Bombay High Court

Vidarbha Konkan Gramin Bank, Through ... vs The Appellate Authority, Under The ... on 6 January, 2020

Equivalent citations: AIRONLINE 2020 BOM 8, 2020 (2) ABR 14 (2020) 2 ALLMR 340, (2020) 2 ALLMR 340

Author:
Manish Pitale

Bench:
Manish Pitale

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH AT NAGPUR

WRIT PETITION NO. 8272/2018

Vidarbha Konkan Gramin Bank,
a Regional Rural Bank constituted
under the relevant provisions of the

Regional Rural Banks Act, 1976
,
through its Authorised signatory,
Mr.Sitaram S/o Tukaram Sawant,
Aged 57 years, Occ. General Manager
Head Office, Ring Road, Deendayal Nagar,
Padole Chowk Nagpur. .. Petitioner

...V E R S U S...

1) The Appellate Authority, under the

Payment of Gratuity Act, 1972
and
the Deputy Chief Labour Commissioner (C)
C.G.O. Complex, Block 'C', 1st Floor,
Seminary Hills, Nagpur

2) Rajkumar s/o Ghanshyamdas Makhija
Aged - major, Occ. Retired,
R/o. 1, Engineers Colony, Ram Nagar,
Chandrapur, Tah. and Dist. Chandrpur .. Respondents

with

WRIT PETITION NO. 8273/2018

Vidarbha Konkan Gramin Bank,
a Regional Rural Bank constituted
under the relevant provisions of the

Regional Rural Banks Act, 1976
,
through its Authorised signatory,
Mr.Sitaram S/o Tukaram Sawant,
Aged 57 years, Occ. General Manager
Head Office, Ring Road, Deendayal Nagar,
Padole Chowk Nagpur. .. Petitioner

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...V E R S U S...

1) The Appellate Authority, under the

Payment of Gratuity Act, 1972
and
the Deputy Chief Labour Commissioner (C)
C.G.O. Complex, Block 'C', 1st Floor,
Seminary Hills, Nagpur

2) Vishwas s/o Banduji Ghaote
Aged - major, Occ. Retired,
R/o.Omkar Nagar, Haveli Garden Road,
Chandrapur, Tah. and Dist. Chandrpur .. Respondents

-------------------------------------------------------------------------------------------
Shri. Anand Jaiswal, learned senior counsel for petitioner bank.
Shri. R. M. Tahaliyani, learned counsel for respondents.
-------------------------------------------------------------------------------------------

CORAM : MANISH PITALE J.

RESERVED ON : 12/12/2019
PRONOUNCED ON : 06/01/2020

JUDGMENT

These two writ petitions give rise to identical questions

raised on behalf of the petitioner Vidarbha Konkan Gramin Bank

and hence both the writ petitions are being disposed of by this

common judgment and order.

2. The question that arises for consideration in these

writ petitions is, as to whether the contesting respondents

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(respondent No.2 in both the writ petitions) are entitled to

payment of gratuity under the provisions of
Payment of Gratuity

Act, 1972
(hereinafter referred to as the 'Act of 1972') or under

the Vidarbha Gramin Bank, Officers and Employees Service

Regulations, 2013, issued by the Board of Directors of the said

Bank under
section 30
of the Regional Rural Banks Act, 1976.

While the petitioner Bank claims that the contesting respondents

are entitled to payment of gratuity under the provisions of the Act

of 1972 with an upper ceiling of Rs.10,00,000/-, the contesting

respondents have claimed that they are entitled to gratuity under

the said Regulations without any such ceiling. The contesting

respondents further claim that even under the said Regulations,

for calculating the amount of gratuity payable, dearness allowance

and other allowances are required to be included in the expression

"Pay" as defined in the said Regulations.

3. The brief facts leading to filing of the present writ

petitions by the petitioner Bank are that the contesting

respondents retired as Senior Managers from the petitioner Bank

on 31/05/2017. Respondent No.2 in Writ Petition No.8272/2018

had completed 33 years before superannuation and respondent

No.2 in Writ Petition No.8273/2018 had completed 29 years of

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service. The petitioner Bank calculated the amount of gratuity

payable to the said respondents on the basis of the provisions of

the Act, 1971 and also in accordance with the said Regulations.

The petitioner Bank found that the amount of gratuity payable to

the said respondents as per the Act of 1972 came to a higher

figure of Rs.10,00,000/- and therefore, the said amount was

disbursed to the respondents upon their attaining the age of

superannuation.

4. The contesting respondents sent applications to the

petitioner Bank after having received the amount of

Rs.10,00,000/- each towards gratuity, claiming that the cap or

upper ceiling of Rs.10,00,000/- under the provisions of the Act of

1972, was wrongly applied in their cases, because they were

entitled to gratuity in terms of Regulation 72 of the said

Regulations. The said Regulation specifically provided that an

officer or an employee of the petitioner Bank shall be eligible for

payment of gratuity either under the Act of 1972 or Regulations,

whichever was higher. It was submitted that therefore, the

petitioner Bank ought to have paid total amount of gratuity

without applying the upper ceiling of Rs.10,00,000/-, as provided

under the Act of 1972.

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5. As the petitioner Bank refused to accept the claims

made by the said respondents, they filed applications under

section 7(4)
of the Act of 1972, for direction to the petitioner bank

to make payment of the balance amount due to them. In the case

of respondent No.2 in Writ Petition No.8272/2018, demand of

further amount of Rs.5,61,472.16, was made and in case of

respondent No.2 in Writ Petition No.8273/2018, claim of further

amount of Rs.3,37,261.78, was made before the Controlling

Authority under the Act of 1972 i.e. Assistant Labour

Commissioner.

6. By orders passed on 28/03/2018, the Controlling

Authority rejected the applications filed by the contesting

respondents, holding that the petitioner Bank had correctly

applied provisions of the Act of 1972, thereby disbursing an

amount of Rs.10,00,000/- each, towards gratuity in favour of the

said respondents. It was held that the said respondents were not

eligible for the additional amount of gratuity claimed by them.

7. Aggrieved by the said orders passed by the

Controlling Authority, the contesting respondents filed appeals

before the Appellate Authority i.e. Deputy Chief Labour

Commissioner. By orders dated 04/10/2018, the Appellate

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Authority allowed the appeals filed by the contesting respondents

and directed the petitioner bank to pay the additional amount of

gratuity claimed by them alongwith interest @10% per annum for

delayed period till the date of actual payment. The petitioner

bank filed instant writ petitions challenging the said orders passed

by the Appellate Authority.

8. Mr. Anand Jaiswal, learned senior counsel

appearing for the petitioner Bank in both the writ petitions

submitted that the Appellate Authority failed to appreciate the real

controversy in the present case. It was submitted that Regulation

72 of the said Regulations clearly specified that an officer or

employee would be entitled to gratuity as per the provisions of the

Act of 1972 or the said Regulations, whichever is higher.

According to the learned senior counsel, calculation of gratuity

payable to the contesting respondents was undertaken by the

petitioner Bank under both the Act of 1972, as well as the said

Regulations. It was submitted that the amount payable to the

contesting respondents under the Regulations came to a figure

which was less than the amount payable to them under the

provisions of the Act of 1972. It was pointed out that as per the

aforesaid Regulation 72 of the said Regulations, the gratuity

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payable to the respondents was to be calculated on their last pay

drawn, which as per the definitions in the Regulations did not

include the component of dearness allowance, while under the

provisions of Act of 1972, the last drawn wage of the respondents

included the last pay and dearness allowance.

9. It was submitted that therefore, the petitioner bank

had calculated the amount of gratuity payable to the contesting

respondents under the Act of 1972 and in the case of respondent

No.2 in Writ Petition No.8272/2018, it came to Rs.15,61,472.16

and in the case of respondent No.2 in Writ Petition

No.8273/2018, it came to Rs.13,37,261.78. It was further

submitted that since at the relevant time the amount of gratuity

payable to an employee under
section 4(3)
of the Act of 1972,

could not exceed Rs.10,00,000/-, the said amount was paid to the

contesting respondents. On this basis, it was pointed out that the

higher amount of gratuity payable to the contesting respondents

was disbursed to them, because on a proper application of the

Regulations, respondent No.2 in Writ Petition No.8272/2018, was

entitled to gratuity amount of Rs.8,93,920/- and respondent No.2

in Writ Petition No.8273/2018 was entitled to gratuity amount of

Rs.7,61,740/-. On this basis, it was submitted that the appellate

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Court had committed a grave error in passing the impugned

orders in favour of the contesting respondents.

10. On the other hand, Mr. R. M. Tahaliyani, learned

counsel appearing for respondent No.2 in both the writ petitions

submitted that the petitioner Bank had wrongly calculated amount

of gratuity payable to the said contesting respondents under the

aforesaid Regulations by refusing to include the component of

dearness allowance in the last pay drawn by the respondents. It

was submitted that a perusal of the said Regulations would show

that dearness allowance could not have been excluded by the

petitioner bank, while calculating the amount of gratuity payable

to the contesting respondents. It was submitted that inclusion of

dearness allowance in "pay" as defined under
Regulation 2(m)
of

the Regulations would show that the respondents were clearly

entitled to the higher amounts which they had claimed and since

there was no upper ceiling or cap to the amount payable under the

Regulations, the Appellate Authority had correctly directed

payment of the additional amounts to the respondents alongwith

interest.

11. The learned counsel for the contesting respondents

placed reliance on judgment of the learned Single Judge of the

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Madhya Pradesh High Court in the case of
All India Gramin

Pensioners Organization Unit Rewa vs. Madhyanchal Gramin

Bank and another
[ W. P. 9182/2017 with W. P. 2299/2017 and

W. P. 2877/2018 decided on 06/09/2018 ] and Division Bench of

the Madhya Pradesh High Court in the case of
Madhyanchal

Gramin Bank and another vs. All India Gramin Pensioners

Organization Unit [W.A.1318/2018
with W.A. Nos. 1316 and

1317/2018 decided on 26/02/2019], wherein pari materia

provisions to the said Regulations were considered and it was

found by the High Court that the expression "pay" under the

Regulations included dearness allowance. It was further held in

the said judgment
that since there was no upper ceiling for the

amount of gratuity payable to the employees of the Bank under

Regulation 72, the higher amount payable was to be disbursed.

The learned counsel pointed out that Special Leave Petitions filed

by the
Madhyanchal Gramin Bank
(supra) before the Hon'ble

Supreme Court challenging the judgment of the Division Bench of

the Madhya Pradesh High Court, were dismissed. It was further

pointed out that a learned Single Judge of the Calcutta High Court

had also followed the said view taken by the Madhya Pradesh

High Court and that therefore, the present writ petitions deserved

to be dismissed.

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12. In rejoinder the learned senior counsel appearing

for the petitioner bank submitted that the Madhya Pradesh High

Court had erred in interpreting the Regulations, particularly

Regulation (2) providing for definitions of the expressions "Pay",

"Salary", and "Emoluments". It was submitted that Regulation 72

was also not properly appreciated in
the said judgment
and that

therefore, reliance placed on the same by the contesting

respondents was misplaced. It was submitted that the Appellate

Authority had committed a grave error and that therefore, the

impugned order deserved to be set aside.

13. There is no dispute amongst rival parties that

higher amount of gratuity would be payable to the contesting

respondents either under the Act of 1972 or the aforesaid

Regulations. The real controversy between the parties in these

writ petitions is, as to the basis of calculation of the amount of

gratuity payable to the contesting respondents under the aforesaid

Regulations. It is only because there is no upper ceiling or cap in

the Regulations that the contesting respondents insist that they be

paid gratuity under the said Regulations, by including dearness

allowance as a component under the expression "Pay" under the

said Regulations so that they are found to be entitled to receive

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entire amount without any cap or upper ceiling of Rs.10,00,000/-.

The petitioner Bank has claimed that, on a proper reading of the

Regulations, calculation of gratuity under its provisions has to be

made by taking only the pay i.e. basic pay drawn by the contesting

respondents including stagnation increments, without adding the

component of dearness allowance. On such a calculation the

amount of gratuity payable to the contesting respondents is much

less and even less than Rs.10,00,000/-. As a result, the petitioner

Bank has calculated gratuity amount under the Act, 1972, wherein

"Wage" includes dearness allowance and then the cap or upper

ceiling of Rs.10,00,000/- has been applied.

14. In order to resolve the conflict between the parties,

it is necessary to refer to the relevant portions of the aforesaid

Regulations.

Regulation 2
, Definitions :- (1) In these regulations,
unless the context otherwise requires -

(a) to (h) ............

(i) "Emoluments" means the aggregate of salary and
allowances, if any.

(j) to (l) ............

(m) "Pay" means basic pay drawn per month by
the officer or employee in a pay-scale including
stagnation increments and any part of the
emoluments which may specifically be classified as
pay under these regulations;

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(n) ...............

(o) "Salary" means aggregate of pay and dearness
allowance;

Regulation 72. Gratuity.-(1) An officer or employee
shall be eligible for payment of gratuity either as
per the provisions of the
Payment of Gratuity Act,
(39 of 1972) or as per sub-regulation (2),
whichever is higher.

(2) Every officer or employee shall be eligible for
gratuity or

(a) retirement

(b) death

(c) disablement rendering him unfit for further
service as certified by a medical officer approved by
the Bank, or

(d) resignation after completing 10 years of
continuous service, or

(e) termination of service in any other way except
by way of punishment after completion of 10 years
of service :

Provided that in respect of an employee there
shall be no forfeiture of gratuity for dismissal on
account of misconduct except in cases where such
misconduct causes financial loss to the bank and
in
that case
to that extent only.

(3) The amount of gratuity payable to an officer or
employee shall be one months pay for every
completed year of service or part thereof in excess
of six months subject to a maximum of 15 month's
pay :

Provided that where an officer or employee has
completed more than 30 years of service, he shall
be eligible by way of gratuity for an additional
amount at the rate of one half of a month's pay for
each completed year of service beyond 30 years :

Provided further that in respect of an officer the
gratuity is payable based on the last pay drawn.

Provided also that in respect of an employee pay

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for the purposes of calculation of the gratuity shall
be the average of the basic pay (100%) dearness
allowance and special allowance and officiating
allowance payable during the 12 months preceding
death, disability, retirement, resignation or
termination of service, as the case may be.

15. The relevant provisions of the Act, 1972 are as

follows :-

Section 2(s)
"wages" means all emoluments which
are earned by an employee while on duty or on
leave in accordance with the terms and conditions of
his employment and which are paid or are payable
to him in cash and includes dearness allowance but
does not include any bonus, commission, house rent
allowance, overtime wages and any other allowance.

Section 4(3)
The amount of gratuity payable to an
employee shall not exceed [such amount as may be
notified by the Central Government from time to
time].

16. The rival parties have not disputed the formulae of

calculation under the Regulations as well as the Act of 1972 and

the only area of dispute is with regard to inclusion or exclusion of

dearness allowance while calculating amount of gratuity under the

said Regulations. A perusal of Regulation 72 shows that after

stating the manner of calculating the amount of gratuity under

Clause (3), there are 03 provisos appended to the said clause. The

2nd and 3rd proviso are relevant for the present controversy. The

2nd proviso states that in respect of an officer, the gratuity is

payable based on last pay drawn while the 3 rd proviso states that

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in respect of an employee, for the purposes of calculation of

gratuity, pay shall be the average of basic pay, dearness allowance

and special allowance and officiating allowance. The expression

"Pay" has been specifically defined under
Regulation 2(m)
quoted

above. It specifically states that "Pay" means basic pay including

stagnation increments and any part of emoluments, which may

specifically be classified as pay under the Regulations. It is

significant that the expression "Salary" is specifically separately

defined under
Regulation 2(o)
as aggregate of pay and dearness

allowance, while the expression "Emoluments" is also separately

defined under
Regulation 2(i)
as the aggregate of salary and

allowances. The three expressions "Pay", "Salary" and

"Emoluments" are distinctly and separately defined under the said

Regulations.

17. The 2nd proviso to Clause (3) of Regulation 72 uses

the expression "last pay drawn". Since "Pay" as defined under

Regulation 2(m)
does not include dearness allowance , the same

cannot be read into the expression "Pay", as sought to be claimed

by the contesting respondents. Since the expression "Salary"

under
Regulation 2(o)
includes pay and dearness allowance, if the

contention raised on behalf of the contesting respondents is

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accepted, instead of the expression "Pay", the expression "Salary"

will have to be read into 2 nd proviso to Clause (3) of Regulation

72. In this situation, the learned counsel appearing for the

contesting respondents submitted that the words used in

Regulation 2(m)
to the effect that " and any part of the emoluments

which may specifically be classified as pay under these regulations "

would be rendered meaningless, if the contention raised on behalf

of the petitioner Bank was to be accepted. It was submitted that

the Madhya Pradesh High Court and Calcutta High Court in the

aforementioned judgment concerning
Madhyanchal Gramin Bank

(supra) had therefore, read the definitions of "Pay" under

Regulation 2(m)
, "Salary" under 2(o) and "Emoluments" under

2(i), as interwoven and interlinked to each other, to give a proper

meaning to the said definitions, read with Regulation 72 of the

said Regulations. It was submitted that dearness allowance was

always part of pay and this was further clear from definition of

wages as defined in
section 2(s)
of the Act of 1972. On this basis,

it was submitted that the expression "Pay" used in the 2 nd proviso

to Clause (3) of the Regulation 72, had to be read to mean that it

included basic pay and dearness allowance.

18. But, the said contentions raised on behalf of the

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contesting respondents cannot be accepted, because as noted

above it would amount to reading something that is not

specifically stated in the 2nd proviso to Clause (3) of the

Regulation 72 of the Regulations. The words used in
Regulation

2(m)
are to the effect that "Pay" would include any part of the

emoluments which may specifically be classified as pay. These

words do have meaning, because if the 3 rd proviso to Clause (3) of

Regulation 72 of the Regulations is perused, it shows that when

gratuity of an "employee" is to be calculated, as opposed to that of

an "officer", "Pay" for the purposes of calculation of gratuity is to

include basic pay, dearness allowance and officiating allowances.

Thus, in the case of an employee, the said allowances have been

specifically classified as pay and therefore, while calculating

gratuity amount payable to an "employee" under the 3rd proviso,

such allowances have to be included before calculating the

quantum. This distinction in the 2nd and 3rd provisos to Regulation

72(3) of the Regulations, in the light of definitions under

Regulation 2
, was not brought to the notice of the High Courts of

Madhya Pradesh and Calcutta when it was held that calculation of

gratuity in the case of officers under the said Regulations ought to

be based on inclusion of dearness allowance in the expression

"Pay".

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19. As regards the dismissal of Special Leave Petition of

the Madhyanchal Gramin Bank against judgment and order of the

Division Bench of the Madhya Pradesh High Court, it would not

result in the judgment of the Madhya Pradesh High Court being

binding on this Court, because as per settled position of law there

is no merger when a Special Leave Petition is dismissed and the

Hon'ble Supreme Court refuses to grant leave by a speaking or

non-speaking order. The Hon'ble Supreme Court has reiterated

the said position of law in a recent judgment in the case of
Khoday

Distilleries Ltd. vs. Shri. Mahadeshwara Sahakara Sakkare Karkhane

Ltd.
(2019) 4 SCC 376. Therefore, dismissal of the Special Leave

Petition against the judgment and order of the Division Bench of

the Madhya Pradesh High Court would not detain this Court from

considering the contentions raised on behalf of the petitioner Bank

on interpretation of the aforesaid Regulations.

20. Thus, the petitioner Bank is justified in raising a

grievance as regards the impugned orders passed by the Appellate

Authority. In fact, the Appellate Authority did not discuss this

main controversy between the parties at all and it proceeded on

the basis that calculation of gratuity under the Act of 1972, as well

as the Regulations resulted in the same quantum of amount and

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that since the Regulations did not have a cap or upper ceiling, the

same would apply and not the Act of 1972. Therefore, the

impugned orders passed by the Appellate Authority are rendered

unsustainable.

21. Once it is found that while calculating the amount

of gratuity payable to the contesting respondents under the

Regulations, only pay could be made the basis without adding

dearness allowance, the quantum of gratuity payable to the

contesting respondents comes to Rs.8,93,920/- in the case of

respondent No.2 in Writ Petition No. 8272/2018 and

Rs.7,61,740/- in the case of respondent No.2 in Writ Petition

No.8273/2018, which is much less than the amount of

Rs.10,00,000/- each disbursed by the petitioner Bank to the said

contesting respondents. Thus, the petitioner Bank applied the

provisions of the Act of 1972, while calculating the amount of

gratuity payable to the contesting respondents, because by

applying the provisions of the said Act higher gratuity was payable

to the contesting respondents, despite the cap or upper ceiling of

Rs.10,00,000/-. This amount for disbursal of gratuity amount was

correctly approved by the Controlling Authority, while rejecting

the applications filed by the contesting respondents for claim of

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additional amount of gratuity. But, the Appellate Authority failed

to appreciate the contentions of the petitioner Bank.

22. In view of the above, the writ petitions are allowed.

The impugned orders passed by the Appellate Authority are

quashed and set aside and the orders passed by the Controlling

Authority in the case of the contesting respondents are restored.

Accordingly, the petitioner Bank is found not liable to pay any

further amount towards gratuity to the contesting respondents as

they admittedly received the amount of Rs.10,00,000/- from the

petitioner Bank immediately upon their superannuation.

23. Writ petitions are disposed of in above terms with

no order as to costs.

JUDGE

KOLHE/P.A.

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