SCA/25144/2007 1/30 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 25144 of 2007 With SPECIAL CIVIL APPLICATION No. 28587 of 2007 To SPECIAL CIVIL APPLICATION No. 28596 of 2007 With SPECIAL CIVIL APPLICATION No. 28639 of 2007 To SPECIAL CIVIL APPLICATION No. 28641 of 2007 With SPECIAL CIVIL APPLICATION No. 28642 of 2007 To SPECIAL CIVIL APPLICATION No. 28645 of 2007 With SPECIAL CIVIL APPLICATION No. 327 of 2008 To SPECIAL CIVIL APPLICATION No. 328 of 2008 With SPECIAL CIVIL APPLICATION No. 330 of 2008 To SPECIAL CIVIL APPLICATION No. 334 of 2008 With SPECIAL CIVIL APPLICATION No. 336 of 2008 To SPECIAL CIVIL APPLICATION No. 338 of 2008 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 ? ========================================================= VADODARA MAHANAGARPALIKA NAUKAR MANDAL - Petitioner(s) SCA/25144/2007 2/30 JUDGMENT Versus THE STATE OF GUJARAT & 1 - Respondent(s) ========================================================= Appearance : MR RAMNANDAN SINGH for Petitioner(s) : 1, Mr. Sunit S. Shah, learned GP with Ms. Bhavika Kotecha, Ms. Kiran Pandey and Mr. KJ Dwivedi, learned AGPs for the respondent State authority in all these petitions. MR PRANAV G DESAI, learned Advocate for Respondent Corporation in all these petitions. ========================================================= CORAM : HONOURABLE MR.JUSTICE H.K.RATHOD Date : 10/01/2008 ORAL JUDGMENT 1. Heard learned Advocate Mr. Ramnandan Singh for petitioners, Mr. Sunit S. Shah, learned GP with Ms. Bhavika Kotecha, Ms. Kiran Pandey and Mr. KJ Dwivedi, learned AGPs for the respondent State authority and Mr. Pranav G. Desai, learned Advocate for respondent Baroda Municipal Corporation. 2. When these matters are taken up for hearing, learned advocate Mr. Ramnandan Singh appearing for the petitioner has submitted that the petitions involving same and identical question filed by the concerned employees of the respondent corporation but same have not been notified because of the office objections raised by the Registry and he requested before this Court to call for papers of those petitions and accordingly, considering his request, registry SCA/25144/2007 3/30 JUDGMENT of this Court was directed to dispense with the office objections raised by the registry and to send papers of those petitions and therefore, registry has sent papers of Special Civil Application NO. 327,328, 330,331,332,333,334, 336, 337 and 338 of 2008 before this Court and same have been disposed of along with the matters which are notified in today's board as identical in nature raising same question and it is open for the learned Advocate Mr. Pranav G. Desai to file his vakalatnama for the respondent corporation in those matters which have been sent by the registry of this court today for being disposed of by way of this judgment. Government Pleader may also file appearance in such matters on behalf of the State Authority. 3. Rule. Service of Rule is waived by learned Advocate Mr. Pranav G.Desai on behalf of the respondent Baroda Municipal Corporation in each matter. Service of rule is also waived by Mr. Sunit S. Shah, learned GP with Ms. Bhavika Kotecha, Ms. Kiran Pandey and Mr. KJ Dwivedi, learned AGPs for the respondent State authority in each matter. In the facts and circumstances of the case, and with consent of the learned advocates for the respective parties, the matters have been taken up for final hearing today. 4. In this group of petitions, petitioner is praying for quashing and setting aside the impugned order dated 26.10.2006 passed by SCA/25144/2007 4/30 JUDGMENT respondent NO.1 by holding notification dated 14.12.2001 and 9.9.2002 issued by respondent no.1 and circular dated 12.9.2002 issued by respondent no.2 as illegal and unlawful. Petitioner is also praying for issuing appropriate direction against the respondents directing them to pay gratuity as per the provisions of the Payment of Gratuity Act, 1972 to all the retiring employees of the respondent corporation. In support of these prayers, it was submitted by the learned Advocate Mr. Singh that respondent corporation is paying pensionary benefits under the Bombay Civil Services Rules and also paying gratuity amount under the Payment of Gratuity Act from 1983 onwards. The Industrial Tribunal passed award on 13.1.1977 in Reference No. 159 of 1975 wherein Industrial Tribunal directed that the eligible employees of the Baroda Municipal Corporation shall be paid gratuity as per Act of 1972 and allowed the reference accordingly, meaning thereby, the tribunal has decided that the Gratuity Act is applicable to the employees of the Baroda Municipal Corporation. Said award was accepted by Corporation and not challenged by corporation before the higher forum and on that basis, the corporation is paying benefit of gratuity under the Payment of Gratuity Act, 1972. Government was moved by the Corporation by sending proposal dated 16.3.1999 (page 62) addressed to the Secretary of the Corporation. According to the SCA/25144/2007 5/30 JUDGMENT Corporation, reason for moving such proposal is that both the benefits, if they are to be paid by the corporation, it is causing financial loss to the corporation. According to the corporation as per the said proposal, pay scales of the employees have been revised as per recommendations made by the 5th Pay Commission. Employees are being paid pensionary benefits as per the BCSRs. Over and above that, commuted pension is also given and if the payment of gratuity is made as per the BCSRs, then, the amount equal to the amount payable under the Gratuity Act, 1972 would be required to be paid. Thus, if the implementation of the Payment of Gratuity Act, 1972 is continued, then, payment of pensionary benefits in addition to the payments of gratuity would be required to be given which is causing financial loss to the establishment. It was submitted by the corporation in the said proposal that in this regard, as per section 5, appropriate Government i.e. State Government is competent to grant exemption to the Municipal Corporation from the implementation of the Gratuity Act,1972. Therefore, it was requested in the said proposal for presenting the matter before the General Body of the Corporation through Standing Committee for obtaining sanction of the General Body for empowering the Commissioner to make necessary representation in the Government for obtaining exemption from the implementation of SCA/25144/2007 6/30 JUDGMENT the Payment of Gratuity Act, 1972. Accordingly, having permission from the General Board, powers were given to the Municipal Commissioner and proposal was sent in the Government which was considered by the State Government by issuing Yadi dated 14.12.2001 giving exemption to the respondent corporation wherein it was mentioned that the employees / workmen of the Vadodara Municipal Corporation are getting more benefits than the benefits under the Payment of Gratuity Act,1972, therefore, employees of the electricity and gas department of the Vadodara Municipal Corporation were exempted from the Payment of Gratuity Act under sec. 5 of the Act. Accordingly, having permission from the General Board, powers were given to the Municipal Commissioner and, thereafter, proposal made by the Corporation to the State Government was considered by the State Government by giving exemption to the class of employees working in the electricity and gas department. Thereafter, said exemption was challenged by the concerned employees by filing writ petitions before this court wherein this court directed the concerned employees to make representation to the Government and Government will examine their case in accordance with law. Accordingly, representation was made by the concerned employees in the State Government. Thereafter, corporation has passed order on 12.9.2002 and thereby, benefits of the Yadi dated 14.12.2001 SCA/25144/2007 7/30 JUDGMENT were extended in favour of all the employees including working in the Electricity and Gas Department of the Vadodara Municipal Corporation. The State Government has passed another resolution on 3.9.92 amending the earlier resolution dated 14.12.2001 and extended the exemption covered all the employees working in corporation. Said resolution was issued by exercising powers under section 5 of the Payment of Gratuity Act, 1972. On 12.9.2002, page 39, the Corporaiton issued circular in respect of the exemption given by the State Government in favour of the corporation. Representation has been decided by respondent no.1 on 26.10.2006. Concerned authority has considered various factors as well as considered representation from both the parties, one from the employees and another from the Municipal Corporation and,thereafter, the authority has come to the conclusion that application made by Corporation with the approval of the General Board has been rightly granted by the State Government after considering the report from the Labour Department. It has also been considered that Vadodara Municipal Corporation is a local self government giving benefits of pension to its employees as per provisions of the BCSRs. As per the BCSRs, pension includes pension, commuted pension and gratuity and, therefore, in comparision to the gratuity available under the Payment of Gratuity Act, 1972, these pensionary SCA/25144/2007 8/30 JUDGMENT benefits available under the BCSRs are more beneficiary whereas the Payment of Gratuity Act,1972 includes the Gratuity alone, therefore, pensionary benefits are more beneficiary. Of course, amongst both the gratuities, amount of gratuity available under the Act is more and as per the prima facie view, it is higher by 10 to 15 per cent than the amount of gratuity available under the BCSRs but as against that, benefits of pension/family pension/commuted pension are not available, therefore, benefits available under the BCSRs are more beneficial. Therefore, State Government which is an independent authority considering the interest of the workers, came to the conclusion that while comparing both the benefits that after all looking to the benefits under the BCSRs as against the benefits under the Payment of Gratuity Act, 1972, benefits under the BCSRs are more favourable and beneficial. Thereafter,the respondent authority has considered the award referred to above and considered the contention of the union that before making any change in reference to the said award, notice of change under sec. 9(A) of the ID Act,1947 is required to be given or not. In reference to the said contention of the union, it was the contention of the Corporation before the respondent authority that the Industrial Court has merely asked to make applicable the Payment of Gratuity Act, 1972 and that does not mean that it is SCA/25144/2007 9/30 JUDGMENT binding to the State Government while granting exemption under section 5 of the Act. Intention of the Industrial Court was to see that the benefits under the Gratuity Act, 1972 are extended in favour of the workmen of the corporation and the corporation is paying pensionary benefits as per the BCSRs which are more favourable than the benefits under the Gratuity Act because pension includes the gratuity and workmen are entitled for any one of the two benefits. Both the benefits cannot be available as per law. Considering the contentions of both the side on this aspect, the authority came to the conclusion that as the workmen are getting better benefits, change notice under section 9(A) of the ID Act, 1947 is not required to be given. Notice of change under section 9A is necessary if any adverse order or existing condition of service is adversely affected, otherwise not. Here, benefits of BCSRs is more favourable and beneficial and, therefore, notice under section 9A is not necessary. It has also come to the conclusion that the gratuity is not included in the Fourth Schedule of the said Act, therefore, provisions of section 9(A) of the ID Act, 1947 are not applicable. The respondent authority has also come to the conclusion that the BCSRs are the rules of the State Government and it includes the pension wherein responsibility for payment is that of the State Government. Pension SCA/25144/2007 10/30 JUDGMENT includes pension, commuted pension, family pension and gratuity, therefore, it is not possible to bifurcate the part of pension therefrom whereas the Payment of Gratuity Act, 1972 includes the Gratuity alone and, therefore, according to the respondent authority, the calculations made by the respondent corporation is not misleading and in reality, it is in the interest of the workmen to get the benefits under the BCSRs and after making the discussion as aforesaid, the authority has come to the conclusion that the representation made by the concerned employees is liable to be rejected considering interest of the workmen/employees and accordingly rejected the representation by upholding and maintaining exemption under section 5 of the Act dated 14.12.2001 and 3.9.92. 5. Learned Advocate Mr. Desai for the corporation has submitted that detailed decision is given by the State Government by giving cogent reasons in support of the exemption which is not properly understood by the union and, therefore, because of the misunderstanding on the part of the union, this kind of petitions have been filed, otherwise, in substance, he has prepared one statement while considering the present situation for considering as to which benefit is more beneficial and favourable. Copy of such statement prepared by him was given to learned advocate Mr. Singh for the petitioners and Ms. SCA/25144/2007 11/30 JUDGMENT Kotecha, learned AGP for the State Authority. Said statement is reproduced as under: “Statement showing Calculation of Gratuity as per the Payment of Gratuity Act,1972: Sr No SCA No. Pen. Case No. Name Payments as per Gratuity Act Payments as per BCSR Amt. Of Higher Payment as per BCSR Gratuity Commute Total 1 28639 /07 C/1/ 2387 Mr. R.J. Patel 257281 222481 Prov. Pension 22481 - NA - 2 28640 /07 C/1/ 2853 Mr. P.C. Vyas 240149 212009 “ 212009 - NA - 3 28641 /07 C/1/ 2540 Mr. N.P. Ghasade 290559 224598 160406 385004 94445 4 28642 /07 C/1/ 2439 Mr HG Shah 278848 234564 Pro. Pension 234564 NA 5 28643 /07 C/1/ 2620 Mr RC Rana 186000 161200 212150 373350 187350 6 28644 /07 C/1 2746 Mr DS Solanki 272993 236594 204906 441500 168507 7 28587 /07 C/1/ 2360 Mr DR Chiniwala 193200 167440 222539 389979 196779 8 28588 /07 C/1/ 2493 Mr IP Raj 202363 175383 235764 411147 208784 9 28589 /07 Gas Mr MI Khan 312742.5 238739 NA 238739 NA 10 28590 /07 C/1/ 2198 Mr SD Kulaye 364079.41 231969 199731 431700 67620.59 11 28591 /07 C/1/ 2712 Mr NC Shah 237683 194222 210598 404820 167137 12 28592 /07 C/1/ 2137 Mr SD Bhatt 302540 240356 222177 462533 159993 13 28593 / 07 C/1/28 04 Mr GC Sheth 327066 246164 202836 449000 121934 14 28594 /07 C/1/ 2537 Mr VV Halabe 272993 236594 20963 446157 173164 15 28595 /07 C/1/ 2696 Mr IM Suthar 278371 25177 215513 430690 152319 16 2896/ 07 C/1/ 2334 Mr BA Patel 300273 264949 191970 456919 156646 17 28645 /07 C/1/27 26 Mr RM Solanki 218996 189789 199214 289003 17007 18 25144 /07 C/1/ 2170 Mrs. MP Shah - 179437 19537 374474 - SCA/25144/2007 12/30 JUDGMENT “ 4. Learned AGP Ms. Kotecha for the State authority has submitted that it is within the powers of the State Government when it is satisfied that particular benefit under BCSRs is more favourable or more beneficial in the interest of workers than the other benefit of Gratuity Act, 1972, then, it can grant such exemption to any establishment which is covered by the Act. She also submits that there is no mala fide alleged against the State Government. There is also no arbitrariness alleged against the State Government by the petitioners in granting such exemption and, therefore, petitions challenging the decision of the State Government are not maintainable since no mala fides and/or arbitrariness is alleged against the State Government. As per her submission, exemption granted by the State Government is just and proper and it gives more benefits to the employees under the BCSRs and the said order was passed by the State Government after receiving report from the labour commissioner at length and cogent reasons have beengiven by the respondent authority and even looking to the same, under the Payment of Gratuity Act, 1972, pensionary benefits are not available to the employees whereas under the BCSRs, such benefits are available to the employees and it is very clear legal aspect that a Government employees those who are receiving benefits under the BCSRs SCA/25144/2007 13/30 JUDGMENT are not entitled as per law for the benefits under the Payment of Gratuity Act, 1972 at the same time, as per the decision of this Court in Junagadh District Panchayat v. Surendrasinh Dayabhai Rathod & Ors. reported in 2006(4) GLR page 2849. 5. Learned Advocate Mr. Singh has relied upon the decision of this Court (Coram : Hon'ble Ms. Justice RM Doshit,J.) in case of Rajkot Municipal Corporation versus Aniruddh Fulshankar Shukla reported in 1999-2-LLJ-830 : 1999 (82) FLR 927. He relied upon the said judgment on the ground that the claim made by the concerned employees before the controlling authority which has been denied by the corporaiton. Ultimately, controlling authority has decided against the corporation and granted benefits to the concerned employees which has been confirmed by the appellate authority and the High Court and, therefore, Payment of Gratuity Act, 1972 is applicable to the employees of the corporation and such employees are entitled for such benefits under the Payment of Gratuity Act,1972 as the Act is applicable. The question of granting exemption from implementation thereof is not arising. Whether the State Government has rightly granted exemption in favour of the Baroda Municipal Corporation or not,for that, certain observations have been made by this court in the aforesaid decision which are more important and, relevant, therefore, para 5 of SCA/25144/2007 14/30 JUDGMENT the said judgment is reproduced as under: “ The Honourable Supreme Court in the matter of MUNICIPAL CORPORATION OF DELHI vs DHARAM PRAKASH SHARMA (AIR 1999 SC 293) has held that the Payment of Gratuity Act, 1972 being a special provision shall have an overriding effect over any scheme that might have been adopted by the concerned employer, and even if the benefit is availed of under the concerned scheme, the employee would be entitled for payment of gratuity under the Act. n view of the above judgment of the Honourable Supreme Court, the defence raised by the corporation can not be accepted. It is not disputed that the corporation has not applied for exemption under section 5 of the Act. Unless the appropriate Government exempts the corporation from the operation of the provisions of the Act, the Corporation shall be bound to make payment of gratuity under the Act.” 6. In para 6 of the said judgment, it has been observed as under: “For the reasons recorded herein above, the impugned orders made by the Controlling authority and confirmed by the appellate authority do not call for interference. However, it is evident that the pension scheme has been introduced in lieu of the benefit conferred under the Act. No employee, therefore, can have a right to benefit both, under the Act and also under the pension scheme. It is, therefore,clarified that the petitioner-corporation shall be at liberty to adjust the amount of gratuity and pension paid to the concerned respondents under the pension scheme against the amount of gratuity which is payable under the impugned orders. The corporation shall also be at liberty to discontinue the payment of monthly pension to the concerned respondents.” SCA/25144/2007 15/30 JUDGMENT 8. Thus, aforesaid observations are very relevant relating to the substance of the present matter. In short, both the benefits are not available to any employees working in any establishment that is the decision given by this court and that is the legal position under both the Acts. State Government has only inquired or verified while exercising powers under sec. 5 of the Act which is reproduced as under: “5.Power to exempt: (1) The appropriate Government may, by notification, and subject to such conditions as may be specified in the notification, exempt any establishment, factory, mine, oilfield,plantation,port, railway company or shop to which this Act applies from the operation of the provisions of this Act if, in the opinion of the appropriate Government, the employees in such establishment factory mine oil field, plantation, port,railway company or shop are in receipt of gratuity or pensionary benefits not less favourable then the benefits conferred under this Act. (2) The appropriate Government may by notification and sucject to such conditions as may be specified in the notification,exempt any employee or class of employees employed in any establishment, factory mine oilfield plantation port railway company or shop to which this Act applies from the operation of the provisions of this Act, if in the opinion of the appropriate Government, such employee or class of employees are in receipt of gratuity or pensionary benefits not less than the benefits conferred under this Act. (3) A notification issued under sub section () or sub section (2) may be issued retrospectively a date not earlier than the date of commencement of the Act but no such notification shall be issued so as to prejudicially affect the SCA/25144/2007 16/30 JUDGMENT interests of any person.” 9. Therefore, considering the relevant provisions and the language used in statutory provisions, according to my opinion, State Government was right in granting the exemption by exercising the powers under section 5 of the Act and detailed and cogent reasons have been given after considering the grievance of the petitioner by respondent no.1 and according to my opinion, State Government has rightly granted exemption to the Baroda Municipal Corporation while exercising the powers under section 5 of the Act of 1972 and in doing so, the State Government has not committed any error and no infirmity is pointed out by the learned Advocate Mr. Singh and, therefore, same does not warrant any interference of this court in exercise of the powers under Article 226/227 of the Constitution of India. 10.According to my opinion, decision to grant exemption is in the larger interest of the employees, those who are working in the corporation because ultimately pensionary benefits along with gratuity will remain continue till person dies and even after death of the concerned employee, benefit will remain continue in the form of family pension in favour of the widow or the legal heirs of the deceased employee and same is more beneficial in comparision to the gratuity under the Payment of Gratuity Act, 1972 and, therefore, decision of SCA/25144/2007 17/30 JUDGMENT the State Government is more beneficial to the employees concerned. Learned advocate Mr. Singh for the petitioner has raised contention that while giving exemption by the State Government, no better scheme has been introduced by the State Government but this contention raised by learned advocate Mr. Singh cannot be accepted on the ground that the powers under section 5 of the Payment of Gratuity Act, 1972 is to be exercised while comparing the benefits available under the said Act of 1972 and it has to be considered as to which benefits are more beneficial/favourable to the employees of the Corporation and therefore, said contention cannot be accepted as the learned Advocate Mr. Singh appearing for the petitioner has also not been able to point out that the exemption granted in favour of the Baroda Municipal Corporation is adversely affecting existing rights of the employees concerned and the benefits available to them are lesser than the benefits available under the Payment of Gratuity Act, 1972. He has also not been able to point out as to on what basis employees can avail or entitled for both the benefits at the same time. Therefore, matter does not require interference of this court in exercise of the powers under Art. 226/227 of the Constitution of India and, therefore petitions are required to be dismissed. 11.In Janak Prasad Singh versus Bihar State SCA/25144/2007 18/30 JUDGMENT Electricity Board, reported in 2004-II-LLJ page 1080, identical question of powers to exempt the establishment from the Payment of Gratuity Act,1972 was examined