VRS Schemes are contractual in nature and the provisions of the Indian Contract Act, 1872 would apply to them, which categorically lay down that an offer made by a person can be withdrawn before acceptance, not thereafter.
The Supreme Court in Madhya Pradesh State Road Transportation Corporation vs. Manoj Kumar & Anr. held that Voluntary Retirement Schemes (VRS) are contractual in nature and the option to opt for them constituted as an ‘invitation to offer’ and not an ‘offer’ themselves. The Bench of Justices AK Sikri and RK Agrawal also held that it is not open to the applicants to withdraw their applications after the stipulated last date
In the concerned case, the Madhya Pradesh State Road Transportation Corporation is a PSU that was running into losses hence, permission was obtained to wind it up and a VRS was introduced for the benefit of the employees. The employees could sign up for the scheme between 1st July 2005 and 1stAugust 2005 and no more options were to be accepted by the Corporation thereafter. However, vide order dated 12th October 2006 extended the date for applying up to 28th October 2006.
The Court broadly relied on the two cases, namely, Bank of India & Ors. Vs. O. P. Swarnakar etc. andState Bank of Patiala vs. Romesh Chander Kanoji & Ors. to lay down the following legal principles in regard to the issue at hand:
Another important question that was dealt with was whether changing the last date for accepting applications from 1st August 2005 to 28th October 2006 promulgated a new scheme or if it was an extension of the existing scheme. It was held that there are two separate groups of employees in the case; one that had to submit applications by 1st August 2005 and the last date for the other was 28thOctober 2006. But between 1.08.2005 and 28.10.2006 no VRS scheme existed. Thus, those who had sent their applications in the first slot had to withdraw their option before 1.08.2005 and the option of revoking it after the stipulated last date was not an option for the first group, similarly, withdrawing applications after 28.10.2006 for those who sent their applications in the second slot.
“The VRS Scheme floated by the employer would be treated as invitation to offer and the application submitted by the employees pursuant thereto is an offer which does not amount to resignation in praesenti and the offer can be withdrawn during the validity period. This would be the position even when there is a clause in the Scheme that offer once given cannot be withdrawn at all. However, exception to this principle is that in such cases offer is to be withdrawn during the validity period of the Scheme and not thereafter even when if it is not accepted during the period of the Scheme”, said the Bench.
The Court took delivered the judgment that the direction reinstating the employees would be of no consequence because their withdrawal of application post tenure of the scheme is contrary to law and set aside, thereby favouring the contentions of the Corporation.
Read the Judgment here.