Voluntary retirement pension rights preserved where the scheme treated pension as an integral part of the retirement package.

A voluntary retirement scheme approved as a contractual package must be construed as a whole, and pension cannot be denied by relying on an unamended internal rule or a later clarification. The SC noted that the scheme, memorandum, IBA guidelines and government approval showed retirement after 15 years of service was offered as a package in which pension formed an integral part of the inducement. The reference to pension rules was confined to computation, not to reinstating the ordinary 20-year qualifying service requirement. On that construction, employees who completed 15 years of service on the relevant cut-off date were entitled to proportionate pension, and the contrary denial was unsustainable.

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Issues: Whether employees who opted for the State Bank of India Voluntary Retirement Scheme after completing 15 years of service were entitled to proportionate pension under the scheme and whether the subsequent clarification could deny that benefit.

Analysis: The scheme, the contemporaneous memorandum, the IBA guidelines and the Government approval showed that voluntary retirement was introduced as a package to rationalise manpower and that pension was an integral part of the consideration for employees who retired after completing 15 years of service. The reference in the scheme to pension in terms of the pension rules was intended for computation of pension and not to reintroduce the ordinary 20-year qualifying service requirement so as to defeat the scheme. The later clarification could not amend or override the scheme, because the Central Board had approved the proposal as a whole and the bank, being an instrumentality of the State, was bound to act fairly and reasonably. A construction denying pension would be arbitrary, unconscionable and contrary to the scheme's purpose. Where two interpretations were possible, the one favouring the employees had to be adopted.

Conclusion: Employees who completed 15 years of service on the relevant cut-off date were entitled to proportionate pension under the scheme, and the denial of that benefit was unsustainable.

Final Conclusion: The employees' entitlement to pension under the voluntary retirement package was upheld, and the appeals were disposed of by directing extension of the pensionary benefit to similarly situated retirees.

Ratio Decidendi: A voluntary retirement scheme approved as a contractual package must be construed as a whole, and where pension is an essential component of the inducement for retirement after 15 years of service, the employer cannot deny that benefit by relying on an unamended internal rule or a later clarification.

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