Author: Niyush Kumar, 4th year, Amity Law School, Delhi.
CITATION: 2020 SCC OnLine SC 253
DATE OF DECISION: 02 March, 2020
BENCH: Arun Mishra, Ms. Banerjee
ORIGINAL COPY: VIEW
ISSUE IN QUESTION
- Whether the employees are entitled to pension after completion of 15 year of job as per the SBI’s VRS?
BACKGROUND OF THE CASE
- Under the VRS system proposed by the Indian Banking Association (IBA), every employee with 15 years of service was entitled to the pension. On December 27, 2000, the SBI Central Board approved the program, however, according to the SBI Pension Fund Regulations, a pension entitlement only exists after 20 years of service. On January 15, 2001, the IBI made it clear that the pension fund regulations apply when deciding on pension benefits. Several retired employees soon turned to the High Courts, which ruled in their favor. Challenging the HC rulings, the SBI appealed to the Supreme Court.
- After the Indian government received approval, the Indian Banks Association (IBA) developed a voluntary retirement plan. The SBI Board of Directors approved and adopted the plan at its December 27, 2000 meeting to introduce the VRS for bank employees, who will be retired after 15 years of service with the benefits provided for in the plan. The heart and soul of the system were the benefits granted after 15 years of service as of December 31, 2000.
- The SBI argued that it reserved the right under the Plan to change, add or remove this or any of the clauses and to bring them into effect at any time it deems appropriate. Director cum CDO was the responsible authority for this.
- In view of specific doubts, the deputy managing director made it clear on 15th 2001 that employees who have not completed 20 years of pensionable service are not entitled to a pension under the current regulation.
- The bank’s refusal to pay the pension to the respondent who retired on 31.3.2001 under the SBI VRS. In 2001, the bank accepted the employee’s offer to voluntarily retire. He was 59 years old for three months and had previously been on duty for nine months.
- On 31st 2001, when the VRS came into force, he had invested 19 years, nine months and 18 days of pensionable service. He had to retire at the age of 60 and would have served a little over 20 years of pensionable service. Bearing in mind the facts, the court warned that once the board had accepted the pension payment memorandum, if it did not accept the proposal in the memorandum, it should have clearly stated that it was unwilling to accept the proposals to the government and the IBA and further rejects them, after having approved the proposals mentioned in the memorandum, which were based on the IBA letter and the decision of the Indian government, it was obliged to implement them in the true wording and spirit, it cannot make its own decision by not changing the rule, while other banks later did so retrospectively.
- The SC Bench established that SBI is an instrument of the state within the meaning of Article 12, i.e. is tied to the equity principle. The SBI Central Board accepted the IBA’s VRS proposal without reservation. The proposal to provide a pension was absolutely approved by the board of directors of the bank, the clarification of 2001 could have no value in watering down the clear and unambiguous decision of the board of directors.
- The court also found that once the VRS program was approved by the SBI Board of Directors, it became a legal contract. The rights from the contract cannot be revoked. The court ruled that the order must be complied with and that the arrears must be paid within three months, otherwise the amount will be subject to interest of 6 percent per annum from the date of this ruling.
- The Court found that the main objective of the socialist state, as set out in the preamble, is to eradicate inequality. The basic structure of socialism is to give workers security in the case of life, and above all, it provides security from cradle to grave when the employees have served in the prime of their lives, they cannot be destitute in old age, acting arbitrarily and omitting the full obligation. He added that while there couldn’t be a legal obstacle, if a bank had the authority to change it, it couldn’t resort to its own inaction and the SBI should have continued the pursuit. From other banks and had to behave fairly after agreeing to the plan.
- The basic framework of socialism is to give workers security in the case of life and, above all, it provides security from cradle to grave when the employees have served in the prime of their lives, they cannot become indiscriminately destitute in old age and by failure to comply with the insured obligation. While there can be no legal obstacle, if a bank had the power to change it, it cannot take refuge in its own inaction and the SBI should have continued to persecute other banks. and had to act in a similar manner after agreeing to the plan.