High Court · 2012

Heard Mr. S. Kataki, learned counsel for the petitioners and Mr. P.N. Go of Gratuity (Amendment) Act, 2010. It is also stated that as per latest valuatio n made by LICI, the present value of past service benefits would be Rs. 20,89,55 ,191/- in case of payment of gratuity as per the amendment Act of 2010, out of w hich the Apex Bank has already paid an amount of Rs. 6,09,38,540/- to the gratui ty fund. Thus, it is stated that the remaining past liability would be Rs. 14,80 ,16,651/- which the LICI authority may accept in five equal installments. 6. swami, learned Standing Counsel, Apex Bank appearing for the respondents. 7. Mr. Kataki, learned counsel for the petitioners submits that the Payment of Gratuity Act, 1972 was amended with effect from 24.5.2010 providing for paym ent of enhanced gratuity to retiring employees, raising the ceiling from Rs. 3.5 0 lakhs to Rs. 10 lakhs. Since the petitioners had retired after the amended pro vision came into force, the enhanced gratuity benefit should be paid to the peti tioners. Referring to the decision of the Board of Directors, learned counsel fo r the petitioners submits that since a decision has already been taken in princi ple to extend the benefit of enhanced gratuity to the petitioners, the said deci sion should now be given effect to without any further delay. Placing reliance o n the judgment of the Hon’ble Supreme Court in the case of Bakshish Singh -versu s- M/s. Darshan Engineering Works and others reported in AIR 1994 SC 251, learne d counsel for the petitioners submits that the respondents are duty bound to pay the gratuity as per the amended provision and poor financial condition of the A pex Bank would not be a ground to deny enhanced gratuity to the petitioners. 8. Mr. Goswami, learned counsel for the respondents on the other hand submi ts that the Apex Bank has not said that it will not pay the enhanced gratuity to the petitioners. As a matter of fact, decision has already been taken in princi ple to pay enhanced gratuity to the employees with effect from the date of comin g into force of the amendment Act. However, because of the poor financial condit ion of the Bank, modalities are being worked out with the LICI authorities so th at petitioners can be paid enhanced gratuity. The submissions made have been considered. 9. 10. The Payment of Gratuity Act, 1972 (Gratuity Act) is a Central Act which was enacted to provide for a scheme for payment of gratuity to employees engaged in factories, mines, oil fields, plantation, ports, railways companies, shops o r other establishments and for matters connected therewith or incidental thereto . At the time of enacting the above Gratuity Act, there was no central act to re gulate payment of gratuity to industrial workers except the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955. There were two A cts by the States of Kerala and West Bengal providing for payment of gratuity. S ince the enactment of the Kerala and West Bengal Acts, some other State Governme nts also expressed their intention to enact similar laws in their respective Sta tes. To bring in uniformity, it was decided to enact a central legislation and t he deliberation following such decision ultimately resulted in the enactment of the Gratuity Act. 11. Section 4 of the Gratuity Act is the pivotal section. Under sub-section (1), it is provided that gratuity shall be paid to an employee on the terminatio n of his employment after he has rendered continuous service for not less than 5 years. Termination of employment can be on superannuation, or on retirement oth erwise than on superannuation or resignation, or on death or disablement due to accident or disease. Since ’continuous service’ is not an issue in the present p roceeding, no deliberation on this aspect is called for. The methodology of calc ulating gratuity is laid down in sub-section (2). It provides that for every com pleted year of service or part thereof in excess of six months, the employer sha ll pay gratuity to an employee at the rate of 15 days wages based on the rate of wages last drawn by the employee concerned. As per the Explanation, in the case of monthly rated employee, the 15 days wages shall be calculated by dividing th e monthly rate of wages last drawn by him by twenty six and multiplying the quot ient by 15. Sub-section (3) lays down the upper ceiling of the amount of gratuit y payable. Initially, the maximum amount was fixed at Rs. 50,000/- which over a period of time was enhanced to Rs. 3.50 lakhs. By the Payment of Gratuity (Amend ment) Act, 2010, such upper ceiling has now been enhanced to Rs. 10 lakhs. In ot her words, the amount of gratuity payable to an employee shall not exceed Rs. 10 lakhs. Sub-section (6) enumerates the circumstances in which gratuity may be fo rfeited, such as, where termination of employment is because of riotous or disor derly conduct of the employee or for committing an act constituting an offence i nvolving moral turpitude etc. 12. Under Section 4 A of the Gratuity Act, the employer is required to obtai n insurance for his liability for payment towards the gratuity from the LICI or any other prescribed insurer. Section 7 of the Gratuity Act provides that an emp loyer is under a legal obligation to determine the amount of gratuity and give n otice in writing to the person to whom the gratuity is payable. The employer sha ll arrange to pay the amount of gratuity within 30 days from the date it becomes payable to the person to whom the gratuity is payable. Failure to pay gratuity timely would attract simple interest. 13. Rule 65 of the Assam Co-operative Apex Bank Ltd. (Staff) Rules, 1980, as amended, provides for payment of gratuity to employees of Apex Bank. Rule 65 (d ) of the Staff Rules, which is relevant, reads as under:- (cid:28)65(d) Notwithstanding anything contained in Sub-Rule (a) to (c) of the Rule, th e provisions of the Payment of Gratuity Act may be applied in case of those empl oyees for whom the provisions of the said Act are found to be more beneficial. (cid:29) 14. In the case of Bakshish Singh (Supra), issue before the Hon’ble Supreme Court was the constitutional validity of section 4 (1) (b) of the Gratuity Act. The High Court had struck down the said provision as being unconstitutional. Rev ersing the judgment of the High Court, the Apex Court upheld the constitutional validity of the aforesaid provision. While doing so, the Apex Court made a detai led survey of the relevant law and held as under:- (cid:28)7. The aforesaid survey of the relevant authorities shows that in labour jurisp rudence the concept of (cid:28)gratuity (cid:29) has undergone a metamorphosis over the years. The dictionary meaning may suggest that gratuity is a gratuitous payment, a gift or a boon made by the employer to the employee as per his sweet-will. It necess arily means that it is in the discretion of the employer whether to make the pay ment or not and also to choose the payee as well as the quantum of payment. Howe ver, in the industrial adjudication it was considered as a reward for a long and meritorious service and its payment, therefore, depended upon the duration and the quality of the service rendered by the employee. At a later stage, it came t o be recognized as a retiral benefit in consideration of the service rendered an d the employees could raise an industrial dispute for introducing it as a condit ion of service. The industrial adjudicators recognized it as such and granted it either in lieu of or in addition to other retiral benefits such as pension or p rovident fund depending mainly upon the financial stability and capacity of the employer. The other factors which were taken into consideration while introducin g gratuity scheme were the service conditions prevalent in the other units in th e industry and the region, the availability or otherwise of the other retiral be nefits, the standard of other service conditions etc. The quantum of gratuity wa s also determined by the said factors. The recognition of gratuity as a retiral benefit brought in its wake further modifications of the concept. It could be pa id even if the employee resigned or voluntarily retired from service. The minimu m qualifying service for entitlement to it, rate at which it was to be paid and the maximum amount payable was determined likewise on the basis of the said fact ors. It had also to be acknowledged that it could not be denied to the employee on account of his misconduct. He could be denied gratuity only to the extent of the financial loss caused by his misconduct, and no more. Thus even before the p resent Act was placed on the statute book, the Courts had recognized gratuity as a legitimate retiral benefit earned by the employee on account of the service r endered by him. It became a service condition wherever it was introduced whether in lieu of or in addition to the other retiral benefits. The employees could al so legitimately demand its introduction as such retiral benefit by raising an in dustrial dispute in that behalf, if necessary. The industrial adjudicators grant ed or rejected the demand on the basis of the factors indicated above. It is true that while doing so, the industrial adjudicators insisted upon certai n minimum years of qualifying service before an employee could claim it whether * * * * * on superannuation or resignation or voluntary retirement. This was undoubtedly i nconsistent with the concept of the gratuity being an earning for the services r endered. What is, however, necessary to remember in this connection is that ther e is no fixed concept of gratuity or of the method of its payment. Like all othe r service conditions, gratuity schemes may differ from establishment to establis hment depending upon the various factors mentioned above, the prominent among th em being the financial capacity of the employer to bear the burden. There has co mmonly been one distinction between a retiral benefit like provident fund and gr atuity, viz., the former generally consists of the contribution from the employe e as well. It is, however, not a necessary ingredient and where the employee is required to make his contribution, there is no uniformity in the proportion of h is share of contribution. Likewise, the gratuity schemes may also provide differ ing qualifying service for entitlement to gratuity. It is true that in the case of gratuity an additional factor weighed with the industrial adjudicators and Co urts, viz., that being entirely a payment made by the employer without there bei ng a corresponding contribution from the employee, the gratuity scheme should no t be so liberal as would induce the employees to change employment after employm ent after putting in the minimum service qualifying them to earn it. But as has been pointed out by this Court in the Straw Board Mfg. Co. Ltd. case (AIR 1977 SC 941) (supra), in view of the constantly growing unemployment, the surplus lab our and meagre opportunities for employment, the premise on which a longer quali fying period of service was prescribed for entitlement to gratuity on voluntary retirement or resignation, was unsupported by reality. In the face of the dire p rospects of unemployment, it was facile to assume that the labour would change o r keep changing employment to secure the paltry benefit of gratuity. (cid:29) * (cid:28)9. &. & &.It would thus be apparent both from its object as well as its provision s that the Act was placed on the statute book as a welfare measure to improve th e service conditions of the employees. The provisions of the statute were applie d uniformly throughout the country to all establishments covered by it. They app lied to all employees drawing a monthly salary up to a particular limit in facto ries, shops and establishments etc. whether the employees were engaged to do any skilled, semi-skilled, unskilled, manual, supervisory, technical or clerical wo rk. The provisions of the Act were thus meant for laying down gratuity as one of the minimal service conditions available to all employees covered by the Act. T here is no provision in the Act for exempting any factory, shop etc. from the pu rview of the Act covered by it except those where, as pointed out above, the emp loyees are in receipt of gratuity or pensionary benefits which are no less favou rable than the benefit conferred under the Act. The payment of gratuity under th e Act is thus obligatory being one of the minimum conditions of service. The non -compliance of the provisions of the Act is made an offence punishable with impr isonment or fine. It is settled law that the establishments which have no capaci ty to give to their workmen the minimum conditions of service prescribed by the Statute have no right to exist & & & & & & & & & &. & (cid:29) * (cid:28) & & &. & &The present Act is of the genre of Minimum Wages Act, the Payment of Bonu s Act, the Provident Funds Act, Employees’ State Insurance Act, and other like s tatutes. These statutes lay down the minimum relevant benefits which must be mad e available to the employees. We have solemnly resolved to constitute this count ry, among others, into a socialist republic and to secure to all its citizens, w hich, of course, include workmen, social and economic justice. Article 38 requir es the State to strive to promote the welfare of the people by securing and prot ecting as effectively as it may, a social order in which, among other things, so cial and economic justice shall inform all the institutions of the national life . Article 39 states that the State shall, in particular, direct its policy towar ds securing, among others, that the citizens have the right to an adequate means to livelihood and that the health and strength of workers are not abused. Artic le 41 of the Constitution directs the State to make effective provision, among o thers, for securing public assistance in old age and in other cases of undeserve d want. Article 42 enjoins the State to make provisions for securing just and hu * * * * * * * * * mane conditions of work while Article 43 requires the State to endeavour to secu re by (sic) conditions of work ensuring a decent standard of life and full enjoy ment of leisure and social and cultural opportunities. Article 47 requires that the State shall regard the raising of the level of nutrition and standard of liv ing of its people and the improvement of public health as one of its primary dut ies. Further, there is a restriction placed on the exercise of the fundamental right under Article 19(1) (g) by clause (6) of the said Article. That clause states th at nothing in sub-clause (g) of clause (1) shall affect the operation of any exi sting law or prevent the State from making any law imposing in the interests of the general public reasonable restrictions on the exercise of the right conferre d by that sub-clause. It cannot be disputed that the present Act is a welfare me asure introduced in the interest of the general public to secure social and econ omic justice to workmen to assist them in their old age and to ensure them a dec ent standard of life on their retirement. On both grounds, therefore, viz., that the provisions for payment of gratuity co ntained in Section 4(1) (b) of the Act are one of the minimal service conditions which must be made available to the employees notwithstanding the financial cap acity of the employer to bear its burden and that the said provisions are a reas onable restriction on the right of the employer to carry on his business within the meaning of Article 19(6) of the Constitution, the said provisions are both s ustainable and valid. Hence the decision of the High Court has to be set aside. (cid:29) 15. From the above, it is clear that Gratuity Act is a welfare legislation a nd provides for minimal relevant benefits which must be made available to the em ployees on retirement. Right to gratuity is a statutory right. Withholding of gr atuity would not permissible on the ground of financial incapacity of the employ er to bear its burden. 16. Coming to the facts of the present case, the petitioners had retired on attaining the age of superannuation in September and October, 2010. Prior to the ir retirement, the amendment Act came into force with effect from 24.05.2010. Th e effect of the amendment is that the upper ceiling for the amount of gratuity p ayable has been enhanced from Rs. 3.50 lakhs to Rs. 10 lakhs. The methodology of calculating gratuity is laid down in Section 4 (2) of the Gratuity Act. If by f ollowing the said methodology, the amount of gratuity exceeds Rs. 10 lakhs, the employee would then receive the maximum limit of Rs. 10 lakhs. But if the quantu m worked out is less than Rs. 10 lakhs, the employee will receive the actual amo unt which is less than Rs. 10 lakhs. 17. In view of the discussions made above, there can be no manner of doubt t hat petitioners are entitled to enhanced gratuity as per the amendment Act. With holding of the same is not justified. Respondents are directed to work out the a mount of gratuity payable to the petitioners as per the amendment Act and after deducting the amount of Rs. 3.50 lakhs already paid to them, the balance amount of gratuity should thereafter be released to the petitioners within a period of 3 (three) months from the date of receipt of a certified copy of this order. 18. 19. Writ petition accordingly stands allowed. There shall, however, be no order as to cost.