Delhi High CourtAjay Kumar Vyas & Others vs Indian Road Construction Corporation ... on 8 December, 2010Author:Sanjiv KhannaBench:Sanjiv Khanna*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+         COMPANY APPEAL (SB) NOS. 20, 22-45 OF 2006


                                 Reserved on : 19th November, 2010.
%                          Date of Decision:    8th December, 2010.


      AJAY KUMAR VYAS & OTHERS               .... Appellants
               Through Ms. Maninder Acharya, advocate.

                                 VERSUS


      INDIAN ROAD CONSTRUCTION
      CORPORATION LTD AND ANOTHER                     .....Respondents
                Through Mr.P.R. Agarwal,             Mrs.Anju Bhushan,
                advocates.

CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA

1. Whether Reporters of local papers may be
allowed to see the judgment?
2. To be referred to the Reporter or not ?            YES
3. Whether the judgment should be reported
in the Digest ?                                       YES


SANJIV KHANNA, J.:The appellants herein are the erstwhile employees of Indian Road

Construction Corporation Limited (hereinafter referred to as IRCC, for

short) - the company under liquidation. They had on 30th June, 2000

applied under voluntary retirement scheme (hereinafter referred to as

VRS, for short) circulated vide circular dated 31st May, 2000 and were paid

retirement benefits stipulated therein on 30th Sept.,2000. Subsequently,

petition for winding up of IRCC i.e. CP No. 14 of 2004 was filed in this

Court on 20.01.2004 and on the request of the Central Government, Mr.

Pran Konchady was appointed as a Liquidator. Advertisement/notice was

published inviting claims against IRCC, the company in liquidation, on 18th

June, 2004 and pursuant thereto the appellants filed their claims under

Rule 148(2) of the Company (Court) Rules, 1959 (hereinafter referred to as

Co.A(SB) No.20/2006                                                  Page 1
 the Rules, for short). The claim made by the appellants before the

Liquidator    was     that   they   had    not    been    paid    retirement

benefits/compensation in accordance with the Office Memorandum dated

5th May, 2000 issued by Government of India, Ministry of Heavy

Industries and Public Enterprises modelled on the scheme which existed in

the State of Gujarat. As per the Gujarat pattern scheme ex-gratia

compensation is to be calculated on the basis of 26 day month instead of

30 day month which was adopted and applied by IRCC. By the impugned

Order dated 18th April, 2006, the Liquidator had rejected the claim of the

appellants for the following reasons :"1.    As the methodology under Gujarat
                Pattern for calculation of VRS on the basis of 26
                days a month instead of 30 days a month, which
                you are claiming, is not applicable to you as this
                pattern was not adopted by the IRCC Limited while
                calculating the VRS compensation.2.     As per the Supreme Court decision, after
                the payment of VRS compensation, there is a
                complete cessation of the relationship between
                IRCC and you. So, you have no right for agitating
                any kind of past rights."2.     There are several reasons why the present appeals deserve to be

dismissed. These have been explained in detail below;3.     IRCC was incurring losses and by letter dated 15th February, 2000

written by Ministry of Surface Transport, the decision of the Government

of India to wind up the said enterprise was conveyed. It was decided that

the existing employees of IRCC would be encouraged to opt for voluntary

retirement under the existing scheme failing which they would be entitled

to compensation upon closure of an enterprise as per theIndustrial

Disputes Act, 1947(hereinafter referred to as IDA, for short). This decision

was adopted by the Board of Directors of IRCC vide item no. 95/11 dated



Co.A(SB) No.20/2006                                                    Page 2
 28th March, 1999 (see, minutes of the Board meeting dated 4th July, 2000)

and employees of IRCC were advised to opt for voluntary retirement based

on the existing directions of the Government of India dated 5th October,

1988. IRCC by their Circular dated 31st May, 2000 reiterated/advised the

employees of IRCC to opt for voluntary retirement on or before 30th June,

2000 under the existing scheme failing which they would be entitled to

compensation as per the provisions of IDA. Along with the Circular, the

salient features of the voluntary retirement scheme were mentioned.

Clause (b) thereof reads:-"(b)     Benefits

              The terminal payment available to an employee who
            seeks voluntary retirement would be an under:i) The balance of his provident fund account
             payable as per the CPF regulation.ii)     Cash equivalent to accumulated earned
             leave as per the rules of this organization. However,
             encashment of leave upto the maximum of 300 days
             of earned leave will be allowed.iii)    Gratuity as perGratuity Actor Gratuity
             Scheme applicable to the employees, that is to say
             Gratuity will be equal to 15/26 of a months
             emoluments for each completed year of service or part
             thereof in excess of 6 months subject to a maximum of
             16½ times the monthly emoluments or 3.5 lakhs
             rupees whichever is less.iv)     One month's/three month's notice pay
             as per the condition of service applicable to the
             employee.v)      Ex-gratia payment equivalent to 1½
             months emoluments (Pay + DA) for each completed
             year of service or monthly emoluments at the time of
             retirement multiplied by the balance months of
             service left before normal date of retirement
             whichever is less. For example, an employee who has
             put in 24 years of service and has got only 1 year of
             service for normal retirement, will get ex-gratia
             payment of only 12 months emoluments and not 36
             months emoluments.vi)     The employee and his family would also
             be entitled to travel by the entitled class to the place
             where he intends settling down.Co.A(SB) No.20/2006                                                     Page 3
                   vii)     The voluntary retirement scheme wouldbe applicable to all employees, workers and executives
             except Chief Executives and Executive Directors."4.    Government of India, Ministry of Heavy Industries and Public

Enterprises Ltd. had issued an Office Memorandum dated 5th May, 2000.

The said Office Memorandum records that the Government of India had

earlier announced voluntary retirement scheme dated 5th October, 1988

and that the said Scheme had been revised to make it more efficacious

having regard to the interest of the employees and to enable Public Sector

Enterprises to rationalize their surplus manpower. For the sake of

convenience, paragraphs 2, 3 and 5 of the Office Memorandum dated 5 th

May, 2000 are reproduced below:-"2. Enterprises which are financially sound and
          can sustain a scheme of VRS on their own surplus
          resources may devise and implement variants of the
          existing VRS cited in para 1 above. However, in no case
          shall the compensation exceed 60 days salary for each
          completed year of service or the salary for the number of
          months service left, whichever is less. Salary for the
          purpose of VRS shall consist of basic pay and DA only
          and no other element.3. Enterprises that make marginal profits or loss-
          making enterprises, may adopt the revised scheme of
          VRS which is modeled on the Scheme that exists for the
          State of Gujarat. The details of the scheme are set out
          hereunder:i) The compensation will consist of salary of
              35 days for every completed year of service and
              25 days for the balance of service left until
              superannuation. The compensation will be
              subject to a minimum of Rs.25,000/- or 250
              days salary whichever is higher. However, this
              compensation shall not exceed the sum of the
              salary that the employee would draw at the
              prevailing level for the balance of the period left
              before superannuation.ii) Salary for purpose of VRS will consist of
              basic pay and DA only.iii) Arrears of wages due to revision etc. will
              not be included in computing the eligible
              amount.iv) Payment of bonus should conform to the
              provisions in theBonus Act; Casual Leave may


Co.A(SB) No.20/2006                                                    Page 4
              be encashed in proportionate measure upto the
             date of VRS.4. x x x x5. For sick and unviable units, the VSS
             package of Department of Heavy Industry will be
             adopted. As a corollary, the VSS scheme may be
             modelled on Gujarat pattern and be made
             applicable as in para 3 above.         However,
             employees would have to opt for VSS within 3
             months from the date of offer failing which they
             would be eligible only for retrenchment
             compensation. The details of VSS are as under:-(i)    An employee would be entitled to an ex-gratia
             payment equivalent to 45 days emoluments
             (pay+DA) for each completed year of service or
             the monthly emolument at the time of retirement
             multiplied by the balance months of service left
             before the normal date of retirement, whichever
             is less;(ii)   All those who have completed not less
             than 30 years of service, will be eligible for a
             maximum of 60 (sixty) months salary/wage as
             compensation.    This will be subject to the
             amount not exceeding the salary/wage for the
             balance period of service left (at the rate of
             monthly salary/wage at the time of voluntary
             retirement)."5.    The Office Memorandum dated 5th May, 2000 in para 2 stipulated

that enterprises that were financially sound and could sustain a scheme of

VRS on their own surplus resources could devise and implement variants

of the existing VRS but in no case should the compensation exceed 60

days salary for each completed year of service or the salary for the number

of months of service left, whichever was less. Para 3 of the said Office

Memorandum, unlike para 2 which dealt with financially sound

enterprises that could sustain a scheme of VRS, applied to enterprises that

were making marginal profits or were loss-making enterprises and such

enterprises were given an option to adopt the revised scheme of VRS that

existed in the State of Gujarat. Under Clause (i) of para 3, compensation



Co.A(SB) No.20/2006                                                  Page 5
 was to consist of 35 days for every completed year of service and 25 days

for the balance of service left until superannuation. There were certain

other stipulations.6.     Paragraph 5, on the other hand, applied to sick and unviable units

like IRCC. VRS package for retirement of employees of heavy industries

was to be adopted in such cases. Paragraph 5 stipulated that the VRS "may

be modelled" on the Gujarat pattern and made applicable. The words

"may be modelled" in paragraph 5 show an element of discretion. Another

requirement was that employees must opt for VRS within three months of

offer, failing they would be eligible for retrenchment compensation. VRS

compensation as per paragraph 5 was equal to 45 days emoluments; pay

and DA for each completed year of service or monthly emoluments at the

time of retirement multiplied by months of service left till retirement,

whichever was less. In cases where employees had completed thirty years

of service, they were eligible for maximum of sixty months' salary/wages as

compensation, subject to the amount not exceeding salary/wage for the

balance period of service left.7.     It is apparent from paragraphs 2, 3 and 5 that methods of

computing ex-gratia compensation in paragraphs 2, 3 and 5 were different

from each other.8.     After aforesaid Office Memorandum dated 5th May, 2000 was

received, the matter was examined by the Board of IRCC in their 151st

meeting held on 4th July, 2000. It was noticed that if the VRS modelled on

Gujarat pattern was made applicable, it could be disadvantageous to the

employees in view of stipulations given in paragraph 5 of Office

Memorandum dated 5th May, 2000. Copy of the said Board meetings have



Co.A(SB) No.20/2006                                                  Page 6
 not been placed on record but at the time of hearing, copy of the said

Minutes was handed over by the counsel for the appellants. Pursuant to

the Board meeting, a letter dated 19th July, 2000 was written by IRCC to

Government of India recommending as under:-"3.     The Board of Directors of IRCC
             considered the matter in detail and after due
             deliberations and keeping in view the decision of
             the Govt of India to wind up the Corporation and
             the scheme forwarded by DPE vide their OM
             quoted in para 2) above decided to improve the
             VRS package from 45 days to 60 days
             emoluments (pay+DA) for each completed year
             of service or the monthly emoluments at the time
             of retirement multiplied by the balance months
             of service left before normal date of retirement
             whichever is less to mitigate the hardship to all
             its employees who have applied for VRS in
             response to IRCC circular dated 31.3.2000 and
             31.5.2000 and will be made effective to all the
             employees who are relieved on or after 1.7.2000.
             This decision was based on the guidelines to
             improve the VRS package enumerated in DPE's
             OM dated 5th May, 2000 and keeping in view the
             fact that expenditure on this account will be met
             by IRCC from its own assets/resources and no
             additional funds will be required from MOST."9.     In response to this letter, the Ministry of Surface Transport by their

letter dated 22nd Sept.,2000 conveyed their approval to the proposal for

enhancing compensation package from 45 days emoluments to 60 days

emoluments for each completed year of service. Financial implications

were to be met by IRCC from their own resources/assets.10.    It is clear from the aforesaid facts that what was adopted and made

applicable to the employees of IRCC, who were opting for VRS, was

different and in variation of clause 5 of the aforesaid memorandum dated

5th May, 2000. Benefits and advantages over and above envisaged in and

distinct from paragraph 5 were given to the employees of IRCC opting for

VRS.    Ex-gratia payment was enhanced from 45 days to 60 days

emoluments for each completed year of service. The requirement to opt


Co.A(SB) No.20/2006                                                    Page 7
 for VRS within three months was also done away with.                In these

circumstances, it is not correct for the appellants to contend that they were

entitled to ex-gratia compensation by calculating their past service by

treating each month as 26 days and not 30 days.            What was made

applicable and paid to the appellants was a special package. Specific

approval was sought and granted by the Ministry of Surface Transport for

payment in terms of the package. Paragraph 5 of the Office Memorandum

dated 5th May 2000 was not applied and accepted in the case of IRCC.11.   The appellants had made VRS applications on 30th June, 2000.

These applications were accepted on 3rd July, 2000.         Payments were

received by the appellants without any protest on 30th September, 2000.

As noticed above, the appellants have raised this claim only after the

advertisement was published by the liquidator on 18th June, 2004. The

principle of estoppel applies. The appellants ceased to be employees of

IRCC when payment under VRS was made and accepted by them.InA.K.

Bindal versus Union of India(2003) 5 SCC 2003                    it has been

observed:"33. The Voluntary Retirement Scheme (VRS)
            which is sometimes called Voluntary Separation
            Scheme (VSS) is introduced by companies and
            industrial establishments in order to reduce the
            surplus staff and to bring in financial efficiency.
            The office memorandum dated 5-5-2000 issued by
            the Government of India provided that for sick and
            unviable units, the VRS package of the Department
            of Heavy Industry will be adopted. Under this
            Scheme an employee is entitled to an ex gratia
            payment equivalent to 45 days' emoluments (pay +
            DA) for each completed year of service or the
            monthly emoluments at the time of retirement
            multiplied by the balance months of service left
            before the normal date of retirement, whichever is
            less. This is in addition to terminal benefits. The
            Government was conscious about the fact that the
            pay scales of some of the PSUs had not been
            revised with effect from 1-1-1992 and therefore it
            has provided adequate compensation in that
            regard in the second VRS which was announced for

Co.A(SB) No.20/2006                                                    Page 8
           all Central public sector undertakings on 6-11-
          2001. Clause (a) of the Scheme reads as under:(a) Ex gratia payment in respect of employees
          on pay scales at 1-1-1987 and 1-1-1992 levels,
          computed on their existing pay scales in
          accordance with the extant Scheme, shall be
          increased by 100% and 50% respectively.34. This shows that a considerable amount is to
          be paid to an employee ex gratia besides the
          terminal benefits in case he opts for voluntary
          retirement under the Scheme and his option is
          accepted. The amount is paid not for doing any
          work or rendering any service. It is paid in lieu of
          the employee himself leaving the services of the
          company or the industrial establishment and
          foregoing all his claims or rights in the same. It is a
          package deal of give and take. That is why in the
          business world it is known as "golden handshake".
          The main purpose of paying this amount is to bring
          about a complete cessation of the jural relationship
          between the employer and the employee. After the
          amount is paid and the employee ceases to be
          under the employment of the company or the
          undertaking, he leaves with all his rights and there
          is no question of his again agitating for any kind of
          his past rights with his erstwhile employer
          including making any claim with regard to
          enhancement of pay scale for an earlier period. If
          the employee is still permitted to raise a grievance
          regarding enhancement of pay scale from a
          retrospective date, even after he has opted for
          Voluntary Retirement Scheme and has accepted
          the amount paid to him, the whole purpose of
          introducing the Scheme would be totally
          frustrated.35. The contention that the employees opted
          for VRS under any kind of compulsion is not
          worthy of acceptance. The petitioners are officers
          of the two Companies and are mature enough to
          weigh the pros and cons of the options which were
          available to them. They could have waited and
          pursued their claim for revision of pay scale
          without opting for VRS. However, they in their
          wisdom thought that in the fact situation VRS was
          a better option available and chose the same. After
          having applied for VRS and taken the money it is
          not open to them to contend that they exercised the
          option under any kind of compulsion. In view of
          the fact that nearly ninety-nine per cent of
          employees have availed of the VRS Scheme and
          have left the Companies (FCI and HFC), the writ
          petition no longer survives and has become
          infructuous."Co.A(SB) No.20/2006                                                 Page 912.   The aforesaid reasoning and principle of estoppel was reiterated by

the Supreme Court inHEC Voluntary Retirement Scheme versus

Heavy Engineering Corporation Limited, (2006) 3 SCC 708.( SeeBank of India versus O.P. Swarnakar(2003) 2 SCC 721 and

Punjab & Sindh Bank & another versus S. Ramveer Singh Bawa

& another(2004) 4 SCC 484)13.   Learned counsel for the appellants have relied uponSatya Paul

Nakra versus Union of India, 2003 (3) AD (Delhi) 293. In the said

case, the Court was examining the effect of Office Memorandum dated 6th

November, 2001 issued by the Department of Public Enterprise modifying

OM dated 5th May, 2000. By memorandum dated 6th November, 2001 it

was directed that under the Gujarat pattern scheme salary shall be

calculated on the basis of 30 days in a month and not 26 days and

consequently method of calculation of ex-gratia in VRS shall be similar.

Pursuant to the said Office Memorandum dated 6th November,2001,

National Fertilizers Limited the respondent therein had issued a circular

dated 22nd November, 2001 modifying the existing VRS and stating that

for computation of ex-gratia, the month will be taken as 30 days and not

26 days. Some employees withdrew their application but the petitioners

therein did not withdraw and their applications were accepted after the

memorandum dated 22nd November, 2001. The contention raised was that

the Board of Directors of National Fertilizers Limited had not approved the

modified scheme mentioned in circular dated 22nd November, 2001.

Another issue raised was that of discretion of the Board of Directors of

National Fertilizers Limited. Both the contentions were rejected. Principle

of estoppel was applied as the petitioners therein had taken compensation

and accepted the same after circular dated 22nd November, 2001 was

issued. It was held that OM dated 6th November, 2001 was binding on the


Co.A(SB) No.20/2006                                                 Page 10
 National Fertilizers Limited, a public sector company. The said decision is

not applicable to the facts of the present case. In the present case, the

scheme was revised after the Office Memorandum dated 5th May, 2000

was issued and the option exercised by the Board of Directors of IRCC was

approved by Ministry of Surface Transport in their letter dated 22 nd

September, 2000. What has been paid to the appellants is different and

higher than envisaged and applicable as per paragraph 5 of the Office

Memorandum dated 5th May,2000.14.   The appellants have also relied upon Annexure A-8, note of

personnel department reference No. 701072 dated 4th December, 2002.

The respondent liquidator in their counter affidavit has explained that this

is an internal note of Deputy Manager (Personnel), who had expressed his

own views. It is alleged that this note motivated for personal financial

gain. The liquidator and Officer on Special Duty did not accept the view of

Deputy Manager (Personnel).       In these circumstances, the appellants

cannot rely upon note dated 4th December, 2002.15.   In view of the above, I do not find any merit in the present appeals

and the same are dismissed.(SANJIV KHANNA)
                                                       JUDGE
DECEMBER 08, 2010.P/VKR




Co.A(SB) No.20/2006                                                  Page 11