A.M.Sampath v. Bank of Baroda

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 02.2.2009C O R A M :THE HONOURABLE MR. JUSTICE K. CHANDRUW.P.No.6746 of 1999A.M.Sampath .. Petitioner-vs-1.Bank of Baroda, rep.by itsChairman & Managing Director,No.3, Walchand Hirachand Marg,Ballard Pier, Mumbai-400 038.2.The Regional Labour Commissioner (c) and Appellate Authority under Paymentof Gratuity Act, 1972, Office of the Regional LabourCommissioner (C), No.26, Haddows Road,Sastry Bhavan, Chennai-600 006. .. RespondentsPRAYER : Petition filed under Article 226 of the Constitution of Indiapraying for the issuance of a writ of certiorarified mandamus callingfor the records pertaining to the impugned order of the secondrespondent bearing number Gratuity Appeal No.52/98, dated 31.12.1998and quash the same, directing the first respondent bank to pay thepetitioner balance of gratuity of Rs.60,197/- awarded on 16.3.1998 bythe Controlling Authority under the Payment of Gratuity Act, 1972 inG.A.No.25 of 1997 together with interest at 10% p.a. from the date itbecame due i.e. 19.9.1996. For petitioner : Mr.C.R.Chandrasekar For respondents : Mr.Bhiman for M/s.Sampathkumar Associates(R1) Mr.P.Gurunathan, GA (R2)*****O R D E R The petitioner is seeking to challenge the order of the secondrespondent, appellate authority under the Payment of Gratuity Act(constituted by the Central Government) made in GA.No.52/98 dated https://hcservices.ecourts.gov.in/hcservices/

31.12.1998 and seeks for a direction to the first respondent to pay theamount of Rs.60,197/- as ordered by the Controlling Authority under thePG Act made in G.A.No.25/97 dated 16.3.1998 together with interest atthe rate of 10% per annum from the date it became payable, viz.,19.9.1996 till the date of payment.2. The writ petition was admitted on 19.4.1999. On notice fromthis Court, a counter affidavit dated 13.7.1999 has been filed by thefirst respondent. 3. It is seen from the records that the petitioner was an employeeof the first respondent bank and was appointed even before the bank wasnationalised. He was appointed on 02.4.1962. He got retired fromservice in the cadre of middle management scale III Officer on31.4.1964 on attaining the age of superannuation of 60 years. He hadput in 32 years of service. He was paid a sum of Rs.1,65,100/- being 15months salary towards gratuity. It was calculated on the basis of hisaverage basic salary payable during the twelve months preceding hisretirement and also an additional gratuity in terms of Chapter 10.4 ofthe Bank of Baroda Service Conditions of Officers as on 31.12.1969 atthe rate of 6 months pay and allowances drawn by him immediately priorto his retirement as an Officer. This payment was made as per thescheme enunciated by the Bank of Baroda Gratuity Fund which wasconstituted as a Trust. 4. It was claimed that Regulation 46 of the Bank of BarodaOfficers Service Regulations, 1979 dealt with the scheme of payment ofgratuity to officer employees. As per the said scheme, an officeremployee was given an option on 01.7.1979 either to accept the patternof extra gratuity at the rate of half a month's pay for each completedyear of service beyond thirty years or to continue the present systemof payment of an additional amount equivalent to 6 month's pay andallowance immediately prior to his retirement. The petitioner had optedfor the present system as per the service conditions laid down underChapter 10.4 as of 31.4.1969. The petitioner was paid the initialgratuity of Rs.1,65,100/- on the basis of the pay which was revisedwith retrospective effect from 01.7.1973 and he was also paid thearrears of pay and allowance consequent upon the revision. 5. There was also a joint note of conclusion arrived at andminutes were recorded on 23.6.1995 between the Federation of the firstrespondent bank, viz., Indian Banks' Association on the one hand andthe Officers' Organisation on the other hand. Later the Board ofDirectors of the first respondent bank adopted certain amendments tothe Service Regulations, 1979 on 19.9.1996 in consultation with the RBIand with the previous sanction of the Government of India. It was dueto these amendments, the pay and allowances were revised with effectfrom 01.7.1993. But nevertheless the petitioner was not paid gratuityarrears on the basis of the revision of pay effected from 01.7.1993. https://hcservices.ecourts.gov.in/hcservices/

6. Therefore he filed an application before the controllingauthority under the Gratuity Act claiming the balance of gratuity. Thecontrolling authority after hearing the parties came to a conclusionthat the petitioner was entitled to get a gratuity of a sum ofRs.2,25,297/-. After giving credit to the amount of Rs.1,65,100/-, itwas held that the petitioner was entitled to get the balance ofRs.60,197/-. The petitioner's Gratuity Application No.25/97 thus cameto be allowed by an order dated 16.3.1998.7. The first respondent bank aggrieved by the said order filed anappeal before the second respondent appellate authority. The appellateauthority after notice to the petitioner and after hearing the partiesallowed the appeal vide Gratuity Appeal No.52/98 and by order dated31.12.1998 set aside the order passed by the Controlling Authority.The appellate authority held that the memorandum of understandingbetween the IBA and the Officers Federation came to be made on01.11.1994 whereas the petitioner got retired even five months earlieron 31.5.1994. Therefore, in view of the MoU providing for gratuitypayment on the revised pay only with effect from 01.11.1994, he was noteligible for the extra amount as claimed by him. 8. Mr.C.R.Chandrasekaran, learned counsel for the petitionersubmitted that the order of the appellate authority impugned in thewrit petition is contrary to the provisions of the Payment of GratuityAct. The authority failed to take note of the overriding effect ofsection 14 of the PG Act over the Industrial Labour Understanding dated26.3.1995. The authority also failed to note that the scales of pay ofthe officers were amended on 19.12.1996 with retrospective effect from01.7.1993 and the petitioner was also paid the arrears of pay witheffect from 01.7.1993. He also submitted that it cannot be the legalposition that the employees who have been drawing same salary as on01.7.1993 getting different gratuity on the basis of their dates ofretirement.9. Mr.Bhiman, learned counsel for the first respondent bank placedreliance upon the counter affidavit and referred to paragraphs 5 and 6,which are as follows:-''5. ... There is a valid and reasonable basis for thepurpose of calculation of gratuity pursuant to the MOU,namely Gratuity shall be calculated on the basis of revisedsalary for those who retire on or after 01.11.1994. The MOUitself has not been challenged before the proper Forum tillthis date. When that is the position, to come forward with acase without making full representation of circumstancessmacks of unfair attempts to derive a material gain beyondthe scope of accepted and established rules.6. The averment that the cut-off date under the MoU isviolative is simplistic. Such a classification pursuant to https://hcservices.ecourts.gov.in/hcservices/ consultation with all the interested parties cannot but bereasonable. Moreover, the MOU itself has not been challengedbefore this Hon'ble Court in this W.P."10. The learned counsel for the petitioner Mr.C.R.Chandrasekar,drew the attention of this Court to the judgment of the Karnataka HighCourt in Y.R.Shenoy -vs- Syndicate Bank and others reported in 2003-II-LLJ 977, wherein the High Court set aside the memorandum ofunderstanding in respect of the Syndicate Bank excluding the employeeswho retired from 01.7.1993 to 31.10.1994 from having benefit out of thepay revision to be taken into account for the purpose of gratuity. Thelearned counsel relied upon the following passages found in paragraphs12 and 13, which are as follows:-''Para 12. Therefore, gratuity is a statutory right to beearned by long and continuous service, which is payable as aretiral benefit, a definite sum as lumpsum payment onretirement. It is a right if accrued cannot be taken away byagreement between the parties. Amount payable is alsodefinite, by agreement between the parties it cannot bereduced, but it could be enhanced.Para 13. Re. Point No.(ii). The joint note entered intobetween the management and the officers' union is binding onthe parties. However, if the term of the agreement isinconsistent with the provisions of the Payment of GratuityAct, 1972 such a term of the agreement has no effect. Evenotherwise the consideration or object of an agreement is ofsuch a nature that if permitted it would defeat theprovisions of any law the said term of the agreement would beunlawful, void ab-initio and unenforceable. When the gratuitypayable to an employee is statutory right which he has earnedby long and continuous service, thus when once it is accrued,by agreement of the parties what is accrued cannot bedeprived. Merely because an employee had the benefit of theother provisions of the agreement that does not estop theemployee from challenging that portion of the agreement whichis unlawful, void ab-initio. If the said offending portion ofthe agreement could be separated without nullifying theentire agreement it is permissible to challenge that portionof the agreement which is unlawful. Therefore, it is open tothe petitioners who had the benefit of the remaining portionof the agreement to challenge that portion of the agreementwhich deprives them of a statutory right which has accrued tothem by their long continuous service."11. The learned counsel also brought to the notice of this court,a Division Bench decision of the Kerala High Court which dealt with thesimilar issue in respect of the Syndicate Bank in the case relating toSyndicate Bank and others -vs- Celine Thomas and others reported in https://hcservices.ecourts.gov.in/hcservices/ 2006-II-LLJ 413. He referred to the following passages found inparagraphs 7, 13 and 14:-''Para 7. Memorandum of Understanding cannot meddle with thestatutory prescriptions. Nobody can agree by way of asettlement at the behest of an organisation taking away thebenefit conferred on individuals by way of statutes orstatutory rules. There need not have any authority tosubstantiate this. Statutory prescriptions crystallize therights in favour of the subjects of that statute. It cannotbe varied to their disadvantage unless otherwise by amendmentto the statute.Para 13. ... No nexus is pointed out for bringing anyclassification between those who retired between April 1,1992 and October 31, 1994 and those who retired betweenNovember 1, 1994 and June 23, 1995. Both these artificialgroups of retirees had retired from service prior to the dateof arriving at the Memorandum of Understanding, but after thedate of retrospectivity to the MoU. They therefore formthemselves into one class as all of them retired later thanthe giving effect to the pay revision by the Memorandum ofUnderstanding. When persons forming same class are treateddifferently it violates Article 14 of the Constitutiondenying them equal protection of law and equality before law.Denial of gratuity to the writ petitioners is thereforediscriminatory. Consequently, on that reason alone, we haveto sustain the view taken by the learned Single Judge.Para 14. Consequently, W.A.No.1584 of 2002 stands dismissedand O.P.No.23514 of 1998 stands allowed with consequentialdirection to pay the respective employees the amount ofgratuity payable based on the revised pay as entitled tothem."12. It will not be out of place to refer to a judgment of aDivision Bench of this Court, to which I am a party (K.Chandru, J.), inP.Selvaraj -vs- Management of Shardlow India Ltd. Chennai reported in2007 (1) LLN 835. The following passage with reference to the effect ofthe term 'last drawn wage' found in the Gratuity Act may be extracted:-''Para 35. .... The Gratuity Act is a beneficial piece oflegislation and it should receive an interpretationconsistent with the principles of equity and fair play.Therefore, the term ''last drawn wage'' found in S.4(2) ofthe Gratuity Act should receive its full meaning and itcannot give any fractured interpretation. Further, thesettlement provides as to what should be the wages thatshould be paid to a workman and that the management cannotadopt an artificial interpretation with reference to the term''wages". It is in this context, the term ''wages'' which isdefined under the Gratuity Act, must include not only what ispaid but also what is payable to a workman. ...." https://hcservices.ecourts.gov.in/hcservices/

13. In the light of the above binding precedents and the factualmatrix involved in this case, the order passed by the second respondentappellate authority is liable to be set aside. Accordingly, the writpetition stands allowed. The order of the second respondent in G.A.52of 1998 dated 31.12.1998 stands set aside and the first respondent ishereby directed to pay the petitioner a sum of Rs.60,197/- as orderedby the controlling authority vide order dated 16.3.1998 in G.A.No.25 of1997 together with interest at the rate of 10% with effect from19.9.1996 till the date of the payment. This order shall be compliedwith within a period of eight weeks from the date of receipt of a copyof this order. There will be no order as to costs.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarjsTo1.The Chairman & Managing Director, Bank of Baroda, No.3, Walchand Hirachand Marg,Ballard Pier, Mumbai-400 038.2.The Regional Labour Commissioner (c) and Appellate Authority under Payment of Gratuity Act, 1972, Office of the Regional LabourCommissioner (C), No.26, Haddows Road,Sastry Bhavan, Chennai-600 006.+1cc to M/s. Sampathkumar & Associates Sr 4787VSV (CO)km/9.2. W.P.No.6746 of 1999