TaxTMI 
TaxTMI 
2020 (3) TMI 1318
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.... scheme. The scheme had been drawn up, keeping in view the guidelines issued by the IBA. "Memorandum" dated 26.12.2000 was submitted by the Deputy Managing Director and the Corporate Development Officer for according approval to the proposals contained in the Memorandum as also for adopting the scheme as Annexure 'B' to the Memorandum. 4. The basis of Memorandum dated 26.12.2000, was the advice by IBA vide letter dated 31.8.2000 in which it was pointed out that they deliberated with the Government of India, Ministry of Finance (Banking Division), at its meeting with the Finance Minister, with Chief Executives of public sector banks on 13.6.2000. The human resource and manpower planning in public sector banks were reviewed, and a Committee was constituted to examine the issues concerned to public sector banks and to suggest suitable remedial measures. The Committee considered the economic reforms set in motion in the year 1990, the high establishment cost and low productivity in public sector banks. It was felt that the banks convert their human resource into assets compatible with the business strategies through a variety of measures. The data available indicated that 43....
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....leave encashment to be provided beside the amount of ex gratia. 6. The heart and soul of the scheme were that benefits to be given on completion of 15 years of service. The eligibility for benefits was provided to those who had completed 15 years of service as on 31.12.2000. 7. The SBI submitted that it reserved a right under the scheme to modify, amend or cancel it or any of the clauses and to give effect to it from any date deemed fit. The Deputy Managing Director-cum-CDO was the competent authority for the purpose. As specific queries were raised, a clarification was issued by the Deputy Managing Director on 15.1.2001, in which about a query whether an employee on completing 15 years of pensionable service as on the relevant date of retirement, would be entitled to pensionary benefits, in response, para 6(c) of the scheme was reiterated, and it was also mentioned that as per the existing rules, employees who had not completed 20 years of pensionable service, were not eligible for pension. 8. The clarification issued by the Deputy General Manager was not in the form of modification or amendment of the scheme. The Deputy General Manager in clarification quoted the provisi....
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.... value, was stopped in view of the amendment of Rule 22 of the Pension Fund Rules. Though the amendments in Pension Fund Rules were made effective with effect from 31.3.2001, and the age of retirement had been raised from 58 years to 60 years, w.e.f. 22.5.1998, this had necessitated increase in age for admission to Pension Fund to 58 years specified in Rule 22(i)(a) of the Rules so that the employees who have retired/are retiring on attaining the age of 60 years after completing ten years of pensionable service on or after 22.5.1998 are eligible for pension. (d) The Central Board of the SBI in its meeting held on 30.1.2001 accorded approval to the amendment in Rules 8 and 22(i)(a) of the Rules as set out in Annexure 1. The Trustees of the SBI Employees' Pension Fund in their meeting on 30.10.2001 adopted the amended rules. Consequently, a Circular was issued on 8.11.2001. The amendment was given effect from 31.3.2001, the date on which it was notified, though it was adopted by the Trustees of the SBI Trust Pension Fund in October 2001. (e) A Division Bench of the High Court held Respondent-employee, as per Rules on 17.3.2001, the date on which his offer was accepted, was ....
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.... Pension Rules, the High Court opined that as the employee completed more than 19 years and ten months of service on 31.3.2001, therefore, the first part of Clause one of Rule 22 is not applicable. Further, the third part of Clause (a) is not applicable as he has completed ten years of service but not attained the age of 60 years. The case of the employee was covered under the second part of Clause (a) of Rule 22, which enabled the member to get a pension if an employee in the service of the bank on or after 1.11.1993, and completed ten years pensionable service and attained 58 years age. The employee applied in terms of the Pension Rules prevailing in January 2001. Alternatively, if an employee was in service of the bank on or after 1.11.1993, having completed ten years of pensionable service and on attaining the age of 58 years, shall be entitled to a pension. Thus, he fulfilled the requirement of second part of Clause (a) of Rule 22 as he was in service of the bank on 1.11.1993 and completed ten years of pensionable service, and the age of 58 years, therefore, in terms of Rule 22, he was entitled to pension as well as leave encashment dues along with interest at the rate of 9 pe....
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....s are entitled to Provident Fund, gratuity and pension in terms of the Rules on completion of 20 years of service. Thus, there cannot be any comparison of SBI employees with the employees of other nationalised banks. The clarification dated 11.01.2000 has also been relied on by the bank. Now more than 19 years have passed and to grant a pension to all those who have retired, w.e.f. 1.4.2001 would cast a huge financial liability on the bank. 14. It was submitted on behalf of the employees that the decision rendered by the High Court is appropriate. No case for interference is made out in appeals. The very essence of the VRS was the admissibility of pension on completion of 15 years of service and other benefits. Once the scheme was adopted and approved by the Central Board of SBI, the clarification could not have been made to the detriment of employees. The clarification did not have effect of the amendment, modification, or cancellation of the VRS scheme as approved and adopted by Board. The amendment in the Pension Regulations of 1995 was carried out by other public sector banks with retrospective effect in 2002, though the scheme was floated and implemented in the year 2000-20....
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....ee who rendered the service for 15 years, would be per se discriminatory, unfair and arbitrary. Once the scheme was floated and approved, the bank being State within the purview of Article 12 of the Constitution of India, it would not be permissible for it to discriminate and act unfairly. The VRS constituted an independent contract and was binding upon the bank. The benefits could not have been taken away from eligible employees who accepted VRS, which was implemented by the bank for its benefit to induct new skills as well as to rationalise the workforce. Thus, appeals being bereft of merit, deserve dismissal. 15. The main question is whether, under the scheme as approved and adopted by the Central Board of SBI, the pension is admissible to the employees on completion of 15 years of permanent service. Connected question is whether employees have been denied benefit of pension unfairly and arbitrarily contrary to the essential terms of the scheme. 16. Firstly, it is necessary to consider the nature of the package, which was accepted in the resolution by the Central Board of Directors of SBI in its meeting dated 27.12.2000. As already mentioned, exercise was done in order to ....
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....her banks in respect of voluntary retirement schemes shows that a maximum number of applications have been received from these centers. f) As against the average of 43% of employees in Public Sector Banks in the 46+ age group, we have 47% of the employees in this age group. Of this, 1/5th are in the age group of 56 and above. To put it simply, 21,824 employees will reach the age of superannuation and retire by March 2005. In the light of the above-mentioned factors, it will be seen that the manpower of the Bank will undergo major changes in the ensuing years in number and deployment. Further, considering the variety of business the Bank undertakes, and its special role in the banking sector, over-emphasis on quantitative parameters would be inappropriate. An approach paper on Manpower Planning is placed at Annexure-'A'. Considering the various aspects of Manpower Planning, we are of the view that the Voluntary Retirement Scheme should be employed as a moderate tool to right-size the manpower in State Bank of India. In the light of aforesaid, it is clear that the VRS scheme was devised as a tool to reduce overstaffing. The memorandum submitted t....
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....eived from Bank's actuary, an outlay of approximately Rs. 2100 crores would be required for the implementation of SBIVRS if 10% of the employees opt for retirement. The break-up being as under: Ex-gratia Rs. 1300.00 crores Leave encashment Rs. 180.00 crores Additional Provision for Gratuity Rs. 140.00 crores Additional Provision for Persion Rs. 480.00 crores (These estimates may undergo a change on receipt of clarification from Government of India as to the components of 'Pay' for the purpose of Ex-gratia) A provision was made for the pension. The bank reserved the right to modify, amend or cancel any or all the clauses. The Deputy Managing Director and CDO would be the competent authority. Following is the relevant Clause regarding modification of the scheme: MODIFICATION OF THE SCHEME Bank reserves the right to modify, amend or cancel any or all the clauses of the Scheme and to give effect thereto from any date it may deem fit. The Dy. Managing Director and CDO would be the Competent Authority for the purpose. The effective date of retirement was 31.3.2001. The relevant Clause is extracted hereunder: ....
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....pecial note of the following: 1. Section 10(10C) of the Income Tax Act read with Rule 2BA. 2. As per the amendments brought in by the Finance Act 2000, so long as the bank complies with the Rules framed Under Section 10(10C), prior approval from the Chief Commissioner or Director General of Income-tax, as the case may be, is not required for VRS. 3. Income-tax shall be deducted at source in respect of ex-gratia exceeding Rs. 5.00 lakhs or such other ceiling as may be prescribed under the Income-tax Act. 4. Only completed years of service will be reckoned for arriving at the minimum eligible service. Subject to this, fraction of service of six months and above will be reckoned as one year for the purpose of calculating the ex-gratia. 5. While exercising discretion to decline applications for VRS or to make exceptions in the case of employees categorised as ineligible for VRS, the decision should not be discriminatory among employees who are similarly placed and the reasons therefor should be recorded. 6. The competent authority for accepting VRS for the various categories/class of employee should be clearly laid down by the Board....
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.... DIRECTOR (IR) 19. The agenda submitted on 27.12.2000 for consideration of the Central Board of SBI along with resolution are extracted as under: AGENDA NO. 3 Man-Power Planning and SBI Voluntary Retirement Scheme (SBI VRS) Submitted Memorandum dated the 26th December 2000 by the Deputy Managing Director & Corporate Development Officer, recommending that for the reasons stated therein, approval be accorded for the proposals contained in the Memorandum as also for adopting the stated approach to manpower planning and introduction SBIVRS in terms of the provisions contained in the Scheme at Annexure 'B' of the Memorandum. Copies of the Memorandum were placed before the Directors present at the Meeting. APPROVED" (SEAL) 20. Annexure 'B' to the memorandum contained the VRS. The VRS was prepared in view of the guidelines of the IBA. The amount of ex gratia and other benefits specified in the scheme under clauses 5/6 of the scheme are extracted hereunder: 5. Amount of Ex-gratia: The staff members whose request for retirement under SBIVRS has been accepted by Competent Authority will be paid a....
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....ble to the employee. 21. Most significantly, the scheme of the IBA, accepted by the Board on 27.12.2000, was for providing pension on completion of 15 years of service. The pension specified in Clause 6 of scheme was to be worked out in terms of the Pension Fund Rules including the commuted value of the pension. It was not mentioned in the VRS adopted by the SBI that the person on completion of 15 years would not be entitled to the benefit of pension. On the other hand, proposal of IBA, as approved by the Government of India, was accepted in toto by SBI. When gauged in terms of the proposals of the IBA, the essential feature was that an employee was entitled to get pension on completion of 15 years of service. The meaning of the expression "pension" in terms of the Rules would be proportionate pension on completion of 15 years of service as per the terms of calculation provided in Rule 23 of the Pension Rules. VRS is an independent contract and the background in which it was floated, pension on completion of 15 years of service was an essential part of the scheme of VRS 2000, as approved by the Government and floated by the IBA and adopted by all the Banks, and Pension Rules wer....
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.... or not the employees, completing 15 years of pensionable service as on relevant date (date of retirement under SBIVRS), will be entitled for pension benefits? In this connection, we invite a reference to para 6(c) of the Scheme forwarded under the cover of Staff Circular letter No. CDO/81 dated 30/12/2000. The payment of pension to the employee retiring under SBIVRS would be governed by State Bank of India Employees Pension Fund Rules on the relevant date (including commuted value of pension). However, as per existing rules, employees who have not completed 20 years of Pensionable Service are not eligible for pension. It is clear from answer that the staff circular dated 30.12.2000 was reiterated. Payment of pension to an employee retiring under VRS would be governed by Rules on the relevant date, i.e., 31.3.2001. At the same time, the position of the existing Rule was indicated that those employees who had not completed 20 years of pensionable service were not eligible for a pension. It was not clarified what was the meaning and purport of para 6(c) of the scheme. It was not mentioned that an employee would not be entitled to pension on 15 years of service as per the ....
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....ificate or otherwise that he is incapacitated for further active service; (c) After having completed twenty years pensionable service, irrespective of the age he shall have attained at his request in writing; (d) After twenty-five years' pensionable service. 26. It is clear from Rule 22 that pension is admissible to an employee thus: 1) After having completed 20 years' pensionable service provided that he has attained the age of 50 years; or 2) If he is in the service of the Bank on or after 01.11.1993, after having completed 10 years pensionable service provided that he has attained the age of 50 years; or 3) If he is in the service of the Bank on or after 22.05.1998, after having completed 10 years pensionable service provided that he has attained the age of 60 years. 27. Rule 22(1)(c) was incorporated in the Pension Fund Rules w.e.f. 20.9.1986 when the bank decided inter alia to introduce VRS on completion of 20 years of service. The unamended Rule 22(i)(a) provided the normal age of retirement to be 58 years. Thereafter, as per the guidelines issued by the Government on 22.5.1998, the age of retirement was increased fro....
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.... 28. Superannuation pension.--Superannuation pension shall be granted to an employee who has retired on his attaining the age of superannuation specified in the Service Regulations or Settlements. Provided that pension shall also be granted to an employee who opts to retire before attaining the age of superannuation, but after having served for a minimum period of 15 years in terms of any scheme that may be framed for the purpose by the Bank's Board with the concurrence of the Government. (emphasis supplied) 32. The employees who opted for VRS on completion of 15 years of service within the specified period in 2000/2001, were given the benefit of pension. The Regulations came to be amended in 2002 with the retrospective effect. However, the benefit under Regulation 29(5) was not extended to the optees/employees who completed 20 years of service by adding 5 years of qualifying service. Regulations 29(1) and 29(5) applicable to the said banks are extracted hereunder: 29. Pension on voluntary retirement.--(1) On or after the 1st day of November 1993 at any time, after an employee has completed twenty years of qualifying service he may, by givi....
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.... years of service. The scheme was for extending the benefit of pension to the employees retiring on completion of 15 years of permanent service, and the Government of India also desired that the IBA advised banks to make necessary amendments to their pension regulations, as mentioned in the Annexure. Thus, the essence of the VRS scheme was the benefit of pro-rata pension as per the Rules on completion of 15 years of pensionable service. 34. It is apparent that the very fulcrum of the scheme was a felt need for inducting new workforce, with adequate knowledge of new skills such as modern technology, foreign exchange, venture capital, e-commerce, money management, etc. as pointed out by the Ministry of Finance in its letter dated 22.5.2000. The banks were overstaffed and for effective management and manpower planning, the desirability of introducing VRS was felt in order to rationalise the workforce and skill. Hence a Committee was constituted by the Central Government. In pursuance of report of the Committee, a policy decision was taken to frame the VRS. The scheme applied to employees who, on the date of the application, completed 15 years of service. The employees specified the....
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.... being accepted individually, but the question which has to be posed and answered is as to whether having regard to the service jurisprudence; the principles of the Indian Contract Act would be applicable in the instant case. It is the specific case of the "banks" that the Schemes had been floated by way of contract. It does not have any statutory flavour. Reference to the Pension Scheme framed under the Regulations was made for computation of the pension. (emphasis supplied) 36. Significantly in O.P. Swarnakar (supra), this Court observed that employees must have proceeded to apply for VRS on the basis even though they have merely completed 15 years of service, which was not a qualifying service, under the Pension Regulations of Bank, they would be entitled to benefits in terms of the VRS scheme. The Court observed thus: 89. Furthermore, a large number of employees have withdrawn their offer only when a proviso was sought to be added to Regulation 28 aforementioned. In terms of the Scheme the employees, who expected to get benefits of Sub-regulation (4) of Regulation 29 would be deprived therefrom. It is not in this dispute that the qualifying period for recei....
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.... concur, and such Rules shall, after notification in the Official Gazette, be deemed to have been modified or rescinded accordingly. It was urged by the Petitioner that the Rules framed under Bombay Act 22 of 1939 were not placed before the Legislative Assembly or the Legislative Council at the first session, and therefore they had no legal validity. The Rules under Act 22 of 1939 were framed by the Provincial Government of Bombay in 1941. At that time, there was no Legislature in session, the Legislature having been suspended during the emergency arising out of World War II. The session of the Bombay Legislative Assembly was convened for the first time after 1941 on 20-5-1946, and that session was prorogued on 24-5-1946. The second session of the Bombay Legislative Assembly was convened on 15-7-1946, and that of the Bombay Legislative Council on 3-9-1946 and the Rules were placed on the Assembly Table in the second session before the Legislative Assembly on 2-9-1946 and before the Legislative Council on 13-9-1946. Section 26(5) of Bombay Act 22 of 1939 does not prescribe that the Rules acquired validity only from the date on which they were placed before the Houses of Legislature.....
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....e Voluntary Retirement Scheme. It advised that Banks may 'adopt' the scheme after obtaining their Boards' approval and implement it in 'right earnest'." The memorandum also contained that the employees who completed 15 years of service were to be the beneficiaries of VRS as approved by the Government of India and conveyed by the IBA. The approval by Government of India and scheme, conveyed by IBA, was to provide for the benefit of pension on completion of 15 years of service. The same was an essential condition of the scheme. The Annexure, which was part of the memorandum, provided inter alia the benefit of pension, including the commuted value of pension without any rider of completion of 20 years period of service. Once SBI accepted the proposals contained in the memorandum, when we gauge the scheme in the light of the subject matter of the memorandum which was unconditionally approved, it became clear and beyond the pale of doubt that in VRS (Annexure B) inasmuch as the expression to provide the benefit of pension as per Rules was only for providing the proportionate pensionary benefit of the qualifying service on and above 15 years, rendered by an employee. ....
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....unds for the benefit of the employees of the State Bank. Section 50(2)(o) reads: 50. Power of Central Board to make regulations.--(1) The Central Board may, after consultation with the Reserve Bank and with the previous sanction of the Central Government [by notification in the Official Gazette,] make regulations, not inconsistent with this Act and the Rules made thereunder, to provide for all matters for which provision is expedient for the purpose of giving effect to the provisions of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for-- x x x (o) the establishment and maintenance of superannuation pension, provident or other funds for the benefit of the employees of the State Bank or of the State Bank or of the dependents of such employees or for the purposes of the State Bank, and the granting of superannuation allowances, annuities and pensions payable out of any such fund;] 43. Thus, it is apparent that the Central Board of SBI could not have framed a scheme different than the one approved by the Central Government on its own, nor could have implemented it without ....
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.... of service as a special measure, the banks were bound to implement it in that manner or not at all. The Central Board of Directors of the SBI accepted the VRS proposal of Government and IBA without any reservation of not providing pension along with other benefits, as mandated in the VRS scheme. The action of the instrumentality of the State cannot be violative of Article 14. It cannot be permitted to act arbitrarily. Articles 15 and 16 provide for equality and provide for an umbrella against discrimination. 47. Though the Deputy General Manager was authorised by the Central Board of Directors to amend, modify or cancel the VRS. The Rules were amended by other banks later in 2002. It was not stated in answer to the query that under the VRS scheme, a person who has rendered 15 years of qualifying service would not be entitled to a pension. Nor it was so stated in resolution dated 27.12.2000 of the Central Board of SBI. That apart, Deputy General Manager tried to interpret VRS scheme in isolation without considering what was approved by the Board. Not only the scheme but also the memorandum have to be read together to understand resolution of Board. Once the memorandum containing....
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.... to the employees for receiving the pension in view of the memorandum and the resolution passed by the Central Board of Directors adopting memorandum and the SBI-VRS. 50. (a). The rights under contract cannot be taken away, and they become enforceable by a court of law. Bank cannot be permitted to make a representation and later on wriggle out of its obligation. It is not permissible to make a "misrepresentation". Under Section 19 of the Contract Act, when consent is obtained by coercion, fraud, or 'misrepresentation,' the agreement is voidable at the option of the aggrieved party. In Central Inland Water Transport Corporation Ltd. and Anr. v. Brojo Nath Ganguly and Anr., (1986) 3 SCC 156, this Court considered the contract of employment between the Central Inland Water Transport Corporation and its employees and also the rules. In that context, observed thus: 75. Under Section 19 of the Indian Contract Act, when consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. It is not the case of either of the contesting Respondents that there was any coercio....
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....law, you may reject the bad part and retain the good. (emphasis supplied) (b). In Brojo Nath Ganguly (supra), this Court considered the concept of unconscionable bargain and as to actions showing no regard for conscience; irreconcilable with what is right or reasonable, observed thus: 76. Under which head would an unconscionable bargain fall? If it falls under the head of undue influence, it would be voidable but if it falls under the head of being opposed to public policy, it would be void. No case of the type before us appears to have fallen for decision under the law of contracts before any court in India nor has any case on all fours of a court in any other country been pointed out to us. The word "unconscionable" is defined in the Shorter Oxford English Dictionary, Third Edition, Volume II, page 2288, when used with reference to actions, etc. as "showing no regard for conscience; irreconcilable with what is right or reasonable." An unconscionable bargain would, therefore, be one which is irreconcilable with what is right or reasonable. (emphasis supplied) (c). Chitty on Contracts was referred in Brojo Nath Ganguly (supra) about the old ideas of....
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.... What the French call "contracts d'adhesion," the American call "adhesion contracts" or "contracts of adhesion." An "adhesion contract" is defined in Black's Law Dictionary. 5th Edn., at page 38, as follows: Adhesion contract.--Standardized contract form offered to consumers of goods and services on essentially 'take it or leave it' basis without affording consumer realistic opportunity to bargain and under such conditions that consumer cannot obtain desired product or services except by acquiescing in form contract. Distinctive feature of adhesion contract is that weaker party has no realistic choice as to its terms. Not every such contract is unconscionable. 80. The position under the American law is stated in Reinstatement of the Law -- Second as adopted and promulgated by the American Law Institute, Volume II which deals with the law of contracts, in Section 208 at page 107, as follows: § 208. Unconscionable Contract or Term If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable te....
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....Nonetheless, the more standardised the agreement and the less a party may bargain meaningfully, the more susceptible the contract or a term will be to a claim of unconscionability. (emphasis supplied) The position has been thus summed up by John R. Peden in 'The Law of Unjust Contracts' published by Butterworths in 1982, at pages 28-29: ... Unconscionability represents the end of a cycle commencing with the Aristotelian concept of justice and the Roman law laesio enormis, which in turn formed the basis for the medieval church's concept of a just price and condemnation of usury. These philosophies permeated the exercise, during the seventeenth and eighteenth centuries, of the Chancery court's discretionary powers under which it upset all kinds of unfair transactions. Subsequently the movement towards economic individualism in the nineteenth century hardened the exercise of these powers by emphasising the freedom of the parties to make their own contract. While the principle of pacta sunt servanda held dominance, the consensual theory still recognized exceptions where one party was overborne by a fiduciary, or entered a contract under duress....
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.... of reasonableness or fairness of a Clause in a contract where there is inequality of bargaining power. Lord Denning, MR, appears to have been the propounder, and perhaps the originator --at least in England, of this theory. In Gillespie Brothers & Co. Ltd. v. Roy Bowles Transport Ltd., (1973) QB 400, where the question was whether an indemnity Clause in a contract, on its true construction, relieved the indemnifier from liability arising to the indemnified from his own negligence, Lord Denning said (at pages 415-416): The time may come when this process of 'construing' the contract can be pursued no further. The words are too clear to permit of it. Are the courts then powerless? Are they to permit the party to enforce his unreasonable clause, even when it is so unreasonable, or applied so unreasonably, as to be unconscionable? When it gets to this point, I would say, as I said many years ago: 'there is the vigilance of the common law which, while allowing freedom of contract, watches to see that it is not abused': John Lee & Son (Grantham) Ltd. v. Railway Executive, (1949) 2 All ER 581. It will not allow a party to exempt himself from his....
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....ated' or 'overcome' by the other. One who is in extreme need may knowingly consent to a most improvident bargain, solely to relieve the straits in which he finds himself. Again, I do not mean to suggest that every transaction is saved by independent advice. But the absence of it may be fatal. With these explanations, I hope this principle will be found to reconcile the cases. (emphasis supplied) (e). The Court clearly held that the contracts, which are the outcome of misrepresentation, cannot be enforced, and inequality of bargaining power merit the intervention of the court. In A. Schroeder Music Publishing Co. Ltd. v. Macaulay (formerly Instone) (1974) 1 WLR 1308, Lord Diplock made the following observations at pp. 1315-16 thus: 84. .... "My Lords, the contract under consideration in this appeal is one whereby the Respondent accepted restrictions upon the way in which he would exploit his earning power as a songwriter for the next ten years. Because this can be classified as a contract in restraint of trade the restrictions that the Respondent accepted fell within one of those limited categories of contractual promises in respect of which the cour....
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.... reasonably necessary for the protection of the legitimate interests of the promisee and commensurate with the benefits secured to the promisor under the contract. For the purpose of this test, all the provisions of the contract must be taken into consideration. (f). A term which exempts the stronger party from his ordinary common law liability should not be given effect except when it is reasonable, as observed in Levison v. Patent Steam Carpet Co. Ltd., (1949) 2 All ER 581 at 584 relied upon in Brojo Nath Ganguly (supra) thus: 85. The observations of Lord Denning, M.R., in Levison v. Patent Steam Carpet Co. Ltd. are also useful and require to be quoted. These observations are as follows (at page 79): In such circumstances as here the Law Commission in 1975 recommended that a term which exempts the stronger party from his ordinary common law liability should not be given effect except when it is reasonable: see The Law Commission and the Scottish Law Commission Report, Exemption Clauses, Second Report (1975) (August 5, 1975), Law Com. No. 69 (H.C. 605), pp. 62, 174; and there is a Bill now before Parliament, which gives effect to the test of reasonableness. Th....
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.... in a commercial contract are those which, by judicial consensus over the years or by Parliament in passing a statute, have been regarded as obligations which a reasonable businessman would realise that he was accepting when he entered into a contract of a particular kind, the court's view of the reasonableness of any departure from the implied obligations which would be involved in construing the express words of an exclusion Clause in one sense that they are capable of bearing rather than another, is a relevant consideration in deciding what meaning the words were intended by the parties to bear. (emphasis supplied) Lord Scarman, while agreeing with Lord Wilberforce, described (at page 853) the action out of which the appeal before the House had arisen as "a commercial dispute between parties well able to look after themselves" and then added: "In such a situation what the parties agreed (expressly or impliedly) is what matters, and the duty of the courts is to construe their contract according to its tenor." 88. As seen above, apart from judicial decisions, the United States and the United Kingdom have statutorily recognised, at least in certain areas of....
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....ll bargains of this type. No court can visualize the different situations which can arise in the affairs of men. One can only attempt to give some illustrations. For instance, the above principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not. It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of Rules as part of the contract, however unfair, unreasonable and unconscionable a Clause in that contract or form or Rules may be. This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen, and the contract is a commer....
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.... contract is only voidable would be to compel each person with whom the party with superior bargaining power had contracted to go to court to have the contract adjudged voidable. This would only result in multiplicity of litigation, which no court should encourage and would also not be in the public interest. Such a contract or such a Clause in a contract ought, therefore, to be adjudged void. While the law of contracts in England is mostly judge-made, the law of contracts in India is enacted in a statute, namely, the Indian Contract Act, 1872. In order that such a contract should be void, it must fall under one of the relevant Sections of the Indian Contract Act. The only relevant provision in the Indian Contract Act, which can apply is Section 23, when it states that "The consideration or object of an agreement is lawful, unless ... the court regards it as ... opposed to public policy. (j). The Court also considered the "public policy". The same is not the policy of a particular Government. It connotes some matter which concerns the public good and the public interest. Action has to be subservient to public policy. This Court in the context of Contract Act and Public Policy ma....
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.... Law or the principles of Equity would never have evolved. Sir William Holdsworth in his "History of English Law," Volume III, page 55, has said: In fact, a body of law like the common law, which has grown up gradually with the growth of the nation, necessarily acquires some fixed principles, and if it is to maintain these principles, it must be able, on the ground of public policy or some other like ground, to suppress practices which, under ever new disguises, seek to weaken or negative them. It is thus clear that the principles governing public policy must be and are capable, on proper occasion, of expansion or modification. Practices which were considered perfectly normal at one time have today become obnoxious and oppressive to public conscience. If there is no head of public policy which covers a case, then the court must in consonance with public conscience and in keeping with public good and public interest declare such practice to be opposed to public policy. Above all, in deciding any case which may not be covered by authority, our courts have before them the beacon light of the Preamble to the Constitution. Lacking precedent, the court can always be gui....
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....n changing times in Delhi Transport Corporation v. D.T.C. Mazdoor Congress and Ors., (1991) Supp 1 SCC 600 thus: 279. In paragraph 4 of Chitty on Contracts (25th edn., vol. 1) it is stated that "freedom of contract is a reasonable social ideal only to the extent that equality of bargaining power between contracting parties can be assumed and no injury is done to the economic interest of the community at large." 280. In Anson's Law of Contract at pages 6 and 7 stated the scope of freedom of contract in the changing circumstances thus: Today the position is seen in a very different light. Freedom of contract is a reasonable social ideal only to the extent that equality of bargaining power between contracting parties can be assumed, and no injury is done to the economic interests of the community at large. In the more complicated social and industrial conditions of a collectivist society, it has ceased to have much idealistic attraction. It is now realised that economic equality often does not exist in any real sense and that individual interests have to be made to subserve those of the community hence there has been a fundamental change both in our soci....
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....dealt with in extenso in the light of the development of law in the Supreme Court of United States of America and the House of Lords in England and in the continental countries. To avoid needless burden on the judgment, I do not repeat the same reasoning. I entirely agree with the reasoning, and the conclusions reached therein on all these aspects. (b). This Court in D.T.C. (supra) with respect to the alteration of Government contracts and the right of the State to impose unconstitutional conditions, observed: 283. The problem also could be broached from the angle whether the State can impose unconstitutional conditions as part of the contract or statute or Rule etc. In (1959-60) 73 Harvard Law Review, in the Note under the caption 'Unconstitutional Condition' at pages 1595-96 it is postulated that the State is devoid of power to impose unconstitutional conditions in the contract that the power to withhold largesse has been asserted by the State in four areas i.e. (1) regulating the right to engage in certain activities; (2) administration of government welfare programme; (3) government employment; and (4) procurement of contracts. It was further adumbrated at p....
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....proper for carrying out any of the specific clauses of the Constitution or power to spend for general welfare. The Federal Government has no power, inherent or sovereign, other than those specifically or explicitly granted to it by the Constitution. At page 1197, it is further stated thus: The government acts according to due process standards for the due process Clause is quite up to that task without the rule. Alterations of government contracts are not desirable in a free country even when they do not constitute a 'taking' of property or impinge on questions of fundamental fairness of the type comprehended in due process. The government may make changes, but only if war or commerce require them and not on the broader and more ephemeral grounds that the general welfare would be served by the change. Any other Rule would allow the government to welch almost at will. x x x 286. In Brojo Nath case (supra, after elaborate consideration of the doctrine of "reasonableness or fairness" of the terms and conditions of the contract vis-a-vis the relative bargaining power of the contracting parties this Court laid down that the principles deducible from th....
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.... Bhagwati, J. (as he then was) held that Article 14 is the genus while Article 16 is a specie. Article 16 gives effect to the doctrine of equality in all matters relating to public employment. The basic principle which, therefore, informs both Articles 14 and 16 is equality and inhibition against discrimination. "Equality is a dynamic concept with many aspects and dimensions, and it cannot be "cribbed, cabined and confined" within traditional and doctrinaire limits. From a positivistic point of view, equality is antithetical to arbitrariness. In fact, equality and arbitrariness are sworn enemies; one belongs to the Rule of law in a republic while the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14, and if it affects any matter relating to public employment, it is also violative of Article 16. Articles 14 and 16 strike at arbitrariness in State action and ensure fairness and equality of treatment. In Maneka Gandhi case (1978) 1 SCC 248, it was further held that the principle of reasonableness, which legally as wel....
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....Article 19(1)(g) empowers every citizen the right to avocation or profession etc. which includes right to be continued in employment under the State unless the tenure is validly terminated consistent with the scheme enshrined in the fundamental rights of the Constitution. Therefore, if any procedure is provided for deprivation of the right to employment or right to the continued employment till the age of superannuation as is a source to right to livelihood, such a procedure must be just, fair and reasonable. This Court in Fertilizer Corporation Kamgar Union (Regd.), Sindri v. Union of India (1981) 1 SCC 568, held that Article 19(1)(g) confers a broad and general right which is available to all persons to do works of any particular kind and of their choice. Therefore, whenever there is arbitrariness in State action -- whether it be of the legislature or of the executive or of an authority Under Article 12, Articles 14 and 21 spring into action and strikes down such an action. The concept of reasonableness and non-arbitrariness pervades the entire constitutional spectrum and is a golden thread which runs through the whole fabric of the Constitution. Therefore, the provision of the s....
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....ands. History shows that it is always subtle and insidious encroachments made ostensibly for a good cause that imperceptibly but surely erode the foundations of liberty. (emphasis supplied) (e). An employer cannot act in a manner that is in the negation of just, fair, and reasonable procedure. The Court held: 329. I am, therefore, inclined to hold that the courts, though, have no power to amend the law by process of interpretation but do have power to mend it so as to be in conformity with the intendment of the legislature. Doctrine of reading down is one of the principles of interpretation of statute in that process. But when the offending language used by the legislature is clear, precise, and unambiguous, violating the relevant provisions in the Constitution, resort cannot be had to the doctrine of reading down to blow life into the void law to save it from unconstitutionality or to confer jurisdiction on the legislature. Similarly, it cannot be taken aid of to emasculate the precise, explicit, clear and unambiguous language to confer arbitrary, unbridled and uncanalised power on an employer which is a negation to just, fair and reasonable procedure envisage....
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....consider the objections and record reasons on the basis of which it had taken action and communicate the same. However, scanty the material may be, it must form foundation. This minimal procedure should be made part of the procedure lest the exercise of the power is capable of abuse for good as well as for whimsical or capricious purposes for reasons best known to the authority and not germane for the purpose for which the power was conferred. The action based on recording reasoning without communication would always be viewed with suspicion. Therefore, I hold that conferment of power with wide discretion without any guidelines, without any just, fair or reasonable procedure is constitutionally anathema to Articles 14, 16(1), 19(1)(g) and 21 of the Constitution. Doctrine of reading down cannot be extended to such a situation. (emphasis supplied) 53. On the basis of aforesaid principles, it is apparent that once the Central Board of Directors accepted the memorandum for making payment of pension, in case it was not accepting the proposal in the memorandum, it ought to have said clearly that it was not ready to accept the proposals of the Government and the IBA and reject....
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....ice would be entitled for pensionary benefits. The scheme was carved out specially for attracting the employees by providing pension and other benefits to eligible persons like ex gratia, gratuity, pension and leave encashment. Deprivation of pension would make them ineligible for the benefits and would run repugnant to the eligibility clause. 55. The submission raised on behalf of the SBI that the draft scheme nowhere stipulated that 15 years' service would be the eligibility or that on completion of 15 years' service, the incumbent would be eligible for pension, is factually incorrect. It is apparent from the material circumstances, documents, and correspondence that the decision was taken at all levels including the one by the Central Board of Directors of SBI, that the benefit of pension was to be given to the employees on completion of 15 years of service. In that perspective, vagueness of scheme of SBI, if any, can be of no advantage as it is clear beyond the pale of doubt that pension was heart and soul of the scheme with ex gratia on completion of 15 years of service. It is due to the reason that the benefit was to be accorded to the incumbents having completed 1....
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....ry retirement shall be considered. The relevant clause, as referred to hereinbefore, creates an enforceable right. In the event the State Bank failed to adhere to its preferred policy, the same could have been specifically enforced by a court of law. The same would, therefore, amount to some consideration. 57. While construing a contract, the language and surrounding circumstances of the overall scheme, memorandum and letters are to be read conjointly to find out whether any departure made by the Board of Directors in its Resolution dated 27.12.2000 is of pivotal significance. In this case, the decision was taken by it of approval of the IBA scheme as proposed. Its binding effect cannot be changed on the basis what parties choose to say afterward, nor they can be permitted to wriggle out. The contract is required to be read as a whole. It is apparent on a bare reading that optees will be eligible for proportionate pension under the Pension Regulations of the bank and therefore, the bank bears the risk of lack of clarity, if any. 58. In Bank of India and Anr. v. K. Mohandas and Ors., (2009) 5 SCC 313 wherein several other banks were also parties, the question arose as to the n....
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....er it. 30. In Ganga Saran v. Firm Ram Charan Ram Gopal AIR 1952 SC 9, a four-Judge Bench of this Court stated: (AIR p. 11, para 6) 6. ... Since the true construction of an agreement must depend upon the import of the words used and not upon what the parties choose to say afterwards, it is unnecessary to refer to what the parties have said about it. 31. It is also a well-recognised principle of construction of a contract that it must be read as a whole in order to ascertain the true meaning of its several clauses and the words of each Clause should be interpreted so as to bring them into harmony with the other provisions if that interpretation does no violence to the meaning of which they are naturally susceptible. (North Eastern Railway Co. v. Lord Hastings, 1900 AC 260) 60. With respect to lack of clarity in the scheme, this Court in K. Mohandas (supra) relied on maxim verba chartarum fortius accipiuntur contra proferentem to hold that banks who were responsible for formulation of the terms in the contractual Scheme, bear the risk of lack of clarity. Thus, the benefit has to be given to the employees by making interpretation against the banks. The Cou....
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....SCC 721, it must attract the wrath of Article 14 of the Constitution. 36. Any interpretation of the terms of VRS 2000, although contractual in nature, must meet the test of fairness. It has to be construed in a manner that avoids arbitrariness and unreasonableness on the part of the public sector banks who brought out VRS 2000 with an objective of rightsizing their manpower. The banks decided to shed surplus manpower. By formulation of the special scheme (VRS 2000), the banks intended to achieve their objective of rationalising their force as they were overstaffed. The special Scheme was, thus, oriented to lure the employees to go in for voluntary retirement. In this background, the consideration that was to pass between the parties assumes significance and a harmonious construction to the Scheme, and the Pension Regulations, therefore, has to be given. 37. The amendment to Regulation 28 can, at best, be said to have been intended to cover the employees with 15 years of service or more but less than 20 years of service. This intention is reflected from the communication dated 5-9-2000 sent by the Government of India, Ministry of Finance, Department of Economic Aff....
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....er. The concept of pension was considered in D.S. Nakara and Ors. v. Union of India, (1983) 1 SCC 305. The right to a pension can be enforced through the court, it observed: 20. The antequated notion of pension being a bounty, a gratuitous payment depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced through Court has been swept under the carpet by the decision of the Constitution Bench in Deokinandan Prasad v. State of Bihar (1971) 2 SCC 330 wherein this Court authoritatively ruled that pension is a right and the payment of it does not depend upon the discretion of the Government but is governed by the Rules and a government servant coming within those Rules is entitled to claim pension. It was further held that the grant of pension does not depend upon anyone's discretion. It is only for the purpose of quantifying the amount having regard to service and other allied matters that it may be necessary for the authority to pass an order to that effect but the right to receive pension flows to the officer not because of any such order but by virtue of the rules. This view was reaffirmed in State....