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CASE NO.: Appeal (civil)  2957 of 2008

PETITIONER: National Textile Corporation (M.P.) Ltd.

RESPONDENT: M.R. Jhadav

DATE OF JUDGMENT: 24/04/2008

BENCH: S.B. Sinha & V.S. Sirpurkar

JUDGMENT: J U D G M E N T  REPORTABLE

CIVIL APPEAL NO.      2957            OF 2008 [Arising out of  SLP (Civil) No. 6934 of 2006]

S.B. SINHA, J :          1.      Leave granted.

2.      Interpretation of a Voluntary Retirement Scheme (VRS) floated by the  appellant \026 Corporation is in question in this appeal which arises out of a  judgment and order dated 10.01.2006 passed by the High Court of Madhya  Pradesh at Indore in Writ Petition No. 2623 of 2001.

3.      Respondent at all material times was working as an Assistant  Spinning Master.   A Voluntary Retirement Scheme was floated by the  appellant.  

4.      Respondent, on or about 16.05.2000 opted for the said Scheme with  effect from 31.07.2000.  The said application was in a prescribed proforma,  the relevant portion of which reads as under:

"With reference to your circular/ Notice  No\005..dated\005./Memorandum of Settlement  dated\005.containing details of N.T.C. Scheme of  Voluntary Retirement, I hereby tender my  unconditional resignation from my post and  service of your mills/ office with effect from\005.  I  hereby opt for Voluntary Retirement in terms of  above said Scheme of Voluntary Retirement which  I have carefully read and understood.

2.      I hereby undertake that I shall not claim any  payments from your management/ mills/ company  on account of my Voluntary resignation  consequent on my Voluntary Retirement other than  those admissible under the aforesaid scheme of  Voluntary Retirement.

3.      I also undertake that I shall not at all  withdraw resignation herein tendered by me from  your service.  I have furnished the required  particulars in the Appendix enclosed."

5.      Indisputably, administrative clearance in relation thereto was made  but no decision taken by a competent committee in that behalf was

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communicated to the respondent.  Indisputably, he at the material time was  aged over 57 years.   

6.      Respondent on expiry of the said date, i.e., 31.07.2000, requested the  appellant for being relieved from his post by a letter dated 19.09.2000.

7.      According to the appellant, sufficient fund was not available with it  for implementation of the scheme and to proceed with the request of the  respondent for his offer to retire voluntarily in terms of the said Scheme.   The General Manager in his letter dated 26.09.2000 addressed to the  respondent, stated:

"In reference to your VRS proposal dated  16.5.2000, we have received the administrative  approval from HO vide letter of IR/  VRS/NBT/99/980 dated 24.5.2000.  Accordingly,  your VRS was prepared and sent to HO for funds.   HO has informed us that the funds for payment of  VRS are not forthcoming hence do not relieve the  employees on relieving date till further orders.

Therefore, we are not in a position to relieve you  as requested by you, which you please note."

8.      Respondent issued a legal notice upon the appellant contending that it  had not been acting to effectuate his application under VRS on the ground of  non-availability of funds.

9.      Indisputably, however, the retirement age of the employees of the  appellant \026 corporation was rolled back from 60 years to 58 years.  The  decision was taken by the CMD of the Holding Company which was  approved by the Board of Directors of the Corporation; the procedures  wherefor were specified as under:

"(a)    The employees who have already attained  the age of 58 years or shall attain the same by 31st  December 2000 will retire on the close of office  hours on 31st January, 2001.

(b)     The employees who would attain the age of  58 years in January, 2001 or thereafter will retire  in the month in which they attain the age of 58  years in the normal course."

10.     Respondent filed a writ petition in the High Court of Madhya Pradesh  at Indore inter alia praying for issuance of a writ of or in the nature of  mandamus directing the appellant to effectuate his VRS application on and  from 1.08.2000 upon making payment of admissible dues.   

       The said writ petition was disposed of by a learned Single Judge of  the said Court, by an order dated 8.03.2001, stating:

"2.     In the situation of this nature, the only  direction at this stage that this Court can give is to  decide the application of the petitioner by the  respondent within a period of six months from  today. 3.      This Court does not give any opinion at this  stage except to direct the respondent to pass  appropriate orders on the application which the  petitioner has claimed to have made under the  VRS scheme.  On such decision being taken, the  petitioner is always free to raise any other  grievances depending upon the orders passed by  the respondents."

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11.     Pursuant thereto or in furtherance of the said direction, an office order  dated 7.08.2001 was passed by the appellant herein rejecting the said  proposal, stating:

"6.     Under these circumstances, the application  of Shri M.R. Jadhav for Voluntary Retirement  made on 16.5.2000, which was not sanctioned,  could not have been sanctioned in view of the VRS  not being in vogue.  Shri M.R. Jadhav was  accordingly retired on 31.1.2001 in accordance  with the orders dated 20.11.2000 whereunder the  age of retirement was rolled back to 58 years and  he stood retired as aforesaid.

7.      In view of the position indicated in para 6  above an amount of Rs. 1,53,743/- being the  amount of gratuity admissible under the Payment  of Gratuity Act, 1972 was deposited with the  Controlling Authority (Payment of Gratuity Act,  1972), Bhopal as Shri M.R. Jadhav did not turn up  to collect this amount though offered to him and  other dues viz Leave Encashment etc. (if  payable)."

12.     Questioning the validity of the said order, the respondent filed another  writ petition before the Indore Bench of the Madhya Pradesh High Court  praying inter alia for the following relief:

"The Respondent Employer be commanded  through a Writ of Mandamus to effectuate  acceptance of VRS by making payment of  admissible dues without further delay together  with interest as may be deemed proper."

13.     By reason of the impugned judgment, a learned Single Judge of the  said Court has allowed the said writ application upon following the decisions  of this Court in Tek Chand v. Dile Ram [(2001) 3 SCC 290] and State of  Haryana v. S.K. Singhal [(1994) 4 SCC 293], stating:

"6.     From the above principle of law and in the  facts and circumstances of the case, in my opinion,  the petitioner is entitled to get the benefits of  voluntary retirement scheme.  Consequently,  petition of the petitioner is allowed.  The  respondents are directed to grant benefits of the  voluntary retirement scheme to the petitioner.   Necessary payments be made to the petitioner  within a period of three months from the date of  receipt of copy of this order.  No order as to cost."

14.     Mr. Sanjay Ghose, learned counsel appearing on behalf of the  appellant, in support of this appeal, inter alia would submit that having  regard to the fact that the offer of the respondent was not accepted, the  impugned judgment cannot be sustained.

15.     Ms. Meera Mathur, learned counsel appearing on behalf of the  respondent, on the other hand, would urge:

(i)     Appellant being a ’State’ within the meaning of Article 12 of the  Constitution of India was bound to act fairly and reasonably. (ii)    Having regard to the scope and purport of the Voluntary  Retirement Scheme floated by it as also the fact that the respondent  had applied pursuant thereto in time which was one of the relevant

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factors which having been approved by the competent authority, a  legal right accrued in favour of the respondent.

16.     Indisputably, Appellant is a public sector undertaking.  It, however, at  the relevant time was a sick company.  A financial burden was cast on it in  meeting the aforementioned Scheme.

17.     When a scheme is floated for voluntary retirement, it constitutes an  offer to treat.  It is not an offer stricto sensu.  Only when pursuant to the said  invitation to treat, an employee opts for such a scheme, it constitutes an  offer.  When such an offer is made, it is required to be accepted.   

       The matter relating to implementation of the said offer would  indisputably be governed by the terms and conditions of the scheme.  Does it  contain any provision for automatic approval of an offer made by the  employee is the question?  The High Court has proceeded to hold in view of  the decision of this Court in S.K. Singhal (supra) that there was no  requirement of an order of acceptance of the notice to be communicated to  the employee nor non-communication thereof should be treated as  amounting to withholding of permission.

18.     The High Court, however, with respect, failed to read the decision in  the factual matrix obtaining therein.  It was a case where construction of  Sub-Rule (1) of Rule 5.32(B) of the Punjab Civil Services Rules was in  question.  What was, therefore, necessary in terms of the said Rule was a  notice to retire and not a request seeking permission to retire.  What was  contemplated was seeking exemption for the three months period.  In terms  thereof, failure to refuse to grant permission attracted the acceptance clause  from the date of expiry of the said period.  In the light of the aforementioned  facet of the Scheme, it was held:

"18. In the case before us sub-rule (1) of Rule  5.32(B) contemplates a "notice to retire" and not a  request seeking permission to retire. The further  "request" contemplated by the sub-rule is only for  seeking exemption from the 3 months’ period. The  proviso to sub-rule (2) makes a positive provision  that "where the appointing authority does not  refuse to grant the permission for retirement before  the expiry of the period specified in sub-rule (1),  the retirement shall become effective from the date  of expiry of the said period. The case before us  stands on a stronger footing than Dinesh Chandra  Sangma case so far as the employee is concerned.  As already stated Rule 2.2 of the Punjab Civil  Services Rules Vol. II only deals with a situation  of withholding or withdrawing pension to a person  who has already retired."

19.     Our attention has also been drawn to a decision of this Court in  Manjushree Pathak v. Assam Industrial Development Corpn. Ltd. and  Others [(2000) 7 SCC 390] wherein although Clause 8.1 of the Scheme  provided for a discretion on the part of the Management to accept or reject  the request from any employee for voluntary retirement viewing the  organizational requirements and any other relevant factors, para 2 of the  prescribed application form was to the following effect:

"I, of my own accord and without any external  pressure and coercion, am opting for voluntary  retirement under the said Scheme. I shall be  obliged if you kindly accept my option for  voluntary retirement with immediate effect."     

       Appellant therein, thus, made a request in the said form for its

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acceptance with immediate effect.  For a period of 10 days, no response  thereto was made.  On that date, no vigilance enquiry or any disciplinary  proceeding was pending against him.  It was in the aforementioned situation,  this Court observed:

"\005We are unable to understand why the  Managing Director of the respondent Corporation  did not accept the same although it was required to  be accepted with immediate effect as per para 2 of  the prescribed application form. No doubt, as per  clause 8.1 of the Scheme extracted above, the  management had discretion to accept or reject the  request from any employee for voluntary  retirement viewing the organisational requirement  and any other relevant facts but that does not mean  that the respondent Corporation being an authority  coming within the purview of Article 12 of the  Constitution can abdicate its duty to act reasonably  and fairly in exercise of discretion. It is strange as  to why the Managing Director of the respondent  Corporation, the competent authority to accept the  application made for the voluntary retirement, did  not act on it at all till 17-2-1996. He ought to have  exercised his discretion as per clause 8.1 if not  immediately at least within a reasonable time. The  last para of Memorandum No.  AIDC/Estt./1485/93/746-51 dated 20-5-1993/21-5- 1993 issued by the respondent Corporation reads  thus: "The Corporation has thus offered a unique  opportunity. It is now for all eligible and  interested employees of the Corporation to avail  of this golden opportunity in a big way." 13. As per sub-clause (i) of clause 5 of the  Scheme, once an employee applied for voluntary  retirement it could not be withdrawn. The  appellant wanted to avail this golden opportunity.  With this background it is not known as to why her  application was not accepted. From the letter of the  appellant dated 23-1-1996, it is clear that she  informed the Managing Director of the respondent  Corporation that there was no need to place her  application before the Board and he himself was  competent to accept it. The non-response of the  respondent Corporation to the letters of the  appellant dated 23-1-1996, 14-2-1996 and 15-2- 1996 and issuing of show-cause notice by the  respondent Corporation subsequently, clearly  indicate that all was not well with the respondent  Corporation in dealing with her application  seeking voluntary retirement. A subsequent  complaint alleging indulgence of the appellant in  political activities was not germane to the  consideration of the application of the appellant,  having regard to the relevant factors mentioned in  clause 8.1 of the Scheme particularly when there  was no infirmity or impediment in terms of the  Scheme in considering and accepting the  application of the appellant for voluntary  retirement, having regard to the fact that the  appellant on her part did what all was required to  be done."

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       The said decision also cannot be said to have any application  whatsoever in the instant case.

20.     Subject, of course, to the terms of "invitation to treat" as also those of  the offer as envisaged under the Indian Contract Act, an offer has to be  accepted.  Unless an offer is accepted, a binding contract does not come into  being.  A Voluntary Retirement Scheme contemplates cessation of the  relationship of master and servant.  The rights and obligations of the parties  thereto shall become enforceable only on completion of the contract.  Unless  such a stage is reached, no valid contract can be said to have come into  force.  Acceptance of an offer must, therefore, be communicated.

21.     In Bank of India v. O.P. Swarnakar [(2003) 2 SCC 721], this court  held:

"60. Acceptance or otherwise of the request of  an employee seeking voluntary retirement is  required to be communicated to him in writing..."

22.     What is the meaning of the word "communication" has been noticed  by this Court in State of Punjab v. Amar Singh Harika [AIR 1966 SC 1313]  in the following terms:

"It is plain that the mere passing of an order of  dismissal would not be effective unless it is  published and communicated to the officer  concerned. If the appointing authority passed an  order of dismissal, but does not communicate it to  the officer concerned, theoretically it is possible  that unlike in the case of a judicial order  pronounced in Court, the authority may change its  mind and decide to modify its order."

[See also BSNL v. Subash Chandra Kanchan (2006) 8 SCC 279]

       A distinction, however, has always been made by this Court as to  cessation of a contract of service by way of punishment vis-‘-vis an order of  suspension which does not bring about such a cessation, as for example  suspension.  [See State of Punjab v. Khemi Ram AIR 1970 SC 214]

23.     In MCD v. Qimat Rai Gupta [(2007) 7 SCC 309], this Court opined:

"27. An order passed by a competent authority  dismissing a government servant from services  requires communication thereof as has been held  in State of Punjab v. Amar Singh Harika but an  order placing a government servant on suspension  does not require communication of that order. (See  State of Punjab v. Khemi Ram)"  

24.     Therefore, there cannot be any doubt whatsoever that communication  of the acceptance of offer was necessary.  An internal noting does not  constitute a communication.  Even in a case of order of suspension, only  when the case goes out of the control of the appropriate authority, actual  communication may not be necessary.

25.     If for good and sufficient reasons, the competent authority did not  communicate its decision, in our opinion, the respondent did not derive any  legal right.  Such a legal right cannot be claimed only on the basis of the  letter of the General Manager dated 26.09.2000.  What was communicated  there was the administrative approval.  However, it was also categorically  stated therein that the Head Office had not sanctioned the funds for payment  of VRS.  It is in that situation, the request of the respondent to relieve him

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from his duties was not acceded to.  Respondent continued in his service  after 1.08.2000.  He had been drawing his salary and other perks.  There is  nothing on record to show that he drew his salaries without prejudice to his  rights and contentions.  If he had drawn his salary for the entire period  during which he was in service and reached the age of superannuation, by  reason thereof, he must be held to have waived his right, if any.

26.     An offer for voluntary retirement must be made and accepted so long  the relationship of an employer and employee continues, subject of course to  the rules to the contrary.  Such relationship would come to an end on the  date on which the employee reaches his age of superannuation.

27.     The contents of the letter dated 26.09.2000, therefore, indicate that  although administrative approval had been granted but no final decision had  been taken.

28.     We, therefore, are of the opinion that in absence of the  communication of the offer of the respondent, the respondent derived no  legal right to obtain the benefits of the voluntary retirement scheme.   

29.     It was submitted by Ms. Mathur that by asking the respondent to  continue in service, the appellant has taken away the right of an employee to  continue in service.   

       We are unable to accept the said contention.  By reason of a mere  offer to retire voluntarily, in terms whereof employee was to get some more  monetary benefits by itself, did not confer any legal right on him.

30.     For the said purpose, it is of some significance to notice that Clause  3.1 of the Scheme provides for acceptance of an employee’s offer for  voluntary retirement.  The scheme postulates that the appointing authority  concerned would be competent not to accept the offer.

       By reason of Clause 3.2 of the Scheme, the management reserved a  right to accept or reject an employee’s offer under the Scheme.  The said  right is absolute and is not hedged by any condition whatsoever.  The  procedure provided for acceptance also postulates that not only the offer has  to be accepted, an order is required to be issued that the post falling vacant  in all cases shall stand abolished simultaneously.  Issuance of such an order,  simultaneously with acceptance of resignation, therefore, plays an important  role.  Admittedly, no such order was also issued by the appellant.   

31.     Clause 4 of the Scheme provides for the grant of benefits under the  Scheme.  Respondent has been paid his provident fund dues, accumulated  earned leave as also gratuity.  What has not been paid to him is the ’ex gratia  payment’.  However, such ex gratia payment was to be made equivalent to  one and a half month’s emoluments for each completed year of service or  the monthly emoluments at the time of voluntary retirement multiplied by  the remaining months of service before normal date of retirement, whichever  is lower.  Thus, even the said provision contemplates that some service  should remain.  If no period of service remained, even ex gratia payment  could not be made.

32.     For the reasons aforementioned, we are of the opinion that the  impugned judgment cannot be sustained and is set aside accordingly.  The  appeal is allowed.  No costs.