SBI Denies VRS Claim After Employee Dies Before Retirement Date, High Court Orders Payment to Family
The Telangana High Court has ruled that if an SBI employee’s Voluntary Retirement Scheme (VRS) application has already been accepted, the employee’s death before the formal retirement date cannot automatically stop the legal heirs from receiving VRS benefits.
The Court directed State Bank of India (SBI) to consider and pay VRS benefits of ₹9.48 lakh to the family of late K.S.R. Sastry. SBI had earlier rejected the claim because Sastry died about one month before the VRS cut-off date.
SBI Employee Died Before VRS Retirement Date
K.S.R. Sastry joined SBI on November 9, 1971. He died of a heart attack on February 27, 2001. The effective retirement date under the VRS scheme was March 31, 2001. SBI argued that because Sastry died before this date, his VRS application became invalid. However, Sastry’s family challenged the bank’s decision before the Telangana High Court.
SBI Introduced VRS Scheme in December 2000
SBI announced a Voluntary Retirement Scheme for its employees on December 30, 2000 through Circular No. Per/39/2000-2001.
Under the scheme, employees who had completed at least 15 years of service or had reached 40 years of age as on December 31, 2000, were eligible to apply for voluntary retirement.
Sastry applied for VRS on January 15, 2001. His application was sent through the Branch Manager of SBI’s Fathekhanpet Branch in Nellore to the Deputy General Manager of SBI’s Hyderabad Circle.
Bank Found Sastry Eligible for VRS
After conducting an enquiry, the Bank found that Sastry was eligible for the VRS scheme and forwarded his application to senior officials.
The Deputy General Manager and Circle Development Officer accepted the application. The acceptance was communicated to the SBI Fathekhanpet Branch on March 3, 2001.
However, Sastry had died of a heart attack on February 27, 2001, just a few days before the acceptance communication reached the branch and around one month before the formal VRS retirement date.
SBI Rejected Family’s ₹9.48 Lakh VRS Claim
On March 18, 2001, Sastry’s family submitted an application to the Branch Manager seeking payment of VRS and other benefits. However, on March 29, 2001, the Assistant Manager of Region-II, Zonal Office, Tirupati, rejected the request.
SBI said the effective retirement date under the VRS was March 31, 2001. Since Sastry died before this date, the bank treated his VRS application as invalid and refused to pay the VRS amount to his family.
Family Challenged SBI’s Decision
Sastry’s family again wrote to the bank on June 1, 2001. They argued that once the VRS application had been accepted, the benefits should be paid to the legal heirs after the employee’s death.
However, on November 16, 2001, the Branch Manager again informed the family that Sastry had died before March 31, 2001 and therefore his application could not be considered under SBI’s VRS scheme. The family then filed a writ petition before the Telangana High Court.
Family Cites VRS Rules Followed by Other Banks
The lawyer representing Sastry’s family argued that other banks had paid VRS benefits to legal heirs of deceased employees in similar cases. The family referred to Clause 11.13 of the State Bank of Hyderabad Employees’ Voluntary Retirement Scheme, 2001.
Under this provision, if an employee dies after his or her VRS request has been accepted, the ex-gratia amount payable under the scheme can be paid to the employee’s legal heirs after completing the required formalities.
High Court Says Denial of VRS Benefits Was Not Justified
Justice Namavarapu Rajeshwar Rao delivered the judgment on May 6, 2026. The High Court explained that a bank may reject a VRS benefit claim if the employee’s application had not been examined or accepted before the employee’s death.
However, the situation was different in Sastry’s case. He had submitted his VRS application, the withdrawal period had expired, and the application had already been examined and accepted.
The Court said that Sastry died only after these formalities had been completed. Therefore, denying VRS benefits to his legal heirs could not be justified.
Employee’s Death Cannot Be Predicted, Says High Court
The High Court observed that all formalities relating to Sastry’s VRS application had been completed and he was expected to receive the benefits after about one month. Unfortunately, Sastry died of a heart attack before the prescribed retirement date.
The Court said a person’s death cannot be predicted. It noted that only about one month remained between Sastry’s death and the prescribed VRS date.
Considering these circumstances, the Court held that the claim of Sastry’s legal heirs deserved consideration.
Nationalised Banks Should Follow Uniform VRS Procedure
The Telangana High Court also referred to the State Bank of Hyderabad’s VRS scheme, which allowed payment of VRS benefits to the legal heirs of an employee whose VRS request had already been accepted.
The Court observed that State Bank of Hyderabad has now merged with SBI. It said nationalised banks should follow a uniform approach while considering VRS applications.
The Court also relied on the Supreme Court judgment in Assistant General Manager and Others v. Radhey Shyam Pandey, reported in (2020) 6 SCC 438.
SBI Argues High Court Cannot Rewrite VRS Policy
SBI’s lawyers referred to the Supreme Court judgment in State of Himachal Pradesh and Another v. Prakash Chand. The bank argued that a High Court cannot rewrite the terms of a policy.
However, the Telangana High Court rejected this argument and said it was not rewriting the terms of SBI’s VRS policy in the present case.
The Court said it was relying on a three-judge Bench judgment of the Supreme Court concerning the implementation of the VRS scheme by banks.
High Court Orders SBI to Pay ₹9.48 Lakh VRS Benefits
SBI informed the High Court that terminal benefits under the service rules had already been settled and paid to Sastry’s family. However, the family claimed ₹9,48,474 under the VRS scheme.
The High Court ruled that Sastry’s legal heirs were entitled to receive benefits under the VRS scheme. It directed SBI to pay the VRS amount after deducting any amount already paid to the family, if applicable.
SBI has been directed to make the payment within four months from the date it receives a copy of the High Court order. The High Court disposed of the writ petition without imposing any costs.
