O LATE MR v. RAMASHWAMY, AGED ABOUT
Case Details
IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 22ND DAY OF APRIL 2025 BEFORE THE HON’BLE MR. JUSTICE B. M. SHYAM PRASAD WRIT PETITION NO.12662/2023 (L/PG) BETWEEN : M/s. HMT MACHINE TOOLS LIMITED (MBX), A COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMPANIES ACT 1956, BANGALORE COMPLEX, JALAHALLI P.O., BENGALURU - 560 013. REPRESENTED BY JOINT GENERAL MANAGER, MR. S.P. DAS. (BY MR. GANAPATI NARAYANA HEGDE, SENIOR COUNSEL FOR MR.RAYAPPA Y. HADAGALI] ... PETITIONER AND: 1. CONTROLLING AUTHORITY UNDER THE PAYMENT OF GRATUITY ACT AND ASSISTANT LABOUT COMMISSIONER (CENTRAL) SHRAM SADAN, 3RD CROSS, 3RD MAIN, 2ND PHASE, TUMKUR ROAD, YESHWANTHPURA BENGALURU - 560 022. 2. DEPUTY COMMISSIONER, BANGALORE DISTRICT, 2 KANDAYA BHAVAN, K.G. ROAD, BENGALURU – 560 070. 3. THE TAHASHILDAR, BENGALURU NORTH TALUK, KANDAYA BHAVAN, K.G. ROAD, BENGALURU – 560 001. 4. MR. V.L. JAYARAM S/O LATE MR. LAKSHMAIAH, AGED ABOUT 67 YEARS, R/O NO.156, 13TH MAIN, 2ND BLOCK, HMT LAYOUT, VIDYARANYAPURA BENGALURU - 560 097. 5. MR. D.S. RAVINDRAPRASAD, S/O MR. D.N.SUBRAMANYAM, R/AT NO.63, 2ND MAIN, NATARAJ LAYOUT, J.P. NAGAR, 7TH PHASE, BENGALURU - 560 078. 6. MR. NARAYANA KULKARNI, S/O MR. V. KULKARNI, R/AT NO.180, 4TH 'B' MAIN, 4TH BLOCK, 4TH STAGE, BASAVESHWARANAGAR, BENGALURU - 560 079. 7. MR. R. B. RAMESH, S/O MR. BASAVACHAR, NO.2, 5TH MAIN, SHREE SHARADAMBANAGAR, JALAHALLI POST, BENGALURU - 560 013. 3 8. MR. M.R. VISHWANATH, S/O LATE MR. V. RAMASHWAMY, AGED ABOUT 68 YEARS, RESIDING NO.567/37, 13TH 'A' CROSS, BHUVANESHWARINAGAR HEBBAL - KEMPAPUR, BENGALURU - 560 024. 9. MR. C.V. NAGARAJA, S/O LATE MR. CHIKKAVEERABHADRAPPA, NO.3, SRI. VEERABHADRASWAMY NILAYA, CHAMUNDESHWARI LAYOUT, VIDYARANYAPURA, BENGALURU - 5690 097. 10. MR. RAGHUVEERA A.S., S/O MR. A.N. SUBBA ROA, SITE NO.16, 3RD CROSS, APC LAYOUT, THINDLU, VIDYARANYAPURA POST, BENGALURU - 560 097. 11. MR. MOHAMMED ALI AZGAR, S/O LATE MR. A. ABDUL RAZAK, NO.3, DEVASANDRA, OPP. RAMAIAH HOSPITAL, NEW B.E.L. ROAD, BENGALURU - 560 094. 12. MR. PUTTAIAH S/O MR. LINGE GOWDA, NO.270, HMT LAYOUT, MATHIKERE, BENGALURU - 560 054. 13. MR. NARAYAN GOWDA, S/O MR. NARASIMME GOWDA, 25, 5TH MAIN, DWARAKA NAGAR, BSK II STAGE, BENGALURU - 560 085. 4 14. MR. VENKATESH Y., S/O MR. YELLAPPA N., NO.1, 5TH MAIN ROAD, MUNESWARA BLOCK, AVALAHALLI, BENGALURU - 560 020. 15. MR. VENKATARAMA REDDY S/O LATE MR. PAPIREDDY BILLERHALLI, KYASAMBALLI (P.O.) BANGARPET TALUK, KOLAR DISTRICT - 563 114. ... RESPONDENTS (BY MR. SHANTHI BUSHAN, DSGI, FOR R.1., MS.CHANDINI S., HCGP, FOR R.2 AND R3, MR.VACHAN H.V., ADV. FOR R.4 TO R.15) THIS WRIT PETITION FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE PUBLIC NOTICE DATED 06.06.2023, BEARING NO.M.S.C/CR/26/2022-23, PUBLISHED IN KANNADA PRABHA, DAILY NEWSPAPER ON 13.06.2023, ISSUED BY THE TAHASILDAR, BANGALORE NORTH TALUK, BANGALORE (RESPONDENT NO.3), FIXING THE DATE OF AUCTION OF LAND BEARING SY.NO.5 MEASURING 3 ACRES, BELONGING TO THE PETITIONER'S COMPANY, SITUATED AT MYAKAL CHANNENAHALLI, YESHWANTHAPURA VIDE ANNEXURE-A AND ETC. THIS PETITION HAVING BEEN HEARD AND RESERVED AND COMING ON FOR PRONOUNCEMENT OF ORDERS THIS DAY, THE COURT MADE THE FOLLOWING: 5 CORAM: HON'BLE MR JUSTICE B M SHYAM PRASAD CAV ORDER The petitioner is a Central Public Sector Undertaking [CPSU]. The petitioner is referred to the Board for Industrial and Financial Reconstruction [BIFR] in Case No.501/2006, but this proceeding has abated, and presently, it is stated that the proceeding under the Insolvency and Bankruptcy Code, 2016 [for short, 'the IBC'] is pending with the National Company Law Tribunal. The petitioner has filed this petition being aggrieved by the different Communications caused by the Controlling Authority under the Payment of Gratuity Act, 1972 [for short, 'the PG Act'] and the subsequent publication of auction notice by the jurisdictional Tahsildar notifying its land measuring 3 acres in Sy. No.5 of Myakala Channenahalli, Yeshwanthpur, Bengaluru [the Subject Property]. 6 2. The Controlling Authority is arrayed as the
Legal Reasoning
first respondent, and the impugned Communications are dated between the years 2015 and 2017. These communications are produced as Annexures B-B9. The Controlling Authority has caused, after the orders under Section 7[4] of the PG Act, these Communications as envisaged under Section 8 of the PG Act to the Jurisdictional Deputy Commissioner for Recovery Certificate to enforce the petitioner's liability to pay interest @ 10% to the fourth respondent and compound interest @ 15% to the fifth to fifteenth respondents from the effective date till the date of payment. 3. The petitioner's grievance with these Communications and the notification of the subject property for public auction is essentially premised on two grounds viz., [a] the alleged lack of opportunity to 7 show cause against issuing of Recovery Certificate1, and [b] the Controlling Authority’s failure to consider that though it has been a sick industry, it has paid the gratuity amount without dues based on the seniority of its employees from borrowed funds. 4. This Court, on 21.06.2023, has granted stay of the proposed auction subject to the petitioner depositing with the Controlling Authority 50% of Rs.49,11,485/-, which is the sum total of the interest payable to the private respondents at 10% per annum and the compounded interest at 15% per annum. The petitioner, in compliance with this interim order, has deposited a sum of Rs.24,55,743/-, and the Competent Authority has disbursed a sum of Rs.21,77,794/- out of this sum total to the private respondents. It is undisputed that this amount of Rs.24,55,743/- would be the interest payable at 10% per annum to the fourth 1 It is undisputed that the Controlling Authority has not heard the petitioner before issuing the impugned Communications as per Annexures-B- B9. 8 to fifteenth respondents [the private respondents] and the difference between Rs.24,55,743/- and Rs.21,77,949/- [Rs.2,77,794/-] will have to be disbursed amongst the private respondents based on the individual's claim on delay. The facts and circumstances leading to the petitioner and the subsequent events as afore stated:: 5. The private respondents have retired from service between the years 2010 and 2015. The Controlling Authority has passed orders under Section 7[4] of the PG Act directing the petitioner to pay gratuity with interest at 10% per annum. The copies of a few such orders are placed on record as Annexures - C to G. The petitioner, mostly after the orders under Section 7[4] of the PG Act, has paid the gratuity to the private respondents. The date of the Controlling Authority’s orders and the date of payment of gratuity are different and specific to each of the private respondents. The date 9 of retirement and the other material details2 are as mentioned in the following table: Rank of the Respondents. Date of Retirement Respondent No. 4 31.10.2013 Gratuity Amount [in Rs.] 6,87,091.00 Gratuity Received on 01.10.2014 Respondent No. 5 30.06.2014 10,00,000.00 30.08.2018 Respondent No. 6 31.12.2014 10,00,000.00 30.08.2018 Respondent No. 7 28.02.2015 6,63,430.00 29.08.2018 Respondent No. 8 30.09.2010 3,47,553.00 19.01.2012 Respondent No. 9 31.05.2015 6,85,422.00 24.08.2018 Respondent No. 10 30.04.2015 9,82,319.00 24.08.2018 Respondent No. 11 31.08.2016 6,51,680.00 12.06.2019 Respondent No. 12 30.04.2014 5,64,647.00 02.11.2015 Respondent No. 13 31.05.2014 7,65,333.00 28.03.2016 Respondent No. 14 30.05.2015 6,86,622.00 24.08.2018 Respondent No. 15 31.08.2013 4,72,690.00 16.10.2014 6. The Controlling Authority, after the aforesaid orders under section 7[4] of the PG Act and payment of gratuity, has caused the impugned Communications [Annexures-B-B9] for initiation of proceedings under the provisions of the Karnataka Land 2 These details are as per the Memo which is filed on 01.09.2023. 10 Revenue Act, 1964 [for short 'the KLR Act'] to recover interest at 10% per annum and compound interest at 15% per annum. Consequently, the jurisdictional Tahsildar [the third respondent] has issued Notice dated 09.02.20213 under the KLR Act. The petitioner has responded to such Notice [vide Annexure – L dated 09.05.2022] furnishing the details of the payments made and referring to certain Orders which are purportedly in its favour, but the jurisdictional Tahsildar has issued Attachment Orders in the month of April, 2022 for recovery of the amount under Section 169 of the KLR Act [Annexures- J and K Series]. 7. The petitioner has called in question these Attachment Orders and the consequential Communication in the writ petitions in W.P. Nos.8643/2022 and 9757/2022. This Court has granted interim order, but ultimately, this Court by 3 The petitioner has not produced a copy of this Notice as an Annexure, but it is mentioned in the petitioner's response in Annexure-L. 11 Orders dated 05.12.2022 has dismissed these petitions as withdrawn with the petitioner filing separate Memos in each of these petitions stating that the challenge to the Attachment Orders has become infructuous and it may be permitted to withdraw the petitions with liberty to file fresh petitions if there is a fresh cause of action. 8. The petitioner, in January 2023, has written to the Special Tahsildar, Bengaluru North Taluk, Bengaluru [as per Annexures-P and Q] not to proceed with the survey of the subject property asserting inter alia that the property is under the control of the Government of India and any transaction regarding the same must be with such Government’s permission. The petitioner has also emphasized that it has received no notice of the survey and a survey without such notice will be impermissible. The petitioner has repeated its representations that are followed by the impugned 12 Auction Notice dated 06.06.2023 [published on 13.06.2023]. The submissions on behalf of the petitioner:
Legal Reasoning
9. Mr. Ganapati Narayana Hegde, the learned Senior Counsel who leads Mr. Rayappa Y Hadagali, the learned counsel on record for the petitioner, has canvassed the following. 9.1 The jurisdictional Deputy Commissioner [the second respondent] is conferred with the power under Section 8 of the PG Act to issue a Certificate for recovery of the amount payable under the PG Act together with compounded interest thereon as arrears of land revenue, but the Controlling Authority must, as envisaged under the first proviso to Section 8 of the PG Act, extend a reasonable opportunity to show cause and examine the cause shown against issuance of such Certificate. In the present case, the Controlling Authority has not even issued a notice to the petitioner 13 denying a reasonable opportunity provided under such proviso. 9.2 The petitioner, if given an opportunity, could have showed that it cannot be fastened with the liability to pay compounded interest because (i) it has paid the private respondents the gratuity amount that they are entitled to, (ii) despite being a sick industry facing proceedings under the IBC, it has been paying the gratuity amount to the retiring employees based on their seniority and the private respondents have also been paid accordingly, (iii) the petitioner has paid these amounts borrowing from different sources, and (iv) the financial constraints is a permissible ground to show compound interest cannot be permitted. 9.3 The Section 8 of the PG Act indeed reads that if the gratuity payable is not paid by the employer within the prescribed time, the Controlling Authority shall, on an application by the aggrieved person, issue a 14 Recovery Certificate to the Deputy Commissioner [the Collector] who shall recover the same together with compounded interest thereon at such rate as the Central government may specify by notification. It is settled law that the expression shall need not always be read as being mandatory or obligatory and it can also be read as may, and the expressions shall in Section 8 of the PG Act must be read as may because the legislature only intended that the Recovery Certificate to be issued depending on the facts and circumstances of the case. 9.4 The expression shall as found in this Section 8 cannot be read to mean that if the gratuity amount is not paid within the specified time, the liability to pay compound interest is incurred and the Controlling Authority shall [mandatorily] issue Recovery Certificate for the gratuity amount with compounded interest. The first proviso appended to Section 8 of the PG Act reads that the Controlling Authority shall, before issuing a 15 Recovery Certificate, extend the employer a reasonable opportunity to show cause against the issuance of such certificate. 9.5 It is indisputable that, because of this proviso, the Controlling Authority must extend a reasonable opportunity to show cause against the issuance of the Certificate. If only because there is a failure to pay the gratuity within the prescribed time it is held there must be a certificate covering compound interest, the requirement of extending a reasonable opportunity will be rendered nugatory. 9.6 The following decisions are relied upon in support of the propositions that the expression shall in a statute could be read as may based on the objective and purpose of the enactment and that the main section and the proviso must be read holistically. 16 • On the first proposition. [a] UP State Electricity Board v Shiv Mohan Singh and another4 and PEC Limited . Austbulk Shipping SDN BHD5. • On the second proposition. JK Industries Ltd and others v. Chief Inspector of Factories and Boilers and others6. The submissions on behalf of the respondents: 10. Mr. H U Vachan, the learned counsel for the private respondents, who has been supported by Ms.Chandini S., the learned Additional Government Advocate, without rebutting the propositions as aforesaid, submits as follows. 10.1 The petitioner cannot rely upon these propositions as aforesaid because the Apex Court in H. Gangahanume Gowda v. Karnataka Agro Industries 4 [2004] 8 Supreme Court cases 402 5 [2019] 11 Supreme Court cases 620 6 [1996] 6 Supreme Court cases 665 17 Corporation Ltd7, while considering these very provisions - Section 7 [3-A] and 8 of the PG Act - has clearly enunciated that once the right to receive gratuity under this Act is either undisputed or upheld, there is a mandate in law to pay interest not only under Section 7[3]-A but also under compounded interest under Section 8 if the gratuity is not paid within the time contemplated under Section 7[3]. 10.2 The reliance is on the enunciation in this decision which reads thus: “…………. The learned single judge having held that the appellant was entitled to payment of gratuity was not right in denying the interest of the delay payment of gratuity having due regard to Section 7 [3-A] of the Act. It was not the case of the respondent that the delay in the payment of gratuity was due to the fault of the employee and that it had obtained permission in writing from the controlling authority for the delayed payment on that ground. As noticed above, there is a clear mandate in the provisions of Section 7 to the 7 [2003] 3 Supreme Court cases 40 18 employer for payment of gratuity within time and to pay interest on the delayed payment of gratuity. There is also provision to recover the amount of gratuity with compounded interest in case the amount of gratuity payable was not paid by the employer in terms of Section 8 of the Act. Since the employer did not satisfy the mandatory requirements of the proviso to Section 7[3-A], no discretion was left to deny the interest of the appellant on belated payment of gratuity.” 10.3 It follows from this enunciation, and Section 7 [3-A] and 8 of the PG Act, that an employer must pay gratuity within 30 [thirty] days from the date it becomes payable and if the employer fails to so pay the gratuity, it must pay simple interest from the date the gratuity had to be paid unless the delay in the payment is because of the concerned employee’s default and the employer has obtained permission in writing from the Controlling Authority for the delay in payment on the ground of the default by the employee. If the liability to pay simple interest is thus incurred, the liability to pay 19 compound interest under Section 8 is also consequentially incurred. If there is to be any interpretation otherwise, an employee’s right to receive gratuity in time under Section 7 of the PG Act will be undermined. 10.4 In the present case, the petitioner cannot dispute that it has paid gratuity much after the expiry of the period of 30 [thirty] days as contemplated, and therefore, it cannot dispute the liability to pay compound interest at 15% [as per the rates notified by the Central Government]. The petitioner has defaulted in making these payments, and therefore, the Controlling Authority is justified in issuing the Recovery Certificate for the compound interest and the jurisdictional Tahsildar is justified in issuing notice for sale of the subject property to recover the amounts so payable. 10.5 The petitioner has filed different writ petitions, including the writ petition in 20 W.P.No.6963/2021, calling in question the Controlling Authority’s order directing payment of gratuity due along with interest at the rate of 10% for the period of delay, and when the concerned employees have filed contempt proceedings, the petitioner has paid the respective amounts in due compliance. As such, the petitioner cannot dispute its liability to pay compound interest as is mandatory under Section 8 of the PG Act. This Court’s reasoning. 11. This Court, on facts peculiar to the case, must observe that certain facts emerge as indisputable [i] the Controlling Authority in the case of the fourth respondent [Mr. Jayaram V L] on 03.12.2014 has directed the petitioner to pay gratuity and simple interest at the rate of 10% per annum from 01.11.2013; [ii] the Controlling Authority has passed similar order when corresponding applications are filed by the other private respondent; [iii] the petitioner has paid gratuity 21 to the private respondents belatedly by a period between 2 to 3 years; [iv] the petitioner has paid simple interest as contemplated under Section 7[3-A] of the PG Act only during the pendency of the present proceedings; [v] the jurisdictional Special Tahsildar has issued attachment orders specifying the amounts payable to the private respondents - including the compounded interest, [vi] the petitioner has called in question such orders in WP No. 8643/2022 and 9757/2022, which stand disposed of as having become infructuous but with liberty to the petitioner to file fresh petition if the need arises. 11.1 The cause for the present petition is the purported survey of the subject property undertaken by the Revenue Authorities, pursuant to the attachment orders issued in the year 2021-2022. If this Court, on the question of law, can opine that the petitioner must pay compound interest, notwithstanding all circumstances because there is delay between 2-3 years 22 in paying the gratuity amount, this Court must next examine whether the subject property must be auctioned based on the attachment orders which are issued when the petitioner had not paid the simple interest and should the further proceedings be after the compound interest is computed. Hence, these two questions are considered for final disposal of the petition. The Questions for consideration: [a] Whether the Controlling Authority, which is required to extend a reasonable opportunity as contemplated under the first proviso to Section 8 of the PG Act, is vested with discretion to examine the circumstances set up by an employer to either grant or not grant compound interest. [b] If the Controlling Authority should have so examined the petitioner's cause against grant of compound interest but has not, what should be the order as the petitioner 23 has deposited simple interest at 10% during the pendency of this petition? Reg. Question No. 1. 12. Every employer as is contemplated under Section 2 [f] of the PG Act must pay gratuity as computed under Section 4 thereof, and the determination of the gratuity, the manner in which it must be paid and the consequences that would be if there is any delay in the determination of the amount of the payment thereof are contemplated under Section 7 of the Act. In fact, these provisions provide for adjudication and appeal if there is any dispute about the amount or any dispute in relation to the payment of gratuity. An employee who is eligible for payment of gratuity under the Act [or the authorised person] must file an application in writing within the time contemplated with the concerned employer in the prescribed Form. 24 12.1 However, the concerned employer, whether an application is filed or not, must determine the gratuity payable and give notice of the gratuity determined to the employee as also the Controlling Authority. The employer must next arrange for payment of the gratuity within 30 days from the date it becomes payable. If the employer does not pay the gratuity amount within the said period of 30 days, will be liable to pay simple interest [not exceeding the rate specified by the Central Government] for the period between the date on which the gratuity becomes payable and the date on which it is paid. 12.2 The petitioner has not paid gratuity to the private respondents [its employees] within 30 days as contemplated under Section 7[3] of the PG Act, and there is delay of a period between 2-3 years in paying gratuity. The petitioner, as the date of this petition, had not paid interest at the rate of 10% [simple interest] for 25 the period of delay but it has now deposited this interest, and the Controlling Authority has disbursed such deposit amounts to the private respondents excluding a small amount which should also be disbursed. The petitioner essentially contends that the private respondents are not automatically entitled to compound interest and the Controlling Authority should have examined whether, in the facts and circumstances, it should be called upon to pay compound interest. On behalf of the respondents, reliance is placed upon the decision of the Apex Court in H. Gangahanume Gowda v. Karnataka Agro Industries Corporation Ltd supra to contend that the petitioner must pay compound interest for the delayed period and there is no discretion in the Controlling Authority to refuse compound interest. 12.3 The Apex Court has indeed observed that there is a mandate under Section 7 the PG Act to pay gratuity within time [within 30 days] and that there is 26 also provision to recover the gratuity with compound interest in case the gratuity is not paid by the employer. The petitioner does not dispute that in appropriate cases the Controlling Authority can issue Recovery Certificate for gratuity with compound interest, but it contends that in the present case where it was declared sick earlier and is now subject to the proceedings under IBC cannot be compelled to pay compound interest and that it has discharged the liability to pay gratuity and simple interest for the delayed period. This Court, on a careful reading of the Apex Court’s aforesaid decision, must respectfully observe that the question whether in all cases where there is delay the employer, notwithstanding the peculiar circumstances, will be liable to pay gratuity with compound interest and the Controlling Authority must issue Recovery Certificate therefore - did not fall for consideration, and as such, the question for consideration must be examined by this Court. 27 12.4 The petitioner’s case that under certain circumstances an employer need not be called upon to pay compound interest hinges on the interpretation of Section 8 of the PG Act, which reads as under: Recovery of gratuity shall, controlling authority If the amount of gratuity payable under this Act is not paid by the employer, within the prescribed time, to the person entitled thereto, the on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the Collector, who shall recover the same, together with compound interest thereon at such rate as the Central Government may, by notification, specify, from the date of expiry of the prescribed time, as arrears of land revenue and pay the same to the person entitled thereto Provided that the controlling authority shall, before issuing a certificate under this section, give the employer a reasonable opportunity of showing cause against the issue of such certificate: Provided further that the amount of interest payable under this section shall, in no case exceed the amount of gratuity payable under this Act. If the gratuity payable is not paid within the prescribed time, the Controlling Authority must, of course on an 28 application made by the aggrieved person, issue a Certificate for recovery of such gratuity as land revenue arrears. 12.5 This Court has no doubt that if only the Section [without the first proviso] is read, an employer will incur the liability to pay compound interest notwithstanding these circumstances. In this regard this Court must observe that the objective of the PG Act is to ensure that an employer does not default in either determining the gratuity payable or in paying the same, and if an employer either delays or defaults, must incur the liability to pay interest. However, the first proviso to the section reads that the Controlling Authority shall, before issuing a certificate under this section, give the employer a reasonable opportunity of showing cause against the issue of such certificate. 12.6 The Apex Court, in JK Industries Ltd and others v. Chief Inspector of Factories and Boilers and 29 others supra, considering the provisions of Section 2 [n] of the Factories Act, 1948 has held thus: the real object of 33. A proviso to a provision in a statute has several functions and while interpreting a provision of the statute, the court is required to carefully scrutinise and find out the proviso appended to that provision. It is not a proper rule of interpretation of a proviso that the enacting part or the main part of the section be construed first without reference to the proviso and if the same is found to be ambiguous only then recourse may be had to examine the proviso as has been canvassed before us. On the other hand an accepted rule of interpretation is that a section and the proviso thereto must be construed as a whole, each portion throwing light, if need be, on the rest. A proviso is normally used to remove special cases from the general enactment and provide for them specially. This declaration on the interplay between the main part of the section and the proviso thereto enjoins this Court to read Section 8 and the proviso [the first proviso] holistically with each throwing light on the other. When so read, it would be beyond dispute that the Controlling Authority must extend a reasonable opportunity. 30 12.7 This Court must examine the expanse of the expression ‘the reasonable opportunity’ as found in first proviso to Section 8 of the PG Act. The import of the expression ‘the reasonable opportunity’ as found in Article 311 [2] of the Constitution of India has come up for consideration in a number of matters before the Apex Court, and in the light of such decisions, the Apex Court in Transmission Corpn. of A.P. Ltd. v. Sri Rama Krishna Rice Mill8, has referred to a celebrated Author on this aspect. The reference reads as under: What would be a reasonable opportunity would also depend upon the fact situation. In Advanced Law Lexicon by P. Ramanatha Aiyar (3rd Edn., Vol. 4, pp. 3959 and 3968) the word “reasonable” has been described as follows: (i) [What is] fair, proper, or moderate under the circumstances….” (ii) “The expression ‘reasonable’ is not susceptible of a clear and precise definition. A thing which is reasonable in one case may not be reasonable in another. Reasonable does not mean the best, it 8 (2006) 3 Supreme Court Cases 74 31 means most suitable in a given set of circumstances.” (iii) “There is no point on which a greater amount of decision is to be found in courts of law and equity than as to what is reasonable : It is impossible a priori to state what is reasonable as such in all cases. You must have the particular facts of each case established before you can ascertain what is meant by reasonable under the circumstances—Lord M.R., Labouchere v. Dawson [(1872) LR 13 Eq 322 : 25 LT 894] .” Romilly, The expression ‘a reasonable opportunity’ in the first proviso to Section 8 must be read contextually. 12.8 Sri H.U.Vachan does not dispute that in a given case an employer, with the right to a reasonable opportunity to show cause against issuance of certificate as mentioned in the first proviso to Section 8 of the PG Act, may show that an application for Recovery Certificate is filed by the concerned employee [or the aggrieved person] notwithstanding the fact that the gratuity amount and simple interest are paid, and in that event the employer will have shown sufficient cause 32 against issuance of a certificate for recovery as land areas. The question that persists is should an employer be denied the opportunity to show any other cause, including the cause as in the present case, against issuance of Certificate. The answer to this question must turn on whether the expression ‘shall’ as used in Section 8 of the PG Act connotes a mandatory direction for the issuance of Recovery Certificate even for the compound interest when there is delay notwithstanding the nature of cause. 12.9 It is oft declared by the Courts, as is canvassed on behalf of the petitioner, that the expression ‘shall’ can be read as ‘may’ and the determinative factor would be the object and purpose of the enactment. A reference in this regard must be made to the decision of the Apex court in PEC Limited v. Austbulk Shipping SDN BHD supra wherein it held as follows: 33 The word “shall” in its ordinary import is “obligatory”. But there are many decisions wherein the courts under different situations construed the word to mean “may” [Drig Raj Kuer v. Amar Krishna Narain Singh, (1960) 2 SCR 431 : AIR 1960 SC 444] . The scope and object of a statute are the only guides in determining whether its provisions are directory or imperative [Caldow v. Pixell, (1877) LR 2 CPD 562]. It is the duty of the courts of justice to try to get at the real intention of the legislature by carefully attending to the whole scope of the statute to be construed [Craies on Statute Law, 5th Edn.] As such, the question on the nature of the cause that an employer can show against issuance of Recovery Certificate must be examined in the context of the scheme under Sections 7 and 8 of the PG Act. 12.10 This Court must opine that the legislature in Section 7 of the PG Act has firstly 34 stipulated9 that an employer must, even without an application in writing by the aggrieved, determine the gratuity payable and issue notice to both the concerned and the Controlling Authority, and secondly, that if the employer fails to pay the gratuity within 30 days, it shall be liable to pay simple interest10 from the date on which the gratuity becomes payable to the date unless certain 9 [1] A person who is eligible for payment of gratuity under this Act or any person authorized , in writing to act on his behalf shall send a written application to the employer, within such time and in such form, as may be prescribed, for payment of such gratuity. [2] As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub-section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity so determined. xxxxxx [3]. [3-A] If the amount of gratuity payable under sub-section (3) is not paid by the employer within the period specified in sub-section(3), the employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the Central Government from time to time for repayment of long-term deposits, as that Government may, by notification specify. Provided that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment on this ground. 35 conditions are satisfied. It must be underscored here that the employer incurs the liability to pay simple interest for the delayed period unless the reason for delay is attributed to the concerned employee and permission is obtained in writing from the Controlling Authority on such ground. These provisions along with Section 4 of the Act make the bedrock for the oft repeated proposition that payment of gratuity is the rule and not the exception. 12.11 The legislature has thirdly stipulated that if there is any dispute on the amount determined by the employer, the employer must deposit with the Controlling Authority such amount as admittedly is payable with the right to file an application with the Controlling Authority both in the employer and the employee for adjudication of the dispute. The Controlling Authority, after giving reasonable opportunity of being heard to the parties to the dispute, 36 adjudicates the dispute. If the Controlling Authority decides that a further sum must be paid, upon directions in that regard by the Controlling Authority, the employer must deposit such amount. Lastly, the legislature has stipulated that if the dispute persists notwithstanding such decision and the direction, an employer may file an appeal but not unless a certificate of deposit [for the amount adjudicated] issued by the Controlling Authority is produced. The Appellate Authority may indeed modify or confirm or reverse the Controlling Authority’s decision. These requirements further reiterate the proposition if there is delay, the liability to pay interest is incurred. 12.12 The issuance of Recovery Certificate is [a] when an employer, having failed to take Controlling Authority’s permission in writing against making the deposit, does not deposit the gratuity with simple interest [when there is delay] or [b] when an employer, 37 even on the conclusion of the proceedings before the Controlling Authority or the Appellate Authority, as the case may be, fails to deposit the gratuity determined with simple interest. However, the Controlling Authority, subject to extending a reasonable opportunity to the employer to show cause, issue such certificate. 12.13 This Court must verify did the Legislature intend that the scope of the enquiry with a reasonable opportunity to show cause against issuance of Recovery Certificate with compound interest to be the same both in the first and second instances. In the first instance, there is no adjudication at all and therefore every aspect, including the question of default by the employees, must be examined; while in the second instance, which will be after the adjudication by the Controlling Authority [and even after the decision by the Appellate Authority], the aspects for consideration will 38 have to be limited. The fact that in the second instance an application for Recovery Certificate is filed after adjudication [unlike in the first instance] will be crucial, and this must restrict the scope of examination under Section 8 of the PG Act in the second instance. 12.14 The significance of the expression ‘shall’ in Section 8 of the PG Act must be examined in this context to discern whether the Legislature intended that the Controlling Authority, notwithstanding the stage at which application is filed thereunder, must issue Recovery Certificate for a sum including compound interest. The logical fallout of the different circumstances in which application can be filed with the Controlling Authority for Recovery Certificate and the difference in the scope of consideration, must be that the Controlling Authority is vested with the discretion either to grant Recovery Certificate for just gratuity and simple interest or gratuity and compound interest. 39 12.15 In the light of this analysis, and the undisputed position that the Controlling Authority need not issue a Recovery Certificate if an application for the same is filed despite the employer having paid the amount with simple interest if there is delay, this Court must conclude that the expression ‘shall’ must be read as ‘may’, and the Controlling Authority, depending on whether there is adjudication under Section 7[4] or 7 [7] of the PG Act and the other attending circumstances shall issue Recovery Certificate with or without compound interest in its discretion. The first question is answered accordingly. Reg. Question No.2: 13. The Controlling Authority has passed orders under Section 7[4] of the PG Act calling upon the petitioner to pay gratuity with interest at 10% per annum. The petitioner has deposited such gratuity but 40 belatedly. The Controlling Authority has thereafter caused Communication [Annexure-B] for payment of compound interest resulting in attachment orders leading to further proceedings as recounted in the earlier part of this order. There is nothing on record to indicate that the Controlling Authority has considered the petitioner's cause against Recovery Certificate for compound interest. 13.1 The petitioner contends that it is initially declared a sick industry and is now facing proceedings under IBC and that upon mobilizing funds from different sources has paid gratuity to its employees based on seniority and the private respondents have also been paid accordingly. These and other aspects of the petitioner's cause could be 'cause against' the liability to pay compound interest, and the Controlling Authority has definitely not considered such circumstances. 41 13.2 The petitioner has now paid simple interest, and the question that remains is whether the petitioner must pay compound interest. In view of these circumstances, and this Court's opinion that the Controlling Authority is vested with the discretion, dependant on whether the application under Section 8 of the PG Act is after the proceedings under Section 7(4) or 7(7) of the PG Act or otherwise, to grant Recovery Certificate for gratuity or simple interest or compound interest, this Court must answer the second question holding that there can be no further proceedings for auction of the subject property unless there is due consideration of all circumstances by the Controlling Authority. It is held accordingly, and in view of the afore, the following:
Decision
ORDER The petition is allowed-in-part quashing the impugned Communications [as 42 per Annexure-B series] and the consequential auction notice [as per Annexure-A] reserving liberty to the private respondents to file afresh an application under Section 8 of the PG Act for issuance of Recovery Certificate for compound interest leaving open all questions for consideration in the light of this Court's opinion on the expanse of the Controlling Authority's discretion thereunder. Sd/- (B M SHYAM PRASAD) JUDGE nv*