IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 9755 of 1998 For Approval and Signature: Hon'ble MR.JUSTICE K.M.MEHTA ============================================================ 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 : NO 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 Civil Judge? : NO -------------------------------------------------------------- HIMATBHAI PANCHABHAI MAKAWANA Versus JIVIBEN KHIMABHAI -------------------------------------------------------------- Appearance: MR RA MISHRA for Petitioner MR BHUSHAN B OZA for Respondent No. 1 MR A.D. OZA, GP, WITH MR. H.C. PATEL, AGP AND MRS. PAREKH, AGP, for Controlling Authority -------------------------------------------------------------- CORAM : MR.JUSTICE K.M.MEHTA Date of decision: 20/04/2001 ORAL JUDGEMENT Leave to add controlling authority as party respondent. 1. The petitioner Himatbhai Panchabhai Makwana, Proprietor Param Shakti Ceramic Industries, Ambawadi, Ahmedabad - petitioner has filed this petition against the judgement and order dated 26.3.1998 passed by the appellate authority, Payment of Gratuity, in appeal No. 39 of 1997. The appellate authority by its impugned judgement and order was pleased to condone the delay in filing application filed by the employee in the interest of employee and after condoning the delay also decided the matter on merits that the employee-respondent is entitled to payment of gratuity as per the Payment of Gratuity Act (hereinafter referred to as `the Act') and Payment of Gratuity Rules (hereinafter referred to as `the Rules'). It may be noted that the petitioner has also filed review application on 6.5.1998 which has also been rejected by the authority on 15.7.1998 2. The facts giving rise to this petition are as under: 2.1 Jiviben Khimabhai, respondent-original employee, was working with Param Shakti Ceramic Industries since 1978 and she worked there upto 8.4.1990. The contention of the employee is that she has resigned from the service of the petitioner on 8.4.1990 and therefore she is entitled to payment of gratuity as per the provisions of the Act. Her case before the authority was that in spite of the provisions of the Act, the employer has not paid any amount of gratuity to her. 2.2 When the employer failed and neglected to make payment of gratuity as per the provisions of the Act, on 14.10.1996 the employee had filed an application as per the provisions of the Act and Rules particularly Rule 10 Form F. The employer failed and neglected to scrutinise the said application and did not even entertain the application of the employee. 2.3 As the employer failed and neglected to consider the application of the employee, the employee was constrained to file application on 11.12.1996 as per Rule 10(1) of the Rules in Form N before the Controlling Authority, Payment of Gratuity. In the said application it has been stated that she has served the employer from 8.3.1978 to 8.4.1990 and the last salary which was drawn by her was Rs. 1000/- per month from the employer and therefore she was entitled to Rs. 16,060/- as payment of gratuity as per the provisions of the Act and Rules. 2.4 The Controlling Authority after receiving the said application being application No. 277 of 1996 was pleased to issue notice to the employer-petitioner on 19.12.1996 with a direction that the employer must remain present on 6.1.1997. The respondent employee has also produced certain documents before the authority on 20.1.1997. 2.5 The employer has filed reply dated 20.2.1997 before the Controlling Authority and raised preliminary contention that the application filed by the employee is barred by limitation and the same should be rejected on the ground of limitation. However, except raising this preliminary contention, the employer failed and neglected to give any alternative submission on merits of the matter. 2.6 The Controlling Authority by its order dated 24.2.1997 was pleased to hold that as per Section 7(1) read with Section 7(5) of the Act, application filed by the employee is barred by period of limitation. Even the employee as per the provisions of Section 7(5) of the Act did not file the application for condonation of delay and therefore also her application is required to be rejected. 3. Being aggrieved and dissatisfied with the said order the employee filed an appeal before the appellate authority, Payment of Gratuity on 22.9.1997. The appellate authority thereafter issued notice to the employer and the respondent also filed reply to that appeal on 9.2.1998. 4. The appellate authority after hearing both the parties by its judgement and order dated 26.3.1998 has come to the conclusion that application for condonation of delay has to be considered on the ground that the employee had worked from 4.7.1980 and she is entitled to Rs. 16,060/- as payment of gratuity as per the provisions of the Act and the Rules and on merits of the matter, the employer has not controverted any of the facts of the employee in this behalf. The payment of gratuity is a provision by which the employee earned gratuity for the work which the employee has done and therefore there is no question of application being barred by limitation and in the interest of the employee the same should be granted and the employer should pay gratuity of Rs. 16,060/- to the employee in this behalf. 5. Thereafter, it appears that the employer has also filed a review application on 6.5.1998 and the said review application was rejected on 15.7.1998. Thereafter, the Controlling Authority by its communication dated 5.8.1998 directed the employer-petitioner to pay Rs. 16,060/- to the respondent employee. 6. Being aggrieved and dissatisfied with the aforesaid, the petitioner has filed this petition before this court challenging the said action. 7. On behalf of the petitioner Mr. R.A. Mishra, learned advocate appeared. On behalf of the Controlling Authority Mr. Patel and Ms. Parekh appeared. Mr. Bushan Oza appeared on behalf of the employee. The learned A.G.P. had contacted the Officers and brought the original record before this court and rendered very valuable assistance to this court for deciding this very old matter. Mr. Oza has also rendered very able assistance to support the order of the authority in this behalf. 8. Before I consider the rival contention let me consider even provisions of Payment of Gratuity Act. Payment of Gratuity Act provides for payment of gratuity to the employees employed in factories, mines, oil-fields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto. Section 2 of the Act provides definitions. Section 2(a) of the Act defines `appropriate government'. Section 2(a)(ii) provides for appropriate government in any other case, the State Government. Section 2(b) provides for `completed year of service' means continuous service for one year. Section 2(c) of the Act provides for `continuous service' which means continuous service as defined in Section 2-A. Section 2(d) of the Act provides for `controlling authority' which means an authority appointed by the appropriate Government under Section 3. Section 2(e) of the Act defines the term `employee'. Section 2(f) of the Act provides for `employer'. Section 2(o) of the Act provides for `prescribed' which means prescribed by rules made under this Act. Section 2(s) of the Act defines the term `wages'. Section 2-A of the Act provides `continuous service'. Section 3 of the Act provides `controlling authority'. Section 4 of the Act provides for `payment of gratuity' which reads as under: "(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years - (a) on his superannuation, or (b) on his retirement or resignation, or (c) on his death or disablement due to accident or disease. 8.1 Section 7 of the Act provides for determination of the amount of gratuity. The relevant portion of Section 7 of the Act is reproduced hereunder: "Sec. 7(1) - A person who is eligible for payment of gratuity under this Act or any person authorised, in writing, to act on his behalf shall send a written application to the employer, within such time and in such form, as may be prescribed, for payment of such gratuity. Sec. 7(2) As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub-section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity so determined. Sec. 7(3) The employer shall arrange to pay the amount of gratuity within thirty days from the date it becomes payable to the person to whom the gratuity is payable. Sec. 7(3-A) If the amount of gratuity payable under sub-section (3) is not paid by the employer within the period specified in sub-section (3), the employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the Central Government from time to time for repayment of long-term deposits, as that Government may, by notification specify. Sec. 7(4) to Sec. 7(6) xxxxxxx Sec. 7(7) - Any person aggrieved by an order under sub-section (4), may, within sixty days from the date of the receipt of the order, prefer an appeal to the appropriate Government or such other authority as may be specified by the appropriate Government in this behalf. Provided that the appropriate Government or the appellate authority, as the case may be, may if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of sixty days, extend the said period by a further period of sixty days. Provided further that no appeal by an employer shall be admitted unless at the time of preferring the appeal, the appellant either produces a certificate of controlling authority to the effect that the appellant has deposited with him an amount equal to the amount of gratuity required to be deposited under sub-section (4), or deposits with the appellate authority such amount. Sec. 7(8) The appropriate Government or the appellant authority, as the case may be, after giving the parties to the appeal a reasonable opportunity of being heard, confirm, modify or reverse the decision of the controlling authority." 8.2 Section 8 of the Act provides for `recovery of gratuity'. Section 14 of the Act provides for an Act to override other enactments etc. Section 15 of the Act provides for Power to make rules. 8.3 In exercise of power conferred under Section (1) of Section 15 of the Act, Gujarat Government prescribed rules known as Rules, 1973. Rules 2 of the said Rules provides for certain definitions. Rule 7 of the said Rules provides for an application of gratuity. Rule 7(1) of the said Rules provides as under: "An employee who is eligible for payment of gratuity under the Act, or any person authorised in writing, to act on his behalf, shall apply, ordinarily within thirty days from the date the gratuity became payable, in Form `I' to the employer. Provided that where the date of superannuation or retirement of an employee is known, the employee may apply to the employer before thirty days of the date of superannuation or retirement. 8.4 Sub-clause (5) of Rule 7 of the Rules provides for an application for payment of gratuity filed after the expiry of the period specified in this rule shall also be entertained by the employer, if the applicant adduces sufficient cause for the delay in preferring his claim, and no claim for gratuity under the Act shall be invalid merely because the claimant failed to present his application within the specified period. Any dispute in this regard shall be referred to the controlling authority for his decision. Rule 8 provides for notice for payment of gratuity. Rule 9 of the Rules provides for mode of payment of gratuity. Rule 10 of the Rule provides application to controlling authority for direction. Rule 10( A) provides for production of documents. Rule 11 provides procedure for dealing with application for direction. Rule 15 of the Rule provides service of summons or notice. Rule 16 of the Rule provides maintenance of records of cases by the controlling authority. Rule 18 provides for appeal. Rule 19 provides application for recovery of gratuity. 9. Mr. Mishra, learned advocate for the petitioner states that the first authority has rightly rejected the application on the ground of limitation and rejected the application of the employee as employer has filed an application beyond the period of 7 years. He submitted that the appellate authority has not considered that aspect properly and did not give any cogent and convincing reasons as to why the appellate authority has condoned the delay. He submitted that after condoning the delay the appellate authority has remanded the matter to the original authority so that the original authority can decide the matter on merits. It is stated that in this case the original authority has not decided the case on merit. After condoning the delay the appellate authority has straightaway considered the merit of the matter. Therefore, the appellate authority has erred in law while considering the application on merit of the matter. 9.1 On the other hand Mr. A.D. Oza, learned Government Pleader, through learned A.G.P. Mr. Patel and Ms. Parekh appeared on behalf of the authority. Mr. Oza has tried to support the order of the appellate authority in this behalf. Mr. Oza, learned G.P. has submitted that as per the provisions of Section 4 of the Act liability of payment of gratuity arises as soon as the conditions which are there under Section 4 are fulfilled. In this case the learned counsel has submitted that the employee has completed 12 years of service and he has given his resignation in the year 1990 and he has also worked for 12 years and his last salary was Rs. 1000/- per month. The learned counsel has submitted that as per Section 7(3) of the Act which has come into force from 1.10.1987 the employer shall arrange to pay the amount of gratuity within 30 days from the date it becomes payable to the person to whom the gratuity is payable. In view of this specific section, the learned counsel submitted that the liability to pay gratuity arose immediately in the year 1990 as soon as the employee resigned from the service and as per the provisions of Section 4 of the Act the liability has been fastened on the employer and the employer is liable to pay the gratuity to the employee immediately in this behalf. 9.2 The learned counsel has submitted that the employer has failed and neglected to make payment of gratuity statutorily then on conjoint reading of Rule 7 read with Rule 10 the employee has to make an application in Form I to the employer that is the effect of Rule 7(1) read with Rule 10 of the Rules, thereafter the employer has again been given power and jurisdiction to scrutinise the application of the employee and after scrutinising the same, the he can still make payment of the gratuity amount after considering considering whatever his objection in this behalf. 9.3 If thereafter the gratuity is not paid by the employer then as per Rule 10 then the employee has to make an application in Form N in this behalf. 9.4 After the said application in Form N is made, the controlling authority gets jurisdiction to decide the difference and dispute between the employee and the employer and thereafter it has to adjudicate the payment of gratuity. The controlling authority has right to quantify the payment of gratuity and after the said payment is quantified there is an obligation on the employer to pay the gratuity in this behalf. 9.5 If any of the parties is aggrieved and dissatisfied with the said order of the controlling authority, he can file appeal before the appellate authority as per Section 7(7) of the Act. 9.6 The learned counsel for the respondent submitted that Payment of Gratuity Act, 1972, is enacted to introduce a scheme for payment of gratuity for certain industrial and commercial establishments as a measure of social security. There is no gainsaying of the fact that this statute is a beneficent piece of social legislation expressly drafted in the interest of the employees for the payment of statutory gratuity to them. As its preamble indicates, it is made applicable to all employees engaged in factories, mines, oil fields, plantations, ports etc. It also provides for all matters connected therewith or incidental thereto including the expeditious payment of gratuity when it becomes payable. Section 4 of the Act prescribes the statutory liability of the employer to pay gratuity and corresponding right of the employee to receive it whenever it becomes payable. He has also relied on the judgement of the Karnataka High Court in the case of BHALACHANDRA KRISHNAJI KALE VS. KARNATAKA STATE ROAD TRANSPORT CORPORATION reported in 1999(1) LLJ 932 (Kar) in which at para 7 on page No. 934 the Court has observed as under:- "A reading of the Section makes it clear that the employee acquires a right to receive gratuity on the termination of his employment after he has rendered continuous service for not less than 5 years and the provisions make it abundantly clear that this amount becomes payable on the date of retirement from service on his superannuation, or his retirement or resignation, or on the death or disablement due to accident or disease." 9.7 He has further submitted that gratuity is in the nature of a gracious gift and a donor cannot be compelled to make a gift but in the Industrial Law, gratuity came to be recognised as a retiral benefit available as of right to an employee for long, continuous and meritorious service whether such retirement is the result of superannuation, physical disability or otherwise. The Payment of Gratuity Act is a piece of beneficial legislation made in the interests of the employees and it is the intention of the Legislature that the employees should not be allowed to be exploited so as to contract out of the rights conferred on them by the Act when the terms of the contract are detrimental to their interests. The Act is intended to safeguard the employees who served the employer for a long time from penury in their declining years of old age and the helpless dependents of the employees in the event of the employee's death. 9.8 As regards limitation, on conjoint reading of the provisions of the Act and the Rules, it becomes clear that the employee has to make an application in Form-I to the employer within 30 (thirty) days from the date of termination or otherwise of the employment. Thereafter, if the employee is unable to obtain gratuity then the employee should file an application in Form-N to the Controlling Authority under Section 7(4) of the Act within 90 (ninety) days from the termination or otherwise of the employment. Application filed after the expiry of the period of 90 days could be accepted by the Controlling Authority if the the applicant shows sufficient cause for the delay and the Controlling Authority was satisfied with the cause shown for the delay, the application filed after the expiry of the period of 90 days could be treated as valid application only after delay was condoned. 9.9 The learned counsel for the respondent submitted that in this case though the Controlling Authority has dismissed the application on the ground of limitation, the appellate authority has considered this aspect and condoned the delay and granted the application on merits of the matter and therefore this court should not interfere with the said discretion used by the appellate authority in this behalf. 9.10 The learned counsel has also relied on the judgement of the Kerala High Court reported in 1999(2) LLJ 1001 in the case of KERALA ELECTRICAL AND ALLIED ENGINEERING CO. LTD. VS. RAVEENDRAN PILLAI AND OTHERS reported in 1999(2) LLJ 1001 where the Division Bench of the Kerala High Court in para 10 has held this:- "What we have to do here is only to examine whether the direction given by the learned single Judge to the appellant to pay the balance amount of gratuity to the respondents is legal and valid. Inasmuch as the respondents had already retired from service as early as in the year 1996 and 1997 the amendment to the Standing Orders with retrospective effect will not take away the accrued rights available to the respondents on the date of retirement. The above conclusion of the learned Judge is just and proper. We do not see any reason whatsoever to interfere with the impugned judgement." 10. The learned counsel further submitted that under Article 227 of the Constitution of India this court has a very limited jurisdiction and when the appellate authority has passed perfectly justified order in law, this court may not interfere with the said finding of the authorities in this behalf. The authority has not committed any error of law in this behalf. 11. I have considered the rival submission and I have also considered the provisions of the Act and Rules and also gone through the entire relevant records which have been supplied to me by the learned A.G.P. In my view the liability to pay gratuity arose as soon as the condition precedent provided under Section 4 of the Act. In this case it is an admitted fact that the employee had resigned in the year 1990 and he has worked right from 1978 to 1990 so he has worked for more than 12 years and he has also got for more than 240 days earned leave. Therefore, the employer was in law liable to make payment of gratuity to the employee particularly when the employee has served the employer for more than 12 years. In this case the the employer has failed and neglected to make payment of gratuity. 11.1 As indicated earlier, thereafter, in my view when the employer had filed an application under Form I as per Rule 10, it was again an obligation on the employer to make payment in this behalf after scrutinising the same. However, the employer failed and neglected to scrutinise the same and even did not pay any amount in spite of the fact that there was no dispute on the facts of the case. 11.2 In my view thereafter when the Form N application was filed before the controlling authority the employer had filed only application on the ground that the application has barred by limitation and did not raise any contention on merits of the matter. The authority did not consider Section 7(3) of the Act which casts an obligation on the employer to make the payment within 30 days from the date it becomes payable to the person to whom the gratuity is payable. In my view the obligation to pay gratuity on the employer is in three stages: (i) as soon as resignation is accepted within one month from the date of resignation the employer is liable to make payment, (ii) if failed and neglected to make payment when the employee files application under Form I as per Rule 10, it is an obligation on the employer to pay up gratuity after scrutinising and verifying the said application. In this case the employer has failed and neglected to do the same. Thereafter only the employee has filed the present application in Form No. N. Section 7(1) of the Act provides application to be filed to an employer. Section 7(3-A) of the Act also provides that if the amount of gratuity payable under sub-section (3) is not paid by the employer within the period specified in sub-section (3),