. The questions raised by writ petitioners thus could be
raised in a proceeding under Article 226. Furthermore, in the event it be
held that the action of appellants was arbitrary and unreasonable, the same
D would attract the wrath of Article. The right of the employee to continue in
employment, which is a fundamental right under Article 21 could not have
been taken away except in accordance with law. 1487-C-El

Har Shankar and Ors. v. The Dy. Excise and Taxation Commr. and Ors,,
11975) l sec 737, distinguished

E 5. 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 High Court and has retired on attaining the age of superannuation, this
order shall not apply. In respect of the orders of the Punjab and Haryana High
Court refusing to grant the relief to the employees of Punjab and Sind Bank
F on the ground that the Scheme was not enforceable, the matters are remitted
to the High Court for consideration afresh on merits and in accordance with
law.1489-F, 489-H; 490-AI

CIVIL APPELLATE JURISDitTION : Civil Appeal No. 854 of2002.

From the Judgment and Order dated 29.3.2001 of the Rajasthan High
G Court in DBCSA 1984 of2001.
WITH
C.A.Nos.855,870,874,877,878,879,883, 7353-7354, 7355, 7356,873,
876, 880, 3552-60, 4067, 5380-81, 875, 881, 8467, 8499, 8511, 7314-35, 3561-
H 65, 896, 955, 8500, 8500A, 85008 of2002.
BANK OF INDIA v. O.P. SWARANAKAR [S.B. SINHA, J.) 445

Mukul Rohtagi, Additional Soliciter General, Soli J. Sorabjee, Attorney A
General, V.R. Reddy, Ashok Kumar Panda, L.N. Rao, Gopal Subramanian,
Rakesh Dwivedi, Rajeev Dhawan, Jagdeep Dhankar, Ms. Nina Gupta,
Ms. Arpita Mahanan, Navin Giri, Saurav Agrawal, Laksh Yadav, Ms. Bina
Gupta, Dhruv Mehta, Mohit Chaudhary, Jos Chiramel, S.B. Upadhyay, R.K.
Tripathi, Shailendra Bhardwaj, Pale Ram Dhania, Anil Kumar Sangal, Pradeep B
Gupta, Ms. Geetanjali Mohan, C.M. Kennedy, S.M, Jadhav, Himanshu
Gupta, Ms. Ruby Singh Ahuja, Meenakshi Arora, Ms. S. Srivastava, Sanjay
Kapur, Ms. Shubhra Kapur, Sushil Balwada, Anil Hooda, Alok Sangwan,
Devendra Singh, D.N. Goburdhan, Geeta Luthra, Ms. Pinky Anand, Bhupinder
Yadav, S.S. Shamsher, Babita Yadav, R.C. Kohli, Pradeep Gupta, K.K. Mohan,
Bhupinder Singh, Shiv Kant Arora, Sanjeev Sahay, Ms. Pratibha Jain, C
Sanjiv Sharma, A.P. Dhamija, Y.P. Sharma, Raj Kumar, K.K. Gupta,
Ms. Kawaljit Kochar, S.C. Paul, Ms. Kusuin Cha~dhary, Jagat Arora, Rajat
Arora, Ms. Ritu Arora, Aditya Kumar Chaudhary, U.S. Prasad, O.P. Gaggar,
Shree Pal Singh and Rajiv Nanda, for the appearing parties.

The Judgment of the Court was delivered by D
S.B. SINHA, J. Leave granted in the special leave petitions.

A common question, as to whether an employee who opts for the
voluntary retireinent pursuant to or in furtherance of a scheme floated by the
Nationalised Banks and the State Bank of India would be precluded from E
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 F
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 G
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 : .~ H
" •*
446 SUPREME COURT REPORTS [2002] SUPP. S S.C.R.

A "While there is a need for inducting new workforce, which had adequate
knowledge ofnew skills such as modem 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
B 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
c recruit 50% officers from open market in accordance with the needs
of the hanks 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
D 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
E
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 compete with other banks operating in the country and their
profitability will remain under severe strain. Optimising the existing
F work force is also necessary to facilitate recruitment of personnel with
specialised skills required for appropriate use of infonnation 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.
G
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.
H
BANK OF INDIA v. 0.P. SWARANAKAR (S.B. SINHA, J.] 447

3.15.4 The Committee further reiterates that the Government may A
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 resuit 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 B
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.
c
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 D
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 :-
E
"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 :-
F
(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;
G
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 of this scheme :-
H
448 SUPREME COURT REPORTS [2002) SUPP. 5 S.C.R.

A (Q 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
(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
C 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.
D
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 :-

"I o.4. A mere request of an employee seeking voluntary retirement
E 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.
F
I0.6. 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
G
authority. Acceptance or otherwise of the request of an employee
seeking voluntary retirement will be communicated to him in writing.

I0.11. An employee who would seek voluntary retirement under this
scheme will not be eligible for re-employment in the bank or any of
H its subsidiaries.
BANK OF INDIA v. O.P. SWARANAKAR (S.B. SINHA, J.] 449

10.13. The benefits payable under this scheme shall be in full and final A
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, B
whether for re-employment or compensation or back wages including
employment of any of his relative on compassionate grounds in 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.
c
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
D
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 E
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 F
of the Bank.

(For workmen employees & officers upto scale-lll)

The Dy. General Manager
Personnel Division G
Head Office
New Delhi.
(Through proper channel)
Sir, H
450 SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.

A 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
B 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
C consideration of my offer to seek voluntary retirement from the service
of the Bank under the above scheme.

Yours faithfully,

Signature of the Employee

D Place: Name - - - - - -
Date : Designation_ _ _ __
BO/Division - - - -
A large number of employees (1,01,000 employees approx.) submitted
their applications out of whom a small number of employees (200 employees
E 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
F Board of Directors.

Questioning the action on the part of the banks, in accepting the
applicat!ons of the concerned employees despite their withdrawal, writ petitions
were filed in the Punjab & Haryana High Court, Bombay High Court, Uttaranchal
High Court etc.
G
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.
H
BANK OF INDIA v. 0.1~. SWARANAKAR (S.B. SINHA, J.] 451

The Punjab & Haryana High Court by reason of its judgment impugned A
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. B
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
C.W.P. Nos.1458, 1472 of2001 and C.W.PNos. 303 and 1765 of2002
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, D
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 E
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.
F
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
IO 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 G
from a valid scheme and the moment the s~heme 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 YRS. Scheme but they H
452 SUPREME CO_URT REPORTS [2002] SUPP. 5 S.C.R.

A 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,
B held that clause I0.5 of the scheme or the scheme 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 and Ors. v. Gopal Chandra Misra and Ors.. [1978] 2 SCC 301,
C Bairam Gupta v. Union of India and Anr., [1987] Supp. SCC 228, Punjab
National Bank v. P.K. Miua/, [1989] Supp. 2 SCC 175, Union of India and
Anr. v. Wing Commander T. Parthasarathy, [200 l] 1 SCC 158 and Shambhu
Murari Sinha v. Project and Development India Ltd. and Anr., [2002] 3 SCC
437.

D 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
E 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
F 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
G Indian Contract Act, 1872 or the Constitution of India. Taking us through the
decisions of this Court in Gopa/ Chandra Misra (supra), T. Parthasarthy
(supra), Bairam 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
H a provision prospective resignation can be withdrawn before its acceptance.
BANK OF INDIA v. O.P. SWARANAKAR [S.B. SINHA, J.] 453
It was further submitted that as each of the employees had made irrevocable A
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 B
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
and Anr. v. Harsh Wardhan and Ors., [1988] I SCC 454, Shri lachoo Mal v.
Shri Radhey Shyam, [1971] l SCC 619, Halsbury's Laws of England, Fourth
Edition, Volume 16, para 957 and American Jurisprudence, 2d, Volume 28,
pages 677 to 680. C
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 D
not vitiate the scheme itself. Strong reliance, in this connection, has been
placed in Jan Mohammad Noor Mohammad Begban v. State of Gujarat and
Anr., [1966] I SCR 505 and Mis. Atlas Cycle Industries ltd. and Ors. v. The
State of Ha1yana, [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 E
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 p
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 G
response received from the employees and several other relevant factors. In
the aforementioned situation, the learned counsel would submit that clause
I 0.5 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 H
454 SUPREME COURT REPORTS [2002) SUPP. 5 S.C.R.
A requirement of the individual employees.
As regards the validity of clause I0.5, 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
B 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
C contract, they were not maintainable. The learned counsel placed strong
reliance in Har Shankar and Ors. v. The Dy. Excise and Taxation Commr and
Ors., [1975] l 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
D itself insofar as it failed to take into consideration that the provisions 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,
E implementation thereof was contemplated in a time-bound manrier i.e.:-
(a) Opportunity to the employees to apply for voluntary retirement
during the period 15 .1.200 I to 31.1.200 I; ·

(b) Opportunity to the employees to withdraw, if so desired by
F 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
G employees, by a circular a cut-off date of 15.2.2001 was fixed; thereby gra'!ting
opportunities to the employee to withdraw the option exercised by him. The
logic and necessity therefor, inter a/ia, was :-

(i) the purpose of the SBJVRS was inter alia to have overall reduction
in the existing strength of the employees. However, the bank
H
BANK OF INDIA v. O.P. SWARANAKAR (S.B. SINHA, J.] 455
were also required to control the outflow according to its A
requirements, for which the ban~ 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 YRS; the petitioner bank had
to process the applications of all the employees who had opted B
for YRS. This ratio of 10% could be achieved only after the bank
receives a definite figure about the number of persons opting for
YRS and withdrawing later.
(iiO Further the final decision of the category of persons eligible
under YRS could be taken only after the petitioner bank had the C
final tally regarding the last and final figure of number of persons
who had opted under the YRS.
(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 D
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. E
It has been pointed out that around 35,380 employees had applied under
the said schem"' 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.
F
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 G
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 H
456 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.

A placed on 'Chitty on Contract' paras 37-114 and 37-115.
Mr. Nageshwar Rao, learned senior counsel appearing on behalf of the
appellants in civil appeal arising out ofSLP (C) CC No.7966, inter alia, would
submit that the decisions of this Court in Bairam Gupta (supra) and
Parathasary (supra) in no unmistakable terms laid down the law that an offer
B 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
C 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.

D Strong reliance, in this connection, has been placed on Rajendra
Kumar Verma v. State of Madhya Pradesh and Ors., AIR (1972) MP 131,
Abdus Salam Choudhury v. The State ofAssam and Ors., AIR (1991) Gauhati
9 and Devi Krishan Goyal v. District Inspector of Schools, Ghaziabad and
Ors., J.T. (1988) 4 SC 201.

E Mr. Gopal Subramanium, learned senior counsel appearing on behalf of
the respondent in Civil Appeals arising out of SLP (C) Nos.19373-404 of2002,
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 to be read as a whole. It was
F pointed out that the scheme had a limited duration from 1.12.2000 to 3 I .12.2000,
and a cumulative consideration of the relevant clauses would clearly show
that the relationship between the master a:id 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 ofthe Branch Manager and Zonal Manager and
upon their recommendation the same was ultimately to be taken up by the
G Personnel Department will clearly go to show that irrevocable nature of option
would be relevant only ifthe 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 JN. Srivastava v. Union ofIndia and Anr.,
H [1998] 9 SCC 559, Gopal Chandra Misra (supra), Parthasarathy (supra),
BANK OF INDIA v. O.P. SWARANAKAR (S.B. SINHA, J.] 457
Shambhu Murari Sinha (supra), Bairam Gupta (supra), the learned counsel A
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.
B
The decisions of this Court, Mr. Subramanium 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. C
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 D
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 E
from the said scheme.

Mr. Rakesh Dwivedi, learned senior counsel appearing on behalf of the
respondents in Civil Appeals arising out ofSLP (C) Nos. 19373-405 of2002,
would contend that the offending clause having been unilaterally prescribed F
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, G
namely, Zoravarmal v. Gopal Das, AIR {1922) Mad. 486, 491, Secretary of
State v. Bhaskar Krishnaji, AIR (1925) Bom. 485,487, 488, Somu Szmdram
Pillai v. Provincial Government, AIR (1947) Mad. 366, 368, Raghunandan v.
State of Hyderabad, AIR (1963) AP I lO, 113, T. Linga Godar v. State of
Madras, AIR (1971) Mad. 28, Rajendra K. Vernia v. State ofMP., AIR (1972) H
458 SUPREME COURT REPORTS [2002) SUPP. 5 S.C.R.

A 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. StateofU.P., AIR (1981)Allahabad213,216-217,M/s. Sura)Besan
& Rice Mills v. FC/, AIR (1988) Delhi 224, A.S. Khongphai, v. Special
Judicial Officer, AIR (1981) Gau, 9, it was argued that in absence of any
B statute or statutory rules governing the field, Section 5 of the Indian Contrac-t
Act would be attracted and in that view of the matter clause I 0.5 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
C contractual bar cannot be imposedc Reliance, in this connection, has been
placed on Delhi Transport Corporation v. D. TC Mazdoor Congress and
Ors., [1991] Supp.I 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.
D
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 8.1.200 I i.e. well after the expiry of the
period of the scheme, namely, 31.12.2000, the competent authority had no
E jurisdiction to accept the same.

Mr. Panda appearing for the Appellant in Civil Appeal No.955 of 2002
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
p 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 and Ors. v. Reserve Bank of India and Anr., [1982) 2 SCC 7.
Mr. Panda contended that by reason of the impugned judgment, the Uttaranchal
G 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
H cannot be sustained.
BANK OF INDIA v. O.P. SWARANAKAR (S.B. SINHA, J.) 459
Mr. D. Goburdhan, appearing on behalf of the respondent-employee of A
the State Bank of India would submit that his client, who had completed 19
years, I 0 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 B
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 C
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. D
The learned counsel appearing in SLP (C) CC No. 7966 would submit that
the Punjab & Haryana High Co\lrt 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 E
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)(t) and 19(4) of 1970 Act read as follows:- F

"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 G
authorised to exercise and do."

"I 9. Power to make regulations. - (I) 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 H
460 SUPREME COURT REPORTS [2002) SUPP. 5 S.C.R.

A with the provisions of this Act or any scheme made thereunder, to
provide for alt 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 may provide for alt or any of the
B following matters, namely, :-

(a)

(b)

(c)
c
(d)

(e)

(t) the establishment and maintenance of superannuation, pension,
provident or other funds for the· benefit of officers or other employees
D
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
E 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
F 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
G
regulation."

Pursuant to or in furtherance of the power conferred upon the 'Ba~k'
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
H provisions being Regulations 28 and 29 thereof read thus :-
BANK OF INDIA v. O.P. SWARANAKAR [S.B. SINHA, J.] 461
"28. Superannuation Pension A
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
B
(I) On or after the I st 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 c
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;
(3) Provided further that this sub-regulation shall not apply to an D
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;
E
Provided that this sub-regulation shall not apply to an employee
who is deemed to have retired in accordance with clause (I) 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 F
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 :-
G
"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''.
H
462 SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.

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

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

B "SB! VOLUNTARY RETIREMENT SCHEME (SBIVRS)

l.xxx

2. Objectives :

I. To have a balanced age profile providing for mobility, training,
c 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
ppportunities elsewhere.
D
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,
E except those specifically mentioned as 'ineligible', who have put
in I 5 years of service or have completed 40 years of age as on
3 Ist December, 2000.
Age will be reckoned on the basis of the date of birth as entered
in service record.
F
Ineligible:
The following categories of employees are ineligible under the
scheme;
(0 Staff members who have executed bonds and have not completed
G 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.
(iO Employees against whom Disciplinary Proceedings are
contemplated/pending or who are under suspension. This will
H also include employees against whom action has been initiated
BANK OF INDIA v. O.P. SWARANAKAR [S.B. SINHA; J.] 463
by Government Agencies/other Jaw enforcing agencies. A
(iiQ Employees appointed on contract basis.
(iv) Watch and ward staff.
(v) Specialist Officers.
(vi) Highly skilled and qualified staff. B
4. xxx

5. Amount ofEx-gratia:
The staff members whose request fqr retirement under SBIVRS
has been accepted by Competent Authority will be paid an amount C
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, D
if any, will be ignored.
6. Other benefits :
(a) Gratuity as payable under the extent instructions on the
relevant date. E
(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). F
(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 G
housing loan etc. will be extended to officers/others retiring
under SBIVRS as per present dispensation, at the dis~r~tion
of Competent Authority. However, in such cases ofretention
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. H
464 SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.

A- All other outstanding loans/advances will have to be repaid
before date of retirement under SBI YRS, 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.
B
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
c 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
D 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 luive come into effect
E unless the decision of the Competent Authority has been
communicated in writing.
General conditions :
(i) Staff members desirous of availing benefits under the scheme will
have to submit a written application to the Competent Authority,
F 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).
G
(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.
H
BANK OF INDIA v. O.P. SW ARANAKAR [S.B. SINHA, J. ) 465
(iv) As SBIVRS is voluntary, it shall not be negotiable and shall not A
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.
B
(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 C
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 D
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 E
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 ), F
the Reserve Bank oflndia 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( I) 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 detennining the terms and G
conditions of the appointment and services of officers in the Bank.

Following legal issues arise for determination in these appeals :

A. Whether an applicatfon by an employee to secure voluntary
retirement under the Voluntary Retirement Scheme (YRS) can be H
466 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.

A withdrawn by such an employee before the same is accepted by I
tC
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 B. Whether upon making an application under YRS 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
C whether the voluntary retirement scheme is an offer/proposal or merely an
invitation to offer. The question is whether the banks intended to make an
offer or merely issued an invitation to tre.at 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
D 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
E 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
F 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
G 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
H framed in terms of Section 19 of the 1970 Act, other terms and conditions of
BANK OF INDIA v. O.P. SWARANAKAR [S.B. SINHA, J.] 467

their service are not statutory in nature. But the State Bank of India as also A
the nationalize.d 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 bi~artite 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 B
and strictly in terms of the nonns 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. C
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 D
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 E
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 F
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. G
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 H
468 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.

A so become binding promises. A person advertises 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
price; or a bus co.mt;>any 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
B 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:

c "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
D 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
E 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 c~se may be, the lowest) offer; and the
contract is concluded as soon as the highest offer to buy (or
F lowest offer to sell, etc.) is communicated ..... "
In Treitei'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
G 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."
H
BANK OF INDIA v. O.P. SWARANAKAR [S.B. SINHA, J.] 469

It has also been stated in the said book: A
"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 B
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. C
In Hamilton, Rau and Winthraub on Contracts, the learned authors
referred to a decision of Habaska Seed Co. v. 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. D
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 mechanical in
their operation. They also involve situations that are relatively easy E
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 modem contracts scholars
tend to deprecate the importance of the ru Jes of offer and acceptance.
See Geneally G. Gilmore, the Death of Contract (1974): L. Freidman, F
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 G
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 H
470 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.

A 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
B 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
C 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
D 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
E 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 could be accepted or rejected.
F (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.
G (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.
H
BANK OF INDIA v. 0.P. SWARANAKAR [S.B. SINHA, J.] 471

(vii) The Bank reserved its right to alter/rescind the conditions of the A
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. B
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 C
an employee wou Id be considered, is a consideration cannot be accepted.

Once it is held that the provisions of the Indian Contract Act, 1872
would be ;:ipplicable, the scheme admittedly being contractual in nature, the
provisions of the Act shall apply. The. Scheme having regard to its provisions D
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 E
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, F
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 G
when floating the scheme did not signify that on the employees assenting
thereto a concluded contr.act 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 H
472 SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.

A 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.
B
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.

C 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
D to sell the house to you at the purchase price of Pounds 2, 725 less 20% =
Pounds 2180 (free 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 .
.E When it was claimed by Mr. Gibson that the transaction amounted to
a binding contract, the House of Lords negativ.ing 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.

F 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
G 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.
Jn Cheshire, Fifoot & Funnston's Law of Contract (14th edition) at Page
H 62 the law is stated as under:-
BANK OF INDIA v. 0.P. SWARANAKAR [S.B. SINHA, J.] 473

"It has been established ever since the case of Payne v Cave in I 789 A
that revocation 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 B
whole. The offeror may, of course, bind himself, by a separate and
specific contract, to keep the offer open; but the offeree, if ~uch is his
allegation, must provide all the elements of a valid contract, including
assent and consideration. Jn Routledge v Grant the defendant offered
on 18 March to buy the plaintiffs house for a certain sum, 'a definite
answer to be given within six weeks from the date'. Best CJ held that C
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 D
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:
E
"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, F
once used will be deemed to be final. The date of retirement shall be
the end of session".

Interpreting the said rule this court held:

"we are of the view that the High Court should not have rejected the G
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. I obviously acted under the wrong H
474 SUPREME COURT REPORTS [2002) SUPP. 5 S.C.R.

A 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
B 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.

c The submission in our considered op101on proceed on a total
misconception. By reason of making such option or finn 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
D 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.
E
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
F 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, Q[ 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
G nominal, makes a separate contract not to revoke the offer during a
stated period. The position is similar where the ojferee 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
H period. Again, a building tendering for a construction contract may
BANK OF INDIA v. O.P. SWARANAKAR [S.B. SINHA, J.] 475
have invited quotations for a fixed period (i.e. firm offers) from electricity A
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
tlie 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 B
binding promise not to revoke my offer in the meantime'. The Law
Revision Committee recomr:nended 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 C
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 D
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 E
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 F ,
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 G
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 H
476 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.

A 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
B 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
c provide consideration for that promise by incurring the expense of a
survey. On the other hand, the equitable principie applied in Hughes
v. Metropolitan Ry. and in the High Trees case will not avail the
offeree since it on!~ 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
D 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 stated as under:

'"235.
I
Options. A contract of option is one whereby the grantor of the •
E 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
F 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
G 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.
H
BANK OF INDIA v. 0.P. SW ARANAKAR [S.B. SINHA, J.] 477

With regard to the envisaged major contract, the effect of the contract A
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 B
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 C
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 D
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; (I) an offer may be revoked at E
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 0 that, if he would discount bills for another F
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 0, and duly paid, but before the twelve months
had expired D, the guarantors, revoked their offer and notified 0 that
they would guarantee no more bills. 0 continued to discount bills, G
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 H
·.
478 SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.

A 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
B 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 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
C 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
D 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
E 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
F 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.
G 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
H for voluntary retirement shall be considered. The relevant clause as referred
BANK OF INDIA v. O.P. SWARANAKAR [S.B. SINHA, J.] 479

to herein before creates an enforceable right. In the event the State Bank A
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 B
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 C
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 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 D
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.
E
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 wh~re a Judge of a High Court in terms of Article 217 of the
Constitution of India withdraw the resignation submitted by him. Resignation F
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 G
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 H
480 SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.

A 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 I, 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
B 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 I, 1977".

In that case, thus, a resignation which was not in praesenti has been
C 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
D 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."

Yefagain in Raj Kumar v. Union ofIndia, [ 1968] 3 SCR 857 it was held:
E
"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
F
open to the public servant to withdraw his resignation after it is
accepted by the 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".
G
In Bairam 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
H aforementioned situation observed:
BANK OF INDIA v. O.P. SWARANAKAR (S.B. SINHA, J.] 481
"That has been done. The approval of the authority was, however, not A
given. Therefore, the normal r11 le 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 B
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 C
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 D
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 E
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 modem 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, F
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: G
"In the modem 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 H
482 SUPREME COURT REPORTS [2002) SUPP. 5 S.C.R.

A the appellant to withdraw his letter of retirement in the facts and
circumstances of this case".

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
B 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 sec 280) a scheme of voluntary retirement was floated and pursuant thereto
the Respondents therein had applied for voluntary retirement but subsequently
C 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
D 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
E withdrew the scheme. Consequently, the order accepting voluntary
retirement did not become effective. Thereby no vested right has been
1

created in favour of the respondent. The High Comt, 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".
F
This decision is an authority for the propos1t1on 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 JN. Srivastava 's case (supra), it was held :
G
"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.

H In Wg. Cdr T. Parthasarathy's case the fact of the matter was as
BANK OF INDIA v. O.P. SWARANAKAR [S.B. SINHA, J.] 483
follows: A
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 B
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 C
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 D
the Respondent was aware and having given a certificate at the time of
submission of application for premature retirement that he Wl!S aware of the
fact that his request for withdrawal or cancellation subsequently would not
be accepted, the impugned judgment of .the High Court was erroneous but
rejecting the same this court held : E
"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 F
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 G
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:
H
484 SUPREME COURT REPORTS [2002) SUPP. 5 S.C.R.

A "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
B 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
c 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
D
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
E 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
F 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
G 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.

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
H under the scheme, in our considered opinion, could not have resiled therefrom.
BANK OF INDIA v. O.P. SWARANAKAR [S.B. SINHA, J.] 485

The Scheme is contractual in nature. The contractual right derived by A
the concerned employees, therefore, could be waived. The employees
concerned having accepted a part of the benefit could not be permitted to
apptobate 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: B
"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 d_ispensed with without infringing any public right or public
policy. Thus the maxim which sanctions the non-observance of the C
statutory provision is cuilibet lice! 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 D
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 I432:

As a general rule, any person can enter into a binding contract E
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 Legislatuie has expressly provided that F
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 G
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:
. H
486 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.

A 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.. ..
B
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 his 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
c in this view of the 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:
D "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:

(I) That the person in question, having a choice between two courses
of conduct is to be treated as having made an election from
E 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."
F
In American Jurisprudence, 2nd Edition, Volume 28, 1966, Page 677-680
it is stated:

"Estoppel by the acceptance of benefits: Estoppe I is frequently based
upon the acceptance and retention, by one having knowledge or
G 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
H contract or conveyance is estopped to deny the validity or binding
BANK OF INDIA v. O.P. SWARANAKAR [S.B. SINHA, J.) 487
effect on him of such contract or conveyance. A
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 B
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 C
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 I0.5 of the said scheme was in question. The
appellants herein are 'State' within the meaning of Article 12 of the Constitution
of India. The ques~ions raised by the writ petitioners thus could be raised in D
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 E
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 F
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 clause 4 of section 19 of the 1970 Act.

We do not agree with the decision of the High Court on that count for G
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.
H
488 SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.

A 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
B 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
c Houses concur and such rules shall, after notification "in the Official·
Gazette, be d~emed 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
D 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
E 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.
F 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 Ho!!ses of
G 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
H
BANK OF INDIA v. O.P. SW ARANAKAR (S.B. SINHA, J.] 489
regarded as mandatory. The rules have been in operation since the A
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.
B
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 C
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 D
matters are, therefore, remitted to the High Court for consideration thereof
afresh.

For the reasons aforementioned, we direct that :

I. The appeals preferred by the Nationalised Banks arising from the E
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 F
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 G
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 H
490 SUPREME COURT REPORTS (2002) SUPP. S S.C.R.

A 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.
B
N.J. Appeals disposed of.