IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM THURSDAY, THE 23RD JULY 2009 / 1ST SRAVANA 1931 WP(C).No. 22308 of 2005(E) ----------------------------------------- PETITIONER(S): ------------------------ 1. P.G.RADHAKRISHNAN NAIR, EX.B.NO.9232, DEPUTY CHIEF MANAGER, PROJECTS, FACT, 30/5647A, KRISHNANM, KURISHUPALLY ROAD, PERMANNUR, COCHIN 682 015. ( REP.BY POWER OF ATTORNEY HOLDER V.G.MATHEW, S/O. V.M.GEORGE, AGED 61 YEARS, VATTAKUZHY, ELAVUNKAL RD. PALARIVATTOM , KOCHI – 25.) 2. M.V.SANKARAN NAMBOOTHIRI, EX.B.NO.8797 DEPUTYCHIEF ENGINEER, PCE DEPARTMENT, FEDO, FACT, MANKULAM ILLAM, PUNNAYAM, ASAMANOOR P.O. ERNAKULAM 683 549. 3. P.M.MANIKANDAN, EX.B.NO.9233, DY.CSP. FACT LTD., PADINCHARE MELEPPATT HOUSE, KANNANOOR, NHANGATTIRI P.O. PALAKKAD 679 303. 4. P.SATHYAPRAKASAN, EX.B. NO.9235, DESIGN MANAGER, FEDO, FACT LTD., PUICKEL, EROOR (S), THIRPUNITHURA, ERNAKULAM 682 306. 5. ABI.K.ISSAC, EX.B.NO.9236, PLANT MANAGER FACT LTD,. KOZHUMATTATHIL, KOLENCHERRY, ERNAKULAM DISTRICT. 6. UMA, PRASAD CHANDRAN NAIR, EX.B.NO.9269, DESIGN MANAGER, CIVIL DEPOT, FEDO, BHADRACHALAM, PALAKULANGARA, TRIVANDRUM 695 024. 7. K.P.SUNIL KUMAR, EX.BO.NO.9276, MANAGER TECH SERVICES, FACT PD, SUNDER BHAVAN, GOPAL STREET, KANNUR 670 001. 8. JAMES MENACHERY, EX.B.9578, SR.DEPUTYFINANCE MANAGER, FACT, BLISS, 32/1165, NETTAIKODATHU ROAD, PALARIVATTOM, KOCHI 682 025. W.P.(C) NO.22308/2005 9. SANTHOSH.P.H. EX.B.NO.12194, ASSISTANT MANAGER, (MECH), FACT.LTD. XX/10, VANDANA, KALLUKADAVU ROAD, PULINCHODE, ALWAYE 683 101. 10. CLAUDIUS PETER, EX.B. NO.8148, DEPUTY CHIEF ENGINEER, TECH SERVICES, FACT CD, CLADALE, ERAVIPURAM P.O. QUILON 691 011. BY ADV. MR.ANTONY M. AMBAT RESPONDENT(S): ---------------------------- 1. THE CHAIRMAN AND MANAGING DIRECTOR, THE FERTILIZERS AND CHEMICALS TRAVANCORE LIMITED, UDYOGAMANDAL 683 501. 2. UNION OF INDIA, REPRESENTED BY THE SECRETARY, MINISTRY OF CHEMICALS AND FERTILIZERS, DEPARTMENT OF FERTILIZERS, SASTRI BHAVAN, NEW DELHI. BY MR.A.M.SHAFFIQUE, SENIOR ADVOCATE FOR R1 BY ADVS MR.E.K.NANDAKUMAR FOR R1 MR.A.K.JAYASANKAR NAMBIAR FOR R1 SMT.PRIYA MAHESH FOR R1 BY MR.VARGHESE P. THOMAS, CGSC FOR R2 THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 11/06/2009, THE COURT ON 23/07/2009 DELIVERED THE FOLLOWING: W.P.(C) NO.22308/2005 APPENDIX PETITIONER'S EXHIBITS P1:- COPY OF THE OFFICE ORDER DT. 25.6.99. P2:- COPY OF THE OFFICE ORDER ISSUED BY FACT DT. 28TH AUGUST 2001. P3:- COPY OF THE JUDGMENT IN OP. NO.6613/02(K) DT. 26TH FEBRUARY 2003. P4:- COPY OF THE JUDGMENT IN WA. NO.642/03 DT. 9.7.03. P5:- COPY OF THE LETTER ISSUED BY FACT DT. JUNE 21, 2004 TO A FORMER OFFICER. P6(a)-(b):- COPY OF THE RELEVANT PAGES OF ANNUAL REPORT OF FACT LTD. P7:- COPY OF THE LETTER DT. 18.3.02 ISSUED BY THE 2ND RESPONDENT. P8 TO P8(i):- COPY OF THE REPRESENTATIONS DT. 2.5.05 SUBMITTED BY THE PETITIONERS 1 TO 10. P9:- COPY OF THE ADVERTISEMENT IN ECONOMIC TIMES DT. 20.6.02. R1(a):- COPY OF THE ORDER DT. 11.7.2001 ISSUED BY MINISTRY OF CHEMICALS & FERTILISERS, DEPARTMENT OF FERTILISERS TO THE IST RESPONDENT TRUE COPY P.S. TO JUDGE TSS C.K.ABDUL REHIM,J. -------------------------------------------- WP(C).No.22308 of 2005 --------------------------------------------- Dated this the 23rd day of July, 2009. JUDGMENT The petitioners in this writ petition were officers of the first respondent, which is a public sector undertaking of Union of India. Petitioners 1 to 9 resigned from the service of the first respondent company on various dates falling in between 1.1.1997 to 30.6.2001. The 10th petitioner was removed from service on 3.5.2001, which falls within the above said period. Petitioners were paid gratuity and other terminal benefits on relieving from the service, based on the pay scale which existed before 1.1.1997. The grievance voiced in this writ petition is about denial of the differential amount in gratuity and other terminal benefits based on the revised pay scale which came into effect as on 1.1.1997, along with interest. 2. The Department of Public Enterprises, Government of India, had issued Ext.P1 'Office Memorandum' intimating its decision to accept recommendations of a high level committee constituted for revising pay and allowances of managerial staff in WPC.22308/2005 2 Central Public Sector Undertakings, which was annexed therewith, with effect from 1.1.1997. Consequently, the first respondent issued Ext.P2 order dated 28.8.2001, revising the pay scale of managerial personnel in their service. It is specifically declared in Ext.P2 that the revised pay scale will be applicable with effect from 1.1.1997. But it is mentioned that payment of revised salary will be made effective only from 1.7.2001. In clause (9) of Ext.P2 it is mentioned that arrears consequent to revision of basic pay/wages and DA for the period from 1.1.1997 to 30.6.2001 will be reviewed and decided by the Management/Government, when the company starts earning continuous profit atleast for three years. It is further stated that payment of PF, Gratuity and Annual Bonus on revised wages for the said period will be subject to payment of arrears of wages pertaining to the said period. Clause 9 in Ext.P2 is extracted below: “ The liability and payment of arrears relating revision of basic pay/wages and DA for the period from 1.1.1997 to 30.6.2001 will be reviewed and decided by the Management/Government, when the company WPC.22308/2005 3 starts earning continuous profit atleast for three years. PF, Gratuity and annual bonus on revised wages for this period will also be subject to payment of arrears of wages for this period.” 3. Some of the retired employees of the first respondent company, who left service between 1.1.1997 and 30.6.2001, challenged clause (9) of Ext.P2 before this court in various writ petitions , contending that the condition incorporated therein to the effect that the increase in terminal benefits resulting from the pay revision will be paid only if company earns profit consecutively for a period of three years, is unsustainable because it is in variance with the direction issued by the Ministry of Chemicals and Fertilisers Government of India. The first respondent company resisted those writ petitions contending that the question regarding revision of terminal benefits will arise only in a case where the arrears of pay and allowances are actually released and as long as the arrears of salary pursuant to the pay revision is not released, the revision of terminal benefits and its payment does not arise for consideration. While disposing of those writ petitions through Ext.P3 common WPC.22308/2005 4 judgment, this court observed that, the condition in clause (9) that payment of arrears of revised terminal benefits to those who were already retired will be made only on the first respondent company making profit consecutively for three years, is highly unjust as it is not going to be fulfilled in the near future. The court observed that it amounts to a practical denial of the claim for revised terminal benefits to those who had already retired from service. In Ext.P3 judgment this court observed as follows:- “I find considerable force in the submission of the petitioners in this regard and I am inclined to agree with them. If the conditions imposed by the first respondent are upheld, the same will result in permanently denying whatever pittance they may receive by way of revision of terminal benefits. So I am inclined to allow the third relief sought by the petitioners. For other benefits, the petitioners may wait for better times. Accordingly, the original petitions are disposed of directing the first respondent to pay the gratuity, leave encashment of privilege leave/medical leave admissible on the basis of the revised pay and WPC.22308/2005 5 allowances within three months from the date of receipt of a copy of this judgment. The claim of the petitioners for other benefits is kept open for which they may work out their remedies at the appropriate time.” 4. Ext.P3 judgment was taken up in appeal by the first respondent company in WA.642/2003 and connected cases. By Ext.P4 common judgment the writ appeals were dismissed. The Division Bench observed that it is not reasonable for the company to contend that eventhough the scales have been revised with effect from 1.1.1997 the employees who were in service on that day and retired thereafter shall be treated differently. It is held that those who retired from service after 1.1.1997 has to be treated uniformly and equally as they constitute one class and there is no rational basis for a differential treatment. Since the pay scales were revised with retrospective effect, the benefit should be made equally admissible to all. 5. Consequent to Ext.P4 judgment the first respondent company paid gratuity and other terminal benefits to managerial employees who retied between 1.1.1997 and 30.6.2001. Ext.P5 is a letter issued by the first respondent to one of such WPC.22308/2005 6 employees granting such benefits. It is stated in Ext.P5 as follows:- “In the context of the judgments pronounced by the Honourable High Court of Kerala, we are glad to inform you that the management has decided to pay the difference in the gratuity and leave encashment amount, as per rules based on revised wages to the managerial personnel who left the services between 1.1.1997 and 30.6.2001 on account of superannuation/voluntary retirement and died while in service, in 12 equal monthly instalments.” It is evident that the benefit allowed pursuant to Ext.P4 judgment was limited to managerial personnel who left service on account of, superannuation, voluntary retirement, and died while in service. But those who resigned from service as well as those who were removed from service were not included in the category of employees eligible for such benefits. 6. Mr.Antony M.Ambat, learned counsel appearing for the petitioners had pointed out that exclusion of persons like petitioners, who left service of the first respondent company WPC.22308/2005 7 during the relevant period by way of resignation and removal, is highly illegal and unjustifiable and it amounts to discrimination. It is contended that the petitioners are eligible atleast for payment of the same benefits as granted in Ext.P5. It is pointed out that as per section 4(1) of the Payment of Gratuity Act 1972 all employees who had rendered continuous service for not less than 5 years are entitled for payment of gratuity on their termination of employment by way of superannuation, retirement, resignation or death or disablement. Therefore, the petitioners are seeking direction for payment of differential in gratuity based on the revised pay scale. 7. Mr.A.K.Jayasankaran Nambiar, learned counsel for the first respondent company contested the case mainly on the ground that the petitioners have no manner of right to claim the differential amount in terminal benefits arising out of the pay revision, unless the first respondent takes a decision to grant such benefits. The terms in Ext.P2 order will not put them entitled for such benefits. Further as per the decision of the first respondent company taken as evidenced by Ext.P5, it specifically intended to extend such benefits only to those category of WPC.22308/2005 8 employees, who left service on account of, superannuation, voluntary retirement, and died while in service. Therefore there is no legal right for the petitioners to claim such benefits which are arising out of Exts.P2 and P5, is the contention. 8. The dispute regarding entitlement of the petitioners for the benefits claimed need evaluation, not on the basis of Exts.P2 and P5, but on the basis as to whether they were discriminated in any manner in denial of such benefits. The specific relief sought for in this writ petition includes declaration of clause 9 in Ext.P2 as ultravires. The reasoning upon which the challenge against the said clause was dealt with in Exts.P3 and P4 judgments is relevant and need be looked into. In Ext.P4 judgment it is observed that the pay scales had been revised by the company with effect from 1.1.1997 and having been introduced the revised scales with effect from that date it is not reasonable for the first respondent to contend that the employees who were in service on that day and retired thereafter shall be treated differently. It is specifically observed that those who were in service as on that date constitute one class and are entitled for equal treatment. The discrimination in between those WPC.22308/2005 9 who were in service as on 1.1.1997, differentiating them as those who retired after a particular date and those who retired before that date, without disclosing any rational basis for such differential treatment, cannot be sustained on the toutchstone of Article 14 and 16 of the Constitution., is the findings. Therefore, it is held that as long as the revision is introduced with retrospective effect, the benefit should be made equally admissible to all. The reasoning rendered in Ext.P4 judgment holds valid and the first respondent company had suffered that judgment. When the consequential orders were issued, the company had further distinguished and created two classes among the employees who were in service as on 1.1.1997, as those who retired due to superannuation, voluntary retirement, and died while in service in difference to those who were resigned and removed from service. Whether such a discrimination is valid or not, especially in view of the judgment of this court and the provisions contained in the Payment of Gratuity Act 1972, is the question to be decided. The learned counsel for the respondents had pointed out a decision of the Honourable Supreme Court in Uco Bank and others vs. WPC.22308/2005 10 Sanwar Mal (2004 (2) LLJ 490) . Referring to the provisions in Banking Companies ( Acquisition and Transfer of Undertakings) Act 1970 and the Regulations governing the service of employees of that particular Bank, the Honourable Supreme Court observed that, the disqualification for pension with respect to resigned employees in difference to employees retired is valid. The learned counsel also produced copy of a judgment of this court in OP.No.17206/99 dated 16.10.2003, wherein a learned Single Judge of this court found that in the case of an employee of the first respondent who was treated as resigned, is not entitled to the differential in gratuity on account of a long term settlement regarding revision of wages entered by the company with the Trade Unions with retrospective effect. But in the case at hand, as stated above, the question regarding entitlement of gratuity is governed by section 4(1) of the Payment of Gratuity Act. It provides entitlement of Payment of Gratuity with respect to retired employees and resigned employees at par. In view of the principle laid in Ext.P4 judgment when considered on the basis of section 4(1) of the Act, it can only be construed that those employees who resigned from the WPC.22308/2005 11 service after 1.1.1997 could not be denied of the same benefits allowed to those who retired after that date, and if such a discrimination is permitted the same will be violated Article 14 and 16 of the Constitution of India. Hence I am inclined to hold that the petitioners 1 to 9 who resigned from service of the first respondent company in between 1.1.1997 and 30.6.2001 is entitled to gratuity on the basis of the revised pay scale. 9. With respect to the 10th petitioner there is slight difference as he was removed from service , contrary to the case of other petitioners 1 to 9 who were resigned. It is revealed that the 10th petitioner was removed from service alleging unauthorised absence. But in fact the 10th petitioner had submitted resignation prior to such removal and the removal was without considering his request for resignation. It is evident that the removal was not treated as part of any punishment and he was paid gratuity and other terminal benefits as applicable to the case of resignation. Since the respondent company had already paid gratuity and other terminal benefits to the 10th petitioner on his removal from service, he should also be treated in par with petitioners 1 to 9 in the matter of payment of WPC.22308/2005 12 differential amount in gratuity. Therefore, I am inclined to hold that the benefits entitled for petitioners 1 to 9 are equally entitled for the 10th petitioner. 10. Lastly, learned counsel for the petitioners contended that the first respondent company is liable to pay interest on the differential amount of gratuity, because it is a statutory liability. Valuable rights of the employees on retirement to get the gratuity was delayed because of the illegal and unreasonable approach of the first respondent and therefore the payment of gratuity must be visited with penalty of payment of interest, is the contention. In support he placed reliance on a judgment of the Honourable Supreme Court in H.Gangahanume Gowda vs. Karnataka Agro Industries Corporation Limited (2003(3) SCC 40). The Honourable Supreme Court, considering the provisions under section 7(2) of the payment Gratuity Act 1972, held that the Payment of gratuity with or without interest as the case may be, does not lie in the domain of discretion, but it is a statutory compulsion. But in the case at hand, the entitlement is claimed based on Ext.P2. But the benefit of Ext.P2 was made available to similarly placed employees, , only from June, 2004 as per Ext.P5, WPC.22308/2005 13 based on Exts.P3 and P4 judgments. Therefore at the most the denial of such benefits can be attributed only from July, 2004 onwards. But the petitioner had approached this court claiming such benefits only in July, 2005, exactly on 26.7.2005. Hence it is proper to limit payment of interest on the differential amount of gratuity within the period after filing of this writ petition. 11. In the result, the writ petition is allowed in part, directing the first respondent to make payment of the differential amount of gratuity due to the petitioners 1 to 10, based on the revised pay scale declared through Ext.P2 order which came into effect as on 1.1.1997, along with interest due thereon at 7.5% p.a. from 26.7.2005 onwards till the date of payment, as early as possible, either in lump sum or in instalments, at any rate within a period of six months from the date of receipt of a copy of this judgment. C.K.ABDUL REHIM, JUDGE Pmn/ WPC.22308/2005 14