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The Supreme Court on 2 March, held that State Bank of India employees are entitled to proportionate pension as per SBI Pension Fund Rules, who have taken voluntary retirement as per the 2000 Voluntary Retirement Scheme after 15 or more years of service.

The three-judge bench comprising of Justices Arun Mishra, MR Shah and BR Gavai were dealing with a question of whether employees who opted for VRS after putting in pensionable service were entitled to pension as well under the SBI Pension Fund Rules.

As per sources, on 27 December 2000, the VRS scheme proposed by the Indian Banks Association was approved by the Central Board of State Bank of India. As per this scheme, any employee with 15 years of service was eligible for a pension. However, as per SBI Pension Fund Rules, an employee was eligible for pension only on completion of 20 years of service. Thus, citing the SBI Pension rules, Deputy Managing Director ­cum­ Circle Development Officers of SBI clarified on 15 January 2001 that as per the existing rules, employees who had not completed 20 years of pensionable service were not eligible for a pension.

Subsequently, one Radhey Shyam Pandey, who opted for VRS after 19 years, nine months, and 18 days of pensionable service, was denied pension as per Rules on the ground that he had not completed 20 years of service. There were several other employees who were in the same situation as Radhey Shyam Pandey. They approached the High Courts, which ruled in their favor.

However, the SBI challenged the HC verdict before SC in an appeal.

The bench stated that “Once the memorandum containing the IBAs proposal for providing pension was approved in absolute terms, the clarification could not be of any value to dilute the otherwise clear and unambiguous resolution of the Board of Directors.” It further observed that SBI, being an instrumentality of State under Article 12, is bound by the principle of fairness.

The bench further asserted that “The VRS scheme was not floated by the SBI on its own volition. It was pursuant to an exercise that was undertaken by the IBA in view of the recent developments of modern technology considering the age group of the employees in the bank, the need to have a new skill, and to rationalize the manpower; a decision was taken.”

Subsequently, the bench stated that even if two interpretations were possible, the interpretation benefiting the employee should be adopted and held that the employees who completed 15 years of service or more as on cut-off date were entitled to a proportionate pension under SBI VRS to be computed as per SBI Pension Fund Rules.


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