NEW INDIA ASSURANCE CO. LTD.versusRAGHUVIR SINGH NARANG & ANR.

                        [2010) 4 S.C.R. 299


                NEW INDIA ASSURANCE CO. LTD.                     A
            "                     v.
                RAGHUVIR SINGH NARANG & ANR.
                  (Civil Appeal No. 3295 of 2009)

                       FEBRUARY 25, 2010*
                                                                 B
[R.V. RAVEENDRAN AND K. S. RADHAKRISHNAN, JJ.]

      Service Law:

   General Insurance (Rationalization of Pay Scales and          c
Other Conditions of Service of Development Staff)
Amendment Scheme 2003:

      Special Voluntary Retirement Package - Para 5, Clauses
(3), (4) and (5) - Employees opting for the Scheme - Later
withdrawing the option - Employer, accepting the offer, D
relieved the employees - HELD: Where the voluntary
retirement is governed by a contractual scheme, as
contrasted from a statutory scheme, the principle of contract
relating to offer and acceptance will apply and consequently
the letter of voluntary retirement will be considered as an offer E
by the employee and therefore any time before its acceptance, ·
the employee could withdraw the offer - But where the
voluntary retirement is under a statutory scheme which
categorically bars the employee from withdrawing the option
once exercised, the terms of the statutory scheme will prevail F
oiler the general principles of contract - In the instant case,
the Special Voluntary Retirement Package being a part of the
Amendment Scheme 2003 framed by the Central
Government in exercise of the powers u/s. 17A of the General
Insurance Business (Nationalisation) Act 1972, is a delegated G
legislation and statutory in character - The validity of the said
statutory scheme has been upheld by this Court* (with
reference to other provisions of the Act) - Consequently, the
*.   Judgment recd.on 8.4.2010.
                                  299                            H
    300     SUPREME COURT REPORTS                  [2010] 4 S.C.R.


A provisions of the Scheme will prevail over the provisions of
  Contract Act or any other Jaw or any principle of contract, and
  having regard to the binding nature of the scheme, the
  employees, upon exercising the option, cannot withdraw from
  the same - Paragraph 5(4) of the Special Voluntary
B Retirement Package categorically states that a Development
  Officer shall not be eligible to withdraw the option once made
  for the Special Voluntary Retirement Package - Thus, the
  general principle of contract that an offer could be withdrawn
  any time before its acceptance stands excluded - Clauses
c (3) and (5) of Para 5 deal with the question as to whether the
  retirement, in pursuance of option exercised by the employee,
  will come into effect without acceptance by the employer -
  These clauses have no bearing on the issue whether the
  employee can withdraw from the exercise of option and cannot
  be interpreted as giving an .option to the employee to withdraw
0
  the option once exercised -Principles laid down in the
  decision in Swamakar** - Explained - General Insurance
  Business (Nationalisation) Act 1972 - s. 17-A - Delegated
  Legislation - Contract. [para 6, 7, 8, 9 and 12]

E       Bairam Gupta vs. Union of India 1987 SCR 1173 =
    1987 (Supp) SCC 228; Punjab National Bank vs. P.K. Mitta/
                       =
    1989 (1) SCR 612 1989 Supp (2) SCC 175; Union of India
    vs. Wg.Comdr. T. Parlhasarathy 2000 (4) Suppl. SCR 531 =
    2001 (1) sec 158, relied on.
F
       *National Insurance Co.Ltd. v. General Insurance
  Development Officers Association 2008 (5) SCR 1087 2008 =
  (5) SCC 472; Kishan Prakash Sharma v. Union of India 2001
  (5) SCC 212; and Union of India vs. Gopal Chandra Misra
G 1978 (3) SCR 12 = 1978 (2) SCC 301, referred to.

       **Bank of India vs. Swaranakar & Ors. 2002 (5) Suppl.
    SCR 438 = (2003) 2 SCC 721, explained.

                        Case Law Reference:
H      2002 (5) Suppl. SCR 438       referred to      para 4
   NEW INDIAASSURANCE CO. LTD. v. RAGHUVIR                   301
             SINGH NARANG & ANR.

     2008 (5 ) SCR 1087             relied on       para 6          A
     2001 (5) sec 212               relied on       para 6
     1978 (3) SCR 12                referred to     para 7.1
     1987 SCR 1173                  relied on       para 7.2
                                                                    B
     1989 (1) SCR 612               relied on       para 7.3
     2000 (4) Suppl.                relied on       para 7.4
     SCR 531

    CIVIL APPELLATE JURISDICTION : Civil Appeal No.                 c
3295 of 2009.

    From the Judgment & Order dated 27.8.2003 of the High
Court of Judicature at Jabalpur, Bench at Indore in Writ Petition
No. 880 of 2003.                                                    D

     Jaideep Gupta, Dinesh Mathur, Nishant Menon, Saurabh
Jain, Dr. Ramesh Chandra Mishra for the Appellant.

      R. Santhan Krishanan, Praveen Pandey, D. Mahesh Babu
for the Respondents.                                                E

     The Order of the Court was delivered by

                            ORDER

     R.V. RAVEENDRAN, J. 1. The respondents were working            F
as Develop.ment Officers under the appellant - New India
Assurance Co. Ltd. Section 17A of the General Insurance
Business (Nationalisation) Act, 1972 ('the Act', for short)
inserted by the Amendment Act 3 of 1985 empowered the
Central Government to regulate, by issue of notifications, the      G
pay scales and other terms and conditions of service of officers
and other employees of the appellant by framing one or more
schemes and by adding, amending or varying any scheme. In
exercise of the powers under Section 17A of the said Act, the
Central Government framed a Scheme by Notification dated            H
    302      SUPREME COURT REPORTS                  [2010) 4 S.C.R.


A 2.1.2003 to amend the General Insurance (Rationalization of
  Pay Scales and Other Conditions of Service of Development
  Staff) Scheme, 1976. Paragraph 15-C inserted by the said
  Amendment Scheme of 2003 gave a special option to the
  Development Officers of the appellant, to opt within 60 days of
8 commencement of the said Amendment Scheme: (a) for
  Special Voluntary Retirement Package as per Annexure 1
  appended thereto; or (b) to render his services as Development
  Officer (Administration) under paragraph 21A, as per Annexure
  11 thereto. Sub-para (2) of the said Para 15-C provided that a
C Development Officer, who does not exercise either of the
  options, under sub-para (1) within the stipulated period of sixty
  days, shall continue to render services as such under the
  General Insurance (Rationalization of Pay Scales and Other
  Conditions of Service of Development Staff) Amendment
D Scheme, 2003.

          2. Annexure-1 appended to the Amendment Scheme of
    2003 contained the Special Voluntary Retirement Package
    ('SVRP' for short). Para (1) of SVRP specified the eligibility
    criteria. Para (2) thereof prescribed the ex-gratia amount and
E   Clause (3) prescribed the other benefits, which a Development
    Officer seeking SVRP will be entitled. Para 5 thereof laid down
    the General Conditions of the Scheme and Clauses (3), (4) and
    (5) of para 5 which are relevant for our purpose are extracted
    below:
F
          "(3) The mere request of such Development Officer
          seeking Special Voluntary Retirement Package shall not
          take effect unless it is accepted in writing by the Company.

        (4) A Development Officer shall not be eligible to withdraw
G       the option once made for Special Voluntary Retirement
       ·Package.

          (5) The Company shall have absolute discretion either to
          accept or reject the request of a Development Officer
H         seeking Special Voluntary Retirement Package
   NEW INDIA ASSURANCE CO. LTD. v. RAGHUVIR                   303
   SINGH NARANG & ANR. [R.V. RAVEENDRAN, J.]

     depending upon the requirement of the Company. The               A
     reasons for rejection of request of a Development Officer
     seeking Special Voluntary Retirement Package shall be
     recorded in writing by the Company. Acceptance or
     rejection of the request of a Development Officer seeking
     Special Voluntary Retirement Package shall be                    B
     communicated to him in writing."

                                            (emphasis supplied)

      3. Respondents 1 and 2 on 3.3.2003 opted for the Special
Voluntary Retirement Package. The Regional Office of                  C
 appellant informed the Divisional Office at Indore by letter dated
 28.3.2003 that in view of several writ petitions challenging the
 provisions of the Amendment Scheme, the Head Office had
 instructed that it will not be possible to relieve all the opting
 Development Officers with effect from 1.4.2003. The                  D
 respondents were, accordingly informed on 29.3.2003. This
was followed by a circular dated 31.3.2003 issued by the
appellant stating that status quo should be maintained in regard
to Development Officers who have opted for Special Voluntary
Retirement Package. On 31.3.2003, the respondents                     E
requested the appellant to extend the scheme and give more
time for exercising the option under the Scheme, and if that was
not possible, then treat the option earlier exercised by them on
3.3.2003 as withdrawn as till that day (31.3.2003) there was
no communication from the appellant regarding acceptance of           F
the voluntarY retirement.

      4. On 1.4.2003, the appellant relieved the respondents
from the services of the Company stating that the competent
authority has accepted the voluntary retirement of the
respondents. The respondents sent a letter dated 2.4.2003             G
stating that they should be permitted to continue in service until
a fresh option was given. The appellant, by letter dated
3.4.2003, informed the respondents that they cannot withdraw
from the option already given. This was followed by letter dated
12.5.2003 wherein the appellant reiterated that the                   H
    304     SUPREME COURT REPORTS                (2010) 4 S.C.R.


A respondents were relieved on 1.4.2003 in view of the
  acceptance by the competent authority, of the option exercised
  by the respondents to retire from service. Feeling aggrieved,
  the respondents filed a writ petition seeking a direction to the
  appellant to reinstate them in the post of Development Officer.
B The said writ petition was allowed by the Madhya Pradesh High
  Court by order dated 27.8.2003, purporting to follow the
  decision of this Court in Bank of India vs. Swaranakar & Ors.,
  (2003) 2 SCC 721. It held that the SVRP Contained in the
  Amendment Scheme of 2003 was not a statutory scheme, but
c was contractual in nature; that the option exercised by the
  respondents to retire voluntarily in terms of SVRP was merely
  an offer by the respondents, and that before the acceptance of
  the request of respondents by the appellant, the respondents
  could withdraw their offer; and that as respondents had already
D withdrawn their offers on 31.3.2003, there was no occasion for
  the appellant to accept their offers. The said decision is
  challenged in this appeal.

      5. The contentions urged give rise to the question whether
  a Development Officer who exercises the option under the
E Amendment Scheme of 2003, seeking the Special Voluntary
  Retirement Package, could withdraw the same before its
  acceptance.

       6. The Special Voluntary Retirement Package was a part
F of the General Insurance (Rationalization of Pay Scales and
  Other Conditions of Service of Development Staff) Amendment
  Scheme 2003 framed by the Central Government in exercise
  of the powers in Section 17A of the General Insurance Business
  (Nationalisation) Act 1972. The said Scheme is a delegated
G Legislation which is statutory in character. The validity of the
  said statutory scheme has been upheld by this Court (with
  reference to other provisions in the Scheme) in National
  Insurance Co.Ltd. v. General Insurance Development Officers
  Association - 2008 (5) SCC 472 following Kishan Prakash
H Sharma v. Union of India 2001 (5) SCC 212. Paragraph 5(4)
  NEW INDIA ASSURANCE CO. LTD. v. RAGHUVIR                   305
  SINGH NARANG & ANR. [R.V. RAVEENDRAN, J.]
of the Special Voluntary Retirement Package categorically            A
states that a Development Officer shall not be eligible to
withdraw the option once made for the Special Voluntary
Retirement Package.

    7. It is true that the principles of Contract Law relating to    B
offer and acceptance enables the person making the offer to
withdraw the offer any time before its acceptance; and that any
subsequent acceptance of the offer by the offeree, after such
withdrawal, will not result in a binding contract. Where the
voluntary retirement is governed by a contractual scheme, as
contrasted from a statutory scheme, the said principle of            C
Contract will apply and consequently the letter of voluntary
retirement will be considered as an offer by the employee and
therefore any time before its acceptance, the employee could
withdraw the offer. But the said general principle of Contract
will be inapplicable where.the voluntary retirement is under a       D
statutory scheme which categorically bars the employee, from
withdrawing the option once exercised. The terms of the
statutory scheme will prevail over the general principles of
contract. This distinction has been recognized by a series of
decisions of this Court. We may refer to a few of them :             E

     (7 .1.) In Union of India vs. Gopal Chandra Misra - 1978
(2) SCC 301, a Constitution Bench of this Court held :

    "It will bear repetition that the general principle is that in
    the absence of a legal, contractual or constitutional bar,       F
    a 'prospective' resignation can be withdrawn at any time
    before it becomes effective, and it becomes effective when
    it operates to terminate the employment or the office-
    tenure of the resignor. ......... In the case of a Government
    servanUor functionary who cannot under the conditions of         G
    his service/or office, by his own unilateral act of tendering
    resignation, give up his service/or office, normally, the
    tender of resignation becomes effective and his service/
    or office 0,tenure terminated, when it is accepted by the
                                                                     H
    306       SUPREME COURT REPORTS                  [2010] 4 S.C.R.


A         competent authority.

                                                 [emphasis supplied]

        (7.2.) In Bairam Gupta vs. Union of India - 1987 (Supp)
  SCC 228, this Court held that independent of any statutory
B Rules, an employee who gives notice of voluntary retirement
  to take effect prospectively from a subsequent date, is at liberty
  to withdraw his notice of voluntary retirement, any time before
  it comes into effect. But this normal rule would not apply, where
  having regard to the statutory Rules governing the matter, the
C employee cannot withdraw except with the approval of an
  authority. But such approval can not be the ipse dixit of the
  approving authority. He should act reasonably and rationally. He
  cannot keep the matter pending for unduly long time, nor can
  he discriminate in dealing with applications of employees
D similarly situated.

        (7.3.) In Punjab National Bank vs.        P.K. Mittal - 1989
    Supp (2) SCC 175, this Court held :

           "The result of the above interpretation is that the employee
E          continued to be in service till April 21, 1986 or June 30,
           1986, on which date his services would have come normally
          to an end in terms of his letter dated January 21, 1986.
          But, by that time, he had exercised his right to withdraw
          the resignation. Since the withdrawal letter was written
F         before the resignation became effective, the resignation
          stands withdrawn, with the result that the respondent
          continues to be in the service of the bank. It is true that
          there is no specific provision in the regulations permitting
          the employee to withdraw the resignation. It is, however,
G         not necessary that there should be any such specific rule.
          Until the resignation becomes effective on the terms of the
          letter read with Regulation 20, it is open to the employee,
          on general principles, to withdraw his letter of resignation.
          That is why, in some cases of public services, this right
H         of withdrawal is also made subject to the permission of
  NEW INDIA ASSURANCE CO. LTD. v. RAGHUVIR                  307
  SINGH NARANG & ANR. [R.V. RAVEENDRAN, J.]
   . the employer. There is no such clause here."                   A
                                           [emphasis supplied]

     (7.4.) In Union of India vs. Wg.Comdr. T. Parthasarathy
- 2001 {1) SCC 158, this Court held :
                                                                    B
     "So far as the case in hand is concerned, nothing in the
     form of any statutory rules or any provision of any Act has
     been brought to our notice which could be said to impede
     or deny this right of the appellants. On the other hand, not
    only the acceptance of the request by the Headquarters, c
    the ap~ropriate Authority was said to have been made
    only on 20-2-86, a day after the respondent withdrew his
    request for pre-mature retirement but even such
    acceptance in this case was to be effective from a future
    date namely 31-8-86. Consequently, it could not be D
    legitimately contended by the appellants that there was any
    cessation of the relationship of master and servant
    between the Department and the respondent at any rate
    before 31-8-86. While that be the position inevitably the
    respondent had a right and was entitled to withdraw or . E
    revoke his request earlier made before it ever really and
    effectively became effective."

                                           [emphasis supplied]

     8. In this case the statutory scheme contains a specific       F
provision that a Development Officer shall not be eligible to
withdraw the option once made for Special Voluntary
Retirement Package. In view of the said statutory provision, the
general principle of contract that an offer could be withdrawn
any time before its acceptance stands excluded.                     G

     9. Let us now consider whether Clauses (3) and (5) of
Paragraph 5 of the Scheme have any relevance to the issue.
Clause (3) provides that when an employee exercises an option
seeking Special Voluntary Retirement Package, it will not take
effect unless it is accepted in writing by the employer Company.    H
    308       SUPREME COURT REPORTS                (2010) 4 S.C.R.

A  Clause (5) provides that the employer shall have the discretion
  either to accept or reject the request made by the Development
   Officer. The effect of these clauses is that voluntary retirement
  will not take effect unless it is accepted in writing by the
  employer. Where the employee exercises an option to retire
B from a future date, unless and until it is accepted in writing by
  the employer, the Development Officer will continue to be the
  employee, even after the date mentioned as the date of
  retirement. Similarly, where the employE;!r rejects the request of
  the employee, the employer will continue as an employee, in
C spite of his exercise of option to retire. Neither Clause (3) nor
  Clause (5) can be interpreted as giving an option to the
  employee to withdraw the option once exercised. Clauses (3)
  and (5) of Para 5 deal with the question as to whether the
  retirement, in pursuance of option exercised by the employee,
D will come into effect without acceptance by the employer. These
  clauses have no bearing on the issue whether the employee
  can withdraw from the exercise of option.

       ·10. The High Court proceeded on an erroneous
  assumption that the voluntary retirement package was not part
E of any statutory scheme, but was contractual in nature and
  therefore the general principles of contract will apply. The
  reliance placed by the High Court upon the decision of this
  Court in Swamakar, to assume that every scheme for voluntary
  retirement is always contractual and not statutory, is
F misconceived.

          11. A detailed reference to the decision in Swamakar is
  necessary, to clear the misconception under which the High
  Court has proceeded. The said decision related to VRS
  Schemes floated by Nationalised Banks and the State Bank
G of India. The VRS schemes of Nationalized Banks contained
  a provision (Para 10.5) that it will not be open for an employee
  to withdraw the request made for voluntary retirement under the
  scheme, after having exercised such option. The scheme of
  Sta.te Bank of India was slightly different as it permitted
H
          NEW INDIA ASSURANCE CO. LTD. v. RAGHUVIR                309
          SINGH NARANG & ANR. [R.V. RAVEENDRAN, J.]

        withdrawal of the application before a given date and also A
        contained a provision laying down the mode and manner in
        ·;nich applications for voluntary retirement should be
        considered, which created an enforceable right in the employee
/       if State Bank of India failed to adhere to its preferred policy.
        The Punjab & Haryana High Court held the VRS Scheme of B
        the Nationalised Banks was not a valid piece of subordinate
        legislation. The other High Courts, on the other hand, held that
        the Clause 10.5 of the voluntary retirement scheme which
        barred an employee from withdrawing the request for voluntary
        retirement after having exercised the option was not operative  c
        as the employee had an indefeasible right to withdraw his offer
        before it was accepted. The decisions of the Punjab & Haryana
        High Court as also of the other High Courts were challenged
        by various Banks including State Bank of India and they were
        disposed of by the said common judgment.                         D
              (11.1.) This Court at the outset noticed that there was a
        difference in the scheme floated by the State Bank of India and
        the schemes framed by the Nationalised Banks. This Court held
        that the schemes of the Nationalised Banks were introduced
         by a circular dated 20.8.2000 with the purpose of downsizing E
        the number of employees and that the terms and conditions of
        service of the employees of Nationalized BanJ..:s (except in the
        matter of pension) were not statutory in nature and the VRS
        schemes of the Nationalised Banks were floated by way of
        contract af")g did not have any statutory flavour. Consequently, F
        it was held that the provisions of the Indian Contract Act, 1872
        would apply to the VRS schemes of the Nationalised Banks.
        This Court also held that the scheme being an invitation to offer
        and not an offer by the Banks, the employee made an offer
        when exercising the option, and he can withdraw the offer any G
        time before it was accepted by the employer. This Court further
        held that Clause 10.5 of the scheme barring employee from
        withdrawing the request for the voluntary retirement was an

,,  I
        agreement without consideration and was therefore not valid.
        This Court observed that once it was found that by giving their H
    310       SUPREME COURT REPORTS                   [2010] 4 S.C.R.


A   option under the Scheme, the employees did not derive an
    enforceable right, in the absence of any consideration, the term
    would be void in terms of Section 2(g) of the Contract Act c.,-
    opposed to an enforceable agreement in terms of Section 2(h)
    of that Act. This Court further therefore concluded that once the
B   application filed by the employees is held to be an offer,
    Section 5 of the Contract Act would come into play, in the
    absence of any other independent binding contract or statute
    or statutory Rules to the contrary.

      (11.2.) In so far as the scheme of State Bank of India, this
C Court held that the terms and conditions of service of its
  employees were governed by statutory Rules and the scheme
  was also statutory in nature; that the provisions of the Scheme
  would show that there was some 'consideration' for the
  employee agreeing not to withdraw the voluntary retirement and
D consequently the scheme would be binding. As a result this
  Court allowed the appeals of the State Bank of India but
  dismissed the appeals of the Nationalised Banks except in
  cases where employees have accepted a part of the benefit
  under the scheme.
E
       (11.3.) The effect of the decision in Swamakar can be
    summarized thus :

          (i) If a contractual scheme provides that the voluntary
          retirement by exercise of option by the employee, will
F
          come into effect only on its acceptance by the employer,
          it will not create any enforceable right in the employee to
          claim SV retirement. Any term in such a scheme that the
          employee shall not withdraw from the option once
          exercised, will be an agreement without consideration and
G         therefore, invalid. Consequently, the employee can
          withdraw the offer (that is option exercised) before its
          acceptance. But if the contractual scheme gives the option
          to an employee to voluntarily retire in terms of the scheme
          and if there is no condition that it will be effective only on
H         acceptance by the el)lployer, the scheme gives an
  NEW INDIA ASSURANCE CO. LTD. v. RAGHUVIR                     311
  SINGH NARANG & ANR. [R.V. RAVcENDRAN, J.]

     enforceable right to the employee to retire, by exercising        A
     his option. In such a situation, a provision in the contractual
     scheme that the employee will not be entitled to withdraw
     the option once made, will be valid and binding and
     consequently, an employee will not be entitled to withdraw
     from the option exercised.                                        B

    (ii) Where the scheme is statutory in character, its terms
    will prevail over the general principles of contracts and the
    provision of the Contract Act. Further, there will be no
    question of any "consideration" for the condition in the           C
    Scheme that the employee will not withdraw from the
    option exercised. Subject to any challenge to the validity
    of the scheme itself, the terms of the statutory scheme will
    be binding on the employees concerned, and once the
    option is exercised by an employee to voluntary retire in          D
    terms of the Retirement Package contained in the
    Scheme, the employee will not be entitled to withdraw from
    the exercise of the option, if there is a bar against such
    withdrawal.

     12. The question therefore is whether Clause 4 of Para 5          E
of the SVRS contained in the Amendment Scheme of 2003 is
void and whether Section 5 of the Contract Act which enables
the person making the offer, to withdraw the offer, any time
before its acceptance, would apply. The special voluntary
retirement package is a part of the General Insurance                  F
(Rationalizatiorfof Pay Scales and Other Conditions of Service
of Development Staff) Amendment Scheme, 2003, made by
the Central Government in exercise of the power under Section
17A of the General Insurance Business Insurance
(Nationalisation) Act, 1972. Section 17A, as noticed above,            G
authorizes and empowers the Central Government, to frame,
by notification published in the official gazette, one or more
schemes for regulating the pay scales and other terms and
conditions of service of officers and other employees of the
Corporation or of any acquiring company (including the                 H
    312     SUPREME COURT REPORTS                 [2010] 4 S.C.R.


A appellant). Sub-section (6) of Section 17A provides that the
  provision of Section 17 and of any scheme framed under it shall
  have effect notwithstanding anything to the contrary contained
  in any other law or any agreement award or other instrument
  for the time being in force. Therefore the scheme is statutory
B in character. Consequently, the provisions of the Scheme w;11
  prevail over the provisions of Contract Act or any other law or
  any principle of contract, and having regard to the binding
  nature of the scheme, the employee upon exercising the option,
  cannot withdraw from the same.
c        13. We, therefore, allow this appeal and set aside the
    judgment of the High Court and dismiss the Writ Petition filed
    by the respondents before the High Court.

    R.P.                                         Appeal allowed.