Holding

Employees who retire under a special voluntary retirement scheme are not covered by Rule 24.2 and are not entitled to the revised pay scales under Office Order No. 45/90.

Summary

Hindustan Machine Tools Ltd. introduced a special voluntary retirement scheme for employees aged 45 with at least 15 years of service, and the respondents retired under this scheme. After their retirement, the company issued Office Order No. 45/90 revising pay scales for existing employees and certain retirees, and the respondents claimed entitlement to the revised pay. The Punjab & Haryana High Court allowed a writ directing recomputation of their compensation under the revised scales. On appeal, the Supreme Court examined whether retirees under the special scheme fell within Rule 24.2 of the Conduct, Discipline and Appeal Rules, which governs voluntary retirement. The Court held that the special scheme expressly excluded employees who retired under Rule 24.2, and therefore the respondents were not covered by the Office Order’s provisions. Consequently, the High Court’s direction to recompute compensation was set aside. The appeals were allowed and the writ petitions dismissed without costs.

Issues considered

Whether employees who retire under a special voluntary retirement scheme are covered by Rule 24.2 of the Conduct, Discipline and Appeal Rules for the purpose of receiving benefits of a later pay‑scale revision.

Subjects

voluntary retirement schemepay scale revisionRule 24.2employee benefitscompensation recomputationSupreme CourtHigh Court

Judgment

:1-,

·-~
-r HINDUSTAN MACHINES TOOLS LTD. AND ANR. A
v.
M.S. KANG/P.N. KASHYAP
-..
JANUARY 27, 1997

[K. RAMASWAMY AND G.T. NANAVATI, JJ.] B
J
'r
Service Law :

Voluntary retiremenf--Company-Hindustan Machine Tools-Special
Scheme fonnulated for voluntary retirement of employee-Respondents ac-
cepted the scheme and retired thereunder-Thereafter Company issued office
c
order 45/90 dated March 1, 1991-Revision of pay scales thereunder-Claim
for revision of pay by re;pondents-Writ allowed by High Court-Appeal
before Supreme Court-Held there was distinction between employees who
voluntarily retired under Conduct, Discipline and Appeal Rules and those
who retired under the Special Scheme-Respondents having retired under the D
Special Scheme are not employees covered under the voluntary retirement
under Rule 24.2 of the Conduct, Discipline and Appeal Rules-Accordingly,
the High Court was not right in directing recomputation of the compensation
under Office Order No. 45 dated March, 1, 1991.
i
Prantiya Vidhyut Manda! Mazdoor Federation & Ors. v. Rajasthan E
State Electricity Board & Ors., [1992] 2 SCC 723, held inapplicable.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 626 of
1997 Etc.
-I
From the Judgment and Order dated 19.4.96 of the Punjab & F
Haryana High Court L.P.A. No. 2 of 1996.

V.R. Reddy, Additional Solicitor General, 0.C. Mathur and Ms.
Meera Mathur for the Appellants.

Manoj Swarup for the Respondent in C.A. No. 627/97 G

The following Order of the Court was delivered :
,- ""
Leave granted.

These appeals by special leave arise from the judgment of the High H
569
570 SUPREME COURT REPORTS (1997]1 S.C.R.
A Court of Punjab&. Haryana, made on 19.4.1996 in LPA Nos. 2 and 3 of
1996.

The admitted facts are that the appellants have formulated a Scheme
for voluntary retirement of the employees who have completed 45 years of
age, effective from April, 1989 for a period of three months subject to the
B conditions specified in the scheme. The respondents had accepted the
scheme and retired thereunder. Thereafter by Office Order No. 45/90
dated March 1, 1991 pay scales were revised in respect· of existing
employees and those who retired from time to time. In furtherance thereof,
the respondents claimed and revision of the scale of pay was sought to be
C given effect by the office by the audit objection to the payment thereof was
raised. Consequently, the respondents filed the writ petitioners in the High ,
Court and the learned Single Judge allowed the writ petition and appeals
were dismissed. Thus, these appeals by special leave.

D Shri V. Reddy, learned Additional Solicitor General, contends that
the Scheme is a special scheme containing the mode of payment of com-
pensation as calculated in terms of the Scheme. There is a distinction
between those employees who retired voluntarily under Conduct Discipline
and Appeal Rules and those who retired under the Scheme. The revised
scales of pay are applicable to those persons who are enumerated in Clause •
I
E 2.2.2 of the office orders providing for Revision of Pay Scales. Proceedings
Dated March 1, 1991 refers to the candidates who retired voluntarily.
Under Rule 24.2. of the Conduct, Discipline and Appeal Rules, the
revision of the Provident Fund would be effected only in respect of those
employees who retired under the special scheme; the scale and gratuity
F have to be revised in terms of the revised scales of pay but not the payment
of the difference of pay. On the other hand, Shri Manoj Swamp, learned
counsel for the respondents, contends that no distinction had been draw
in the proceedings dated March 1, 1991 between the employees who retired
under the Conduct, Discipline and Appeal Rules or under the Special
Scheme and those who retired voluntarily under the Scheme and are
G entitled to the same benefit of the revision of the pay scales as con-
templated under the Office Order dated March 1, 199.1. He also contends
that even clause 2.3 negatively puts that they are disentitled to the payment.
The word 'salary' is linked to the other component, namely, additional
dearness allowance, ad hoc pay, additional pay etc. Therefore, the word
H 'pay' would include revised pay. Thereby the respondents are entitled to
HINDUSfANMACHINES TOOLS LTD. v. M.S. KANG/P.N. KASHYAP 571

the benefit of the revised pay scales. A
In support thereof, he placed reliance on the judgment of this Court
in Prantiya Vidhyut Mandal Mazdoor Federation & Ors. v. Rajasthan State
Electricity Board & Ors., (1992] 2 SCC 723. Therein the dispute relating to
the revision of the pay was pending before the Industrial Tribunal. Pending
dispute, the wages were revised. Consequently, after the award was made, B
the revision of the wages was effected. The question was : whether the P.F.
was required to be re-calculated on the basis of the revised scales? This
Court had held that in view of the revision of the pay scales, the P.F.
requires to be decision on the basis of the revised wages payable to the
employees as was recalculated. The ratio therein has no application to the c
facts in these cases.

The question, therefore, is : whether the respondents arc entitled to
the benefit of the revised scales of under the Office Order No. 45/90 dated
March 1, 1991? It is not in dispute that the respondent have not completed
~ 50 years of age for voluntary retirement under clause (b) or clause (c) of D
Rule 24.2. on attaining the age of Superannuation. They contemplate thus:

"(b) An employee may at time after completing the age of 50 years
voluntarily retire by giving the month's notice in writing."
E
(c) The Competent Authority may also retire an employee at any
time after he completes 50 years by giving one month's notice or
one month's salary/wages in lieu of the notice, if it is considered
in the interest of the Company."

Thus, an employee who is normally entitled to remain in service until F
he reaches the age of superannuation of 58 years, is entitled to retire either
voluntarily by giving one month's notice on attaining the age of 50 years
and the Company may, if it considers it necessary, in the interest of the
Company, retire an employee by giving one month's notice or one month's
Salary/wages in lieu thereof. Thus, those who retired under the above Rule G
would be construed to have voluntarily retired from service. It is seen that
a special voluntary retirement scheme had been introduced by the Com-
- -<. pany. The objective of the Voluntary Retirement Scheme is to achieve the
optimum level of manpower with the desirable average age-mix as per the
changing needs ·of the Company. In regard to the respondents, they come
under the Scheme 'B' which contains that the scheme is applicable to all H
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572 SUPREME COURT REPORTS [1997) 1 S.C.R.
A regular/permanent employees of the Company as notified from time to time -r
who have put in 15 years of service or more in the Company and who are
of the age of 45 years and above as on the date of the submission of the
application for voluntary retirement. ·

It is, thus, seen that there is a distinction between the employees who
B retire under the Conduct, Discipline and Appeal Rules on attaining the
age of 50 years and the employees who accept voluntary retirement on
completion of 15 years of service or more in the Company and who are of
the age of 45 years and above. In other words, before attaining the age of
50 years as contemplated under the Conduct, Discipline and Appeal Rules,
C the benefits enumerated for such of the employees who opt for and where
option is accepted by the Company, are postulated in Clause {b) of Scheme
'B' which says that the eligible employees requesting for voluntary retire-
ment, subject to acceptance of their requests by the Company/Competent
Authority, shall be entitled to receive benefits at the following rates for the
D remaining period of service prior to the date of retirement on superannua-
tion from the service of the Company. The computation thereof :1as been
enumerated in the scheme which reads as under :

"It has been decided to introduce a Voluntary Retirement Scheme
for the employees of the Company as per the enclosed copy of
E comprising of two parts viz., Scheme 'A' and Scheme 'B'. The
. scheme will be in operation from 1.4.1989 for a period of three
months, subject to the following further conditions :

(i) Scheme A shall be applicable only to the employees of Lamp
F unit, Hyderabad in WG Cadre with the terms and Conditions
specified in Scheme. A for a period of three months from 1.4.1989.

(ii) Scheme B shall be applicable to all the Units/Divisions (includ-
ing Lamp), Business Group Directorates, other offices and Cor-
porate Office with the terms and condition specified in the
G enclosed scheme, for a period of three months from 1.8.1989.

(iii) The scheme does not confer any right or any employees to
have his request for voluntary retirement accepted by the com-
petent authority right to accept or reject the application for volun-
H tary retirement shall entirely vest the Company.
,,:(..
;
H!NDUSfANMACHINESTOOLSLID.v.M.S.KANG/P.N.KASHYAP 573

(iv) Acceptance of application for Voluntary Retirement shall A
depend inter alia availability of funds in the respective
Units/Divisions/Business Group Directorates, other Offices and
Corporate Officer.

(v) The eligible employees requesting for voluntary retirement,
B
subject to acceptance of their requests by the competent authority
shall be en}itled to such benefits are specified in the scheme.

Such employees may be persuaded to deposit the benefits received,
in the Company Fixed Deposit Scheme.
c
2. The existing medical retirement Scheme and Voluntary.Retire-
ment Scheme introduced for Hyderabad based Units of the Com-
pany shall stand discontinued with the introduction of the above
Voluntary Retirement Scheme.
D
3. the Units and areas within the Units, where the Scheme could
be implemented will separately be intimated by the DPS.

4. The progress of implementation of the Scheme with regard to
the number of employees in each cadre and the total amount paid
on account compensation shall be reported to DPS every month." E

. For the computation of the payment of the compensation in terms of
the calculation, the 'Note' postulates that the salary mentioned under
Scheme A and B shall mean basic pay, Dearness Allowance, Interim
Relief/ad hoc Relief and Personal Pay, if any, and shall be calculated on · F
the basis of a calendar month. In other words, this contract has expressly
omitted to mention the revised scale of pay from time to time. The reason
would be obvious. An employee who retires on completing the age of 50
years but before the age of 58 years, is not entitled to the payment of any
special component of the salary as indicated hereinbefore. On the other G
hand, he will be entitle only to the retire benefits as are available under
the normal Rules. If the company, in public interest, instead of giving one
month's notice makes payment of salary in lieu thereof then employee
would be entitled to nothing more except other retrial benefit like pension,
gratuity etc. The procedure in regard to the calculation of the payment of
the compensation and method of computing the compensation has been H
574 SUPREME COURT REPORTS [1997] 1 S.C.R.

A provided in Para VI; the details whereof are not material for the purpose
of these case. Para IX of the Special Scheme postulates that retirement on
medical grounds in terms of clause 24.1 and voluntary retirement in terms
of clause 24.2(b) and (c) of the Conduct, Discipline and Appeal Rules of
the Company shall fall outside the purview of the scheme. In other words,
the special scheme excluded such of the employees who voluntarily retired
B under Rule 24.1 or 24.2(b) and ( c) of the Conduct, Discipline and Appeal
Rules of the Company, Para XII in this behalf is more relevant wherein it
says that the Chairman and Managing Director shall have power to amend,
modify, alter or withdraw the above Scheme either in whole or in part, at
'f
his directions, if the circumstances so warrant. In other words, whatever
C components are enumerated thereunder would be binding on the parties
until the Chairman and the Managing Director before acceptance amends,
modifies, alters or withdraws the above scheme.

It is seen that the Office Order No. 45 dated March 1, 1991 provides
D that the revised pay scales shall be effective from 1.1.1987 and will remain
in force for the period of five years upto 31.12.1991. Clause 2.2. provides
that the revised pay scales shall also be applicable on a pro-rata basis to •"
those categories of employees who were on the rolls of the company as on
31.12.1986 but have subsequently separated due to superannuation and
E voluntary retirement etc. Those who retired on attaining the age of 58 years
or voluntarily retired under Rule 24.2. (b) or (c), as the case may be, under
the Conduct, Discipline and Appeal Rule 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
F of the company before the date of issue of Office Order No 45/90 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 cm cred and stand on the same footing are excluded except to the
extent of gratuity, revision of the terminal benefits as mt!ntioned in para
G 6.13 which postulates that gratuity paid or payable to employees covered
under Clause 2.2 \viii 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 retired under
H the Special Scheme operating form time to time. The respondents having
HINDUSTAN MACHINES TOOLS LlD. v. M.S. KANG/P.N. KASHYAP 575
retired under the Special Scheme are not employees covered under the A
-,, voluntary retirement under Rule .24.2 of the Conduct, Discipline and
Appeal Rules referred to hereinbefore. Accordingly, the High Court was
not right in directing recomputation of the compensation under Office
Order No. 45 dated March 1, 1991.

The appeals arc accordingly allowed. Consequently, the writ peti- B
tions stand dismissed. No costs. ·

T.N.A. Appeal are allowed.