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TMI Blog2020 (5) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... an "Approved Gratuity Fund" was constituted "for the purpose of providing Gratuities to the employees of the Company under the Payment of Gratuity Act, 1972 (hereinafter referred to as 'the Act') and the Gratuity Scheme of the Company". Clauses 4, 11 and 15(a) of the Trust Deed are as under:- "4. RULES: The Fund shall be governed by the Rules and any reference to the Rules in these presents shall mean the Rules for the time being in force which shall be binding on the Members, their Beneficiaries and on the Company. A copy of the current Rules is annexed to and the same shall be deemed to form part of these presents. 11. MEMBERS TO HAVE NO LEGAL RIGHT Except as provided in these presents and in the Rules, no Member or his Beneficiary shall have any legal claim, right or interest in the Fund. Provided always that the Trustees shall administer the Fund for the benefit of the Members and their Beneficiaries in accordance with the provisions of these presents and the Rules. 15. PAYMENT OF GRATUITY: (a) On behalf of the Company, the Trustees shall provide for the payment of gratuity on termination of service, on death or retirement of the Member or otherwise as provided i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or each completed year of service subject to maximum of 20 months basis pay, payable to the employees or payable to his heirs, executors or nominee in case of death of the employee. (b) On termination of Service: i. Beyond five years upto 8 years of continuous service at the rate of 5 (five) days basic pay for every completed year of service. ii. Beyond 8 years upto 10 years of continuous service at the rate of 10 days (ten) basic salary for every completed year of service. iii. Beyond 10 years upto 15 years of continuous service at the rate of 12 (twelve) days basic salary for every completed year of service. iv. Beyond 15 years of continuous service at the rate of 15 (fifteen) days basic salary for every completed year of service subject to maximum of 20 months basic salary. (c) On resignation or voluntary retirement: After completion of 5 years of continuous service or more at the rate of 15 days basic salary per year of completed service, subject to maximum of 20 months basic pay provided that the management is satisfied that such resignation or voluntary retirement is in the interest of the administration. The rate of basic salary for payment of Gratuity shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Gratuity Act were entitled for gratuity in accordance with the provisions of the Gratuity Act. (v) As per the aforementioned prescribed scheme, the gratuity was always determined as per the method prescribed under the Gratuity Act and when the gratuity for any employee exceeded the maximum limit (as prescribed from time to time), under the Gratuity Act, it was capped at the prevailing upper limit at the relevant time i.e. the gratuity amount was reduced so as to stay within the upper caps prescribed by the Gratuity Act." While responding to the submission that some of the employees had received gratuities in excess of Rs. 10 lakhs, it was submitted that the respondent as Chief Executive officer was responsible for making such excessive payments to said employees and that the respondent reserved its rights to take appropriate remedy in that behalf. It was further stated:- "In any event, the emoluments sheet never mentioned that the provisions on the letter of appointment, Trust Deed and provisions of the Gratuity Act are not to be followed. The petitioner was entitled to payment of gratuity as per the Gratuity Act in accordance with the terms and conditions of its let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, same is more beneficial to the applicant and he is entitled to receive full gratuity amount of Rs. 1,83,75,000/- under the said scheme." 9. The appellant being aggrieved, filed appeal before the Appellate Authority under the Act challenging the aforesaid order dated 31.07.2017 passed by the Controlling Authority and applied for waiver of the requirement of pre-deposit of the amount directed to be paid to the respondent. Submitting that said application for waiver was not being considered by the Appellate Authority, Writ Petition (Civil) No.10319 of 2017 was preferred in the High Court by the appellant. The Writ Petition was disposed of by the High Court on 22.11.2017 directing the appellant to submit appropriate bank guarantee in the sum representing the amount of gratuity along with interest till the date of filing of the appeal. After compliance, the appeal was taken up for hearing. By order dated 23.03.2018 the appeal No.36(26)/2017 P.A. DYC was dismissed by the Appellate Authority under the Act with following observations:- "The Gratuity Fund so created by the appellant to regulate the gratuity of the employees is necessarily a term of the service contract between the emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1979 or the Rules thereunder that curbs the respondent's entitlement to gratuity to the ceiling limit prescribed under Section 4(3). The relevant Rule 6(b) of petitioner's gratuity scheme only stipulates that the amount of gratuity payable to an employee shall be calculated in accordance with the provisions of the PG Act. The "provisions of the PG Act" is a broad phrase that not only contemplates the rate statutorily prescribed under Section 4(2) and the ceiling limit under Section 4(3), but also the exception carved out under Section 4(5) for employees who have better terms of gratuity under an award, or agreement/contract with the petitioner. Therefore, in the absence of a specific clause that caps the maximum amount of gratuity payable to the respondent, a broad stipulation in Rule 6(b) that gratuity will be calculated as per the provisions of the PG Act, cannot be construed to mean that the ceiling limit under Section 4(3) is applicable to the respondent. To my mind, such an interpretation would amount to selectively applying only Section 4(3) of the Act, by ignoring the mandate of Section 4(5), when Rule 6(b) in itself contemplates the provisions of the PG Act as a whole. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the petitioner that curbs the gratuity payable to the respondent to the statutory ceiling limit under Section 4(3)." 10.2. As regards, the decision of this Court in Beed District Central Cooperative Bank Ltd. v. State of Maharashtra and others (2006) 8 SCC 514, it was observed:- "31.Similarly, the decision in Beed District Central Coop. Bank Ltd. v. State of Maharashtra and Ors.4, is also not applicable to the present case. In that case, the appellant/employer's internal gratuity scheme provided a better rate for computing the gratu9ity of the respondent/workman, but the ceiling limit thereunder was lower than that prescribed by the PG Act. When the respondent/workman sought to avail the benefit of the appellant/employer's internal gratuity scheme as also the ceiling limit under the PG Act, the Supreme Court held that the respondent/workman must either avail the benefit of his contract with the appellant/employee in its entirety or the statute. He cannot avail the better terms of his contract with appellant/employer and at the same time keep his options open in respect of a part of the statute that suits him." The Single Judge of the High Court, thus by order dated 06.02.2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court, we heard Mr. C.U. Singh, learned Senior Advocate for the appellant and Mr. J.P. Cama, learned Senior Advocate for the respondent. 13. In the submission of Mr. C.U. Singh, learned Senior Advocate, the respondent was clearly covered by the Payment of Gratuity Act, 1972 and subject to the ceiling or limit of Rs. 10 lacs as provided under Section 4(3). He submitted that while an employee would be entitled to receive better terms of gratuity under Section 4(5) of the Act, such better terms could be claimed only under specific circumstances as set out in Section 4(5); that at no stage any claim was raised regarding existence of any award, agreement or contract nor was there any pleading about the existence of any award, agreement or contract. It was further submitted that in terms of law laid down by this Court in Beed District Central Cooperative Bank Ltd.4 and Union Bank of India and others vs. C.G.Ajay Babu and Another (2018) 9 SCC 529 either the statutory provisions or the contractual scheme can be followed and not a combination of both the elements. 14. In response, it was submitted by Mr. J.P. Cama, learned Senior Advocate for the respondent that since Section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es per mensem, is employed at any time thereafter on wages exceeding one thousand rupees per mensem, gratuity, in respect of the period during which such employee was employed on wages not exceeding one thousand rupees per mensem, shall be determined on the basis of the wages received by him during that period;" The original text of Sub-Sections (2) and (3) of Section 4 of the Act was as under:- "Payment of gratuity: 4. (1) ... ... ... (2) For every completed year of service or part thereof in excess of six months the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned. Provided that in the case of a piece rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account: Provided further that in the case of an employee employed in a seasonal establishment, the employer shall pay the gratuity at the rate of seven days' wages for each season. (3) The amount of gratuity payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceive, now stand covered. This Amendment Act also substituted expression "one lakh" in place of the earlier expression "fifty thousand" occurring in Section 4(3) of the Act. 15.5 By Act 47 of 2009, for Clause (e) of Section 2 following Clause was substituted:- "(e) "employee" means any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of work, manual or otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway company, shop or other establishment to which this Act applies, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity;" 15.6 The ceiling limit of "one lakh rupees" as stipulated in Section 4(3) of the Act was successively raised by Act 11 of 1998 and by Act 15 of 2010 to "rupees three lakhs and fifty thousand rupees" and "ten lakh rupees" respectively. 15.7 By Act 12 of 2018 the expression "ten lakh rupees" now stands substituted by the expression "such amount as may be notified by the Central Government from time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the case of [an employee who is employed in a seasonal establishment and who is riot so employed throughout the year], the employer shall pay the gratuity at the rate of seven days wages for each season. Explanation: In the case of a monthly rated employee, the fifteen days wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen. (3) The amount of gratuity payable to an employee shall not exceed three lakhs and fifty thousand] rupees. (4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced. (5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer. (6) Notwithstanding anything contained in sub-section (1), - (a) the gratuity of an employee, whose services have been terminated for any act, wilfu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffers better terms, the employee cannot be denied right to receive those higher benefits. 19. But the question still remains whether in the present case there was such a choice available or not. According to Mr. C.U. Singh, learned Senior Advocate, the case of the respondent would be clearly covered by the provisions of the Act and not under the Scheme at all. Similar submissions were advanced on behalf of the appellant before the High Court, as noted by the Single Judge. However, the submissions were rejected after placing reliance on Section 4(5) of the Act. 20. We must, therefore, see what exactly has been provided for in the Trust Deed, Scheme and the Rules framed thereunder. The Trust Deed was executed "for the purpose of providing gratuities to the employees of the company under the Payment of Gratuity Act". Clause 15 of the Trust Deed casts an obligation on the trustees to provide payment of gratuity upon termination of service or upon death or retirement of service of the Member "as provided in the Rules of Scheme" Rule 6(b) of the Rules clearly stipulates that notwithstanding the Scheme of the Company, if any member is covered by the Act, the amount of gratuity shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckground and the changes that the provisions of Section 2(e) and Section 4 have undergone show that not all employees were initially sought to be covered under the Act. Those, who were in wage-brackets greater than what was stipulated in Section 2(e) till it was finally amended to do away with the wage-bracket, were not covered by the Act. The Trust Deed and the Scheme sought to devise an apparatus and make provision for those who were otherwise not covered by the Act and for this reason contemplated two kinds of employees. The Trust Deed and the Scheme were executed and formulated in the year 1979 when the wage-bracket was a definite parameter for an employee to be covered under the Act. The intent of the Trust Deed and the Scheme has to be understood in that perspective. The idea was not to afford to the employees who are covered by the provisions of the Act, a package better than what was made available by the Act, but it was to extend similar benefit to those who would not be covered by the Act. 23. In Beed District Central Cooperative Bank Ltd. (2006) 8 SCC 514, the gratuity scheme provided by the employer had better rate for computing gratuity but the ceiling limit was lower ..... X X X X Extracts X X X X X X X X Extracts X X X X
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