IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 8674 of 1999 with SPECIAL CIVIL APPLICATION No 8687 of 1999 with SPECIAL CIVIL APPLICATION NO 2465 TO 2489 OF 2000 WITH SPECIAL CIVIL APPLICATION NO 2492 TO 2628 OF 2000 For Approval and Signature: HON'BLE MR.JUSTICE H.K.RATHOD ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : YES of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- GUJARAT STATE KHADI GRAMODYOG BOARD PENSIONERS ASSOCIATION Versus GUJARAT STATE KHADI GRAMODYOG BOARD -------------------------------------------------------------- Appearance: MR MB GANDHI for Petitioners. Mr. DD Vyas, Sr. Advocate for M/S.VYAS ASSOCIATES for Respondent No. 1 Board Mr. AD Oza, GOVERNMENT PLEADER for Respondent No. 2 State of Gujarat. -------------------------------------------------------------- CORAM : HON'BLE MR.JUSTICE H.K.RATHOD Date of decision: 17/10/2003 CAV JUDGEMENT Before adverting to the facts of the present case, it would be proper to refer to the decision of the Karataka High COurt in the matter of YR Shenoy v. Syndicate Bank, reported in 2003 II LLJ page 977, para 11 and 12 as the same are important in view of the facts of the present case. Therefore, the observations made by the Karnataka High COurt in the said decisions are reproduced as under: "11. Re point No. (i): Right to gratuity was the subject matter of various decisions of the Supreme Court. The principle deducted from those decisions can be broadly stated as under: The fundamental principle underlying gratuity is that it is a retirement benefit for long service as a provision for old age. Demands of social security and social justice made it necessary to provide for payment of gratuity. On the enactment of Payment of Gratuity Act, 1972 a statutory liability was cast on the employer to pay gratuity. Pension and gratuity coupled with contributory Provident Fund are well recognized retiral benefits. Pension and gratuity are both retiral benefits ensuring that the workman who has spent his useful span of life in rendering service and who never got a living wage, which would have enabled him to save for a rainy day, should not be reduced to destitution and penury in his old age. As a return of long service he should be assured social security to some extent in the form of either pension, gratuity or provident fund whichever retiral benefit is operative in the establishment. It must not be forgotten that it is not a gratuitous payment, it has to be earned by long and continuous service. A scheme of gratuity and a scheme of pension have much in common. Gratuity is a lump sum payment while pension is a periodic payment of a stated sum. Undoubtedly both have to be earned by long and continuous service. If gratuity is a retiral benefit and can be earned as a matter of right on fulfilling the conditions subject to which it is earned, any rule conferring absolute discretion not testable on reason, justice or fair play which denies the same must be treated as utterly arbitrary and unreasonable and discarded. Rules for payment of gratuity became incorporated in the Standing Orders and thereby acquired the status of statutory condition of service, an arbitrary denial referable to whim, fancy or sweet will of the employer must be rejected as arbitrary. The claim to absolute discretion not to pay gratuity even when it is earned is a hangover of the laissez fair days and utterly inconsistent with the modern notions of fair industrial relations and, therefore, it must be rejected as ineffective and hence unenforceable. 12. Therefore, gratuity is a statutory right to be earned by long and continuous service, which is payable as a retiral benefit, a definite sum as lumpsum payment on retirement. It is a right if accrued cannot be taken away by agreement between the parties. Amount payable is also definite, by agreement between the parties it cannot be reduced, but it could be enhanced." Heard learned advocate Mr. M.B. Gandhi for the petitioners in both the groups; Mr. D.D.Vyas, learned Sr. Advocate for the respondent No.1 Board and Mr. A.D. Oza, learned GP for respondent NO.2 in both the groups. The petitioners in these two groups were working with the respondent No. 1 Board and they retired from service after reaching the age of superannuation as per the Board Rules. All the petitioners in these two groups are receiving their pensionary benefits from the respondent Board, means, all of them are entitled to get pension from the respondent Board. However, the question is as to whether the petitioners who have retired prior to 1.1.1996 are entitled for the revision of pension on the basis of the recommendations made by the 5th Pay Commission or not. The petitioners in the second group of petitions have retired subsequent to 1.1.1996 and prior to 4th May, 1998. The question in respect of the said petitioners is as to whether those petitioners are entitled for the revision of pension on the basis of the recommendation made by the 5th Pay Commission or not with effect from 1.1.1996, for the amount of gratuity on the basis of their last drawn salary as per the recommendation made by the 5th Pay Commission. It is not in dispute between the parties that the first respondent board which is established in the year 1973 is receiving 100 per cent finance from the State Government. Respondent No.1 Board has been created under the relevant provisions of the Bombay Khadi and Village Industries Act, 1960. The Board is also defined under section 2(a) of the said Act.Under Chapter II Section 3, the State of Gujarat issued notification in the official gazette and established the Board for the whole of the State of Gujarat and the said notification was published in the Gazette and since then, the Board is in existence and, thus, it is an establishment created by the State of Gujarat. Chapter V of the Regulations provides that the finance, accounts and audit of the Board and it also provides that the budget and all other aspects are to be prepared and to be approved by the State Government and 100 per cent finance is provided by the State Government and the Board is a creation of the Statute and, therefore, liable to the writ jurisdiction of this court under Article 12 of the Constitution of India. In the respondent No.1 Board, since 1973, pension scheme is made applicable to the Board and all the persons who were in service as on 12th November, 1973 and who were the members of the Contributory Provident Fund ("CPF" for short) were made eligible for the pension scheme. Resolution in this connection was passed on 6.11.1987. All the petitioners who were the employees of the first respondent board have retired after 1.1.1986. It is not in dispute that the employees of the Board are entitled for pension and in fact, employees of the respondent no.1 board who have retired have been given the pension. The respondent Board is paying pension to the employees those who have retired from service but the question is that the pension received by the petitioners is the pension available to them as per the amount prior to the recommendations made by the 5th Pay Commission, upto 31st December, 1995 and the pension which was being paid to the petitioners prior to the recommendations of the 5th Pay Commission has continued but the effect of the recommendations made by the 5th Pay Commission has not been given and the pension has not been revised though the respondent board has adopted the resolution and the Government has approved the same. The Government issued directions and the effect was given by the Government as well as by all the Government Boards in the form of interim relief and accordingly all the pensioners of the board were given the interim relief prior to the implementation of the 5th Pay Commission Report. Copy of such pay slip in respect of one petitioner Shri Ishwarbhai B. Patel has been produced by the petitioners alongwith the petition. According to the petitioners, in spite of the interim relief being given and inspite of the fact that the scales as per the 5th Pay Commission Report have been accepted by the Board but so far as the petitioners are concerned who are 135 in number, who have retired prior to 1.1.1996 and to each one, though the benefit of interim relief is given, the Board is not calculating and is not given full effect of the pay scales of the 5th Pay Commission Report and that is how the petitioners are not getting full pension which they ought to have received on implementation of the 5th Pay Commission Report by the Board. The details have been given by the petitioners about the names and salaries and how much amounts they are entitled for the period between 1.1.1996 to 30.9.1998 is produced in the form of statement at Annexure-D. According to the petitioners, the employees of the board who retired after 1.1.1996 have been given complete impact and effect of the 5th Pay Commission Report and accordingly those who have retired after 1.1.1996 are receiving at present full pension as per the report of the 5th Pay Commission but the list of such sixteen employees who have been given full pension including the effect of 5th Pay Commission report is produced at Annexure E to the petition. In respect of the second group of petitions being SCA NO. 8687 of 1999, same is relating to 25 employees who retired from service after 1.1.1996 and who were given retirement benefits qua leave encashment and difference of salary on the basis of the 5th Pay Commission Report but the respondent Board has denied the benefit available on the basis of the 5th Pay Commission report in respect of the benefit of pension and gratuity and the same has not been paid and for that, said petitions have been filed by the petitioners. Annexure-A to the petition being SCA No. 8674 of 1999 is the resolution dated 24.10.1999 passed by the members of the association to take appropriate legal action against the Board. Annexure-B to the said petition is the list of the members of the petitioners on whose behalf the petition is filed. Annexure C is the copy of the pay slip of one petitioner Ishwarbhai B. Patel. According to the petitioners, employees of the board, in all respects and for the purpose of pension, are being treated at par with the employees of the State Government and in this connection, order has already been passed by the Board on 1st March, 1989 wherein it has been directed that to the employees of the Board, pension scheme is made applicable and it has also been resolved that all the employees of the State Government to whom the pension scheme is made applicable and with all the changes and modifications which are made applicable to the employees of the State Government, same pension scheme with all such changes and modifications will also be made applicable to the employees of the first respondent board with effect from 30th January, 1986. Copy of the said office order dated 1st March, 1989 implementing the pension scheme is produced by the petitioner at annexure F to SCA No. 8674 of 1999. It is the case of the petitioners that the Member Secretary of the Gujarat State Khadi Gramodyog Board has also passed office order dated 16.10.1990 in the subject of pension cum gratuity wherein it has been mentioned that the Government of Gujarat has granted approval for making applicable the pension cum gratuity scheme with retrospective effect to the employees of the Gujarat State Khadi Village Industries Board who have retired from service on superannuation and it has also been mentioned in the said order that in this scheme family pension scheme is also being included as per the clarification made in the Government of Gujarat Resolution dated 31.8.89. Copy of the said office order dated 16.10.1990 is produced at Annexure G to the said petition. Vide Annexure H page 30 to the said petition, the petitioners have produced true copy of the resolution no.5 of the Board Meeting dated 31.7.91 for the year 1991-92. Agenda no.4 thereof was relating to application of the Superannuation Rules of the Government employees as per the resolution of the Government dated 31.9.89 to the employees of the Board and it has been resolved to adopt such rules in respect of the employees of the Board. According to the petitioners, regarding necessary regulations and the office orders which have been issued and came to be passed, they are in consonance with the notifications of the State of Gujarat Khadi Gramodhyog Board by which necessary powers under section 30 sub section (2) (b) of the Cottage and Village Industries Act, 1960 and with the previous approval and sanction of the Government, rules and regulations have been framed which are known as the Gujarat State Khadi Gramodyog Board Officers and Servants (Conditions of Service) Regulations, 1973 and in this regulation, Regulation 2 (5) is relevant which has been reproduced by the petitioners in the memo of petition. Same is also reproduced as under for the sake of convenience: "Pay and Other Conditions of Service : (1) When the pay and other conditions of service of any officer or servant are laid down in a contract entered into by the Board with him, the officer or servant shall be governed by that contract in so far as the pay and other conditions of service are concerned. (2) In other cases, the Bombay Civil Service Rules, 1959, as applied from time to time to Government servants, shall apply to the officers and servants of the Board as regards their pay, joining time, foreign service, maintenance of records of ' service, addition to pay, travelling allowance, combination of appointments, leave, revised leave and superannuation." Therefore, according to the petitioners, when the pay and other conditions of service of any officer or servant are laid down in a contract entered into by the Board with him, the officer or servant shall be governed by that contract in so far as the pay and other conditions of service are concerned and in other cases, the Bombay Civil Service Rules, 1959, as applied from time to time to Government servants, shall apply to the officers and servants of the Board as regards their pay, joining time, foreign service, maintenance of records of service, addition to pay, travelling allowance, combination of appointments, leave, revised leave and superannuation and, therefore, in view of that, the action of the respondent board in not implementing the resolution and not following the resolution which is not obligatory but mandatory liability of the board is not fair and the board cannot refuse the same as the employees have a statutory right to get the pension and gratuity according to the rules and regulations of the Board. The petitioners have also pointed out that the Board has already written to the Commissioner of Cottage and Village Industries, Gujarat State on 15.5.1999 to the effect that the employees who are entitled for pension and to discharge their liability, it is communicated in the letter that calculated the amount is payable by way of pension as well as by way of gratuity and the letter also indicates that the increase in the said liability has come into effect from 1.1.1996 owing to the implementation of the recommendations made by the 5th Pay Commission and on that basis, different calculations have been made and the reference of the employees who have retired prior to 1.1.1996 is also made therein. According to the petitioners, it has also been admitted that the respondents no.1 Board is a public undertaking and the pension scheme is also made applicable at par with the Government employees and in this back ground, the liability that has been created for which a demand is made. Copy of the letter in that regard sent to the Commissioner under the signatures of the Chairman of the first respondent board is produced by the petitioners at Annexure I to the said petition. According to the petitioners, before filing the present petitions, various efforts were made by the petitioners but of no avail. Ultimately, petitioner association wrote a letter to the Board dated 22.7.1999 in the similar line but that has not been responded by the respondent board. Copy of the said letter is produced by the petitioners at Annexure J to the petition. In short, according to the petitioners, taking into consideration all the aforesaid aspects, it is beyond the shadow of doubt that the members of the present petitioner association are entitled to the pension and that too the board is bound to give the impact to or implement the recommendation of the 5th Pay Commission Report as adopted by the State Government and as adopted by the Board and as soon it is a liability of the Board to calculate the pensionary benefits of these employees and to regularly pay the same. According to the petitioners, as per the list annexed to the said petition, the said list is indicating the exact calculations of the difference which the respondent board is liable to pay and therefore according to that calculations, each and every employee of the board is required to be paid the difference of the pension and from future date also, newly calculated pension giving effect of the 5th Pay Commission Report should be paid till such pension is revised. According to the petitioners, the board has illegally not implemented and paid the pension by calculating on the basis of the effect of 5th Pay Commission Report and, therefore, the petitioners who have got the legitimate right tog et the pension but they have been illegally deprived of the full pension and the outstanding amount of pension from 1.1.1996 to 30.9.1998 comes to more than 17 lacs and this amount has been illegally utilized by the board instead of paying the same to them embers of the petitioner association and, therefore, same is required to be paid to the petitioners with interest thereon at the rate of 18 per cent p.a. In view of this back ground, according to the petitioners, the board has to pay such benefits as per the provisions of law and whatever liability that arises or accrues for the purpose of giving effect of 5th Pay Commission or for paying pension then, in that case, when the Government is financing to the Board, it is the duty of the board to see that the proper provisions are made in the budget and claimed from the Government but the Board has no authority whatsoever to evade the liability on the ground that there is financial difficulties and when the Government is financing 100 per cent, then, the question of making hue and cry of any financial difficulties on the part of the board does not arise and if the Board has not made any provision in the budget, then, in the alternative, it is also equally a liability of the State Government to see that an industry undertaken by the State Government is run properly and all the liabilities which have been created under the statute are properly discharged. Therefore, one of the liability which is created with regard to the service conditions of the employees of the board does include the liability to pay the pension and accordingly all the petitioners who have retired prior to 1.1.1996 are entitled for such benefits but they have been denied the benefits arising out of the report of the 5th Pay Commission. The petitioners have filed one additional affidavit in view of this court's order dated 3.11.1999 (Coram : Rajesh Balia,J.). The petitioners were required to bring before this court a resolution of the Government regarding implementation of 5th Pay Commission Report for the employees who have retired prior to 1.1.1996. In compliance of the said directions, the Government of Gujarat has already published a resolution with regard to the revision of pension of pre-1996 pensioners and the members of the family pension scheme etc. Xerox copy of such resolution dated 20th January, 1998 has been annexed to the additional affidavit in reply wherein it has been clarified that it is made applicable tot he employees who have retired prior to 1.1.1996 and in that very connection, a resolution has been passed by the Government of Gujarat. It has been submitted that under the circumstances, even those who have retired prior to 1.1.1996 are also entitled for the implementation of the 5th Pay Commission Report and as per this resolution, it is the duty of all the institutions to see that the pensions are worked out accordingly and paid to the concerned employees who have retired prior to 1.1.1996. Affidavit in reply on behalf of respondent no.1 Board has been filed through one KB Bhatt, Member Secretary of the Board wherein the deponent has submitted that the petition is not maintainable since the petitioner is not a registered association and as such, the petitioner association is not entitled to file the petition on behalf of its members. It has also been submitted by the said deponent that the main claim is depending on the disputed questions of fact to be decided and, therefore, petition under Article 226 of the Constitution of India is not a proper remedy. According to the deponent of the said affidavit in reply, the respondent NO. 1 is not a statutory authority within the meaning of Article 12 of the Constitution of India. According to the deponent, the board is an autonomous body. The deponent has denied that according to the recommendations made by the 5th Pay Commission as per its report, there is non payment of pension to some persons but not in case of persons who retired prior to 1.1.1996. According to the Board, persons who have retired prior to 1.1.1996 are not entitled for the pension as claimed and the rights of the petitioners have been denied by the respondent. It has also been contended by the respondent Board that this being individual right and since no fundamental right has been violated, the petition is not maintainable. According to the deponent, Khadi Board is acting under the provisions of Khadi Village Industries Act, 1960 and the rules framed thereunder; every resolution passed by the Government by itself does not apply to the Board automatically. The averments made in para 5 and 6 of the petition have not been admitted by the deponent. It is denied that in view of the fact that the effect of the 5th Pay Commission Recommendation being given, the pension is liable to be paid on that basis. It has been denied that there were repeated representations, numerous talks and conversations as alleged. It has been submitted that even all the persons mentioned in Annexure D have raised any grievance regarding the pension, in ay case, even if it is assumed that the revised pay scales are made applicable on 1.1.1996, that would be applied only to those who were in service on that day and it does not automatically give benefits tot he persons who were not in service on that day or can claim on that basis. As regards annexure "C", it was submitted that annexure C is merely a pay slip of one Shri Ishwarbhai B Patel which does not carry to any further. The calculations made by the petitioner at annexure D are not admitted by the respondent and it is submitted that the same are not correct. It has