Vijay R. Pandhare v. M/s. Balsara Hygenic Products Ltd.

1) Petitioners have filed this petition challenging the judgment and order dated 10 April 2003 passed by the Member, Industrial Court, Thane dismissing Complaint (ULP) No.138 of 1998 filed ____Page No.1 of 21___ by them challenging voluntary retirement granted to them, seeking their reinstatement in service or to pay correct amounts towards implementation of the Voluntary Retirement Scheme.

2) Respondent No.1-M/s. Balsara Hygenic Products Ltd. was a Company engaged in manufacture of basic chemicals, pharmaceuticals, cosmetics etc. and had one of its factories at Thane. It had employed about 180 employees in its Thane Factory. Respondent No.1 displayed Voluntary Retirement Scheme (VRS) on its notice board on 12 June 1997 which was to come into effect on 20 June 1997. According to the Petitioner, only 8 to 10 employees voluntarily opted for the said scheme and majority of the Workmen were against the Voluntary Retirement Scheme and they were in the process of negotiating with the Management either for continuation of their employment or for offering more beneficial VRS terms. It is Petitioner’s contention that the same VRS was once again displayed by the Respondent- Management on 12 November 1997. It is Petitioner’s case that they were kept in dark about the exact features of the Scheme and were forced and compelled to opt for the Scheme by giving threats that upon refusal to opt for the Scheme, they would lose their entire service benefits. Accordingly, on 30 November 1997, all the Workers accepted VRS offered to them. The Management obtained receipts-cum-declaration from the concerned workers about acceptance of full and final entitlements under the Voluntary Retirement Scheme. Petitioners contend that after 10 to 15 days, they realised that they were cheated in the matter of implementation of VRS. They made representations to the Management. Without prejudice, it is Petitioner's contention that they were not paid correct amounts in accordance with the Scheme and ____Page No.2 of 21___ were paid much lesser amounts than the promised amount of Rs.5,00,000/-. That the Workmen opted for voluntary retirement under a hope that each one of them would secure atleast Rs.5,00,000/- out of the Scheme, whereas, they were paid paltry sums ranging between Rs.1,00,000/- to Rs.2,00,000/-. With the above broad grievances, Petitioners filed Complaint (ULP) No.138/1998 in Industrial Court, Thane. The complaint was resisted by Respondent-employer by filing Written Statement. Both the sides led evidence in support of their respective claims. After considering the pleadings, documentary and oral evidence, the Industrial Court has dismissed the Complaint by judgment and order dated 10 April 2003, which is subject matter of challenge in the present petition.

3) By order dated 15 June 2004, this Court has admitted the petition by denying any interim relief. By order dated 16 June 2009, this Court permitted Petitioners to implead, ‘M/s. Dabur India Ltd.’ (Dabur) as Respondent No.5 to the petition on the ground that Respondent No.1- Company amalgamated with Dabur. Originally, the petition was filed in the name of ‘Shri. Vijay Ramchandra Pandhare’ on behalf of 174 workers, whose list is appended at Exhibit-A to the petition. Civil Application No.1551 of 2018 was filed seeking substitution of the Original Petitioner by the names of 57 workers. By order dated 26 July 2018, this Court permitted addition of the said 57 workers as Respondent Nos. 2 to 59. By further order dated 11 January 2024, this Court permitted impleadment of another 7 workers as Respondent Nos. 60 to 66. This is how petition is now being prosecuted by total 66 Petitioners. ____Page No.3 of 21___ 4) Mr. Deshmukh, the learned counsel appearing for the Petitioners would submit that the Industrial Court has erred in dismissing the complaint filed by the Petitioners. He would submit that insertion of words ‘if lower than the amount as per clause No.1 (a or b) above’ is contrary to the provisions of Section 10 (10C) of the Income Tax Act, 1961 (Income Tax Act) read with Rule 2BA of the Income Tax Rules, 1962 (Income Tax Rules). He would submit that Section 10(10C) of the Income Tax Act mandates the Voluntary Retirement Scheme floated by any Company to be in accordance with the provisions of the Income Tax Rules. That the Income Tax Rules prescribe conditions, subject to which, Voluntary Retirement Scheme can be approved by the Income Tax Authorities. That an employer cannot float Voluntary Retirement Scheme which is contrary to the provisions of the Income Tax Act and the Rules made thereunder. He has also relied upon guidelines issued by the Income Tax Department under Circular No.640 dated 26 November 1992, which again mandates that the scheme cannot be contrary to the prescribed guidelines. Mr. Deshmukh would submit that the Voluntary Retirement Scheme, which is forcibly imposed by the Petitioners, is nothing but an unconscionable contract, which is invalid in the eyes of law and merely because the Petitioners accepted the same, the same would estop them from changing the same. That the contract in the form of voluntary retirement is of such nature that the Court cannot expect or enforce the same and would infact strike it down as an unfair and unreasonable contract. That the Petitioners did not possess the necessary bargaining power and have been misrepresented by Respondent-Management. That each of them would receive atleast Rs. 5,00,000/- towards implementation of the scheme. That they were however paid paltry sums ranging between Rs.1,00,000/- to ____Page No.4 of 21___ Rs.2,00,000/-. That acceptance of scheme was premised on specific promise and assurance about payment of minimum amount of Rs.5,00,000/- to each workers. That therefore such unconscionable contract cannot be permitted to operate. He would further submit that under Clause (vi) of Rule 2BA of the Income Tax Rules, every employer is mandated to offer the option of being paid the amount of salary at the time of retirement multiplied by the balance months of service left before his retirement on superannuation. That though such option was made available in the VRS, the same was unauthorisedly and illegally rendered nugatory by use of the words ‘if lower than the amount as per clause No.1(a or b) above’. He would submit that in the event of conflict in the provisions of the scheme and the provisions of the Rules, the provision of the Rules, which are more beneficial to the employees, must be given effect to. He would submit that the Industrial Court has completely erred in not appreciating the above position where the workers concerned were forced and cheated in accepting unconscionable contract of voluntary retirement. Mr. Deshmukh would submit that though the workers prayed for various reliefs such as their reinstatement, prevention of sale of Plant & Machinery etc. before the Industrial Court, considering the long lapse of time, only the monetary reliefs in the form of difference in the amounts as indicated in Exhibit-A to the petition needs to be paid to the Petitioners. He would also submit that number of aggrieved employees have also come down drastically from 174 to 66. He would therefore pray for setting aside the order of the Industrial Court and a direction for payment of the balance amounts indicated in Exhibit-A to the petition. ____Page No.5 of 21___ 5) The petition is opposed by Mr. Engineer appearing for Respondent No.5-Dabur which has amalgamated with Respondent No.1- Company. He would submit that implementation of Voluntary Retirement Scheme was as a result of series of negotiations with the workers and their unions. That the workers have voluntarily accepted the offer that was made to them after fully understanding the same. That there is no element of force or coercion on the part of Respondent No.5-Management in the matter of implementation of the VRS. That the Industrial Court has rightly appreciated the entire evidence on record for repelling the objections of force, misrepresentation or deceit raised by the Petitioners.

6) So far as reliance of Petitioners on the provisions of the Income Tax Act and Income Tax Rules is concerned, Mr. Engineer would submit that the relevant provisions only deal with tax exemption and do not seek to create any employment conditions between the employer and the employee. That Section 10(10C) of the Act and Rule 2(BA) of the Rules deals with entitlement of a person in receipt of amount towards voluntary retirement to claim tax exemption. That the said provisions are incorporated in order to regulate the scheme for tax exemption and the said provisions are in no manner intended to create any terms of contract and employment between the employer and employee. That every employer is entitled to frame his own scheme for voluntary retirement. That the tax exemption is applicable only if the scheme conforms to the provisions of the Act and the Rules.

7) Mr. Engineer would submit that despite Respondent No.1 facing financial crisis, it offered much higher amounts to the workers ____Page No.6 of 21___ towards voluntary retirement. That as against payment of only 15 days salary for per completed years of service towards retrenchment compensation, the Respondent-Management offered much higher package at the rate of 45 days salary for each completed year of service or 45 days of salary for the balance years of service, whichever was higher. Thus, the workers have already been paid attractive package which is accepted by them voluntarily and they cannot be subsequently take volte face and challenge the very scheme of which they are beneficiaries. Mr. Engineer would pray for dismissal of the petition.

8) Having considered the submissions canvassed by the learned counsel appearing for the parties, it seen that the Voluntary Retirement Scheme was offered by notice dated 12 November 1997. It would be apposite to reproduce the Scheme introduced vide Notice dated 12 November 1997 which reads thus: November 12, 1997 VOLUNTARY RETIREMENT SCHEME Pursuant to our Notice dated 12.6.1997, the Management hereby declares/introduce following Voluntary Retirement Scheme for the permanent employees employed in the Company. The employers, who desires to leave the Company voluntarily, shall be entitled to the benefits enumerated hereinbelow: RETIREMENT BENEFITS

1. Voluntary Retirement Benefits at the rate of 45 days' Salary/wages on: a) Completed years of service OR ____Page No.7 of 21___ c) Remaining years of service WHICHEVER IS HIGHER OR

2. Monthly emoluments at the time of retirement multiplied by the balance months of service left, if lower than the amount as per clause No. 1 (a or b) above. Both the above are subject to an overall statutory maximum limit of Rs. 5,00,000/- (Rupees Five Lacs only).

3. Gratuity as per the payment of Gratuity Act.

4. Leave Wages.

5. Bonus as applicable.

6. Ex-gratia on following rates: CATEGORY COMPENSATION a) Completed 25 Years of Service & above Rs. 35,000/d) Completed 14 years of Service to 24 Years and above but less than 25 Years Rs. 30,000/e) 1 Year to 13 completed Years of Service and above but loss than 14 years Rs. 25,000/- The said Voluntary Retirement Scheme will come into force from the date of displaying this Scheme and it shall remain in force upto 30th June, 1997. During this period, the employees who shall come forward and submit Resignation Application-cum- Declaration for Voluntary Retirement shall be paid the benefits mentioned above. ____Page No.8 of 21___ The payment as agreed above will be made subject to its acceptance by the Management. The Management reserves the right and discretion to accept or reject such Voluntary Retirement Resignation Application-cum- Declaration. The proforma of the Resignation Application-cum-Declaration form is kept ready with the calculations of the dues arising out of Voluntary Retirement Scheme with Mr. Sunil Surana and Mr. K. P. Muraleedharan, and Mr. Vijay Gurav and the employees desirous of availing them for the proforma of the Application form and the details of the benefits arising out of the said scheme. Those of the employees who will apply under Voluntary Retirement Scheme shall have no right thatsoever to withdraw the said Resignation Application-cum-Declaration once it is submitted. The Vacancy caused by the Voluntary Retirement Scheme will not be filled-in and the retired employees would not be re-employed in this Company or any other Company or Concern belonging to the same. This Scheme approval by Commissioner of Income-tax as per Sec. 10 (10C) of the Income-tax Act. The Management hopes that maximum number of employees will available opportunity. For BALSARA HYGIENE PRODUTS LTD., Sd/- (ZAL A BALSARA)

JOINT MANAGING DIRECTOR

9) Thus, under the VRS, the workers were offered (i) voluntary retirement benefit in the form of compensation with maximum cap of Rs.5,00,000/-, (ii) gratuity, (iii) leave wages, (iv) bonus and (v) ex-gratia. The main bone of contention of the Petitioners is about interpretation of Clauses-(1) and (2) of the Scheme. Here again, there appears to be no ____Page No.9 of 21___ debate about interpretation of Clause-(1), under which, the benefit at the rate of 45 days of salary was payable either on the basis of completed years of service or remaining years of service as per the choice of worker and the amount which was higher was to be paid. Thus, a worker putting in more length of service could opt for benefit at the rate of 45 days of salary multiplied by number of years of service put in by him/her whereas the worker who had less number of years of service could opt for computation of benefit at the rate of 45 days of salary by taking into consideration the balance years of service. The main problem sought to be highlighted by Petitioners is with regard to the operation of Clause-(2) of the Scheme, which provided for computation of benefit by taking into consideration monthly emoluments at the time of retirement multiplied by the balance months of service left. However, addition of the words ‘if lower than the amount as per clause No. 1(a or b) above’ has virtually rendered Clause- (2) redundant. If the amount payable under Clause-(2) (salary multiplied by balance months of service) was lower than the amount receivable under Clauses-1(a) or 1(b), no sane worker would opt for lesser amount under Clause-(2). This is the exact grievance sought to be highlighted by Mr. Deshmukh and, in my view, he cannot be said to be entirely wrong in his contention. In fact, Mr. Engineer has fairly conceded to the position that Clause-(2) of the Scheme has been rendered redundant on account of use of the words ‘if lower than the amount as per clause No.1(a or b) above’. To this extent, Clause-(2) of the Scheme appears to be faulty. The issue however is whether any fault in the Scheme creates a right in favour of the employee to have the same modified as per its choice? More particularly in the present case, Petitioners seek to bring Clause-(2) of the Scheme on par with the ____Page No.10 of 21___ provisions of the Income Tax Act and Income Tax Rules. This is more so because the Scheme clearly provides that the same was approved by the Commissioner of Income Tax under Section 10(10C) of the Income Tax Act. It would therefore be relevant to consider the provisions of the Income Tax Act and Income Tax Rules.

10) Section 10 of the Income Tax Act deals with incomes not to be included in total income for levy of income tax. Section 10 incorporates numerous heads of income which are exempted from being included in the total income for levy of income tax. Once such excluded head is to be found under sub-section 10C of Section 10, which relates to amounts received by an employee towards voluntary retirement or termination of services. Section 10(10C) of the Income Tax Act reads thus: