HEC VOLUNTARY RETD. EMPS WELFARE SOC. AND ANR. versus HEAVY ENGINEERING CORPORATION LTD. AND ORS.

Citation: [2006] 2 S.C.R. 678 · Decided: 24-02-2006 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
HEC VOLUNTARY RETD. EMPS WELFARE SOC. AND ANR. 
i 
v. 
HEAVY ENGINEERING CORPORATION LTD. AND ORS. 
FEBRUARY 24, 2006 
B 
fS.B. SINHA AND DAL VEER BHANDARI, JJ.] 
Service Law: 
,. 
• 
c 
Voluntary Retirement Scheme --Sick company floated a scheme for 
voluntary retirement of its employees in the year 1987 which remained in 
force up to 1990- -On 22.10.1990 a revised Voluntary Retirement Scheme 
was floated-The scheme was to remain effective for an initial period of one 
year-But the scheme had been extended from time to time- --Company issued 
a circular dated 9.10.1997 revising the scale of pay-The same was given 
D retrospective effect from 1.1.1992 and was to remain in force for a period of 
5 years from the said date i.e. up to 31.12. 1996-- The employees who opted 
for voluntary retirement in accordance with the l 990 scheme between the 
, . 
period 1.1.1992 and 31.12.1996 claimed benefit of the said circular, which 
t 
was denied -High Court held that the employees. having voluntarily retired 
E 
under a Special Scheme, were not entitled to the revised scale of pay under 
the said circular--Correctness of-Held: An offer j?r voluntary retirement in 
terms of a scheme, when accepted, leads to a conch1ded contract between the 
employer and the employee-An employee has w1 option either to accept or 
not to opt therefor-Thereafter. the employee cannot raise a claim for a 
higher salary unless by reason of a statute he becomes entitled thereto-
F Voluntary Retirement Scheme is a Special Scheme---Hence, the said employees 
are not entitled to the benefit of the revised scale of pay. 
The appellants were the employees of the respondent-company, which was 
a sick company. The respondent floated a scheme for voluntary retirement of its 
employees in the year 1987 which remained in force up to 1990. On 22.10.1990, 
G a revised Voluntary Retirement Scheme was floated. The said scheme was to 
remain effective for an initial period of one year but admittedly the same had been 
extended from time to time. 
;;.., 
The respondent issued a circular dated 9.10.1997 effecting a revision in 
the scale of pay. The same was given retrospective eflect from 1.1.1992 and was 
H 
678 
HEC VOLUNTARY RETD. EMPS WELFARE SOC:. v. HEAVY ENG. CORPN. LTD_ 679 
y 
to remain in force for a period of 5 years from the date i.e. up to 31.12.1996. 
A 
The appellants opted for the said voluntary retirement scheme dated 
22.10.1990 and retired between the period 1.1.1992 and 31.12.1996 and claimed 
benefits of the circular dated 9.10.1997. In spite of the Central Government's 
direction, the benefit of the revised scale of pay was not extended to the appellants. 
B 
The High Court dismissed the writ petition filed by the appellants holding 
that the appellants, having voluntarily retired under a Special Scheme, were not 
_ ... 
entitled to the revised scale of pay under the said circular. Hence the appeal. 
Dismissing the appeal, the Court. 
c 
HELD: I. I. An offer for voluntary retirement in terms of a scheme, when 
accepted, leads to a concluded contract between the employer and the employee. 
In terms of such a scheme, an employee has an option either to accept or not to 
opt therefor. The scheme is purely voluntary, in terms whereof the tenure of 
service is curtailed which is permissible in law. Such a scheme is ordinarily D 
floated with a purpose of downsizing the employees. It is beneficial both to the 
' 
1 
employees as well as to the employer. Such a scheme is issued for elective 
""; 
functioning of the industrial undertakings. Although the Company is a "State" 
within the meaning of Article 12 of the Constitution oflndia, the terms and 
conditions of service would be governed by the contract of employment. Thus, 
unless the terms and conditions of such a contract are governed by a statute or E 
statutory rules, the provisions of the Contract Act would be applicable both at the 
formulation of the contract as also the determination thereof. By reason of such 
a scheme only an invitation of offer is floated. When pursuant to or in furtherance 
of such a voluntary retirement scheme an employee opts therefor, he makes an 
offer which upon acceptance by the employer gives rise to a contract. Thus, as F 
'1 
the matter relating to voluntary retirement is not governed by any statute, the 
provisions of the Indian Contract Act. 1872, therefore, would be applicable to. 
(686-D-GI 
Hindustan Machines Tools ltd v. MS Kang!P.N Kashyap, [1997] l 1 S

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