IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN WEDNESDAY, THE 17TH SEPTEMBER 2008 / 26TH BHADRA 1930 OP.No. 10824 of 1998(L) ----------------------- PETITIONER: ------------ THE CHIEF GENERAL MANAGER, STATE BANK OF INDIA, LOCAL HEAD OFFICE, 21-RAJAJI SALAI, MADRAS-600 001. BY ADV. SRI.GEORGE THOMAS RESPONDENTS: ------------- 1. SRI. A.K. MENON, HOUSE NO. 30/63, DWARAKA (AMBADI), POONITHURA P.O., COCHIN – 682 317. 2. THE CONTROLLING AUTHORITY APPOINTED UNDER THE PAYMENT OF GRATUITY ACT 1972 AND THE ASSISTANT LABOUR COMMISSIONER (CENTRAL), COCHIN-16. 3. THE APPELLATE AUTHORITY APPOINTED UNDER THE PAYMENT OF GRATUITY ACT 1972 AND THE REGIONAL LABOUR COMMISSIONER (CENTRAL), KALATHILPARAMBIL ROAD, COCHIN-16. BY ADV. SRI.V.K.KISHOR FOR R1 THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 17/09/2008, ALONG WITH OP NO. 11819 OF 1998 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: PETITIONER'S EXHIBITS: O.P.NO. 10824/1998. ----------------------------------------------------------------- EXT.P1 TRUE COPY OF APPLICATION DT. 4-3-1991. EXT.P2 APPLICATION FOR GRATUITY DT. 14-6-1995. EXT.P3 DECISION OF CONTROLLING AUTHORITY DT. 26-3-1996. EXT.P4 MEMORANDUM OF APPEAL DT. 7-6-1996. EXT.P5 ORDER IN APPEAL DT. 26-2-1998. [TRUE COPY] P.S TO JUDGE. S. Siri Jagan, J. =-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-= O.P. Nos. 10824 & 11819 of 1998. =-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-= Dated this, the 17th September, 2008. J U D G M E N T In these two original petitions, both the employer and the employee challenge the same orders, namely, the orders of the controlling authority and appellate authority under the Payment of Gratuity Act. O.P.No. 10824/1998 is filed by the employer and O.P.No. 11819/1998 is filed by the employee. The employer is challenging the orders as a whole whereby the employer has been directed to pay more amounts of gratuity in addition to what has already been disbursed by the employer. The employee is challenging that part of the orders, whereby the employee was denied interest on the additional amount of gratuity awarded. 2. The employer is the State Bank of India. The employee was originally appointed in the Imperial Bank on 5-4-1955. That Imperial Bank merged with the State Bank of India, when the State Bank of India took over the Imperial Bank on 1-7-1955. Later on, the employee was confirmed in the service of the State Bank of India on 1-10-1955. He retired from service on 31-1-1991. At that time, the employee was paid gratuity as calculated under the Payment of Gratuity Act. The employee filed a gratuity claim before the controlling authority under the Payment of Gratuity Act claiming gratuity in accordance with the Sastri Award applicable to employees of the State Bank of India. The claim appears to be that since the employee originally started service in the Imperial Bank, he is eligible for the benefit of clause 389 of the Sastri Award. This was opposed by the employer- State Bank of India stating that the employee is eligible for gratuity only in accordance with Payment of Gratuity Act which O.P. Nos. 10824 & 11819/1998. -: 2 :- has been paid to him. This contention was repelled and both the controlling authority and appellate authority upheld the claim of the employee and directed payment of gratuity to the employee for the entire 36 years' of service put in by him without any upper limit as provided under the Payment of Gratuity Act. That order is challenged in O.P.No. 10824/1998 by the employer. The employee filed O.P.No. 11819/1998 claiming that in view of sub-section 3A of Section 7 of the Payment of Gratuity Act, he is eligible for interest also on the additional amount of gratuity awarded. 3. The contention raised by the employer is that paragraph 389 of the Sastri Award is applicable only to those employees who are not covered by a scheme for non-contributory pension. According to the employer, the employees covered by a non-contributory pension scheme are eligible only for payment of gratuity as provided under the Payment of Gratuity Act, which has been paid to the employee. Therefore, the employer submits that the orders of the controlling and appellate authorities under the Payment of Gratuity Act impugned in the original petition are unsustainable and liable to be set aside. 4. The contention of the employee is that he entered service in the Imperial Bank, wherein there was no contributory pension scheme and therefore the employee is entitled to the benefit of paragraph 389 of the Sastri Award. He would also submit that the denial of interest to him on the additional gratuity on the ground that there is delay of 4½ years in approaching the controlling authority is clearly unsustainable since sub-section 3A of Section 7 does not deny interest on the ground of delay. 5. I have considered the rival contentions in detail. 6. It is not disputed before me that the employee would be O.P. Nos. 10824 & 11819/1998. -: 3 :- entitled to additional gratuity as ordered by the authorities under the Payment of Gratuity Act only if he comes within the purview of paragraph 389 of the Sastri Award. Therefore, the issue arising in these original petitions can only be as to whether the employee is covered by paragraph 389 of the Sastri Award. Paragraph 389 of the Sastri Award reads thus: “389. We have already provided for a compulsory provident fund scheme for the benefit of workmen. The question now is whether in addition there should be a compulsory scheme of gratuity or pension. A claim for gratuity can no longer be regarded as a mere ex-gratia matter. It is as much the subject of an industrial dispute as a claim for bonus. It is true that in many of the banks gratuity though provided for is generally on an ex-gratia basis. We are, however, of opinion that in the present circumstances of the banking industry, a compulsory gratuity scheme should be introduced. The Sen Award observed in paragraph 253, “It is an elementary principle that an employee who has served an institution during the best part of his life should not, on his retirement, have to face the prospect of starvation, indebtedness or dire poverty; and it should also be accepted that if an employee dies while in service or shortly after his retirement his family should have some provision to fall back upon at least for a time. In old days many an employee, even in a humble situation, could hope to save something against a rainy day; but in these days of high cost of living the chances of saving anything substantial are dwindling greatly, if not disappearing, for a great many employees of the lower middle class.” We respectfully agree with these observations. Indeed, the underlying principle has been already recognized to a great by many of the major banks although gratuity is paid only as an ex-gratia payment. In practice, it is never withheld and we have been assured that it is given on a generous scale. Even where a provident fund scheme exists there is scope and need for a scheme of gratuity as well. We are therefore of opinion and we direct accordingly that except where there is a scheme for a non-contributory pension and an employee is actually allowed a pension under such a scheme, a gratuity should be paid to all employees who are covered by our award. In other words, while payment of gratuity and payment of pension may be exclusive, one such payment at least must be made to the workman in addition to the benefit of a provident fund scheme, subject however to such exceptions as are laid down later on.” (Emphasis supplied) O.P. Nos. 10824 & 11819/1998. -: 4 :- As is clear from the underlined portion of the paragraph, employees for whom there is a scheme for non-contributory pension and who are actually allowed pension under such scheme are taken out of the purview of paragraph 389. In fact, the employee himself admits that he is covered by a non-contributory pension and he is being paid pension under such a scheme. It is also not disputed before me that the employee has also received provident fund. From the very wording of paragraph 389, it is abundantly clear that the benefit conferred by that paragraph is intended for only those employees who are not covered by a non-contributory pension scheme. When, admittedly, the employee is receiving pension under a non- contributory pension scheme, I have no doubt in my mind that he is not entitled for any gratuity in addition to the pension and provident fund as provided under paragraph 389. But, of course, in view of the Payment of Gratuity Act, he would certainly be entitled to gratuity as provided under the Act. 7. The last drawn salary of the employee is Rs. 3,537/-. He had put in 36 years of service. Therefore, gratuity calculated as per the Payment of Gratuity Act is: 3537 x 36 x 15 = 73460.77. At the 26 relevant time, the maximum gratuity payable as provided under sub- section (3) of Section 4 of the Payment of Gratuity Act was Rs. 50,000/-. Admittedly, the employee was paid only Rs. 40,242.46. Therefore, the employee is entitled to an additional amount of Rs. 9,758/-. This the employer is liable to pay to the employee. Accordingly, I modify the orders of the controlling and appellate authorities under the Payment of Gratuity Act limiting the additional gratuity payable to the employee as Rs. 9758/-. 8. Regarding the question of interest, counsel for the employer O.P. Nos. 10824 & 11819/1998. -: 5 :- would contend that by virtue of the proviso to sub-section (3A) of Section 7 of the Payment of Gratuity Act, the employee should be denied interest since he filed the application for gratuity only 4½ years after his retirement. Since the employer disputes the claim for interest, I should examine the scope of the proviso to sub-section (3A) of Section , which reads thus: “(3A) 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: Provided that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment on this ground.” 9. Before considering the proviso to sub-section (3A), first we should consider sub-sections (2) and (3) as well. Sub-sections (2) and (3) read thus: “(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. (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.” Under sub-sections (2) and (3), it is the bounden duty of the employer to determine the amount of gratuity and pay the same within thirty days from the date when it becomes payable to the employee. Admittedly, the employer has paid only Rs. 40,242.46, which is less than the amount found due to the employee under the Payment of Gratuity Act. Therefore, the employer has not complied with the statutory duty cast upon them by the Act. Hence, the employer is O.P. Nos. 10824 & 11819/1998. -: 6 :- certainly liable to pay interest on the amount to the employee as provided under sub-section (3A). As regards the proviso to sub- section (3A), that is applicable only in cases where the delay in payment is due to the fault of the employee and the employer had obtained permission in writing from the controlling authority for delayed payment on this ground. Therefore, only on the cumulative satisfaction of both the conditions stipulated in the proviso, the employer can validly deny interest on the gratuity due to the employee. Here, not only is there any fault on the part of the employee in causing delay in payment of full gratuity due to him, but also the employer has not obtained permission from the controlling authority for delayed payment. Simply because there was delay on the part of the employee in approaching the controlling authority, the proviso is not attracted. Therefore, I am satisfied that on the basis of the proviso to sub-section (3A), the employee cannot be denied interest on the amounts now found due. Accordingly, the said amount of Rs. 9,758/- would carry interest as provided under sub-section (3A) of the Payment of Gratuity Act at the rate of 9% p.a. from 3-3-1991, i.e., the date of expiry of 30 days from the date of retirement of the petitioner. The said additional amount of gratuity with interest shall be paid within two months from the date of receipt of a certified copy of this judgment. The original petitions are disposed of as above. Sd/- S. Siri Jagan, Judge. Tds/