Madras High Court

P. Mathappan vs The Deputy Commissioner Of Labour on 9 June, 2008

Author:
K. Chandru

Bench:
K. Chandru

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED : 9..6..2008

CORAM

THE HONOURABLE MR. JUSTICE K. CHANDRU

W.P. No. 15468 of 1997

1. P. Mathappan
2. G. Rangan
3. G. Muthumanickam
4. I. Manickam
5. G. Mani
6. S. Kali
7. R. Srinivasaraghavan
8. R. Krishnan
9. K. Kandan
10. C. Kannappan
11. P. Chinnapaiyan
12. V. Marimuthu
13. G. Mathesh
14. K. Ponnappan
15. S. Iyankutti
16. M. Thangavelu
17. O.P. Shanmugam
18. S. Thangavelu
19. S. John
20. S. Srinivasan
21. R. Antony Gurus
22. A. Anagappan
23. S. Thangavelu
24. P. Kandasamy
25. P. Allimuthu
26. C. Santhappan
27. V. Alagappan
28. G. Jayapal
29. P. Kutty Goundan
30. M. Chellamuthu
31. A. Mohammed Ghouse
32. K. Chinnappan
33. P. Pongiannan
34. S. Ramasamy
35. R. Samiappan
36. L. Appusamy
37. P. Doraisamy
38. E. Ammasi
39. J. Palani
40. G. Kaveri
41. K. Seviappan
42. V. Natarajan
43. N. Rajalingam
44. V. Manickam
45. S. Thangavelu
46. K. Chinnathambi
47. R. Kumarasamy
48. S. Marimuthu
49. N. Sengodan
50. C. Palaniappan
51. R. Mathappan
52. S. Srirangan
53. R. Santhanam
54. P. Ramadurai
55. K. Goundappan
56. K. Natarajan
57. R. Anantharaman
58. S.P. Govindan
59. K. Natesan
60. K. Ayyathurai
61. E. Mammusa
62. P. Palaniappan
63. K. Muthu
64. I. Chinnappan
65. P. Ramasamy
66. A. Mathalairaj
67. P. Muniyan
68. A. Chinnasamy
69. M. Yesudoss
70. K. Chinnamuthu
71. K. Palaniappan
72. P. Chidambaram
73. C. Palaniappan
74. K. Marimuthu
75. K. Chinnaponnu
76. A.M. Purushothaman
77. K. Srinivasan
78. R. Karuppusamy .. Petitioners

Vs.

1. The Deputy Commissioner of Labour
(Appellate Authority under the

Payment of Gratuity Act
)
Salem Region

2. The Assistant Commissioner of Labour
(Controlling Authority under the

Payment of Gratuity Act
)
Salem Region

3. The Management of Chemplast
Sanmar Ltd. (Previously known as
Chemicals and Plastics India Ltd.)
Salem District .. Respondents

Petition filed for issuance of writ of Certiorarified Mandamus calling for the records from the first respondent relating to his order in P.G. Appeal No. 3/97 dated 27.6.1997 and quash the said order dated 27.6.1997 which confirms the order of the second respondent dated 27.11.1996 and consequently direct the third respondent to pay the amount of gratuity claimed to the petitioners as claimed by them before the second respondent.

For Petitioner : Mr. S. Ayyathurai

For Respondents 1&2: Mrs. Geetha Thamaraiselvan, GA

For Respondent 3 : Mr. A.L. Somayaji, SC
Assisted by Mr. Giridhar Rao

ORDER

Heard the arguments of Mr. S. Ayyathurai, learned counsel appearing for the petitioner and Mrs. Geetha Thamaraiselvan, learned Government Advocate representing the respondents 1 and 2 and Mr. A.L. Somayaji, learned Senior Counsel assisted by Mr. Giridhar Rao, for the third respondent and perused the records.

2. The petitioners 78 in number, were all erstwhile employees of the third respondent factory in Salem. By a notice dated 10.7.1994, the said factory introduced Voluntary Retirement Scheme (VRS). The said scheme included payment of salary for the substantial period of service left out and also special gratuity. All the 78 petitioners accepted the VRS including the special gratuity. Subsequently, the Trade Unions and the third respondent Management, on 06.02.1995, entered into a settlement under
Section 18(1)
of the Industrial Disputes Act, 1947 [for short, '
I.D. Act
'] providing for wage revision. Paragraphs 1, 36 and 37 of the said Settlement read as follows:-

"1. The terms and conditions of the Settlement shall apply only to those Permanent workmen on the Rolls of the Company as of date of signing the Settlement in Mettur Scale of Pay at Mettur, Sankari and Vedaranyam."

"36. Arrears payable under this Settlement will be paid on or before 18th February 1995, (including to those permanent workmen who have retired on superannuation or died while in service between 01.4.1994 and the date of signing this Settlement). Income-tax deductions will be made from the arrears arising out of this Settlement.

37. This Settlement shall come into force from 01.4.1994 and shall be in force till 31.3.1998 and thereafter until terminated by either of the parties in accordance with law."

The petitioners having left the service along with the lump sum amount paid, filed two sets of proceedings, viz., one claiming difference in gratuity and the other claiming arrears of salary in terms of paragraph 36 of the said Settlement.

3. Before the Labour Court at Salem, they filed a petition under
Section 33(C)(2)
of the Industrial Disputes Act being C.P. Nos. 13 to 160 of 1996 and C.P. Nos. 192 to 195 of 1996. The Labour Court computed the amount claimed towards arrears of backwages by its order dated 06.01.1997. As against the said order, the third respondent Management filed W.P. Nos. 5395 of 1996 and 3145 of 1997. Those two writ petitions were dismissed by this Court vide order dated 04.02.2005. The learned Judge referred to the terms of Settlement and interpreted the same in favour of VRS retirees and held that they are eligible for the arrears of wages arising out of revision of wages done pursuant to the Settlement. It is necessary to refer to paragraphs 38 and 43 of the said judgment.

Para 38: "In the said background, I am inclined to hold that if the intention was to exclude employees under the Voluntary Retirement Scheme from the benefit of the settlement, it should have been specifically stated in Clause 36 expressing exclusion of the employees who have left the service on voluntary retirement on and after 1.4.2004."

Para 43: "In conclusion, I am inclined to hold that the expression " retire on superannuation" would include also cases of voluntary retirement. The said conclusion is arrived at not only on the basis of the above discussion, but also the fact that various issues of dispute between the Management and Labour were admittedly under negotiation between the Unions and the Management at the time when V.R.S. was formulated, the earlier settlement having lapsed. It is only in those circumstances, Clause 36 was made applicable to the employees who were in service even as on and from 1.4.1994. There is no explanation as to why the Management had to accept the said condition of applying the settlement retrospectively from 1.4.1994. The settlement was a culmination of a prolonged negotiation, taking into account the rights of the employees who were on the rolls as on 1.4.1994 and subsequently. That being so, there is no justification to deny the benefits to the claimants."

4. However, it is now stated that the above judgment is pending in appeal before the Division Bench of this Court. The same set of petitioners have also moved the Controlling Authority under the
Gratuity Act
(second respondent herein) claiming differential gratuity on account of the wage revision that took place between the Union and the Management through a Settlement under
Section 18(1)
of the I.D. Act. Their applications were numbered as P.G. Case Nos. 31 to 109 of 1995. The authority, by his order 27.11.1996, dismissed the applications and held in paragraph 8 as follows:-

"At the end, I come to the conclusion that the petitioners accepted Voluntary Retirement Scheme without coercion as alleged by them, received attractive payments including due gratuity and also were relieved from their jobs. The claims of the petitioners are not maintainable both legally and factually. Hence I dismiss the claims."

5. Aggrieved by the said order, the petitioners filed an appeal before the first respondent, who is the appellate authority under the
Gratuity Act
. Their appeals were taken on file as P.G. Appeal Nos. 3/97, 4/97 and 6/97. The appellate authority, by his order dated 27.6.1997, confirmed the order of the second respondent and dismissed all the appeals. In paragraphs 29 and 30, the appellate authority recorded his findings, which read as follows:-

"29. From the above analysis it is crystal clear that the employees were paid better terms of gratuity under VRS Scheme. This is not denied or disputed by the appellants. Hence the stand

taken by the appellant to calculate gratuity based on the settlement has not merits to be considered.

30. Whereas in the instant case, the employees themselves voluntarily accepted VRS without coercion or compulsion. They left the services on their own accord. Therefore, it is clear that clause 36 of the Settlement has in commensuration with clause 22 of the Standing Orders i.e., "Retirement" that is on the completion of 58 years or found unfit to be continued on medical grounds by the employer. If these two conditions are applicable to the claimants, then it will be good that the claim of the workmen are sustainable in law or on facts. The claimants left the services voluntarily by submitting petitions before attaining the age of superannuation and was duly accepted and orders passed by the employer. The claimants in the petitions are permanent workers who were not gone either on retirement or superannuation or died while in service or found to be medically unfit found by the employer. If so the stand taken by the claimants are perfectly alright and eligible for balance of gratuity. Since the above conditions don't fit as per clause 36 of the settlement, the claimants are not entitled to get any benefit."

It is as against this order, the employees have come on appeal in the present writ petition.

6. The writ petition was admitted on 16.10.1997. It is in the meanwhile, the order of the Labour Court was upheld by a learned Judge of this Court.

7. Mr. S. Ayyathurai, learned counsel appearing for the petitioners, made the following submissions:-

(a) Inasmuch as this Court had upheld the order of the Labour Court by an order dated 04.02.2005 in W.P. Nos. 5395 of 1996 and 3145 of 1997, this Court must take the same view in terms of interpretation of the said Settlement.

(b)
Section 4(1)
of the Payment of Gratuity Act, 1972 [for short, 'P.G. Act'] will cover even the case of employees who had gone on Voluntary Retirement.

(c) Paragraph 36 of the Settlement dated 06.02.1995 is retrospective in nature (ie., w.e.f. 01.4.1994), which term includes even persons, who have gone on voluntary retirement. Since the petitioners' request for VRS was accepted only on 10.7.1994, they are eligible for the benefit of the said Settlement and the gratuity must include by taking into account the revision of wages as basis for calculating the last drawn wage.

8. The learned counsel relied upon the judgment of the Supreme Court in
State of Punjab v. Labour
Court, Jullunder [1980 (1) SCC 4]. He placed reliance on the following passages found in paragraphs 4 and 5 of
the said judgment
:-

Para 4: "The second contention on behalf of the appellant is that retrenchment does not fall within
Section 4(1)
of the Payment of Gratuity Act, under which gratuity is payable to an employee on the termination of his employment. The termination envisaged occurs either
(a) on his superannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease.

Para 5: Having regard to the definition of superannuation in
Section 2(r)
of the Act, it is clear that the case is not one under clause (a). Nor, admittedly, is it a case which falls under clause (c). As regards clause (b) it is not a case of resignation. The only question is whether it can be regarded under clause (b) as a case of retirement. The expression retirement has been defined by
Section 2(q)
to mean termination of the service of an employee otherwise than on superannuation. The definition is framed in the widest terms. Except for superannuation, any termination of service would amount to retirement for the purposes of the Act. Retrenchment is a termination of service. It is immaterial that the termination is occasioned by the need to discharge surplus labour. That retrenchment implies the discharge of surplus labour was explained in Barsi Light Railway Co. Ltd. v. K.N. Joglekar. Nonetheless, it amounts to termination of service. We are of opinion that the retrenchment of the employee respondents falls within the scope of
Section 4(1)
of the Payment of Gratuity Act, and the employee respondents are therefore entitled to gratuity under that provision."

9. Taking advantage of the observation that the definition under Section 2(q) of the P.G. Act is framed in wider terms, the learned counsel argued that it will cover even the case of employees gone on voluntary retirement. In support of this submission, he also referred to paragraphs 34 to 37 of the order passed by the learned Judge with reference to the interpretation of the very same Settlement, which read as follows:-

Para 34: "It is true that Clause 36 uses only the expression "retired on superannuation". It is pertinent to note that it does not also mention "voluntary retirement". It is equally true that it does not specifically mention or restrict superannuation only on reaching the age of retirement.

Para 35: In my opinion, there is no variation between the expression "retirement" and "superannuation". Both mean the same. Retirement could result either on reaching the age of retirement or by compulsory retirement or by voluntary retirement, which involves the necessity of consent between both parties. While the age of retirement is automatic on completion of age, compulsory retirement is a unilateral action of the employer in terms of the service regulations. Voluntary retirement is on consent by both parties, one party making the offer and the other party accepting the same, without waiting for the completion of the age.

Para 36: Though it is within the powers of the employer to prescribe the age of retirement, it is settled proposition that most of the terms of employment are contractual in nature, including the fixation of the retirement age. When an individual is appointed, one of the terms under which the employer offers the employment is that he shall retire on attaining the age of retirement. The employee accepts the contract of service, one of the terms of the contract being that he will retire on attaining the age of superannuation. In the case of voluntary retirement also, both parties agree that the employee shall retire even earlier to the date of retirement subject to the conditions as may be agreed to between the parties. That these are matters in the realm of contract, is not disputed by the Management.
In one of the judgments of the Supreme Court relied on by the Management itself, it is clearly brought out that the offer and acceptance of the proposals of voluntary retirement is a contractual issue vide
BANK OF INDIA AND OTHERS Vs. O.P.SWARNAKAR (2003-I-LLJ
819) supra.

Para 37: Therefore, voluntary retirement is no more and no less than an accelerated form of retirement or superannuation on agreement between both parties. It follows that voluntary retirement is also superannuation from service. The only difference, if any, is that superannuation is accelerated on agreement by parties instead of the employee reaching the age of retirement."

10. Per contra, Mr. A.L. Somayaji, learned Senior Counsel appearing for the third respondent, contended that the said order of the learned Judge is under appeal and an interim stay has also been obtained. Therefore, the claim of the workmen should not be based upon the order of the learned Judge. He further submitted that a person, who leaves the Company under VRS, cannot be equated with the categories like the retirement, resignation or death, etc. He also submitted that the VRS is a package and once it is accepted, in the absence of any other right, the workmen cannot claim for wage revision or differential amount of gratuity, etc.

11.
In this context, the learned Senior Counsel referred to the judgment of the Supreme Court in
Hindustan Machines Tools Ltd. v. M.S. Kang / P.N. Kashyap
[(1997) 11 SCC 186]. It is necessary to refer to the following passage found in paragraph 10 of
the said judgment
:-

Para 10: "It is seen that the Office Order No. 45 dated 1.3.1991 provides that the revised pay scales shall be effective from 1-1-1987 and will remain in force for a period of five years up to 31.12.1991. Clause 2.2 provides that the revised pay scales shall also be applicable on a pro rata basis to those categories of employees who were on the rolls of the company as on 31-12-1986 but have subsequently separated due to superannuation and voluntary retirement etc. Those who retired on attaining the age of 58 years or voluntarily retired under Rule 24.2(b) or (c), as the case may be, under the Conduct, Discipline and Appeal Rules referred to hereinbefore are the persons referred to in clause 2.2.2 of the office order. The benefits of the revision of pay scales shall not be applicable to those persons who were on the rolls of the Company as on 31-12-1986 but subsequently left the service of the Company before the date of issue of Office Order No. 45 of 1990 for any reason, whatsoever, including resignation except the category mentioned in clause 2.2 above. Thereby, the necessary implication is that all those who are covered and stand on the same footing are excluded except to the extent of gratuity, revision of the terminal benefits as mentioned in para 6.13 which postulates that gratuity paid or payable to employees covered under clause 2.2 will be recalculated on the revised pay subject to the prescribed ceiling. Thus, it could be seen that the distinction has been drawn between employees who retired voluntarily under Rule 24.2 of the Conduct, Discipline and Appeal Rules or the employees who retired under the Special Scheme operating from time to time. The respondents having retired under the Special Scheme are not employees covered under the voluntary retirement under Rule 24.2 of the Conduct, Discipline and Appeal Rules referred to hereinbefore. Accordingly, the High Court was not right in directing recomputation of the compensation under Office Order No. 45 dated 1.3.1991."

12. Learned Senior Counsel also submitted that the subsequent wage revision will have no bearing on the employees who left under VRS. For this purpose, he relied upon the passage found in paragraph 34 of the judgment in
A.K. Bindal v. Union of India
[(2003) 5 SCC 163], which reads as follows:-

Para 34: "This shows that a considerable amount is to be paid to an employee ex gratia besides the terminal benefits in case he opts for voluntary retirement under the Scheme and his option is accepted. The amount is paid not for doing any work or rendering any service. It is paid in lieu of the employee himself leaving the services of the company or the industrial establishment and foregoing all his claims or rights in the same. It is a package deal of give and take. That is why in the business world it is known as golden handshake. The main purpose of paying this amount is to bring about a complete cessation of the jural relationship between the employer and the employee. After the amount is paid and the employee ceases to be under the employment of the company or the undertaking, he leaves with all his rights and there is no question of his again agitating for any kind of his past rights with his erstwhile employer including making any claim with regard to enhancement of pay scale for an earlier period. If the employee is still permitted to raise a grievance regarding enhancement of pay scale from a retrospective date, even after he has opted for Voluntary Retirement Scheme and has accepted the amount paid to him, the whole purpose of introducing the Scheme would be totally frustrated."

13. He also submitted that the Supreme Court in almost similar circumstances dealt with the case of retrospective wage revision and its impact on the VRS. He referred to the decision of the Supreme Court in HEC Voluntary Retd.
Employees' Welfare Society and another v. Heavy Engineering Corporation Ltd.
[(2006) 3 SCC 708] and relied on the following passages found in paragraphs 18 to 22 and 26, which read as follows:-

Para 18: "The Voluntary Retirement Scheme speaks of a package. One either takes it or rejects it. While offering to opt for the same, presumably the employee takes into consideration the future implication also.

Para 19: It is not in dispute that the effect of such Voluntary Retirement Scheme is cessation of jural relationship between the employer and the employee. Once an employee opts to retire voluntarily, in terms of the contract he cannot raise a claim for a higher salary unless by reason of a statute he becomes entitled thereto. He may also become entitled thereto even if a policy in that behalf is formulated by the Company.

Para 20: We have indicated hereinbefore that before floating such a scheme both the employer as also the employee take into account the financial implications in relation thereto. When an invitation to offer is floated by reason of such a scheme, the employer must have carried out exercises as regards the financial implication thereof. If a large number of employees opt therefor, having regard to the financial constraints, an employer may not accept offers of a number of employees and may confine the same to only a section of optees. Similarly when an employer accepts the recommendations of a Pay Revision Committee, having regard to the financial implications thereof it may accept or reject the whole or a part of it. The question of inclusion of employees who form a special class by themselves, would, thus, depend upon the object and purport thereof. The appellants herein do not fall either in clause 3.2 or 3.3 expressly. They would be treated to be included in clause 3.2, provided they are considered on a par with superannuated employees. They would be excluded if they are treated to be discharged employees.

Para 21: We have noticed that admittedly thousands of employees had opted for voluntary retirement during the period in question. They indisputably form a distinct and different class. Having given our anxious consideration thereto, we are of the opinion that neither are they discharged employees nor are they superannuated employees. The expression superannuation connotes a distinct meaning. It ordinarily means, unless otherwise provided for in the statute, that not only he reaches the age of superannuation prescribed therefor, but also becomes entitled to the retiral benefits thereof including pension. Voluntary retirement could have fallen within the aforementioned expression, provided it was so stated expressly in the Scheme.

Para 22: Financial considerations are, thus, a relevant factor both for floating a scheme of voluntary retirement as well as for revision of pay. Those employees who opted for voluntary retirement, make a planning for the future. At the time of giving option, they know where they stand. At that point of time they did not anticipate that they would get the benefit of revision in the scales of pay. They prepared themselves to contract out of the jural relationship by resorting to golden handshake. They are bound by their own act. The parties are bound by the terms of contract of voluntary retirement. We have noticed hereinbefore that unless a statute or statutory provision interdicts, the relationship between the parties to act pursuant to or in furtherance of the Voluntary Retirement Scheme is governed by contract. By such contract, they can opt out of such other terms and conditions as may be agreed upon. In this case the terms and conditions of the contract are not governed by a statute or statutory rules."

Para 26: "Considering the matter from that context, we are of the opinion that it cannot be said that the Company intended to extend the said benefits to those who had opted for voluntary retirement. Clause 3.2 of the circular includes only those who were on the rolls of the Corporation as on 1-1-1992, as also those who ceased to be in service on that date on account of superannuation or death. The appellants do not come in the said category. In view of the fact that they have not been expressly included within the purview thereof, we are of the opinion that although they have not been excluded by clause 3.3, they would be deemed to be automatically excluded."

14. The learned Senior Counsel also referred to the latest decision of the Supreme Court in
Vijay Kumar v. Whirlpool of India Ltd.
[(2008) 1 SCC 119] where more or less similar situation was dealt with. He
placed reliance upon
paragraphs 9 and 10 of
the said judgment
, which read as follows:-

Para 9: "Few portions of the settlement which throw considerable light on the controversy need to be noted:

0.1. Coverage
All paras of this settlement shall cover all permanent workmen, except casuals, of Kelvinator of India Ltd., Faridabad and Ballabgarh on the rolls (of its various specified divisions) as on 30-6-1995 (hereinafter called eligible workmen).
0.6. Financial benefits
The parties decided to grant the undernoted financial benefits to the workmen:
Increase in basic wage
Period Amount
1-7-1995 Rs 800
1-7-1996 Rs 400
1-7-1997 Rs 300
The amount of financial benefit shall be added to the workman concerneds basic wage as on 30th June, 1995 and the total thereof would be the revised basic wage of that workman. The second and third instalments of the financial benefits shall be given only on attainment of the specified production target and the current 15 per cent special worker allowance shall be added to the workmens basic wage from 1-10-1995.

Para 10: A bare reading of the above quoted portion clearly shows that the settlement covered only cases of existing employees. The question of any erstwhile workman attaining specified production target does not arise."

15. The argument advanced by Mr. S. Ayyathurai, learned counsel for the petitioners by placing reliance upon the
State of Punjab v. Labour
Court, Jullunder (Cited supra), is of no assistance to him. There, the Supreme Court while dealing with the case of "retrenchment", which term was read into the word "retirement" found in
Section 2(q)
of the I.D. Act.

However, the Supreme Court in
HEC Voluntary Retired Employees' Welfare Society
case (cited supra) has held that unless there is an express inclusion of the term "voluntary retirement", it cannot be read into the term "superannuation", which has got a distinct meaning. The learned Judge, who dealt with the same Settlement went by a diametrically opposite conclusion in paragraph 38 of
the said judgment
, which is already extracted above. He has rendered a finding that if there is no exclusion of employees under the VRS from the benefit of the Settlement, they will be included. Unfortunately, the Management did not place all the decisions of the Supreme Court in this regard before the learned Judge.

16. In the light of the above binding legal precedents, there is no other option except to hold that paragraph 36 of the Settlement does not include persons, who have gone on Voluntary Retirement. The interpretations given by the respondents 1 and 2 in the impugned orders are perfectly in consonance with law.

17. Therefore, the writ petition lacks in merits and accordingly, will stand dismissed. However, there will be no order as to costs.

gri

To

1. The Deputy Commissioner of Labour
Salem Region

2. The Assistant Commissioner of Labour
Salem Region