In Brief
The State Bank of India (SBI) introduced a Voluntary Retirement Scheme (VRS) in 2000, approved by its Central Board and Government of India, offering employees who had completed 15 years of service benefits including pension, gratuity, and ex-gratia. When the bank later refused pension to employees who retired under this scheme with only 15 years of service (arguing the pension rules required 20 years), the Supreme Court held that the bank had breached its contractual obligation. The Court found the VRS constituted a binding contract where pension was the "heart and soul" of the scheme. Reading the scheme together with its supporting memorandum and Government approval, pension on 15 years of service was an essential term. The bank's failure to amend its rules and the subsequent clarification letter could not override the approved scheme. The Court held this amounted to arbitrary and unfair action violating constitutional equality protections. Employees who completed 15 years of service were entitled to proportionate pension computed under the SBI Pension Rules.
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