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2025 (5) TMI 392 - HC - Indian LawsCalculation of gratuity amount as per unamended service rules of the Company which would result in a higher amount payable to deceased husband s estate - HELD THAT - Though it is true that the Company ought to have amended the service manual immediately in line with the amended service rules but the unamended service manual will certainly not give or create any right in favour of the petitioner to claim higher gratuity. The service manual is a mere handbook for the employees and does not have any statutory force. The employees would be governed by the statutory service rules as amended. It is not a case that the amendment of the gratuity rules took place in 2022 after the death of the employee as claimed by the petitioner but the rules stood amended in the year 2014 with retrospective effect from July 2013 with the approval of the Commissioner of Income Tax. May be due to mistake the amendment was not incorporated in the service manual. On detection of the error the manual has been amended and the amendment is with effect from the date on which the amended gratuity rules came into force. Conclusion - It does not appear that the petitioner would be entitled to gratuity at a higher rate relying on the unamended gratuity rules. The petitioner would be entitled to receive gratuity as per the rules prevailing in the Company on the date of death of the employee i.e the amended rules which came into effect from July 2013. Petition dismissed.
1. ISSUES PRESENTED and CONSIDERED
- Whether the petitioner is entitled to gratuity calculated as per the unamended service rules of the Company, which would result in a higher amount payable to her deceased husband's estate. - Whether the amended gratuity rules, which came into effect prior to the deceased employee's appointment but were not reflected in the service manual until after his death, can be applied retrospectively to reduce the gratuity payable. - Whether the petitioner's claim for gratuity based on the unamended rules is sustainable given that the amended rules were approved by the Commissioner of Income Tax with retrospective effect. - Whether the delayed amendment of the service manual and the initial erroneous communication of the gratuity amount to the petitioner creates any right or entitlement to the higher gratuity amount. - Whether application of the amended gratuity rules to the petitioner's claim amounts to discrimination or unfair treatment. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of amended gratuity rules versus unamended rules for calculation of gratuity Relevant legal framework and precedents: The gratuity payable to employees of the respondent Company, a public sector undertaking, is governed by the Company's gratuity fund rules and regulations, which require approval by the Commissioner of Income Tax. The rules in question were amended with effect from 16th July, 2013, prior to the appointment of the deceased employee in December 2014. The amended rules specify calculation of gratuity at the rate of 15 days' emolument inclusive of basic pay, stagnation pay, and DA for each completed year of continuous service, subject to a maximum ceiling. Court's interpretation and reasoning: The Court observed that the amended gratuity rules were duly approved by the Commissioner of Income Tax with retrospective effect from July 2013, predating the deceased employee's appointment. Therefore, the amended rules were applicable to the employee from the commencement of his service. The petitioner's reliance on the unamended rules, which would yield a higher gratuity amount, was misplaced as those rules had ceased to be effective before the employee joined service. Key evidence and findings: The Company produced documentary evidence including the appointment letter, the amended gratuity rules with approval from the Commissioner of Income Tax, and a calculation sheet demonstrating uniform application of the amended rules to all employees. The petitioner's claim was initially based on an erroneous communication from the Company, which was later corrected. Application of law to facts: Since the amended gratuity rules were in force at the time of the employee's appointment and death, they govern the calculation of gratuity payable. The unamended rules do not apply and cannot be invoked to claim a higher gratuity amount. Treatment of competing arguments: The petitioner argued that the rules were not actually amended until 2022 and that the Company's delay in updating the service manual misled her. The Court rejected this, finding the amendment had been effective since 2013, and the delay in reflecting the amendment in the service manual did not create any substantive right. Conclusions: The petitioner is not entitled to gratuity calculated as per the unamended rules. The amended rules apply retrospectively and govern the gratuity calculation. Issue 2: Effect of delayed amendment of the service manual and erroneous communication on the petitioner's rights Relevant legal framework and precedents: Service manuals are generally considered internal documents or handbooks and do not have statutory force. The controlling legal provisions are the approved service rules and regulations. Court's interpretation and reasoning: The Court held that the service manual's failure to reflect the amended gratuity rules until May 2022 was an administrative oversight that caused confusion but did not create any enforceable right in favor of the petitioner. The erroneous communication of a higher gratuity amount was acknowledged by the Company, which expressed regret and corrected the mistake promptly. Key evidence and findings: The Company's affidavit and communication records showed the initial incorrect gratuity figure was a bona fide error. The Company corrected the amount and paid the gratuity as per the amended rules. The petitioner did not demonstrate any detrimental reliance or estoppel arising from the incorrect communication. Application of law to facts: Since the service manual is not a statutory document, and the amended rules were valid and effective, the petitioner cannot claim entitlement based on the unamended manual. The correction of the error and payment as per the applicable rules extinguished any claim to the higher amount. Treatment of competing arguments: The petitioner's contention that the Company deliberately delayed amendment to frustrate her claim was rejected due to lack of evidence. The Court found no mala fide or discrimination in the Company's actions. Conclusions: The delayed amendment of the service manual and the initial erroneous communication do not confer any right to the petitioner to claim gratuity at the higher rate. Issue 3: Allegation of discrimination in applying the amended gratuity rules Relevant legal framework and precedents: Equal treatment of employees and their heirs in application of service rules is a fundamental principle. Discrimination must be established on evidence of differential treatment without justification. Court's interpretation and reasoning: The Company demonstrated through calculation sheets and affidavits that the amended gratuity rules were uniformly applied to all employees and their heirs. No other employee or heir had raised any grievance regarding the amendment. Key evidence and findings: The calculation sheets showed consistent application of the amended rules from 2013 to 2022. The petitioner's claim was the sole exception arising from the initial erroneous communication. Application of law to facts: Granting the petitioner gratuity calculated under the unamended rules would result in discrimination against other employees who were paid under the amended rules. The Court emphasized the need for uniform application of approved rules. Treatment of competing arguments: The petitioner argued that applying the amended rules retrospectively was unfair. The Court found no merit in this as the amendment predated the employee's service. Conclusions: There was no discrimination in applying the amended gratuity rules; the petitioner's claim for higher gratuity would cause unjust discrimination. 3. SIGNIFICANT HOLDINGS "The amended gratuity rules were placed before the Commissioner of Income Tax in 2014 and the same stood approved by the Commissioner with effect from July, 2013. The petitioner never had the right to receive gratuity at the higher rate as the amendment took place before the husband of the petitioner joined service, as such, there cannot be any question of frustrating her claim." "The service manual is a mere handbook for the employees and does not have any statutory force. The employees would be governed by the statutory service rules, as amended." "Directing the Company to grant gratuity at a higher rate to the petitioner would, in fact, cause discrimination." Core principles established:
Final determinations:
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