T.P.Act - sec. 105,106 and 107 = Un registered lease deed - can be considered as month to month lease or one year lease - Terms of tenancy can not used to derogate the statutory provision of Sec.106 T.P.Act ; Non registration of the lease= “It is the general proposition of law in view of the provisions of Section 49 of the Indian Registration Act that when a document is required to be registered under a provision of law, it cannot be accepted in evidence of any transaction affecting an immovable property in absence of registration of that document. It is also true that in accordance with the provisions of Section 107 of the Transfer of Property Act, 1882, a lease of immoveable property from year to year or for any term exceeding one year or reserving a yearly rent can be made only by a registered instrument.- When lease is a transfer of a right to enjoy the property and such transfer can be made expressly or by implication, the mere fact that an unregistered instrument came into existence would not stand in the way of the court to determine whether there was in fact a lease otherwise than through such deed.- Non registration of the document had caused only two consequences. One is that no lease exceeding one year was created. Second is that the instrument became useless so far as creation of the lease is concerned. Nonetheless the presumption that a lease not exceeding one year stood created by conduct of parties remains un-rebutted.” Taking a different view would be contrary to the reality when parties clearly intended to create a lease though the document which they executed had not gone into the processes of registration. That lacuna had affected the validity of the document, but what had happened between the parties in respect of the property became a reality = the question of remanding the matter back to the Trial Court to consider it afresh in view of the fact that the same has been admitted in evidence, as the High Court has done in the impugned judgment and order, does not arise at all. While the agreement dated 07.08.2006 can be admitted in evidence and even relied upon by the parties to prove the factum of the tenancy, the terms of the same cannot be used to derogate from the statutory provision of Section 106 of the Act, which creates a fiction of tenancy in absence of a registered instrument creating the same. If the argument advanced on behalf of the respondents is taken to its logical conclusion, this lease can never be terminated, save in cases of breach by the tenant. Accepting this argument would mean that in a situation where the tenant does not default on rent payment for three consecutive months, or does not commit a breach of the terms of the lease, it is not open to the lessor to terminate the lease even after giving a notice. This interpretation of the clause 6 of the agreement cannot be permitted as the same is wholly contrary to the express provisions of the law. The phrase ‘contract to the contrary’ in Section 106 of the Act cannot be read to mean that the parties are free to contract out of the express provisions of the law, thereby defeating its very intent. As is evident from the cases relied upon by the learned senior counsel appearing on behalf of the appellant, the relevant portions of which have been extracted supra, the contract between the parties must be in relation to a valid contract for the statutory right under Section 106 of the Act available to a lessor to terminate the tenancy at a notice of 15 days to not be applicable. In view of the above reasoning and conclusions recorded by us, the impugned judgment and order passed by the High Court is set aside. The judgment and order passed by the Trial Court is restored. The Appeal is accordingly allowed. No costs.

NON-REPORTABLE
 IN THE SUPREME COURT OF INDIA                              CIVIL APPELLATE
                                JURISDICTION
                  CIVIL APPEAL NO. 8361 OF 2016
                  (Arising out of SLP (C) No.24486 of 2014)


M/S PARK STREET PROPERTIES (PVT) LTD.     ………APPELLANT

                                     Vs.

DIPAK KUMAR SINGH & ANR.                       ……RESPONDENTS



                               J U D G M E N T


V. GOPALA GOWDA, J.

  Leave granted.
The present appeal arises out of  the  impugned  judgment  and  order  dated
15.05.2014 passed by the High Court of Calcutta in F.A.  No.  151  of  2012,
whereby the High Court has set aside  the  order  of  the  Trial  Court  and
remanded the matter to it for reconsideration from the  stage  of  examining
the question of validity of the notice dated 30.10.2008.

The relevant facts of the  case  required  to  appreciate  the  rival  legal
contentions  advanced  on  behalf  of  the  parties  are  stated  in   brief
hereunder:

One Karnani Properties Limited, a company incorporated under  the  Companies
Act, 1956 was the owner of the suit  premises.  It  had  let  out  the  suit
premises in favour of the appellant herein with  the  right  to  sublet  the
same or portions thereof. The appellant herein  entered  into  an  agreement
dated 15.10.2004 with the respondents subletting the suit premises  for  the
purpose  of  carrying  out  business  from  the   ‘Blue   Fox   Restaurant’.
Subsequently, the respondents requested the appellant to allow them  to  run
franchise or business dealing with McDonald’s  family  restaurant  from  the
suit premises. In pursuance of the same, the agreement dated 15.10.2004  was
terminated, and a tenancy of the suit premises was created in favour of  the
respondents on the basis of an unregistered agreement dated 07.08.2006 at  a
rent and on the terms and conditions agreed therein. In terms  of  the  said
agreement, the tenancy commenced from 01.08.2006, at a rent of Rs.  20,000/-
per month, payable by the  tenants-respondents  by  the  7th  day  of  every
succeeding month according to the English  calendar.  Further,  as  per  the
terms of the agreement, in case of breach of the  agreement,  the  landlord-
appellant was entitled to terminate the tenancy after serving  a  notice  of
period of thirty days. On 30.10.2008, the appellant issued  a  notice  under
Section 106 of the Transfer of Property Act, 1882 (hereinafter  referred  to
as the “Act”) terminating the monthly tenancy of the respondents in  respect
of the tenanted premises upon the  expiry  of  15  days  from  the  date  of
receipt of the said notice. Upon the expiry of the period of  15  days,  the
respondents did not vacate the suit  premises.  The  appellant  thus,  filed
suit for recovery of khas possession and mesne profits of the suit  premises
before the City Civil Court at Calcutta. The respondents contested the  suit
inter alia contending that by necessary implication the parties  had  agreed
to not terminate the lease of the premises before 30 years, and that it  was
for this reason, a clause was incorporated for enhancement of  monthly  rent
at the rate of 15% after expiry of every 3 years.  The  respondents  further
urged that the appellant had permitted them to invest a substantial  sum  of
money for further repair and renovation of the  tenanted  premises  suitably
for their business. Thus,  the  appellant,  by  its  declaration,  acts  and
omissions had intentionally caused and permitted the respondents to  believe
that they will not terminate the lease of the respondents in respect of  the
tenanted premises before the expiry of the franchise agreement  for  running
the McDonald’s Family Restaurant from the tenanted premises.  It  was  thus,
urged by the respondents that the notice of termination of lease is bad  and
not in accordance with law. The Trial Court, after  examining  the  evidence
on record, decreed the suit in favour of the appellant.
“It appears that clause 6 of the unregistered Memorandum of Agreement  dated
7th August, 2006, is an important clause which deals with  determination  or
termination of the tenancy only in case of non-payment  of  rent  for  three
consecutive months and the tenant in spite of notice to remedy  such  breach
fails to make such payment. When the document is inadmissible  in  evidence,
none of its terms can be admitted in evidence for the purpose of proving  an
important clause contained therein  including  the  clause  6.  Reliance  on
clause 6 of the memorandum of Agreement dated 7th  August,  2006  cannot  be
termed as using the document  for  a  collateral  purpose,  in  as  much  as
proving and/ or reliance on clause 6 is an important term of  the  agreement
which cannot be proved by admission  of  an  unregistered  lease  deed  into
evidence.
So the notice appears to be legal and valid.”
                      (emphasis laid by this Court)

The respondents were accordingly,  directed  to  vacate  the  suit  premises
within three months from the date of the order. Aggrieved  of  the  judgment
and order of the Trial Court, the respondents challenged the correctness  of
the same by way of filing appeal before  the  High  Court.  The  High  Court
observed as under:
“It is the general proposition of law in view of the provisions  of  Section
49 of the Indian Registration Act that when a document  is  required  to  be
registered under a provision of law, it cannot be accepted  in  evidence  of
any transaction affecting an immovable property in absence  of  registration
of that document. It is also true that in accordance with the provisions  of
Section 107 of the Transfer of Property Act, 1882,  a  lease  of  immoveable
property from year to year or for any term exceeding one year  or  reserving
a yearly rent can be made only by a registered instrument.
But the above observation does not exhaust the scope of determination  of  a
question  as  regards  admissibility  of  an  instrument  which   has   been
improperly admitted in evidence. The  decision  of  Javer  Chand  &  Ors  v.
Pukhraj Surana reported in  AIR  1961  SC  1655  is  an  authority  for  the
proposition that once document has been marked as an exhibit in a  case  and
the trial has proceeded all along on the footing that the  document  was  an
exhibit in the case and has been used by  the  parties  in  examination  and
cross examination of their witnesses, it is not open  either  to  the  trial
court itself or to a court of appeal or revision to go behind that order.
The learned Court below committed an error in passing the decree  in  favour
of the respondent. The impugned  judgment  is,  therefore,  required  to  be
interfered with and the validity of the  notice  dated  October  30,2008  is
required to be reconsidered by the learned  Court  below  looking  into  the
“Exhibit-4”


The High Court accordingly, allowed the appeal and remanded  the  suit  back
to the Trial Court for reconsideration  from  the  stage  of  examining  the
question of validity of notice dated 30.10.2008. Hence, the  present  appeal
filed by the appellant.
Mr. C.A. Sundaram,  learned  senior  counsel  appearing  on  behalf  of  the
appellant contends that the agreement dated  07.08.2006  creates  a  monthly
tenancy.  It  is  submitted  that  in  terms  of  Section  17(1)(d)  of  the
Registration Act and Section  107  of  the  Act,  the  said  document  would
require registration only if it leases the  immoveable  suit  property  from
year to year or for any term exceeding one year or  receiving  yearly  rent.
Therefore,  the  agreement  dated  07.08.2006  was  not   required   to   be
registered. It is further contended that it is not  even  the  case  of  the
appellant that the agreement intended to grant lease of year  to  year.  The
learned  senior  counsel  further  contends  that  a  monthly   tenancy   is
terminable at will. In the instant case, the monthly tenancy was  terminable
only in the  manner  stipulated  under  Clause  6  of  the  agreement  dated
07.08.2006. The learned senior counsel further contends that it is the  case
of the appellant that  in  terms  of  the  lease,  the  same  could  not  be
terminated unless there was a breach of  its  provisions.  It  is  contended
that this argument cannot be accepted, as that goes against the very  spirit
of Section 106 of the Act. It  is  contended  that  the  term  ‘contract  to
contrary’ in Section 106 of the Act only envisages  a  valid  contract,  and
that Section 106 of the Act cannot be subverted by way of a  contract  which
is contrary to the provisions of law. It is contended that parties are  free
to contract out of Section 106 of the  Act  only  by  way  of  a  registered
instrument and not otherwise. The learned senior counsel places reliance  on
the decision of this Court in the case of Samir  Mukherjee  v.  Davinder  K.
Bajaj[1], the relevant potion of which is extracted as hereunder:
“Section 107 prescribes the procedure for execution of a lease  between  the
parties. Under the first paragraph of this  section  a  lease  of  immovable
property from year to year or for any term exceeding one year  or  reserving
yearly rent can be made only by registered instrument and remaining  classes
of leases are governed by the second paragraph that  is  to  say  all  other
leases of immovable property can be made either by registered instrument  or
by oral agreement accompanied by delivery of possession.
In the case in hand we are concerned with an oral lease which is hit by  the
first paragraph of Section 107  of  the  Transfer  of  Property  Act.  Under
Section 107 parties have an option to enter into a lease in  respect  of  an
immovable property either for a term less than a year or from year to  year,
for any term exceeding one year or reserving a yearly rent. If  they  decide
upon having a lease in respect of any immovable property from year  to  year
or for any term exceeding one year, or reserving yearly rent, such  a  lease
has to be only by a  registered  instrument.  In  absence  of  a  registered
instrument no valid lease from year to year or  for  a  term  exceeding  one
year or reserving a yearly rent can be created. If the lease is not a  valid
lease within the meaning of the opening words of Section  106  the  rule  of
construction embodied therein would not  be  attracted.  The  above  is  the
legal position on a harmonious reading of both the sections.
      In Ram Kumar Das (supra), Section 106 was considered  by  a  bench  of
four judges of this court. This court held that this section 106  lays  down
the rule of construction which is to be applied  when  there  is  no  period
agreed upon between the parties  and  in  such  cases  duration  has  to  be
determined by the reference to the object for purpose for which  tenancy  is
created. It was also  held  that  rule  of  construction  embodied  in  this
section applies not only to express leases of uncertain  duration  but  also
to leases  implied  by  law  which  may  be  inferred  from  possession  and
acceptance of rent and other circumstances. It was further held that  it  is
not disputed that a contract to the contrary as contemplated by Section  106
of the Transfer of Property Act need not be an express contract; it  may  be
implied, but it certainly should be a valid contract. On the  fact  of  that
case, the court held that 'the difficulty  in  applying  this  rule  to  the
present case arises from  the  fact  that  tenancy  from  year  to  year  or
reserving an yearly rent can be made only by registered instrument  as  lays
down in Section 107 of the Transfer of Property Act.'”
                 (emphasis laid by this Court)


The learned senior counsel further places reliance on the decision  of  this
Court in the case of K.B. Saha & Sons Pvt.  Ltd  v.  Development  Consultant
Ltd.[2], wherein it was held as under:
“34. From the principles laid down in the various decisions  of  this  Court
and the High Courts, as referred to hereinabove, it is evident that :-

1. A document required to be registered, if unregistered is  not  admissible
into evidence under Section 49 of the Registration Act.

2. Such unregistered  document  can  however  be  used  as  an  evidence  of
collateral purpose  as  provided  in  the  proviso  to  Section  49  of  the
Registration Act.

3. A collateral transaction must be independent of, or divisible  from,  the
transaction to effect which the law required registration.

4. A collateral transaction must be a transaction not itself required to  be
effected by a registered document, that is,  a  transaction  creating,  etc.
any right, title or interest in immoveable property  of  the  value  of  one
hundred rupees and upwards.
5. If a document is inadmissible in evidence for want of registration,  none
of its terms can be admitted in evidence and that to use a document for  the
purpose of  proving  an  important  clause  would  not  be  using  it  as  a
collateral purpose.
35. In our view, the particular clause in the lease  agreement  in  question
cannot be called a collateral purpose. As noted earlier, it is the  case  of
the appellant that the suit premises was let out  only  for  the  particular
named officer of the respondent and accordingly, after the same was  vacated
by the said officer, the respondent was not entitled  to  allot  it  to  any
other employee and was therefore, liable to be evicted which, in  our  view,
was an important term forming part of the lease agreement.  Therefore,  such
a Clause, namely, Clause 9 of the Lease Agreement in this  case,  cannot  be
looked into even for collateral purposes to come to a  conclusion  that  the
respondent was liable to be evicted because of violation of Clause 9 of  the
Lease Agreement. That being the position, we are unable to hold that  Clause
9 of the Lease Agreement, which is admittedly unregistered,  can  be  looked
into for the purpose of evicting the respondent from the suit premises  only
because the respondent was not entitled to induct  any  other  person  other
than the named officer in the same.”

The learned senior counsel submits that  there  is  no  infirmity  with  the
judgment and order of the Trial Court  and  that  the  High  Court  was  not
justified in interfering with the same and remanding the matter back to  the
Trial Court on the ground that the terms of the agreement  dated  07.08.2006
were not taken into consideration in a proper perspective.

On the other hand, Mr. Anindya Mitra  and  Mr.  Gopal  Subramanium,  learned
senior  counsel  appearing  on  behalf  of  the  respondents  contends  that
termination of lease is by its definition  meant  to  disrupt  the  contract
between the parties. Sections 106 and 107 of the Act provides  for  duration
of leases and how they are to be made. It is submitted that Section  106  of
the Act cannot be departed from and that the operation  of  Section  107  of
the Act can be excluded by virtue of Section 106 of the Act  only  in  cases
where there is a valid contract to  the  said  effect.  The  learned  senior
counsel places reliance on the decision of this Court in  the  case  of  Ram
Kumar Das v. Jagadish Chandra Deb Dhabal[3], wherein it was held as under:
“The section lays down a rule of construction which is to  be  applied  when
there is no period agreed upon  between  the  parties.  In  such  cases  the
duration has to be determined by reference to  the  object  or  purpose  for
which the tenancy is created. The rule  of  construction  embodied  in  this
section applies not only to express leases of uncertain  duration  but  also
to leases  implied  by  law  which  may  be  inferred  from  possession  and
acceptance of rent and other circum- stances. It is  conceded  that  in  the
case before us   the tenancy  was  not  for  manufacturing  or  agricultural
purposes. The object was to enable the lessee to build structures  upon  the
land. In these circumstances, it could be regarded as a tenancy  from  month
to month unless there was a contract to the contrary. The question  now  is,
whether there was a contract to  the  contrary  in  the  present  case?  Mr.
Setalvad relies very strongly upon the fact that the rent paid here  was  an
annual rent and he argues that from this fact  it  can  fairly  be  inferred
that the agreement between  the  parties  was  certainly  not  to  create  a
monthly tenancy. It is not disputed that the contract to  the  contrary,  as
contemplated by section 106 of the Transfer of Property Act, need not be  an
express contract; it may be implied, but it  certainly  should  be  a  valid
contract. If it is no contract in law, the section  will  be  operative  and
regulate the duration of the lease. It  has  no  doubt  been  recognised  in
several cases that the mode in which a  rent  is  expressed  to  be  payable
affords  a  presumption  that    the   tenancy       is   of   a   character
corresponding there to. Consequently, when the rent reserved  is  an  annual
rent, the presumption would arise that the tenancy  was  an  annual  tenancy
unless there is something to rebut the presumption.”


  The  learned  senior  counsel  submits  that  in  the  instant  case,  the
requirements under Section 106 of the Act need to be adhered to,  as  clause
6 of the agreement operates as a contract to the contrary.

We have heard the learned senior counsel appearing on behalf of the  parties
and have perused the  evidence  on  record.  The  essential  question  which
arises for our consideration in the instant case is  whether  the  agreement
dated 07.08.2006 can be read in evidence, and whether it is  a  contract  to
contrary in terms of Section 106 of the Act.

At the outset, it would be useful to refer to the  statutory  provisions  at
play in the instant case, which are Sections 106 and 107 of the  Act,  which
read as under:
“106. Duration of certain leases in absence of  written  contract  or  local
usage:

In the absence of a contract or local law or usage to the contrary, a  lease
of immovable property for agricultural or manufacturing  purposes  shall  be
deemed to be a lease from year to year, terminable, on the  part  of  either
lessor or lessee, by six months' notice expiring with the end of a  year  of
the tenancy; and a lease of immovable property for any other  purpose  shall
be deemed to be a lease from month to month,  terminable,  on  the  part  of
either lessor or lessee, by fifteen days' notice expiring with the end of  a
month of the tenancy.

Every notice under this section must be in writing, signed by or  on  behalf
of the person giving it, and either be sent by post  to  the  party  who  is
intended to be bound by it or be tendered or delivered  personally  to  such
party, or to one of his family or servants at his  residence,  or  (if  such
tender or delivery is not practicable) affixed to a conspicuous part of  the
property.

107. Leases how made:
A lease of immovable property from year to year, or for any  term  exceeding
one year or reserving a yearly rent,  can  be  made  only  by  a  registered
instrument.

All other leases of immovable property may be made either  by  a  registered
instrument or by oral agreement accompanied by delivery of possession.
Where a lease of immovable property is  made  by  a  registered  instrument,
such instrument or, where there are more instruments  than  one,  each  such
instrument shall be executed by both the lessor and the lessee:

PROVIDED that the State Government from time to  time,  by  notification  in
the Official Gazette, direct that leases of immovable property,  other  than
leases from year to year, or for any term exceeding one year,  or  reserving
a yearly rent, or any class of such leases,  may  be  made  by  unregistered
instrument or by oral agreement without delivery of possession.”
             (emphasis laid by this Court)

A perusal of Section 106 of the Act makes it clear that it creates a  deemed
monthly tenancy in those cases where there is no  express  contract  to  the
contrary, which is terminable at a notice period of  15  days.  The  section
also lays down the requirements of a valid notice to terminate the  tenancy,
such as that it must be in writing, signed by the person sending it  and  be
duly delivered. Admittedly, the validity of the notice itself is  not  under
challenge. The main contention advanced on  behalf  of  the  respondents  is
that the impugned judgment and order is valid in light of  the  second  part
of Section 107 of the Act, which requires that lease for  a  term  exceeding
one year can only be made by way of a registered instrument.

At this stage, it will also be useful to examine Clause 6 of  the  agreement
dated 07.08.2006, which reads as under:
“6. Default
In the event of any default on the part of the Tenants in making payment  of
the rent for 3 consecutive months or in the event of any breach of  any  the
terms and conditions herein contained and on the part of the tenants  to  be
performed and observed and the landlord shall be entitled to serve a  notice
on call upon the tenants to make payment of the rent and to remedy  for  the
breach of any of the remaining terms and conditions herein contained and  if
within a period of 30 days, the Tenants shall fail to remedy the breach  the
landlord shall be entitled to determine or terminate the tenancy.”
             (emphasis laid by this Court)

Thus, in terms of clause 6 of the agreement, the landlord  was  entitled  to
terminate the tenancy in case there  was  a  breach  of  the  terms  of  the
agreement or in case of non-payment of rent  for  three  consecutive  months
and the tenants failed to remedy the same within a period of thirty days  of
the receipt of the notice.  The  above  said  clause  of  the  agreement  is
clearly contrary to the provisions of Section 106 of the Act. While  Section
106 of the Act does contain the phrase ‘in the absence of a contract to  the
contrary’, it is a well settled position of  law,  as  pointed  out  by  the
learned senior counsel appearing on behalf of the appellant  that  the  same
must be a valid contract.
It is also a well  settled  position  of  law  that  in  the  absence  of  a
registered instrument, the courts are not  precluded  from  determining  the
factum of tenancy from the other evidence on record as well as  the  conduct
of the parties. A three Judge bench of this Court in the case of Anthony  v.
KC Ittoop & Sons[4], held as under:
“A lease of immovable property is defined in Section 105 of the  TP  Act.  A
transfer of a right to enjoy a property in consideration of a price paid  or
promised to be rendered periodically or on specified occasions is the  basic
fabric for a valid lease. The provision says that such  a  transfer  can  be
made expressly or by implication. Once there is such a transfer of right  to
enjoy the property a lease stands created. What is mentioned  in  the  three
paragraphs of the first part of Section 107 of  the  TP  Act  are  only  the
different modes of how leases are created.  The  first  paragraph  has  been
extracted above and it deals with   the  mode  of  creating  the  particular
kinds of leases mentioned therein. The third paragraph  can  be  read  along
with the above as it contains  a  condition  to  be  complied  with  if  the
parties choose to create a lease as per a  registered  instrument  mentioned
therein. All other leases, if created, necessarily fall within the ambit  of
the second paragraph. Thus, dehors  the  instrument  parties  can  create  a
lease as envisaged in the  second  paragraph  of  Section  107  which  reads
thus………
When lease is a transfer of a right to enjoy the property and such  transfer
can be made expressly or by implication, the mere fact that an  unregistered
instrument came into existence would not stand in the way of  the  court  to
determine whether there was in fact a  lease  otherwise  than  through  such
deed.
………………
Taking a    different view would be contrary to  the  reality  when  parties
clearly intended to  create  a  lease  though     the  document  which  they
executed had not gone  into the processes of registration. That  lacuna  had
affected the validity of the document, but what  had  happened  between  the
parties     in respect of the property became a  reality.  Non  registration
of the      document had caused only   two consequences.     One is that  no
lease exceeding one year was created. Second is that the  instrument  became
useless so far as creation  of  the  lease  is  concerned.  Nonetheless  the
presumption that a lease not exceeding one   year stood created  by  conduct
of parties remains un-rebutted.”
              (emphasis laid by this Court)

Thus, in the absence of registration of a document, what  is  deemed  to  be
created is a month to month tenancy, the termination of  which  is  governed
by Section 106 of the Act.
Thus, the question of remanding the  matter  back  to  the  Trial  Court  to
consider it afresh in view of the fact that the same has  been  admitted  in
evidence, as the High Court has done in the  impugned  judgment  and  order,
does not arise at all. While the agreement dated 07.08.2006 can be  admitted
in evidence and even relied upon by the parties to prove the factum  of  the
tenancy, the terms  of  the  same  cannot  be  used  to  derogate  from  the
statutory provision of Section 106 of the Act, which creates  a  fiction  of
tenancy in absence of a registered instrument  creating  the  same.  If  the
argument advanced on behalf of the  respondents  is  taken  to  its  logical
conclusion, this lease can never be terminated, save in cases of  breach  by
the tenant. Accepting this argument would mean that  in  a  situation  where
the tenant does not default on rent payment for  three  consecutive  months,
or does not commit a breach of the terms of the lease, it  is  not  open  to
the lessor  to  terminate  the  lease  even  after  giving  a  notice.  This
interpretation of the clause 6 of the agreement cannot be permitted  as  the
same is wholly contrary to the express provisions of  the  law.  The  phrase
‘contract to the contrary’ in Section 106 of the Act cannot be read to  mean
that the parties are free to contract out of the express provisions  of  the
law, thereby defeating its very intent. As is evident from the cases  relied
upon by the learned senior counsel appearing on  behalf  of  the  appellant,
the relevant portions of which  have  been  extracted  supra,  the  contract
between the parties must  be  in  relation  to  a  valid  contract  for  the
statutory right under Section 106 of  the  Act  available  to  a  lessor  to
terminate the tenancy at a notice of 15 days to not be applicable.

In view of the above reasoning and conclusions recorded by us, the  impugned
judgment and order passed by the High Court is set aside. The  judgment  and
order passed by the Trial Court  is  restored.  The  Appeal  is  accordingly
allowed. No costs.



                                                    …………………………………………………………J.
                               [V.GOPALA GOWDA]


 …………………………………………………………J.
                               [ADARSH KUMAR GOEL]

New Delhi,
August 29, 2016
-----------------------
[1]
      [2] (2001) 5 SCC 259
[3]
      [4] (2008) 8 SCC 564
[5]
      [6] 1952 (3) SCR 269
[7]
      [8] (2000) 6  SCC 394

This chart indicates that some of the employees belonging to the first group had withdrawn their offer before August 01, 2005. They had right to do so. Acceptance of their offer after the withdrawal would be of no consequence. However, those employees who withdrew their offers after August 01, 2005 could not do so and, therefore, the Corporation was within its right to accept their offers. Likewise, those employees belonging to the second category who had withdrawn their offers before October 28, 2006 were entitled to withdraw their offers as those were not accepted by that date. However, the withdrawal after October 28, 2006 when Scheme was closed would be of no consequence.=When we apply the aforesaid test to the facts of this case, we find that insofar as those employees who fall in the first category are concerned, they had withdrawn their offer after August 01, 2005, except one Mr. Dinesh Chand Yadav, who is respondent No.1 in the Civil Appeal arising out of Special Leave Petition (Civil) No. 14874 of 2010. Therefore, from this batch, only he is entitled for reinstatement with back wages, as he has also filed an undertaking, in terms of this Court's order dated May 12, 2016, to the effect that he is not gainfully employed during the relevant period. Likewise, employees falling in the second category had withdrawn their offer after October 28, 2006, except Mr. Sukhram and Mr. Ram Sharan Rathore, both respondents in the Civil Appeal arising out Special Leave Petition (Civil) No. 14594 of 2010. However, these respondents failed to comply with this Court's order dated May 12, 2016. They are, therefore, entitled for reinstatement without back wages. = In the case of all other respondents, their application for withdrawal post the tenure of the Scheme would be of no consequence. - The direction of the High Court reinstating these respondents/employees is, therefore, found to be contrary to law and is hereby set aside, resulting into allowing all other appeals of the Corporation.

                                                                  REPORTABLE


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 4437 of 2009


|MADHYA PRADESH STATE ROAD                  |                             |
|TRANSPORT CORPORATION                      |.....APPELLANT(S)            |
|VERSUS                                     |                             |
|MANOJ KUMAR & ANR.                         |.....RESPONDENT(S)           |

                                   W I T H
                        CIVIL APPEAL NO. 8363 OF 2016
                  (ARISING OUT OF SLP (C) NO. 4697 OF 2008)

                        CIVIL APPEAL NO. 4438 of 2009

                        CIVIL APPEAL NO. 4439 of 2009

                        CIVIL APPEAL NO. 4440 of 2009

                        CIVIL APPEAL NO. 4441 of 2009

                        CIVIL APPEAL NO. 4442 of 2009

                        CIVIL APPEAL NO. 4443 of 2009

                        CIVIL APPEAL NO. 4444 of 2009

                        CIVIL APPEAL NO. 4445 of 2009

                        CIVIL APPEAL NO. 4446 of 2009

                        CIVIL APPEAL NO. 8364 OF 2016
                 (ARISING OUT OF SLP (C) NO. 14522 OF 2010)



                        CIVIL APPEAL NO. 8365 OF 2016
                 (ARISING OUT OF SLP (C) NO. 14587 OF 2010)

                        CIVIL APPEAL NO. 8366 OF 2016
                 (ARISING OUT OF SLP (C) NO. 14594 OF 2010)

                        CIVIL APPEAL NO. 8367 OF 2016
                 (ARISING OUT OF SLP (C) NO. 14595 OF 2010)

                        CIVIL APPEAL NO. 8368 OF 2016
                 (ARISING OUT OF SLP (C) NO. 14679 OF 2010)

                        CIVIL APPEAL NO. 8370 OF 2016
                 (ARISING OUT OF SLP (C) NO. 14775 OF 2010)

                        CIVIL APPEAL NO. 8371 OF 2016
                 (ARISING OUT OF SLP (C) NO. 14785 OF 2010)

                        CIVIL APPEAL NO. 8372 OF 2016
                 (ARISING OUT OF SLP (C) NO. 14874 OF 2010)

                        CIVIL APPEAL NO. 8373 OF 2016
                 (ARISING OUT OF SLP (C) NO. 14877 OF 2010)

                        CIVIL APPEAL NO. 8374 OF 2016
                 (ARISING OUT OF SLP (C) NO. 14890 OF 2010)

                        CIVIL APPEAL NO. 8375 OF 2016
                 (ARISING OUT OF SLP (C) NO. 14933 OF 2010)

                        CIVIL APPEAL NO. 8376 OF 2016
                 (ARISING OUT OF SLP (C) NO. 14964 OF 2010)

                        CIVIL APPEAL NO. 8377 OF 2016
                 (ARISING OUT OF SLP (C) NO. 27017 OF 2011)

                                    A N D

                        CIVIL APPEAL NO. 8378 OF 2016
                 (ARISING OUT OF SLP (C) NO. 27670 OF 2011)


                               J U D G M E N T

A.K. SIKRI, J.
                 Leave granted in the special leave petitions.

The appellant Madhya Pradesh State Road Transport  Corporation  (for  short,
the 'Corporation') is a public sector undertaking of  the  State  of  Madhya
Pradesh and undertakes the work of carrying passengers  from  one  place  to
another within and outside the State of Madhya Pradesh.   As  the  appellant
Corporation  was  running  into  losses,  the  State   Government   obtained
permission from the Department of Road Transport & Highways of the  Ministry
of Shipping, Road Transport & Highways, Government of India for  winding  up
of the appellant Corporation.  This permission was given by  the  Government
of India on March 23, 2005 with the following directions:
“The State Government shall ensure and be  fully  responsible  for  ensuring
compliance of any existing/future orders passed by various  court  including
Tribunal in any/all matters relating to MPSRTC.   The  State  Government  is
also advised to safe guard the interest of employees of MPSRTC.”

Considering the closure of the  Corporation,  the  Managing  Director,  vide
S.No. 1452 (Karmik-2)Stha-B/2005, Order No. 28, introduced a  Scheme  called
as Voluntary Retirement from Service (for short, 'VRS')  for  the  employees
of the Corporation.  The said Scheme was to come into force  from  July  01,
2005.  The relevant clauses, for the purpose of the instant appeals, are  as
under:
“4.  Scheme: (i)  All the candidates –  employees,  shall  be  permitted  to
give their option under this Scheme upto 1.8.2005 in Form (ka),  along  with
in Form Kha.   Nomination  Form  shall  also  have  to  be  filled  up.  The
Management shall have this right, that they may on the basis of the  reasons
to be given in writing, but without intimating any reason to the  applicant,
may accept the Voluntary Retirement from Service or  reject,  against  which
no provision of any appeal, relief shall be vested.

(ii)  In the following matters,  on  receipt  of  the  option  of  Voluntary
Retirement from Service, on the basis of merits,  decision  shall  be  taken
for consideration:

(ka)   Whether  against  the  employee   concerned   of   the   Corporation,
Administrative action is either pending or is 'anudhyat'.

(Kha)  Where, in any criminal court, any proceeding is pending,  or  in  any
Court, is in process before hand.

(ga)  Employee, who in the normal course has given  the  resignation  letter
from the service of the Corporation, or has given.

(gha)  Employee, who against the Corporation has initiated judicial  action,
or is going on, and till such action is not  rejected  or  finished  by  the
Court.

(kha)  Application for option presented after dated 1.8.2005.

(iii)  Under the Scheme, the option once given by the  employee,  shall  not
be permissible to be changed or taken back.

(iv)  The Management, by  accepting  once,  the  Voluntary  Retirement  from
Service of which employee has intimated to the employee,  in  this  respect,
then he shall not be entitled to employment on  contract,  or  otherwise  in
service of the State Government, or in the Service of  the  Corporation,  or
in its attached  Company,  active  Companies,  i.e.  the  employee  in  this
scheme, in the Public Service, as defined, shall not be entitled to ask  for
employment.

                          xx          xx         xx

As per clause 4(1) of the said Scheme, the  option  was  to  be  given  till
1.8.2005.  In other words one month time was given to decide either  to  opt
for VRS Scheme or not to opt.

Clause 4(ii) of the order clearly  provided  that  “under  the  Scheme,  the
option once given by the employee, shall not be permissible  to  be  changed
or taken back.””

It becomes  manifest  from  the  provisions  of  the  aforesaid  Scheme,  it
provided  certain  conditions  and  also  a  specific  form  in  which   the
application/option for VRS under the Scheme was to be  made.   Further,  one
of the conditions in the VRS Scheme was that once the application  form  for
opting VRS is submitted, it would not be open to the applicant  to  withdraw
the same.  This Scheme was declared open on July 01, 2005 and  was  to  last
till August 01, 2005.  It may also be stated at this stage  that  though  in
this VRS Scheme there was no indication that the last  date  for  submission
of the application can be extended,  on  October  12,  2006,  an  order  was
passed  amending  certain  provisions  of  the  original  Scheme  which  was
promulgated vide Order No. 28 dated July 01, 2005.  Essentially,  there  was
only one amendment, namely, extending the last date  of  submission  of  the
application upto October 28, 2006.   Other  provisions/  conditions  of  the
original Scheme  had  to  remain  unaltered.   With  this  amendment,  those
employees who had not opted under  the  Scheme  by  the  earlier  stipulated
date, i.e. August 01, 2005, were provided another opportunity to give  their
option for VRS.  As would be noticed hereinafter, one of  the  arguments  is
as to whether a new Scheme was promulgated or it was  an  extension  of  the
earlier Scheme.  This aspect becomes significant because of the reason  that
as per the original Scheme last date for making application was  August  01,
2005 and the Scheme came to an end on that date.  The 'extension'  given  is
much thereafter, i.e. on October 12, 2006.  Thus, there  was  no  Scheme  in
operation from August 02, 2005 to October 11, 2006.  As this argument  needs
serious consideration and will have  to  be  necessarily  addressed  at  the
appropriate place, we would like to  reproduce  hereunder  the  Order  dated
October 12, 2006 by which the time was extended till October 28, 2006.   The
same reads as under:
“Sl.No. 1919/Karmik/Ek/Swi.Se.Ni/06
                                                            Dated 12.10.2006
                                  O R D E R

Subject: Order No. 28 (Voluntary Retirement from Service Scheme 2005)  –  in
connection with.

            For giving option in the order No. 28  issued  by  the  Managing
Director, of Part Ka, Kha, in para 4(ii),  (kna)  the  last  date  has  been
given as 01.08.2005.  After consideration and after  consent  by  the  State
Government, this paragraph is amended as hereunder:

“(kna)  Application for option presented after dated 28.10.06”.

2.  The rest of the provisions/conditions issued vide order No.  28  of  the
Managing Director, with regard to Voluntary Retirement  from  Service  2005,
shall remain as before.

3.  Those  employees,  by  whom  option  under  this  Scheme  has  not  been
presented in the past and now want  to  present  their  option,  under  this
Scheme, then they can present the option, about V.R.S. under the  conditions
of Managing Director Order No. 28.

                                                                        Sd/-
                                                          Managing Director”

The  respondents/employees  in  all  these  appeals  had   submitted   their
applications for voluntary retirement within the  span  of  original  period
fixed under the Scheme, i.e. between July 01,  2005  and  August  01,  2005.
Other common factor in all these appeals is that before  their  applications
could be accepted, they had sought withdrawal  of  their  option.   However,
requests for withdrawal of the options were made after August 01, 205,  i.e.
after the expiry of  the  original  Scheme.   However,  their  requests  for
withdrawal were not entertained and on the  contrary  applications  for  VRS
submitted by these employees were accepted.  In order to make it  abundantly
clear, we clarify that this happened after these respondents  had  submitted
their affidavits withdrawing their options  under  the  VRS  Scheme.   These
respondents  were,  accordingly,  relieved  from  the  organisation  on  the
afternoon of July 31, 2005.

These respondents challenged the aforesaid action by  contending  that  once
they had withdrawn their application for  VRS,  there  was  no  question  of
going ahead with the option of VRS and accepting the same.   Therefore,  the
action of the Corporation was unwarranted and contrary to  law.   All  these
employees approached the High Court of Madhya Pradesh and  filed  respective
writ petitions challenging the aforesaid action of the Corporation.

While contesting these writ petitions, plea taken  by  the  Corporation  was
that as per the specific provision  contained  in  the  VRS  Scheme  itself,
there was a clear prohibitory clause putting an embargo on  the  rights,  if
any, of these employees from withdrawing their applications and,  therefore,
move on the part of these respondents  to  withdraw  their  option  to  take
voluntary retirement was inconsequential and the Corporation  was  empowered
to go ahead by accepting the applications for VRS.

The learned Single Judge of the High Court dismissed  these  writ  petitions
accepting the plea of the Corporation.  It was held  that  the  applications
for withdrawal of VRS could only be moved within the validity period of  the
Scheme and in those cases where applications for  withdrawal  was  submitted
after August 01, 2005, this could not be done by  the  concerned  employees.
Writ appeals came to be filed before the Division Bench of  the  High  Court
by  the  aggrieved  employees.   The  Division  Bench,  vide  the   impugned
judgment, decided all these appeals together and allowed them  holding  that
it is always permissible for an employee to withdraw the  option  under  VRS
before it is accepted.  The High Court has proceeded on the basis that  such
a VRS Scheme calling for options is an  invitation  to  offer.   Application
submitted by an employee opting under this Scheme qua  voluntary  retirement
amounts to an officer and only on the acceptance of such  an  offer  by  the
employee, a deal gets concluded and such an offer can, therefore, always  be
withdrawn before it is accepted.   For  this  proposition,  the  High  Court
referred to and relied upon judgments of this Court in Bank of India &  Ors.
v. O.P. Swarnakar etc.[1] and concluded as under:
“14.  From the aforesaid enunciation of law, there is no scintilla of  doubt
that  an  offer  made  by  an  employee  ipso  facto  would  not  amount  to
resignation in praesenti and the offer can be withdrawn during the  validity
period.  Learned Single Judge, as is perceivable, has dismissed some of  the
writ petitions and required some of the writ petitioners to  seek  redressal
under the industrial law as the scheme was valid  upto  1.8.2005.   At  this
juncture, it is appropriate to mention that the  conclusion  arrived  at  by
the learned Single Judge in this regard cannot be found fault  with  as  the
scheme in question, at the time of delivery  of  judgment,  was  valid  upto
1.8.2005.  Presently, the scheme is valid upto 31.7.2007.  The said fact  is
not disputed by Mr. Shobhit Aditya, learned  Counsel  for  the  Corporation.
As the validity period of the Scheme has been extended,  the  said  validity
would relate back to the date of inception of the Scheme and  it  cannot  be
said that jural relationship between the  employees  and  the  employer  has
come to an end.  Therefore, the employees were entitled in law  to  withdraw
their option for voluntary retirement within the validity period and as  the
validity period has been extended and they have withdrawn their option  they
should be deemed to be in service.  Be it noted that none of the  appellants
has accepted any kind of benefit  under  the  voluntary  retirement  scheme.
Some of them are continuing in service.  The employees  who  are  continuing
in service should  be  allowed  to  continue  till  the  jural  relationship
between the employees and the employer comes to an  end  as  per  law.   The
appellants who are not in service should be reinstated in service  and  they
shall reap all the consequential benefits.”

It becomes manifest from the reading of the three Judge  Bench  judgment  of
this Court in  O.P.  Swarnakar  that  such  a  VRS  Scheme  is  held  to  be
contractual in nature.  The Court, thus, held that provisions of the  Indian
Contract Act, 1872 would apply,  which  provisions  categorically  lay  down
that an offer  made  by  a  person  can  be  withdrawn  by  him  before  its
acceptance.  However, an endeavour was made by the  learned  senior  counsel
appearing for the Corporation to argue that the judgment in  O.P.  Swarnakar
should not have been followed by the High Court  in  view  of  the  specific
clause in the Scheme to the effect that an application once given cannot  be
withdrawn.  He submitted that the High Court, in the  process,  ignored  the
mandate of law laid down by this Court in State Bank of  Patiala  v.  Romesh
Chander Kanoji & Ors.[2] wherein this Court held as under:
“9.  We do not find any merit in the above  argument.  It  is  important  to
bear in mind that the Schemes in  question  are  basically  funded  schemes.
Under such Schemes, time is given to every employee  to  opt  for  voluntary
retirement and similarly time is given to the management  to  work  out  the
Scheme. Clause (5) of SBPVRS gave fifteen days' time  to  the  employees  to
opt for the Scheme and under clause (8) a period of two months is  given  to
the management to work out the Scheme. Since the  said  Schemes  are  funded
schemes, the management is required to create a fund. The  creation  of  the
fund would depend upon the number of applications; the cost of  the  Scheme;
liability which the Scheme would impose on the Bank and such other  variable
factors. If the employees are allowed to withdraw from  the  Scheme  at  any
time after its closure, it would not be possible to work out the  Scheme  as
all calculations of the management would fail. In the case of Bank of  India
v. O.P. Swarnakar [(2003) 2 SCC 721 : 2003 SCC (L&S) 200] SBIVRS is held  to
be an invitation to offer. Following the said judgment, we hold that  SBPVRS
is an invitation to offer and not an offer. Clause (5) of  the  said  SBPVRS
inter alia states that the Scheme will remain open during the  period  15-2-
2001 to 1-3-2001 whereas Rule 8 thereof provides for mode of  acceptance  by
the management. It is in the light of Rules 5 and 8 that  one  has  to  read
clause (9)(i) which provides for general conditions and under  which  it  is
provided that application once  made  cannot  be  withdrawn.  In  Chitty  on
Contracts (28th Edn., p. 125), the learned author states that:

“an offer may be withdrawn at any time before  it  is  accepted.  That  this
rule applies even though the offeror has promised to  keep  the  offer  open
for a specified time, for such a promise is unsupported by consideration.”

Therefore, clause (5) of SBPVRS gives locus poenitentiae to the employee  to
withdraw by 1-3-2001 after which the  mode  of  acceptance  contemplated  by
clause (8) of SBPVRS would apply and  the  Bank  will  proceed  to  vet  the
applications. As  stated  above,  the  Bank  needs  time  to  ascertain  its
liability; it is required to find out the cost of  creation  of  a  separate
fund which in turn  depends  on  the  number  of  applications  and  if  the
employees are permitted to withdraw after the date of closure  it  would  be
impossible for the Bank to  implement  the  Scheme.  Therefore,  clause  (5)
gives time to the employee to withdraw by 1-3-2001 and  the  Bank  is  given
time of two months thereafter to complete the designated mode of  acceptance
(see Halsbury's Laws of England, 4th Edn., p.  133).  Reading  clauses  (5),
(8) and (9)(i), it is clear that employees are  precluded  from  withdrawing
from SBPVRS after the closure of the Scheme on 1-3-2001.”

On that basis, it was argued that it was not  open  to  the  respondents  to
withdraw their application after August 01, 2005, which was  the  last  date
stipulated in the application and thereby disturb the  equilibrium  and  the
very creation of the Fund that was created  depending  upon  the  number  of
applications; the cost of the  Scheme;  liability  which  the  Scheme  would
impose and other  variable  factors  etc.   It  was  also  argued  that  the
judgment in O.P. Swarnakar related  to  batch  of  matters  of  nationalised
banks where  the  facts  and  questions  were  different.   The  significant
distinguishing  factor  was  that  there  was  no  closure  of  any  of  the
nationalised banks, which was the  prime  motive  for  introducing  the  VRS
Scheme by the Corporation.

Second argument, in the alternative, was that even if the judgment  in  O.P.
Swarnakar is to be applied, it was  specifically  held  in  that  case  that
option of voluntary retirement can be withdrawn by the last  date  on  which
the application is to be submitted.  In  the  instant  case,  these  options
were withdrawn after the stipulated date.  It was pointed out that the  High
Court did not accept this plea on the ground that since the  last  date  was
extended from August 01, 2005 to October 28, 2006 and the  applications  for
withdrawal  were  not  submitted  from  the  said   date,   the   withdrawal
applications would be treated as having been  submitted  before  the  expiry
date  mentioned  in  the  Scheme.   The  learned  senior  counsel  for   the
Corporation argued with ardor that this was an  erroneous  approach  on  the
part of the High Court inasmuch as the original VRS Scheme promulgated  vide
order No. 28 dated July 01, 2005 never mentioned any  clause  for  extension
of the Scheme and once these employees opted  under  the  said  Scheme  they
were very well informed that the last date is August 01, 2005.  It was  also
submitted that the amendment was carried out for specific  purpose,  namely,
to give opportunity to those who had not yet opted  under  the  Scheme  and,
therefore, such an extension in the date could not enure to the  benefit  of
those who had already opted and for whom the last date was August 01, 2005.

Learned counsel who appeared for the respondents in these appeals  submitted
that the position in law was crystal clear as stated in O.P.  Swarnakar  and
even in Romesh Chander Kanoji, relied upon by the Corporation,  and  made  a
fervent plea to this court to accept the approach adopted by the High  Court
in the impugned  judgment.   They  also  pointed  out  that  Romesh  Chander
Kanoji, in fact, specifically referred to and relied  upon  O.P.  Swarnakar,
which was a three Judge Bench  judgment.   It  was  also  argued  that  even
thereafter the principle of O.P. Swarnakar has been applied  by  this  Court
consistently and following judgments are cited in support:

      (i)  Food Corporation of India and others v. Ramesh Kumar[3]
      (ii) New India Assurance Company Limited v. Raghuvir Singh Narang  and
another[4].

To begin  with,  we  deem  it  appropriate  to  consolidate,  with  required
astuteness, various legal principles touching upon the issue at hand,  which
are sparged in various judgments, and then apply  those  principles  to  the
facts in these cases.  Though much case law has emerged,  reference  to  few
judgments, which take into consideration the earlier cases  as  well,  would
suffice.  Since the High Court has referred to the judgment in the  case  of
O.P. Swarnakar, we  deem  it  apt  to  initiate  the  discussion  with  that
judgment, which is also earliest of the  four  judgments  we  are  going  to
refer to.

In O.P. Swarnakar, which was a judgment rendered by a three Judge  Bench  of
this Court, various nationalised banks were  the  appellants  and  batch  of
matters pertaining to these banks were decided.   The State Bank  of  India,
constituted under the State Bank of India Act, 1955 and  other  banks  taken
over under the Banking Companies (Acquisition and Transfer of  Undertakings)
Act, 1970 adopted in the year 2000 separately but similar schemes  known  as
the “Employees Voluntary  Retirement  Scheme”.   The  question  involved  in
those appeals was whether an employee opting for voluntary retirement  under
the said Schemes was precluded from  withdrawing  that  offer.   The  Scheme
adopted by the State Bank of India differed from the  Scheme  of  the  other
nationalised banks inasmuch as  that  scheme  permitted  withdrawal  of  the
applications for voluntary  retirement  by  February  15,  2001.   The  said
Scheme  was  applicable  in  relation  to  employees  who  on  the  date  of
application had completed 15 years of service  or  40  years  of  age.   The
period during which the said Scheme was  to  remain  operative  varied  from
bank to bank.  However, in case  of  the  Punjab  National  Bank,  the  said
Scheme was to remain in operation from November  1,  2000  to  November  30,
2000.  Para 10.5 of the said Scheme barred an employee from withdrawing  the
request made for voluntary retirement  after  once  exercising  the  option.
Other sub-paras of para 10 provided that a request for voluntary  retirement
would not take effect unless accepted by the competent authority  who  would
have absolute discretion to accept or reject that request.  The said  Scheme
prescribed a particular procedure for  making  an  application  for  seeking
voluntary  retirement.   A  large  number  of  employees   submitted   their
applications, out of whom a small number of employees withdrew their  offer.
 Despite withdrawal of their offer, the same was accepted.  In  some  cases,
offers, despite withdrawal thereof, were accepted after the  expiry  of  the
operation period of the Scheme.  Writ petitions were filed in  various  High
Courts to challenge the acceptance of the  employees'  applications  by  the
banks despite their withdrawal.  Before the Punjab  &  Haryana  High  Court,
the validity of the said Scheme also was challenged.  Some writ  petitioners
sought issuance of a writ of mandamus to the respective banks  to  pay  unto
them their lawful dues strictly in terms of  the  Scheme.   The  High  Court
held that:  (i) the said  Scheme  was  not  a  valid  piece  of  subordinate
legislation  as  Sections  19(1)  and  19(4)  of   the   Banking   Companies
(Acquisition and Transfer of Undertakings) Act, 1970 had not  been  complied
with, (ii) even assuming the said Scheme to be valid,  it  was  open  to  an
employee to withdraw his option  before  the  same  had  been  accepted  and
effectively enforced, and (iii) since the  Scheme  was  invalid,  no  relief
could be granted in the  writ  petitions  seeking  any  benefits  under  the
Scheme.  The Bombay High Court and other High Courts held that  clause  10.5
of the said Scheme was not operative as the employees  had  an  indefeasible
right  to  withdraw  their  offer  before  the  same  was   accepted.    The
Uttarakhand High Court dismissed a writ petition as not maintainable on  the
ground that the petitioner had bound himself by the terms  not  to  withdraw
the application for voluntary retirement.

Eschewing the discussion on other aspects which are not relevant  for  these
cases, insofar as issue at hand  is  concerned,  the  Court  held  that  the
Scheme was floated with a purpose  of  downsizing  all  employees.   Such  a
Scheme, although may incidentally be beneficial also to the  employees,  but
was primarily beneficial to the banks.   The  ultimate  aim  and  object  of
floating such a Scheme was for the purpose of effective functioning  of  the
banks so as to enable them to compete with  private  banks.   On  the  other
hand, the Court also remarked that though bank employees do  not  enjoy  the
'status' as in the case  of  Government  employees,  nevertheless,  they  do
enjoy security of their employment  inasmuch  as  these  nationalised  banks
were 'States' within the meaning of Article 12  of  the  Constitution.   The
banks, therefore, cannot take recourse to 'hire and  fire'  for  terminating
the services of  the  employees.   They  are  required  to  act  fairly  and
strictly in terms of the norms laid down therefor.  Their  actions  in  this
behalf must satisfy the test of Articles 14 and 21.   Proceeding  therefrom,
the Court took the view that a contract of  employment  is  also  a  subject
matter of contract and insofar as the question whether the  VRS  Scheme  was
an offer/proposal  or  merely  an  invitation  to  offer  is  essentially  a
question of fact.  The Court further discussed the law relating  to  'offer'
and 'acceptance' with the observations  that  it  could  not  be  stated  in
simplistic form.  In the context of the  VRS,  however,  the  Court  applied
this law of contract by deducing the following conclusions:
      (i)  The banks treated the application from the employees as an  offer
which could be accepted or rejected.
      (ii)  Acceptance of such an offer was required to be  communicated  in
writing.
      (iii)  The decision making process involved  application  of  mind  on
the part of several authorities.
      (iv)  The decision making process was to be formed at various levels.
      (v)  The process of acceptance of an offer made by an employee was  in
the discretion of the competent authority.
      (vi)  The request of voluntary retirement would  not  take  effect  in
praesenti but in future.
      (vii)  The bank reserved its right to alter/rescind the conditions  of
the Scheme.
                 Thus, the nationalised banks in terms  of  the  Scheme  had
secured for themselves an unfettered and unguided right  to  deal  with  the
jural relationship between themselves and  their  employees.   It  was  held
that the Scheme constituted invitation to an offer and not an offer.   As  a
fortiorari, the application submitted by an employee was to  be  treated  as
offer/proposal of the employee, and when  accepted  by  the  bank  it  would
constitute a 'promise' within the meaning of  Section  2(b)  of  the  Indian
Contract Act,  1872  and  only  then  the  promise  becomes  an  enforceable
contract.
                 On this analogy, the Court held that  since  employees  had
withdrawn their offer before it was accepted, they had a right to do so.
                 However, the Court found that the case  of  State  Bank  of
India stood slightly on a different footing as it had not  amended  the  VRS
Scheme and even permitted withdrawal of applications by February  15,  2001.
Also, the Scheme floated by the State Bank of  India  contained  clause  (7)
which laid down the mode and  manner  in  which  application  for  voluntary
retirement was to be considered  and  this  clause  created  an  enforceable
right.  The Court noted that in the event the State Bank of India failed  to
adhere to its preferred  policy,  the  same  could  have  been  subsequently
enforced by the Court of  law  and,  therefore,  it  would  amount  to  some
consideration.  On this basis, insofar as appeals of  State  Bank  of  India
are concerned, the same were allowed but appeals of nationalised banks  were
dismissed.  Following passages from this judgment  capture  the  essence  of
the legal principle laid down:
“113.  The submission of the learned Attorney-General that  as  soon  as  an
offer is made by an employee,  the  same  would  amount  to  resignation  in
praesenti cannot be accepted.  The Scheme was in force for a  fixed  period.
A decision by the authority was required to be taken  and  till  a  decision
was taken, the jural relationship of employer  and  employee  continued  and
the employees concerned would have been entitled to payment of all  salaries
and allowances etc.  Thus it cannot be said to be a  case  where  the  offer
was given in praesenti but the same would be prospective in  nature  keeping
in view of (sic) the fact that it was come into force at a  later  date  and
that too subject to acceptance thereof by the employer.  We, therefore,  are
of  the  opinion  that  the  decisions  of  this  Court,  as   referred   to
hereinbefore, shall apply to the facts of the present case also.

114.  However, it is accepted that a group  of  employees  accepted  the  ex
gratia payment.  Those who accepted the  ex  gratia  payment  or  any  other
benefit under the Scheme, in our considered opinion, could not have  resiled
therefrom.

115.  The Scheme is contractual in nature.  The  contractual  right  derived
by the employees concerned,  therefore,  could  be  waived.   The  employees
concerned having accepted a part of the benefit could not  be  permitted  to
approbate and reprobate nor can they  be  permitted  to  resile  from  their
earlier stand.”

Next decision, in the chronology, which we want to refer to is the  case  of
Romesh Chander Kanoji.  This is also a judgment rendered by  a  three  Judge
Bench, in which case of O.P. Swarnakar  was  specifically  referred  to  and
discussed.  The principle laid down in O.P. Swarnakar was explained  and  in
the process the Court noticed different outcomes insofar as  State  Bank  of
India is concerned  vis-a-vis  nationalised  banks.   This  distinction  was
brought out and explained by this Court in the following manner:
“6.  It is evident from above that in the case of SBIVRS, where there  is  a
specific provision for withdrawal, the employee  must  exercise  his  option
within the time specified; and in case of  nationalized  banks  where  there
was no provision to withdraw (and in fact the  Scheme  forbade  withdrawal),
the  withdrawal  must  be  effected  prior  to  acceptance  by   the   Bank.
Therefore, in terms of the ratio laid down by this Court,  the  employee  is
ensured under SBIVRS the right of withdrawal within the specified period.”

The Court thereafter referred to its  earlier  judgment  of  this  Court  in
State Bank of Patiala v. Jagga Singh[5] wherein the Court  held  that  since
State Bank of Patiala was a subsidiary  of  State  Bank  of  India  and  the
Schemes were similar, the decision in O.P. Swarnakar, so far as  it  related
to the State Bank of India, would be applicable to State Bank of Patiala  as
well.  The counsel appearing for  the  employees  in  this  case  sought  to
distinguish Jagga Singh.  However, this contention was repelled and  in  the
process observation which was made by the  Court  need  a  glance.   It  is,
thus, reproduced below:
“9.  We do not find any merit in the above  argument.  It  is  important  to
bear in mind that the Schemes in  question  are  basically  funded  schemes.
Under such Schemes, time is given to every employee  to  opt  for  voluntary
retirement and similarly time is given to the management  to  work  out  the
Scheme. Clause (5) of SBPVRS gave fifteen days' time  to  the  employees  to
opt for the Scheme and under clause (8) a period of two months is  given  to
the management to work out the Scheme. Since the  said  Schemes  are  funded
schemes, the management is required to create a fund. The  creation  of  the
fund would depend upon the number of applications; the cost of  the  Scheme;
liability which the Scheme would impose on the Bank and such other  variable
factors. If the employees are allowed to withdraw from  the  Scheme  at  any
time after its closure, it would not be possible to work out the  Scheme  as
all calculations of the management would fail. In the case of Bank of  India
v. O.P. Swarnakar [(2003) 2 SCC 721 : 2003 SCC (L&S) 200] SBIVRS is held  to
be an invitation to offer. Following the said judgment, we hold that  SBPVRS
is an invitation to offer and not an offer. Clause (5) of  the  said  SBPVRS
inter alia states that the Scheme will remain open during the  period  15-2-
2001 to 1-3-2001 whereas Rule 8 thereof provides for mode of  acceptance  by
the management. It is in the light of Rules 5 and 8 that  one  has  to  read
clause (9)(i) which provides for general conditions and under  which  it  is
provided that application once  made  cannot  be  withdrawn.  In  Chitty  on
Contracts (28th Edn., p. 125), the learned author states that

“an offer may be withdrawn at any time before  it  is  accepted.  That  this
rule applies even though the offeror has promised to  keep  the  offer  open
for a specified time, for such a promise is unsupported by consideration.”

Therefore, clause (5) of SBPVRS gives locus poenitentiae to the employee  to
withdraw by 1-3-2001 after which the  mode  of  acceptance  contemplated  by
clause (8) of SBPVRS would apply and  the  Bank  will  proceed  to  vet  the
applications. As  stated  above,  the  Bank  needs  time  to  ascertain  its
liability; it is required to find out the cost of  creation  of  a  separate
fund which in turn  depends  on  the  number  of  applications  and  if  the
employees are permitted to withdraw after the date of closure  it  would  be
impossible for the Bank to  implement  the  Scheme.  Therefore,  clause  (5)
gives time to the employee to withdraw by 1-3-2001 and  the  Bank  is  given
time of two months thereafter to complete the designated mode of  acceptance
(see Halsbury's Laws of England, 4th Edn., p.  133).  Reading  clauses  (5),
(8) and (9)(i), it is clear that employees are  precluded  from  withdrawing
from SBPVRS after the closure of the Scheme on 1-3-2001.”


The aforesaid two judgments pertained to nationalised banks  or  State  Bank
of India/its subsidiaries.  Issue  was  discussed  again  in  respect  of  a
public sector undertaking in the case of Food Corporation of  India  &  Ors.
v. Ramesh Kumar[6].  In the said case, clause VIII (d)  of  the  VRS  Scheme
framed by the Food Corporation of India was to the following effect:
“Once an employee submits his application  for  voluntary  retirement  under
this scheme to the competent authority, it shall be treated as final and  it
is not open to the employee to withdraw the same.  The  competent  authority
within notice period (3 months) shall take a decision to  accept  or  reject
the request and shall communicate the same to the official concerned.”

                 On  facts,  it  was  found  that  the  offer  of  voluntary
retirement given by the employee was withdrawn before its  acceptance.   The
Court held that it could be so done  following  O.P.  Swarnakar  and  Romesh
Chander Kanoji.  Paragraph 8 of the said judgment discusses the position  as
under:
“8. Now adverting to the present Scheme of Food Corporation, Para 8  clearly
stipulates that the incumbent has no  right  to  revoke  the  same  and  the
Management will  decide  the  same  within  three  months.  That  means  the
Management still has three months' time to consider and  decide  whether  to
act upon the offer given by the incumbent  or  not.  But  if  the  incumbent
revokes his offer before the Corporation accepts it then in that  case,  the
revocation of the offer is complete and  the  Corporation  cannot  act  upon
that offer. In the present case there is one more  additional  factor  which
is that  the  Management  has  to  take  a  decision  within  three  months.
Therefore, once the revocation is made by the incumbent before three  months
then in that case the Corporation cannot act upon  the  offer  of  voluntary
retirement unless it is accepted prior to its  withdrawal.  In  the  present
case, it is clear that the  incumbent  had  given  an  offer  for  voluntary
retirement on 13-9-2004 and he revoked his offer on 27-9-2004 but  the  same
was accepted on 9-11-2004 i.e. after the revocation of his  offer.  In  view
of the law laid down by this Court in State Bank of Patiala  [(2004)  2  SCC
651 : 2004 SCC (L&S) 428]  the  incumbent  has  already  revoked  his  offer
before it could be accepted. Therefore, in this  view  of  the  matter,  the
approach of the High Court appears to be correct and does  not  require  any
interference. The revocation made by  the  incumbent  on  27-9-2004  of  his
offer of retirement cannot be acted upon as he has  revoked  it  before  the
Corporation could act upon it. Hence, we are of the opinion, that  the  view
taken by the High Court is correct. Consequently, all the three appeals  are
dismissed but without any order as to costs.”


In New India Assurance Company Ltd. v.  Raghuvir  Singh  Narang  &  Anr.[7],
this Court again reiterated that such schemes  were  contractual  in  nature
and the provisions of the Indian Contract Act,  1872  would  apply  and  the
offer could be withdrawn any time before its acceptance.  What is  important
is that this Court culled out the principles laid down in O.P. Swarnakar  in
para 22 of its judgment, which we reproduce below:
“22. The effect of the decision in Swarnakar can be summarised thus:

(i) If a contractual  scheme  provides  that  the  voluntary  retirement  by
exercise of option by the  employee  will  come  into  effect  only  on  its
acceptance by the employer, it will not create any enforceable right in  the
employee to claim SV  retirement.  Any  term  in  such  a  scheme  that  the
employee shall not withdraw from the  option  once  exercised,  will  be  an
agreement without consideration and therefore,  invalid.  Consequently,  the
employee can withdraw the  offer  (that  is  option  exercised)  before  its
acceptance. But if the contractual scheme gives the option  to  an  employee
to voluntarily retire in terms of the scheme and if there  is  no  condition
that it will be effective only on acceptance by  the  employer,  the  scheme
gives an enforceable right to the employee  to  retire,  by  exercising  his
option. In such a situation, a provision in the contractual scheme that  the
employee will not be entitled to withdraw the  option  once  made,  will  be
valid and binding and consequently, an employee  will  not  be  entitled  to
withdraw from the option exercised.

(ii) Where the scheme is statutory in  character,  its  terms  will  prevail
over the general principles of contract and the provision  of  the  Contract
Act. Further, there will be no  question  of  any  “consideration”  for  the
condition in the scheme that the employee will not withdraw from the  option
exercised. Subject to any challenge to the validity of  the  scheme  itself,
the terms  of  the  statutory  scheme  will  be  binding  on  the  employees
concerned, and once the option is exercised by an  employee  to  voluntarily
retire in terms of the retirement  package  contained  in  the  scheme,  the
employee will not be entitled to withdraw from the exercise of  the  option,
if there is a bar against such withdrawal.


Reading of the aforesaid judgments would clearly demonstrate that  in  those
cases where the Scheme is  contractual  in  nature  (and  not  statutory  in
character as was seen in State Bank of  India's  case),  provisions  of  the
Indian Contract Act would apply. 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.  That  is  the  clear  mandate  of
Romesh Chander Kanoji.  The rational which is given  for  carving  out  this
exception is contained in para 9 of the said  judgment,  which  has  already
been reproduced above.  To put it pithily, what is highlighted is that  such
schemes are funded schemes and time is given to every employee  to  opt  for
voluntary retirement.  Because these are funded schemes, the  Management  is
required to create a fund.  The creation of this fund depends upon a  number
of applications; the cost of the Scheme; liability which this  Scheme  would
impose on the employer and such other variable factors.  In this  situation,
if the employees are allowed to withdraw from the Scheme at  any  time  even
after its closure, it would not be possible to work out the  Scheme  as  all
calculations of the employer would fail.

In the present case, the Corporation had floated the Scheme because  of  the
reason that it has virtually stopped transport business and the  purpose  of
the Scheme was to benefit itself by shrinking the strength of the  employees
as with no transport business need for such employees is  not  there.   Here
also, the Scheme provided that once the option is given, the same cannot  be
withdrawn.  Following the dicta in the aforesaid judgments, as noted  above,
it is clear that notwithstanding this clause, the employees had a  right  to
withdraw the offer during the validity  period  but  not  thereafter.   This
legal principle is even taken note of by the  High  Court  as  well  in  the
impugned judgment.
                 The High Court has, however, held that  though  the  Scheme
was valid up to August 01, 2005, but validity was extended up  to  July  31,
2007, the employees could  withdraw  their  offers  before  July  31,  2007.
Further, as in all these cases where the offer  was  withdrawn  before  July
31, 2007, the High Court  has  dismissed  the  appeals  of  the  Corporation
herein.

At this juncture, therefore, other issue that gains importance and needs  to
be decided is: whether validity of the Scheme was extended up  to  July  31,
2007 and the employees could withdraw their offer before this  date  or  the
date on which the initial scheme expired,  i.e.  August  01,  2005  and  the
withdrawal thereafter was not permissible?

To decide this question, let us recapitulate some salient facts.  Scheme  in
the first instance was floated on July 01, 2005.  It clearly mentioned  that
those interested to opt for the Scheme would give their  options  by  August
01,  2005  and  not  thereafter.   It  was   categorically   provided   that
application for  option  presented  after  August  01,  2005  shall  not  be
considered.  Para 4(iii) also provided that the option  once  given  by  the
employee shall not be permitted to be  changed  or  taken  back.   Sub  para
(viii) of para 4  provided  for  settlement  of  dues  of  the  employee  on
acceptance of such an Scheme.  This Scheme came to  an  end  on  August  01,
2005.  There was no extension of the Scheme  during  its  currency  or  even
immediately thereafter.  More than one year thereafter, i.e. on October  12,
2006, the appellant Corporation gave another opportunity to  those  who  had
not submitted the applications earlier, to submit  the  options  by  October
28, 2006.  We have already reproduced, in toto, the order dated October  12,
2006.  In the first blush, it may give an impression that the  initial  date
of August 01, 2005 stands  extended  till  October  28,  2006.   However,  a
little closer scrutiny and  analysis  of  the  factual  background  narrated
above amply demonstrates that it is not a case of extension of the  original
Scheme.  Reason is simple and can be found in the fact that there was a  big
gap/hiatus between August 01, 2005 and October  12,  2006.   Earlier  Scheme
had come to an end on August 01, 2005, naturally no employees  submitted  or
could submit applications after August 01, 2005  under  the  Scheme.   There
was no VRS Scheme in operation from August 02, 2005  to  October  11,  2006.
It is only on October 12, 2006, another opportunity was given  to  the  rest
of the employees to submit their applications and the  period  during  which
such an application for voluntary retirement could  be  submitted  was  from
October 12, 2006 to October 28, 2006.  This small window was  opened  for  a
period  of  17  days  for  those  employees  who  had  not  submitted  their
applications and they were afforded another chance.  At the same  time,  the
main reason was to attract more  such  employees  to  opt  for  VRS  as  the
Corporation had  decided  to  close  down  its  operations  and  wanted  its
employees to take an honorable exit  with  'golden  handshake'.   Therefore,
there is an acquity and sharpness in  the  submissions  of  the  Corporation
that it cannot be treated as extension of  the  earlier  Scheme.   In  fact,
instead of promulgating the VRS Scheme all over again, easy  way  was  found
by  making  amendment  in  a  particular  clause  stating  that  application
presented  after  October  28,  2006  shall  not  be  considered.    Another
significant feature which has to be kept in mind is that between August  01,
2005 and October 12, 2006, applications of many employees had been  accepted
and many out of them had even been offered their terminal  dues.   Thus,  we
find that there are two distinct  groups  of  employees  who  had  submitted
their applications for VRS.  First group was the  one  which  exercised  its
option between July 01, 2005 to August 01, 2005.  Second  set  of  employees
are those who submitted their options  when  another  chance  was  given  to
them, i.e. from October 12, 2006 to October  28,  2006.   In  view  thereof,
insofar as first set of employees are concerned, they could  withdraw  their
option, before it was accepted, by  August  01,  2005  and  not  thereafter.
Likewise, those who submitted  their  options  in  the  second  phase  could
withdraw the same before October 28, 2006.  A chart was submitted before  us
giving the status  of  the  applications  that  were  submitted  by  various
employees/respondents in these appeals.  This chart indicates that  some  of
the employees belonging to the first group had withdrawn their offer  before
August 01, 2005.  They had right to do so.  Acceptance of their offer  after
the withdrawal would be of no consequence.   However,  those  employees  who
withdrew their offers after August 01, 2005 could not do so and,  therefore,
the Corporation was within its right  to  accept  their  offers.   Likewise,
those employees belonging to the second category  who  had  withdrawn  their
offers before October 28, 2006 were entitled to  withdraw  their  offers  as
those were not  accepted  by  that  date.   However,  the  withdrawal  after
October 28, 2006 when Scheme was closed would be of no consequence.

When we apply the aforesaid test to the facts of this  case,  we  find  that
insofar as those employees who fall in the  first  category  are  concerned,
they had withdrawn their offer after August 01, 2005, except one Mr.  Dinesh
Chand Yadav, who is respondent No.1 in  the  Civil  Appeal  arising  out  of
Special Leave Petition (Civil) No. 14874  of  2010.   Therefore,  from  this
batch, only he is entitled for reinstatement with  back  wages,  as  he  has
also filed an undertaking, in terms of this  Court's  order  dated  May  12,
2016, to the effect that he is not gainfully employed  during  the  relevant
period.  Likewise, employees falling in the second  category  had  withdrawn
their offer after October 28, 2006, except Mr. Sukhram and  Mr.  Ram  Sharan
Rathore, both respondents in the Civil  Appeal  arising  out  Special  Leave
Petition (Civil) No. 14594 of 2010.  However, these  respondents  failed  to
comply with this Court's order dated May 12,  2016.   They  are,  therefore,
entitled for reinstatement without back wages.

Accordingly, Civil Appeal arising out of Special Leave Petition (Civil)  No.
14874 of 2010 qua Mr. Dinesh Chand Yadav and Civil  Appeal  arising  out  of
Special Leave Petition (Civil) No. 14594 of  2010  are  dismissed.   In  the
case of all other respondents, their application  for  withdrawal  post  the
tenure of the Scheme would be of no consequence.  The direction of the  High
Court reinstating these respondents/employees is,  therefore,  found  to  be
contrary to law and is hereby set aside, resulting into allowing  all  other
appeals of the Corporation.
                 In the facts and circumstances of this  case,  there  shall
be no order as to costs.


                             .............................................J.
                                                                (A.K. SIKRI)



                             .............................................J.
                                                              (R.K. AGRAWAL)
NEW DELHI;
AUGUST 29, 2016.
-----------------------
[1]
      (2003) 2 SCC 721
[2]   (2004) 2 SCC 651
[3]   (2007) 8 SCC 141
[4]   (2010) 5 SCC 335
[5]   (2004) 2 SCC 201
[6]   (2007) 8 SCC 141
[7]   (2010) 5 SCC 335