SC preserve right to pension for SBI employees who took VRS after 15 or more years of service

sc right to pension of sbi

“The basic framework of socialism is to provide security in the fall of life to the working people.” 

The Supreme Court has held that employees of State Bank of India who have taken voluntary retirement as per the 2000 VRS scheme after 15 or more years of service as on the cut-off date are entitled to proportionate pension as per SBI Pension Fund Rules.

The question was whether employees who opted for VRS after putting in pensionable service were entitled to pension as well under the SBI Pension Fund Rules. On December 27, 2000, the Central Board of State Bank of India approved the VRS scheme proposed by the Indian Banks Association, as per which any employee with 15 years of service was eligible. It is relevant to note that as per SBI Pension Fund Rules, an employee was eligible for pension only on completion of 20 years of service.


 In this backdrop, Deputy Managing Director cum CDO of SBI issued a clarification on January 15, 2001 that as per the existing rules, employees who had not completed 20 years of pensionable service were not eligible for pension. 

One Radhey Shyam Pandey, who opted for VRS after 19 years, nine months and 18 days of pensionable service, was denied pension as per Rules on the ground that he had not completed 20 years of service. There were several other employees who were in the same situation as Radhey Shyam Pandey. They approached the High Courts, which ruled in their favour. Challenging the HC verdicts, the SBI came in appeal.

 Action of state instrumentality cannot violate Art 14 

The bench observed that SBI, being an instrumentality of State under Article 12, is bound by the principle of fairness.

 The judgment authored by Justice Arun Mishra stated : 

“The VRS scheme was not floated by the SBI on its own volition. It was pursuant to an exercise that was undertaken by the IBA in view of the recent developments of modern technology considering the age group of the employees in the bank, the need to have a new skill, and to rationalise the manpower; a decision was taken. It was decided at the Government level to provide pension after completion of 15 years 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” 

The bench noted that the clarification issued by the Deputy Manager cannot be regarded as an amendment or modification of scheme.

 It was observed : 

“Once the memorandum containing the IBAs proposal of providing pension was approved in absolute terms, the clarification could not be of any value to dilute the otherwise clear and unambiguous resolution of the Board of Directors. The Deputy General Manager did not have any such wide and arbitrary power to defeat the claim of the employees for pension on completion of 15 years of permanent service, which was their right. The action of D.G.M. could not be said to be in accordance with the resolution. The pension was the essence of the scheme, depriving it could not be said to be authorised, such action can only be termed as unfair and unreasonable and patently violative of Articles 14, 16, and 21 of the Constitution of India”

Bank cannot wriggle out of the obligation 

The Court held that the VRS scheme, once approved by the Board of Directors of SBI, became a contract enforceable by law. 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.

The Court added that even if two interpretations were possible, the interpretation benefiting the employee should be adopted. 

Principle of socialism is to secure working people in the fall of life

The Court observed that pension cannot be denied in an arbitrary and unfair manner, as it was a measure of security for a retired employee during old age. 

The principal aim of the socialist State as envisaged in the Preamble is to eliminate inequality, the Court added. 

It observed :

“The basic framework of socialism is to provide security in the fall of life to the working people and especially provides security from the cradle to the grave when employees have rendered service in heydays of life, they cannot be destituted in old age, by taking action in an arbitrary manner and for omission to complete obligation assured one”. 

In conclusion, the Court said :

 “we are of the opinion that the employees who completed 15 years of service or more as on cutoff date were entitled to proportionate pension under SBI VRS to be computed as per SBI Pension Fund Rules. Let the benefits be extended to all such similar employees retired under VRS on completion of 15 years of service without requiring them to rush to the court.”

 The Court, however, chose not to burden the bank with interest. The order has to be complied with and arrears be paid within three months, failing which amount to carry interest at the rate of 6 per cent per annum from the date of the order.