Voluntary Retirement Dispute: Supreme Court Rules in Favor of State Bank of Patiala

The Supreme Court of India recently ruled on a significant case involving voluntary retirement under the State Bank of Patiala’s Voluntary Retirement Scheme (VRS), 2001. The case, State Bank of Patiala & Ors. v. Kanwal Nain Singh, revolved around whether an employee could withdraw his voluntary retirement application after submission. The Court upheld the irrevocability clause in the scheme and set aside the Punjab and Haryana High Court’s ruling, reaffirming that the voluntary retirement application, once submitted, could not be withdrawn.

Background of the Case

The dispute arose from the voluntary retirement of Kanwal Nain Singh, an employee of the State Bank of Patiala, under the VRS announced by the bank. Key facts of the case include:

• February 29, 1977: The respondent joined service at the bank.
• January 20, 2001: The bank introduced a Voluntary Retirement Scheme (VRS), applicable from February 15, 2001, to March 1, 2001.
• March 1, 2001: On the last day of the scheme, the respondent applied for voluntary retirement.
• March 2, 2001: The respondent attempted to withdraw his application.
• March 30, 2001: His request for withdrawal was denied, and he was retired as per the scheme.

The VRS contained an irrevocability clause (Clause 9), which explicitly stated that once an application was submitted, it could not be withdrawn. Despite this, the respondent challenged his retirement before the Punjab and Haryana High Court.

Petitioner’s (State Bank of Patiala) Arguments

• The bank argued that Clause 9 of the VRS was binding and prevented employees from withdrawing their applications.
• The Supreme Court had already ruled on a similar issue in Bank of India v. Pale Ram Dhania (2003), where it was held that once an application is submitted under VRS, it is final.
• The respondent’s retirement was legally processed, and the benefits, including ex gratia payments, had been credited to his account.
• The bank had a valid interim order from the Supreme Court in 2004 confirming the irrevocability of applications under its VRS.

Respondent’s (Kanwal Nain Singh) Arguments

• The respondent argued that he was not allowed to withdraw his application due to coercion from bank officials.
• The scheme should be interpreted in a more lenient manner to allow withdrawals in exceptional cases.
• His ex gratia payment was credited to his account without his consent, indicating procedural irregularities.
• He cited the Supreme Court’s ruling in Food Corporation of India v. Ramesh Kumar (2007), where voluntary retirement withdrawals were allowed before final acceptance.

Supreme Court’s Observations

The Supreme Court analyzed the scheme and previous rulings, making several key observations:

• “The irrevocability clause in the VRS is unambiguous and binding on all applicants.”
• “The respondent’s claim that he was coerced into not withdrawing his application is unsupported by evidence.”
• “The 2003 Supreme Court ruling on the State Bank of India’s VRS applies to this case, making the voluntary retirement final and binding.”
• “The ex gratia payment was processed per the scheme’s terms and does not indicate irregularities.”
• “The High Court erred in reopening a settled issue by referring to an unrelated Supreme Court ruling (FCI v. Ramesh Kumar).”

Final Judgment

The Supreme Court allowed the appeal, setting aside the Punjab and Haryana High Court’s judgment and upholding the respondent’s retirement under the VRS. The Court ruled:

“The irrevocability clause in the VRS is final and binding. Once an application is submitted, it cannot be withdrawn. The respondent’s attempt to withdraw his application was correctly rejected by the bank.”

However, the Court acknowledged delays in processing ex gratia payments and directed the bank to pay an additional ₹1 lakh as compensation to the respondent while ensuring no recovery of benefits already paid.

Significance of the Judgment

This ruling is a landmark decision reinforcing the following principles:

• Finality of Voluntary Retirement: Employees must adhere to the terms of the VRS and cannot withdraw applications once submitted.
• Judicial Restraint in Contractual Agreements: Courts should not interfere in employer-employee agreements unless there is a clear violation of law.
• Binding Precedents: The judgment clarifies that previous Supreme Court rulings on similar schemes must be followed.
• Compensation for Procedural Delays: The ruling ensures employees receive fair compensation for delays in benefit disbursement.

Conclusion

The Supreme Court’s decision in this case sets a crucial precedent for voluntary retirement disputes in public sector banks and other institutions. By upholding the sanctity of irrevocability clauses, the ruling ensures transparency and certainty in VRS schemes. Employees must carefully consider their decisions before opting for voluntary retirement, as courts will strictly enforce the terms of such agreements.

Petitioner Name: State Bank of Patiala & Ors..
Respondent Name: Kanwal Nain Singh.
Judgment By: Justice Kurian Joseph, Justice Mohan M. Shantanagoudar, Justice Navin Sinha.
Place Of Incident: Punjab and Haryana.
Judgment Date: 02-04-2018.

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