Holding

Employees who retired under VRS 2000 after completing twenty years of service are entitled to the five‑year notional service addition under Regulation 29(5) of the Pension Regulations, 1995, but are not entitled to interest on the delayed pension.

Summary

The Supreme Court considered whether employees of several public sector banks who had completed twenty years of service and retired under the Voluntary Retirement Scheme 2000 (VRS 2000) were entitled to the five‑year notional service addition provided by Regulation 29(5) of the Pension Regulations, 1995. The banks argued that an amendment to Regulation 28 covered the employees and that Regulation 29(5) did not apply to VRS retirements, while the employees contended that the scheme expressly incorporated pension benefits under the Pension Regulations. The Court examined the contractual nature of VRS 2000, the interpretation of the regulations, and the constitutional requirement of fairness for State entities. It held that the scheme was a contract that incorporated the pension provisions, and that employees with twenty years of service are entitled to the five‑year weightage under Regulation 29(5). However, the Court declined to award interest on the delayed pension payments. Consequently, the banks' appeals were dismissed and the employees' claims for the additional service credit were allowed.

Issues considered

Whether employees who retired under VRS 2000 after completing twenty years of service are entitled to the five‑year notional service addition under Regulation 29(5) of the Pension Regulations, 1995.
Whether the amendment to Regulation 28 affects the applicability of Regulation 29(5) to VRS retirees.
Whether the employees are entitled to interest on the unpaid pension amount.

Legislation cited

Subjects

Voluntary Retirement SchemePension RegulationsNotional servicePublic sector banksContract interpretationArticle 14Regulation 29(5)VRS 2000Discrimination

Judgment

[2009] 5 S.C.R. 118

1
A BANK OF INDIA & ANR.
v.
K. MOHANDAS & ORS.
(Civil Appe~al No. 1942 of 2009)
MARCH 27, 2009
8
[D.K. JAIN AND R.M. LODHA, JJ.]

Pension Regulations, 1995: Regulation 28, 29(5) - VRS
2000 - Bank employees - Optees of voluntary retirement
c under VRS 2000 having completed .20 years of services of
appellants-Banks are entitled to addition of five years of
notional service in calculating the length of service for the
purpose of said scheme as per Regulation 29(5) - Special
benefit under Regulation 29(5) available to employees who
D completed 20 years of service or more, cannot be said to be ~
discriminatory to those employees who completed 15 years
of service but not completed 20 years - Service law -
Voluntary retirement.

The question which arose for consideration in these
E appeals filed by Banks was whether employees (having
completed 20 years of services) of appellants-Banks who
had opted for voluntary retirement under VRS 2000 are
entitled to addition of five years of notional service in
calculating the length of service for the purpose of said
F scheme as per Regulation 29(5) of Pension Regulations, \

1995.

Dismissing the appeals, the Court

HELD: 1. The employees who had completed 20
G
years of service and weire pension optees and offered
voluntary retirement under VRS 2000 and whose offers ...
were accepted by the banks are entitled to addition of five
years of notional service in calculating the length of
H 118
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 119
;z
service for the purposes of that Scheme as per A
Regulation 29(5) of the Pension Regulations, 1995. [Para
53] [152-F, G]

2.1. It is admitted position that VRS 2000 was a
.., contractual scheme. It was an invitation to offer B
containing a term that optee would also be eligible for
pension as per Pension Regulations. An application by
an employee for voluntary retirement was a proposal or
offer and upon acceptance of the application for
voluntary retirement made by the employee and a
communication of acceptance to him, the concluded
c
contract came into existence and the offeree was relieved
from the employment. [Para 27] [138-G-H; 139-A]

HEC Voluntary Retd. Employees Welfare Society v.
~· Heavy Engineering Corporation Ltd. (2006) 3 SCC 708, D
referred to.

2.2. The true construction of a contract must depend
upon the import of the words used and not upon what
the parties choose to say afterwards. Nor does E
subsequent conduct of the parties in the performance of
the contract affect the true effect of the clear and
unambiguous words used in the contract. The intention
of the parties must be ascertained from the language
- they have used, considered in the light of the
surrounding circumstances and the object of the
F
contract. The nature and purpose of the contract is an
important guide in ascertaining the intention of the
parties. It is also a well-recognized principle of
construction of a contract that it must be read as a whole
in order to ascertain the true meaning of its several G
clauses and the words of each clause should be
--! interpreted so as to bring them into harmony with the
other provisions if that interpretation does no violence to
the meaning of which they are naturally susceptible.
H
120 SUPREME COURT REPORTS [2009] 5 S.C.R.
:i;
A [Paras 28 and 31] (139-B-D; 139-G-H; 140-A]
Ottoman Bank of Nicosia v. Ohanes Chakarian AIR 1938
PC 26 and Ganga Saran v. Firm Ram Charan Ram Gopal,
AIR 1952 SC 9, relied on.
B The North Eastern Railway Company vs. L. Hastings
(1900) AC 60, referred to.

2.3. The fundamental position is that it is.the banks
who were responsible fol' formulation of the terms in the
c contractual Scheme that the optees of voluntary
retirement under that Scheme would be eligible to
pension under Pension Regulations, 1995, and, therefore,
they bear the risk of lack 01f clarity, if any. It is a well-known
principle of construction of contract that if the terms
D applied by one party are unclear, an interpretation against
that party is preferred. [Para 32] [140-8, C] +
3.1. The appellant-banks are public sector banks and'
are 'State' within the meaning of Article 12 of the
Constitution and their action even in contractual matters
E has to be reasonable, lest, as observed in *O.P. Swamakar, ·!
it must attract the wrath c1f Article 14 of the Constitution.
[Para 33] (141-B]

*Bank of India & Ors. v. 0.P. Swarnakar & Ors. (2003) 2
F sec 721, relied on.
3.2. Any interpretation of the terms of VRS 2000,
although contractual in nature, must meet the test of
fairness. It has to be construed in a manner that avoids
arbitrariness and unreas,onableness on the part of the
G public sector banks who brought out VRS 2000 with an
objective of rightsizing its manpower. The banks decided
to shed surplus manpower. By formulation of the Special
Scheme (VRS 2000), the banks intended to achieve its
objective of rationalizing its force as they were
H
BANK OFINDIA & ANR. v. K. MOHANDAS & ORS. 121

overstaffed. The Special Scheme was, thus, oriented to A
lure the employees to go in for voluntary retirement. In
this background, the consideration that was to pass
between the parties assumes significance and a
harmonious construction to the Scheme and Pension
Regulations, therefore, has to be given. [Para 34) B

4.1. The amendment to Regulation 28 can, at best, be
said to have been intended to cover the employees with
15 years of service or more but less than 20 years of
service. This intention is reflected from the C
communication dated September 5, 2000 sent by the
Government of India, Ministry of Finance, Department of
Economic Affairs (Banking Division) to the Personnel
Advisor, Indian Banks' Association. [Para 35) [141-C-E]

4.2. Two things immediately become noticeable from D
the said communication. One is that as per Regulation 29
of Pension Regulations, 1995, an employee can take
voluntary retirement after 20 years of qualifying service
and become eligible for pension. The other thing is that
the Scheme provides that the employees with 15 years E
of service or 40 years of age shall be eligible to take
voluntary retirement under the Scheme and under
Regulation 29, the employees having rendered 15 years
of service or completed 40 years of age but not
completed 20 years of service shall not be eligible for F
pensionary benefits on taking voluntary retirement under
the Scheme. The use of the words 'such employees' in
the communication is referable to employees having
,.,, "'' rendered 15 years of service but not completed 20 years
of service and, therefore, it was decided to bring in G
amendment in the Regulations so that employees having
not completed 20 years service do not loose the benefit
of pension. The amendment in Regulation 28, as is
reflected from the afore-referred communication, was
H
122 SUPREME COURT REPORTS [2009] 5 S.C.R.

A intended to cover the employees who had rendered 15
years sel'Vice but not completed 20 years service. It was
not intended to cover the optees who had already
completed 20 years service as the provisions contained
in Regulation 29 met that contingency. [Para 36] [143-B-
8 F]
4.3. Even if it be assumed that by insertion of the
proviso in Regulation 28 (in the year 2002 with effect from
September 1, 2000), all class of employees under VRS
2000 were intended to be covered, such amendment in
C Regulation 28, needs to be harmonized with Regulation
29, particularly Regulation 29(5) which provides for
addition of qualifying sel'vice by five years for the optees
who had put in 20 years service or more subject to the
condition that total qualifying service rendered by such
D employee shall not in any case exceed 33 years. This
would be in tune and consonance with the explanatory
note appended to the amendment in Regulation 28
wherein it is stated that the amendment with retrospective
effect would not adversely affect any employee or officer
E of the respondent-bank. That would also meet the test of
fairness. [Para 37] [143-G, H; 144-A, BJ

5. If a special ben1efit under Regulation 29(5) is
available to the employees who had completed 20 years
F of service or more, iit cannot be said that it is
discriminatory to those employees who had completed
15 years of service but not completed 20 years. In view
of the provision contained in Regulation 29(5), if the
optees who have not completed 20 years get excluded
G from the weightage of five years which has been given
to optees who have completed 20 years of service or
more, it is no discrimination. Such provision can neither ~
. be said to be arbitrary nor can be held to be violative of
: any constitutional or statutory provisions. The weightage
H · of five years under Regulation 29(5) is applicable to the
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 123

optees having service of 20 years or more. There is, thus, A
\ basis for additional benefit. Merely because the
employees who have completed 15 years of service but
not completed 20 years of service are not entitled to
weightage of five years for qualifying service under
.. Regulation 29(5), the employees who have completed 20 B
years of service or more cannot be denied such benefit.
[Para 38) [144-E-H; 145-A]

6. It is misplaced assumption that by reading

- Regulation 29(5) in the Scheme, the Pension Regulations
would get altered or amended. The statutory relationship
of employee and employer brought to an end
prematurely by contractual VRS 2000 would not amount
C

to alteration or amendment in the statutory Regulations.
The precise effect of Pension Regulations, for the
+ purposes of pension, having been made part of scheme, D
is that Pension Regulations, to the extent, these are
applicable, must be read into the Scheme. It is pertinent
to bear in mind that interpretation clause of VRS-2000
states that the words and expressions used in the
scheme but not defined and defined in the Rules/ E
Regulations shall have the same meaning respectively
assigned to them under Rules/Regulations. The Scheme
does not define the expression 'retirement' or 'voluntary
retirement'. Regulation 29 uses the expression, 'voluntary
retirement under these Regulations'. Obviously, for the F
purposes of the Scheme, it has to be understood to mean
with necessary changes In points of details. Section 23
of the Contract Act has no application to the present fact
situation. [Para 39) [145-C-H]
G
7. It is true that VRS 2000 is a complete package in
itself and contractual in nature. However, in that package,
it has been provided that the optees, in addition to ex-
gratia payment, will also be eligible to other benefits inter
a/ia pension under the Pension Regulations. The only H
124 SUPREME COURT REPORTS [2009] 5 S.C.R.
v
)-<

A provision in the Pension Regulations at the relevant time
during the operation of VIRS 2000 concerning voluntary I
retirement was Regulation 29 and clause(5) thereof
provides for weightage of addition of five years to
qualifying service for pension to those optees who had
B completed 20 years service. It, therefore, cannot be
accepted that VRS 2000 did not envisage grant of
pension benefits under Regulation 29(5) of the Pension
Regulations, 1995, to the optees of 20 years service along
with payment of ex-gratia. The whole idea in bringing out
c VRS 2000 was to rightsize workforce which the banks
had not been able to achieve despite the fact that the
statutory Regulations provided for voluntary retirement
-
to the employees having completed 20 years service. It
was for this reason that VRS 2000 was made more
D attractive. VRS 2000, accordingly, was an attractive
package for the employE!es to go in for as they were
getting special benefits in the form of ex-gratia and in
addition thereto, inter a/i.a pension under the Pension
Regulations which also provided for weightage of five
E years of qualifying service for the purposes of pension
to the employees who had completed 20 years service.
[Para 41) [146-F-H; 147-A·.C]

State of Orissa v. Sudhansu Sekhar Misra, AIR 1968 SC
647; Ambica Quarry Works v. State of Gujarat (1987) 1 SCC
F 213 and Bharat Petroleum Corporation Ltd. v. N.R. Vairamani ) .
(2004) 8 sec 579, relied on.

Bank of Baroda and Ors. v. Ganpat Singh Deora 2009
(1) Scale 168, distinguished.
G
Quinn v. Leathern 1901 AC 495 and Bhavnagar
University v. Palitana Sugar Mill (P) Ltd. (2003) 2 SCC 111, ,..
referred to. '

8. The employees were not seeking to resile from the
H
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 125
,_t
Scheme. They were actually seeking enforcement of the A
clause in the Scheme that provided that the optees would
be eligible for pension under the Pension Regulations,
1995. According to them, they were entitled to the benefits
of Regulation 29(5). Plea of estoppel is devoid of any
substance; as a matter of fact it did not arise at all in the B
facts and circumstances of the case. [Para 52) [152-D-E]

9. Any award of interest on unpaid pension would
not be in the interest of justice. [Para 55) [153-B]

Case Law Reference: c
(2006) 3 sec 108 referred to Para 14
AIR 1938 PC 26 relied on Para 29
AIR 1952 SC 9 relied on Para 30 D
-+
(1900) AC 260 referred to Para 31
(2003) 2 sec 121 relied on Para 33
AIR 1968 SC 647 relied on Para 44
E
(1987) 1 sec 213 relied on Para 46
...
(2004) 8 sec 579 relied on Para 48
1901 AC 495 referred to Para 43
y F
(2003) 2 sec 111
~

referred to Para 47
2009 (1) Scale 168 distinguishe.d. Para 42
CIVIL APPELLATE JURISDICTION,: Civil Appeal No.
1942 of 2009.
G
From the Judgment & Order dated 21.6.2005 of the High
"""'.., Court of Kerala at Ernakulam in Writ Appeal No. 1640/2002-
D.

H
126 SUPREME COURT REPORTS [2009] 5 S.C.R.

A WITH

C.A. No. 1943/2009, C.A. No. 1944/2009.

C.A. No. 1945/2009, C.A. No. 1946/2009.

B C.A. No. 1947/2009, C.A. No. 1948/2009.

C.A. No. 1949/2009, C.A. No. 1950/2009.

C.A. No. 1951/2009, C.A. No. 1952/2009.

C C.A. No. 1953/2009, C.A. No. 1954/2009.

C.A. No. 1955/2009, C.A. No. 1956/2009.

C.A. No. 1957/2009.

D A Saran, ASG, T.L.V. Iyer, Bhaskar P. Gupta, C.S. Rajan,
Dr. A.E. Chelliah, Dushyant Dave, Raju Ramachandran, Dinesh
Dwivedi, Shyam Divan, Ramesh Singh, Nina Gupta, Swigin
George, Bina Gupta, Subramonium Prasad, Jagat Arora, Rajiv
Nanda, Rajat Arora, Yashrah Singh Deora, Mohit Abraham, T.S.
E Sabarish for M/s. K.L. Mehta & Co., Sudarshan Rajan, Rana
Mukherjee, Siddharth Gautam, Goodwill lndeevar, Abhijit
Sengupta, P.V. Yogeswaran, C.K. Chandrasekkar, S.R. Setia,
Makarand D Adkar, Vijay Kumar, R. G. Londha, Vishwajit Singh,
-
Vasant Kumari Chelliah, Dinesh Kumar Garg, Soumya
F Chakraborty, Dharam Bir Raj Vohra, K.N. Bhargava, G.
x -
Prakash, Saurabh Bhargava, Beena Prakash, Ramesh Singh,
Nina Gupta, Tulika Mukherjee, Bina Gupta, C.K. Sasi, Dhruv
Mehta, MohitAbraham, Yashraj Singh Doera, T.S. Sabarish (for
K.L. Mehta & Co.,) Braj Kishore Mishra, O.P. Gaggar, Arvind
G Verma, Malvika Trivedi, T. Mahipal, S.L. Aneja, Dinesh Verma,
Rajat Sharma, S.L. Aneja, Dr Kailash Chand, H.C. Arora, M.S.
Vinaik, Vandana Sehgal, Rohan Thawani, Hardeep Singh
Anand, Abhishek Atrey, D.K. Garg, Dr. Bheem Pratap Singh,
Pramod B Agrawala, Praveena Gautam, Abhishek Baid, P. P.
Singh, V.K. Rao, Nidhi Bisaria, Madhu Sikari, Naveen R. Nath,
H
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 127

'-~
lalit Mohini Bhat, Anita Abraham, Pavan Kumar, Kunela Kumar, A

- Prithvi Pal, Satyendra Kumar, Mohinder Singh, Satwant Singh,
PS.C. Paul, Sumita Bhardwaj appearing for the parties.

The Judgment of the Court was delivered by

R.M. LODHA, J. 1. Leave granted. B
"
2. These sixteen appeals arise from the judgments of
Punjab and Haryana High Court, Calcutta High Court and
Kerala High Court and relate to different banks but since the
common issues are involved, it is appropriate that these c
appeals are dealt with and disposed of by the common
judgment.

3. In the month of May, 2000, Government of India, Ministry
of Finance (Banking Division), advised the nationalized banks
D
~ to carry out detailed manpower planning as these banks were
found to have 25% of its manpower as surplus. A Human
Resource Management Committee was constituted to examine
the said issue and to suggest suitable remedial measures. The
committee so constituted observed that high established cost
and low productivity in public sector banks affect their E

.. profitability and it was necessary for these banks to convert their
human resources into assets compatible with business
strategies. Inter a/ia, the committee placed the draft Voluntary
Retirement Scheme with the Central Government that would
assist the banks in their efforts to optimize their human F
'f
resources and achieve a balanced age and skills profile in
keeping with their business strategies. With the approval of the
\
I
central government, Indian Bank Association (IBA) circulated
I salient features of the draft scheme to the nationalized banks
for consideration and adoption by their respective boards vide G
its letter dated August 31, 2000. The Board of Directors of each
;,
..A
of the nationalized banks, keeping in view the objectives,
considered the draft scheme and adopted it separately.
~

4. In the present batch of appeals, the Voluntary Retirement H
128 SUPREME COURT REPORTS [2009] 5 S.C.R.

A Scheme brought out by the Punjab National Bank, Punjab &
Sind Bank, Bank of India, Union Bank of India and United Bank
of India is in issue. -
5. The scheme adopted by these banks, although
separately, is identical and bears similar salient features with
B
some variation in certain respects. It is not necessary to
consider them individually. For the sake of brevity, we shall refer
the scheme as VRS 2000.

6. The objective of YRS 2000 has been:
c
-to transform the organizational as more efficient as well
as for controlling op1~rational costs;

-to improve the pro:;pects and career growth and skills
upgradation for employees by rationalizing the manpower;
D
+
-to help the bank to rightsize the growth.

7. We may, at this stage, summarise the salient features
of VRS 2000. These are :
E (i) All permanent employees of the bank who have put in
minimum 15 years of service or completed 40 years of ,.
age on the date of coming into force of the scheme are
eligible for voluntary retirement.

F (ii) In addition to the' normal retirement benefits available .,,
to an employee, acc;ording to the terms and conditions of
his employment in the bank, an employee whose
application for voluntary retirement is accepted will be paid
a lump sum amount equivalent to 60 days salary for each
G completed year of service.

(Ill) The competent authority may accept or reject the -~
....
application of an employee for voluntary retirement and the
decision of the competent authority shall be final.

'H (IV) No voluntary retirement shall come into effect unless
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 129
[R.M. LODHA, J.]
competent authority has passed orders accepting the A
applications of the employees to retire voluntarily under the
scheme.

(V) The scheme can be withdrawn at the discretion of the
bank at any time without assigning any reason. 8
(VI) It shall be open to the bank to alter/amend the
conditions of the scheme. (In the scheme framed by Punjab
National Bank such provision !snot there).

(VII) The applications made under the scheme will be C
irrevocable and the employee will not have the right to
withdraw the application once submitted.
(VIII) An employee whose application for voluntary
retirement is accepted and relieved from the bank shall be
0
eligible for :

(i) gratuity as per Gratuity Act/service gratuity as the case
may be;

(ii) own contribution of provident fund and bank contribution E
towards provident fund, in case of those who have opted
for. Contributory Provident Fund or own contribution of
provident fund and pension in terms of Employees
Pension Regulations, 1995, in case of those who have
opted for pension and have put in 20 completed years F
--i of service in the bank (emphasis supplied) and

(iii) leave encashment as per rules.

8. The period during which VRS 2000 was to remain in
operation in respect of the banks with which we are concerned G
is as follows:
J,..
-' Punjab and Sind Bank 01.12.2000 to 31.12.2000
Punjab National Bank 01.11.2000 to 30.11.2000
H
130 SUPREME COURT REPORTS [2009] 5 S.C.R.

A Bank of India 15.11.2000 to 14.12.2000

Union Bank of India 01.12.2000 to 31.12.2000

United Bank of India 01.01.2001 to 31.01.2001

B 9. Section 19 of the Bank.ing Companies (Acquisition and
Transfer of Undertakings) Ai:;t, 1970 (for short ' Act 1970')
empowers the Board of Directors to make regulations
consistent with the provisions of the Act or any Scheme made
thereunder after consultation with the Reserve Bank and with
c the previous sanction of the Central Government in respect of
matters provided therein. Section 19 (2)(f) reads thus:

"(2) In particular, and without prejudice to the generality of
the foregoing power, the regulations may provide for all or
any of the following matters, namely:--
0
(f) the establishment and maintenance of superannuation,
pension, provident or other funds for the benefit of officers
or other employees of the corresponding new bank or of
the dependants of such officers or other employees and
E the granting of superannuation allowances, annuities and
pensions payable out of such funds."

10. These banks have made their regulations in respect
of pension separately. Since they bear identical provisions; we
F shall refer them as Pension Regulations, 1995 generally. On the
date of the commencement of the VRS 2000, Regulations 28
and 29 read as follows:

"28. Superannuation Pension:-

G 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:-
H (1) On or after the 1st day of November, 1993 at any time,
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 131
d [RM. LODHA, J.]
after an employee has completed twenty years of qualifying A
service he may, by giving notice of not less than three
months in writing to the appointing authority retire from
service.

Provided that this Sub-regulation shall not apply to
B
an employee who is on deputation or on study leave
abroad unless after having been transferred or having
returned to India he has resumed charge of the post in
India and has served for a period of not less than one year:

Provided further that this Sub-regulation shall not c
apply to an employee who seeks retirement from service
for being absorbed permanently in an autonomous body
or a public sector undertaking or company or institution or
body, whether incorporated or not to which he is on
deputation at the time of seeking voluntary retirement; D

Provided that this Sub-regulation shall not apply to
an employee who is deemed to have retired in accordance
with Clause (1) of regulation -2.

(2) The notice of voluntary retirement given under sub- E
regulation (1) shall require acceptance by the appointing
authority:

Provided that where that appointing authority does not
refuse to grant the permission for retirement before the F
expiry of the period specified in the said notice, the
retirement shall become effective from the date of expiry
of the said period.

(3)(a). An employee referred to in sub-regulation (1) may
make a request in writing to the appointing authority to G
>- , accept notice of voluntary retirement of less than three
months giving reasons therefor.
(b) On receipt of a request under Clause (a), the appointing
authority may, subject to the provisions of Sub-regulation H
132 SUPREME COURT REPORTS [2009] 5 S.C.R.

A (2) , consider such request for the curtailment of the period
of notice of three months on merits and if it is satisfied that
the curtailment of the period of notice will not cause any
administrative inconvenience, the appointing authority may
relax the requirement of notice of three months on the
B condition that the employee shall not apply for commutation
of a part of his pension before the expiry of the notice of
three months.

(4) An employee, who has elected to retire under this
regulation and has given necessary notice to that effect to
c the appointing authority, shall be precluded from
withdrawing his notice except with the specific approval of
such authority;
Provided that the reque~•t for such withdrawal shall be
D made before the intended date of his retirement.
(5) The qualifying service of an employee retiring voluntarily
under this regulation shall be increased by a period not
exceeding five years, subj ect to the condition that the total
1

qualifying service rendered by such employee shall not in
E
any case exceed thirty three years and it does not take him
beyond the date of supenmnuation.
(6) The pension of an employee retiring under this
regulation shall be based on the average emoluments as
F defined under clause (d) of regulation 2 of these r
regulations and the increase, not exceeding five years in
, his qualifying service, shall not entitle him to any notional
fixation of pay for the purpose of calculating his pension."

G
11. It appears that the benefits provided under Regulation
29 were not found to be attractive by the employees and did
not help these banks in rightsizing their manpower; thus, arose ~
'-
a necessity of special scheme. VRS 2000 is, in a way, special
scheme launched for a very limited period.
H 12. VRS 2000 came up for consideration before this Court
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 133
[RM. LODHA, J.)
in the case of Bank of India & Ors. vs O.P. Swamakar & Ors., A
(2003) 2 SCC 721. The question under consideration in that
case was whether an employee who opts for voluntary
retirement pursuant to or in furtherance of a scheme floated by
the nationalized banks would be precluded from withdrawing
. the said offer. This Court culled out the following aspects: B
(i) The banks treated the application from the employees
as an offer which could be accepted or rejected.

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

(iii) The decision-making process involved application of
mind on the part of several authorities.

(iv) Decision-making process was to be formed at various
levels.· 0

(v) The process of acceptance of an offer made by an
employee was in the discretion of the competent authority.
(vi) The request for voluntary retirement would not take E
effect in present but in future.
(vii) The bank reserved its right to alter/rescind the
conditions of scheme.
13. In O.P. Swamakar, it has been held that scheme is F
contractual in nature. It amounted to an invitation to offer and
not an offer or proposal itself; the application made by the
employees was an offer.
14. The statement of law with regard to nature of voluntary G
retirement scheme expounded in O.P. Swarnakar has been
reiterated in HEC Voluntary Retd. Employees Welfam Society
v. Heavy Engineering Corporation Ltd. (2006) 3 SCC 708;
albeit a different voluntary retirement scheme.
15. The admitted factual position in this batch of appeals H
134 SUPREME COURT REPORTS [2009] 5 S.C.R.

A is that each of the employees had completed 20 years of
service.

16. It may be noticed that at the fag end of the operation
of VRS 2000, at the instance of IBA and with the approval of
B the Central Government, Regulation 28 was proposed to be
amended. The amendment in fact was carried out in the year
2002 with retrospective effect from September 1, 2000. By way
of amendment, a proviso has been inserted to Regulation 28,
which reads as follows:

C "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 tefms of any scheme that may be
framed for the purpose by the Bank's Board with the
D concurrence of the GovE~rnment."

17. The optees have been given retiral benefits by the
respective banks under VRS 2000 save and except the benefit
of pension under Regulation 29(5). Their representation in this
E regard did not yield any result and that necessitated them to
approach various High Courts for redressal of their grievance.

18. The views of High Courts differ. Punjab and Haryana
High Court has held that employees are entitled to add a period
of qualifying service not exceeding five years in terms of the
F Regulation 29(5); the total qualifying service rendered by an
employee seeking voluntary retirement in any case shall not
exceed 33 years. With regard to the amendment in Regulation
28, Punjab and Haryana High Court has held that by the said
amendment, the provision con.tained in Regulation 29(5) of the
G Regulations does not get affected so as to disentitle the
employees the benefit provided therein.

19. There are two views in so far as Kerala High Court is
concerned. In the case of K. Mohandas (Civil Appeal arising
H out of SLP (c) 22704/2005), the Division Bench in the Writ
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 135
[R.M. LODHA, J.]
~
Appeal held that the employees seeking voluntary retirement A
under VRS 2000 were entitled to benefit under Regulation 29(5)
of Pension Regulations, 1995. However, in the case of N.U.
Kurup, the single Judge held otherwise. The single Judge took
the view that the employees seeking voluntary retirement under
VRS 2000 were entitled to pension under Regulation 28 and B
that they are not entitled to benefit of addition of five years
service as provided in Regulation 29(5). The view of the
Division Bench of Calcutta High Court· is on the lines of the view
of the single Judge of Kerala High Court that the optees of
voluntary retirement under VRS 2000 are not entitled to b~nefit c
of addition of five years service under Regulation 29(5).

20. We have heard the senior counsel, counsel for the
respective parties and Baldev Singh who appeared in person
at quite some length. The written submissions have also been
filed by the parties which we considered thoughtfully . D
. -f

21. The submissions on behalf of the banks may be
summarised thus : (i) that Pension Regulations, 1995, as were
existing during the operation of VRS 2000, did not cover the
class of employees retiring under the Scheme which is E
contractual in nature. Regulation 28 came to be amended by
insertion of proviso thereto to cover the employees retiring
under the Scheme inasmuch as by the said amendment, the
employees having completed 15 years of service or more
became entitled to pension on pro-r~ta basis; (ii) that voluntary F
1' retirement under VRS 2000 cannot be compared or equated
with voluntary retirement under Pension Regulations, 1995.
VRS 2000 is completely different and distinct scheme from
voluntary retirement contemplated under Regulation 29 of the
Pension Regulations, 1995; (iii) that Regulation 29(5) of
G
Pension Regulations, 1995, read: "the qualifying service of an
employee retiring voluntarily under this regulation shall be
_.(
increased by a person not exceeding ......... " The words "under
this regulation" would mean 'under Regulation 29' and no other
interpretation to the meaning could be attributed to these words;
H,
136 SUPREME COURT REPORTS [2009) 5 S.C.R.

A {iv) that during operation of VRS 2000, the concerned banks
had brought out circulars to bring to the notice of the concerned
employees the proposed amendment and, thus, the employees
were aware of the proposed amendment of Pension
Regulations and could have withdrawn their offer but in the
B absence of such withdrawal and after having accepted the
benefits under VRS 2000, they are estopped under law from
challenging the Scheme or claiming benefit of addition of five
years of notional service in calculating the length of service for
the purposes of pension and {v) that Regulation 29 does not
c cover persons retiring under VRS 2000 which is de hors the
statutory scheme for voluntary retirement.

22. On the other hand, on behalf of the employees, it was
contended: (i) that Pension Regulations, 1995, were framed
and notified in the year 1995 that provides for different classes
D of pension which might be available to a pension optee, inter
alia, two classes of these pension are; superannuation pension
{Regulation 28) and pension on Voluntary Retirement
{Regulation 29); that VRS 2000 was brought out with the object
of optimizing human resourcos at various levels for achieving
E the balanced age and skills profile in keeping with business
strategies and the banks allowed its employees to retire
voluntarily under the Scheme with an intention to confer
attractive benefits in addition to ex-gratia and such additional
benefits also included pensi1Jn as per Pension Regulations,
F 1995; {ii) that VRS 2000 is nClt statutory in nature; rather, it is
an invitation to treat by the bank to its employees to offer for
voluntary retirement. The offer for voluntary retirement was
founded on the terms of scheme. By acceptance of the said
offer made by the employees, the concluded contract came into
G existence between the bank and the employee which could not
have been altered; {iii) that on the date of the relieving the
concerned employees, Regulation 28 had not been amended
and, therefore, the entitlement to the pension could not have
been decided in terms of that Regulation and the pension
H benefits to the optees could only be given under Regulation 29;
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 137
[RM. LODHA, J.)
·~
(iv) that by making provision in the Scheme that optees would A
be eligible for the benefits in addition to the ex-gratia amount,
inter a/ia, pension as per Pension Regulations, 1995, the
employees understood that what was contemplated was
pension under Regulation 29. Any ambiguity in VRS 2000
ought to be construed that harmonized with the intention of the B
parties; (v) that the amendment in Regulation 28 was introduced
for a class of employees who had put in more than 15 years
but less than 20 years of service. In terms of Pension
Regulations, 1995, as it stood before amendment to Regulation
28, an employee although a pension 9ptee under VRS having c
not completed 20 years service was not entitled to any pension.
In order to take care of this anomalous position and to confer
pensionary benefits on such employees, the amendment was
brought into effect in Regulation 28 which cannot affect the
subject employees who undisputedly have put in more than 20
D
years of service; (vi) that the employees made the offer to retire
from service in terms of the Scheme which was accepted by
the banks without any reservation. In terms of the Scheme under
the head 'other benefits', the optees are eligible for benefit of
pension as per Pension Regulations, 1995. Regulation 29 was
the only regulation under the Pension Regulations, 1995, E
applicable to voluntary retirement and, therefore, Regulation 29,
ipso facto, became the term of the contract and (vii) that each
and every paragraph of Regulation 29 can be made applicable
to an optee of more than 20 years of service without coming
. '(
into conflict with any provision of the Scheme; the notice period F
of three months in Regulation 29(3) can be waived at the
discretion of the banks.

23. The principal question that falls for our determination
is : whether the employees (having completed 20 years of G
,,.. service) of these banks (Bank of India, Punjab National Bank,
,-( Punjab & Sind Bank, Union Bank of India and United Bank of
India) who had opted for voluntary retirement under VRS 2000
are entitled to addition of five years of notional service in
calculating the length of service for the. purpose of the said H
138 SUPREME COURT REPORTS [2009] 5 S.C.R.

A Scheme as per Regulation 29(5) of Pension Regulations, 1995
?
24. As noticed above, Pension Regulations, 1995, came
to be framed by each of the afore-referred banks separately in
exercise of the powers conferred by clause(f) of sub-Section 2
8
of Section 19 of the Act, 1970. In the interpretation clause
various expressions have been defined.

25. Regulation 2(t) defines 'pension':

c "pension" includes the basic pension and additional
pension referred to in Chapter VI of these Regulations".

Regulation 2(y) defines 'retirement':

"retirement" means cessation from bank's service
D
"(a) .....................

(b) on voluntary retirement in accordance with provisions
contained in Regulations 29 of these Regulations.
E (c) ......... "

26. Chapter V of Pension Regulations deals with the
various classes of pension: superannuation pension
(Regulations 28); voluntary retirement pension (Regulation 29);
F invalid pension (Regulation 30}; premature retirement pension y •
(Regulation 32) and compulsory retirement pension (Regulation
33). -
27. In view of the admitted position that VRS 2000 was a
contractual scheme; that it was an invitation to offer containing
G a term that optee will also be eligible for pension as per
Pension Regulations; that an application by an employee for ..._
voluntary retirement was a proposal or offer and that upon
'"'
acceptance of the application for voluntary retirement made by
the employee and a communication of acceptance to him, the
H concluded contract came into existence and the offeree was
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 139
[R.M. LODHA, J.]
..1
relieved from the employment, for consideration of the question A
posed herein, the court need to examine the contract and the
circumstances in which it was made in order to see whether
or not from the nature of it, the parties must have made their
bargain on the footing that a particular thing or state of things
would continue to exist. B
+
28. The true construction ·of a contract must depend upon
the import of the words used and not upon what the parties
choose to say afterwards. Nor does subsequent conduct of the

.. parties in the performance of the contract affect the true effect
of the clear and unambiguous words used in the contract. The
intention of the parties must be ascertained from the language
they have used, considered in the light of the surrounding
c

circumstances and the object of the contract. The nature and
___,., purpose of the contract is an important guide in ascertaining
the intention of the parties. D
-I

29. In Ottoman Bank of Nicosia vs. Ohanes Chakarian,
AIR 1938 PC 26, Lord Wright made these weighty
observations:
"-----that if the contract is clear and unambiguous, its true
E

- effect cannot be changed merely by the course of conduct
adopted by the parties in acting under it. n
30. In Ganga Saran vs. Firm Ram Charan Ram Gopal,
... '(
AIR 1952 SC 9, a four Judge bench of this Court stated: F

"Since the true construction of an agreement must depend
upon the import of the words used and not upon what the
., parties choose to say afterwards, it is unnecessary to refer
to what the parties have said about it. n G

;..
31. It is also a well-recognized principle of construction of
~ a contract that it must be read as a whole in order to ascertain
the true meaning of its several clauses and the words of each
clause should be interpreted so as to bring them into harmony
with the other provisions if that interpretation does no violence H
•
140 SUPREME COURT REPORTS (2009] 5 S.C.R
....
A to the meaning of which they are naturally susceptible. [(The
North Eastern Railway Company vs. L. Hastings) (1900 AC
260)).

32. The fundamental position is that it is the banks who
were responsible for formulation of the terms in the contractual .....
B
Scheme that the optees of voluntary retirement under that
Scheme will be eligible to pension under Pension Regulations,
1995, and, therefore, they be~ar the risk of lack of clarity, if any.
It is a well-known principle of construction of contract that if the
terms applied by one party are unclear, an interpretation against
c that party is preferred. [Vertla Chartarum Fortius Accipiuntur
Contra Proferentum].

33. What was, in respect of pension, the intention of the
-
banks at the time of bringing out VRS 2000? Was it not made ,,_
0 expressly clear therein that the employees seeking voluntary
.>-
retirement will be eligible~ for pension as per Pension
Regulations? If the intentic>n was not to give pension as
provided in Regulation 29 and particularly sub-regulation (5)
thereof, they could have said so in the scheme itself. After all
E much thought had gone into the formulation of the VRS 2000
and it came to be framed after great deliberations. The only
provision that could have been in mind while providing for
pension as per Pension Regulations was Regulation 29.
Obviously, the employees, too, had benefit of Regulation 29(5)
-
F in mind when they offered for voluntary retirement as admittedly
Regulation 28 as was existing at that time was not applicable
at all. None of the regulations 30 to 34 was attracted. It appears
that VRS 2000 evoked hu1~e response, much more than
y
-
expected and then began the second thought. At the fag end
of operation of VRS 2000, at the instance of NBA, the banks
G proposed amendment in the Pension Regulations and a circular
came to be issued. But, by that time, ball had gone out of the
hands of the employees; they had already made their offers . ..._
which were irrevocable; it was not open to them to withdraw
the offers as per specific condition incorporated in the scheme
H
• .
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 141
[R.M. LODHA, J.]
~
(albeit this court in O.P. Swarnakar held that offer could be A
.... withdrawn before acceptance) and their offers were accepted
and they were relieved. We are afraid, it would be unreasonable
if amended Regulation 28 is made applicable, which had not
seen the light of the day and which was not the intention of the
·>I'
bank when scheme was framed. The banks in the present batch B
of appeals are public sector banks and are 'State' within the
meaning of Article 12 of the Constitution and their action even
in contractual matters has to be reasonable, lest, as observed
in O.P. Swamakar, it must attract the wrath of Article 14 of the
Constitution. c
34. Any interpretation of the terms of VRS 2000, although
contractual in nature, must meet the test of fairness. It has to
be construed in a manner that avoids arbitrariness and
' unreasonableness on the part of the public sector banks who
brought out VRS 2000 with an objective of rightsizing its D
-I
manpower. The banks decided to shed surplus manpower. By
formulation of the Special Scheme (VRS 2000), the banks
intended to achieve its objective of rationalizing its force as they
were overstaffed. The Special Scheme was, thus, oriented to
lure the employees to go in for voluntary retirement. In this E
background, the consideration that was to pass between the
parties assumes significance and a harmonious construction
to the Scheme and Pension Regulations, therefore, has to be
given.
~ 'f; F
35. The amendment to Regulation 28 can, at best, be said
to have been intended to cover the employees with 15 years
of service or more but less than 20 years of service. This
intention is reflected from the communication dated September
5, 2000 sent by the Government of India, Ministry of Finance,
G
Department of Economic Affairs (Banking Division} to the
>- Personnel Advieor, Indian Banks' Association·. The said letter
~ may be set out as it is which reads thus:

H
142 SUPREME COURT REPORTS [2009] 5 S.C.R.

A "F.No.4/8/4/2000-·IR
Government of India
• +
Ministry of Finance
Department of Economic Affairs
(Banking Division)
B
New Delhi, the 5th Sept.2000

To

The Personnel Advisor,
c Indian Bank's Association,
Mumbai.

Sub: Amendment to Regulation 29 of the Pension
Regulations. •
D
Sir, )--

I am directed to refer to this Division's letter No. 11/
1/99 IR dated 29th August, 2000 conveying Government's
no objection for circulation of Voluntary Retirement
E Scheme in Public Sector Banks. The scheme, inter-alia,
provides that employees with 15 years of service or 40
years of age shall be eligible to take voluntary retirement
under the scheme. Ai~ per provisions contained in
Regulation 29 of Pension Regulations an employee can
F take voluntary retirement after 20 years of qualifying service y ,
and thereafter becomes eligible for pension. Thus
employees having rendered 15 years of service or
completing 40 years of age but not having completed 20
years of service shall not be eligible for pensionary benefits
G on taking voluntary retirement under the scheme.

In order to ensure that such employees do not lose ,....
the benefit of pension, IBA may work out modalities and •
suggest amendments, if any, required to be made in the
pension regulations to ensure that these employees also
H
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 143
[R.M. LODHA, J.]
-~ get the benefit of pension. A
Yours faithfully,
sd/-
(U.P. Singh)
Director (IR)"
.. 36. Two things immediately become noticeable from the
8
said communication. One is that as per Regulation 29 of
Pension Regulations, 1995, an employee can take voluntary
retirement after 20 years of qualifying service and become
eligible for pension. The other thing is that the Scheme provides
.~ that the employees with 15 years of service or 40 years of age
c
shall be eligible to take voluntary retirement under the Scheme
and under Regulation 29, the employees having rendered 15
years of service or completed 40 years of age but not
...l completed 20 years of service shall not be eligible for
pensionary benefits on taking voluntary retirement under the D
.....(
Scheme. The use of the words 'such employees' in the
communication is referable to employees having rendered 15
years of service but not completed 20 years of service and,
therefore, it was decided to bring in amendment in the
Regulations so that employees having not completed 20 years E
service do not loose the benefit of pension. The amendment
in Regulation 28, as is reflected from the afore-referred
communication, was intended to cover the employees who had
(
rendered 15 years service but not completed 20 years service.
--., It was not intended to cover the optees who had already F
completed 20 years service as the provisions contained in
Regulation 29 met that contingency.

37. Even if it be assumed that by insertion of the proviso
in Regulation 28 (in the year 2002 with effect from September
G
1, 2000), all class of employees under VRS 2000 were
r intended to be covered, such amendment in Regulation 28,
~ needs to be harmonized with Regulation 29, particularly
Regulation 29(5) which provides for addition of qualifying
service by five years for the optees who had put in 20 years
H
144 SUPREME COURT REPORTS [2009) 5 S.C.R.

A service or more subject to the condition that total qualifying
service rendered by such employee shall not in any case
exceed 33 years. This would be in tune and consonance with
the explanatory note appended to the amendment in Regulation
28 wherein it is stated that the amendment with retrospective
e effect would not adversely affect any employee or officer of the
respondent-bank. That would also meet the test of fairness.

38. The contention was raised on behalf of the banks that
if Regulation 29(5) of the Pension Regulations, 1995, is applied
for the purposes of VRS 2000, the same would create an
C anomalous situation inasmuch as two different classes of
employees for the purpose of granting pension would be
created, namely, a class of employees who had completed 15
years of service but less than 20 years of service and this class
would not be entitled to receive benefits under Regulation 29(5) ...
D while the employees who had completed 20 years service or
more would be entitled to rec:eive the benefit under Regulation
29(5). It was submitted that by such· construction a class within
the class would be created which is impermissible. We do not
agree. If a special benefit under Regulation 29(5) is available
E to the employees who had completed 20 years of service or
more, by no stretch of imagination, can it be said that it is
discriminatory to those employees who had completed 15
years of service but not completed 20 years. In view of the
provision contained in Regulation 29(5), if the optees who have
F not completed 20 years get excluded from the weightage of five
years which has been given to optees who have completed 20
years of service or more, it is no discrimination. Such provision
can neither be said to be arbitrary nor can be held to be
violative of any constitutional or statutory provisions. The
G weightage of five years under Regulation 29(5) is applicable
to the optees having service of 20 years or more. There is, thus,
basis for additional benefit. Merely because the employees wh<>
have completed 15 years of service but not completed 20 years
of service are not entitled to weightage of five years for
H qualifying service under Regulation 29(5), the employees who
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 145
[R.M. LODHA, J.]
~
have completed 20 years of service or more cannot be denied A
such benefit.

39. On behalf of the banks, it was contended that Pension
Regulations, 1995, are statutory in nature and these
Regulations cannot be altered, amended or read down in view B
of any contract or a contractual scheme. It was submitted that
any contract (or contractual scheme), contrary to a statutory law
would be hit by Section 23 of the Contract Act and, therefore,
it is the contract or the scheme which has to be modified,
altered or read do)Nn to bring it in tune with the provisions of
statutory Regulations and not the other way round. The
c
contention does not impress us. It is misplaced assumption that
by reading Regulation 29(5) in the Scheme, the Pension
Regulations would get altered or amended. Can it be said that
statutory relationship of employee and employer brought to an
end prematurely by contractual VRS 2000 amounted to D
~
alteration,or amendment in the statutory Regulations. Surely,
answer has to be in negative and that must answer this
contention. The precise effect of Pension Regulations, for the
purposes of pension, having been made part of scheme, is that
Pension Regulations, to the extent, these are applicable, must E
be read into the Scheme. It is pertinent to bear in mind that
interpretation clause of VRS-2000 states that the words and
expressions used in the scheme but not defined and defined
in the Rules/Regulations shall have the same meaning
~
respectively assigned to them under Rules/Regulations. The F
'
Scheme does not define the expression 'retirement' or
'voluntary retirement'. We have, therefore, to fall back on the
definition of 'retirement' given in Regulation 2(y) whereunder
voluntary retirement under Regulation 29 is considered to be
retirement. Regulation 29 uses the expression, 'voluntary G
retirement under these Regulations'. Obviously, for the
r purposes of the Scheme, it has to be understood to mean with
~
necessary changes in points of details. Section 23 of the
Contract Act has no application to the present fact situation.
' H
146 SUPREME COURT REPORTS [2009] 5 S.C.R.

A 40. It was submitted on behalf of the banks that amendment
to Regulation 28 has neither been challenged nor the said
Regulation has been declared ultra vires and, therefore, that
provision cannot be rendered otiose by taking recourse to
Regulations 29. It is true that validity and legality of Regulation
B 28 has not been put in issue. It was apparently not done
because, according to the employees, amended Regulation 28
although made retrospective could not have affected the
concluded contract. We have already indicated above as to
how the amendment in Regulation 28 in the year 2002 with
c effect from September 1, 2000 could not have applied to the
optees under the Scheme who had completed service of 20
years. Lack of challenge to the Regulation 28 by the employees
is, therefore, not very material. It is not correct to say that by
taking recourse to Regullation 29, the amendment to Regulation
28 is rendered otiose.
0
41. It was vehemently contended on behalf of the banks
that VRS 2000 was a self-contained Scheme and it provided
for special benefits in the form of ex-gratia. It was submitted
that ex-gratia was not available to the employees claiming
E voluntary retirement under Pension Regulations and it was
because of that, that Scheme did not envisage granting of
pension benefits under Regulation 29(5) of the Pension
Regulations, 1995, along with the payment of ex-gratia which
was a substantial amount. It is true that VRS 2000 is a complete
F package in itself and contractual in nature. However, in that
package, it has been provided that the optees, in addition to
ex-gratia payment, will also be eligible to other benefits inter
alia pension under the Pension Regulations. The only provision
in the Pension Regulations at the relevant time during the
G operation of VRS 2000 concerning voluntary retirement was
Regulation 29 and clause(5) thereof provides for weightage of
addition of five years to qualifying service for pension to those
optees who had completed 20 years service. It, therefore,
cannot be accepted that VRS 2000 did not envisage grant of
H pension benefits under Regulation 29(5) of the Pension
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 147
~ [R.M. LODHA, J.]
Regulations, 1995, to the optees of 20 years service along with A
payment of ex-gratia. The whole idea in bringing out VRS 2000
was to rightsize workforce which the banks had not been able
to achieve despite the fact that the statutory Regulations
provided for voluntary retirement to the employees having
f completed 20 years service. It was for this reason that VRS B
2000 was made more attractive. VRS 2000, accordingly, was
an attractive package for the employees to go in for as they
were getting special benefits in the form of ex-gratia and in
addition thereto, inter a/ia pension under the Pension
Regulations which also provided for weightage of five years of c
qualifying service for the purposes of pension to the employees
who had completed 20 years service.

42. In support of their contention that the employees, who
have sought voluntary retirement under VRS 2000, are not
~ entitled to benefit of Regulation 29(5) of Pension Regulations, D
1995, on behalf of banks, heavy reliance was placed on a
decision of this Court in the case of Bank of Baroda and Ors.
Vs. Ganpat Singh Deora, 2009 (1) Scale 168. As a matter of
fact, it was submitted that the decision of this Court in the case
of Bank of Baroda concludes the controversy and the legal E
position is no more res integra. Reliance in this connection was
placed on the following observations:

"15. The only question which is required to be determined
in the instant case is whether Regulation 29 of the Pension F
Regulations, 1995, could have been applied in the case
of the respondent or whether Regulation 14 has been
rightly applied both by the Tribunal and the High Court.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
G
.......... 18. However, we are inclined to agree with Ms. Bhati that
~ Regulation 29 does not contemplate voluntary retirement
under the Voluntary Retirement Scheme and applies only
to such employees who themselves wish to retire de hors
any Scheme of Voluntary Retirement, after having H
148 SUPREME COURT REPORTS [2009] 5 S.C.R.
•. (

A completed 15 years of qualifying service for the said
purpose. There is a distinct difference between the two
situations and Regulation 29 would not cover the case of
an employee optin!~ to retire on the basis of a Voluntary
Retirement Scheme.
B l
19. Furthermore, Re!gulations 2 of the Voluntary Retirement
Scheme, 2001, of the appellant-Bank merely prescribes
a period of qualifying service for an employee to be
eligible to apply for voluntary retirement. On the other hand,
Regulations 14 and 29 of the Pension Regulations, 1995,
c relate to the period of qualifying service for pension under
the said Regulations, in two different situations. While
Regulations 14 provides that in order to be eligible for
pension an employee would have to render a minimum of
10 years service, Regulation 29 is applicable to the
D employees choosing to retire from service pre-maturely, .....
and in their case the period of qualifying service would be
15 years. The facts of this case, however, do not attract
the provisions of Regulation 29 since the respondent
accepted the offer of voluntary retirement under the
E Scheme framed by the Bank and not on his own volition
de hors any Scheme of Voluntary Retirement. In such a
case, Regulaion 14 read with Regulation 32 providing for
premature retirement would not also apply to the case of
the respondent. While Regulation 2 of the BOBEVRS -
F 2001 speaks of eligibility for applying under the Scheme, ~
Regulation 14 of the Pension Regulations, 1995,
contemplates a situation whereunder an employee would
be eligible for premature pension. The two provisions are
for two different purposes and for two different situations.
G However, Regulations 28 of the Pension Regulations,
1995, after amendment made provision for situations ...-
similar to the one in the instant case. In the absence of any
particular provision for payment of pension to those who •
opted for BOBEVRS-2001 other than Regulation 11 (ii) of
the Scheme, we are once again left to fall back on the
H
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 149
[R.M. LODHA, J.]
...J
Pension Regulations, 1995, and the amended provisions A
of Regulation 28 which brings within the scope of
Superannuation Pension employees who opted for the
Voluntary Retirement Scheme, which will be clear from the
Explanatory Memorandum. However, the period of
qualifying service has been retained as 15 years for those B
opting for BOBEVRS-2001 and is treated differently from
premature retirement where the minimum period of
qualifying service has been fixed at 10 years in keeping
with Regulation 14 of the Pension Regulations, 1995."

43. A word about precedents, before we deal with the
c
aforesaid observations. The classic statement of Earl of
Halsbury, LC. in Quinn vs. Leathern, 1901 AC 495, is worth
recapitulating first:

"Before discussing Allen v. Flood (1898) AC 1 and what D
was decided therein, there are two observations of a
general character which I wish to make; and one is to
repeat what I have very often said before -that every
judgment must be read as applicable to the particular facts
proved, or assumed to be proved, since the generality of E
the expressions which may be found there are not intended
to be expositions of the whole law, but are governed and
qualified by the particular facts of the case in which such
expressions are to be found. The other is that a case is
only an authority for what it actually decides. I entirely deny F
that it can be quoted for a proposition that may seem to
follow logically from it. Such a mode of reasoning assumes
that the law is necessarily a logical code, whereas every
lawyer must acknowledge that the law is not always
logically at all."
G
44. This Court has in long line of cases followed the
..>-'-< aforesaid statement of law. In State of Orissa vs. Sudhansu
Sekhar Misra, AIR 1968 SC 647, it was observed:

".... A decision is only an authority for what it actually H
150 SUPREME COURT REPORTS [2009] 5 S.C.R.

J-,...
A decides. What is of thE3 essence in a decision is its ratio
and not every observation found therein nor what logically
follows from the various observations made in it."

45. In the words of Lord Denning:
8 "Each case depends on its own facts and a close similarity
between one case and another is not enough because
even a single significant detail may alter the entire aspect,
in deciding such cases, one should avoid the temptation
to decide cases (as said by Cardozo) by matching the
c colour of one case against the colour of another. To decide
therefore, on which side of the line a case falls, the broad
resemblance to another case is not at all decisive."

46. It was highlighted by this Court in Ambica Quarry
D Works Vs. State of Gujarat, (1987) 1 SCC 213:
)-
"18 .... The ratio of any decision must be understood in the
background of the facts of that case. It has been said long
time ago that a case is only an authority for what it actually
decides, and not what logically follows from it."
E
47. In Bhavnagar University vs. Palitana Sugar Mill (P)
Ltd., (2003) 2 SCC 111, this Court held that a little difference
in facts or additional facts may make a lot of difference in the
precedential value of a d13cision.
F
48. This Court in Bharat Petroleum Corporation Ltd. vs.
N.R. Vairamani, (2004) 8 SCC 579, emphasized that the
Courts should not place reliance on decisions without
discussing as to how the factual situation fits in with the fact
situation of the decision on which the reliance is placed. It was
G further observed that the judgments of courts are not to be
construed as statutes and the observations must be read in the
context in which they appear to have been stated. The Court )c

went on to say that circumstantial applicability, one additional
or different fact may make a word of difference between
H conclusions in two cases.
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 151
[R.M. LODHA, J.]

49. It _is true that the controversy in the case of Bank of A
Baroda arose out of the same voluntary retirement scheme with
which we are concerned in this group of appeals. However,
there is vital factual difference in that case and this group of
appeals. Pertinently that was a case where the employee had
~- completed only 13 years of service( not even 15 years of B
service much less 20 years' service) although he completed 40
years of age at the time he offered for voluntary retirement. The
employee's application therein for voluntary retirement was
accepted by the Bank of Baroda and he was paid all retiral
benefits. However, his request for grant of pension in addition c
to the other retiral benefits was not acceded to by the bank. It
was so because he had not completed even 15 years of
servlte. The employee pursued industrial adjudicatory process
for redressal of his grievance in respect of non-grant of pension
~ by the bank. The employee's claim was opposed by the Bank
0
of Baroda contending that in terms of Regulations 14, 28 and
29 of the Pension Regulations, 1995, the employee was not
entitled to pension. The observations made by this Court in
Bank of Baroda which have been quoted above and relied
upon by the banks in support of their contention have to be
understood in the factual backdrop namely, that the employee E
had completed only 13 years of service and, was not eligible
for the pension under the Pension Regulations, 1995 and for the
benefit of addition of five years to qualifying service under
Regulation 29(5), an employee must have completed 20 years
'1 of service. The question therein was not identical in form with F
the question here to be decided. The following observations in
paragraph 11 of the report in Bank of Baroda are significant:

"...... since both the Tribunal as well as the High Court
appear not to have considered or taken note of the fact G
that the respondent was not eligible for pension as he had
not completed 15 years of qualifying service ............ ."
50. The decision of this Court in Bank of Baroda is, thus,
clearly distinguishable as the employee therein had not H
152 SUPREME COURT REPORTS [2009] 5 S.C.R.
I l'f

A completed qualifying service much less 20 years of service for
being eligible to the weightage under Regulation 29(5) and
cannot be applied to the present controversy nor does that
matter decide the question here to be decided in the present
group of matters.
B
51. On behalf of banks it was submitted that the
employees, having taken benefits under the scheme (VRS
2000), are estopped from raising any issue that their
entitlement to pension would not be covered by amended
Regulation 28. It was suggested that the employees having
C taken benefit of the scheme cannot insist for pension under
Regulation 29(5). O.P. Swarnakar was relied upon in this
regard wherein it has been held that an employee, having taken
the ex-gratia payment, or any other benefit under the scheme
cannot be allowed to resile from the scheme.
D
52. lnsofaras the present group of appeals is concerned,
the employees are not seeking to resile from the Scheme. They
are actually seeking enforcement of the clause in the Scheme
that provides that the optees will be eligible for pension under
E the Pension Regulations, 1995. According to them, they are
entitled to the benefits of Regulation 29(5). In our considered
view, plea of estoppel is devoid of any substance; as a matter
of fact it does not arise at all in the facts and circumstances of
the case.
F 53. We hold, as it must be, that the employees who had
completed 20 years of service and were pension optees and
offered voluntary retirement under VRS 2000 and whose offers
·were accepted by the banks are entitled to addition of five years
of notional service in calculating the length of service for the
G purposes of that Scheme as per Regulation 29(5) of the
Pension Regulations, 1995. The contrary view expressed by
some of the High Courts do not lay down the correct legal
position.

H 54. The only question now remains to be seen is whether
BANK OF INDIA & ANR. v. K. MOHANDAS & ORS. 153
..... \ [R.M. LODHA, J.]

the concerned employees are entitled to interest on unpaid A
-. pension.

55. Although it has been held by us that the subject
employees are entitled to the weightage in terms of Regulation
29(5) of Pension Regulations, 1995, but we are satisfied that B
any award of interest on unpaid pension would not be in the
interest of justice. It is so because different High Courts did not
have unanimous judicial opinion on the issue. Punjab and
Haryana High Court and the Division Bench of the Kerala High
Court upheld the contention of the employees with regard to
applicability of Regulation 29(5) to the optees who had
c
completed 20 years of service while the Division Bench of the
Calcutta High Court and a single Judge of the Kera la High Court
took exactly an opposite view. The stance of the banks, although
" found not meritorious, cannot be said to be totally frivolous. We,
~ accordingly, hold that the subject employees are not entitled to D
interest on unpaid pension.

56. The result of the foregoing discussion is that the
appeals preferred by the banks must fail and are dismissed
while the appeals of the employees deserve to be allowed and E

- are allowed accordingly. The respective banks shall now
recalculate, within one month from today, the pension payable
to the concerned employees by giving them the benefit of
Regulation 29(5). However, the employees shall not be entitled
4
to interest on unpaid pension. The pending applications in F
~
these appeals stand disposed of. The parties shall bear their
own costs.

D.G. Appeals dismissed.