Supreme Court Upholds High Court Order on VRS Parity: Union of India Vs Hindustan Photo Films Workers Welfare Centre (CITU) & Ors.

Background and Factual Matrix

The dispute in Union of India Vs Hindustan Photo Films Workers Welfare Centre (CITU) & Ors. arose from a long-drawn legal battle connected to the implementation of a Voluntary Retirement Scheme (VRS) for the workforce of Hindustan Photo Films Manufacturing Company Limited, a Public Sector Undertaking (PSU) that had been declared a Sick Industrial Company under the relevant statutory framework.

The Board for Industrial and Financial Reconstruction (BIFR), through its order dated 30 January 2003, recommended that the company be wound up. This recommendation was subsequently affirmed by the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) on 7 June 2005, sealing the company's fate as a non-viable enterprise. Following years of administrative deliberation, the Ministry of Heavy Industries and Public Enterprises issued a letter dated 20 March 2014 approving a VRS package for the company's employees. Pursuant to this approval, the company itself issued a circular dated 21 March 2014 laying out the terms for implementation of the scheme.

However, the employees' union was not entirely satisfied with the terms of the scheme as approved and implemented. The union moved the courts through writ petitions, seeking several reliefs, including:

  • Payment of 72 months' salary computed on the 2007 pay scales
  • Clearance of pay arrears based on the 2007 pay scales
  • Non-recovery of specified advances and allowances from the severance amount
  • Permission for employees to continue occupying staff quarters until 1 May 2016

Proceedings Before the Single Judge

The learned Single Judge, upon examining the matter, declined to strike down either the Government's approval letter dated 20 March 2014 or the company's implementation circular dated 21 March 2014, thereby rejecting the union's challenge to the legal validity of these documents.

Nevertheless, the Single Judge issued certain operational directions:

  1. The severance package was to be implemented within one month
  2. Upon receiving the package, employees were required to vacate and surrender possession of staff quarters within one month
  3. Crucially, the Single Judge held that no income tax was recoverable from the severance package disbursed to the employees

These directions became the subject of writ appeals filed by both the company management and the Government of India, setting the stage for further judicial examination at the Division Bench level.

Division Bench Proceedings — High Court's Analysis

Cabinet Committee's Policy Approval

The High Court, hearing the writ appeals, took note of a significant administrative fact — the Cabinet Committee on Economic Affairs (CCEA) had already sanctioned the VRS package and released ₹181.54 crore as a non-plan loan specifically for implementing the scheme on 2007 notional pay scales without arrears, treating this as a one-time relaxation of the Department of Public Enterprises (DPE) guidelines.

The High Court acknowledged that Hindustan Photo Films Manufacturing Company Limited was a PSU, and the VRS had been floated as a conscious policy decision of the Central Government. Most employees initially opted for the scheme, while the remaining employees exercised their option subsequently.