SCHOOL OF LAW
Case Study
BANK OF INDIA
Vs.
OP SWARANKAR
Submitted to: Submitted by:
SEEMA YADAV KUMAR AYUSH
ASST.PROFESSOR LL.B. 1st sem.
SOL,GU
Regt.No.21GUSOL1010026
INTRODUCTION
BANK OF INDIA vs OP SWARANKAR Case deals with the issue of
companies using Voluntary Retirement Schemes to reduce surplus
employees. Since Indian labor laws prohibit direct retrenchment of unionized
employees, this mode has emerged. The banks introduced the scheme with
the Board of Directors’ approval. Many employees of different nationalized
banks, such as Punjab National bank, Union Bank of India, Allahabad Bank,
the State Bank of India. applied for the Voluntary Retirement Scheme. Later,
about 2000 employees withdrew from their applications. However, the
applications which were withdrawn were accepted by the bank employers.
Thus, these employees filed Writ petitions against the Nationalized banks in
different High Courts. The High Courts ruled in favor of the petitioners and the
banks appealed in the Supreme Court.
BENCH: B. Pattanaik, C.J., Justice K. Sema, Justice B. Sinha
RELEVANT PROVISIONS:
Section 5 of the Indian Contract Act
Section 2(g) of the Indian Contract Act
FACTS
With the approval of the Board of Directors, the Nationalised banks
implemented the Voluntary Retirement Scheme. (V.R. Scheme). It had an
eligibility criterion, a reservation clause, which stated that employees who
were facing disciplinary action would not be eligible for voluntary retirement.
Employees who choose to retire voluntarily will be eligible for all other
retirement benefits, according to the document. The bank may withdraw the
scheme it sees fit under the existing scheme, and its decision is final.
About 1,01,000 employees applied for the V.R. Scheme, and a small
number (approximately 2000 employees) withdrew their application. Although
their offer had been withdrawn, the same was accepted. Despite withdrawal,
some offers were accepted during the scheme’s operational period, while
others were accepted after the period had expired.
The petitioners filed writ petitions under Article 226 against several
Nationalised banks, including the State Bank of India, Punjab National Bank,
and Bank of India, challenging the validity of their Voluntary Retirement
Scheme, which stated that an offer made by an employee could not be
withdrawn once it was made.
The Writ petitions were filed by the employees in different High Courts
of the country, including the Punjab & Haryana High Court, Bombay High
Court, Uttaranchal High Court, etc. The Nationalised banks and the State
Bank of India appealed against the decision of the various High Courts in the
Supreme court of India.
ISSUES
Whether the voluntary retirement scheme an offer or an invitation
to offer?
Whether an employee could withdraw a Voluntary Retirement
Scheme (VRS) application before it was accepted by the
Competent Authority?
Whether the employer bank gets the authority to unilaterally
determine the jural relationship of master and servant between the
parties after applying under VRS?
CONTENTIONS
The respondent argued that the appellant’s actions and policies regarding the
Voluntary Retirement Scheme were arbitrary, and violated Article 14 of the
Constitution of India. The respondent contended that the right of the
employee to continue working, which falls under the purview of ‘Right to
livelihood’ enshrined in Article 21 of the Constitution of India, could not be
infringed except according to the procedure established by law.
RATIO DECIDENDI
Justice S.B. Sinha: The scheme does not fall under the purview of statutory
regulation. It was a contractual issue. Therefore, the Central Government did
not need to bring the matter before Parliament.
Even if it were a regulation, the establishing rule is merely a guideline and not
a requirement. As a result, we believe that the scheme in question cannot be
said to be bad in law.
The court referred to the case of Gibson v. Manchester City Council (1979)
All. E.R. 972 which dealt with the matter of distinction between Offer and
Invitation to Offer. The case of Power Finance Corporation Ltd. v. Pramod
Kumar Bhatia (1997) was cited wherein a voluntary retirement scheme was
floated and the respondent applied for it, but the Corporation withdrew the
scheme although the offer had been accepted.
DECISION
The Supreme Court held that the Voluntary Retirement Scheme was not an
offer, but an ‘invitation to offer‘, with the employees’ applications making up
the ‘offer.’
In the absence of any other independent contract, statute, or statutory rules to
the contrary, the application filed by the employees will be considered an
‘offer’ under Section 5 of the Indian Contract Act.
When the Bank accepts the proposal, it will be considered a promise under
Section 2(b) of the Indian Contract Act. The apex court ruled that an offer
can be revoked even before it is accepted. Employees had the right to revoke
their offers if they believed they would not receive the full benefits as promised
under the Scheme after it was amended. Accepting an employee’s offer was
left to the discretion of the competent authority.
The Court observed that the Nationalized banks had secured an unrestricted
and unguided right to deal with the jural relationship between themselves and
their employees. The court ruled that because the employee’s offer to
voluntarily retire was conditional on the amount owed to him being adjusted; it
did not reach finality.
This decision establishes that the scheme can be withdrawn even after the
employee has accepted the offer and that the employee does not gain any
vested rights if this happens.
CONCLUSION
Except where the affected employees have accepted a portion of the benefit
under the scheme, the appeals by the Nationalised Banks were dismissed.
The appeals from the Punjab and Haryana High Court judgments concerning
ten writ petitions filed by employees are dismissed, and the cases were
remitted to the High Court for consideration of the merits and under the law.
Bank of India v. OP Swarankar was an important case dealing with the
distinction between ‘Offer’ and ‘Invitation to Offer’ and the rule laid down, in
this case, helps to decide cases involving acceptance of offer under a
Voluntary Retirement Scheme.
