Holding

Employees who retired voluntarily under the special scheme are not entitled to the benefits of the retrospective pay‑revision circular.

Summary

The appellants, former employees of Heavy Engineering Corporation Ltd., had opted for voluntary retirement under a scheme introduced in 1990 and retired between 1 January 1992 and 31 December 1996. The company later issued a circular in October 1997 revising the pay scales retroactively to 1 January 1992, but the circular limited the benefit to employees who were on the rolls on that date and left only by superannuation or death, expressly excluding those who left by dismissal, discharge or resignation. The appellants claimed entitlement to the revised pay, relying on a Union of India letter stating that voluntary retirees were eligible for arrears. The High Court dismissed the claim, holding that the voluntary retirement scheme was a "special scheme" and that the retirees were not covered by the circular. The Supreme Court affirmed this view, stating that acceptance of the voluntary retirement offer creates a contract governed by the Indian Contract Act, not by any statute, and that the circular’s exclusions logically bar the retirees from the benefit. Consequently, the appeal was dismissed.

Issues considered

The applicability of the 1997 pay‑revision circular to employees who had voluntarily retired under the 1990 voluntary retirement scheme.
Whether a voluntary retirement scheme constitutes a "special scheme" and thus falls outside the purview of statutory or contractual rights to later pay revisions.
Whether the contract of voluntary retirement, being governed solely by the Indian Contract Act, precludes entitlement to benefits not expressly provided in the scheme.

Legislation cited

Indian Contract Act, 1872

Subjects

Voluntary retirementSpecial schemePay revisionContract of employmentIndian Contract ActRetrospective benefitSick industrial companyEmployee entitlement

Judgment

A HEC VOLUNTARY RETD. EMPS WELFARE SOC. AND ANR. i
v.
HEAVY ENGINEERING CORPORATION LTD. AND ORS.

FEBRUARY 24, 2006

B fS.B. SINHA AND DAL VEER BHANDARI, JJ.]

Service Law: ,.
•
Voluntary Retirement Scheme --Sick company floated a scheme for
c voluntary retirement of its employees in the year 1987 which remained in
force up to 1990- -On 22.10.1990 a revised Voluntary Retirement Scheme
was floated-The scheme was to remain effective for an initial period of one
year-But the scheme had been extended from time to time- --Company issued
a circular dated 9.10.1997 revising the scale of pay-The same was given
D retrospective effect from 1.1.1992 and was to remain in force for a period of
5 years from the said date i.e. up to 31.12. 1996-- The employees who opted
for voluntary retirement in accordance with the l 990 scheme between the , .
period 1.1.1992 and 31.12.1996 claimed benefit of the said circular, which t
was denied -High Court held that the employees. having voluntarily retired
under a Special Scheme, were not entitled to the revised scale of pay under
E the said circular--Correctness of-Held: An offer j?r voluntary retirement in
terms of a scheme, when accepted, leads to a conch1ded contract between the
employer and the employee-An employee has w1 option either to accept or
not to opt therefor-Thereafter. the employee cannot raise a claim for a
higher salary unless by reason of a statute he becomes entitled thereto-
F Voluntary Retirement Scheme is a Special Scheme---Hence, the said employees
are not entitled to the benefit of the revised scale of pay.

The appellants were the employees of the respondent-company, which was
a sick company. The respondent floated a scheme for voluntary retirement of its
employees in the year 1987 which remained in force up to 1990. On 22.10.1990,
G a revised Voluntary Retirement Scheme was floated. The said scheme was to
remain effective for an initial period of one year but admittedly the same had been
extended from time to time. ;;..,

The respondent issued a circular dated 9.10.1997 effecting a revision in
the scale of pay. The same was given retrospective eflect from 1.1.1992 and was
H 678
HEC VOLUNTARY RETD. EMPS WELFARE SOC:. v. HEAVY ENG. CORPN. LTD_ 679

y to remain in force for a period of 5 years from the date i.e. up to 31.12.1996. A
The appellants opted for the said voluntary retirement scheme dated
22.10.1990 and retired between the period 1.1.1992 and 31.12.1996 and claimed
benefits of the circular dated 9.10.1997. In spite of the Central Government's
direction, the benefit of the revised scale of pay was not extended to the appellants.
B
The High Court dismissed the writ petition filed by the appellants holding
that the appellants, having voluntarily retired under a Special Scheme, were not
_... entitled to the revised scale of pay under the said circular. Hence the appeal.

Dismissing the appeal, the Court.
c
HELD: I. I. An offer for voluntary retirement in terms of a scheme, when
accepted, leads to a concluded contract between the employer and the employee.
In terms of such a scheme, an employee has an option either to accept or not to
opt therefor. The scheme is purely voluntary, in terms whereof the tenure of
service is curtailed which is permissible in law. Such a scheme is ordinarily
floated with a purpose of downsizing the employees. It is beneficial both to the D
employees as well as to the employer. Such a scheme is issued for elective
'""; 1
functioning of the industrial undertakings. Although the Company is a "State"
within the meaning of Article 12 of the Constitution oflndia, the terms and
conditions of service would be governed by the contract of employment. Thus,
unless the terms and conditions of such a contract are governed by a statute or E
statutory rules, the provisions of the Contract Act would be applicable both at the
formulation of the contract as also the determination thereof. By reason of such
a scheme only an invitation of offer is floated. When pursuant to or in furtherance
of such a voluntary retirement scheme an employee opts therefor, he makes an
offer which upon acceptance by the employer gives rise to a contract. Thus, as
the matter relating to voluntary retirement is not governed by any statute, the F
'1 provisions of the Indian Contract Act. 1872, therefore, would be applicable to.
(686-D-GI
Hindustan Machines Tools ltd v. MS Kang!P.N Kashyap, [1997] l 1 SCC
186 and Bank ofIndia v. OP. Swarnakar, (2003] 2 SCC 721, relied on.
G
1.2. It is also com men knowledge that a scheme of voluntary retirement is
~ preceded by a financial planning. Finances for such purpose, either in full or in
part, might have been provided for by the Central Government. Thus financial
implications arising out of implementation of a scheme must have been borne in
mind by the Company, particularly when it is a sick industrial undertaking. Offers
H
680 SUPREME COURT REPORTS [2006] 2 S.C.R.

A of such number of employees for voluntary retirement were to be accepted by the
Company only to the extent offinances available therefor. [686-H; 687-A-B)

2. The revised scale of pay have been made appl.icable on a pro-rata basis to
those employees who were on the rolls of the Corporation as on 01.01.1992 but
have subsequently ceased to be in service of the Corporation on account of
B superannuation or death. While extending the said benefit, the word "only" had
been used which is of some significance. Clause 3.3 of the scheme which excludes
the applicability of the scheme categorically states that the same shall not be
applicable to those who were on the rolls of the Corporation on the said date, but
subsequently left the services for the reasons stated thereunder. [687-E-F)
C 3.1. The voluntary retirement scheme speaks of a package. One either
takes it or rejects it While offering to opt for the same, pnsumably the employee
takes into consideration the future implication also. [688-B-C)
3.2. It is not in dispute that the effect of such voluntary retirement scheme
is cessation of jural relationship between the employer and the employee. Once
D an employee opts to retire voluntarily, in terms of the contract he cannot raise a
claim for a higher salary unless by reason of a statute he becomes entitled thereto.
He may also become entitled thereto even if a policy in that behalf is formulated ' .
by the Company. [688-C-DJ
3.3. Before floating such a scheme both the employer as also the employee
E take into account financial implications in relation 1thereto. When an invitation
to offer is floated by reason of such a scheme, the employer must have carried
out exercises as regards the financial implication thereof. If a large number of
employees opt therefor, having regard to the financial constraints, an employer
may not accept offers of a number of employees and may confine the same to only
a section of optees. Similarly, when an employer accepts the recommendations of
F a Pay Revision Committee, having regard to the financial implications thereof it
may accept or reject the whole or a part of it. The question of inclusion of
employees who form a special class by themselves, would, thus, depend upon the
object and purport thereof. The appellants do not fall either in clauses 3.2 or 3.3
expressly. They would be treated to be included in clauses 3.2, provided they are
G considered at par with superannuated employee. They would be excluded if they
are treated to be discharged employees. [688-D-GJ
4.1. Admittedly thousands of employees had opted for voluntary retirement '?- •
during the period in question. They indisputably form a distinct and different etas&
The appellants are neither discharged employees nor are they superannuated
H employees. The expression "superannuation" connotes a distinct meaning. It
HEC VOLUNTARY RETD. EMPS WELFARE SOC. v. HEAVY ENG. CORPN. LTD. 681

y ordinarily means, unless otherwise provided for in the statute, that not only he A
reaches the age of superannuation prescribed therefor, but also becomes entitled
to the retiral benefits thereof including pension. "Voluntary retirement" could
have fallen within the afore-mentioned expression, provided it was so stated
expressly in the scheme. [688-G-H; 689-A-B]

4.2. Financial considerations are, thus, a relevant factor both for floating a B
scheme of voluntary retirement as well as for revision of pay. Those employees,
who opted for voluntary retirement, make a planning for the future. At the time
A
of giving option, they know where they stand. At that point of time they did not
anticipate that they would get the benefit of revision in the scales of pay. They
prepared themselves to contract out of the jural relationship by resorting to
"golden handshake". They are bound by their own act The parties are bound by
c
the terms of contract of voluntary retirement Unless a statute or statutory
provision interdict, the relationship between the parties to act pursuant to or in
furtherance of the voluntary retirement scheme, is governed by contract By such
contract, they can opt out for such other terms and conditions as may be agreed
upon. In this case the terms and conditions of the contract are not governed by a D
statute or statutory rules. [689-B-D)
'y .;

A.K. Bindal v. Union of India, [2003) 5 SCC 163, Officers and Supervisors
ofl.D.P.L v. Chairman and MD., LD.P.L., [2003) 6 SCC 490 and State ofAndhra
Pradesh v. A.P. Pensioners' Association, JT (2005) 10 115, r.elied on.
E
V. Kasturi v. Managing Director, State Bank of India, [1998) 8 SCC 30,
held inapplicable.

4.3. It will also be germane for such a purpose to take into consideration
the question as to whether those who are no longer on the rolls of the company
should be given the benefit thereof. (689-H; 690-A) F
1 4.4. It cannot be said that the Company intended to extend the said benefits
to those who had opted for voluntary retirement. Clause 3.2 of the circular
includes only those who were on the rolls of the Corporation as on 1.1.1992, as
also those who ceased to be in service on that date on account of superannuation
G
or death. The appellants do not come in the said category. In view of the fact that
they have not been expressly included within the purview thereof, although they
A have not been excluded by clause 3.3, they would be deemed to be automatically
excluded. (690-B-C)

Hindustan Machines Tools Ltd. v. MS. Kang/P.N. Kashyap, (1997) 11 SCC H
682 SUPREME COURT REPORTS [2006] 2 S.C.R.

A 186, relied on.
6. The Voluntary Retirement Scheme is a Special Scheme. The scheme
was initially introduced for one year. It might have been extended from time to
time. Extension of such a scheme indisputably must have been on the basis of
exercises resorted to by the employer as regards tile fmancial implications thereof,
B availability of fund, average number of employees opting therefor and other
relevant factors. Only because the said scheme remained in force for a total period
of IO years, the same would not mean that it became a part of the general terms
and conditions of contract of employment Futhermore, evidently as the scheme
floated in 1987 did not work to the satisfaction of the company, it was replaced by
C the 1990 scheme upon extending more benefits to the employees. [691-A-C)

State of U.P. v. Neeraj Awasthi, [2006) 1SCC6671, referred to.

State Bank ofIndia v. A.N. Gupta, (1997) ll SCC 60, held inapplicable.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5367 of2001.
D
From tht: Final Judgment/Order dated 5.7.2000 of the Patna High Court
in C.W.J.C. No. 227of1998 (R). )I

S.B. Upadhyay, Shiv Mangal Sharma and M.A. Chinnasamy for the
E Appellants.
Ranjit Kumar, Ms. Binu Tamta, A.R. Qur1~shi and Mohd. Irshad Haniffor
the Respondents.

The Judgment of the Court was delivered by

F S.B. SINHA, J. These two appeals involving common questions of fact
and law were taken up for hearing together and are being disposed of by this
common judgment.

The members of the appellant Union were employees of Heavy
G Engineering Corporation Limited, the respondent herein ('the Company'). It
is a sick company. It was referred to BIFR in terms of the provisions of Sick
Industrial Companies (Special Provisions) Act, 1985. As one of the measures
for revival of the company it floated a scheme for voluntary retirement of its j-.,

employees. One of such scheme was floated in the year 1987 which remained
in force upto 1990. On and about 20. I0.90 a revised Voluntary Retirement
H Scheme was floated. The said scheme was to remain effective for an initial
HEC VOLUNTARY RETD. EMPS WELFARE SOC. v. HEAVY ENG. CORPN. LTD.[SINHA, J.) 683

period of one year but admittedly the same has been extended from time to A
1"' time. Both unionised and non-unionised employees numbering in thousands
opted thereunder. Pursuant to or in furtherance of the said scheme the following
benefits were to be given to the employees opting for voluntary retirement:

"5.1.1 Compensation at the rate of one and half month months' salary
for each completed year of service, subject to a ceiling equal to B
the employee's monthly salary at the time of voluntary retirement
multiplied by balance months of service left before the normal
date of superannuation.

5.12 Payment of salary for the notice period as provided in the offer
of appointment of the employee. c
5.13 Cash value of the unavailed Earned Leave at the credit of the
employee on the effective date of voluntary retirement subject to
the existing limit of 240 days.
5.1.4 Payment of Provident Fund accumulation inclusive of Corporation's
D
contribution in full together with interest thereon standing to the
.i. . employee's credit in the Provident Fund Account as on the date
¥ of the voluntary retirement.
5.1.5 Gratuity as admissible under the Gratuity Rules applicable to the
employee.
E
5.1.6 Payment of TA, cost of transportation of baggage, Transfer Grant
and incidental Travelling Allowance etc. as in the case of serving
employees on transfer for proceeding to his Home Town or to the
place where he intends to settle in India."

The Company issued a circular letter being Circular No.5/97 dated 9th F
October, 1997 effecting revision in the scale of pay. The same, although
issued on 9th October, 1997, was given retrospective effect from 1.1.1992. It
was to remain in force for a period of 5 years from the said date, i.e., upto
31.12.1996. Clauses 3.2 and 3.3 thereof read as under:

"3.2. The revised Scales of Pay shall also be applicable on a pro-rata
G
basis to only those Executives, non Unionised Supervisors and
Employees in equivalent salary grades who were on the rolls of the
A Corporation as on 1.1.J 992 but have subsequently ceased to be in
service of the Corporation on account of superannuation or death.
H
3.3. Benefits of revision of Scales of Pay shall not be applicable to
~
684 SUPREME COURT REPORTS [2006) 2 S.C.R.

A those Executives, Non Unionised Supervisors and Employees in
equivalent Salary Grades of the Corporation who were on the rolls of
the Corporation as on 1.1.1992 but have subsequently left the services
of the Corporation for the following reasons:-

3.3. I Dismissal;
B
3.3.2 Discharge;

3.3.3 Resignation without pennission;

3.3.4 Resignation in cases where disciplinary action for misconduct
involving moral turpitude has been initiated or contemplated."
c
The appellants herein indisputably opted for the said voluntary retirement
scheme dated 22.10.1990 and retired between the period 1.1.1992 and 31.12.1996.

In view of the revision of scales of pay by the Company in terms of the
D afore-mentioned circular dated 9th October, 1997 a contention was raised by
the appellant that they were entitled to the benefit thereof. The matter was
referred to the Government of India and the Ministry of Industries by a letter
dated 24th March, 1993 stated that the employees who had opted for voluntary ' .
retirement in terms of the aforementioned scheme W<:re entitled to the benefit
of the revision of pay in the following terms :
E
" ... the employees who have voluntarily retired after 1.1.1992, on the
effective date of revision of wages and salary, as the case may be, he
will be eligible for arrears of wages including arrear of compensation
paid under the approved voluntary retirement scheme. However, the
arrears will be payable only after the wage revision is approved. It is
F the responsibility of the company to pay the arrears arising from wage
revision. Arrears on account of V.R.S., compensation, if any, may
however be met from the Budget grant of the company for V.R.S. for
the year in which such revision takes effect."

G As despite the said purported direction of the Central Government the
benefit of the revised scale of pay were not extended to the appellants herein,
they filed a writ petition before the Ranchi Bench of the High Court of
Judicature at Patna (now Jharkhand High Court). A learned Single Judge of
the said Court dismissed the said writ petition opining that the appellants had
no legal right in relation thereto. It was furthermore opined that when the said
H circular No.5 of 1997 was issued, the appellants having voluntarily retired, it
-
HEC VOLUNTARYRETD. EMPSWELFARE SOC. v. HEAVY ENG. CORPN. LTD.[SINHA, J.] 685

r was not applicable in their case. A
Letters Patent Appeals preferred there against by the appellants were
also dismissed. The Division Bench of the High Court in its judgment, which
is impugned herein, relying upon or on the basis of Hindustan Machines
Tools Ltd & Anr. v. MS. Kang/P.N. Kashyap, reported in [1997] 11SCC186
held that as the respondents had voluntarily retired under a Special Scheme, B
they were not entitled for revised scale of pay as revised under the said
CircularNo.45 of1990 dated 1-3-1991.

In assailing the said judgments, Mr. S.B. Upadhyay and Mr. M.A.
Chinnasamy, the learned c011nsel appearing on behalf of the appellants would
submit that the High Court committed a manifest error in arriving at the said
c
conclusion, in so far as it proceeded on the basis that the voluntary retirement
scheme dated 22.10.1990 was a special scheme as the same remained in force
for a period of 10 years. It was furthermore urged that the Company being
a sick industry, it had taken recourse to the voluntary retirement on a long-
term basis and even prior to introduction of the said scheme of the year 1990, D
another scheme had been floated. The learned counsel for the appellants
j ...,
furthermore urged that no distinction exists between 'voluntary retirement'
y
and 'superannuation' and in support of the said proposition, reliance has
been placed on V. Kasturi v. Managing Director, State Bank ofIndia, Bombay
& Anr., [1998] 8 SCC 30.
E
Mr. Ranjit Kumar, learned Senior counsel appearing on behalf of the
respondent, on the other hand, would contend that having regard to the
contract of voluntary retirement, the concerned employees having already
taken the benefits admissible under the scheme including the proportionate
pay for their future service were not entitled to benefits of revised scale of
F
pay. The employer in arranging its financial plan on request to payment of
benefits under the voluntary retirement scheme could not and did not anticipate
that there would be a revision in the pay scale and the same would be
applicable also to the employees who had opted for voluntary retirement.
Pensioners, according to the learned counsel, stand absolutely on a different
footing inasmuch as even after their superannuation they continue to draw G
pension. Similarly, the family members of the deceased employees would be
A entitled to family pension. Upon such voluntary retirement in terms of the
scheme, the jural relationship comes to an end, Mr. Ranjit Kumar argued.
Drawing our attention to the distinction between clauses 3.2 and 3.3 afore-
mentioned, it was submitted that it specifically lays down as to what was to
,) H
686 SUPREME COURT REPORTS [2006] 2 S.C.R.

A be included has been included and what was to be excluded has been
excluded. Thus, the Company never had any intention to include the cases
of the employees who had opted for voluntary retirement in terms of the
scheme, they have not been included in clause 3.2 of the Circular. Revised
pay scale being applicable to a person who is in service, a'fortiori the same
would be inapplicable to the persons who are not in service, according to the
B learned counsel.
In reply, Mr. S.B. Upadhyay, learned counsel submitted that the jural
relationship was created in terms of the scheme itself and in this behalf our
attention was drawn to paragraph 20.2 of afore-mentioned Circular No.5/97
C which reads as under:
"20.2. Only those separated Executives, Supervisors and Employees
in the equivalent salary grades who ceased to be in employment of
the Corporation due to superannuation or death on or after 01.01.1992
shall be eligible for arrears on pro-rata basis."
D An offer for voluntary retirement in terms of a scheme. when accepted,
leads to a concluded contract between the employer and the employee. In
terms of such a scheme, an employee has an option either to accept or not
..
to opt therefor. The scheme is purely voluntary, in terms whereof the tenure
of service is curtailed which is permissible in law. Such a scheme is ordinarily
E floated with a purpose of downsizing the employees. It is beneficial both to
the employees as well as to the employer. Such a scheme is issued for
effective functioning of the industrial undertakings. Although the Company
is a "State" within the meaning of Article 12 of the Constitution of India, the
terms and conditions of service would be governed by the contract of
employment. Thus, unless the terms and conditions of such a contract are
F governed by a statute or statutory rules, the provisions of Contract Act
would be applicable both at the formulation of the contract as also the
determination thereof. By reason of such a scheme only an !nvitation of offer
is floated. When pursuant to or in furtherance of such a voluntary retirement
scheme an employee opts therefor, he makes an offer which upon acceptance
G by the employer gives rise to a contract. Thus, as the matter relating to
voluntary retirement is not governed by any statute, the provisions of Indian
Contract Act, 1872, therefore, would be applicable to. (See Bank of India &
Ors. v. O.P. Swarnakar & Ors., (2003] 2 SCC 721]

It is also common knowledge that a scheme of voluntary retirement is
H preceded by a financial planning. Finances for such purpose. either in full or
HEC VOLUNTARYRETD. EMPSWELFARESOC. v. HEAVY ENG. CORPN. LTD.[SINHA, J.) 687

t' in part, might have been provided for by the Central Government. Thus A
financial implications arising out of implementation of a scheme must have
been borne in mind by the Company, particularly when it is a sick industrial
undertaking. Offers of such number of employees for voluntary retirement, in
that view of the matter, were to be accepted by the Company only to the
extent of finances available therefor.
B
We have noticed hereinbefore the benefits admissible under the scheme.
The employee offering to opt for such voluntary retirement, not only gets his
,;;. salary for the period mentioned therein but also gets compensation calculated
in the manner specified therein, apart from other benefits enumerated
thereunder.
c
A clarification was issued on and about 17th July, 1992 whereby and
whereunder the benefit of compensation and notice pay was restricted to
Basic Pay and Dearness Allowance that would have been paid to the
employees till the date of their supernanuation and in case the employee
. being released after serving the full notice period or part thereof and having D
. ~
drawn the salary for the same, the notice pay would not be admissible to that
extent. It is on the afore-mentioned premise clauses 3.2 and 3.3 of the said
t scheme are to be construed.

The revised scale of pay have been made applicable on a pro-rata l:iasis
to those employees who were on the rolls of the Corporation as on 01.01.1992 E
but have subsequently ceased to be in service of the Corporation on account
of superannuation or death. While extending the said benefit, the word "only"
has been used which is of some significance. Clause 3.3 of the scheme which
excludes the applicability of the scheme categorically states that the same
shall not be applicable to those who were on the rolls of the Corporation on
F
the said date, but subsequently left the services for the reasons stated
thereunder, namely :

I. Dismissal;

2. Discharge;
G
3. Resignation without permission;
......
,,-1; 4. Resignation in cases where disciplinary action for misconduct
involving moral turpitude has been initiated or contemplated.
......
_;-.,~ ~

The question which arises for our consideration is whether in-~few Of
the fact that the employees who had opted for voluntary retirement having H
688 SUPREME COURT REPORTS (2006) 2 S.C.R..

A not been excluded from the purview of Clause 3.3 of the said Circular No.5/
97, would be treated to be included or the benefits thereof would be available
to only such employees who come within the purview of Clause 3.2 thereof?

Construction of the afore-mentioned provisions undoubtedly would
depend upon the purport and object of the voluntary retirement scheme vis-
B a-vis the retrospective effect given to the revision of pay in terms of the afore-
mentioned circular dated 9th October, 1997

The voluntary retirement scheme speaks of a package. One either takes ...
it or rejects it. While offering to opt for the same, presumably the employee
takes into consideration the future implication also.
c
It is not in dispute that the effect of such voluntary retirement scheme
is cessation of jural relationship between the employer and the employee.
Once an employee opts to retire voluntarily, in te1ms of the contract he cannot
raise a claim for a higher salary unless by reason of a statute he becomes
entitled thereto. He may also become entitled th1~reto even if a policy in that
D
behalf is formulated by the Company.
..
We have indicated hereinbefore that before floating such a scheme both f

the employer as also the employee take into account financial implications in
relation thereto. When an invitation to offer is floated by reason of such a
E scheme, the employer must have carried out exe:rcises as regard the financial
implication thereof. If a large number of employees opt therefor, having regard
to the financial constraints an employer may not accept offers of a number
of employees and may confine the same to only a section of optees. Similarly
when an employer accepts the recommendations of a Pay Revision Committee,
having regard to the financial implications then:of it may accept or reject the
F whole or a part of it. The question of inclusion of employees who form a
special class by themselves, would, thus, depend upon the object and purport
.
thereof. The appellants herein do not fall either in clauses 3.2 or 3.3 expressly.
They would be treated to be included in clause 3.2, provided they are
considered at par with superannuated employee. They would be excluded if
G they are treated to be discharged employee.

We have noticed that admittedly thousands of employees had opted for
voluntary retirement during the period in question. They indisputably form a
+-, -
distinct and different class. Having given our anxious consideration thereto,
we are of the opinion that neither they are discharged employees nor are
H superannuated employees. The expression ·'superannuation" connotes a
,
I
-(
/
;

HEC VOLUNTARYRETD. EMPS WELFARE SOC. v. HEAVYENG.CORPN. LTD.[SINHA,J.] 689

;
·,r distinct meaning. It ordinarily means, unless otherwise provided for in the A
• statute, that not only he reaches the age of superannuation prescribed therefor,
but also becomes entitled to the retiral benefits thereof including pension.
"Voluntary retirement" could have fallen within the afore-mentioned expression,
' provided it was so stated expressly in the scheme.

Financial considerations are, thus, a relevant factor both for floating a B
scheme of voluntary retirement as well as for revision of pay. Those employees
who opted for voluntary retirement, make a planning for the future. At the
.j!J(
time of giving option, they know where they stand. At that point of time they
did not anticipate that they would get the benefit of revision in the scales of
pay. They prepared themselves to contract out of the jural relationship by
resorting to "golden handshake". They are bound by there own act. The
c
parties are bound by the terms of contract of voluntary retirement. We have
noticed hereinbefore that unless a statute or statutory provision interdict, the
relationship between the parties to act pursuant to or in furtherance of the
voluntary retirement scheme, is governed by contract. By such contract, they
can opt out for such other terms and conditions as may be agreed upon. In D
l, ~ this case the terms and conditions of the contract are not governed by a
)· statute or statutory rules.

The question came for consideration before the Division Bench of this
Court in A.K. Binda/ & Anr. v. Union of India & Ors. [2003] 5 SCC 163
wherein this Court took notice of the fact that in implementation of such a E
scheme a considerable amount has been paid to the employee ex gratia
besides the terminal benefits in case he opts therefor. It has further been
noticed that the payment of compensation is granted not for doing any work
or rendition of service and in lie of his leaving the services of the company.
F
~· [See also Officers & Supervisors ofl.D.P.L. v. Chairman & MD., l.D.P.L.
& Ors., [2003] 6 sec 490]

In State of Andhra Pradesh and Anr. v. A:P. Pensioners Association &
Ors., IT (2005) 10 SC 115, this Court categorically held that financial implication
is a relevant criteria for the State Government to determine as to what benefits G
can be granted pursuant to or in furtherance of the recommendations of a Pay
..A Revision Committee. A' fortiori while taking that factor into account, an
employer indisputably would also take into consideration the number of
employees to whom such benefit can be extended.
;..
It will also be germane for such a purpose to take into consideration the H

~
I

~

690 SUPREME COURT REPORTS (2006] 2 S.C.R.

A question as to whether those who are no longer on the rolls of the company
should be given the benefit thereof.

Considering the matter from that context, we are of the opinion that it
cannot be said that the Company intended to extend the said benefits to
those who had opted for voluntary retirement. Clause 3.2 of the circular
B includes only those who were on the rolls of the Corporation as on l. 1.1992,
as also those who ceased to be in service on that date on account of
superannuation or death. The appellants do not come in the said category.
In view of the fact that they have not been expressly included within the
purview thereof, we are of the opinion that although they have not been
C excluded by clause 3.3, they would be deemed to be automatically excluded.

In Hindustan Machine Tools ltd. & Anr. v. M.S. Kang/P.N. Kashyap,
(1997] 11 SCC 186, this Court observed that

"JO ... Those who retired on attaining the age of 58 years or voluntarily
retired under Rule 24.2(b) or (c ), as the c:ase may be, under the
D Conduct, Discipline and Appeal Rules referred to hereinbefore are the
persons referred to in clause 2.2.2 of the office order. The benefits of
the revision of pay scales shall not be applicable to those persons
- .
who were on the rolls of the Company as on 31-12-1986 but
subsequently left the service of the Company before the date of issue
E of Office Order No.45 of 1990 for any reason, whatsoever, including
resignation except the category mentioned in clause 2.2 above. Thereby
the necessary implication is that all those who are covered and stand
on the same footing are excluded except to the extent of gratuity,
revision of the terminal benefits as mentioned in para 6. 13 which
postulates that gratuity paid or payable to employees covered under
F clause 2.2 will be recalculated on the revised pay subject to the
prescribed ceiling. Thus, it could be seen that the distinction has been
drawn between employees who retired voluntarily under rule 24.2 of
the Conduct, Discipline and Appeal rules or the employees who retied
under the Special Scheme operating from time to time. The respondents
G having retired under the Special Scheme are not employees covered
under the Special Scheme are not employees covered under the
voluntary retirement under Rule 24.2 of the Conduct, Discipline and
Appeal Rules referred to hereinbefore."

The expression "Special Scheme" used therein must be understood in
H the context of a general Scheme of employment governing the terms and
-l
t

HEC VOLUNTARY RETD. EMPS WELFARE SOC. v. HEAVY ENG. CORPN. LTD.[SINHA, J.] 69 J

"r·
I
conditions of service or which is a part of the statutory rules governing the A
service of the employees. In this sense also the Voluntary Retirement Scheme
is a Special Scheme. The scheme was initially introduced for one year. It might

- have been extended from time to time. Extension of such scheme indisputably
must have been on the basis of exercises resorted to by the ·employer as
regards the financial implications thereof, availability of fund, average number
of employees opting therefor and other relevant factors. Only because the
B
said scheme remained in force for a totafperiod of I 0 years, the same ·would
not mean that it became a part of the general terms and conditions of contract
..,,. of employment. Furthermore evidently as the scheme floated in 1987 did not
work to the satisfaction of the Company, it was replaced by the year 1990
scheme upon extending more benefits to the employees. c
State Bank of India v. A.N. Gupta & Ors., (1997] 8 SCC,60 whereupon
Mr. Upadhayay placed strong reliance, departmental proceeding could be
initiated in terms of the pension rules. Jt is in that context this Court held:

"It cannot be said that an employee retires only on superannuation D
and there is no other circumstance under which an employee can
retire. Retirement on superannuation is not the only mode of retirement
r known to service jurisprudence. There can be other types of retirements
like premature retirement, either compulsory or voluntary. It would be
in the case of a premature retirement or any other contingency when
E
an employee leaves the service of the Bank before he superannuates,
Rule 11 would become applicable. Retirement on superannuation is
automatic as per Rule 26 of the Service Rules. No further action on
the part of the Executive Committee of the Central Board of the Bank
would be required in such a case and rule 11 will not be applicable."
F
The said has no application in the present case.
i
It has not been suggested that voluntary retirement, in absence of any
express statutory rule governing the filed, would bring about a case of
superannuation. In V. Kasturi (supra) a new Rule was introduced providing
for pension of an employee after retirement on completion of 20 years of G
service, provided he requested in writing therefor. The questions which fall
for consideration therein was that if a person was eligible for pension at the
,,~
time of his retirement and if he survives till the time of subsequent amendment
"
; of the relevant pension scheme, whether he would become entitled to enhanced
pension or would become eligible to get more pension as per the new formula
H
692 SUPREME COURT REPORrS [2006] 2 S. C.R.

A of computation of pension. In the fact situation obtaining therein, it was held
that employees could be divided in two categories, i.e., those who were

B
eligible for pension at the time of his retirement and those who were not.
Whereas in the case of first category the benefit of the amended provisions
would be applicable, but in the second it would not. V. Kasturi (supra) also,
thus, in our opinion, is not applicable to the fact of the present case.
.
It may be true that the Central government interpreted the provision
differently, but in the absence of any statutory provision the same is not
binding upon the respondent. It is of some interest to note that the Central
Government opined that the Company itself has to bear the burnt of additional
C burden which on all probabilities was an impossible task.

Our atterttion has not been drawn to the provision of any statute that
even in its day to day functioning the Company would be bound by any
direction issued by the Central Government. It may be that the respondent
is a Government Company within the meaning of Section 617 of the Companies
D Act. It may be that entire shareholding of the Company is held by the the
President of India or his nominee but in law it is a separate juristic entity and,
thus, in absence of any statutory provision, the Company was not bound by
any such clarification issued by the Central Government. Even where a statute
confers such a jurisdiction on the Central Government, the same must be held
E to be confined only to the provisions contained therein. [See State of U.P. v.
Neeraj Awasthi & Ors., [2006] l SCC 667]

Although either before the High Court or before us no submissions
were made relying on or on the basis of office memorandum dated 5th May,
2000, a copy whereof has been annexed only with the written submissions.
F We are, however, of the opinion that the same would not advance the case·
of the appellants for more than one reason. Firstly, the said office memorandum
dated 5th May, 2000 cannot be considered by us as the same had been filed
for the first time with the written submissions. No opportunity therfor had
been given to the respondents to respond thereto. Secondly, the same is a
G general circular whereas the circular letter dated 24th May, 1993 issued by the
Union of India deals with the particular problem wherein it has categorically
been stated that the Central Government shall nor undertake the financial
responsibility therefor. In any event, the said letter refers to the schemes ._.
which might have come into force after 2000. It evidently, does not refer to
the 1987 Scheme vis-a-vis the revision of the pay scales.
H
HEC VOLUNTARY RETD. EMPS WELFARE SOC. v. HEAVY ENG. CORPN. LTD.[SINHA, J.) 693

The Appellants filed the writ petition relying on or on the basis of the A
aforementioned circular of the Union of India dated 24th May, 1993.

For the foregoing reasons, we are of the view that the impugned
judgment cannot be faulted with. The appeals, thus, being devoid of any
merit are dismissed. No costs.
B
v.s.s. Appeal dismissed.

\_ ,,._

t