Gujarat High Court

Gujarat vs Natwarlal on 4 March, 2010

Author:
H.K.Rathod

Bench:
H.K.Rathod

Gujarat High Court Case Information System

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SCA/1161/2010 12/ 22 JUDGMENT

IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD

SPECIAL
CIVIL APPLICATION No. 1161 of 2010

For
Approval and Signature:
HONOURABLE
MR.JUSTICE H.K.RATHOD Sd-

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Whether
Reporters of Local Papers may be allowed to see the judgment ?
To be
referred to the Reporter or not ?
Whether
their Lordships wish to see the fair copy of the judgment ?
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
Whether
it is to be circulated to the civil judge ?

=========================================================

GUJARAT
HOUSING BOARD & 1 - Petitioner(s)

Versus

NATWARLAL
JAGJIVAN MADIA & 2 - Respondent(s)

=========================================================

Appearance
:
MR
HS MUNSHAW for
Petitioner(s) : 1 - 2.
None for Respondent(s) : 1 -
3.
=========================================================

CORAM
:

HONOURABLE
MR.JUSTICE H.K.RATHOD

Date
: 04/03/2010

ORAL
JUDGMENT

Heard
learned Advocate Mr. HS Munshaw for petitioners.

By
filing this petition under
Article 227
of the Constitution of India,
petitioner Gujarat Housing Board has challenged order passed by
Controlling Authority, Rajkot in Gratuity Case NO. 73 of 2008
decided on 9th March, 2009wherein Controlling Authority
has granted Rs.26,338.00 being interest on delayed payment of
Rs.1,58,565.00, for a period of about one year, seven months and 28
days at the rate of 10 per cent and remaining due amount of 10 %
Gratuity which comes to Rs.36,198/- with 10 per cent simple interest
has been granted with effect from 1.8.2006. Aforesaid order passed
by the controlling authority, Rajkot was challenged by petitioner
before appellate authority, Rajkot in Appeal NO. 42 of 2009 which
came to be dismissed by appellate authority, Rajkot on 28.8.2009.

Learned
Advocate Mr. Munshaw for petitioner has raised number of contentions
before this Court. According to his submissions, respondent NO.1
herein who was born on 9.5.1955 was an employee of Gujarat Housing
Board and joined service as work charge clerk on 13.11.1973 and was
made regular in service on 8.12.1983 and later on his application
for voluntary retirement was accepted and accordingly, he retired on
30.6.2006. It was his submission that petitioner board was earlier
having Contributory Provident Fund Scheme for its employees but
after careful consideration of the request of the employees, it was
thought fit to adopt the pension scheme of the State Government and
a Circular dated 12.11.1991 was issued through which the Scheme was
implemented. He submitted that accordingly, provisions of Gujarat
Civil Service Rules/Bombay Civil Service Rules are made applicable
for benefits to employees of petitioner board. He submitted that
respondent NO.1 gave his option for pension scheme and accordingly
his case was to be considered for calculation of pension as well as
gratuity as provided under the Gujarat Civil Service Rules. He
submitted that as per the provisions of the Gujarat Civil Service
Rules, pension includes retirement cum death gratuity and,
therefore, gratuity was also to be calculated accordingly. He
submitted that an order dated 27.2.2008 was passed by Administrative
Officer of petitioner board through which respondent no.1 herein who
retired as a junior clerk, was ordered to be paid pension on the
basis of his last drawn salary. In all, 31 years service was counted
for calculation of pension. Gratuity amounting to Rs.1,58,565/- was
calculated on the basis of 31 years service. Respondent No.1 who
joined service on 13.11.1973 and retired on 30.6.2006 was granted
benefit of pension and gratuity on the basis of 31 years service as
through orders dated 24.8.07, it was ordered that the period
commencing from 13.3.76 to 8.5.78 was not to be counted for the
purpose of pension. He also submitted that the impugned orders
passed by respondent no.3 and 2 respectively are illegal, unjust,
arbitrary and contrary to facts and evidence on record as well as
without jurisdiction. He further submitted that as such, petitioner
board is a statutory body under total administrative control and
supervision of Government of Gujarat and it has accepted and adopted
provisions of Gujarat Civil Service Rules and policy of State. He
submited that services of present respondent no.1 was counted for
the purpose of pension and gratuity in accordance with Gujarat
Civil Service Rules and retirement benefits like pension and
gratuity to its employees accordingly, in other words, the
calculations for payment of pension and gratuity are made as per
provisions of Gujarat Civil Service Rules and policy of State. He
submits that services of respondent no.1 herein was counted for the
purpose of pension and gratuity in accordance with the provisions of
Gujarat Civil Service Rules and accordingly, payment of gratuity
was made. It is submitted that the gratuity was not liable to be
paid under the
Payment of Gratuity Act, 1972
and, therefore, there
is no question of jurisdiction of respondent no.2 and 3 against the
order of Gujarat Housing Board as said authorities have no authority
to decide such calculation under the
Payment of Gratuity Act, 1972
.
He further submitted that the calculation of gratuity is made as per
the provisions of Gujarat Civil Service Rules and after considering
total length of service of the respondent no.1 herein. It is also
submitted that through orders dated 24.8.07 passed by Housing
Commissioner, 31 years service is to be counted for the purpose of
pension and gratuity as two years service was treated as without
pay. It is also submitted that respondent no.2 and 3 have ignored
issues like applicability of provisions of Gujarat Civil Service
Rules, issue of jurisdiction and total length of service etc. raised
before the authorities and allowed application for interest at the
rate of 10 per cent on delayed payment. It is also submitted that
respondent no.2 and 3 have erred in not appreciating whether
respondent no.1 herein was treated as Government servant for the
purpose of benefit of pension and gratuity and grievance, if any, is
represented before appropriate authority. It is submitted that in
case of delayed payment, interest at the rate of 6 per cent is
required to be paid. It is also submitted that respondent no.1 has
not challenged orders passed by Gujarat Housing Board through which
it is decided that in all 31 years service is to be calculated for
purpose of pension and gratuity and has become final and conclusive.
In view of this, respondent no.2 and 3 have no authority to order to
calculate pension and gratuity on the basis of 33 years. It is
submitted that wrong calculation by any incompetent authority would
not only result into heavy burden to the public exchequer but also
set a bad precedent as the respondent no.1 herein is not eligible
and entitled for payment of gratuity under the provisions of the

Payment of Gratuity Act, 1972
. In light of aforesaid contentions
raised by learned Advocate MR. Munshaw and considering draft
amendment which has been placed on record and granted by this court
on 22nd February, 2010, it is submitted that pension
scheme being package, it includes amount of gratuity which has been
accepted by respondent no.1 and thereafter, raising of dispute and
disputing amount of gratuity paid by petitioner is amounting to
committing breach of undertaking given by respondent no.1 and same
is contrary to package scheme of petitioner. Petitioner has placed
on record by way of draft amendment, certain documents which would
go to suggest that pension scheme has been accepted by petitioner
board and accordingly, options were invited from concerned employees
and such option was exercised by present respondent and on that
basis, pension amount has been paid by respondent no.1 as well as
amount of gratuity which is part of pension scheme paid and yet,
respondent no.1 has disputed amount of gratuity and claimed amount
of gratuity under the
Payment of Gratuity Act
, for that, according
to him, respondent no.1 is not entitled and respondent is entitled
to amount of grauity only under the pension scheme which has been
accepted by respondent no.1 and, therefore, this aspect has not been
properly considered by controlling authority as well as appellate
authority and, therefore, this petition has been filed by petitioner
before this Court. Except these submissions, no other submission is
made by learned Advocate Mr. HS Munshaw before this Court.

I
have considered submissions made by learned Advocate Mr. Munshaw
before this court. I have also perused order passed by controlling
authority as well as order passed by appellate authority wherein
order passed by controlling authority has been confirmed by
dismissing appeal preferred by petitioner.

It
is necessary to consider relevant provisions of
Payment of Gratuity
Act, 1972
. Provisions of said Act are applicable to petitioner
establishment as per
section 1 (3) (b)
and (c) and this fact has not
been disputed by learned Advocate Mr. Munshaw before this Court. Not
only that but this fact has also not been disputed by petitioner
either before controlling authority or appellate authority under the

Payment of Gratuity Act
and, therefore, Act is made applicable to
petitioner establishment.
Section 4
sub section (5) of said Act
provides that nothing in this section shall affect the right of an
employee to receive better terms of gratuity under any award or
agreement or contract with the employer.
Section 5
of Act is giving
power to appropriate Government by notification and subject to such
conditions as may be specified in notification to exempt any
establishment, factory, mine, oilfield, plantation, port, railway
company or shop to which this Act applies from operation of
provisions of this Act if, in the opinion of appropriate Government,
the employees of such establishment as aforesaid are in receipt of
gratuity or pensionary benefits not less favourable than the
benefits conferred under this Act. Sub section (3) of
section 5
of
Act provides that a notification issued under sub-section (1) 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 interests of any person.
It is not disputed by petitioner that petitioner establishment has
not been exempted by appropriate Government under
section 5
and
concerned employee is also not exempted under sub section (2) of

section 5
of the Act. As per
section 14
of this Act, provisions of
this Act or any rule made thereunder shall have effect
notwithstanding anything inconsistent therewith contained in any
enactment other than this Act or in any instrument or contract
having effect by virtue of any enactment other than by this Act.
Aforesaid provisions of the
Payment of Gratuity Act, 1972
are
mandatory in nature and same are relevant for deciding issue which
has been raised by learned Advocate Mr. Munshaw for petitioner
before this Court.

Pension
scheme which has been accepted by respondent no.1 includes benefit
of gratuity but amount of gratuity is less favourable than the claim
made under the
Payment of Gratuity Act
, therefore, respondent
workman is entitled to claim such benefit as per the provisions of

Payment of Gratuity Act, 1972
. This being statutory right available
to respondent workman, it has been rightly examined by controlling
authority after considering last drawn salary of employee and
respondent is also covered by definition of
section 2(e)
of Payment
of Gratuity Act, 1972. Continuity of service as defined under

section 2(c)
of Payment of Gratuity Act, 1972 has also been rightly
considered by Controlling Authority and Appellate Authority under
the
Payment of Gratuity Act
and provisions of said Act are
applicable to petitioner establishment and last drawn salary
Rs.10230.00 divided by 26 and then to find out one day salary and on
that basis amount of gratuity has been calculated by controlling
authority considering total 33 years service,for that, employee is
entitled for wages of days as claim of gratuity and accordingly
order has been passed by controlling authority and same aspects were
rightly considered by appellate authority and appellate authority
has rightly come to conclusion that controlling authority has
rightly passed order and it requires no interference. Appellate
authority has rightly come to conclusion that under
section 2 (4)
,
petitioner being commercial establishment, provisions of
Payment of
Gratuity Act, 1972
would apply. Appellate authority has relied upon
decision of this Court reported in case of Jayaben Suryakant Modi
and others versus Gujarat Labour Welfare Boad and others, 1997 Lab
IC 2581 wherein it has been held that provisions of
Gratuity Act
are
applicable to Labour Welfare Board considering it a commercial
establishment as per
section 2(4)
of the Act. Considering activity
of petitioner establishment of construction of house and sale
thereof on hire purchase basis, petitioner establishment has been
held to be commercial establishment.

This
Court had an occasion to consider same question in group of
petitions being Special Civil Application NO. 2138 of 2002 and other
allied matters decided by this court on 27.2.2002. Relevant
discussion made by this Court in para 14 to 21 of said decision of
this court dated 27.2.2002 is quoted as under:

14. However,
other contention raised by learned advocate Ms.Jhaveri is in respect
to Rules framed by the Nagarpalika, which has been sanctioned by the
Government of Guajrat, while exercising power under
Section 271(a)

of the Gujarat Municipalities Act,1963. Accordingly, she relied upon
Rule-5 which for the purpose of calculation of gratuity only basic
pay as defined under BCSR Rules will be taken into account exclusive
of dearness allowance. The gratuity will be paid on the basis of the
average of last 12 months pay preceding the date of the relieve
from service. The contention is that because the concerned employee
is governed by BCSR Rules and Gratuity Rules as referred above,
provisions of the Act are not applicable.
The Himachal Pradesh High
Court has considered this aspect in the case of
State of Himachal
Pradesh v. Lashkari Ram

reported in 2008-I-LLJ-137 wherein after considering the
definition of "employee" under
Section 2(e)
of the Act and
after considering the Central Civil Services Rules (Pension),1972
and employee having worked in different capacity, was held to be
entitled to get benefits of
Gratuity Act
as well as Civil Service
Rule (Pension) Rules.
Whether Rules prevailed or the Act, that
question was also examined by the Apex Court in case of Jashwant
Singh Gill (supra). The Apex Court has considered the Rules framed
by the Bharat Coking Coal Ltd. are not statutory rules and they have
been made by the holding company of respondent No.1.
The Payment of
Gratuity Act
was enacted with a view to provide for a scheme for
payment of gratuity to the employees engaged inter alia in mines.

The Act
provides for close - knit scheme providing for payment of
gratuity. It is a complete code containing detailed provisions
covering the essential provisions of a scheme for a gratuity. It not
only creates a right to payment of gratuity but also lays down the
principles for quantification thereof as also the conditions on
which he may be denied therefrom. A statutory right accrued, thus,
cannot be impaired by reason of a rule which does not have the force
of a statute. The provisions of the Act, therefore, must prevail
over the Rules.

15. In
aforesaid decision, there were no statutory rules but, in facts of
this case, there may be statutory rules. The Apex Court has
considered similar aspect in case of
Eid
Parry (I) Ltd. v. G. Omkar Murthy and Others
reported in 2001 (4)
SCC 68. Relevant observations made in Para.2, 3 and 4 are quoted as
under :

"2. Four
contentions are put forth before us, namely, that

(i)
The Central Act prevails over the State Act by virtue of
Article 254

of the Constitution and Section 40(3) is invalid and the claims are
unsustainable;

(ii)
Section 40(3) of the State Act stood repealed on the coming into
force of the
Andhra Pradesh Shops and Establishments Act, 1988
and
gratuity became payable under Section 47(5) of the State Act where
payment of gratuity is not payable under the Central Act;

(iii)
Section 14 of the Central Act overrides other enactments in relation
to gratuity, and

(iv) The respondents have
been paid gratuity under the Central Act for the period covered and
for the balance period of service gratuity is paid under the
prevailing trust scheme.

At
the relevant time when the respondents voluntarily
retired from service the definition of 'employee' under Section 2(e)
of the Central Act read as not to include employee whose wages
exceeded Rs. 1,000/- per mensem while the respondents-employees were
all getting wages more than Rs. 1,600/- per mensem and, therefore,
the Central Act could not be applied. If that is so, it is certainly
permissible for the respondents to have made an application for
payment of gratuity under Section 40(3) of the State Act. Further
the scheme of the Central Act would indicate that it would not be
applicable in cases where the State Act is more beneficial than the
Central Act. In this case, the finding is that the State Act is more
beneficial than the Central Act. Therefore, the contentions sought
to be advanced on behalf of the appellant as to repugnancy or
otherwise of the State Act would not arise at all. If both the
enactments can co-exist and can operate where one Act or the other
is not available then we find no difficulty in making the State Act
applicable on the fact situation available as has been done in the
present case. Therefore, we find that the contentions raised on
behalf of the appellant are unsustainable.

3.
Shri Narayan B. Shetye, the learned Senior Advocate appearing for
the appellant, submitted that the Central Act is a complete Code
containing detailed provisions and creates right
of payment of gratuity and, therefore, the Central Act should
prevail over the State Act. Reliance has been placed on the decision
of this Court in
State of Punjab v. Labour
Court, Jullundur, (1980)
1 SCR 953 : (AIR 1979 SC 1981 : 1980 Lab IC 1084). In that case the
issue before the Court was whether for payment of gratuity an
application could be made under
Section 33-C(2)
of the Industrial
Disputes Act, 1947, and
it was held that such an application could not be filed under the
said Act. Therefore, this decision cannot be of any assistance to
the appellant inasmuch as the question before us is whether the
Central Act or the State Act would apply for payment of gratuity.

4. The decision in M.S.R.
Murthy v. Arya Somayajula Yagneswara Chenulu, 1985 Lab IC 189 (Andh
Pra) also is of no use to the appellant inasmuch as the State Act is
held not to operate to the extent the Central Act prevails. In the
present case, on facts, it is found that the Central Act is not
applicable."

15.1 In
aforesaid two decisions, the Apex Court has considered the fact that
even when statutory rules are available, the provisions of the Act
prevail. Therefore, in this case though services rules may be
statutory, considering
Section 14
of the Act, provisions of the Act
should prevail.

16. The contention raised
by learned advocate Ms.Jhaveri that
Gratuity Act
is not applicable to
the Nagarpalika being the local authority, cannot be accepted as the
Nagarpalika is covered by definition of 'establishment' and the
provisions of the
Gratuity Act
are applicable.
Section 1(3)(b)
of the
Act wherein definition 'establishment' is provided, which reads,
thus,

"every shop or
establishment within the meaning of any law for the time being in
force in relation to shops and establishment in a State, in which ten
or more persons are employed, or were employed, on any day of the
preceding twelve months."

16.1 The aforesaid
contention is not accepted because the local authority being an
establishment covered under the
Gratuity Act, the Gratuity Act
is
applicable as has been held by the Madras High Court in
case of
Commissioner, Sathyamangalam Municipality v. Deputy
Commissioner of Labour (Appellate Authority
under
Payment of Gratuity
Act
), Salem and others reported in 2004 III LLJ 995 wherein
it has been observed by the Madras High Court that, "
Payment of
Gratuity Act,1972
-
Secs.2(e)
,
and
(3-A)- Local authority also
established liable under Act to pay gratuity - Award of interest to
employee for period after expiry of 30 days from retirement, held
proper.

Even the Panchayat is also considered to be an
establishment under the provisions of the
Gratuity Act and the Act
is
applicable as decided by Madhya Pradesh High Court in the case of

S.N.Verma v. State of M.P. and others
reported in 2004-I-LLJ-560.
Relevant observations in the aforesaid decision is in Para.6 which is
quoted as under :

"6. Thus the
Panchayat is indisputedly a 'local body' and if it is employing more
than ten persons it would be an 'establishment' within the meaning
of the notification given above. An employee of an Panchayat is
entitled to the payment of gratuity as per provisions of
Payment of
Gratuity Act,1972
unless under any other rule of the Panchayat or the
State Government he has a right to receive 'better terms of gratuity"

as per
Section 4(5)
of the Act. Though there is an observation in the
judgment dated June 27, 1997 in W.P.No.1743 of 1997 that the gratuity
is payable to the Panchayat employees as per Madhya Pradesh Janpad
Panchayat Employees (Qualifications, Recruitment and Conditions of
Service) Rules,1976, on a perusal of these rules it is conceded that
there is no provision in these rules for payment of gratuity. In such
a situation an employee of the Panchayat would be entitled to
gratuity as per
Payment of Gratuity Act,1972
. The Supreme Court has
held in
Bakshish Singh v. Darshan Engineering Works
, AIR 1994 SC 251
: 1994 (1) SSC 9 : 1994-I-LLJ-197 that the provisions for payment of
gratuity contained in
Section 4(1)(b)
of the Act are one of the
minimal service conditions, which must be made available to the
employees notwithstanding the financial capacity of the employer to
bear its burden. It is settled law that the establishments which
have no capacity to give to their workmen the minimum conditions of
service prescribed by the statute have no right to exist. The
respondent Janpad Panchayat is admittedly employing more than ten
persons and therefore the petitioner who was its employee is entitled
to gratuity under the
Payment of Gratuity Act,1972
."

16.2 The
Delhi High Court in case of
Municipal Corporation of Delhi
v. Smt. V.T.Naresh and Anr.
reported in 1986-I-LLJ-323 relying
upon the decision of Apex Court in case of
State
of Punjab v. Labour
Court of Jullundur and others reported
in 1981-I-LLJ- 354, it is held that a Corporation and/or local
authority like Municipal Commissioner of Delhi is an establishment
governed by
Payment of Gratuity Act,1972
. The word "establishment'
in the
Gratuity Act
is not controlled by any type of establishment
and it will include commercial, public sector establishment."
Relevant observations in the aforesaid decisions are in Para.6 and 7
which are quoted as under :

"6. It will be
noticed that the word "establishment" used in the aforesaid
clause of
Payment of Gratuity Act,1972
is not controlled by any type
of establishment. It will include commercial, public sector
establishment, private sector establishment as also the
non-commercial establishment. Therefore, it is merely because
Municipal Corporation of Delhi which is created by
Delhi Municipal
Corporation Act,1957
is also a local body or local authority, it does
not mean that the Corporation will not be an "establishment"

so long as it is so in relation to any law relating to
"establishment". It need not multiply the instances. Only
one is sufficient to make the Act applicable. I have, thus, no doubt
that the Municipal Corporation of Delhi is an "establishment"
within the meaning of
S.1
, Sub-s.(3) Cl.(b) of the Act.

7. Coming to the second
point, even if Municipal Corporation of Delhi has certain schemes, it
is no bar to the applicability of the employees of the petitioner -
Corporation. It is only common which can be said that an employee
cannot have benefit of both under
Payment of Gratuity Act
as well as
scheme of regulations/pension framed by the Corporation but if he has
availed of the benefit under
Payment of Gratuity Act
, to that extent
benefit will be denied to him under the regulations/pension scheme
framed by the Corporation. If the scheme framed by the Corporation
gives higher benefit to the extent the employee obtains benefit under
the "
Payment of Gratuity Act
, to that extent those benefits will
be adjusted while claiming benefit under the Scheme of
Regulations/pensions framed by the Corporation. The employee cannot
have complete benefit under both the
Payment of Gratuity Act
as well
as under the Scheme of regulations/pensions. To the extent the
benefit has been granted to him under the
Payment of Gratuity Act
,
only to that extent the benefit will be adjusted while enforcing the
scheme of regulations/pension framed by the Corporation. Similarly,
if under a Scheme framed by the Corporation the benefit is less than
that which is available in the
Payment of Gratuity Act
, the employee
will be entitled to claim difference under the
Payment of Gratuity
Act
. No other point was argued. The petition, therefore, fails and is
dismissed. Since nobody has put in appearance on behalf of the
respondent, parties are left to bear their own costs."

17. The Allahabad High
Court in case of Nagar Palika, Moradabad v. Appellate Authority and
Additional Labour Commissioner, U.P. Kanpur & others, reported in
1990-II-LLJ-156, it has been held that municipal board is an
'establishment' governed by the
Payment of Gratuity Act,1972
.
Relevant observations of the said decision are in Para.8, 9 and 10
which are quoted as under :

"8. Sub.Sec.(3) of

S.1
lays down that the provisions of the Act are to apply to every
establishment in which 10 or more persons are employed.

9. The argument sought to
be advanced by the learned counsel for the petitioner is that the
Municipal Board cannot be described as an 'establishment' because the
word 'establishment' connotes some business institution or atleast it
may include a public institution. Such a definition of a word
'establishment' is to be found in Black's Legal Dictionary.

10. I am afraid the
argument is not sustainable. The activities which are carried on by
the Municipal Board do go to make it a public institution
undoubtedly. In fact, Municipal Board, or for that matter, such local
bodies do exist to cater to the needs of the general public and,
therefore, many statutory duties have been conferred upon such
bodies. To say that in spite of those functions which have to be
carried out by those institutions in accordance with the mandate of
law, those do not become public institutions is too bald an argument
to be accepted."

18. This Court has, in
case of
Dabhoi Nagarpalika and Anr. v. S.J.Khedia and Anr.

1996 II CLR 910, held that
Payment of Gratuity Act
is applicable
to the Nagarpalika.

19. The Karnataka High
Court in case of
Management of Sir Venkataramana Temple and Sri Hale
Mariyamma Temple, Kapu, Udupi District v. Deputy Labour Commissioner
and the Appellate Authority
under the
Payment of Gratuity Act,1972
,
Hassan Region, and Others reported in 2008-I-LLJ-122, has observed in
Para.12 and 14 as under :

"12. On these rival
contentions and on a further examination of the case-law, it is clear
that the word 'establishment' in
Section 1(3)(b)
of the Payment of
Gratuity Act,1972 is not to be restricted as referring to 'commercial
establishments' alone.
The Act
has been held to apply even to
institutions which were exempted under the
Shops and Establishments
Act
(see :
Principal, Bhartiya Mahavidalaya, Amravati and Another v.
Ramakrishna Wasudeo Lahudkar 1994-II-LLJ-556 (Bom.
). There is no
doubt that a liberal construction has to be given to the expression
and any institution or organization where systematic activity is
carried on, by employing ten or more persons, would fall within the
ambit of the provision.

14. The further contention
that the employee ought to have had recourse to remedies prescribed
under the provisions of KHRI and CE Act is also not tenable. The
employee is certainly entitled to elect his remedy, in the absence of
a bar."

20. The Karnataka High
Court has, in case of
Ratnakar Rao U. v. Union of India and others

reported in 2003-II-LLJ-336, observed that, '
Payment of Gratuity
Act,1972
-
Sec.2(e)
- New Mangalore Port Trust (Adaptation of Rules)
Regulations, 1980 -
Regulation 4
- Central Civil Services (Pension)
Rues,1972 - Rule 50 -
Gratuity Act
not applicable to person governed
by Act or Rule providing for payment of gratuity -
Regulation 4
of
Port Trust Regulations made Central Pension Rules applicable to its
employees - Denial of gratuity as per Central Pension Rules therefore
held not proper and payment of balance with interest at 12% ordered."

21. The Andhra Pradesh
High Court has, in case of
Life Insurance Corporation of India,
Hyderabad v. Regional Labour Commissioner (Central), Hyderabad and
others
reported in 2000-II-LLJ-1462, in Para.10, observed as under :

"10. A reference to
the provisions of
Sections 2(e)
,
,
and
leads to an irresistible
conclusion that either
Section 48(2B)
of the LIC Act or the LIC Rules
for Class-I Officers do not take away the right of an employee to
claim the benefit under the provisions of the Act. Indeed,
sub-section (5) of
Section 4
provides that an employee is entitled to
better terms of gratuity other than the gratuity payable under
sub-section (2) of
Section 4
and
Section 5
enables the appropriate
Government to exempt any establishment from the operation of the Act
only if the gratuity payable by the LIC is more favourable to the
employees than the benefits under the Act."

Aforesaid
decision was challenged before Division Bench of this Court by
Bilimora Nagarpalika by filing Letters Patent Appeal NO. 379 of 2008
which is reported in 2008(2) GLH 448. Division Bench of this Court
decided group of appeals and observed as under in para 5,6 and 7:

5. We
are unable to accept the contention raised by Ms. Jhaveri.
Section
2(f)
of the Act of 1972 defines employer. Sub-clause (ii) of
the said clause (f) expressly includes the local authority
within the meaning of the word employer.
Section 4(1)
of the Act of
1972 enjoins the employer to pay gratuity to its employee on
termination of employment after he renders continuous service for
not less than five years, inter alia,
on his superannuation or on his retirement. Thus, the Municipality
is under obligation to pay gratuity to its retired employees in
accordance with the Act of 1972.

6.
Section
of the Act of 1972 empowers the appropriate Government to exempt
any establishment, etc. to which the Act applies, from the operation
of the provision of the Act of 1972. In other words, unless an
establishment is expressly exempted by the appropriate Government by
notification issued under
section 5
of the Act of 1972, such
establishment would be liable to pay gratuity to its retired
employees in accordance with the Act of 1972. It was not the case of
the Municipality before the controlling authority or before the
learned Single
Judge or before us that the Municipality is exempted from the
operation of the provisions of the Act of 1972 as envisaged by

section 5
of that Act. In absence of the exemption specifically
granted under
section 5
, the Municipality is duty bound to pay its
employees gratuity in accordance with the Act of 1972.

7. In
above view of the matter, the order of the learned Single Judge does
not warrant interference. The Appeals are dismissed in limine. Civil
Applications stand disposed of.

Learned
Advocate Mr. Munshaw has relied upon decision of apex court in case
of Beed District Central Coop. Bank Ltd. Verseus State of
Maharashtra and others, (2006) 8 SCC 514. Relevant
para 14 which is relied upon by learned Advocate Mr. Munshaw is
reproduced as under:

14. Applying
the `Golden Rule of Interpretation of Statute', to us it appears
that the question should be considered from the point of view of the
nature of the scheme as also the fact that the parties agreed to the
terms thereof. When better terms are offered, a workman takes it as
a part of the package. He may volunteer therefor, he may not.

Sub-Section (5)
of
Section 4
of the 1972 Act provides for a right in favour of the
workman. Such a right may be exercised by the workman concerned. He
need not necessarily do it. It is the right of individual workman
and not all the workmen. When the expression "terms" has
been used, ordinarily it must mean "all the terms of the
contract". While interpreting even a beneficent statute, like,

Payment of Gratuity Act
, we are of the opinion that either contract
has to be given effect to or the statute. The provisions of the Act
envisage for one scheme. It could not be segregated. Sub-Section (5)
of
Section 4
of the 1972 Act does not contemplate that the workman
would be at liberty to opt for better terms of the contract, while
keeping the option open in respect of a part of the statute.
While-reserving his right to opt for the beneficent provisions of
the statute or the agreement,
he has to opt for either of them and not the best of the terms of
the statute as well as those of the contract. He cannot have both.
If such an interpretation is given, the spirit of the Act shall be
lost. Even in Shin Satellite (supra), this Court stated :

"The
proper test for deciding validity or otherwise of an agreement or
order is "substantial severability" and not "textual
divisibility". It is the duty of the court to sever and
separate trivial or technical parts by retaining the main or
substantial part and by giving effect to the atter if it is legal,
lawful and otherwise enforceable. In such cases, the court must
consider the question whether the parties could have agreed on the
valid terms of the agreement had they known that the other terms
were invalid or unlawful. If the answer to the said question is in
the affirmative, the doctrine of severability would apply and the
valid terms of the
agreement could be enforced, ignoring invalid terms. To hold
otherwise would be

"to expose the
covenanter to the almost inevitable risk of litigation which in nine
cases out of ten he is very ill-able to afford, should he venture to
act upon his own opinion as to how far the restraint upon him would
be held by the court to be reasonable, while it may give the
covenantee the full benefit of unreasonable provisions if the
covenanter is unable to face litigation."

Recently,
this aspect has been examined by apex court in case of Allahabad
Bank and anotehr versus All India Allahabad Bank Retired Employees
Association,(2010) 2 SCC 44. Identical question has been
examined and it has been held that pension and gratuity are two
separate elements of retirement benefits. Apex court considered same
aspect of interpretation of statutes, liberal construction to be
given having regard to directive principles of
State Policy and
Payment of Gratuity Act, 1972
held to be welfare legislation
deserving liberal interpretation as discussed in para 13 to 22.
Therefore, para 13 to 22 are quoted as under:

13.
Section
confers power upon the appropriate Government to exempt any
establishment, factory, mine, oilfield, plantation etc. from the
operation of the provisions of the Act, if, in its opinion, the
employees in such establishment, factory etc. are in receipt of
gratuity or pensionary benefits not less favourable than the
benefits conferred under the Act. The power to exempt conferred upon
the appropriate Government is not an unconditional power. The
appropriate Government is required to hear all the persons concerned
who are likely to be affected by the decision to be taken and the
exemption itself is subject to the conditions mentioned in the
provisions of the Act namely that employee or class of employees in
the opinion of the government are in receipt of gratuity or
pensionary benefits not less favourable than the benefits conferred
under the Act.

14. A
plain reading of the provisions referred to herein above makes it
abundantly clear that there is no escape from payment of gratuity
under the provisions of the Act unless the establishment is granted
exemption from the operation of
the provisions of the Act by the appropriate Government.

15. Notwithstanding
the subsequent improvements and embellishments the stand taken by
the bank was and is before us that the members of the Association
had accepted the Contributory Provident Fund Scheme and they opted
for pension in lieu of gratuity which was being paid and therefore
are not entitled to payment of gratuity under the provisions of the
Act.

16. We
shall proceed to examine the point urged by the learned counsel for
the appellant. Remedial statutes, in contra distinction to penal
statutes, are known as welfare, beneficient or social justice
oriented legislations. Such welfare statutes always receive a
liberal construction. They are required to be so construed so as to
secure the relief contemplated by the statute. It is well settled
and needs no restatement at our hands that labour and welfare
legislation have to be broadly and liberally construed having due
regard to the Directive Principles of State Policy.
The Act
with
which we are concerned for the present is undoubtedly one
such welfare oriented legislation meant to confer certain benefits
upon the employees working in various establishments in the country.

17. Krishna
Iyer, J in
Som Prakash Rekhi Vs. Union of India1
stated the
principle in his inimitable style that benignant provision must
receive a benignant construction and, even if two interpretations
are permissible, that which furthers the beneficial object should be
preferred. It has been further observed: (SCC pp.483-84, para 66)

"We
live in a welfare State, in a "socialist" republic, under
a Constitution with profound concern for the weaker classes
including workers (Part IV). Welfare benefits such as pensions,
payment of provident fund and gratuity are in fulfilment of the
Directive Principles. The payment of gratuity or provident fund
should not occasion any deduction from the pension
as a "set-off". Otherwise, the solemn statutory provisions
ensuring provident fund and gratuity become illusory. Pensions are
paid out of regard for past meritorious services. The root of
gratuity and the foundation of provident fund are different. Each
one is a salutary benefaction statutorily guaranteed independently
of the other. Even assuming that by private treaty parties had
otherwise agreed to deductions before the coming into force of these
beneficial enactments they cannot now be deprivatory. It is
precisely to guard against such mischief that the non obstante and
overriding provisions are engrafted on these statutes."

18.
Interpreting
the provisions of the said Act this Court in
Sudhir Chandra Sarkar
Vs. Tata Iron and Steel Co. Ltd.2
observed that pension and
gratuity coupled with contributory provident fund are well
recognised retiral benefits governed by various statutes. These
statutes are legislative responses to the developing notions of the
fair and humane conditions of work, being the promise of Part IV of
the Constitution. It was observed: (SCC p.380, para 15)

"15...the
fundamental principle underlying gratuity is that it is a retirement
benefit for long service as a provision for old age. Demands of
social security and social justice made it necessary to provide for
payment of gratuity. On the enactment of
Payment of Gratuity Act,
a statutory liability was cast on the employer to pay
gratuity."

19. Gratuity
payable to an employee on the termination of his employment after
rendering continuous service for not less than 5 years and on
superannuation or retirement or resignation etc. being a statutory
right cannot be taken away except in accordance with the provisions
of the Act whereunder an exemption from such payment may be granted
only by the appropriate Government under
Section 5
of the Act which
itself is a conditional power. No exemption could be granted by any
Government unless it is established that the employees are in
receipt of gratuity or pension benefits which are more favourable
than the benefits conferred under the Act.

20.
In

Union of India Vs All India Services Pensioners' Association And
Another3
, this Court explained that there is always a
distinction between the pension payable on retirement and the
gratuity payable on retirement.

"8. While pension is payable
periodically as long as the pensioner is alive, gratuity is
ordinarily paid only once on retirement."

21. No
decision of this Court which has taken a view contrary to the
decisions referred to herein above has been brought to our notice.

22. In
our considered opinion pensionary benefits or the retirement
benefits as the case may be whether governed by a Scheme or Rules
may be a package consisting of payment of pension and as well as
gratuity. Pensionary benefits may include payment of pension as well
as gratuity. One does not exclude the other. Only in cases where the
gratuity component in such pension schemes is in better terms in
comparison to that of what an employee may get under the

Payment of Gratuity Act
the government may grant an
exemption and relieve the employer from the statutory obligation of
payment of gratuity.

In
view of aforesaid decision of apex court and considering contentions
raised by learned Advocate Mr. Munshaw, according to my opinion,
such contentions cannot be accepted by this court because there is
no exemption given to petitioner establishment by appropriate
Government from operation of
Payment of Gratuity Act, 1972
and
respondent no.1 is an employee as defined under
section 2(e)
of said
Act. There is no dispute raised by petitioner before controlling
authority or appellate authority or before this court about
applicability of said Act and pension and gratuity both are separate
and independent scheme for retirement benefits and it cannot be
considered to be one package policy as contended by learned Advocate
Mr. Munshaw and, therefore, in view of that, contentions raised by
learned Advocate Mr. Munshaw are rejected. View taken by controlling
authority and appellate authority is perfectly justified and
therefore, this petition does not call for any interference in
exercising power under
Article 227
of Constitution of India by this
court. Therefore, according to my opinion, there is no substance in
this petition and same is therefore dismissed.

It
is directed to controlling authority concerned to pay amount
deposited by petitioner at the time of filing of an appeal before
Appellate Authority by way of account payee cheque in name of
Natvarlal Jagjivan Madia after proper verification, immediately and
without any delay.

(H.K.Rathod,J.)

Vyas

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