Employees under the Voluntary Retirement Scheme (VRS) are not entitled to claim benefits of subsequent revision in pay-scales on the pension received by them: SC

The Industrial Finance Corporation of India Ltd. (IFCI) is a Government of India Undertaking and a Non-Banking Financial Company, primarily engaged in corporate lending. IFCI introduced Voluntary Retirement Schemes (VRS) from time to time in order to reduce surplus staff. A group of 31 employees (respondents) availed these benefits in the year 2008 (VRS 2008) and were relieved from duty on 25th February 2008. These employees had also signed an undertaking, agreeing that they would not have further claims or rights against the IFCI, except for payment of benefits under the Scheme.

In November 2013, IFCI came under the active control of the Government of India and, sought to align its policies in accordance with the practices in Public Sector Undertakings (PSUs). Thus, IFCI modified its pay structure and decided to follow the (Reserve Bank of India) RBI structure in the matter of pay-scales for serving employees of the IFCI. The IFCI also categorically affirmed that though this scale had come into being in the RBI in 2007, its benefits were available only prospectively, from 1st November 2013, and there were no arrears paid to the existing employees.

The respondents sent a letter to the CEO of IFCI (appellant), requesting for the benefit of such pay revisions. IFCI rejected the representation. A writ petition was filed before the Delhi High Court, seeking revision of the pay-scales. The Delhi Court rejected the writ petition.

The respondents appealed to the Supreme Court of India stating that since the revised pay-scales were made applicable from 2007, when the respondents were still in service, the same ought to be applied to them.

The issue before the Supreme Court was whether these employees would be entitled to an enhanced pension on the basis of subsequent revision of pay-scales, which was given retrospective effect, with effect from the time period when the respondents were still employees of the IFCI.

A Supreme Court bench of Justices Sanjay Kishan Kaul and K.M. Joseph held that employees who have availed benefits under a Voluntary Retirement Scheme (VRS) on leaving the organization on their own will are not entitled to claim benefits of subsequent revision in pay-scales on the pension received by them.

The Court ruled that clauses of the scheme under which voluntary retirement has been taken and the terms of the scheme must be strictly followed. The very rationale of introducing a scheme for voluntary retirement is to reduce surplus staff and to bring in financial efficiency. It is referred to as the ‘Golden Handshake’. Ex gratia amounts are paid, in lieu of employees leaving services of the company and foregoing any further claims or rights in the same. It is optional, not compulsory.

The Supreme Court further held that anyone availing of a VRS does so with his eyes wide open. On having availed of the benefits under the scheme, if there are future changes, which may give any of the monetary benefits, the same cannot be read into the scheme. This would defeat the very purpose of having a VRS, i.e., to bring in financial efficiency, as it would not be possible that despite having paid the amounts, the organization can be lumped with further financial liability arising from re-thoughts by such persons, who have already availed of the VRS.

The Apex Court also ruled that the Pension Regulations and the VRS have to be read harmoniously and, in the context of its inclusion, along with the other terms of the VRS. As mentioned in the Pension Regulations, the date of retirement includes the date on which the employee voluntarily retires, but that would mean that the concerned employee would be deemed to have retired on the date he terminates his relationship with the IFCI.

Further, in the Court’s view, the respondents could not claim parity with employees who had retired after full length of service and did not terminate their relationship. The Court thus concluded that since the tenure of the respondents was terminated by mutual consent before it would have reached the end on superannuation, granting of benefits of pay revision retrospectively, and that to be taken into account for grant of future pension would be a bounty which cannot be given to the respondents.

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