CORAMTHE HONOURABLE MR v. The Appellate Authority

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 14.09.2007CORAMTHE HONOURABLE MR.JUSTICE V.DHANAPALANW.P.No.3896 of 2004Neyveli Lignite Corporation,rep. by its Chairman-cum-Managing Director,Neyveli 607 801.... Petitionervs.1. The Appellate Authority, (under Section 7(4) of Gratuity Act, 1972) Regional Labour Commissioner, (Central), Chennai - 6.2. Kasturi.A.R.3. S.Ramanathan4. S.Venkatasubramaniam5. R.Badrinath6. B.R.Satagopan7. S.Natarajan8. V.Balasubramaniam9. C.N.Ramasubramaniam10.T.K.Mallikeswaran11.R.Balasubramaniam12.K.T.P.Menon13.K.R.Damodaran14.T.K.Venkatasubramaniam15.Loganathan Mudaliar16.C.R.Palaniswamy17.M.R.Vedantam18.R.Ramachandran19.K.Balakumar20.B.Parthasarathy21.C.R.Krishnamurthy22.S.Vinayagam23.D.Srinivasan24.K.Sampath25.T.G.Rangan26.M.K.Parthasarathy27.T.K.Srinivasan28.N.Ganapathy29.S.Sivakumar30.V.Sundaresan31.V.Balasubramanian https://hcservices.ecourts.gov.in/hcservices/

32.A.Ramaswamiah33.N.R.Rajendran34.T.R.Sivaraman35.C.V.Chellam36.T.P.Suryanarayana37.V.Seetharamiah38.R.S.Ramamoorthy39.C.R.Vittal Rao40.C.Venkataraman41.S.A.Lakshmipathy42.C.Mohammed Haroon43.G.R.Bhandari44.T.L.Anantharaman45.R.Sundararaman46.M.S.Kailasam47.T.N.Venugopalan48.T.N.Venugopalan49.R.Alavandar50.S.Swaminathan51.Parthasarathy52.N.Subramania Pillai53.R.Desikan54.N.Ramachandran55.K.R.Vasudeva56.V.Irajaram57.V.Srinivasan58.R.Veerasamy59.D.Retnaraj60.M.Arumugam61.G.Radhakrishnan62.K.A.Doraiswamy63.V.Thyagaraj64.L.V.Srinivasan65.R.Krishnan66.S.Kailasanathan67.sankaranarayanan68.T.K.Dhathathri69.K.Srinivasaradhan70.T.G.Rangan71.S.Abiramasharma72.C.R.Santhanagopalan73.Mar Meyappan74.P.Athmanathan75.S.Dasaratha Ramiah76.H.Sundararajan77.N.Balakrishnan78.R.S.Sivaraman ...Respondents https://hcservices.ecourts.gov.in/hcservices/ Writ Petition filed under Article 226 of the Constitution of Indiapraying for the issuance of a writ of Certiorari, calling for the recordsrelating to the order of the first respondent passed in Gratuity AppealNos.430 to 506 of 2003, dated 31.01.2004, and quash the same.For Petitioner:Mr.N.A.K.SarmaFor Respondents:Mr.Guberan,for M/s.Rank Associates for R 3 to 6, 8 to 26,28 to 55, 57 to 61, 63 to 71, 73 to 75 and 78O R D E R This writ petition has been filed seeking to quash the order of thefirst respondent passed in Gratuity Appeal Nos.430 to 506 of 2003, dated31.01.2004. 2.The case of the petitioner, in a nutshell, is as follows :(i)The petitioner Corporation is a Central Public Sectorundertaking under the administrative control of the Ministry of Coal,Government of India, engaged in mining Lignite from the mines situated inNeyveli and in generating power by using the lignite so mined. Thepetitioner Corporation has on its rolls, about 18,000 employees.Initially, when Payment of Gratuity Act, 1972 was enacted, the upperceiling on gratuity under Section 4(3) was Rs.30,000/-. From time totime, the ceiling was enhanced and subsequent to the issue of Ordinance inSeptember 1997, the petitioner Corporation increased the ceiling to Rs.2.5lakhs with effect from 24.09.1997. Later on, the ceiling was furtherincreased to Rs.3.5 Lakhs under Section 4(3) by the amending Act 11 of1998. Prior to 24.09.1997, the upper ceiling under Section 4(3) of theAct, 1972 was fixed as Rs.1 Lakh. (ii)On superannuation, respondents 2 to 78 applied for payment ofgratuity in terms of Rule 7 of the Rules, 1972 and the petitionerCorporation authorised the payment of Rs.1 Lakh as gratuity payable andthe same was duly disbursed within the prescribed time. The retiredrespondents 2 to 78 received the gratuity amount without any objection.After the enhancement in the ceiling of gratuity payment, respondents 2 to78 formed an association under the name 'Neyveli Retirees WelfareAssociation' and filed a writ petition in W.P.No.9025 of 2000 seeking toapprove the payment of gratuity to the employees of the Corporation, whohad retired after 1.04.1995 upto a ceiling of Rs.2.5 lakhs and also forinterest at the rate of 15% per annum from the date of retirement. (iii)Suppressing the pendency of the writ petition inW.P.No.9025 of 2000, the respondents went before the Assistant LabourCommissioner (C) - II, Chennai for the relief as stated above. The https://hcservices.ecourts.gov.in/hcservices/ Assistant Labour Commissioner, in his capacity as Controlling Authorityunder the Act, 1972, directed the petitioner Corporation to pay thedifference in amount of gratuity as per Form 'R'. Aggrieved by thedecision of the Controlling Authority, the petitioner Corporation filed abatch of appeals in terms of Section 7 of the Act, 1972 and the same waspartly allowed by the Appellate Authority on 31.01.2004. Aggrieved by theorder of the first respondent, the petitioner Corporation has preferredthis writ petition for the aforesaid relief.3.On behalf of respondents 2 to 78, respondents 7 and 62 havefiled their counter. (i)It is their case that the petitioner Corporation can function onits own independently within the framework of its Memorandum and Articlesof Association. The Article 77(16) of the Articles of Association of NLChas been vested with specific powers to award better benefits under theGratuity Act. It is also their case that there was no requirement for theCompany to obtain the approval from the Government for such provision ofbetter benefits to its employees.Their plea for payment of bettergratuity through several representations to the petitioner Corporation hadbeen denied even after the Resolution passed by the petitioner Corporationin its meeting held in September 1995, assuring the approved payment ofgratuity based on the enhanced ceiling of Rs.2.5 lakhs.(ii)After the Board Resolution, the petitioner Corporation movedthe Controlling Authority under the Gratuity Act for appropriate reliefsand the Controlling Authority came to a just and fair conclusion that theretired employees are entitled to receive the enhanced gratuity amount asper Section 4(5) of the Gratuity Act, which the Board of the said Companyhad also approved. Aggrieved by the said order of the ControllingAuthority, the petitioner Company has approached the Appellate Authorityand the Appellate Authority was also not in agreement with the contentionof NLC and the appeal was dismissed in part and NLC was directed to paythe enhanced gratuity amount without interest. However, before preferringthe appeal, NLC has deposited the entire amount and has now approachedthis Court by filing the present writ petition.(iii)The respondents have submitted that the writ petitionitself is liable to be dismissed on the ground that at the time ofadmitting the writ petition, the petitioner appears to have relied on ajudgment of the Supreme Court reported in Judgment Today 2001 (5) SC 635,which according to them is not relevant to their case, since NLC, in itsown Memorandum filed before the Appellate Authority on 28.01.2004, hadadmitted and undertaken to pay the gratuity. The relevant portion of theMemorandum is extracted, as under :"(b)By a recent Resolution dated 28.10.2003, the Boardof Directors of the Corporation had decided as a matter ofconsideration and goodwill gesture to release payment ofprincipal amount of gratuity with respect to the respondentformer employees, reckoned as if the ceiling is Rs.2.5 Lakhs https://hcservices.ecourts.gov.in/hcservices/ and not Rs.1 Lakh and subject to fulfilling other eligibleconditions. The Resolution further provided that the releaseof such increased gratuity is subject to the condition thatthe former employees accept the payment in full and finalsettlement of all their claims in respect of gratuity withoutany liability in interest on the Corporation....."(iv)It it the case of the respondents that in view of the aboveundertaking, it is not open to the petitioner Corporation to set aside theorder passed by the Appellate Authority, which has been passed on thebasis of their own version. It is their further case that on account ofthe interim stay passed by this Court and pendency of this writ petition,the Appellate Authority has withheld the money deposited by the petitionerCorporation and many of the respondents are deprived of their lawfulentitlement. (v)At the stage when the matter was pending before the AppellateAuthority, the petitioner Corporation has requested the AppellateAuthority to refer the matter to Lok Adalat, which would go to show thatthe Corporation only wanted to negotiate for a lesser sum and not deprivethe retired employees of their lawful entitlement. The decision of theControlling Authority as well as the Appellate Authority has been arrivedat after considering the issue involved and the orders as such, cannot becalled as having been passed in violation of the statutory provisions andthe principles of natural justice. The case of the respondents is thatthe petitioner was just and proper in invoking Section 4(5) of theGratuity Act, since the resolution passed by the Board can be construed asan award/agreement between the Management and the employees. The actionon the part of the employer was well within the provision of section 4(5)of the Act and the employer cannot approbate and reprobate. According tothe respondents, as retired employees without any regular income, thegratuity will be of very great help to them at their old age. Hence, theyprayed for dismissal of the writ petition. 4.Heard Mr.N.A.K.Sarma, learned Counsel appearing for thepetitioner Corporation and Mr.Guberan, appearing on behalf of respondents.5.Mr.N.A.K.Sarma, learned Counsel appearing for the petitionerCorporation contended that the Controlling Authority erred in entertainingthe application filed by the Neyveli Retirees Welfare Association, asthere is no provision or entitlement for an Association to file anApplication under Section 7 of the Act, 1972. It was his furthercontention that the respondents have not even furnished a copy of the Form'R' even during the proceedings in the Appeal, based on which, Form 'R'deserves to be reversed by quashing it. According to the learnedcounsel, the Appellate Authority ought not to have invoked the provisionunder Section 4(5) of the Act, inasmuch as the order is neither an awardnor an agreement nor a contract between the Petitioner Corporation andeither with the respondent Association or with the individual employees inwhose favour Form 'R' has been issued. https://hcservices.ecourts.gov.in/hcservices/

6.In particular, learned counsel for the petitioner Corporationcontended that the Appellate Authority has failed to appreciate that anauthority created by the statute has to act under the provisions of theAct, 1972. Till 24.09.1997, under the Act, 1972, there was no statutoryliability on the Corporation or employer to pay terminal gratuity inexcess of Rs.1 lakh. Hence, the impugned order passed in exercise ofSection 4(5) of the Act, 1972 is ultra vires and unjustified and the samehas to be struck down.In support of his contention, learned Counsel forthe petitioner Corporation has relied on a decision reported in JT 2001(5) SC 635 in the case of Shitla Sharan Srivastava and others vs.Government of India and others, wherein the Honourable Supreme Court hasheld as follows :"5.On the other hand, for the respondents, submissionswere made supporting the stand of the Bank pointing out that thepetitioners were retired prior to 24.09.1997. Sub-section 3 ofSection 4 of the Act provided that the amount of gratuitypayable to an employee shall not exceed Rs.1 lakh. By theAmendment Act, 1998, the ceiling limit was raised to Rs.3.50lakhs to be effective from 24.09.1997. Since the petitionershad retired prior to the said date, were not entitled to theenhanced gratuity limit. The 5th Pay Commission recommendationsand the speech of Finance Minister made while presenting theBudget for the year 1997-98 and the circulars or memorandumsissued by the Central Government undertakings giving benefit ofenhanced ceiling limit of gratuity amount either from 01.04.1995or from 01.01.1996 as the case may be, are neither binding onthe respondent Bank nor they can be applied to the petitionerswho have retired prior to 24.09.1997.6.It is not disputed that the claim made in thesepetitions is in respect of the employees who retired prior to24.09.1997. The respondent-Bank has its own servicerules/schemes governing its employees. The 5th Pay Commissionrecommendations are in relation to the Central GovernmentEmployees. A mere speech made by the Finance Minister withouttaking further steps to give the benefit of enhanced ceilinglimit of gratuity amount specifically in the case of therespondent-Bank is of no help to the petitioners. The servicerules governing employees of RBI/IDBI and Central Governmentemployees are different. The Act was amended in 1998 fixingthe ceiling of payment of gratuity at Rs.3.5 Lakhs effectivefrom 24.09.1997. Assuming that the respondent-Bank had madeprofit, the claims of the petitioners cannot be allowed unlessthere is a sustainable foundation for such a claim. Therespondent-bank has pointed out that the officers of the Bankare governed by the Pension Rules and are paid gratuity, onlyin terms of the Act, while the compassionate gratuity is aseparate scheme to provide succor to the bereaved families of https://hcservices.ecourts.gov.in/hcservices/ the officers who die in harness and the effective date ofrevision is fixed by the Executive Committee of the CentralBoard at Rs.1 lakh with effect from 01.01.1986, Rs.2.5 Lakhswith effect from 01.04.1995 and Rs.3.5 Lakhs with effect from01.01.1996. The compassionate gratuity, as stated above, isdifferent from the gratuity amount payable under the Act.Office memorandum dated 27.10.1997 relied upon by thepetitioners categorically provides that those orders apply toCentral Government employees governed by CCS (Pension) Rules,1972. Further, the 5th Pay Commission recommendations areapplicable to Central Government employees only and are notmade applicable to the employees of the respondent Bank". 7.Per contra, Mr.Guberan, learned Counsel for the respondentscontended that the stand taken by the petitioner Corporation in havingagreed to pay the difference in the gratuity amount to the respondents andthereafter, at a later point of time agitating before this Court in notpaying the same cannot be sustained. He further contended that the claimof the retirees is well within time and the same cannot be rejected on theground of limitation.8.According to the learned Counsel for the respondents, the actionof the petitioner Corporation requesting for indulgence of the AppellateAuthority to permit them to refer the matter to Lok Adalat would itself goto show that the petitioner Corporation only wanted to negotiate for alesser sum and not to grant the respondents their lawful entitlement. Itis the further contention of the learned counsel that the authoritiesbelow have legally considered the issue in accordance with the statutoryprovisions and the principles of natural justice and it cannot be calledas having been passed in violation of the same. Since many of therespondents were prevented from withdrawing the money that has beendeposited by the petitioner Corporation already, the learned Counselpleaded that the writ petition may be dismissed, thereby granting therespondents their lawful entitlement. 9.I have considered the submissions made by the learned counsel oneither side. 10.Admittedly, respondents 2 to 78 were employees of the petitionerCorporation and there is no dispute that they retired between 01.04.1995and 24.09.1997 from the service of NLC and it is also not in dispute thatthey are entitled to Gratuity. It is seen that pursuant to certaindemands from the employees of the petitioner Corporation, a proposal wasinternally mooted for increasing the ceiling of the gratuity payable toRs.2.5 lakhs, with effect from 01.04.1995 and such proposal wasprovisionally approved by the Board of Directors on 30.09.1995.Subsequent to the Ordinance in September, 1997, the petitioner Corporationincreased the ceiling to Rs.2.5 lakhs with effect from 24.09.1997. Lateron, the ceiling was further increased to Rs.3.5 lakhs after Section 4(3)was amended by the amending Act 11 of 1998. https://hcservices.ecourts.gov.in/hcservices/

11.The petitioner Corporation, being a Central Public SectorUndertaking under the administrative control of the Ministry of Coal,Government of India, is governed by its Memorandum and Articles ofAssociation. Under Article 77(16) of the Articles of Association of NLC,the Board of Directors of NLC have been vested with specific powers toaward better benefits under the Gratuity Act. On the representations madeby the employees of the petitioner Corporation for payment of bettergratuity, the Company's Board had approved payment of gratuity based onthe enhanced ceiling of Rs.2.5 lakhs in its Board meeting held duringSeptember 1995. Since no steps were taken by NLC with regard to theimplementation of the enhanced ceiling of gratuity, respondents 2 to 78approached the Authority under the Gratuity Act for appropriate relief andthe Controlling Authority, taking note of Sections 6(4)(a), 6(4)(b) and 6(4)(c), came to a just and fair conclusion that the retired employees areentitled to receive the enhanced gratuity amount as per Section 4(5) ofthe said Act, which the Board of the said Company had also approved anddirected the petitioner Corporation to pay the difference in payment ofgratuity to the respondents after amendment of the Act over the ceilinglimit of gratuity amount with simple interest @ 10% per annum from thedate it became due till the date of payment. 12.Aggrieved by the order of the Controlling Authority, NLC went ona batch of appeals before the Appellate Authority under Section 7(7) ofthe Payment of Gratuity Act, 1972 and Rule 18 of Payment of GratuityRules. Taking note of the core issues, particularly, whether therespondents/employees are eligible for the enhanced gratuity as perSection 4(5) of the Act in terms of the Resolution passed by the Board andif there is any need to seek the approval or ratification from the parentMinistry to which they belong when the Parliament has amended the revisedpayment of gratuity to the employees and taking note of the BoardResolution and the Memorandum filed by the petitioner Corporation, theAppellate Authority allowed the appeals in part, holding that therespondents/employees are entitled and rightly eligible to receive theenhanced gratuity under Section 5(4) of the Act. It also held that therespondents/employees are eligible to receive only the amount of enhancedgratuity as per the amended Act but, as per the Board decision on30.09.1995 and 28.10.2003 under Section 4(5) of the Act, the question ofratification or the approval from the Ministry of Coal, Government ofIndia has no relevance at all when the amendment has been passed by theParliament and the same notified by the Government of India after theOrdinance was passed earlier and the Board has extended these benefitsunder the Resolution. For better understanding, the order dated31.01.2004 passed by the Appellate Authority, is extracted as under:"And keeping in view of the goodwill and gesture of theAppellant Corporation and Resolution passed in 1995 and 2003wherein the Appellant Corporation passed payment of enhancedgratuity amount in terms of Section 4(5) without interest toall the above-mentioned respondent employees sinace all the https://hcservices.ecourts.gov.in/hcservices/ employees had retired from service much before the Act waspromulgated. Accordingly, by partially modifying the earlierOrders of the Controlling Authority, I hereby allow theenhanced gratuity as per the entitlement but without anyinterest since most of these respondent employees were not onrolls as on September, 1997 based on the Memo and Argumentsfiled on 30.01.2004.However, such of those respondent employees who haveretired on or after the above amendment to receive higheramount of gratuity amount whose ceiling amount has beenenhanced to receive enhanced gratuity with interest as per sub-section 3A of Section 7 of the Act."13.It is an admitted fact that the Board of Directors of thepetitioner Corporation has, in its 273rd Board Meeting held on 13.09.1995approved the proposal for incorporating the revised maximum limit ofpayment of Gratuity to Rs.2.5 lakhs and the petitioner Corporation, beingan 'employer' has approved the enhancement of gratuity and accordingly,the employees were eligible to receive better terms of gratuity as perSection 4(5) of the Act. After getting convinced about the genuinenessand justification of the enhancement, the Controlling Authority orderedpayment of difference in payment of gratuity to the respondents afteramendment of the Act over the ceiling limit of gratuity amount with simpleinterest @ 10% per annum. But, the Appellate Authority in his order hasmade it clear that the respondent employees are eligible to receive onlythe amount of enhanced gratuity as per the amended Act without interest. 14.Having regard to the facts and circumstances and in view of theforegoing discussion, I am of the considered view that the authoritiesbelow have taken note of the relevant provisions of the Act, the approvalgranted by the Board of the petitioner Corporation as well as theResolution passed by them. Having filed a Memorandum before the AppellateAuthority, accepting to pay the benefits to the employees as approved bythem, the petitioner Corporation has no other option but to pay the dueentitlement to the retired employees, who had put long years of serviceand are languishing for the benefits in their old age. Hence, I am of theview that the Controlling Authority as well as the Appellate Authorityhave fairly considered the issue by directing the petitioner Corporationto pay the benefits to the retired employees. In the absence of anyappeal by the retired employees, respondents 2 to 78 herein, in respect ofrejection of payment of 10% interest by the Appellate Authority, I findthat the order passed by the Appellate Authority is perfectly inconformity with the legal provisions and there is no reason to interferewith it. As such, the order of the appellate authority which has noinfirmity whatsoever, is upheld. https://hcservices.ecourts.gov.in/hcservices/ In view of the above, this writ petition which is devoid of anymerit, fails and stands dismissed. No costs. Consequently, connectedW.V.M.P.No.590 of 2004 and W.P.M.P.No.4573 of 2004 are closed.abeSd/-Asst.Registrar/true copy/ Sub Asst.RegistrarTo :The Appellate Authority,(under Section 7(4) of Gratuity Act, 1972)Regional Labour Commissioner, (Central), Chennai. +1 cc to M/s.Rank Associates, Advocate Sr.No.57956.+1 cc to Mr.N.A.K.Sarma, Advocate Sr.No.57624.LA(CO)dcp/27.9W.P.No.3896 of 2004