:1: IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 5365 OF 2007 Kolhapur Engineering Association ..Petitioner Vs. Jagannath Shankar Arjunwadkar and ors. ..Respondents Mr. S.S. Pakale for petitioner. Mr. P.P. Chavan i/by Mr. V.M. Bhate for respondent no.1. CORAM: CORAM: CORAM: B.H. MARLAPALLE,J. B.H. MARLAPALLE,J. B.H. MARLAPALLE,J. Reserved Reserved Reserved on : March 03, 2008. on : March 03, 2008. on : March 03, 2008. Pronounced Pronounced Pronounced on : on : on : March 14, 2008. March 14, 2008. March 14, 2008. P.C.: P.C.: P.C.: 1. Being aggrieved by the order passed by the Controlling Authority in Application (PGA) No. 4 of 2000 on 3/3/2004 and confirmed by the Appellate Authority under the Payment of Gratuity Act, 1972 (for short the Act) as per the judgment and order dated 17/7/2006, this petition has been filed by the employer-association. The Controlling Authority has directed the petitioner to pay an amount of Rs.34,246/- to the claimant - the present respondent no.1 with 15% interest from due date. :2: 2. The petitioner is an Association of employers located in and around the District of Kolhapur and it is registered under the provisions of Registration of Societies Act, 1860. It does not carry out any activity of its own which could be termed as an "industrial" or "business" or "commercial" or any such similar activity and it has been formed only for the purpose of the betterment of its members which are various companies, partnerhsip/proprietory concerns. At the relevant time it had 4-5 employees on its rolls apart from "Secretary" who is the administrative head, looking after the entire administration and controlling the office work of the petitioner and 4-5 employees used to work under his supervision, control and management. The Secretary is responsible for the allotment of day to day work to the said employees and it is claimed by the petitioner that it cannot be termed as an "employee" as defined under Section 2(e) of the Act. 3. The respondent no.1 was earlier employed with the Karnataka State Road Corporation (KSRTC) at Hubli as a Labour Welfare and Personnel Officer since :3: 19/9/1950 and on reaching the age of superannuation, he retired from the said Corporation. He joined the petitioner in the post of Secretary with effect from 1/8/1982 and was employed till 31/7/1998. He was born on 7/9/1926 and thus when he resigned from the employment of the petitioner he was about 72 years of age and had put in about 16 years of service. As per the appointment letter dated 26/10/1983 he was appointed from 1/8/1982 in the payscale of Rs.600-40-860-50-1150. The said appointment letter further stated that his appointment would be governed by the existing rules, namely, Kolhapur Engineering Association Service Rules. On 19/4/1999 he submitted an application to the petitioner-association claiming the amount of gratuity for the entire period of his service i.e. 16 years and one month. As per him he was entitled for an amount equivalent to 8 months’ salary last drawn by him plus something more. He also stated that inspite of his several representations, the payment of gratuity was not released and as there was no response even to the written representations, he approached the Controlling Authority in March, 2000 and filed an application under Section 7 of the Act, which has been allowed as stated hereinabove. :4: 4. Mr. Pakale the learned counsel for the petitioner-Association submitted that the respondent had retired on reaching the age of superannuation (55 years) from the employment of KSRTC and was thereafter employed as Secretary by the petitioner-Association. As per the Service Rules framed by the Association, the age of superannuation for the employees of the Association is fixed at 55 years and, therefore, when the claimant was appointed in 1982, he had crossed the age of 55 years and was not entitled to claim gratuity under the Act, in view of the scheme of Section 4 of the Act. As per Mr. Pakale the amount of gratuity can be claimed by way of right either on superannuation or on retirement/resignation, but if the retirement/resignation is after the age of superannuation, the claimant will not be entitled for the payment of gratuity and to claim such a right, the retirmenet/resignation has to be before attaining the age of superannuation. He further submitted that even otherwise the respondent was not an employee as defined under Section 2(e) of the Act and, therefore, his application ought to have been dismissed by the Controlling Authority or by the Lower Appellate :5: Authority. As per Mr. Pakale both the authorities below did not consider the scheme of Section 4 of the Act in its proper perspective and committed a manifest error of law in holding that the respondent no.1 was entitled for the payment of gratuity. He also stated that in any case the Controlling Authority was not right in levying interest at the rate of 15% per annum more so because the delay caused in claiming the said amount could not be attributable to the petitioner-association and it was the respondent no.1 who had made such a claim belatedly. 5. As per Section 2(e) of the Act, "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 :6: gratuity. It is thus clear that the term "employee" does not include any such person who holds a post under the Central Government or the State Government or is governed by any other Act or by any Rules providing for payment of gratuity. At the same time, a person holding a supervisory post or a managerial post is covered within the ambit of the term "employee" and he will be entitled for the payment of gratuity so long as the Act is applicable to the establishment where he works. The petitioner - Association has framed its own Service Rules called "Kolhapur Engineering Association Employees Service Rules" and as per the said Rules the employees are covered under the Act for payment of gratuity. Therefore, the contentions of the petitioner- Association that the respondent-claimant was not covered under the Act because he was holding the post of Secretary, which is a supervisory/administrative post, cannot be accepted. 5A. Section 4(1) and Section 8 of the Act read as under:- "4. Payment of gratuity.-(1) Gratuity shall :7: 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: Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement: Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the :8: same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority. Explanation.- For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement. 8. Recovery of gratuity.- If the amount of gratuity payable under this Act is not paid by the employer, within the prescribed time, to the person entitled thereto, the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the Collector who shall recover the same, together with compound interest thereon at such rate as the Central Government may, by notification, specify, from the date of expiry of the prescribed time as arrears of land revenue and pay the same to the person entitled thereto: :9: Provided that the controlling authority shall, before issuing a certificate under this section, give the employer a reasonable opportunity of showing cause against the issue of such certificate: Provided further that the amount of interest payable under this section shall, in no case exceed the amount of gratuity payable under this Act." 6. As noted earlier, Mr.Pakale submitted that Clause (b) of Section 4(1) of the Act would be applicable only if the eventuality of retirement or resignation is prior to the date of superannuation and it cannot be if the said eventuality occurs after crossing the age of superannuation. He submitted that superannuation is the last eventuality which is envisaged and more particularly under Section 4(1) of the said Act and any eventuality either in Clause (b) or Clause (c), if it happens after the age of superannuation, the employee concerned cannot claim :10: gratuity. In support of these submissions, Mr. Pakale has relied upon the judgment of the Supreme Court in the case of Binoy Kumar Chatterjee vs. Jugantar Limited and ors. [(1983) 3 SCC 289] as well as the following other decisions:- (a) Sir J.P. Srivastava Group of Industries vs. State of U.P. and ors. [ 1993 (66) FLR 248]. (b) Edwin A.Daniel vs. Labour Court, Coimbotore and anr. [ 1993 (I) L.L.N. 169]. . Though these submissions appear to be impressive, in view of the law laid down by the Supreme Court in the case of Bakshish Singh vs. M/s. Darshan Engineering Works and ors. [AIR 1994 SC 251], the submissions will have to be rejected. The Supreme Court in Bakshish Singh’s case (Supra) held that Clause (a) and (b) of subsection (1) of Section 4 of the Act are independent of each other and if that be so, the claim for gratuity can be made either on reaching the age of superannuation or on retirement/resignation which may occur even after the :11: age of superannuation. The term retirement has been defined under Section 2(q) of the Act and it means termination of service of an employee otherwise than on superannuation. It is, therefore, clear that retirement/resignation is an eventuality, which can, in a given case, occur even after the age of superannuation and it is not necessary that the outer limit for being covered under the Act is the age of superannuation. The law laid down by the Supreme Court in Bakshish Singh’s case (Supra) clearly holds that the claim of gratuity under the Act can be made even after attaining the age of superannuation as prescribed under the Service Rules if the retirement/resignation occurs after such age, which means that the claimant is either employed or retained in service after he had attained the age of superannuation and on his retirement/resignation he will be entitled for the payment of gratuity under the Act. 7. On the issue of interest, it is clear that Section 8 of the Act speaks of compound interest and in the instant case the Controlling Authority has directed to pay interest of 15% p.a. which is not the :12: compound interest. In the case of H. Gangahanume Gowda vs. Karnataka Agro Industries Corporation Ltd. [AIR 2003 SC 1526], the Supreme Court observed as under:- ".....As noticed above, there is a clear mandate in the provisions of Section 7 to the employer for payment of gratuity within time and to pay interest on the delayed payment of gratuity. There is also provision to recover the amount of gratuity with compound interest in case amount of gratuity payable was not paid by the employer in terms of Section 8 of the Act. Since the employer did not satisfy the mandatory requirements of the proviso to Section 7(3A), no discretion was left to deny the interest to the appellant on belated payment of gratuity......" ". Section 7 of the Act deals with the determination of the amount of gratuity and subsection (1) of the said Section states that a person who is eligible for payment of gratuity under this Act or any person :13: 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. As per subsection (2) of Section 7, as soon as gratuity becomes payable, the employer shall, whether an application referred to in subsection (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. Subsection (3A) of Section 7 deals with the issue of interest and it reads as under:- (3A). If the amount of gratuity payable under sub-section (3) is not paid by the employer within the period specified in subsection (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 :14: 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..." . Obviously, in the instant case the proviso below subsection (3A) of Section 7 is not applicable. There is no material placed on record to show that the rate of interest at 15% p.a. exceeds the rate notified by the Central Government and applicable at the relevant time when the Controlling Authority passed the impugned order, for repayment of long term deposits. If it was pointed out that the rate of interest notified by the Central Government, when the Controlling Authority passed the order, for repayment of long term deposits was less than 15% on the basis of some Government notification or any notification issued by the Reserve Bank of India, the rate of interest could have been reduced, but obviously no :15: such material was either placed before the Controlling Authority or the Appellate Authority or before this Court and, therefore, it cannot be accepted that the authorities below committed any error of law in directing payment of interest at 15% p.a. 8. Hence, on both the counts the challenge to the impugned orders and as raised in this petition fails. Consequently, the petition is rejected summarily. It is clarified that the certificate of recovery will be valid to the extent the amount has been directed to be paid with interest at 15% p.a. and the interest payable will be applicable till the date the amount was deposited with the lower Appellate Authority. (B.H. (B.H. (B.H. Marlapalle,J.) Marlapalle,J.) Marlapalle,J.)