Kerala High Court
Dr.C.Renuka vs Kerala State Council For Science on 21 May, 2010
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS
WEDNESDAY, THE 12TH DAY OF NOVEMBER 2014/21ST KARTHIKA, 1936
WP(C).No. 25584 of 2011 (W)
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PETITIONER(S):
--------------------------
1. DR.C.RENUKA, SCIENTIST-G,
KERALA FOREST RESEARCH INSTITUTE,
PEECHI, THRISSUR.
2. DR.GEORGE MATHEW, SCIENTIST-G,
KERALA FOREST RESEACH INSTITUTE,
PEECHI, THRISSUR.
3. KERALA FOREST RESEARCH INSTITUTE STAFF
ASSOCIATION, REPRESENTED BY ITS PRESIDENT,
DR.T.V.SAJEEV, SCIENTIST, KERALA FOREST
RESEARCH INSTITUTE, PEECHI, THRISSUR.
BY ADVS.DR.K.P.SATHEESAN
SRI.M.R.JAYAPRASAD
SRI.P.MOHANDAS (ERNAKULAM)
SRI.MATHEW SUNNY
SRI.ANOOP.V.NAIR
RESPONDENT(S):
----------------------------
1. KERALA STATE COUNCIL FOR SCIENCE,
TECHNOLOGY & ENVIRONMENT,REPRESENTED BY
EXECUTIVE VICE PRESIDENT, SASTHRA BHAVAN, PATTOM,
THIRUVANANTHAPURAM-695 004.
2. THE MEMBER SECRETARY,
KERALA STATE COUNCIL FOR SCIENCE,
TECHNOLOGY & ENVIRONMENT,
SASTHRA BHAVAN, PATTOM, THIRUVANANTHAPURAM-695 004.
3. KERALA FOREST RESEARCH INSTITUTE,
PEECHI, THRISSUR DISTRICT, PIN-680 653,
REPRESENTED BY ITS REGISTRAR.
R1 & R2 BY ADV. SRI.GEORGE ZACHARIAH,SC,KSCSTE
R3 BY ADV. SRI.S.M.PREM
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 22-07-2014,ALONG WITH WP(C).NO.26114 OF 2011 AND CONNECTED
CASES, THE COURT ON 12-112-14 DELIVERED THE FOLLOWING:
sts
WP(C).NO.25584/2011
APPENDIX
PETITIONER(S) EXHIBITS
EXHIBIT P1: TRUE COPY OF THE RELEVANT PAGES OF THE RULES
AND REGULATIONS OF THE STATE COUNCIL.
EXHIBIT P2: COPY OF A LIST OF EMPLOYEES WHO RETIRED FROM
KFRI AFTER 2007 AND THE AMOUNTS PAID TO THEM
TOWARDS GRATUITY PREPARED BY THE PETITIONERS.
EXHIBIT P3: TRUE COPY OF THE ORDER ISSUED BY THE EXECUTIVE
VICE PRESIDENT KERALA STATE COUNCIL FOR SCIENCE
TECHNOLOGY AND ENVIRONMENT DATED 21/5/2010.
EXHIBIT P4: TRUE COPY OF THE LETTER WRITTEN BY THE 2ND
RESPONDENT TO THE DIRECTORS/EXECUTIVE DIRECTOR
OF THE RESEARCH INSTITUTE AS NO.3070/C5/2011/KSCSTE
DATED 20/9/2011.
EXHIBIT P5: TRUE COPY OF THE JUDGMENT DATED 13/8/2009 IN WP(C).
NO.2254/2002 OF THE HON'BLE HIGH COURT OF DELHI
RESPONDENTS' EXHIBITS : NIL
/TRUE COPY/
P.S.TO.JUDGE
sts
ALEXANDER THOMAS, J.
================================
W.P.(C).Nos.2241/2012, 25584/2011,
26114/2011, 27835/2012, 27836/2012 , 27845/2012 &
2235/2012
=================================
Dated this the 12th day of November, 2014
J U D G M E N T
W.P.(C).Nos.2241/2012 & 25584/2011:
All the 20 petitioners in W.P.(C).No. 2241/2012, except 11th, 15th, 18th and 20th petitioners, have retried from the service of the 3rd respondent-Kerala Forest Research Institute (KFRI), which comes under the 1st respondent-Kerala State Council for Science, Technology and Environment (KSCSTE). The petitioners had entered the service of the above said 3rd respondent, KFRI as Scientists and they claimed to have distinguished service and accomplishments in their scientific career to their credit. The 1st respondent-Council is an autonomous body constituted at the initiative of the respondent State Government and it has been registered as a society under the provisions of the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act, 1955. The formation of the said new society was envisaged by the Government in terms of G.O W.P.C.2241/12 & 25584/11 etc. - : 2 :-
(P) No.76/2002/S&TD dated 6.11.2002. After the registration of the Council as a society under the provisions of the aforementioned Societies Registration Act, the 1st respondent has also formulated their separate rules for regulating the service conditions and other allied matters, which according to the pleadings of the official respondents, has been made effective from 19.6.2003. Six research institutions, viz., (1) Kerala Forest Research Institute (KFRI), (2) Centre for Earth Science Studies (CESS), (3) Tropical Botanic Garden and Research Institute (TBGRI), (4) Centre for Water Recourses Development and Management (CWRDM), (5) National Transportation, Planning and Research Centre (NATPAC) and (6) Kerala School of Mathematics (KSM), have been brought under umbrella of the 1st respondent-Council. Prior to the formation of the 1st respondent-Council, these six individual institutions were functioning without coming under the ambit of a single umbrella organization and they had their own rules. The terms and conditions of payment of gratuity and retiral benefits to the employees of the 3rd respondent-KFRI, prior to the formation of the 1st respondent-
Council, were in terms of Exts.P1 and P2. After the formation of the 1st respondent-Council, conditions of service including payment of W.P.C.2241/12 & 25584/11 etc. - : 3 :-
gratuity and other benefits have been regulated in terms of the aforementioned service rules framed for the functioning of the 1st respondent-Council, which came into force on 19.6.2003. Ext.P3 is the relevant extract of those rules insofar as it regulates the payment of gratuity. Rule 14 of Section 2 of Part 1 of those rules which are extracted in Ext.P3, reads as follows:
"Clause 14. GRATUITY 14.1. In addition to the benefits otherwise admissible, an employee retiring from service under Rule 4 may be granted by competent authority, gratuity at the rate of half month's emoluments which the employee drew last, for each completed year of service qualifying for gratuity, provided such employee has rendered not less than five years of service in the Council or any of the Centres under the Council.
Note:i. An employee whose service is terminated under Rule 3 or resigns under Rule 5 may also be granted by the competent authority, gratuity at the above rate.
ii. For computing half months emoluments 26 days will be reckoned as a month and the amount payable will be calculated as follows:
Monthly Number of years
emoluments eligible x 15 days x of qualifying
for gratuity service
26 days
iii In case where an employee dies while in service or after
retirement, but before the employee has received the gratuity, the gratuity shall be paid on the basis of the nomination filed by the employee and accepted by the competent authority. If no such nomination is made it shall be paid to the legal heirs of the employee.
iv. The emoluments for the purpose of this rule shall be pay (sic) as defined in Rule 2 xxii and dearness allowance.
W.P.C.2241/12 & 25584/11 etc. - : 4 :-
14.2. Service of six months and above shall be reckoned as one year for this purpose.
14.3. Unless, otherwise specifically provided, the service that qualifies for increment shall qualify for gratuity. 14.4. Any amount owed by a retired employee to the Council shall be recovered from the gratuity of the employee."
The gratuity amounts payable to any employee under the 3rd respondent-KFRI has been linked with the Life Insurance Corporation of India (LIC), whereunder premiums are paid by the 3rd respondent-KFRI to the LIC based on the gratuity amounts payable to the employee concerned in terms of Ext.P3 and the LIC makes the payment of gratuity amount to the 3rd respondent-KFRI at the time of retirement of the employee concerned who in turn effects the payment of gratuity to the employee concerned. Exts.P4 and P5 are the receipts of payments made by the LIC to the 3rd respondent in respect of the gratuity payable to one Dr.Renuka and one Dr.George Mathew who are petitioners 1 and 2 respectively in W.P. (C).No. 25584/2011. Ext.P6 is the list of employees to whom the gratuity has been paid in terms of Ext.P3 rules, consequent on their retirement from service.
2. Though Section 4(3) of the Payment of Gratuity Act, 1972, (Central Act 39 of 1972) envisages a maximum limit of W.P.C.2241/12 & 25584/11 etc. - : 5 :-
Rs. 10 lakhs (with effect from 24.5.2010) for payment of gratuity, the rules in the 1st respondent and the 3rd respondent, as evidenced by Ext.P3, do not place any ceiling limit on the maximum gratuity payable and the gratuity is computable purely in terms of the formula mentioned in Note. (ii) appended under Rule 14.1 of the above said Ext.P3 rules. It is also common ground that even prior to the formation of the 1st respondent-Council, the research institutes like the 3rd respondent-KFRI, have been following the same formula for payment of gratuity in terms of Exts.P1 and P2, wherein also there was no maximum ceiling limit for payment of gratuity amount.
3. It is indisputable that all through out, till the issuance of the impugned Ext.P8 proceedings dated 20.9.2011, gratuity has been paid in terms of the above said methodology adopted by the respondent institutions concerned, without placing any ceiling limit for payment of gratuity.
4. By G.O(MS) No.1/2010/S&TD dated 8.1.2010 referred to as 2nd paper in Ext.P4 produced in the connected W.P.(C).No. 27835/2012, the Government issued orders revising the pay scales of the scientific and technical staff of the 1st respondent-Council and the scientific institutions like KFRI, CSIR etc. based on the pay W.P.C.2241/12 & 25584/11 etc. - : 6 :-
revision ordered by the Central Government to the employees on the recommendation of the Sixth Central Pay Commission in respect of Central Personnel with CSIR pay scales. The pay revision was ordered with effect from 1.1.2006. The said Government Order stipulated conditions only as regards the methodology for the above said pay revision. The said Government Order dated 8.1.2010 was adopted by the 1st respondent-Council as per Ext.P4 proceedings dated 8.1.2010 produced in W.P.(C).No. 27845/2012. The said Council proceedings dated 8.1.2010 also made stipulations for effectuating such pay revision with effect from 1.1.2006. Both the above said G.O(Ms.) No.1/2010/S&TD dated 8.1.2010 as well as the Council proceedings dated 8.1.2010 produced as Ext.P4 in W.P.(C). No. 27835/2012, has not made any stipulation as regards the methodology for payment of gratuity or for imposing any ceiling limit for the gratuity amount payable to persons like the petitioners.
5. It appears that the Central Government in their pay revision orders meant for CSIR pay scale posts in Central institutions had stipulated a maximum ceiling limit of Rs. 10 lakhs as gratuity amount payable and in view of this aspect, there arose some doubts as to whether such a maximum ceiling limit for gratuity would be W.P.C.2241/12 & 25584/11 etc. - : 7 :-
applicable to the personnel of the respondent-institutions like the KFRI. The Executive Vice President of the 1st respondent-Council, who is the Chief Executive Officer of the Council and who is also the Chairman of the Executive Committee of the Council, considered the matter and issued instructions to dispel all doubts. This is evident from Ext.P7 proceedings dated 21.5.2010. In Ext.P7 it has been ordered by the Executive Vice President/Chief Executive Officer of the 1st respondent-Council that the payment of gratuity to the employees of the 1st respondent-Council and its R&D centres like the KFRI etc., is governed by the aforementioned Rule 14 of Ext.P3 rules and that those rules do not stipulate any upper limit for payment of gratuity payable to such employees at the time of retirement. Accordingly, it has been ordered that the gratuity shall be payable without any upper limit as has been provided in the rules of the 1st respondent- Council. Long after 21 months after the issuance of G.O(Ms.) dated 8.1.2010 and about 16 months after the issuance of Ext.P7 proceedings dated 21.5.2010, the Member Secretary of the 1st respondent-Council issued Ext.P8 proceedings dated 20.9.2011 ordering that though gratuity is granted to the employees of the 1st respondent-Council and its R&D centres as per W.P.C.2241/12 & 25584/11 etc. - : 8 :-
the aforementioned Rule 14 of Ext.P3 rules, objections are now being raised by the State Government on payment of gratuity in excess of Rs. 10 lakhs, which is the ceiling limit imposed by the Central Government in its pay revision orders for CSIR scales of pay personnel and that the matter is being taken up with the Government of Kerala to get permission for payment of gratuity without ceiling and that in the meantime, as instructed by the Government in the Finance Department, it is directed that gratuity amount payable to employees shall be limited to Rs.10 lakhs till a decision is communicated from the Government of Kerala in the matter. It is these proceedings as per Ext.P8 dated 20.9.2011, that is under challenge in these Writ Petitions.
6. It is contended by the petitioners that the 4th respondent-State Government has no power to interfere with the grant of gratuity in terms of Ext.P3 rules so long as the said rules are not amended in the manner known to law. It is further contended that the gratuity being a retiral benefit, is no longer a bounty, which is not to be paid at the sweet will or grace of the employer, but is regulated by the provisions contained in Ext.P3 and that the said right to gratuity is a property right conferred on the W.P.C.2241/12 & 25584/11 etc. - : 9 :-
petitioners and that the same cannot be deprived of, unless the provisions in Ext.P3 rules are amended in the manner known to law. It is further contended that though Section 4(3) of the Payment of Gratuity Act lays down a ceiling limit of gratuity amount payable at Rs. 10 lakhs (with effect from 24.5.2010), it is mandated in Section 4(5) of the said Act that nothing in Section 4 shall affect the right of an employee to receive better terms of gratuity under an award or agreement or contract with the employer. In this regard, it is contended that the provisions in Ext.P3 relating to gratuity are the terms and conditions that regulate the contract of service/contract of employment between the employees like the petitioners and the employer concerned like the 1st and 3rd respondents. That in view of the provisions in Section 4(5), as there is no ceiling limit for the payment of gratuity in terms of Ext.P3 rules, higher amount of gratuity payable in terms of Ext.P3 than the amount mentioned in Section 4(3), is fully permissible in law. That the right conferred on the employee concerned in terms of Section 4(5) of the Payment of Gratuity Act has been flagrantly violated by virtue of the impugned decision limiting gratuity at Rs.10 lakhs. It is also contended that as contemplated by the Parliament in terms of Section 4A(1) of the W.P.C.2241/12 & 25584/11 etc. - : 10 :-
Payment of Gratuity Act, the 3rd respondent-KFRI has entered into an insurance arrangement with the LIC so as to facilitate payment of gratuity to the employee concerned in terms of the methodology stipulated in Ext.P3 rules and that in terms of this arrangement, the LIC has made available the requisite gratuity amounts payable to the employees like the petitioners herein and the petitioners in W.P. (C).No. 22584/2011. That this is evident from Ext.P4 and Ext.P5 and that the said amounts released by the LIC is fully in terms of the provisions in Ext.P3 rules and the said gratuity amounts payable is higher than the ceiling limit of Rs. 10 lakhs and that by denying payment of gratuity amount to the employee concerned over and above the ceiling limit of Rs. 10 lakhs, is nothing but unlawful appropriation and confiscation of the gratuity amounts due to the employees like the petitioners. That since the gratuity amount is a property right as envisaged under Article 300 A of the Constitution of India, such appropriation of amounts by the respondents is nothing but confiscatory and is amounting to unlawful appropriation of the property of the petitioners.
7. It is in the light of these averments and contentions that the petitioners have instituted these Writ Petitions with the following W.P.C.2241/12 & 25584/11 etc. - : 11 :-
prayers:
W.P.(C).No. 2241/2012:
"i) to issue a writ of certiorari or writ order or direction calling for records in case and quash Exhibit P8 order and further proceedings to put a ceiling on gratuity.
ii) to issue a writ of mandamus or other appropriate writ order or direction compelling the respondents to pay gratuity to the petitioners without any ceiling but as per the conditions of the appointment."
W.P.(C).No. 25584/2011:
"i) to issueora Writ of Certiorari or such other appropriate writ, order direction quashing Ext.P4 letter No.3070/ C5/2011/KSCSTE dated 20.9.2011 written by the 2nd respondent to the Directors/Executive Director of Research Institute under Kerala State Council for Science, Technology and Environment.
ii) to issue a Writ of Mandamus or order or direction to the first respondent to pay gratuity as ordered in Ext.P3 unless and until the Regulation 14(1) is amended by the appropriate authority.
iii) to declare that the Petitioners are entitled to gratuity as provided under Regulation 14(1) without any ceiling limit and purely based on length of service and last drawn salary."
8. The 1st and 2nd respondents have filed a counter affidavit dated 28.6.2014 in W.P.(C).No. 2241/2012. It is admitted by them that the employees of the 1st respondent-Council and its R&D centres like the KFRI, are governed by Ext.P3 Council rules with effect from 19.6.2003. That before formation of the 1st respondent- Council, those research institutions were separate entities and governed by their own service rules. Certain averments are made W.P.C.2241/12 & 25584/11 etc. - : 12 :-
regarding the arrangement between the KFRI and the LIC in the counter affidavit, which need not detain us now and the same will be dealt with in the later part of this judgment. It is clearly admitted in para 5 of the above said counter affidavit n W.P.(C).No. 2241/2012 that the gratuity claims of the petitioners in connected W.P.(C).No. 25584/2011, viz., Dr.C.Renuka and Dr.George Mathew, have been released by the respondents as evident from Exts.P4 and P5 produced in W.P.(C).No. 2241/2012 and it is further admitted therein that those payments as per Exts.P4 and P5 are based on the entitlement of those employees as per the KSCSTE rules, viz., Ext.P3 rules. It is also admitted that all the scientists named in Ext.P6 have been paid gratuity as mentioned therein, which is in excess of Rs. 10 lakhs. It is further clearly admitted in paragraph 5 of the counter affidavit that such amounts in excess of Rs. 10 lakhs have been paid as Ext.P3 rules prescribed no ceiling limit for payment of gratuity and there are no orders restricting the payment to Rs. 10 lakhs during those times. It is stated that Ext.P7 dated 21.5.2010 issued by the Chief Executive Officer of the 1st respondent-Council stipulated that gratuity can be paid without upper limit, as provided in the Council Rules, viz., Ext.P3 rules. It is also stated that as no W.P.C.2241/12 & 25584/11 etc. - : 13 :-
pension is payable to the employees like the petitioners, imposing a limit on the payment of gratuity will cause considerable hardship to them. In para 7 of the counter affidavit, it is cogently stated that as no decision fixing upper limit for payment of gratuity to the Council employees, has been communicated by the Government, the natural corollary is that Rule 14.1 of Ext.P3 rules is applicable to the retiring employees. That as the 1st respondent-Council is fully funded by the State Government, they are bound to concede to the instructions of the Government and that it is in the light of this aspect, that the impugned Ext.P8 order dated 20.9.2011 has been issued.
9. The 4th respondent-State Government has also filed a counter affidavit dated 25.9.2013. The main thrust of the case projected by the respondent Government is that payment of gratuity over and above Rs. 10 lakhs causes financial burden on the State and that there were audit objections and directions of the Finance Department, which led to the imposition of the ceiling limit of Rs. 10 lakhs as per the impugned Ext.P8 order. It is clearly admitted in para 3 on page 2 of the counter affidavit of the Government in W.P. (C).No. 2241/2012 that the 4th respondent-Government cannot impose any direction to limit excess payment of gratuity. But that W.P.C.2241/12 & 25584/11 etc. - : 14 :-
the Government have right to issue necessary instructions to limit expenditure to the 1st respondent-Council as the said Council is fully funded by the State Government. The fact that the employees like the petitioners are governed by Ext.P3 rules with effect from 19.6.2003 is also admitted in the counter affidavit. It is pointed out that since there was ceiling limit for payment of gratuity imposed by the Central Government in the pay revision orders for regulating the CSIR pay scales personnel, such limit is also applicable in the case of employees under the 1st and 3rd respondents in as much as the petitioners also enjoyed pay revision in terms of the Central Government's pay revision as above said. It is further stated that the 3rd respondent is granting gratuity in excess of the ceiling limit without consulting the Government. It is further stated that since the Government is the main source of funding for the 1st respondent-Council, the said Council has to adhere to the directives of the Government. Reference is made about the audit objections of the Accountant General and observations of the Finance Department. It is further contended that by virtue of Section 4(3) of the Payment of Gratuity Act, the amount of gratuity payable to the employee shall not exceed Rs. 10 lakhs. It is also stated that the W.P.C.2241/12 & 25584/11 etc. - : 15 :-
premium amounts to be paid by the employees of the 3rd respondent to the LIC is remitted from the non-plan grant provided for paying salary to such employees and this results huge financial liability to the Government.
10. Heard Sri.Thampan Thomas appearing for the petitioners in W.P.(C).No.2241/2012, Dr.K.P.Satheesan, the learned Senior Counsel appearing for the petitioners in W.P.(C).No. 25584/2011, Sri.Thoufeek Ahammed, learned counsel appearing for the petitioners in W.P.(C).Nos.26114/2011, 27836/2012, 27835/2012 27845/2012, Sri.P.K.Madhusoodhanan, learned counsel appearing for the petitioner in W.P.(C).No.2235/2012, Sri.George Zachariah, the learned Standing Counsel appearing for the 1st respondent-
Council, Smt.Vijayamma, learned counsel appearing for the Centre for Earth Science Studies, Sri.S.M.Prem, learned counsel appearing for the 3rd respondent-KFRI and Sri.Sunil Cyriac, the learned Special Government Pleader (Finance) appearing for the 4th respondent.
11. The main issues that arise for consideration in this matter are as follows:
(i) Whether the 4th respondent-State Government has the power and competence to interdict the 1st respondent-Council and W.P.C.2241/12 & 25584/11 etc. - : 16 :-
3rd respondent-KFRI from paying gratuity amounts to the employees like the petitioners in terms of Ext.P3 rules, on the plea that the gratuity amount payable should be limited to the ceiling limit of Rs. 10 lakhs ?
(ii) Whether the terms and conditions for payment of gratuity as per Ext.P3 can get the protection of Section 4(5) of the Payment of Gratuity Act ?
Coming to the first issue, it is common ground and indeed it is indisputable that all the six research institutions including the 3rd respondent-KFRI come under the umbrella of the 1st respondent- Council and the service conditions including payment of gratuity of the employees like the petitioners are regulated by the provisions of Ext.P3 rules framed by the 1st respondent-Council made effective from 19.6.2003. It is also common ground that the 1st respondent- KSCSTE is a separate juristic entity as it is formed and registered as a society in terms of the provisions of the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act, 1955. The 1st respondent has a State Council as well as an executive committee, apart from various other office bearers and functionaries. The State Council of the 1st respondent consists W.P.C.2241/12 & 25584/11 etc. - : 17 :-
mainly of State governmental functionaries like the Chief Minister and seven other Ministers, Vice Chairman of the State Planning Board, Chief Secretary to Government of Kerala, Executive Vice President of the Council and certain other public and eminent functionaries. The role and functions of the State Government is also delineated in the above said rules. The Executive Vice President of the State Council shall be the Chief Executive Officer of the State Council. The functions and powers of the Executive Committee and its composition are also dealt with in the above said rules. The Executive Vice President is the ex-officio Chairman of the Executive Committee. A detailed procedure is dealt with in Rule 19 of Section 1 of the said Rules, for regulating the provisions relating to the amendment of memorandum of association and rules and regulations of the 1st respondent Council. The said Rule 19 reads as follows:
"19. Amendment of Memorandum of Association and Rules and Regulations.
19.1 Whenever it shall appear to the Executive committee of t he State Council that it is advisable to alter, extend or abridge the Memorandum of Association for such purposes as are mentioned in the Memorandum of Association, the Executive Committee may submit the proposal to the members of the State Council in a written or printed report, and may convene a Special General according to the Rules andfor Meeting the consideration thereof Regulations. No such proposal shall be deemed to have been approved unless such reports W.P.C.2241/12 & 25584/11 etc. - : 18 :-
have been delivered by hand or sent by registered post to every member of the State Council 21 days previous to the date of the Special General Meeting convened at the instance of the Executive Committee for the consideration thereof, and unless proposal shall have been agreed to by the votes cast in favour of the proposal by members entitled to do so, and such votes are not less than three times the number of votes, if any, cast against the resolution by members so entitled and voting and attended by not less than half the number of members of the State Council.
19.2. Whenever Committee of the State Councilexpedient the name and Rules it shall appear to the Executive to amend and Regulations of the State Council, the Executive Committee may submit the proposal to a Special General Meeting convened for the purpose of which notice shall have been delivered by hand or registered post to every member of the State Council 21 days previous to the date of the Special General Meeting. The Resolution proposing the amendments shall be passed by the votes cast in favour of the resolution by members who are entitled to do so, provided such votes are not less than three times the number of votes, if nay, cast against the resolution by members so entitled and voting. 19.3 No amendments to the Memorandum of Association and Rules and regulations of the State Council proposed in Rules, 19.1 and 19.2 above shall be repugnant to the provisions of Sections 2(15), 11 to 13 and (80)G of the Income Tax (sic) 1961. Further, no amendments to Rules 19.1 and 19.2 shall be carried out without the prior approval of the Commissioner of Income Tax."
Rule 10 of the Rules deals with the functions and powers of the Executive Committees. Rule 8 stipulates that the Executive Committee is constituted for administration and management of the affairs, finance of the State Council and for overseeing of the administration of all institutions under the State Council and receiving its grant-in-aid. Rule 10 stipulates, inter alia, that the Executive Committee shall administer, direct and control the affairs W.P.C.2241/12 & 25584/11 etc. - : 19 :-
of the funds of the Council and shall have authority to exercise all the powers of the Council subject nevertheless in respect of expenditure, to such limitations as the Council may frame time to time impose.
12. During the course of the hearing, a specific query was put to the learned Standing Counsel for the 1st respondent-Council and to the learned Government Pleader as to whether there is any provision in the above said rules and norms formulated by the 1st respondent-Council, which empowers the State Government to issue directions to the 1st respondent-Council. The learned Standing Counsel and the learned Government Pleader could not point out any provision in the rules, memorandum of association, articles of association etc. of the 1st respondent-Council, which has as provision empowering the State Government to issue directions to the Council that are binding on the Council. It is beyond doubt that the matters relating to payment of gratuity and methodology for computation of gratuity amount are fully regulated by the provisions in Ext.P3 rules framed by the 1st respondent-Council as per Rule 14 thereof, quoted in the earlier part of this judgment. There is no provision in the said rules empowering the State Government to W.P.C.2241/12 & 25584/11 etc. - : 20 :-
issue directions to the Council, which the latter is obliged to comply.
13. It is common ground that Ext.P3 rules do not stipulate any ceiling limit for payment of gratuity amount. It is admitted by the respondents that the provisions in Ext.P3 rules have not been amended till date as prescribed in the aforementioned Rule 19 and that those provisions stand without any alteration till date. If the State Government is also of the considered opinion that there should be a ceiling limit for payment of gratuity amount as envisaged in Section 4(3) of the Act or as stipulated by the Central Government in its pay revision orders for CSIR scales of pay personnel, it was for them through their representatives in the Council and the Executive Committee to put in motion the process of amendment of Ext.P3 rules so as to incorporate the provision for having a ceiling limit for gratuity in the manner deemed fit and proper by them so as to get the above said Rules amended by following the mandatory procedure prescribed by Rule 19 thereof. This course of action has not been adopted and the provisions in Ext.P3 rules stand unaltered. Then the question is that as to whether, in spite of the provisions in Ext.P3 rules, the Government has power to interdict the gratuity payment against the aforesaid W.P.C.2241/12 & 25584/11 etc. - : 21 :-
provisions of Ext.P3 rules in the matter of payment of gratuity. It is now well settled rule in administrative law by a catena of decisions of the Apex Court and various High Courts that an executive authority must be rigorously held to the standards laid down by the norms governing the field and that it must scrupulously adhere to the standards laid down in the governing norms, as otherwise, the action of the executive authority in violation of the such binding norms would result in their invalidation. Mr.Justice Frankfurter in Viteralli v. Saton [359 U.S.535 : Law Ed. (Second series) 1012] has held as follows:
"An executive agency must be rigorously held to the standards by which it professes its action to be judged .... Accordingly, if dismissal from employment is based on a defined procedure, even though generous beyond the requirements that bind such agency, that procedure must be scrupulously observed... This judicially evolved rule of administrative law is now firmly established and if I may add, rightly so. He that takes the procedural sword shall perish with the sword."
(emphasis supplied) Justice K.K.Mathew, in the Apex Court decision rendered in Sukhdev v. Bhagatram reported in (1975) 1 SCC 421, has quoted the above said observation of Mr.Justice Frankfurter with approval. Later in a landmark decision in the case Ramana Dayaram Shetty v. International Airport Authority of India and others reported in (1979) 3 SCC 489, P.N.Bhagwati. J, speaking on behalf of three W.P.C.2241/12 & 25584/11 etc. - : 22 :-
Judge Bench of the Apex Court held as follows, (p.p.503, 504):
'10 .... ..It is a well-settled rule of administrative law that an executive authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them. This rule was enunciated by Mr Justice Frankfurter in Viteralli v. Saton [359 U.S.535: Law Ed. (Second series)] where the learned Judge said:
"An executive agency must be rigorously held to the standards by which it professes its action to be judged .... Accordingly, if dismissal from employment is based on a defined procedure, even though generous beyond themust requirements that bind such agency, that procedure be scrupulously observed .... This judicially evolved rule of administrative law is now firmly established and, if I may add, rightly so. He that takes the procedural sword shall perish with the sword." This Court accepted the rule as valid and applicable in India in A.S. Ahluwalia v. Punjab [(1975) 3 SCC 503] and in subsequent decision given in Sukhdev v. Bhagatram [(1975) 1 SCC 421], Mathew, J., quoted the above-referred observations of Mr Justice Frankfurter with approval. It may be noted that this rule, though supportable also as an emanation from Article 14, does not rest merely on that article. It has an independent existence apart from Article 14. It is a rule of administrative law which has been judicially evolved as a check against exercise of arbitrary power by the executive authority. If we turn to the judgment of Mr Justice Frankfurter and examine it, we find that he has not sought to draw support for the rule from the equality clause of the United States Constitution, but evolved it purely as a rule of administrative law. Even in England, the recent trend in administrative law is in that direction as is evident from what is stated at pp. 540-41 in Prof Wade's "Administrative Law", 4th Edn. There is no reason why we should hesitate to adopt this rule as a part of our continually expanding administrative law. Today with tremendous expansion of welfare and social service functions, increasing control of material and economic resources and large scale assumption of industrial and commercial activities by the State, the power of the executive Government to affect the lives of the people is steadily growing. The attainment of socio-economic justice being a conscious end of State policy, there is a vast and inevitable increase in the frequency with which ordinary citizens come into relationship of direct encounter with State power-holders. This renders it necessary to structure and restrict the power of the executive Government so as to prevent its arbitrary application or exercise. Whatever be the concept of the Rule of Law, whether it be the meaning given by Dicey in his "The Law of the Constitution" or W.P.C.2241/12 & 25584/11 etc. - : 23 :-
the definition given by Hayek in his "Road to Serfdom" and "Constitution of Liberty" or the exposition set forth by Harry Jones in his "The Rule of Law and the Welfare State", there is as pointed out by Mathew, J., in his article on "The Welfare State, Rule of Law and Natural Justice" in "Democracy, Equality and Freedom" "substantial agreement in juristic thought that the great purpose of the rule of law notion is the protection of the individual against arbitrary exercise of power, wherever it is found". It is indeed unthinkable that in a democracy governed by the rule of law the executive Government or any of its officers should possess arbitrary power over the interests of the individual. Every action of the executive Government must be informed with reason and should be free from arbitrariness. That is the very essence of the rule of law and its bare minimal requirement. And to the application of this principle it makes no difference whether the exercise of the power involves affectation of some right or denial of some privilege."
The rationale for evolving this administrative law is to ensure that the actions of the Government should be free from arbitrariness by insisting for adherence to the governing norms concerned. The Apex Court held that this is very essence of rule of law and its bare minimal requirement. It is further held that to the application of this principle, it makes no difference whether the exercise of the power involves affectation of some right or denial of some privilege. The State Government itself, in the instant case, have taken initiative to ensure the formation and registration of the 1st respondent-Council as a society under the aforementioned Societies Registration Act. Once the Council is formed and registered as a society under the said Societies Registration Act, the Council becomes a separate juristic/legal entity and it has legal existence separate and distinct W.P.C.2241/12 & 25584/11 etc. - : 24 :-
from the members founding or forming it. The Government's representatives are adequately nominated in both the State Council of the 1st respondent as well in the Executive Committee and once the society has framed the aforementioned rules and provisions as in Rule 19.6 framed for regulating the amendment of the memorandum of association and rules and regulations, then such provisions framed by way of rules and regulations, can be altered only by effecting due amendment of the said provisions, by following the procedure prescribed in the above said rules. So long as the provisions in Ext.P3 rules are not amended by strict adherence to the procedure prescribed in Rule 19, the provisions in Ext.P3 rules would stand unaltered and has to be fully effectuated. Section 9 of the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act, 1955, mandates that every society may sue or be sued in the name of the president, chairman or principal secretary or trustees as shall be determined by the rules and regulations of the society and in default of such determination in the name of such person, as shall be appointed by the governing body for the occasion. Therefore, this Court is constrained to hold that the action of the Government in interdicting the enforcement of W.P.C.2241/12 & 25584/11 etc. - : 25 :-
Ext.P3 rules is ultra vires and unlawful as the above said Rule 14 has not yet been amended in the manner known to law.
14. Coming to the next issue as to whether the provisions in Ext.P3 rules will get the protection of Section 4(5) of the Payment of Gratuity Act, the following aspects are relevant:
15. Before adhering to the merits of the rival contentions, it would be apposite to refer to the inimitable words used by V.R.Krisha Iyer.J, in the Apex Court decision rendered in Som Prakash Rekhi v. Union of India, reported in 1981 (1) SCC 449, wherein it was observed as under.(SCC p.p.483-484, para 66) "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."
16. The Apex Court in the case Sudhir Chandra Sarkar v. Tata Iron and Steel Co. Ltd., reported in (1984) 3 SCC 369, has held that pension and gratuity coupled with contributory form provident W.P.C.2241/12 & 25584/11 etc. - : 26 :-
fund are well recognised retiral benefits governed by various statutes. These statutes are responses of the legislature to the developing notions of fair and humane conditions of work, which are reflected in the Directive Principles of State policy adumbrated in Part IV of the Constitution of India. In Sudhir Chandra Sarkar's case it was held as follows: (SCC .p.p.380, para 15) "15..... The fundamental principle underlying gratuity is that it is 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, 1972, a statutory liability was cast on the employer to pay gratuity."
The combined effect of the provisions in Section 4(3) vis-a-vis the provisions in Section 4(5) of the Payment of Gratuity Act has to be appreciated and interpreted in a harmonious manner, keeping in view the basic objective of legislature that the legislation has been framed primarily as benevolent piece of legislation for the welfare of the employees. Some of the subtleties of the issues involved in this case, has to be appreciated keeping in view the well accepted cannons of interpretations of statutes evolved by the courts. As declared by the Apex Court, the test of interpretation is the one in which the court relies on not only the text but also the context in which the provision has been made. It would be apposite in this W.P.C.2241/12 & 25584/11 etc. - : 27 :-
context to refer to the position laid down by the Apex Court in the case Reserve Bank of India v. Peerless General Finance and Investment Company Ltd. reported in 1987 (1) SCC 424, wherein it was held as follows: (SCC p.p.450 para 33) "33. Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted.
With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place." In the decision in Paul Enterprises v. Rajib Chatterjee and Co. reported in 2009 (3) SCC 709, the Apex Court held that the clause under interpretation should be a contextual meaning and it was held as follows: (SCC p.718 para 28) "10. Apparently, it appears that the definition is conclusive as the word `means' has been used to specify the members, namely, spouse, son, daughter, grandchild or dependant parent, who would constitute the family. Section 2 of the Act in which various terms have been defined, opens with the words `in this Act, unless the context otherwise requires' which indicates that the definitions, as for example, that of `family', which are indicated to be conclusive may not be treated to be conclusive if it was otherwise required by the context. This implies that a definition, W.P.C.2241/12 & 25584/11 etc. - : 28 :-
like any other word in a statute, has to be read in the light of the context and scheme of the Act as also the object for which the Act was made by the legislature.
11. While interpreting a definition, it has to be borne in mind that the interpretation placed on it should not only be not repugnant to the context, it should also be such as would aid the achievement of the purpose which is sought to be served by the Act. A construction which would defeat or was likely to defeat the purpose of the Act has to be ignored and not accepted." It was held in K.V.Muthu v. Angamuthu Ammal reported in 1997 (2) SCC 53, that in the process of interpretation it has to be borne in mind that the interpretation given should not only be not repugnant to the context, but it should also be such as would aid the achievement of the purpose, which is sought to be served by the Act and that a construction, which would defeat or is likely to defeat the purpose of the Act has to be ignored and not accepted. In Vanguard Fire & General Insurance v. Fraser & Ross reported in AIR 1960 SC 971, the Supreme Court held that the approach that meaning should be ordinarily given as the one given in the definition clause, is not inflexible and that there may be sections in the Act, where the meaning may have to be departed on account of the subject or context, in which the word has been used and that will be giving effect to opening sentence in the definition section, namely, unless there is anything repugnant in the subject or context and that in W.P.C.2241/12 & 25584/11 etc. - : 29 :-
view of this qualification, the court has not only to look at the words but also to look at the context, the collocation and the object of such words and relating to such matter and interpret the meaning intended to be conveyed by the use of the words under the circumstances. In National Building Construction Corporation v. Pritam Singh reported in AIR 1972 SC 1579, the Apex Court was called upon to decide the question as to whether a workman, who was dismissed from service, can maintain an application under Section 33C(2) for computation of monetary benefits. The Apex Court held that in view of the words, "unless there is anything repugnant in the subject or context" appearing in the definition clause of Section 2 of the Industrial Disputes Act, the interpretation should be made looking into the context and subject matter etc. In a recent decision of the Apex Court in Gohil Jesangbhai Raysangbhai and others v. State of Gujarat and another reported in 2014 (5) SCC 199, has made a survey of all the major decisions of the Supreme Court as referred to in the aforementioned earlier decisions of the Apex Court and upheld the necessity for making an interpretation, which is dependent not only on the text, but also on the context of the matter. The above discussion is made mainly in W.P.C.2241/12 & 25584/11 etc. - : 30 :-
view of the aspect that the definition clause contained in Section 2 of the Payment of Gratuity Act also has the words "unless the context otherwise requires". It is true that Section 4(3) of the Payment of Gratuity Act stipulates that the amount of gratuity payable to an employee shall not exceed Rs. 10 lakhs. But it is clearly mandated in Section 4(5) thereof that nothing in the Section, viz., Section 4 thereof, shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer. The principles to be borne in mind in liberally interpreting the wide scope of Sec. 4(5) of the Act is delineated by the Apex Court in the case Allahabad Bank v. All India Allahabad Bank Retired Employees' Association, reported in (2010) 2 SCC 44.
17. It is clear that the Parliament has mandated that notwithstanding the provisions in Section 4(3) imposing a ceiling limit of Rs. 10 lakhs, the right of an employee to receive better terms of gratuity as envisaged in Section 4(5) shall remain unaffected. The clear import of Section 4(5) is that the Parliament has given freedom to the employer to stipulate better terms of gratuity than the provisions in the Payment of Gratuity Act, more W.P.C.2241/12 & 25584/11 etc. - : 31 :-
particularly that in Section 4 thereof and that once there is a better terms of gratuity flowing from Section 4(5), the employee has the right untramelled by any of the other provisions of Section 4 to receive such better terms of gratuity. Though Section 4(5) speaks about the "right of an employee", the provisions in Section 4(5) can be invoked so long as there is an award or agreement or contract envisaging better terms of gratuity not only for an individual employee but also for a class or category of employees or for the entire employees of the establishment concerned. This is because if the employer has envisaged a better terms of gratuity to a class or category of their employees compared to the ceiling limit in Section 4(3), then each such employee belonging to such class or category can invoke the right to better or higher gratuity, by the mandate of Section 4(5).
18. Two subsidiary issues would arise for adjudicating on the rival contentions in this case on the applicability of Section 4(5). Can the provisions in Ext.P3 rules be termed as an agreement or contract as between the employer and the employee, which is offering better terms of gratuity as envisaged in Section 4(5) ? The provisions of Ext.P3 have also been dealt with earlier hereinabove.
W.P.C.2241/12 & 25584/11 etc. - : 32 :-
The methodology and formula for computation of the gratuity payable to the employees are clearly dealt with in those provisions.
The 1st respondent-Council is admittedly a non-statutory body. It has separate juristic or legal existence as a registered society. By virtue of the provisions in the norms governing the formation of the society, it can discharge the functions only by employing various category of scientific, technical, administrative staff etc. The relationship between the R1/R3 on the one hand and persons like the petitioners on the other amounts to jural relationship of employer and employee. A contract of service or contract of employment consists not only of the initial terms and conditions that may be agreed to between the parties at the time of offer and acceptance of appointment, but also would include all other implied and other terms and conditions that may be regulated by the norms and rules that may be issued by the employer. In English common Law, it was referred to as a contract of personal service, which in modern times is referred to as contract of employment or contract of service. Halsbury's Laws of England (5th Edn. Vl.39, para 2) deals with the test to decide the status of an employee at common law arising out of a contract of employment or contract of service.
W.P.C.2241/12 & 25584/11 etc. - : 33 :-
Reference in this connection may be made to the position laid down in para 4 of the 5th Edition of the Halsbury's Laws of England ( Vol.39, para 1, page 21).
"Test whether a person is an employee at common law. There is no single test for determining whether a person is an employee. The test that used to be considered sufficient, that is to say the 'control' test, can no longer be considered sufficient, especially in the case of the employment of highly skilled individuals and is now only one of the particular factors which may assist a court or tribunal in deciding the point. More recently, the 'integration' or 'organization' test had been suggested, proposing that the important question was whether the person was integrated into the enterprise or remained apart from, and independent of, it. However, while both of these factors are still pertinent, the modern starting point for the deciding whether a contract of service (now generally referred to as a 'contract of employment' exists is to ascertain if;
(1) the servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master ('mutuality of obligation';
(2) he agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master '(control' );and (3) the other provisions of the contract are consistent with its being a contract of service.
The final classification of an individual now depends upon a balance of all relevant factors, fine though that balance sometimes might be with 'mutuality of obligation' and 'control' being seen as the 'irreducible minimum' legal requirements for the existence of a contract of employment. The factors taken into consideration may include; the method of payment; any obligation to workholidays that only for employer; stipulations as to hours; overtime, etc; arrangements for payment of income tax and national insurance contributions; how the contract may be terminated; whether the individual may delegate work; who provides tools and equipments; and who, ultimately, bears the risk of loss and the chance of profit. In some cases the nature of the work itself may be an important consideration."
It is further stated in Halsbury's Laws of England that in many W.P.C.2241/12 & 25584/11 etc. - : 34 :-
employment, contract will not be discernible just from one document, but requires consideration of several documents, oral, (for example interview) and subsequent conduct. It is also stated therein that it may be appropriate when deciding on the employment status of an individual to consider whether there is sufficient mutuality of application justifying that there was a contract of employment. Various aspects relating to terms of employment have also been dealt with in paragraphs 88 to 91 of the Halsbury's Laws of England (5th Edn.), which deals with (i) express terms (ii) impose terms (iii) implied terms (iv) incorporated terms.
19. When an employee accepts the offer of appointment under the employment of the R1/R3 (employer), he contracts to be in the employment of those respondents and all the governing norms that are applicable to the said respondents, would also be binding terms and conditions of the contract of employment or contract of service that regulates the jural relationship of employer and employee between persons like the petitioners on the one hand and the R1/R3 on the other hand. Therefore, it is beyond the shadow of doubt that the provisions as in the 1st respondent-
Council's rules referred to above, more particularly, extracted as W.P.C.2241/12 & 25584/11 etc. - : 35 :-
Ext.P3 hereinabove, would certainly be terms and conditions of contract of employment between the petitioners and the R1/R3, that regulates the service conditions as also the terms and conditions for payment of gratuity. Therefore, though this aspect is too elementary, this Court is constrained to take strain on this simple issue, as the respondents strenuously contend that the employees are not entitled to avail the right under Section 4(5), as Ext.P3 rules cannot be said to be a 'contract' or 'agreement' with the employer, as understood in Section 4(5). It is only to determine the issue as to whether Ext.P3 rules amount to a "contract" or an "agreement" with the employer as envisaged in Section 4(5), that this Court is constrained to examine this elementary aspect of the matter. Therefore, as stated hereinabove, Ext.P3 would be a contract of employment or contract of service, which regulates the right of the employees to receive gratuity from their employer. Any or all of the terms and conditions of such contract of employment or contract of service would also come within the general hubric of the terms "contract" or "agreement" with the employer, used in the wordings of Section 4(5). Though the text in Section 4(5) does not expressly speak about a contract of employment/contract of service/contract W.P.C.2241/12 & 25584/11 etc. - : 36 :-
of personal service or an agreement of employment etc., it is too elementary that the context of Section 4(5) refers to nothing but a contract of service or a contract of employment and any terms and conditions regulating the employer-employee relationship as in the instant Ext.P3 rules, would come within the above said expressions used in Section 4(5), in the larger sense.
20. The next issue to be determined is as to whether the provisions in Ext.P3 would offer better terms of gratuity to the employees.
21. In this regard, the learned Standing Counsel for the 1st respondent-Council has raised contentions based on the aspect that they are bound by the directives of the State Government and that that is reason for not paying the full gratuity as due to the petitioners over and above the ceiling limit. Whereas the learned Government Pleader, apart from raising the very same contention, has also a contention that the employees are disentitled for getting higher gratuity amount in view of Section 4(3) and in view of that aspect that they are disentitled from claiming benefit under Section 4(5). In this regard, the learned Government Pleader would contend that the terms and conditions in Ext.P3 can be said to have offered a W.P.C.2241/12 & 25584/11 etc. - : 37 :-
better terms of gratuity than the one envisaged in Section 4(3) only if it is explicitly stipulated in Ext.P3 rules that the ceiling limit of Section 4(3) is not applicable to the respondent-establishments. The provisions in Section 4 has a specific provision in terms of Section 4 (3) that the amount of gratuity payable to the employee shall not exceed Rs. 10 lakhs. The provisions in Ext.P3 do not contain any provision for imposing any ceiling limit as in Section 4(3). Therefore, it is not necessary to stipulate in Ext.P3 rules that the ceiling limit in Section 4(3) is inapplicable, in the facts and circumstances of this case, especially because gratuity exceeding the ceiling limit has always been ensured to these employees, due to the working out of the previous rules and the present rule. It is also to be noted that these employees are not getting any pension. So long as Ext.P3 rules do not contain the provision imposing a ceiling limit as in Section 4(3), then it is clear aspect and consequence flowing out from those provisions that the said provisions in Ext.P3 rules do not contain any ceiling limit as in Section 4(3). This has been so categorically ordered even in Ext.P7 dated 21.5.2010 [produced in W.P.(C).No. 2241/2012] issued by none other than the Executive Head of the respondent-State Council. If the provisions in Ext.P3 do W.P.C.2241/12 & 25584/11 etc. - : 38 :-
not contain any ceiling limit, then it is certainly a better terms of gratuity offered by the employer to the employee, in as much as since the amount of gratuity computable in terms of of Ext.P3 happens to be higher than the ceiling limit of Section 4(3), then such higher amount would become payable to the employee concerned. In other words, the text of Ext.P3 rules has to be read in a wholesome manner, as above said. This is the only reasonable way of the textual reading of Ext.P3 rules, viewed from the context of Section 4(5), enshrining the benevolent legislative provision conferring better right to employees and in the context of the long and consistent past practice in the enforcement of the previous rules and the present rules leading to payment of gratuity based on the formula, in excess of the ceiling limit. Otherwise, the respondent KSCSTE would have certainly stipulated a ceiling limit in Ext.P3 rules, if they wanted to make a departure from the consistent past practice and previous rules, in the matter of payment of gratuity without any ceiling limit. The live context of the matter is clear like the day light from a mere reading of Ext.P7 dated 21.5.2010 issued by the Chief Executive Head of the organization and it is so ordered on 21.5.2010, long after the revision of pay as W.P.C.2241/12 & 25584/11 etc. - : 39 :-
per Ext.P4 dated 8.1.2010 [in W.P.(C).No. 27485/2011]. There is no whisper either in the above said Ext.P4 dated 8.1.2010 or in the G.O. dated 8.1.2010 introducing pay revision, about placing of any ceiling limit for gratuity.
21B. Faced with this situation, the learned Government Pleader then argued that Section 4(3) is mandatory and it is binding on all the employees and that is why the provisions in Ext.P3 are silent about the ceiling limit and notwithstanding the omission to mention about the imposition of ceiling in Section 4(3), the said ceiling limit would automatically apply. This Court is not impressed with this argument. The 1st and 3rd respondents have consciously decided not to impose the ceiling limit in Ext.P3 prescription. It is evident from their pleadings that even before the formation of the 1st respondent-Council, the employees of its R&D centres like KFRI etc. have been consistently paying gratuity over and above the ceiling limit in Section 4(3). This was the position right from the inception of the organizations like KFRI, KSCSTE etc. Later, it was in 2002 that the Government took the initiative to form the 1st respondent-Council, which led to the formulation of Ext.P3 rules with effect from 19.6.2003. All functionaries concerned with the W.P.C.2241/12 & 25584/11 etc. - : 40 :-
functioning of the R-1/R-3 fully knew at the time of the formulation of Ext.P3 rules that even prior to those rules, the employees were being given gratuity based on the formula given in Exts.P1 and P2 without any ceiling limit and if the amounts so calculated as per those formula happened to be higher than the prevailing ceiling limit in Section 4(3), then those gratuity amounts are to be paid to the pensioner concerned. It is with this knowledge and cognizance that the 1st respondent and 3rd respondent have formulated their rules as per Ext.P3. Therefore, it was a conscious decision of the respondents to have a provision for gratuity without any ceiling limit as in Section 4(3). This is clear from a reading of the averments in the counter affidavit filed by the 1st respondent in this case. It is even stated by the 1st respondent that even till date no decision has been conveyed by the Government of Kerala to the 1st respondent regarding any ceiling limit and it is only due to certain other instructions based on audit objections, that they decided to keep in abeyance the payment of higher gratuity amount till a decision is arrived at by the Government. As evident from paragraph 7 of the counter affidavit of the 1st respondent that has no decision fixing a upper limit for payment of gratuity to the Council employees has W.P.C.2241/12 & 25584/11 etc. - : 41 :-
been till date communicated by the Government, the natural corollary is that the Rule 14.1 is applicable to the retiring employees. Since the competent authorities of the 1st and 3rd respondents have expressly stated about the formula for payment of gratuity in Ext.P3 and have consciously omitted to stipulate about any ceiling limit, the logical corollary that flows from it is that the employer is offering a better terms of gratuity than the one envisaged in Section 4(3). The employer has the freedom to do this. The scope and role of the Government to interfere with this process is only by impressing upon the 1st respondent-Council authorities to get the rules amended in the manner known to law or they are at liberty to withdraw from their funding, if there is disobedience to such directives. When this is the position, it is only to be held that the provisions in Ext.P3 so long as it do not contain a provision for imposing a ceiling limit as Ext.P3, is certainly a better terms of gratuity than the one envisaged in Section 4(3). Then certainly, the provisions in Section 4(5) will come into full play. The provisions in Section 4(5) mandate that nothing in this Section, viz., Sec. 4, shall affect the right of an employee to receive better terms of gratuity under a contract W.P.C.2241/12 & 25584/11 etc. - : 42 :-
or agreement or award etc. with the employer. It may be noted that Section 4(3) of the Act reads as follows: "The amount of gratuity payable to an employee shall not exceed ten lakh rupees" and Section 4(5) reads as follows: "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." Therefore, notwithstanding any of the other provisions in Section 4 including Section 4(3), the right envisaged in Section 4(5) would come into full play and that would have overriding effect, notwithstanding the other provisions as in Section 4(3), imposing ceiling limit.
22. A similar situation, though in the context of tie up with the LIC involving an employer, came up for consideration before the Division Bench of this Court in the case Nedupuzha Service Co-
operative Bank Ltd. v. Rugmini reported in 2011 (3) KLT 134 (referred for short Rugmini's case).
23. In Rugmini's case, the employer co-operative society therein had a tie up with the LIC, whereby they paid the premiums to LIC so as to ensure that ultimately the gratuity amounts payable to their employees at the time of retirement, will be paid by the LIC to the employer, which in turn would release it to the employee W.P.C.2241/12 & 25584/11 etc. - : 43 :-
concerned. There was nothing in the policy limiting the gratuity entitlement for employees upto the statutory limit, which is evident from a reading of paragraph 4 of the Rugmini's case. In most of the cases, the co-operative society paid only those amount of premiums in such a manner that the ultimate gratuity amount payable was to the level of the ceiling limit imposed. But in a few cases, the co- operative society-employer paid gratuity, which led to a situation whereby the amount of gratuity payable through the LIC mechanism happened to be much higher than the ceiling limit imposed in Section 4(3) of the Payment of Gratuity Act. The co-operative society contended that the employees are entitled only to get gratuity at the level of the ceiling limit imposed in Section 4(3). The issue raised in W.A.No.197 of 2010 was considered by the Division Bench in para 5 of Rugmini's case supra was as to whether excess amount over and above the statutory limit received by the employer under the LIC policy for retired employees should be given to those retirees or whether the same could be retained by the employer bank. The employer contended that the policies are taken by them from the LIC and that their liability in terms of the provisions of the Payment of Gratuity Act is limited to the statutory limit imposed and the W.P.C.2241/12 & 25584/11 etc. - : 44 :-
excess gratuity amount received under the individual account of the employees over and above the statutory limit cannot be paid to the retirees, but should be taken by the employer. The retired employees, on the other hand, contended that they are entitled to receive the entire amount payable by the LIC for the policies taken by the appellant-Co-operative Society. The Division Bench in Rugmini's case, (viz., W.A.No.197/2010) in para 5, held that there is no justification for the appellant-employer to contend that the policy benefit should go to the employer and the Bench held that the arrangement made with the LIC for payment of gratuity to the retired employees is squarely covered by Section 4(5) of the Payment of Gratuity Act, which mandates that the employer and employee can have separate arrangement for gratuity, if the terms of the same are better to the employees. The Division Bench relied on the judgment of the learned Single Judge in Retnavalli v. Ambalapadu Service Co-operative bank Ltd. reported in 2005 (3) KLT 320. The following aspects are very relevant with regard to the applicability of the above said Division Bench decision. In that case, there was nothing in the policy taken by the employer with the LIC, which limited gratuity entitlement of the employees upto the W.P.C.2241/12 & 25584/11 etc. - : 45 :-
statutory ceiling limit and this resulted in a situation, whereby the gratuity amount was payable to the retirees, which was higher than the ceiling limit imposed by Section 4(3) of the Act. Even an arrangement made by the employer with the LIC to ensure payment of gratuity to the employee was held by the Division Bench to be an arrangement that comes within the protective umbrella of Section 4 (5), as it offers a better terms of gratuity to the employee. The Division Bench in effect was not inclined to go into the hyper technicalities to see whether there was a contract of employment between the employer and the employee. Even the arrangement made with the third party like the LIC was held in W.A.No. 197 of 2010 to be a matter which regulates the terms and conditions that governs of payment of gratuity by the employer to the employee.
Even such an arrangement with the third party like the LIC was held to be an arrangement which gets the protective umbrella under Section 4(5), essentially as it is offering a better terms of gratuity to the employee. Therefore, while interpreting a benevolent legislation, which was primarily meant for the welfare of the retirees, the court has to take a purposive mode of interpretation. A contextual interpretation is all the more important and imperative and Courts W.P.C.2241/12 & 25584/11 etc. - : 46 :-
will not merely insist on clinching to the literal words in the text of the Section. The text of the Section 4(5) is no doubt important, but the context is all the more important. Therefore, in this case also there is an arrangement between the 3rd respondent-employer and the LIC for ensuring payment of gratuity to the employees. Premiums have been paid by the employer to the LIC in such a manner that the gratuity payable is fully in terms of Ext.P3, wherein there is no provision for ceiling limit. Those amounts have become fully fructified and the LIC has even released those payments to the 3rd respondent-employer as can be seen from Exts.P4 and P5. Exts.P4 and P5 are the amounts released by the LIC in respect of petitioners 1 and 2 in W.P.(C).No. 25584/2011. The learned Standing Counsel for the 1st respondent would submit that in view of the aspects arising out of the intervention of the Government, which resulted in the impugned Ext.P8 order, they have disbursed only gratuity upto Rs.10 lakhs and the balance amount released by Exts.P4 and P5 have been withheld by them. As held by the Division Bench in Rugmini's case and by the learned Single Judge in Retnavalli's case (supra), the amount received from the LIC by the employer is an amount held by them in trust for the benefit of the W.P.C.2241/12 & 25584/11 etc. - : 47 :-
retiree. The said excess amount over and above certainly is not the property of the LIC. The LIC has in fact disbursed the amounts fully to the employer. It is certainly not the property of the employer. They are holding it only in trust for the beneficiaries, who is none other than the retiree concerned. Those excess amounts therefore are certainly and surely the property of the retiree, which if withheld by any of the respondents, it is nothing but confiscatory and amounts to unlawful appropriation of property of the pensioner. It is trite law that the retiral benefits like provident fund, gratuity etc. are the property of the retiree and it is the proprietary right as envisaged in Article 300A of the Constitution of India. It could have been appropriated or reduced only by due amendment process of rules. So long as it is not amended, it is the sole property of the pensioner and withholding of such amount at the instance of the respondents is nothing but confiscation of the precious proprietary right of the pensioner.
24. Sri.Sunil Cyriac, learned Special Government Pleader (Finance) also contended that the decision rendered by the Division Bench In Rugmini's case that the arrangement by the employer with the LIC is also entitled for protection under Section 4(5) of the W.P.C.2241/12 & 25584/11 etc. - : 48 :-
Payment of Gratuity Act, has been wrongly decided. This Court is bound by the decision rendered by the Division Bench. That apart, since this contention of the learned Government Pleader on behalf of the respondent-State is absolutely untenable, this Court is proposing to deal with this contention as well.
25. This Court in Retnavalli's case (supra) held that the amount paid by the LIC is held by the employer in their trust for the benefit of the beneficiaries of the trust, viz., the retired employees concerned. In another decision, this Court, relying on the decision in Retnavalli's case (supra), held in the case K.P.Varghese v. LIC of India [W.P.(C).No. 27863/2009-judgment dated 27.7.2010] that not only the amounts paid by the LIC to the employer is held by the employer in trust, but also that the retired employee as beneficiary of the policy also has privity of contract in the larger sense, to enable them to seek recovery of the policy amount that is short paid.
26. The scope and ambit of various terms and conditions that may regulate a contract of service/contract of employment have been dealt with hereinabove. Due to several developments that have taken place in our economy and society, even the degree of control W.P.C.2241/12 & 25584/11 etc. - : 49 :-
of a master/employer over a serving employee has undergone a drastic change. In the modern context, it may not always be possible for an employer for strict control and supervision over the nature of the work done by the employee. The aforementioned paragraph 4 of Halsbury's Laws (vol.39) has stated that "control test" can no longer be considered sufficient, especially in the case of employment of highly skilled individuals and that more recently the "integration" or "organisation" test had been suggested, proposing that the important question was whether the person was integrated into the enterprise or remained apart from, and independent of it, etc. Various changes have happened in our employment scenario, due to unprecedented drastic changes in the economy, which has also drastically changed the core and penumbra of employment jurisprudence. Section 4A(1) of the Payment of Gratuity Act also envisages the tie up of the employer with insurance corporation like the LIC in order to effectuate payment of gratuity amount to the retiree concerned. It appears from the reading of Retnavelli's case (supra) reported in 2005 (3) KLT 320 that Section 4A(1) has not been notified by the Government of Kerala in its application to State of Kerala till date. But the W.P.C.2241/12 & 25584/11 etc. - : 50 :-
Parliament in its wisdom has recognised the tie up between the employer and the insurance corporation like the LIC. True that the executive Government has not so far notified the said provision in its application to the State of Kerala. But the fact that the Parliament has recognised the tie up between the employer and LIC is very important in this context. It is not as if an insurance corporation like the LIC is a total stranger in the matters relating to the affairs of the regulation of payment of gratuity of a retiree. Even if Section 4A(1) is not notified its application in the State of Kerala, where an employer has tie up with a insurance corporation like the LIC, primarily to ensure and effectuate the payment of gratuity to the retiree, any terms and conditions that the insurance corporation will also have an intimate connection and impact on the service conditions affecting the employees concerned. Therefore, this Court has no hesitation to hold that such matters relating to the tie up between the employer and the LIC or such other insurance companies would also be construed as terms and conditions in the matter of regulation of payment of gratuity by the employer to the employee in as much as the arrangement with the insurance corporation as arrived at by the employer only for effectuating W.P.C.2241/12 & 25584/11 etc. - : 51 :-
payment of gratuity to the employee concerned. Therefore, those matters are also terms and conditions that regulate the payment of gratuity by the employer to the employee in the larger sense. Hence, such terms and conditions between the employer and the insurance company would also be the terms and conditions affecting the gratuity of the employees, in the larger sense, as it directly affects payment of gratuity to the retirees. It is in this context, that the principles laid down by the Division Bench in Rugmini's case and by the learned Single Judge in Retnavalli's case (supra) should be appreciated and understood. Therefore, the arrangement between the employer and the LIC also amounts to terms and conditions affecting the contract of employment or contract or service between the employer and the employee in the larger sense, to the extent it regulates payment of gratuity and, therefore, such an arrangement could come within the protective umbrella of Section 4(5) of the Act as concluded by the Division Bench. This Court, after relying on the Retnavalli's case has held in K.P.Varghese's case (supra) that not only that there is an element of trust-beneficiary relationship but also there is also privity of contract in the larger sense to enable the retired employee to have standing to sue for short paid amount.
W.P.C.2241/12 & 25584/11 etc. - : 52 :-
Therefore, these conclusions of the Division Bench in Rugmini's case and by the learned Single Judge in Retnavalli's case and K.P.Varghese's case (supra) have been made, fully going into not only the test of Section 4(5) but also appreciating the context of Section 4(5) as emerging in the facts and circumstances in the modern development of tie up with LIC, more particularly as it is an arrangement which is explicitly recognised by the Parliament in Section 4A(1) of the Act. Hence, this Court has no hesitation to hold that the contention raised by the learned Special Government Pleader that the decision by the Division Bench in Rugmini's case in W.A.No. 197/2010 has been wrongly decided, is absolutely devoid of any merit and such a contention is raised only based on hyper technicalities seeing only the text and not understanding the context of the matter. This Court has no hesitation to hold that the petitioners herein are fully entitled to claim the protective umbrella of Section 4(5) of the Act, in the facts and circumstances of this case and that they are entitled to the higher amount of gratuity as computed in terms of the provisions Section 4(3) of the Act.
27. The learned Standing Counsel, Sri.George Zachariah also contended that the arrangement with the LIC is only an internal W.P.C.2241/12 & 25584/11 etc. - : 53 :-
arrangement between the 3rd respondent and the LIC. Sri.George Zachariah, the learned Standing Counsel for the 1st respondent- Council, on the basis of the pleadings in paragraphs 5, 8 and 9 of the counter affidavit of the 1st respondent, submitted that since the petitioners are enjoying the advantages of CSIR scales of pay based on the Government of India pay revision orders, they should be burdened with the disadvantages that are attached with the Central Government pay revision order. This argument is only to be repelled in any view of the matter. The Central Government has no direct role in the functioning of the 1st respondent-State Council and have no power to issue any directives to the 1st respondent-State Council. It is for the Central Government to prescribe pay revision in respect of CSIR scale of pay Central Personnel in the manner they deem fit. It is for the 1st respondent-Council to decide whether or not to adopt it based on the recommendation in that regard of the Government of Kerala, if any. Therefore, the prescription in the Central Government order regarding the limitation of gratuity to CSIR scales of pay personnel at Rs. 10 lakhs can has no application to the employees of the 1st and 3rd respondents insofar as they are fully governed by Ext.P3 rules alone. More over, unlike the Central Government order, W.P.C.2241/12 & 25584/11 etc. - : 54 :-
which is stated to have expressly stipulated restriction for gratuity amount pursuant to the Central Pay Revision Order for Central Personnel, neither in Ext.P4 dated 8.1.2010 (produced in W.P.(C).No. 27845/12) nor in G.O(Ms.) 1/2010/S&TD dated 8.1.2010 introducing pay revision for these employees of R1 State Council, is there any whisper about even any proposal for restricting the gratuity payable to any ceiling limit. It is long thereafter that Ext.P7 dated 21.5.2010 has been issued by none other than the Executive Head of R-1 State Council that gratuity will be continued to be paid without any ceiling limit as has been consistently provided in their rules.
28. The petitioners 1 & 2 in W.P.(C).No. 25584/2011 filed on 26.8.2011 are the beneficiaries of Ext.P4 proceedings dated 7.9.2011 and Ext.P5 proceedings dated 10.11.2011 produced in W.P.(C).No. 2241/2012, for the claimed gratuity amounts without any ceiling limit. It is clearly admitted in para 5 of the counter affidavit dated 28.6.2014 filed by R1 & R2 in W.P.(C).No. 2241/2012 that the about said gratuity claims of Dr.Renuka and Dr.George Mathew (viz., 1st and 2nd petitioners in W.P.(C).No. 25584/2011) were released as per the above said Exts.P4 and P5, based on their W.P.C.2241/12 & 25584/11 etc. - : 55 :-
entitlements as per the KSCSTE rules. It is further admitted in para 3 on page 2 of the counter affidavit of R4 in W.P.(C).No. 2241/2012 that R4 (State Government) cannot impose any direction to limit excess payment of gratuity. So in view of this admitted and indisputable position, there cannot be any legally sustainable objections for the respondents, in the matter of payment of the above due gratuity amounts, without any ceiling limit, as per the rules.
29. The determination of the issues in these cases are solely dependent on the determination of the issues referred to in paras 11 & 20 supra of this judgment, which is fully in favour of the petitioners herein as per the subsequent paragraphs upto para 21 of this judgment. The further discussion from paras 22 to 26 of this judgment was made, as both sides elaborately dealt with the decisions of this Court in Rugmini's case (supra) and Retnavally's case (supra) as the gratuity arrangement in the respondent Kerala Forest Research Institute (KFRI) is having a tie up with the LIC of India, which is applicable only in W.P.(C).No. 2241/2012 & 25584/2011. The other Writ Petitions are concerned with personnel from institutions other than KFRI and such institutions like CESS do W.P.C.2241/12 & 25584/11 etc. - : 56 :-
not appear to have a tie up with and insurance company for effectuating payment of gratuity. It is to be noted that irrespective as to the tie up with the insurance corporation for gratuity payment, the employers concerned herein are liable to pay the gratuity amounts to their employees concerned, without any ceiling limit, so long as they are governed by the Ext.P3 rules of the umbrella organisation, viz., KSCSTE. This is because this liability is only dependent on the primary issues raised in paras 11 and 20 of this judgment and decided in favour of the employees. So this finding is irrespective of the subsequent aspects dealt with in paras 22 to 26 of this judgment. So the main issue raised and decided in paras 11 to 21 of this judgment are equally applicable to the other Writ Petitions in respect of the same dispute for seeking gratuity without any ceiling limit, in the institutions other than KFRI, but which are covered by Ext.P3 rules of the respondent KSCSTE, even though the latter may not have any insurance tie up.
30. In the result, the impugned rejection orders are quashed and W.P.(C).No. 2241/2012 & W.P.(C).No. 25584/2011 are allowed to the extent of directing the respondents concerned to pay immediately the full gratuity, without any ceiling limit if not already W.P.C.2241/12 & 25584/11 etc. - : 57 :-
paid and in case, part thereof, has already paid, then to pay the balance gratuity amounts as above said to the retiree petitioners concerned within one month from the date of production of certified copy of this judgment. If the above said amounts are not paid within the above said time limit, then the said amounts shall carry interest @ 10% p.a. effective from two months from the respective date of retirement of the retiree petitioners concerned upto the date of actual payment. The Writ Petitions (Civil), W.P.(C). No. 2241/2012 & W.P.(C).No. 25584/2011 are allowed, to the above extent.
There will be no order as to costs.
W.P.(C).Nos.26114/2011, 27835/2012, 27836/2012, 27845/2012 & 2235/2012:
31. The employer concerned in these cases is the respondent Centre for Earth Science Studies (CESS). Though this organisation do not appear to have any insurance tie up for effectuating for gratuity payment, it is covered by the same set of rules of the respondent Kerala State Council for Science, Technology & Environment (KSCSTE). The main issues raised and decided in W.P.(C).No. 2241/2012 & 25584/2011 in favour of the employees, are W.P.C.2241/12 & 25584/11 etc. - : 58 :-
irrespective as to the aspects relating to the insurance tie up. So the decision in the judgment in W.P.(C).No. 2241/2012 & W.P.(C).No. 25584/2011 on the primary issue of liability to pay the gratuity without any ceiling limit, is equally and fully applicable to the petitioners in these Writ Petitions, who are employees of the respondent CESS, who are governed by the same rules of the respondent KSCSTE. Hence the decision on those issues and the directions issued in the judgment in W.P.(C).No. 2241/2012 and W.P.(C).No. 25584/2011 are applicable in these Writ Petitions (Civil), as well.
32. Accordingly, W.P.(C).Nos.26114/2011, 27835/2012, 27836/2012, 27845/2012 & 2235/2012 are allowed to the extent of directing the respondents concerned in these cases to pay immediately the full gratuity amounts without any ceiling limit, if not already paid and in case, part payment thereof has already been made, then to pay the balance gratuity amounts as above said to the retiree petitioners concerned within one month from the date of production of the certified copy of this judgment in the cases concerned. If the above said amounts are not paid within the above said time limit, the said amount will carry interest @ 10% p. a W.P.C.2241/12 & 25584/11 etc. - : 59 :-
effective from two months from the respective date of retirement of each of the retiree petitioner concerned upto the date of actual payment. These Writ Petitions (Civil) are thus allowed, to the above extent.
33. Before parting with these cases, this Court is constrained to remind the State Government about the crucial observations made in paras 15 and the final part of para 17 of the judgment of this Court in Retnavally's case supra reported in 2005 (3) KLT 320, p.p.329-331, which are quoted below:-
'15. In this connection, it may be noted that the law maker also wanted, not only Co-operative Societies but also every employer in the Country, to whom the Payment of Gratuity Act is applicable, to compulsorily subscribe to such Schemes of the L.I.C. or other prescribed insurer for insuring his liability for payment of gratuity to his employees, which is clear from S.4A of the Payment of Gratuity Act, 1972. S.4A reads thus:
date as"4A.mayCompulsory by the appropriate Government in this insurance:-- (1) With effect from such be notified behalf, every employer, other than an employer or an establishment belonging to, or under the control of the Central Government or a State Government shall, subject to the provisions of sub-s.(2), obtain an insurance in the manner prescribed, for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India established under the Life Insurance Corporation of India Act, 1956 (31 of 1956) or any other prescribed insurer:
Provided that different dates may be appointed for different establishments or class of establishments or for different areas.
(2) The
conditions as may be prescribed,may,
appropriate Government subject to such
exempt every employer
who had already established an approved gratuity fund in respect of his employees and who desires to continue such arrangement, and every employer employing five hundred W.P.C.2241/12 & 25584/11 etc. - : 60 :-
or more persons who establishes an approved gratuity fund in the manner prescribed from the provisions of sub-s.(1). (3) For the purpose of effectively implementing the provisions of this section, every employer shall within such time as may be prescribed get his establishment registered with the controlling authority in the prescribed manner and no employer shall be registered under the provisions of this Section unless he has taken an insurance referred to in sub-
s.(1) or has established an approved gratuity fund referred to in sub-s.(2).
(4) The appropriate Government may, by notification, make rules to give effect to the provisions of this section and such rules may provide for the composition of the Board of Trustees of the approved gratuity fund and for the recovery by the controlling authority of the amount of the gratuity payable to an employee from the Life Insurance Corporation of India or any other insurer with whom an insurance has been taken under sub-s.(1), or as the case may be, the Board of Trustees of the approved gratuity fund. (5) Where an employer fails to make any payment by way of premium to the insurance referred to in sub-s.(1) or by way of contribution to an approved gratuity fund referred to in sub-s.(2), he shall be liable to pay the amount of gratuity due under this Act (including interest, if any, for delayed payments) forthwith to the controlling authority. (6) Whoever contravenes the provisions of sub-s.(5) shall be punishable with fine which may extend to ten thousand rupees and in the case of a continuing offence with a further fine which may extend to one thousand rupees for each day during which the offence continues.
Explanation:-- In this section, "approved gratuity fund" shall have the same meaning as in clause (5) of S.2 of the Income Tax Act, 1961 (43 of 1961)."
This Section was inserted in the Act by Act No.22 of 1987 with effect from 1.10.1987 giving liberty to the appropriate Government to notify the date of coming into effect of the said Section. But, alas, the Government of Kerala does not appear to have notified the commencement of this Section in the State of Kerala. The fact that Exts.R3(a) to R3(c) and R3(e) issued in 1995 also do not refer to the adoption of the Scheme of the L.I.C. as compulsory also would suggest that S.4A has not been notified for commencement in the State of Kerala. It is unfortunate that successive Governments, which proclaimed themselves to be committed to the upliftment of W.P.C.2241/12 & 25584/11 etc. - : 61 :-
the working class, have not thought it fit to bestow their attention to such an important but simple matter which provides for better terms of gratuity to employees without any corresponding financial burden on the employer. It is sad that such a progressive and beneficial legislation is given scant attention although there is absolutely no financial commitment to the Government in respect of such subordinate legislation. Further obtaining such insurance will effectively reduce thegratuity employers regarding disputesand between the employees and consequent litigation, considerably relieving the designated controlling authorities and appellate authorities under the Act of considerable workload in that regard.
16......
17......
ferventBeforethat the Government of Kerala will, at least now, wake parting with this case, I would like to express a hope up from slumber and consider the question of notifying the coming into effect of S.4A of the Payment of Gratuity Act, 1972, in the State of Kerala, without further delay. To alert the Government in this regard, a copy of this judgment will be forwarded to the Chief Secretary to Government.' It appears that till date, the State Government has not taken any decision on the question of notifying the coming into effect of Section 4A of the Payment of Gratuity Act, 1972, which have been introduced by the Parliament by the Central Amendment Act 22 of 1987, vide Sec. 5 thereof. Accordingly, the State of Kerala, through the Chief Secretary and the Labour Secretary are directed to ascertain whether any decision has been taken pursuant to the above said observations made in Retnavall'is case rendered as early as on 16.5.2005, on the question of notifying Sec.4A introduced by the Parliament through amendment made as early as in 1987. In W.P.C.2241/12 & 25584/11 etc. - : 62 :-
case, no such decision on the question as to whether to notify the coming into force of Sec. 4A, in the State of Kerala has yet been taken, then the State Government shall take a decision on that matter without any further delay, as observed in Retnavalli's case supra.
After examining the matter by the Chief Secretary and the Labour Secretary, it is further ordered, that within six weeks from the date of production of the certified copy of this judgment, the Labour Secretary to Government of Kerala will file an affidavit about the present position and as to the steps taken till now pursuant to the judgment dated 16.5.2005 of this Court in Retnavalli's case (supra), on the above said issues of notifying the coming into force of Sec.4A etc. Such affidavit should state as to whether the group gratuity scheme of Life Insurance Corporation of India, will be to the benefit of not only the employees but also the employers, who may be greatly relieved in managing the burden of gratuity payment through such group gratuity schemes of LIC of India, on the notification of coming into force of Sec.4A of the Payment of Gratuity Act. The Registry will forward certified copies of this judgment to the Chief Secretary to Government of Kerala and the W.P.C.2241/12 & 25584/11 etc. - : 63 :-
Secretary to Government of Kerala in the Labour Department, for further necessary action in this regard.
There will be no order as to costs.
Sd/-
sdk+ ALEXANDER THOMAS, JUDGE
///True copy///
P.S. to Judge