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Ramchandar's Coaching Institute Pvt. Ltd. & Another Versus Rakesh Ramchandar Nanda

2015 (8) TMI 91 - BOMBAY HIGH COURT

Payment of gratuity to director – Having agreed to make payment of gratuity as per content terms, claim that gratuity not admissible was not maintainable – Held that:- Section 4(5) of Payment of Gratuity Act, 1971, makes it clear that nothing shall effect the right of employee to receive better terms of gratuity under any award or agreement or contract with employer –Even if employee does not fall within meaning of definition prepared for Section 4-A, nothing prevents employer company from enter .....

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om LIC in connection with scheme.

Where there was unequivocal admission of liability to pay gratuity to Respondent coupled with promise to pay same as per content terms – It was agreed and confirmed by appellant that gratuity shall be paid to Respondent on account of his resignation – No infirmity in order of CLB – Appeal dismissed – Decided in favour of Respondent. - Company Appeal No. 65 of 2014, Company Application No. 59 of 2014, CLB Company Petition No. 44 of 2010, Company Appl .....

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inal company petition (in which the company application was taken out) was filed by Appellant No.2 before the CLB against Appellant No.1 and the Respondent herein under Sections 397 and 398 of the Companies Act,1956 alleging acts of oppression and mismanagement in the affairs of Appellant No.1. In the course of the hearing of the company petition, the parties arrived at a mutual settlement pursuant to which consent terms came to be filed by the parties in the company petition. The consent terms .....

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firmed that the Gratuity and Provident Fund payable to the Respondent Nos.2 and 3 on account of their resignation from the Respondent No.1 company shall be processed and paid by the Respondent Company within two months from the date of handing over of management of the Respondent Company to the Petitioner. Though the amount of provident fund was duly paid to the Respondent, the gratuity was not so paid. The Respondent, in the premises, applied for directions of the CLB for payment of gratuity in .....

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ion was disposed of, there was no force in the submission of the Appellants that the Respondent's claim for gratuity was not admissible. On the quantum of gratuity payable, the CLB came to a conclusion that the details and basis of calculation of the gratuity amount payable were indicated in the application (the last salary drawn of the Respondent being part of the record of the case), and the Appellants not having contested such details and basis of calculation or furnished any details of t .....

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of the Act, and there is, thus, no gratuity payable under the Act. It is secondly submitted that any dispute as to either admissibility or quantum of gratuity payable to an employee could only be decided by the authorities under the Act and that the CLB did not have jurisdiction to do so. Learned Counsel relies upon the judgment of the Supreme Court in the case of State of Punjab vs. Labour Court, Jullundur AIR 1979 SC 1981 and the judgments of the Calcutta High Court in the case of Monitron Sec .....

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with any employee for payment of gratuity and it was bound to perform such contract irrespective of compulsory provisions concerning gratuity payable under the Act. It is submitted that the Respondent was not only a director but a bona fide whole-time employee of the company. It is submitted that the company had made suitable provisions towards payment of gratuity to its employees including whole time directiors till 2001 and thereafter, as part of the scheme of gratuity registered with the Life .....

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of parties. 5 At the outset, it needs to be noted that the Act provides for gratuity to be paid to an employee on termination of his employment. The employee is defined under Section 2(e) of the Act as follows : (e) "employee" means any person (other than an apprentice) who is employed on wages, whether the terms of such employment are express or implied, in any kind or work, manual or otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway .....

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are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance. The Act provides for payment of gratuity for every completed year of service or part thereof in excess of six months at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned. The Act also provides for compulsory insurance for the employer's liability of payment of gratuity under the A .....

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the Gratuity Fund other than personal and domestic servants and shall be deemed to include the Directors who are wholetime bonafide employee of the Company and do not beneficially own shares in the Company carrying more than 5% voting rights in the Company. The submission is that the Respondent, being a director of the company carrying more than 5% voting rights in the company (he admittedly has 33.33% shareholding in the company), is not entitled to be treated as an employee under this scheme .....

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erms of gratuity under any award or agreement or contract with the employer. Even if an employee does not fall within the meaning of the definition provided in the trust deed prepared for the purposes for Section 4-A of the Act, nothing prevents an employer company from entering into any agreement with an employee for payment of gratuity. For this purpose, the 'employee' means any person who is employed for wages in or in connection with the work of any establishment in accordance with t .....

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than 5% voting rights for a director employee, may be relevant for the purposes of compulsory insurance under Section 4-A of the Act, but does not generally govern the meaning of the word 'employee' for the purposes of gratuity payable under the Act. Nothing therefore prevents Appellant No.1 company from entering into a separate contract for payment of gratuity with a whole-time employee who has been holding more than 5 per cent voting rights in the company. Secondly, it has been brough .....

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d 3 January 2014 addressed by the LIC that the total accumulation value of gratuity payable to the Respondent as on 1 November 2012 was ₹ 10 lakh as per the scheme rules. This was in response to a query addressed by the Respondent to the LIC under Master Policy No. GGCA/658728 taken by the Appellant company from the LIC in relation to gratuity payable by it to its employees. Then, there are also other documents on record which show that the Respondent was actually included in the gratuity .....

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11. This list shows the name of the Respondent as an employee with salary of ₹ 2 lakh per month as part of the Gratuity Scheme. This clearly shows that not only was the Respondent entitled to receive gratuity but that suitable provisions were made throughout towards payment of such gratuity. The last clinching evidence in this behalf is the consent terms themselves where there is an unequivocal admission of liability to pay gratuity to the Respondent coupled with a promise to pay the same. .....

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terms filed before the CLB, it was agreed and confirmed that gratuity shall be paid to the Respondent on account of his resignation from the first Appellant company within two months from the date of handing over of the management by the Respondent. There is no need to take the dispute before the authorities under the Act. This is rather a case for enforcement of consent terms filed before the CLB. There cannot possibly be any dispute as to the admissibility of the liability, and as far as the .....

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CLB was entitled to undertake. 7 The judgments of the Supreme Court and Calcutta High Court in State of Punjab vs. Labour Court, Jullundur and Surendra Vikram Singh Agarwala do not support the Appellant's case. In State of Punjab case, employees of an establishment, who were retrenched against payment of retrenchment compensation, claimed gratuity under the Act. This claim being disputed, the employees applied to the Labour Court for the gratuity denied to them, under Section 33-C(2) of the .....

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the Act and before the controlling authority. To the same effect are the observations of the Calcutta High Court in Surendra Vikram Singh Agarwala's case. There a retired employee had applied for payment of his gratuity dues in a civil suit. A scheme was framed by the Court in a civil suit for administration of a public trust for religious and charitable purposes. It was the case of the applicant that under this scheme, he as an employee of the trust was entitled to receive gratuity upon his .....

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