Supreme Court of India

Management Of Ksrtc Th. Chief Law ... vs R. Krishna Reddy on 1 November, 2006

Equivalent citations: AIRONLINE 2006 SC 610

Author:
S.B. Sinha

Bench:
S.B. Sinha
,
Markandey Katju

CASE NO.:
Appeal (civil) 4637 of 2006

PETITIONER:
Management of KSRTC Th. Chief Law Officer

RESPONDENT:
R. Krishna Reddy

DATE OF JUDGMENT: 01/11/2006

BENCH:
S.B. Sinha & Markandey Katju

JUDGMENT:

J U D G M E N T
[Arising out of S.L.P. (Civil) No. 24946 of 2005]

S.B. SINHA, J :

Leave granted.

Appellant is a statutory corporation constituted under the
Road
Transport Corporation Act, 1950
. It has its own scheme in terms whereof
gratuity is being paid at the rate of 30 days' basic pay for each completed
year of service. Government Servants are, however, entitled to gratuity
calculated on the basis of 15 days' basic pay for each completed year of
service. Such is the position also under the
Payment of Gratuity Act, 1972

(for short "the Act").

Disputes and differences having arisen by and between the workmen
of the Corporation and the management, a settlement was arrived at on
17.07.1999. The said settlement was valid for the period 1.01.1988 and
31.12.1991. It expired on 31.12.1991, Clause (5) whereof postulated:

"Dearness Allowance
The rates of Dearness allowance shall be on
par with the rates sanctioned by the State
Government to its employees from time to time
and from the same date. The enhanced Dearness
Allowance shall be paid in cash.

If during the currency of this settlement, the
Government of Karnataka were to merge any
portion of Dearness Allowance presently being
paid to its employees, that portion of the Dearness
Allowance so merged will also be reckoned at
appropriate levels by the corporation for
determining the Dearness Allowance, House Rent
Allowance, City Compensatory Allowance and
Gratuity payable to the employees of the
corporation, but shall not be reckoned for other
purposes."

The State of Karnataka merged a part of the Dearness Allowance
with the basic pay wherefor a Government Order being Government Order
No. FD 27 SRS 95 was issued on 28.11.1995 which is to the following
effect:

"The question of revision of pensionery benefits in
respect of Government Servants has been
examined by Government in the light of the
recommendations made by the Karnataka State
Fourth Pay Commission and the decision taken by
the Government of India on the Interim
Recommendations of the Fifth Central Pay
Commission. Accordingly, the following orders
are issued.

2. Government are now pleased to order that
Dearness Allowance sanctioned upto the Average
All India Consumer Price Index (A.I.C.P.I.)
1201.66 in Government order No. FD 29 SRP 93,
dated 30th October, 1993 as indicated below, shall
be reckoned as emoluments for the purpose of
retirement gratuity/ death gratuity under the
Karnataka Civil Services Rules in respect of State
Government Employees who retire or die on or
after 28th November, 1995:

Pay Range
Rate of Dearness
Allowance to be added
to pay for calculating
gratuity

1.

Basic pay upto 3500
per month
90% of basic pay

2.
Basic pay between
Rs. 3401 and upto Rs.

600 per month
67% basic pay subject to
minimum of Rs. 3150
per month

3.
Basic pay above Rs.

6000 per month
58% of basic pay subject
to minimum of Rs. 4020
per month"

The appellant, however, contends that actual merger of pay had taken
place on 7.01.1999 with retrospective effect from 1.04.1998 wherefor a
Government Order was issued. The Board of Directors of the appellant in
its meeting held on 14.01.1999 adopted a resolution in the following terms:

"The Principal Secretary, Finance Department
stated that the provisions of the
Gratuity Act, 1972

has to be followed as far as the ceiling on payment
of gratuity is concerned. The legal position in this
regard may be examined in the context of the
settlements reached and appropriate necessary
action taken.

After considering the matter in detail the
Board of Directors resolved as hereunder:

Resolution No. 7808

Approval is accepted for the payment of
gratuity to the employees of the Corporation from
28.11.1995 in terms of the
Gratuity Act
1972 if it
is more advantageous."

The Board of Directors of the appellant also adopted the following
resolution on 26.06.1999:

"Approval is accorded to merge the Dearness
Allowance as contemplated in Government Order
No. FD 48 SRP 98 dated 7.1.1999 into the Basic
Pay of the employee of the Corporation w.e.f.
1.04.1998 by treating the same as Basic D.A. for
calculation of Gratuity."

The dispute between the parties centers round the issue as to whether
for the purpose of computation of the amount of gratuity, the order dated
28.11.1995 would be attracted or not.

Respondent herein was appointed on 4.06.1959 as a conductor. He
retired as traffic inspector on 30.03.1996. He claimed gratuity in terms of
the said Government Order dated 28.11.1995. The same having been denied
to him, he filed an application before the Assistant Labour Commissioner
and Controlling Authority under the Act. By an award dated 6.02.1998, he
was held to be entitled thereto. An appeal thereagainst was preferred by the
appellant. The Appellate Authority in terms of its order dated 15.09.1998
allowed the said appeal. The respondent filed a writ petition before the High
Court. A learned Single Judge by reason of a judgment and order dated
13.10.2003 allowed the said writ petition inter alia holding:

"In so far as the other contention that the
Government Order only speaks adding Dearness
Allowance to the basic pay wherein Clause to the
basic pay wherein Clause (5) refers to merger of
Dearness Allowance with basic pay is concerned, I
do not find any substance. The word 'adding of
basic pay', 'adding of Dearness Allowance' or the
word 'merger of Dearness Allowance' with the
basic pay are synonymous. There is no difference
in meaning with those two phrases. The ultimate
result is the same if such hyper technical
interpretation of these phrases is accepted it would
result in great injustice to one of the parties to the
contract. Moreover, they are not words used in
any status. They are words used by the
Government at one place and the respondents in
their order. Moreover, in the subsequent order
passed by the KSRTC they have understood the
said word as merger and has given benefit to its
employees. Under the circumstance, I do not find
any merit in the said contention also."

An intra-court appeal filed thereagainst by the appellant was
dismissed.

Mr. G.E. Vahanvati, learned Solicitor General appearing on behalf of
the appellant, principally raised two contentions in support of this appeal:

(i) The actual merger having taken place on 7.01.1999 upon revision
of the scale of pay, the purported settlement dated 28.11.1995
could not have been construed differently.

(ii) In any event, the purported merger of Dearness Allowance in
respect of the employees of the State was not binding on the
Corporation.

Mr. L. Nageshwara Rao, learned senior counsel appearing on behalf
of the respondent, on the other hand, submitted that the amount of gratuity is
required to be calculated in terms of
Section 5
of the Act and in that view of
the matter the rate prescribed therefor must be computed at par with the
settlement. The High Court, the learned counsel would contend, cannot be
said to have committed any illegality in arriving at the said finding.

The Act
was enacted to provide for a scheme for payment of gratuity
to employees engaged in factories, mines, oilfields, plantations, ports,
railway companies, etc. and for matters connected therewith or incidental
thereto. Gratuity is payable in terms of
Section 4
of the Act to an employee
inter alia on his superannuation after he has rendered continuous service for
not less than five years.

Sub-section (2) of
Section 4
of the Act envisages that for every
completed year of service, the employer shall pay gratuity to an employee at
the rate of 15 days' wages based on the rate of wages last drawn by the
employee concerned. Sub-section (3) of
Section 4
, however, puts a ceiling
on the amount of gratuity being Rs. three lakhs and fifty thousand. Sub-
section (5) of
Section 4
inter alia provides that the provisions contained
therein shall not affect the right of an employee to receive better terms of
gratuity under any award or agreement or contract with the employer.

What is, therefore, payable by way of gratuity in terms of the scheme
was 30 days wages for each completed year of service.

'Wages' has been defined in
Section 2(s)
of the Act in the following
terms:

""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."

We have noticed hereinbefore that the Government of Karnataka in
terms of Government Order dated 28.11.1995 inter alia directed that 90% of
Basic Pay to be added to pay for calculating gratuity. If the basic pay of an
employee was upto Rs. 3500/- per month and was drawing a Dearness
Allowance of Rs. 2000/-, what was to be added was the 90% of the Dearness
Allowance which was being paid. If 90% of the Basic Pay as Dearness
Allowance is to be added to the basic pay, the employee became entitled to
higher wages on the basis thereof. It is in that sense the question of
application of the merger of Dearness Allowance with the scale of pay arose
for all intent and purport. As was rightly held by the learned Single Judge,
different terminologies used did not make any material difference.
Section 4

of the Act itself contemplates implementation of a settlement. Settlement,
therefore, entered into by and between the parties was required to be
interpreted having regard to the intention of the parties. What was
contemplated by the parties was that the rates of Dearness Allowance would
be at par with the rate sanctioned by the State Government to its employees
from time to time and from the same date. It was never contemplated that a
different amount of gratuity shall be payable to an employee who retires
prior to the revision of scale of pay although the terms of the settlement are
applicable to his case.

What was necessary to be taken into account was the merger of any
portion of the Dearness Allowance with pay which was being paid to its
employees. In such an event that portion of the Dearness Allowance was
also to be reckoned at appropriate level by the appellant for determining the
quantum of Gratuity payable to its employees. The said settlement was
arrived at for calculating amount of gratuity payable to the employees of the
appellant and not for any other purpose.

It is, therefore, not a case where the appellant could legitimately raise
a contention that any enhancement in the emoluments to its employees by
the State would not automatically enhance the emoluments of the employees
of the appellant. It has been contended before us that the effect of the
merger and addition of Dearness Allowance would be different. It may be
so. But, having regard to the fact of the present matter and the definition of
'wages' under the Act, we need not go into the said question.

We have noticed hereinbefore that the contention may ordinarily be
applicable to a case of merger of the basic pay vis-`-vis adding of Dearness
Allowance to basic pay, but, herein the same would not make any
substantive difference for the purpose of payment of gratuity keeping in
view the definition of "wages" contained in
Section 2(s)
of the Act. It is not
a case where the scheme of the Corporation and the provisions of the Act are
inconsistent with each other.

In
Beed District Central Co-operative Bank Ltd. v. State of
Maharashtra & Ors.
[2006 (10) SCALE 40], it was laid down:

"Undoubtedly, the Payment of Gratuity Act is a
beneficial statute. When two views are possible,
having regard to the purpose, the Act seeks to
achieve being a social welfare legislation, it may
be construed in favour of the workman. However,
it is also trite that only because a statute is
beneficent in nature, the same would not mean that
it should be construed in favour of the workmen
only although they are not entitled to benefits
thereof."

For the reasons aforementioned, we are unable to agree with the
submissions made by the learned Solicitor General that the consequences of
merger in a case of this nature shall be different in case of addition to the
Dearness Allowance in the scale of pay.

Keeping in view the facts and circumstances of this case, we are of the
opinion that it is not a case where this Court should take a view different
from that of the High Court. The Appeal is dismissed with costs. Counsel's
fee assessed at Rs. 10,000/-.