SCA/2138/2002 1/23 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 2138 of 2002 With SPECIAL CIVIL APPLICATION No. 2139 of 2002 To SPECIAL CIVIL APPLICATION No. 2140 of 2002 With SPECIAL CIVIL APPLICATION No. 2143 of 2002 With SPECIAL CIVIL APPLICATION No. 2145 of 2002 To SPECIAL CIVIL APPLICATION No. 2146 of 2002 With SPECIAL CIVIL APPLICATION No. 2148 of 2002 For Approval and Signature: HONOURABLE MR.JUSTICE H.K.RATHOD ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= CHIEF OFFICER - Petitioner(s) Versus STATE OF GUJARAT & 1 - Respondent(s) ========================================================= Appearance : MR SK JHAVERI for Petitioner,MS JIRGA D JHAVERI for Petitioner RULE NOT RECD BACK for Respondent(s) : 1, MR AK CLERK for Respondent(s) : 2, ========================================================= CORAM : HONOURABLE MR.JUSTICE H.K.RATHOD SCA/2138/2002 2/23 JUDGMENT Date : 27/02/2008 ORAL JUDGMENT 1. Heard learned advocate Ms.Jirga D. Jhaveri for the petitioner Nagarpalika and learned advocate Mr.A.K.Clerk for respondents workmen. 2. In all these petitions, the petitioner - Bilimora Nagarpalika has challenged the order passed by the controlling authority under the Payment of Gratuity Act,1972 (for short "the Act"). The respondents workmen in each petition approached the controlling authority claiming the amount of gratuity under the Act and in those applications, the controlling authority has decided that workmen are entitled to amount of gratuity according the provisions of the Act. Accordingly, the controlling authority has calculated the amount and directed the petitioner Nagarpalika to pay the amount of gratuity to the concerned employees with 12% interest within a period of 30 days from the date of receipt of order from the controlling authority. 3. Learned advocate Ms.Jhaveri appearing on behalf of petitioner Nagarpalika submitted that Section 2(e) of the Act provides definition of "employee". She further submitted that the Nagarpalika is having its own gratuity rules, therefore, the provisions of the Act are not applicable to the concerned employees. The Rules framed by the petitioner Nagarpalika have SCA/2138/2002 3/23 JUDGMENT been approved by the State Government as per Annexure-B to the petition. She relied upon Rule-5 which provides the mode of calculation of the amount of gratuity to the concerned employee. According to her, as per the Rules, the amount of gratuity is paid to the concerned employee. Therefore, no payment is to be made by petitioner to the concerned employees. She also raised contention that petitioner Nagarpalika being a local authority and therefore, provisions of the Act are not applicable. She also submitted that the controlling authority has not considered the Gratuity Rules which are at Annexure-B and relying upon the provisions of the Act, the controlling authority decided the issue against the petitioner Nagarpalika. Section 2(e) of the Act reads as under : "2(e) "employee" means any person (other than an apprentice) employed on wages, in any establishment, factory, mine, oilfield, plantation, port, railway company or shop to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied, [and whether or not such person is employed in a managerial or administrative capacity, 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]." SCA/2138/2002 4/23 JUDGMENT 3.1 She also relied upon the decision of this Court (Coram : R.M.Doshit,J.) passed in SCA No.18365 of 2006 dated 5.12.2006 wherein this Court has observed that "Be that as it may, I am of the view that the impugned judgment and order passed by the controlling authority is wholly without the jurisdiction and the authority of law. The present petition preferred under Article 226 of the Constitution of India is maintainable. There is no dispute that the respondent is a member of the Panchayat service and thus the servant of the State Government. It is also not in dispute that a Government servant in Panchayat service is governed by the specific rules made in that behalf by the State Government. Hence, the provisions contained in the Act of 1972 shall not apply in the case of the respondent. It is apparent that the controlling authority has failed to consider and decide this vital issue which goes to the root of its jurisdiction. As the respondent is not governed by the Act of 1972, the controlling authority had no jurisdiction or authority of law to entertain the claim made by the respondent. The impugned judgment and order are thus passed by the controlling authority without the authority of law and are vitiated by inherent lack of jurisdiction." 3.2 Learned advocate Ms.Jhaveri also submitted that concerned employees are governed by separate gratuity rules sanctioned / approved by the State Government and therefore, concerned employees are not entitled to the benefits as provided under the Act. She SCA/2138/2002 5/23 JUDGMENT further submitted that respondents employees are governed by BCSR Rules and therefore, the Act is not applicable. 4. Learned advocate Mr.A.K.Clerk appearing on behalf of respondents submitted that the contentions raised by learned advocate Ms.Jhaveri were not raised before the controlling authority by the petitioner. Therefore, these contentions for the first time before this Court and therefore, petitioner may not be permitted to raise said contentions. He also submitted that there is a delay of more than 3 years in filing the petitions after the order passed by the controlling authority and petition was filed after completion of period of appeal. Therefore, according to him, there is inordinate delay in filing the present petitions by the petitioner. He also raised contention that against the order of the controlling authority under Section 7(7) of the Act, appeal is available to the petitioner but, no appeal was preferred and straightway, petitions were filed after inordinate delay. Therefore, all the petitions are required to be dismissed. He also raised contention that definition of "employee" is given in Section 2(e) of the Act, would not be applicable in the present case because exclusion of employee should satisfy two conditions; one is that he holds a post under the Central Government or State Government and secondly he is governed by any other Act or Rules. Meaning thereby that both the conditions are required to be satisfied and then only, such person cannot be SCA/2138/2002 6/23 JUDGMENT considered as an employee under Section 2(e) of the Act. He submitted that respondents employees were not holding any post either in State Government or Central Government and mere framing of the Rules, would not attract exclusion under Section 2(e) of the Act in case of present respondents employees. He also submitted that though two rules are in operation, then also provisions of the Act are applicable as decided by the Himachal Pradesh High Court in case of State of Himachal Pradesh v. Lashkari Ram, reported in 2008-I-LLJ-137. He further submitted that Gratuity Act provides better terms to the employee to receive the gratuity amount. Therefore, if said Act is applicable, then concerned employee can claim gratuity on better terms and accordingly, claims were made by respondents employees under the Act. He relied upon the decision of Apex Court in case of Jashwant Singh Gil v. Bharat Coking Coal Ltd. and others reported in (2007) 1 SCC 663. Along with affidavit in reply, copy of a resolution is produced at Page-19. As per said resolution, in case of Champaklal Kavat, an order was passed by controlling authority under the Act, against which appeal was preferred and ultimately, a petition was filed by Nagarpalika challenging the order passed by appellate authority. Finally the petition filed by the Nagarpalika was dismissed and the payment was made to said Champaklal Kavat. He also submitted that similarly, in case of Chhanalal, subsequently it was decided to make the payment when controlling authority has passed an order in favour of Shri SCA/2138/2002 7/23 JUDGMENT Chhanabhai. He also submitted that in view of the above, a resolution was passed by Nagarpalika resolving that now in case of any employee, the decision of the controlling authority should have to be implemented in favour of concerned employee by paying gratuity amount. He also submitted that another petition is also filed by concerned employees seeking direction from this Court to direct the statutory authority to recover the amount of gratuity from the petitioner and therefore, some suitable direction may be issued to such statutory authority so that they may recover the remaining amount with interest from the petitioner. 5. I have considered the submissions made by both the learned advocates and also perused the order passed by the controlling authority. I have also perused all annexures annexed with petitions and affidavit in reply with documents. It is necessary to note two or three important aspects while perusing the order passed by the controlling authority. In case of Chhanabhai Bilimoria, total claim was of Rs.51,297.75; form "I" was filled up and submitted to the Nagarpalika; no reply was given by the Nagarpalika; ultimately form "N" was filled up by concerned employee and submitted on 21.4.1999; thereafter, it was admitted by controlling authority, the matter was discussed between the parties before the controlling authority from 26.5.1999 to 11.8.1999; during hearing before the controlling authority, representative of the concerned employer SCA/2138/2002 8/23 JUDGMENT as well as concerned employee both remained preset; that no reply was given by the Nagarpalika; no documentary evidence was produced by the Nagarpalika and no oral evidence led by Nagarpalika before the controlling authority. Meaning thereby that there was no objection at all raised by the Nagarpalika against the application made by Shri Chhanbhai Bilimoriya and no reply, documents and oral evidence was produced before the controlling authority by the petitioner. Ultimately, the controlling authority has examined the workman on 11.8.1999 which was not objected by learned advocate, Mr.Manoj Parekh, who appeared on behalf of Nagarpalika and no cross-examination was taken by learned advocate Mr.Manoj Parekh. Ultimately, the controlling authority has considered oral as well as documentary evidence produced by employee and come to the conclusion that respondent employee is entitled to the amount of gratuity on completion of 21 years' service and his daily wage comes to Rs.162.85 and he retired on 31.5.1997. Therefore, the controlling authority has directed to the petitioner Nagarpalika to pay Rs.51,297 with 12% interest within a period of 30 days. 6. Similarly, the petitioner Nagarpalika has not produced any evidence against the application made by concerned employee. Though learned advocate Mr.Manoj Parekh remained present on behalf of Nagarpalika in case of Thakore C. Gandhi, no challenge was made by the Nagarpalika, as oral evidence of the employee was not challenged and the concerned employee was not SCA/2138/2002 9/23 JUDGMENT cross-examined. Therefore, the controlling authority has directed to pay Rs.82,019.70 with 12% interest within a period of 30 days to the concerned employee. 7. In case of Ramanbhai Jeshvabhai Patel, one contention regarding financial constraint of Nagarpalika was raised and therefore, only that question was considered by the controlling authority but, there was no challenge made by the Nagarpalika before the controlling authority that concerned employee was not entitled to the amount of gratuity under the provisions of the Act. Therefore, the controlling authority has granted Rs.46,123/- with 12% interest. 8. In case of Laxmiben Manibhai, certain payment was made by the Nagarpalika to her and it was made clear by controlling authority that between the parties, there is no dispute in respect to the record produced by the concerned employee. There was delay in filing the application by the concerned employee which was condoned by the controlling authority as it was not opposed by the Nagarpalika before the controlling authority. Therefore, the controlling authority has directed to the Nagarpalika to pay Rs.22,762/- with 12% interest. 9. In case of Sukho Chotu Solanki, only financial constraint of Nagarpalika was raised as a defence by Nagarpalika. Except that, no other contention was raised by the Nagarpalika and considering the date of SCA/2138/2002 10/23 JUDGMENT joining, retirement and salary, the controlling authority has directed to the Nagarpalika to pay Rs.1,01,066/- with 12% interest. 10. In case of Bhanji Maru, no objection was raised by petitioner Nagarpalika before the controlling authority and no reply was filed against the application made by concerned employee. Therefore, the controlling authority has directed to the Nagarpalika to pay Rs.1,70,072/- with 12% interest. 11. In case of Vadilal G. Shah, the Nagarpalika has not raised any contention before the controlling authority. Not only that but the Nagarpalika has not remained present and no reply was filed by the Nagarpalika. Therefore, the controlling authority has granted the amount of Rs.1,46,838/- with 12% interest in favour of concerned employee. 12. The above referred order passed by the controlling authority suggests that applications made by concerned employees were not objected by the Nagarpalika and no contention was raised; no reply was filed and even concerned employee was not cross- examined by the Nagarpalika, which impliedly amounts to accepting the claim of concerned employee by the Nagarpalika. Raising all legal contentions before this Court first time is an afterthought, as it were not raised before the controlling authority at the relevant time. Therefore, this Court cannot permit the petitioner to raise these contentions for the SCA/2138/2002 11/23 JUDGMENT first time before this Court because these petitions are filed by the petitioner under Article 227 of the Constitution of India and this Court is only examining whether controlling authority has rightly passed the order or not. Therefore, the contentions raised by learned advocate Ms.Jirga Jhaveri are not accepted, as it cannot be allowed to be raised before this Court for the first time. 13. It is necessary to note that though remedy of appeal is available to the petitioner under Section 7(7) of the Act, no appeal was preferred by the petitioner and straightway, petitions were filed after a period of more than 2 years. 14. However, other contention raised by learned advocate Ms.Jhaveri is in respect to Rules framed by the Nagarpalika, which has been sanctioned by the Government of Guajrat, while exercising power under Section 271(a) of the Gujarat Municipalities Act,1963. Accordingly, she relied upon Rule-5 which for the purpose of calculation of gratuity only basic pay as defined under BCSR Rules will be taken into account exclusive of dearness allowance. The gratuity will be paid on the basis of the average of last 12 months pay preceding the date of the relieve from service. The contention is that because the concerned employee is governed by BCSR Rules and Gratuity Rules as referred above, provisions of the Act are not applicable. The Himachal Pradesh High Court has considered this aspect in the case of State of SCA/2138/2002 12/23 JUDGMENT Himachal Pradesh v. Lashkari Ram reported in 2008-I- LLJ-137 wherein after considering the definition of "employee" under Section 2(e) of the Act and after considering the Central Civil Services Rules (Pension),1972 and employee having worked in different capacity, was held to be entitled to get benefits of Gratuity Act as well as Civil Service Rule (Pension) Rules. Whether Rules prevailed or the Act, that question was also examined by the Apex Court in case of Jashwant Singh Gill (supra). The Apex Court has considered the Rules framed by the Bharat Coking Coal Ltd. are not statutory rules and they have been made by the holding company of respondent No.1. The Payment of Gratuity Act was enacted with a view to provide for a scheme for payment of gratuity to the employees engaged inter alia in mines. The Act provides for close - knit scheme providing for payment of gratuity. It is a complete code containing detailed provisions covering the essential provisions of a scheme for a gratuity. It not only creates a right to payment of gratuity but also lays down the principles for quantification thereof as also the conditions on which he may be denied therefrom. A statutory right accrued, thus, cannot be impaired by reason of a rule which does not have the force of a statute. The provisions of the Act, therefore, must prevail over the Rules. 15. In aforesaid decision, there were no statutory rules but, in facts of this case, there may be statutory rules. The Apex Court has considered SCA/2138/2002 13/23 JUDGMENT similar aspect in case of Eid Parry (I) Ltd. v. G. Omkar Murthy and Others reported in 2001 (4) SCC 68. Relevant observations made in Para.2, 3 and 4 are quoted as under : "2. Four contentions are put forth before us, namely, that (i) The Central Act prevails over the State Act by virtue of Article 254 of the Constitution and Section 40(3) is invalid and the claims are unsustainable; (ii) Section 40(3) of the State Act stood repealed on the coming into force of the Andhra Pradesh Shops and Establishments Act, 1988 and gratuity became payable under Section 47(5) of the State Act where payment of gratuity is not payable under the Central Act; (iii) Section 14 of the Central Act overrides other enactments in relation to gratuity, and (iv) The respondents have been paid gratuity under the Central Act for the period covered and for the balance period of service gratuity is paid under the prevailing trust scheme. At the relevant time when the respondents voluntarily retired from service the definition of 'employee' under Section 2(e) of the Central Act read as not to include employee whose wages exceeded Rs. 1,000/- per mensem while the respondents-employees were all getting wages more than Rs. 1,600/- per mensem and, therefore, the Central Act could not be applied. If that is so, it is certainly permissible for the respondents to have made an application for payment of gratuity under Section 40(3) of the State Act. Further the scheme of the Central Act would indicate that it would not be applicable in cases where the State Act is more beneficial than the Central SCA/2138/2002 14/23 JUDGMENT Act. In this case, the finding is that the State Act is more beneficial than the Central Act. Therefore, the contentions sought to be advanced on behalf of the appellant as to repugnancy or otherwise of the State Act would not arise at all. If both the enactments can co-exist and can operate where one Act or the other is not available then we find no difficulty in making the State Act applicable on the fact situation available as has been done in the present case. Therefore, we find that the contentions raised on behalf of the appellant are unsustainable. 3. Shri Narayan B. Shetye, the learned Senior Advocate appearing for the appellant, submitted that the Central Act is a complete Code containing detailed provisions and creates right of payment of gratuity and, therefore, the Central Act should prevail over the State Act. Reliance has been placed on the decision of this Court in State of Punjab v. Labour Court, Jullundur, (1980) 1 SCR 953 : (AIR 1979 SC 1981 : 1980 Lab IC 1084). In that case the issue before the Court was whether for payment of gratuity an application could be made under Section 33-C(2) of the Industrial Disputes Act, 1947, and it was held that such an application could not be filed under the said Act. Therefore, this decision cannot be of any assistance to the appellant inasmuch as the question before us is whether the Central Act or the State Act would apply for payment of gratuity. 4. The decision in M.S.R. Murthy v. Arya Somayajula Yagneswara Chenulu, 1985 Lab IC 189 (Andh Pra) also is of no use to the appellant inasmuch as the State Act is held not to operate to the extent the Central Act prevails. In the present case, on facts, it is found that the Central Act is not applicable." 15.1 In aforesaid two decisions, the Apex Court has considered the fact that even when statutory rules SCA/2138/2002 15/23 JUDGMENT are available, the provisions of the Act prevail. Therefore, in this case though services rules may be statutory, considering Section 14 of the Act, provisions of the Act should prevail. 16. The contention raised by learned advocate Ms.Jhaveri that Gratuity Act is not applicable to the Nagarpalika being the local authority, cannot be accepted as the Nagarpalika is covered by definition of 'establishment' and the provisions of the Gratuity Act are applicable. Section 1(3)(b) of the Act wherein definition 'establishment' is provided, which reads, thus, "every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishment in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months." 16.1 The aforesaid contention is not accepted because the local authority being an establishment covered under the Gratuity Act, the Gratuity Act is applicable as has been held by the Madras High Court in case of Commissioner, Sathyamangalam Municipality v. Deputy Commissioner of Labour (Appellate Authority under Payment of Gratuity Act), Salem and others reported in 2004 III LLJ 995 wherein it has been observed by the Madras High Court that, "Payment of Gratuity Act,1972 - Secs.2(e), 5 and 7(3-A)- Local authority also established liable under Act to pay gratuity - Award of interest to employee for period SCA/2138/2002 16/23 JUDGMENT after expiry of 30 days from retirement, held proper. Even the Panchayat is also considered to be an establishment under the provisions of the Gratuity Act and the Act is applicable as decided by Madhya Pradesh High Court in the case of S.N.Verma v. State of M.P. and others reported in 2004-I-LLJ-560. Relevant observations in the aforesaid decision is in Para.6 which is quoted as under : "6. Thus the Panchayat is indisputedly a 'local body' and if it is employing more than ten persons it would be an 'establishment' within the meaning of the notification given above. An employee of an Panchayat is entitled to the payment of gratuity as per provisions of Payment of Gratuity Act,1972 unless under any other rule of the Panchayat or the State Government he has a right to receive 'better terms of gratuity" as per Section 4(5) of the Act. Though there is an observation in the judgment dated June 27, 1997 in W.P.No.1743 of 1997 that the gratuity is payable to the Panchayat employees as per Madhya Pradesh Janpad Panchayat Employees (Qualifications, Recruitment and Conditions of Service) Rules,1976, on a perusal of these rules it is conceded that there is no provision in these rules for payment of gratuity. In such a situation an employee of the Panchayat would be entitled to gratuity as per Payment of Gratuity Act,1972. The Supreme Court has held in Bakshish Singh v. Darshan Engineering Works, AIR 1994 SC 251 : 1994 (1) SSC 9 : 1994-I-LLJ-197 that the provisions for payment of gratuity contained in Section 4(1)(b) of the Act are one of the minimal service conditions, which must be made available to the employees notwithstanding the financial capacity of the employer to bear its burden. It is settled law that the establishments which have no SCA/2138/2002 17/23 JUDGMENT capacity to give to their workmen the minimum conditions of service prescribed by the statute have no right to exist. The respondent Janpad Panchayat is admittedly employing more than ten persons and therefore the petitioner who was its employee is entitled to gratuity under the Payment of Gratuity Act,1972." 16.2 The Delhi High Court in case of Municipal Corporation of Delhi v. Smt. V.T.Naresh and Anr. reported in 1986-I-LLJ-323 relying upon the decision of Apex Court in case of State of Punjab v. Labour Court of Jullundur and others reported in 1981-I-LLJ- 354, it