Supreme Court Upholds Voluntary Retirement Rights: Indian Bank vs. Mahaveer Khariwal (2021)

Date of the Judgment: 22 January 2021
Citation: 2021 INSC 29
Judges: Ashok Bhushan, J., R. Subhash Reddy, J., M.R. Shah, J.
Can an employer reject a voluntary retirement application without proper justification, especially when an employee requests a waiver of the notice period? The Supreme Court of India addressed this question in a recent case involving Indian Bank and one of its employees. The court examined the validity of the bank’s decision to reject the employee’s voluntary retirement request and the applicability of certain pension regulations. The judgment was delivered by a three-judge bench comprising Justices Ashok Bhushan, R. Subhash Reddy, and M.R. Shah, with the opinion authored by Justice M.R. Shah.

Case Background

The respondent, Mahaveer Khariwal, was an employee of Indian Bank, holding the position of Chief Manager SMG-IV. In March 1998, he was transferred to the Colombo Branch of the bank. Subsequently, on May 13, 2003, he was transferred to the Defence Colony Branch in New Delhi. Khariwal applied for leave to visit London, which was initially granted, but his subsequent request for extension was denied, and he was directed to report to the Defence Colony Branch. On January 21, 2004, Khariwal submitted an application for voluntary retirement, requesting a waiver of the three-month notice period required under the Indian Bank Employees Pension Regulations, 1995, and offering to have his salary for the notice period deducted from his retirement dues. The bank rejected his application on April 20, 2004, stating he was ineligible under the Pension Regulations.

Timeline:

Course of Proceedings

Khariwal filed a writ petition in the High Court of Delhi challenging the rejection of his voluntary retirement application. The learned Single Judge dismissed the petition, but a Division Bench of the High Court allowed Khariwal’s appeal, setting aside the bank’s rejection and directing the bank to release Khariwal’s retirement dues. The bank then appealed to the Supreme Court.

Legal Framework

The case revolves around the interpretation of Regulation 29 of the Indian Bank Employees Pension Regulations, 1995, which governs voluntary retirement. The relevant portions of Regulation 29 are as follows:

“29. Pension on Voluntary Retirement:
(1) On or after the first day of November, 1993, at any time after an employee has completed twenty years of qualifying service he may, by giving notice of not less than three months in writing to the appointing authority retire from service:
Provided that this sub-regulation shall not apply to an employee who is on deputation or on study leave on abroad unless after having been transferred or having returned to India he has resumed charge of the post in India and has served for a period of not less than one year:
(2) The notice of Voluntary retirement given under sub-regulation (1) shall require acceptance by the appointing authority:
Provided that where the appointing authority does not refuse to grant the permission for retirement before the expiry of the period specified in the said notice, the retirement shall become effective from the date of expiry of the said period.
(3)(a) An employee referred to in sub-regulation (1) may make a request in writing to the appointing authority to accept notice of Voluntary Retirement of less than three months giving reasons thereof;
(b) On receipt of a request under clause (a), the appointing authority may, subject to the provisions of sub-regulation (2), consider such request for the curtailment of the period of the notice of three months on merits and if it is satisfied that the curtailment of the period of notice will not cause any administrative inconvenience, the appointing authority may relax the requirement of notice of three months on the condition that the employee shall not apply for Commutation of a part of the pension before the expiry of the notice of three months.”

Arguments

Arguments by the Employer (Indian Bank):

• The High Court misinterpreted Regulation 29 of the Pension Regulations, 1995.
• Voluntary retirement requires the employer’s acceptance, and the bank rejected the application within three months.
• The decision to reject was made within three months, which is the relevant factor, not when the decision was served.
• The employee did not give the mandatory three-month notice, making his application defective.
• The employee’s offer to surrender three months’ salary was not a valid application for waiver of the notice period.
• The employee was on deputation in Colombo, and under Regulation 29(1), he was ineligible for voluntary retirement without serving one year after returning to India.
• Departmental proceedings were initiated against the employee for unauthorized absence, and he was compulsorily retired.

Arguments by the Employee (Mahaveer Khariwal):

• The High Court correctly interpreted Regulation 29 and rightly set aside the rejection of the voluntary retirement application.
• The employee was on transfer, not deputation, to Colombo, thus the one-year service requirement was not applicable.
• The rejection of the voluntary retirement application was not legal and proper under Regulation 29.
• The key issue is the legality of the rejection, not the date of service of the decision.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the rejection of the employee’s request for voluntary retirement vide communication dated 20.04.2004 was legal and in consonance with Regulation 29 of the Pension Regulations, 1995.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The court considered the following legal provisions:

• Regulation 29 of the Indian Bank Employees Pension Regulations, 1995: This regulation outlines the conditions for voluntary retirement, including the notice period and the requirement for acceptance by the appointing authority.

Authorities

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Regulation 29 of the Indian Bank Employees Pension Regulations, 1995: The Court interpreted and applied this regulation to determine the validity of the bank’s rejection. The court emphasized that the bank was required to consider the request for waiver of the three-month notice period on its merits, as per Sub-Regulation 3(b), and that the rejection was bad in law because it did not do so.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The bank’s failure to consider the employee’s request for a waiver of the three-month notice period as per Regulation 29(3)(b) of the Pension Regulations. The court noted that the bank did not provide any specific reasons for rejecting the waiver request and did not assess whether the curtailment of the notice period would cause administrative inconvenience.
• The court determined that the employee was on transfer, not deputation, to the Colombo branch. This finding made the proviso to Regulation 29(1), which requires one year of service after returning from deputation, inapplicable to the employee’s case.
• The court emphasized that the rejection of the voluntary retirement application was not based on valid grounds and was in violation of Regulation 29.
• The court also noted that the rejection of the application was on the 90th day, the last day of the three-month period, indicating a lack of proper consideration.

Fact:Law

Logical Reasoning:

The court rejected the bank’s argument that the decision was taken within the three-month period. The court emphasized that the rejection was in violation of Regulation 29 because the bank did not consider the request for waiver of the notice period on merits and the employee was on transfer and not deputation.

The court also held that once the voluntary retirement was deemed valid, all subsequent departmental proceedings initiated against the employee were null and void, as the employer-employee relationship ceased upon the acceptance of voluntary retirement.

The Supreme Court quoted the following from the judgment:

“In the present case, the application of the employee submitting the voluntary retirement application with a request for curtailment of notice of three months was absolutely in consonance with Regulation 29.”

“The request made by the employee for curtailment of the period of notice of three months was required to be considered by the appointing authority on merits and only in a case where it is found that the curtailment of the period of notice may cause any administrative inconvenience, the request for curtailment of the period of three months’ notice can be rejected.”

“Therefore, as rightly held by the Division Bench of the High Court, the application for voluntary retirement was absolutely in consonance with Regulation 29 and that the rejection was bad in law and contrary to Regulation 29.”

Key Takeaways

• Employers must properly consider requests for waiver of notice periods in voluntary retirement applications, as per the applicable regulations.
• Rejections of voluntary retirement applications must be based on valid reasons and must comply with the relevant regulations.
• The distinction between deputation and transfer is crucial in determining the applicability of certain service rules.
• Once a voluntary retirement is deemed valid, subsequent departmental proceedings are null and void.

Directions

The Supreme Court directed the employer-bank to release the retiral dues of the employee in accordance with the Pension Regulations, 1995.

Development of Law

The ratio decidendi of this case is that an employer cannot reject a voluntary retirement application without properly considering a request for waiver of the notice period, as required by the applicable regulations. The court clarified that the rejection of the application was illegal and contrary to Regulation 29 of the Indian Bank Employees Pension Regulations, 1995, as the bank did not consider the waiver request on its merits. The court further clarified that the one-year service requirement after returning from abroad applies only to employees on deputation and not to those on transfer.

Conclusion

The Supreme Court dismissed the appeal by Indian Bank, upholding the High Court’s decision. The court emphasized that the bank’s rejection of the employee’s voluntary retirement application was illegal and not in accordance with the Pension Regulations. This judgment reinforces the importance of adhering to procedural fairness and the need for employers to consider waiver requests on merits in voluntary retirement cases.