Supreme Court Upholds Exclusion of Notional Service Benefit in Special Voluntary Retirement Scheme: National Insurance Special Voluntary Retired/Retired Employees Association vs. United India Insurance Co. Ltd. (26 October 2018)

Introduction

Date of the Judgment: 26 October 2018

Citation: 2018 INSC 953

Judges: Kurian Joseph, J., Sanjay Kishan Kaul, J. (authored the judgment)

Can a special voluntary retirement scheme (SVRS) be interpreted to include benefits from a separate pension scheme, even when the SVRS explicitly excludes them? The Supreme Court of India addressed this question in a dispute between retired employees of insurance companies and their former employers. The core issue was whether employees who opted for the SVRS in 2004 were entitled to an additional five years of notional service for pension calculation, a benefit provided under the 1995 Pension Scheme but specifically excluded in the SVRS. The Supreme Court, in this case, clarified that the terms of the SVRS must be strictly adhered to, thereby denying the additional benefit.

Case Background

The dispute arose from the differing interpretations of two schemes: The General Insurance (Employees) Pension Scheme, 1995 (1995 Scheme), and the General Insurance Employees’ Special Voluntary Retirement Scheme, 2004 (SVRS-2004 Scheme). The 1995 Scheme, introduced to provide pension benefits to employees of the respondent insurance companies, included a provision that allowed for an increase in qualifying service by up to five years for employees retiring voluntarily, subject to certain conditions. This scheme was notified on 28 June 1995, but was brought into force from 1 November 1993.

In 2004, the insurance companies, facing excess manpower, introduced the SVRS-2004 Scheme for a limited period of 60 days from 1 January 2004. This scheme was applicable to permanent, full-time employees who had attained the age of 40 years and completed a minimum qualifying service of ten years. The SVRS-2004 Scheme offered an ex-gratia payment and other benefits, but it explicitly stated that the additional notional benefit of five years of added service, as stipulated in para 30 of the 1995 Scheme, would not be admissible for the purpose of determining the quantum of pension and commutation of pension for those who opted for retirement under the SVRS-2004 Scheme.

The appellants, former employees who had availed of the SVRS-2004 Scheme, sought the benefit of the additional five years of notional service for the calculation of their pension, despite the explicit exclusion in the SVRS-2004 Scheme. This demand was rejected by the insurance companies, leading to the present litigation.

Timeline

Course of Proceedings

Initially, the employees who availed of the SVRS-2004 Scheme sought to take advantage of the revision of pay-scales, as provided for under the notification dated 21.12.2005, which had retrospective effect from 1.8.2002. This benefit was denied by the insurance companies. The employees then filed a review application, which was dismissed. Subsequently, the insurance companies made an attempt to clarify that the observations made in the previous judgment regarding the five years of additional service were factually incorrect. This application was not listed by the Registrar. The beneficiaries then filed a Miscellaneous Application which was later withdrawn.

The matter then went to the High Court. The learned Single Judge opined that the benefit of additional five years’ service, as per the 1995 Scheme, was admissible despite the clear terms of clause 6(1)(c) of the SVRS-2004 Scheme. The learned Single Judge also opined 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.

However, the learned Division Bench of the High Court, on appeal, opined to the contrary and dismissed the original writ petition filed by the appellants. This judgment of the Division Bench was then assailed before the Supreme Court.

Legal Framework

The core legal framework of this case revolves around two schemes:

✓ The General Insurance (Employees) Pension Scheme, 1995: This scheme introduced pension benefits for employees of the 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 allows for an increase in the qualifying service of an employee by up to five years for those who retire voluntarily under the 1995 scheme, subject to certain conditions.

✓ The General Insurance Employees’ Special Voluntary Retirement Scheme, 2004: 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 service, as provided under the 1995 Scheme, for those who opt for retirement under the SVRS-2004 Scheme.

The SVRS-2004 Scheme was introduced under Section 17-A of the General Insurance Business (Nationalisation) Act, 1972, giving it a statutory character.

Arguments

Arguments of the Appellants (Employees):

• The appellants argued that the judgment in Manojbhai N. Shah & Ors. v. Union of India & Ors. (2015) 4 SCC 482, amounted to a concession on the part of the insurance companies. The appellants contended that this concession resulted in a finding that the insurance companies were bound to give the benefit of additional five years’ service, as per the 1995 Scheme, even to those persons who had opted for voluntary retirement under the SVRS- 2004 Scheme.
• The appellants contended that the financial impact of granting the additional benefit would not be significant, as it would be in the range of Rs.388 to Rs.1477 per beneficiary per month.
• The appellants relied on the judgment of the Supreme Court in State of Maharashtra v. Ramdas Shrinivas Nayak & Anr. (1982) 2 SCC 463, to argue that the court should not inquire into what transpired in the High Court, and that statements of fact recorded in the judgment of the court are conclusive.

Arguments of the Respondents (Insurance Companies):

• The insurance companies argued that the SVRS-2004 Scheme is statutory in character, being a scheme under Section 17-A of the General Insurance Business (Nationalisation) Act, 1972 and that its terms must be strictly adhered to. They contended that there could be no concession contrary to the terms of the scheme.
• The respondents argued that the observations made in the judgment in Manojbhai N. Shah & Ors. (2015) 4 SCC 482, regarding the five years of additional service, were obiter in nature and factually contrary to the scheme. They also argued that the review application filed by the beneficiaries was dismissed, which shows that the fact of the five years of additional service was not important for the final conclusion that the salary revision was not applicable to those who had already retired.
• The insurance companies relied on the judgment in Tripura Goods Transport Association & Anr. v. Commissioner of Taxes & Ors. (1998) 2 SCC 264, to argue that there could be no concession against the law. They also cited New India Assurance Company Limited v. Raghuvir Singh Narang & Anr. (2010) 5 SCC 335, to support their plea that if there is a scheme with a statutory character, then there could not be any contention which could be permissibly raised, contrary to the scheme.
• The respondents emphasized that the earlier judgments in 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, support the conclusion that the terms of such schemes must be strictly followed and that the contract cannot be varied.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

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 as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Cases:

• Manojbhai N. Shah & Ors. v. Union of India & Ors. (2015) 4 SCC 482 – Supreme Court of India: This case was referred to by the appellants to argue that there was a concession on the part of the insurance companies regarding the additional five years of service. The Supreme Court, however, clarified that the observations made in this judgment were obiter and did not amount to a grant of relief contrary to the terms of the SVRS-2004 Scheme.
• State of Maharashtra v. Ramdas Shrinivas Nayak & Anr. (1982) 2 SCC 463 – Supreme Court of India: This case was referred to by the appellants to argue that the court should not inquire into what transpired in the High Court, and that statements of fact recorded in the judgment of the court are conclusive. The Supreme Court noted that while this principle is generally correct, it does not apply in cases where a concession was made on a wrong appreciation of the law.
• Y. Sleebachen & Ors. v. State of Tamil Nadu through Superintending Engineer Water Resources Organisation/Public Works Department &Anr. (2015) 5 SCC 747 – Supreme Court of India: This case was cited to reiterate the principle that statements of fact recorded in a judgment are conclusive.
• Tripura Goods Transport Association & Anr. v. Commissioner of Taxes & Ors. (1998) 2 SCC 264 – Supreme Court of India: This case was cited to support the argument that there could be no concession against the law.
• New India Assurance Company Limited v. Raghuvir Singh Narang & Anr. (2010) 5 SCC 335 – Supreme Court of India: This case was referred to by the insurance companies to argue that if there is a scheme with a statutory character, then there could not be any contention which could be permissibly raised, contrary to the scheme.
• Bank of India & Ors. v. O.P . Swarnakar & Ors. (2003) 2 SCC 721 – Supreme Court of India: This case was cited to support the conclusion that the terms of voluntary retirement schemes must be strictly followed.
• HEC Voluntary Retired Employees Welfare Society & Anr. v. Heavy Engineering Corporation Ltd. &Ors. (2006) 3 SCC 708 – Supreme Court of India: This case was also cited to support the conclusion that the terms of voluntary retirement schemes must be strictly followed and that the contract cannot be varied.

Legal Provisions:

• Section 17-A of the General Insurance Business (Nationalisation) Act, 1972: This provision provides the statutory basis for the SVRS-2004 Scheme.
• Paragraph 30(5) of The General Insurance (Employees) Pension Scheme, 1995: This provision allows for an increase in the qualifying service of an employee by up to five years for those who retire voluntarily under the 1995 scheme, subject to certain conditions.
• Clause 6(1)(c) of the General Insurance Employees’ Special Voluntary Retirement Scheme, 2004: This clause explicitly excludes the additional notional benefit of five years of service, as provided under the 1995 Scheme, for those who opt for retirement under the SVRS-2004 Scheme.

Judgment

The Supreme Court held that the beneficiaries of the SVRS-2004 Scheme were not entitled to the additional five years of notional service for pension calculation. The Court emphasized that the SVRS-2004 Scheme is statutory in nature and its terms must be strictly adhered to. The explicit exclusion of the additional five years’ service benefit in the SVRS-2004 Scheme could not be overridden by any perceived concession or interpretation.

The Court clarified that the observations made in the judgment in Manojbhai N. Shah & Ors. (2015) 4 SCC 482, regarding the five years of additional service, were obiter in nature and did not amount to a grant of relief contrary to the terms of the SVRS-2004 Scheme. The Court also noted that the review application filed by the beneficiaries was dismissed, which shows that the fact of the five years of additional service was not important for the final conclusion that the salary revision was not applicable to those who had already retired.

The Court also stated that the terms of voluntary retirement schemes must be strictly followed and that the contract cannot be varied. The Court emphasized that what is offered by the employer is a package as contained in the schemes of voluntary retirement, and that alone would be admissible.

The Court also clarified that the words “whichever is less” have not been excluded from clause 5 of the SVRS-2004 Scheme, as had been opined by the Division Bench. The Court clarified that what is binding between the parties is the statutory scheme itself, as per its terms.

How each authority was viewed by the Court?

• Manojbhai N. Shah & Ors. [2015] 4 SCC 482: The Court clarified that the observations made in this case were obiter and did not create any right contrary to the explicit terms of the SVRS-2004 Scheme.
• State of Maharashtra v. Ramdas Shrinivas Nayak & Anr. [1982] 2 SCC 463: The Court acknowledged the principle of conclusiveness of statements in judgments, but noted that it does not apply in cases where a concession was made on a wrong appreciation of the law.
• Y. Sleebachen & Ors. v. State of Tamil Nadu through Superintending Engineer Water Resources Organisation/Public Works Department &Anr. [2015] 5 SCC 747: The Court reiterated the principle that statements of fact recorded in a judgment are conclusive.
• Tripura Goods Transport Association & Anr. v. Commissioner of Taxes & Ors. [1998] 2 SCC 264: The Court relied on this case to support the principle 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 relied on this case to support the principle that statutory schemes must be strictly adhered to.
• Bank of India & Ors. v. O.P . Swarnakar & Ors. [2003] 2 SCC 721: The Court relied on this case to support the conclusion that the terms of voluntary retirement schemes must be strictly followed.
• HEC Voluntary Retired Employees Welfare Society & Anr. v. Heavy Engineering Corporation Ltd. &Ors. [2006] 3 SCC 708: The Court relied on this case to support the conclusion that the terms of voluntary retirement schemes must be strictly followed and that the contract 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 benefit of additional five years of service for pension calculation. The Court emphasized the statutory nature of the scheme and the need to adhere strictly to its provisions. The Court also considered the fact that the employees had availed of the benefits under the SVRS-2004 Scheme with their eyes open, and therefore, could not seek additional benefits from other schemes.

The Court’s reasoning was heavily based on the legal interpretation of the schemes and the principle that statutory schemes must be strictly adhered to. There was less emphasis on the factual aspects of the case, such as the financial implications for the employees.

Logical Reasoning:

The Court did not consider any alternative interpretations. The Court’s reasoning was clear and straightforward: the explicit terms of the SVRS-2004 Scheme must be upheld. The Court rejected the argument that a previous judgment had created a right to the additional benefit, stating that the observations made in that judgment were obiter and did not amount to a grant of relief contrary to the terms of the SVRS-2004 Scheme.

The Court’s decision was based on the principle that statutory schemes must be strictly adhered to and that employees who avail of the benefits of such schemes with their eyes open cannot later seek additional benefits from other schemes. The Court also emphasized that there can be no concession against the law.

The Court quoted the following from the judgment:

“It has to be appreciated that the SVRS-2004 Scheme is statutory in character, being a Scheme under Section 17-A of the General Insurance Business (Nationalisation) Act, 1972. It would not be appropriate to add or subtract terms from the Scheme, which has a statutory flavour.”

“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. What is offered by the employer is a package as contained in the Schemes of voluntary retirement, and that alone would be admissible.”

“It is, thus, abundantly clear that nothing more would be given than what is stated in the Scheme, and for that matter, nothing less. If the employees avail of the benefit of such a Scheme with their eyes open, they cannot look here and there, under different schemes, to see what other benefits can be achieved by them, by seeking to take advantage of the more beneficial schemes, while simultaneously enjoying the more beneficial aspects of the SVRS-2004 Scheme.”

There was no minority opinion in this case.

Key Takeaways

• Employees who opt for a Special Voluntary Retirement Scheme (SVRS) are bound by the terms of that scheme. They cannot claim benefits from other schemes that are explicitlyexcluded in the SVRS.
• Statutory schemes, such as the SVRS-2004 Scheme, must be strictly adhered to. Their terms cannot be altered or interpreted to include benefits not explicitly provided.
• The principle of strict interpretation of statutory schemes ensures that the intentions of the scheme are upheld and that the financial implications are predictable.
• A concession made on a wrong appreciation of the law does not bind the parties.
• The terms of voluntary retirement schemes must be strictly followed and that the contract cannot be varied.
• What is offered by the employer is a package as contained in the schemes of voluntary retirement, and that alone would be admissible.
• Employees who avail of the benefit of such a Scheme with their eyes open, cannot seek to take advantage of the more beneficial schemes, while simultaneously enjoying the more beneficial aspects of the voluntary retirement scheme.

Conclusion

The Supreme Court’s judgment in National Insurance Special Voluntary Retired/Retired Employees Association vs. United India Insurance Co. Ltd. emphasizes the importance of adhering to the explicit terms of statutory schemes, particularly in the context of voluntary retirement. The decision clarifies that employees who opt for a specific scheme cannot claim benefits from other schemes that are explicitly excluded. This judgment has significant implications for employers and employees alike, highlighting the need for clear and unambiguous terms in voluntary retirement schemes and the binding nature of statutory provisions. The Court’s decision underscores the principle that there can be no concession against the law and that the terms of voluntary retirement schemes must be strictly followed. The judgment also clarifies that the observations made in the earlier judgment of Manojbhai N. Shah & Ors. (2015) 4 SCC 482, were obiter in nature and did not create any right contrary to the explicit terms of the SVRS-2004 Scheme.