Partha Bandyopadhyay and Others vs Reserve Bank of India and Others

Debangsu Basak, J.—1. These two writ petitions have been taken up for hearing as they involve substantially similar issues.

W.P. No. 140 of 2007 has been filed by Ex-Officers of Reserve Bank of India.

W.P. No. 1467 of 2006 has been filed by ex-employees other than ex-officers of Reserve Bank of India.

The petitioners had opted for early retirement under an Optional Early Retirement Scheme introduced by Reserve Bank of India. The scheme had provided for payment of ex gratia, amongst others. Subsequent to the retirement of the petitioners, Reserve Bank of India had revised the pay of its employees with effect from November 1, 2002. The petitioners were given the benefits of the revised pay scale even after their retirement. The petitioners, however, were not given the difference in the ex gratia payment. According to the petitioners the ex gratia payable in terms of the Optional Early Retirement Scheme stood increased in view of the increase in the pay as ex gratia has to be calculated applying the mathematical formula which involves the quantum of pay.

Learned Senior Advocate appearing for the petitioners in both these writ petitions has submitted that, the Optional Early Retirement Scheme introduced by the Reserve Bank of India is a contract between the employer and the employees so far as the employees who have accepted the same. In the present case, both the ex-officers as well as the ex-employees who have filed the writ petitions have entered into a contract with the Reserve Bank of India. All rights under the scheme stand vested with the petitioners. Receipt of ex gratia calculated on the basis of the mathematical formula stated in the scheme is a right which has vested with the petitioners. The pay having being revised with affect from March 1, 2002, the ex gratia payable by taking such pay has to be paid to be petitioners. Reliance has been placed upon 2014 Volume 13 Supreme Court Cases page 583 (MGB Gramin Bank v. Chakrawarti Singh) in this regard. The employer cannot unilaterally modify a term of the contract. He has referred to Section 62 of the Contract Act, 1872 in this regard. He has relied upon , 2008 Volume 2 Supreme Court Cases page 672 (Delhi Development Authority & Anr. v. Joint Action Committee, Allottee of SFS Flats & Ors.) for the proposition that, a contract cannot be unilaterally altered.

Learned Senior Advocate for the petitioner has referred to the clause relating to ex gratia payment in the Optional Early Retirement Scheme. He has submitted that, the calculation for ex gratia has been laid down in the scheme. With the revision in the pay scale, the ex gratia gets revised. Reserve Bank of India has to pay the revised ex gratia in view of the revised pay scale. Reserve Bank of India is acting unilaterally in not paying the revised ex gratia calculated after the revision in the pay.

Learned Additional Advocate General appearing for Reserve Bank of India has submitted that, the revision in pay was brought about consequent to a settlement arrived at with a section of its employees. Such settlement had provided that, the Reserve Bank of India would not be liable to pay any increase in the ex gratia consequent to the increase in the pay. Such settlement is binding on all concerned including the petitioners before the Court. It is not open to the petitioners to challenge the settlement. He has referred to Section 18 of the Industrial Disputes Act, 1947 in this regard. He has also relied upon All India Reporter , 1977 Supreme Court page 322 (Herbertsons Ltd. v. The Workmen of Herbertsons Ltd. & Ors.).

Referring to the dictionary meaning of ex gratia, Learned Additional Advocate General has submitted that, the petitioners cannot claim revision in the ex gratia as a matter of right. He has referred to , 2003 Volume 5 Supreme Court Cases page 163 (A.K. Bindal & Anr. v. Union of India & Ors.) in this regard.

He has referred to Section 37 of the Contract Act, 1872 for the proposition that, the petitioners have accepted the scheme. They cannot contend to the contrary. The contentions of the petitioners in the present writ petitions are contrary to the scheme.

According to him, the petitioners are essentially requiring the Court to rewrite the contract. Courts will not rewrite the terms of the contract between the parties. In support of such proposition he has relied upon , 2003 Volume 11 Supreme Court Cases page 572 (Vice-Chairman & Managing Director, A.P. SIDC Ltd. & Anr. v. R. Varaprasad & Ors.).

Learned Additional Advocate General has relied upon 2010 Volume 12 Supreme Court Cases page 347 (ITI Limited v. ITI EX/VR Employees/Officers Welfare Association & Ors.) and has submitted that, if the benefits received by an employee under a voluntary Retirement Scheme should not be reopened.

Courts will not interfere with policy decisions. The increase in the pay without corresponding increase in the ex gratia is a policy decision of the Reserve Bank of India. In support of such proposition learned Additional Advocate General he has relied upon , 1997 Volume 9 Supreme Court Cases page 495 (Krishnan Kakkanth v. Government of Kerala & Ors.) and , 1998 Volume 4 Supreme Court Cases page 117 (State of Punjab & Ors. v. Ram Lubhaya Bagga & Ors.). On the meaning of the words ''subject to'' used in the circular, he has relied upon , 2006 Volume 3 Supreme Court Cases page 208 (S.N. Chandrashekar & Anr. v. State of Karnataka & Ors.).

Did the ex gratia payable by the Reserve Bank of India stood increased by the subsequent revision in pay with retrospective effect after the retirement of the persons opting for the Optional Early Retirement Scheme in view of the stipulation that the Reserve Bank of India would not be liable to pay any increase in ex gratia, is the issue which has fallen for considerations in the two writ petitions.

By a circular dated August 11, 2003, Reserve Bank of India had introduced an Optional Early Retirement Scheme with effect from August 16, 2003. The scheme was applicable to the employees of Reserve Bank of India in Class I, III and IV who satisfy the eligibility conditions.

The petitioners had applied under the scheme. Reserve Bank of India had accepted the applications of the petitioners. The petitioners were relieved from their duties under the scheme. Reserve Bank of India had thereafter paid the petitioners their due under the scheme.

On October 5, 2005, Reserve Bank of India had entered into two settlements with All India Reserve Bank Employees'' Association. By such settlements, the scales of pay and allowances of Class III and other benefits of the employees of Reserve Bank of India stood increased. Reserve Bank of India had by the Circular dated November 21, 2005 made the revision of pay applicable to Class I officers also.

Subsequent to the revision in pay, Reserve Bank of India had paid the difference in pay and allowance, gratuity and other benefits to the petitioners. Reserve Bank of India however did not pay any amount on account of increase in ex gratia. According to the Reserve Bank of India, the settlements had postulated that there would be no increase in the ex gratia by reason in revision of pay with retrospective effect. Consequently, persons covered by the Optional Early Retirement Scheme are not entitled to any further payment on account of ex gratia.

The relevant clause regarding ex gratia in the Optional Early Retirement Scheme is as follows:--

"5. Ex-gratia payable: Upon acceptance of the application for early retirement under the Scheme, the employee will be eligible for Ex-gratia amount equal to Pay plus Dearness Allowance for the number of years of actual service rendered at 60 days for each completed year of service or part thereof in excess of six months or Pay plus Dearness Allowance for remaining months of service reckoned up to the date on which the employee would retire on superannuation, whichever is less.

Note: "Pay plus Dearness Allowance" for the purpose will be "Pay" as defined in Regulation 3(f) of RBI (Staff) Regulations, 1948 admissible in the grade held on the date of retirement plus Dearness Allowance admissible thereon on the date of retirement."

The relevant clause governing the ex gratia in the settlement between the Reserve Bank of India and All India Reserve Bank Employees Association is as follows:--

"Notwithstanding anything contained hereinabove, no arrears on the basis of revised pay and allowances agreed upon in this settlement will be payable for the amount of Ex-gratia paid by the bank to the employees who retired under the Optional Early Retirement Scheme."

The relevant clause relating to ex gratia in the Circular dated November 21, 2005 is as follows:--

"Clause 12 - Date of effect and applicability of the revised scales of pay and allowances.

i) Except to the extent it has been indicated specifically otherwise in the foregoing paragraphs and subject to the sub-paragraph (iii) hereunder, the revised scales of pay and allowances as above, for officers will be deemed to have come into effect from 1st November, 2002.

ii) The revised scales of pay and allowances will apply to all full time officers of the bank. The benefit of revision of pay and allowances will also be admissible to the officers who were in service of the bank as on 1st November, 2002 and also those who were on leave preparatory to retirement as on 1st November, 2002 and ceased to be in service thereafter.

iii) Notwithstanding anything contained hereinabove no arrears on the basis of revised pay and allowances, will to be payable for the amount of ex-gratia paid by the bank to the officers who retired under the Optional Early Retirement Scheme."

The Circular dated November 21, 2005 is a product of the settlement and was issued to give effect to the settlement. This fact remains undisputed between the parties.

In Herbertsons Ltd. (supra) the Supreme Court has held that,

"27. It is not possible to scan the settlement in bits and pieces and hold some parts good and acceptable and others bad. Unless it can be demonstrated that the objectionable portion is such that it completely outweighs all the other advantages gained the Court will be slow to hold a settlement as unfair and unjust. The settlement has to be accepted or rejected as a whole and we are unable to reject it as a whole as unfair or unjust...."

In course of arguments, the petitioners have not challenged the settlement. They have not invited the Court to pronounce on the validity or otherwise of the settlement. As rightly pointed out on behalf of the petitioners, none of the petitioners were workers on the date of the settlement having retired prior to the date of settlement and consequently the settlement is not binding upon the petitioners.

Ex gratia is understood to be a favour. It is something which is not legally necessary to be performed. Black''s Law Dictionary (Seventh Edition) has defined ''ex gratia'' and ''ex gratia payment'' as follows:--

"ex gratia - As a favour; not legally necessary. ex gratia payment - A payment not legally required; esp., an insurance payment not required to be made under an insurance policy."

The term ex gratia has been explained in A.K. Bindal & Anr. (supra). It has held that,

"34. This shows that a considerable amount is to be paid to an employee ex gratia besides the terminal benefits in case he opts for voluntary retirement under the Scheme and his option is accepted. The amount is paid not for doing any work or rendering any service. It is paid in lieu of the employee himself leaving the services of the company or the industrial establishment and foregoing all his claims or rights in the same. It is a package deal of give and take. That is why in the business world it is known as "golden handshake". The main purpose of paying this amount is to bring about a complete cessation of the jural relationship between the employer and the employee. After the amount is paid and the employee ceases to be under the employment of the company or the undertaking, he leaves with all his past rights and there is no question of his again agitating for any kind of his past rights with his erstwhile employer including making any claim with regard to enhancement of pay scale for an earlier period. If the employee is still permitted to raise a grievance regarding enhancement of pay scale from a retrospective date, even after he has opted for Voluntary Retirement Scheme and has accepted the amount paid to him, the whole purpose of introducing the Scheme would be totally frustrated."

The concerned scheme provides for payment of ex gratia. The manner in which the quantum of ex gratia is receivable by a person covered by the scheme has been laid down in the scheme. The scheme contemplates that, all employees opting under the scheme would be eligible for ex gratia equal to Pay plus Dearness Allowance for the number of years actual service rendered at 60 days for each completed year to service or part thereof in excess of six months or Pay plus Dearness Allowance for remaining months of service reckoned up to the date on which the employee would retire on superannuation, whichever is less. The scheme also defines Pay plus Dearness Allowance. It states that Pay plus Dearness Allowance would be the pay as defined in Regulation 3(f) of RBI (Staff) Regulations, 1948 admissible to the post held on the date of retirement plus Dearness Allowance admissible thereof on the date of retirement.

Reserve Bank of India had paid all the employees opting for the scheme their entitlements under scheme.

Thereafter, the Reserve Bank of India by the Circular dated November 21, 2005 had increased pay and allowances with effect from November 1, 2002. Such circular also provides that, notwithstanding the increase of the pay and allowances with effect from November 1, 2002 the Reserve Bank of India would not pay any amount on account of ex gratia who had retired under the Optional Early Retirement Scheme.

Reserve Bank of India has paid the persons covered under the scheme the revised pay and allowances. The petitioners have received their entitlements consequent to the revision in the pay and allowances given with the retrospective effect in terms of the Circular dated November 21, 2005.

A binding contract came into being between Reserve Bank of India and the petitioners with the petitioners'' acceptance of the Optional Early Retirement Scheme. Reserve Bank of India became liable to pay the benefits under the scheme to the persons who had opted for the same. Reserve Bank of India did pay the same. The obligations of Reserve Bank of India under the scheme stood discharged prior to the Circular dated November 21, 2005.

By the Circular dated November 21, 2005 the Reserve Bank of India has offered to increase the pay and allowances with effect from November 1, 2005 on the condition that Reserve Bank of India would not pay any increase in the ex gratia. Reserve Bank of India has offered novation of the Optional Early Retirement Scheme on the terms specified in the Circular dated November 21, 2005. It is for the offerees to accept the same or reject it. The Circular dated November 21, 2005 and its terms are a policy decision of Reserve Bank of India. The circular has not been demonstrated to be arbitrary or capricious or such that a Court is required to intervene. The Circular dated November 21, 2005 is a policy decision of the Reserve Bank of India not to grant any other amount on account of ex gratia in view of the retrospective increase in the pay and allowances.

In Krishnan Kakkanth (supra) it has been held that, unless a policy decision is demonstrably capricious, arbitrary and not informed by reasons whatsoever or it suffered from the bias of discrimination or infringes of any statute or provision of a constitution, a policy decision cannot be struck down. Similar view has been expressed in Ram Lubhaya Bagga & Ors. (supra).

In Delhi Development Authority & Anr. (supra) it has been held that, novation of contract cannot be done unilaterally. New terms must be brought to the knowledge of the other party and its acceptance must be obtained. Parties must be ad idem as to the new terms conditions for a valid novation of contract. In this case the Reserve Bank of India is not inviting any of the persons who had opted for the Optional Early Retirement Scheme and retired thereunder for novation of such scheme. If at all Reserve bank of India has offered such persons to accept increase in the pay and allowances with retrospective effect from November 1, 2002 without any corresponding increase in the ex gratia by the Circular dated November 21, 2005. It is for the persons covered by the scheme to accept such offer in its entirety or reject the same. The petitioner cannot accept a part of the Circular dated November 21, 2005 so far as it relates to increase in the pay and allowances concerned and say that it will not accepted the stipulation that there would not be any increase in the payment of ex gratia. The Circular dated November 21, 2005 with all stipulated terms and conditions had to be accepted by the persons covered under the scheme or in its entirety or not at all.

In MGB Gramin Bank (supra) it has been held that, a vested right is a right independent of any contingency and that it could not taken away without consent of the person concerned. Vested right can arise from contract, statute or by operation of law. Unless an accrued or vested right has been derived by a party, policy decision/scheme can be changed.

By the Circular of November 21, 2005 Reserve Bank of India has not taking away any right vested in any of the petitioners under the Optional Early Retirement Scheme. The right to receive ex gratia has not been taken away. The quantum of ex gratia payable under the Optional Early Retirement Scheme prior to the Circular on November 21, 2005 has been paid to the individual persons who had opted for and retired under the scheme. The Circular dated November 21, 2005 says that no further ex gratia would be payable. This statement in the circular does not affect any right that has been vested to any of the petitioners or to any persons covered under the scheme inasmuch as it is not taking away any such right.

In R. Varaprasad & Ors. the Supreme Court has held that it is not for the Court to rewrite a contract. It is also not open to a person who has accepted retirement under a scheme to make any claim contrary to the terms thereof.

In ITI Limited (supra) the Supreme Court has held that if an employee has received the benefits under a scheme whether right or wrong it cannot be reopened and that an employee cannot claim a higher revision in wages retrospectively.

The words ''subject to'' used in Section 14 of the Karnataka Town and Country planning Act, 1961 has been considered in S.N. Chandrashekar & Anr. (supra). It has noticed an earlier pronouncement of the Supreme Court and the meaning attributed to such words as has been defined in the Black''s Law Dictionary. The words ''subject to" has been understood to mean liable, subordinate, subservient, inferior, obedient to; governed or affected by; provided that; provided; answerable for.

In view of the discussions above, the issue raised is answered in the negative, against the petitioners and in favour of the Reserve Bank of India.

In such circumstances, the two petitions are without any merit. W.P. No. 140 of 2007 and W.P. No. 1467 of 2006 are dismissed. No order as to costs.