Supreme Court settles the exclusion of additional service benefits in voluntary retirement schemes: National Insurance Special Voluntary Retired/Retired Employees Association & Anr. vs. United India Insurance Co. Ltd. & Anr. (26 October 2018)

Date of the Judgment: 26 October 2018
Citation: 2018 INSC 944
Judges: Kurian Joseph, J., Sanjay Kishan Kaul, J.
Can employees who opt for a special voluntary retirement scheme (SVRS) claim additional benefits from a previous pension scheme, despite explicit exclusions in the SVRS? The Supreme Court of India recently addressed this question, clarifying the binding nature of the terms of a voluntary retirement scheme. The court held that employees who chose to retire under the Special Voluntary Retirement Scheme of 2004 (SVRS-2004) were not entitled to the additional service benefits of five years as stipulated in the General Insurance (Employees) Pension Scheme, 1995, as the SVRS-2004 scheme explicitly excluded this benefit.

Case Background

The case involves ex-employees of respondent Insurance Companies who had initially joined as Assistants between 1972 and 1980. These employees opted for retirement under the General Insurance Employees’ Special Voluntary Retirement Scheme, 2004 (SVRS-2004 Scheme). The core dispute arose from the employees’ claim for additional benefits under the earlier General Insurance (Employees) Pension Scheme, 1995 (1995 Scheme). Specifically, the 1995 Scheme allowed for an increase in qualifying service by up to five years for employees retiring voluntarily, subject to certain conditions. The employees contended that they were entitled to this benefit despite the explicit terms of the SVRS-2004 Scheme.

Timeline

Course of Proceedings

Initially, the employees sought to avail the benefit of revised pay scales from 21.12.2005, which had a retrospective effect from 1.8.2002. This was denied by the insurance company as the employees had ceased to be employees of the company as they had opted for voluntary retirement under the SVRS-2004 Scheme. The Supreme Court in Manojbhai N. Shah & Ors. v. Union of India & Ors. (2015) 4 SCC 482, ruled against the employees, stating that retrospective pay revisions are only for those in service or those who retired under normal circumstances. The employees then sought a review of the judgment, claiming that the court had incorrectly recorded that the employees were given the benefit of five years of extra service for calculation of pension. The review petition was dismissed. Subsequently, the insurance companies attempted to clarify that the observations regarding the five-year benefit were obiter and factually incorrect. This was also not listed by the Registrar. The employees then filed a Miscellaneous Application which was later withdrawn. The matter was then examined by a Single Judge of the High Court, who ruled in favor of the employees, stating that they were entitled to the additional five years of service, despite the clear terms of the SVRS-2004 scheme. The Division Bench of the High Court reversed this decision, which led to the current appeal before the Supreme Court.

Legal Framework

The core legal framework revolves around two schemes:

• The General Insurance (Employees) Pension Scheme, 1995 (1995 Scheme): This scheme introduced the concept of pension for employees of the respondent Insurance Companies. Paragraph 30(5) of the 1995 Scheme states:
  
  “(5) The qualifying service of an employee retiring voluntarily under this paragraph shall be increased by a period not exceeding five years, subject to the condition that the total qualifying service rendered by such employee shall not in any case exceed thirty three years and it does not take him beyond the date of retirement.”
  
  This provision allowed for an additional notional benefit of up to five years of service for employees retiring voluntarily under this scheme.
• The General Insurance Employees’ Special Voluntary Retirement Scheme, 2004 (SVRS-2004 Scheme): This scheme was introduced to reduce excess manpower. Clause 6(1)(c) of the SVRS-2004 Scheme states:
  
  “Pension (including commuted value of pension) as per General Insurance (Employees’) Pension Scheme, 1995, if eligible. However, the additional notional benefit of five years of added service as stipulated in para 30 of the said pension scheme shall not be admissible for the purpose of determining the quantum of pension and commutation of pension;”
  
  This clause explicitly excludes the additional notional benefit of five years of added service for employees retiring under the SVRS-2004 Scheme.

The SVRS-2004 Scheme is a statutory scheme under Section 17-A of the General Insurance Business (Nationalisation) Act, 1972.

Arguments

Arguments of the Appellants (Ex-Employees):

• The appellants contended that the judgment in Manojbhai N. Shah & Ors. v. Union of India & Ors. (2015) 4 SCC 482 amounted to a concession by the insurance companies, wherein it was recorded that the employees retiring under the SVRS-2004 Scheme would get the benefit of five additional years of service for pension calculation.
• They argued that the insurance companies were bound by this concession, despite the specific exclusion in clause 6(1)(c) of the SVRS-2004 Scheme.
• The appellants submitted that the financial impact of granting the additional benefit would not be substantial, ranging from Rs. 388 to Rs. 1477 per beneficiary per month.
• They argued that since clause 6(1)(c) of the SVRS-2004 Scheme did not specifically exclude the benefits under para 30(5) of the 1995 Scheme, there was no reason to deny the same to the beneficiaries of the SVRS-2004 Scheme.

Arguments of the Respondents (Insurance Companies):

• The insurance companies argued that the SVRS-2004 Scheme is statutory in character and its terms must be strictly adhered to.
• They contended that clause 6(1)(c) of the SVRS-2004 Scheme explicitly excludes the benefit of additional five years of service for pension calculation.
• They submitted that there could be no concession against the law and the terms of the scheme.
• The insurance companies argued that the observations in Manojbhai N. Shah & Ors. v. Union of India & Ors. (2015) 4 SCC 482 regarding the five-year benefit were obiter and not part of the main issue in that case.
• They emphasized that the SVRS-2004 Scheme provided a package of benefits, and employees could not seek additional benefits from other schemes.

Issues Framed by the Supreme Court

The core issue before the Supreme Court was:

1. Whether the beneficiaries under the SVRS-2004 Scheme, which specifically excludes the benefit of additional five years’ service of the 1995 Scheme, would still be entitled to claim the said amount contrary to the explicit terms.

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issue:

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court held that the employees who opted for retirement under the SVRS-2004 Scheme were not entitled to the additional five years of service benefit as stipulated in the 1995 Scheme. The court emphasized that the SVRS-2004 Scheme is statutory in character and its terms must be strictly adhered to. The court also clarified that the observations made in the earlier judgment of Manojbhai N. Shah & Ors. v. Union of India & Ors. (2015) 4 SCC 482 regarding the five-year benefit were obiter and not part of the main issue in that case.

How each authority was viewed by the Court?

• Manojbhai N. Shah & Ors. v. Union of India & Ors. (2015) 4 SCC 482: The court clarified that the observations regarding the five-year benefit were obiter and not part of the main issue.
• State of Maharashtra v. Ramdas Shrinivas Nayak & Anr. (1982) 2 SCC 463: The court used this to emphasize that judicial records are unquestionable, but a party may resile from a concession made on a wrong appreciation of the law.
• Tripura Goods Transport Association & Anr. v. Commissioner of Taxes &Ors. (1998) 2 SCC 264: The court used this to support that there could be no concession against the law.
• New India Assurance Company Limited v. Raghuvir Singh Narang & Anr. (2010) 5 SCC 335: The court used this to highlight that if a scheme has a statutory character, no contentions can be raised contrary to the scheme.
• Bank of India & Ors. v. O.P . Swarnakar & Ors. (2003) 2 SCC 721 and HEC Voluntary Retired Employees Welfare Society & Anr. v. Heavy Engineering Corporation Ltd. &Ors. (2006) 3 SCC 708: The court referred to these cases to emphasize that the terms of voluntary retirement schemes must be strictly followed and cannot be varied.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the explicit terms of the SVRS-2004 Scheme, which clearly excluded the additional five years of service benefit. The court emphasized the statutory nature of the scheme and the need to adhere strictly to its provisions. The court also clarified that the observations in the previous judgment were not binding and that there could be no concession against the law.

Fact:Law Ratio

The court’s reasoning was heavily based on the legal interpretation of the schemes and the statutory framework, with a lesser emphasis on the factual aspects of the case.

Logical Reasoning:

The court’s reasoning followed a logical progression, starting with the core issue, considering the statutory nature of the scheme, the explicit exclusion clause, and the nature of the previous judgment’s observations. This led to the final conclusion that the employees were not entitled to the additional benefit.

The Supreme Court rejected the argument that the previous judgment amounted to a concession, stating that the observations were obiter. The court also rejected the argument that the absence of specific exclusion in clause 6(1)(c) meant the benefit was applicable. The court emphasized the need to adhere strictly to the terms of the statutory scheme.

The decision was unanimous, with both judges concurring in the judgment.

“It would not be appropriate to add or subtract terms from the Scheme, which has a statutory flavour.”

“The intent of the SVRS-2004 Scheme was made even more explicitly clear by clause 8 specifying the general conditions in sub-clause(xiv)”

“We have, thus, no hesitation in coming to the conclusion that statutory or contractual, such voluntary retirement schemes as the SVRS-2004 Scheme have to be strictly adhered to, and the very objective of having such Schemes would be defeated, if parts of other Schemes are sought to be imported into such voluntary retirement schemes.”

Key Takeaways

• Voluntary retirement schemes, whether statutory or contractual, must be strictly adhered to.
• Employees cannot claim benefits from other schemes that are explicitly excluded in the voluntary retirement scheme they opt for.
• Observations made in a judgment that are not part of the main issue (obiter dicta) are not binding.
• There can be no concession against the law.
• The terms of a statutory scheme cannot be altered or varied by judicial interpretation.

Directions

The Supreme Court did not issue any specific directions in this case.

Development of Law

The ratio decidendi of this case is that the terms of a voluntary retirement scheme, particularly a statutory one, must be strictly followed, and employees cannot claim benefits that are explicitly excluded. This decision reinforces the principle that contractual and statutory schemes must be interpreted according to their explicit terms, and that obiter dicta in previous judgments are not binding. There is no change in the previous positions of law, rather it reinforces the existing position.

Conclusion

The Supreme Court upheld the decision of the Division Bench of the High Court, ruling that employees who opted for the SVRS-2004 Scheme were not entitled to the additional service benefit of five years under the 1995 Scheme. The court emphasized the binding nature of the terms of the SVRS-2004 Scheme and clarified that observations in a previous judgment were not binding. This decision reinforces the principle that voluntary retirement schemes must be strictly adhered to and that employees cannot claim benefits that are explicitly excluded.