Case: Rajasthan Welfare Society Vs. State Of Rajasthan

teachers of non-Government aided educational institutions are not entitled to gratuity. The appellants liability to pay the gratuity under Section 4 of the Gratuity Act cannot be doubted. The only question is whether appellant is entitled to include the proportionate amount of gratuity in the approved expenditure for the purposes of computation of grant in aid. For this purpose, we have to consider the provisions of the Act and the Rules. 12. Section 7 of the Act stipulates that no aid can be claimed as a matter of right and the aid may cover such part of the expenditure of the institution as may be prescribed. The prescribed expenditure is as contained in the Rules. Under Rule 14, the approved expenditure can relate to only items from (a) to (v) mentioned therein. It is nobodys case that the expenditure on gratuity falls under items (b) to (v). Under Item (a) only expenditure on actual salary and provident fund contribution not exceeding 8.33% in respect of teaching and non-teaching staff can be included. The contention urged is that the gratuity is part of salary. We are unable to age. The amount to be paid as a gratuity in terms of Section 4 of the Gratuity Act, under no circumstances, can be said to be a part of "actual salary" as postulated by Rule 14. Further, some of the items (b) to (v), wherever recurring or non-recurring expenditure is to form part of approved expenditure, specifically provide for it. Admittedly, the expenditure on gratuity does not fall under Items (b) t (v) as the only contention urged was that it falls under Rule 14(a). 13. The position becomes further clear on a plain reading of Note 2 appended to Rule 14. It is clear that ordinarily the charges on account of payment of gratuity paid to former teachers are not admitted for the purpose of grant-in-aid unless the Rules on the subject are approved by the Government. The words the rules on the subject" in Note 2 cannot be interpreted to mean rule contained in other part of the Rules, namely, Rule 82. We are unable to accept the contention that Rule 82 would be the rule on the subject approved by the Government. If Rule 82 is to be interpreted as a rule approved by the Government to contribute the amount of gratuity while computing grant-in-aid, the question of appending Note2 would not have arisen. Clearly, Note2 refers to Rules framed by Non-Government Educational Institutions which are to be approved by the Government and not the Government itself making the Rules and approving the same. As already stated, Rule 82 only makes it obligatory for aided educational institutions to pay gratuity to their employees in accordance with the Gratuity Act. 14. The gratuity cannot be termed to be an emolument for the time being payable to the employees so as to come within the definition of salary defined in Section 2(r) of the Act. Further, Rule 14 uses the word actual salary. Be that as it may, it seems clear the non-recurring payment of this nature cannot be included in the definition of salary. Gratuity is payable at the time of retirement/termination of the employment. Reliance on the decision in the case of Metal Box Company of India Limited vs. Their Workmen [(1969) 1 SCR 790] can render little assistance to the appellant. It is case under Payment of Bonus Act. It was only dealing with accountancy principles. Observations were made that an estimated liability under the gratuity schemes even if it amounts to a contingent liability and is not a debt under the Wealth Tax Act, if properly ascertainable and its present value is fairly discounted, is deductible from the gross receipts while preparing the profits and loss account. In trading circles or in rule or direction in the Bonus Act, there was no prohibition from such a practice. The question in that case was whether while working out the net profits the trader can provide from his gross receipts his liability to pay a certain sum for every additional year of service which he receives from his employees. It was answered in affirmative. If such liability was properly ascertainable, it was possible to arrive at a proper discounted value. This decision, in our view, is not relevant to determine the point in issue in the present case. 15. Further, gratuity cannot be included in the approved expenditure as under Rule 9 the State Government can section the grants under for Heads provided therein and gratuity does not fall under any one of them. It is not claimed that the gratuity falls under Heads 2 to 4. The Head No.1 is maintenance or recurring grant. Admittedly a gratuity cannot come under the category of maintenance. It is also not a recurring grant as already noticed hereinbefore. It is, thus, clear that payment of gratuity cannot come under any of the four categories mentioned in Rule 9. 16. In view of the aforesaid, the gratuity within the meaning of the Act and the Rules cannot form part of recurring grant. It is not includable as part of approved expenditure for the purposes of computing the amount of grant payable to the appellant. In this view, communication dated 26th May, 1994 of Government of Rajasthan to the effect that the Rules do not provide for grant-in-aid on amount of gratuity, the same being not included in the approved expenditures, cannot b held to be illegal. This will, however, not affect the rights of the employees to get the gratuity from the concerned institution. 17. Before parting, we wish to note that if representations are made by aided Non-Government Educational Institutions, the State Government would consider sympathetically the question of the gratuity amount payable to the employees being taken into consideration for the purpose of computing the amount of grant-in-aid. We, however, clarify that pending making of such representation and its consideration, the payment of gratuity to the employees shall not be delayed.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]It was answered in affirmative. If such liability was properly ascertainable, it was possible to arrive at a proper discounted value. This decision, in our view, is not relevant to determine the point in issue in the present case16. In view of the aforesaid, the gratuity within the meaning of the Act and the Rules cannot form part of recurring grant. It is not includable as part of approved expenditure for the purposes of computing the amount of grant payable to the appellant. In this view, communication dated 26th May, 1994 of Government of Rajasthan to the effect that the Rules do not provide for grant-in-aid on amount of gratuity, the same being not included in the approved expenditures, cannot b held to be illegal. This will, however, not affect the rights of the employees to get the gratuity from the concerned institution17. Before parting, we wish to note that if representations are made by aided Non-Government Educational Institutions, the State Government would consider sympathetically the question of the gratuity amount payable to the employees being taken into consideration for the purpose of computing the amount of grant-in-aid. We, however, clarify that pending making of such representation and its consideration, the payment of gratuity to the employees shall not be delayed