1 HIGH COURT OF MADHYA PRADESH : INDORE BENCH, INDORE (S. B.: Hon'ble Mr Justice S.C. Sharma) W.P No.8919/2010 Suresh Rughani Vs. State of M.P. & Ors. W.P No.4035/2011(s) The Secretary, Choithram Hospital Vs. Suresh Rughani Petitioner Suresh Rughani present in person. Shri G.S. Patwardhan, learned counsel for the respondent No.2 Choithram Hospital. O R D E R (22.9.2011) Regard being had to the similitude in the controversy involved in the matter, the above cases were heard analogously together and a common order is being passed. The facts of W.P. No.8919/10 are being narrated as under : 2. The petitioner before this Court has filed the present petition being aggrieved by an order dated 24.9.2008 passed by the controlling authority under the Payment of Gratuity Act, 1972 ( in short 2 hereinafter referred as the 'Act of 1972'). The petitioner's contention is that he was appointed in December, 1989 in the services of Choithram Hospital and Research Centre and his services came to an end in the month of March 1996. The petitioner has further stated that he was entitled for payment of gratuity under the Act of 1972, however the gratuity was paid to him on 22.3.99. The petitioner's contention is that the respondents while paying him gratuity have taken into account the basic pay of Rs.850/-, however the additional special allowance of Rs.658/-, special allowance of Rs.70/- and the city compensatory allowance were not taken into account by the respondents while paying gratuity on 22.3.99. The petitioner has further stated that an application was preferred before the controlling authority under the Act of 1972 and the controlling authority has rejected the petitioner's application on 19.2.01. The petitioner being aggrieved by the order passed by the controlling authority has preferred an appeal before the appellate authority and the appeal was allowed on 24.4.2002 and the appellate authority has directed the payment of gratuity by taking into account the basic pay as well as other allowances. The petitioner has further stated that the gratuity was not paid to the petitioner as directed by the appellate authority, on the contrary the respondents No. 1 and 2 preferred a writ petition before this Court challenging the order passed by the appellate authority under the Act of 1972 and the same was registered as W.P. No.1045/02. The petitioner has further stated that no interim order was passed in favour of Choithram Hospital and 3 Research Centre, the petitioner therein and in spite of the aforesaid fact the gratuity as directed by the appellate authority, was not paid to him. The petitioner has further stated that an application was preferred under Section 8 of the Payment of Gratuity (Central) Rules, 1972 before the competent authority and thereafter a show cause notice was issued to the respondent hospital and the respondent hospital in reply to the show cause notice dated 28.2.2003 informed the controlling authority that they have not paid the gratuity because a writ petition is pending before the High Court of Madhya Pradesh. The reply was submitted to the controlling authority on 7.3.2003. The petitioner has further stated that in spite of his repeated representation gratuity as directed by the appellate authority was not paid to him and finally the respondents have deposited the amount of the gratuity with the controlling authority by submitting a cheque of Rs.5279.28. The petitioner has further stated before this Court that the aforesaid cheque was finally received by him in the year 2003. The same was dispatched on 3.5.2003 to the petitioner. The petitioner has further stated that the writ petition preferred by Choithram Hospital was allowed by an order dated 4th March 2008 and the matter was remanded back to the controlling authority to decide it afresh. The controlling authority has now finally decided the matter on 24.9.2008 and the controlling authority has taken into account the basic pay plus additional allowance of Rs.658 for computing the gratuity, however has not taken into account the special allowance and city 4 compensatory allowance of Rs.70 each. The grievance of the petitioner is that all allowances paid to the petitioner from time to time should have taken into account by the controlling authority while deciding the matter. The petitioner is also aggrieved by non-payment of interest as per the statutory provisions as contained in the Act of 1972 and his contention is that the order passed by the controlling authority is silent on the aforesaid issue. He has prayed for issuance of an appropriate writ, order or direction directing the respondent No.1 to pay the gratuity to the petitioner by taking into account the basic pay as well as all allowances received by the petitioner from time to time. The petitioner, who is appearing in person has placed reliance upon a judgment delivered by High Court of Karnatka in the case of M anglore Ganesh Beedi Works Vs. Assistant Provident Fund Commissioner, Mangalore, reported in Labour Law Journal 2002 September page 154 and his contention is that the allowances did fall under the definition of basic wages u/s 2(b) of Employees Provident Funds and Miscellaneous provisions Act of 1952. The petitioner has also placed reliance upon a judgment delivered in the case of Regional Provident Fund Commissioner West Bangal Vs. Vivekanand Vidya Mandir and Ors decided by the Calcutta High Court reported in Labour Law General 2005 (2) page 183, wherein again the High Court has taken into account the dearness allowance as part of basic wages keeping in view the definition of wages as contained u/s 2b(ii) of Employees Provident Funds and Miscellaneous provisions Act of 5 1952. The petitioner has lastly placed a reliance upon a judgment delivered by a Division Bench of this Court in the case of Surya Roshni Ltd. Vs. Employees' Provident Fund and another, reported in 2011 MPLSR 206, wherein again the Division Bench of this Court while dealing with the Employees' Provident Funds and Miscellaneous provisions Act of 1952 has included special allowances under the heading of basic wages in the matter of deduction of contribution towards provident fund. The contention of the petitioner, who is appearing in person is that all emoluments received by him alongwith basic pay are required to be included for the purposes of payment of gratuity. 3. Learned counsel appearing for the respondent No.2 Choithram Hospital and Research Centre has vehemently argued before this Court that the petitioner was rightly paid gratuity on 22.3.99 and by no stretch of imagination any other allowance paid to the petitioner can be included within the meaning of definition of wages as defined u/s 2(s) of the Act of 1972. He has also argued before this Court that a settlement was arrived at between the petitioner and the employer Choithram Hospital and Research Centre and as per terms of settlement dated 17.5.93, the employees serving under the Choithram Hospital and Research Centre were not entitled for dearness allowance as per price index, however they were given additional special allowances. It has also been argued before this Court that the petitioner himself was a signatory to the aforesaid settlement, therefore 6 as the employees serving Choithram Hospital are not paid dearness allowance, the other allowances cannot be taken into account for the purposes of grant of gratuity under the Act of 1972 specially keeping in view the the definition of wages as defined therein. Learned counsel for the respondent has vehemently argued that the order passed by the controlling authority dated 24.9.2008 is bad in law and the same has also been challenged by the employer by filing a writ petition i.e W.P. No.4035/11 and he has prayed for dismissal of the writ petition filed by Suresh Rughani and in other writ petition he has prayed for quashing of order dated 24.9.2008. Learned counsel for the respondent No.2 has placed reliance upon a judgment delivered by a Division Bench of this Court in the case of Kirloskar Brothers Ltd. Vs. Appellate Authority (under Payment of Gratuity Act) and Ors., reported in 2003-III LLJ Page 195 and his contention is that the Division Bench of this Court in para 11 has held that incentive for production or bonus is not included within the meaning of wages as defined under the provisions of the Act of 1972. 4. Learned counsel for the respondent No.2 has also placed reliance upon a judgment delivered by the Andhra Pradesh High Court in the case of Central Bank of India, Hyderabad Vs. T.K. Ramamoorthy and Ors., reported in 1978 (37) FLR Page 182 and his contention is that the wages include only dearness allowance, keeping in view the judgment delivered by the Andhra Pradesh High Court. He has also placed reliance upon a judgment of Bombay High 7 Court passed in W.P. No.248/2009 on 16th June, 2010 in the case of State Bank of India Vs. Laxmikant Vithal Palekar and his contention is that the Bombay High Court has again considered the definition of wages as defined under the Act of 1972 and other allowances cannot be looked into for the purposes for grant of gratuity. He has prayed for dismissal of writ petition filed by Suresh Rughani and in the writ petition filed by the employer i.e. W.P. No.4035/11 he has prayed for quashing of impugned order dated 24.9.08. 5. Heard the petitioner and learned counsel for the respondent No.2 at length and perused the records. The matter is being disposed of with the consent of the parties at motion hearing stage itself. 6. In the present case, the petitioner before this Court was serving as an employee under the respondent No.2 Choithram Hospital and Research Centre and was discontinued from service in March 1996. The petitioner was paid gratuity on 22.3.99, however the gratuity was paid to him by taking into account the basic pay of Rs.850 per month. The petitioner at the relevant point of time was receiving basic pay of Rs.850, additional special allowance of Rs.658, special allowance of Rs.70 and city compensatory allowance of Rs.70, requested the employer to grant him gratuity by taking into account the basic pay as well as all other allowances, however as the request was not accepted by the employer and an application was preferred under Rule 10(i) of the Payment of Gratuity (Central) Rules, 1972 before the controlling authority. The controlling authority vide order dated 19.2.01 has 8 dismissed the claim of the petitioner and the petitioner being aggrieved by the aforesaid order preferred an appeal before the appellate authority. The appellate authority has allowed the appeal of the petitioner vide order dated 29.4.2002 and the employer was directed to pay the amount by taking into account the basic pay as well as all other allowances. It is pertinent to note that the employer being aggrieved by the order passed by the appellate authority preferred a writ petition and the same was registered as W.P. No.1045/2002 (The Secretary, Choithram Hospital and Research Center Vs. Suresh Rughani and one another). The aforesaid writ petition was admitted on 24.2.2003 and no interim order was passed by this Court during pendency of the aforesaid writ petition. Pursuant to a show cause notice dated 28.2.2003 issued by the controlling authority under the Act of 1972, the employer has deposited a sum of Rs.5279.28 with the controlling authority and the same was also forwarded to the petitioner by the controlling authority vide letter dated 3.5.2003. The writ petition preferred by the petitioner was finally disposed of by an order dated 4th March, 2008 and the matter was remanded back to the controlling authority. The controlling authority has now decided the matter afresh. This Court in the earlier round of litigation i.e. in W.P. No.1045/2002 has held as under : “It appears from the record that Suresh Rughani was working as an Accounts Clerk with Choithram Hospital and Research Center, the present petitioner. As per the claim made by the petitioner- management, there was a settlement between the 9 management and its employees, entered on May 14,1993. A copy of the aforesaid settlement has been appended as Annexure P-2 with the present petition. It appears that Suresh Rughani, present respondent No. 1, was a signatory to the said settlement. being a member of Karamchari Sangh. Later on, a claim petition was filed by the aforesaid employee-Suresh Rughani for issuance of the directions to the management to pay its gratuity. A grievance was raised as well that while calculating the gratuity of the employee, the special allowance which was being paid to its employees by the management, had not been taken into consideration. Vide an order dated February 19, 2001, the Controlling Authority, rejected the aforesaid claim petition filed by the employee. An objection raised by the management that as per clause-3 of the settlement, the special allowance which was agreed to be paid by the management to its employees, was not to be taken into consideration for the purposes of gratuity,was upheld. The order dated February 19, 2001 passed by the Controlling Authority was challenged by Suresh Rughani by filing an appeal before the Appellate Authority. The appeal filed by the employee-Suresh Rughani has been allowed by the Appellate Authority. The objection raised by the management has been over-ruled. In fact, the Appellate Authority has held that under the provisions of Section 14 of the Act and also keeping in view Section 2(s) of the Act, the exclusion of special allowance could not be permitted for computation of the gratuity of the employees. It has been observed that as a matter of fact, the aforesaid settlement between the parties was contrary to the provisions of Section 14 of the Act and as such could not be treated to be binding between the parties. It is in these circumstances that the management is before this Court through the present petition. 10 I have heard Shri S.C. Bagadiya, learned Senior counsel for the petitioner and Shri Suresh Rughani, respondent No. 1, who has appeared in person, and with their assistance, have also gone through the record of the case. At the outset, Shri Suresh Rughani, respondent No. 1, has conceded that a settlement was executed between the management and its employees but maintains that as a matter of fact, since the said settlement was not during the course of any conciliation proceedings, therefore, the said settlement could not be treated to be binding between the parties. Shri Rughani has also pointed out that in any case, clause-3 of the said settlement was not in consonance with the provisions of Section 2(s) of the Act, and therefore, in view of Section 14 of the Act, the said settlement could not be treated to be binding upon the employees. After taking into consideration the aforesaid objection raised by respondent No. 1, I find that although a reference has been made to Section 2(s) of Section 14 of the Act in the impugned order passed by the Appellate Authority, but no finding has been recorded with regard to the fact as to whether the said settlement was binding between the parties or not. It has not been noticed that since there was no challenge to the said settlement by the employees at any stage, therefore, what was the effect thereof. As a matter of fact, Shri S.C. Bagadiya, learned Senior counsel for the petitioner- management contends that under the provisions of Section 2(s) of the Act the gratuity to an employee could only be released/computed on the basis of the emoluments which are earned by an employee while on duty or on leave, in accordance with the terms and conditions of his employment. Thus, maintains the learned Senior counsel, that since the settlement had become a part of the terms and conditions of the employment of the employees, including respondent No. 1, therefore, the said settlement was fully operative between the parties and could not have been treated to be in conflict with the provisions of the Act and as such hit by the provisions of Section 11 14 of the Act. Since I am of the view that various pleas raised by the parties have not been fully appreciated by the authorities below,i.e. the Controlling Authority as well as the Appellate Authority, therefore, Shri Bagadiya and Shri Rughani, respondent No. 1, have stated that the present petition be allowed and after setting aside both the orders passed by the authorities below, the matter be remitted back to the Controlling Authority for a fresh determination of the controversy between the parties. In view of the aforesaid agreement between the parties, the present petition is allowed. The orders dated February 19, 2001 passed by the Controlling Authority as well as the order dated April 24, 2002 passed by the Appellate Authority are set aside. The matter is remitted to the Controlling Authority under the Act, for re-determination of the claim petition filed by the employee-respondent No. 1 (Suresh Rughani). All pleas raised by the parties shall be duly considered and adjudicated by the Controlling Authority. The parties shall also be at liberty to file their written submissions before the Controlling Authority, if so desired. Since the matter has remained pending before various Courts for a quite long time, therefore, the Controlling Authority is directed to take a final decision in the matter within a period of six months from the date the parties put in appearance before it. The parties have been directed to appear before the Controlling Authority, Indore, on April 7, 2008. 6. The Controlling authority vide order dated 24.9.2008 has held that the petitioner is entitled for payment of gratuity by taking into account the basic pay of Rs.850 and additional special allowance of Rs.658 only. The controlling authority has declined to include the sum of Rs.70 which is special allowance as well as city compensatory allowance of Rs.70 again. It is pertinent to note that the respondents have already paid the gratuity to the petitioner by taking into account 12 the basic pay of Rs.850 as well as the additional special allowance of Rs.658. Not only this, it has been categorically admitted before this Court by the petitioner, who appears in person that the respondents have also paid the gratuity to the petitioner by taking into account the special allowance of Rs.70 and the city compensatory allowance of Rs.70 because of the order passed by the appellate authority dated 29.4.2002. The interest amounting to Rs.1658 has also been paid to the petitioner as per the direction of the appellate authority. In the present case, the basic dispute is whether other allowances can be included within the meaning of definition of wages under the definition of clause 2(s) of the Act of 1972. The definition of wages as defined u/s 2(s) of the Act of 1972 reads as under :- “2(s) “wages” means all emoluments which are earned by an employees while on duty or on leave in accordance with the terms and conditions of his employments and which are paid or are payable to him in cash and includes dearness allowances but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.” The aforesaid definition clause makes it very clear that wages means all emoluments including dearness allowance, but it does not include any bonus, commission or any other allowance. 7. In the present case, as there was an agreement between the petitioner and the employer to pay additional special allowance in lieu of dearness allowance, this Court is of the considered opinion that the controlling authority has rightly taken into account the additional special allowance of Rs.658 while calculating the gratuity and by 13 including the aforesaid sum with the basic pay of Rs.850. So far as special allowance and city compensatory allowance are concerned, keeping in view the definition clause of the Act of 1972, as any bonus, commission, house rent allowance, overtime wages and any allowance are excluded from the meaning of term of wages, this Court is of the considered opinion that the controlling authority has rightly excluded Rs.70 special allowance and Rs.70 city compensatory allowance from the term of wages while calculating the gratuity while passing the impugned order dated 24.2.2008. The petitioner has placed the reliance upon a judgment delivered by the Karnataka High Court in the case of Manglore Ganesh Beedi Works (supra) and the Regional Commissioner West Bangal Vs. Vivekanand Vidya Mandir and Ors (supra) as well as the judgment of Division Bench of this Court in the case of Surya Roshni Ltd. (supra). In the aforesaid cases the controversy involved was in respect of employees of Provident Funds and and Miscellaneous provisions Act, 1952 and the definition of basic wages is not identical to that of definition of wages as defined under the Act of 1972. Under the definition clause, the definition of basic wages is defined under 2(b). Section 2 (b) of Employees Provident Funds and Miscellaneous provisions Act, 1952 reads as under :- “(b) “basic wages” means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in case to 14 him, but does not include - (i) the cash value of any food concesssion; (ii) any dearness allowance (that is to say, all cash payments by whatsoever names called/paid to an employee on account of a rise in the cost of living), house rent allowance, over time allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment; (iii) any presents made by the employer.” 8. The definition of basic wages under the Provident funds Act includes all emoluments and dearness relief is not included. In the present case the Act of 1972 is applicable and the controlling authority has included additional special allowance while granting gratuity to the petitioner. Not only this, the Bombay High Court in the case of State Bank of India (supra) has held that other allowances cannot be included under the meaning of wages as defined under the Act of 1972. The Division Bench of this Court in the case of Kirloskar Brothers Ltd. (supra) in pragraphs 11, 12 , 13 and 14 held as under :- “11. Apart from the above the definition of “wages” as appearing in the aforesaid Act makes it clear that it shall not include any bonus, commission house rent allowance overtime wages and any other allowance. The definition does not leave any amount of doubt in our mind that incentive bonus/production bonus, in any case could not have been included in the wage structure. 12. In view of the aforesaid discussion we are of the considered opinion that the learned single Judge has committed an error in including incentive bonus/production bonus in the structure of wage of the employees. In fact it specifically excluded any such bonus. The judgment of the Supreme Court in Harihar 15 Polyfibres (supra), on which reliance was placed by learned single Judge was certainly misplaced. In Harihar Polyfibres (supra) as has been mentioned by us above, the Supreme Court was dealing with the definition of wages as appearing in ESI Act which could not have been made applicable to the present cases as the definition of wages is entirely different from the definition of wages as appearing in the ESI Act. Comparison of the two definitions of wages in two different Acts and yet giving benefit to the respondents employees of the “wages” as defined in the other Act, in the present case was certainly misconceived. 13. Not only this but now the question has been set at rest by the recent judgment of the Supreme Court in the matter of T.I. Cycles (supra). Nothing more is required to be said in view of the ratio of the Supreme Court in the aforesaid judgment. Thus in our considered opinion the impugned Order passed by learned single Judge cannot be upheld.