K.K. Mary vs Kerala Co-Operative Tribunal on 16 March, 2022

[Cites 18, Cited by 0]

Kerala High Court

K.K. Mary vs Kerala Co-Operative Tribunal on 16 March, 2022

W.A No.1509/2021 arises out of the impugned judgment dated 02.11.2017 rendered by the learned Single Judge, dismissing W.P(C) No.14773/2013, as confirmed by the final order dated 19.03.2021 dismissing R.P No.942/2019 in that W.P(C). Whereas, W.A No.1547/2021 arises out of the impugned judgment dated 02.11.2017 rendered by the learned Single Judge, dismissing W.P(C) No.14774/2013, as confirmed by the final order dated 19.03.2021 dismissing R.P.No.952/2019 in that W.P(C).

2. Heard Sri. Ashok B. Shenoy, learned counsel appearing for the appellants in these two appeals, Smt. Rosin Joseph, learned Advocate appearing for R3 (Co-operative Society-Employer), in these cases and Sri.Saigi Jacob Palatty, learned Senior Government Pleader appearing for W.A Nos.1509 & 1547 of 2021 2 R4 to R6 in these cases. Notices to R1 (Kerala Co-operative Tribunal) & R2 (Co-operative Arbitration Court), being adjudicatory Fora, will stand dispensed with.

3. The main issue raised in these cases is as to whether the beneficial provision contained in the proviso to Rule 59 of the Kerala Co-operative Societies Rules, 1969, (in short "KCS Rules") as it stood prior to the statutory amendment made thereto prospectively w.e.f. 02.11.2010, can be treated as better terms of gratuity, as conceived in the beneficial provision contained in Sec.4(5) of the Payment of Gratuity Act, 1972 (Central Act 39 of 1972) ? The contention raised by the learned Advocate appearing for R3 (Co-operative Society employees) in these cases, is that, any "award" or "agreement" or "contract" explicitly enumerated in Sec.4(5) of the Central Act alone would come within the beneficial provision in the central enactment and that a statutory rule, as in Rule 59 proviso framed under Sec.80(3) of the Kerala Co-operative Societies Act (State Act 21 of 1969) (in short "KCS Act"), will not come within the three categories mentioned in Sec.4(5) and that the said three categories mentioned in Sec.4(5) are exhaustive and no other category is included therein, etc.

4. Whereas, the case of the appellants is that, if the beneficial provision, granting conceding gratuity higher than the ceiling limit in terms W.A Nos.1509 & 1547 of 2021 3 of Sec.4(3) of the Act, is made on the basis of a statutory rule, as in the present case, then the same would stand on a higher pedestal or at least on an equal footing, as the three categories mentioned in Sec.4(5) of the Central Act and that, the three categories mentioned in Sec.4(5), are not exhaustive and that the beneficial provision that is given on the basis of a statutory rule framed by the State Government, which provides for a gratuity amount higher than the ceiling limit, stipulated under Sec.4(3) of the Central Act, would also get the beneficial protection under Sec.4(5) of the said Act.

5. After hearing all the parties concerned, we are inclined to accept the abovesaid submission of the appellants in these cases and so, we are constrained to overrule the abovesaid contention raised by the 3rd respondent Co-operative Society-Employer. The reasons for arriving at this conclusion will be dealt with hereinafter.

6. A brief recital of the factual details in these cases would be pertinent. Both the appellants/writ petitioners had retired from service and thereafter, they had made their claim for payment of gratuity, higher than the ceiling limit under Sec.4(3) of the Act, before the State Arbitration Court and later before the Co-operative Appellate Tribunal and the said contentions of the appellants have been concurrently overruled by both the W.A Nos.1509 & 1547 of 2021 4 said Fora. Hence, the appellants herein preferred the aforementioned Writ Petitions (Civil), in which the pleas have also been rejected by the learned Single Judge and the review petitions preferred by them have also been repelled by the learned Single Judge, as above.

It is averred by the appellant in W.A No.1509/2021 in his W.P(C) that he was having a basic pay of Rs.24,140 and D.A of Rs.9,897/- at the time of his retirement and so, his total wages would be Rs.34,037/-. It is also disclosed that he had joined service of the respondent society on 18.11.1971 and he had retired from service on 31.07.2007 and so he has total qualifying service of 35 years 6 months and 13 days, which could be rounded off to 36 years, as per the norms for gratuity computation. The appellant in W.A No.1547/2021 has clearly averred in the above W.P(C) that her basic pay was Rs.18,940/- and Dearness Allowance of Rs.13,806/- at the time of retirement and thus, her total wages, for the purpose of gratuity computation, would be Rs.32,766/-. Further, it is stated that she had joined service of the respondent Society on 08.06.1978 and she had retired from service on 31.12.2009 and thus, she has 31 years 6 months and 23 days of qualifying service, which could be rounded off to 32 years. These factual details are also disclosed in the arbitration reference proceedings and the appellate tribunal proceedings produced at Exts.P-2 & P-3, in each W.A Nos.1509 & 1547 of 2021 5 of these W.P(C)s. These factual details are not in any manner controverted. No counter affidavits have been filed by the respondent Society in these W.P(C)s and so these factual details are admitted by them. Further, a reading of the ARC proceedings and the appellate tribunal proceedings would indicate that the respondent society has no serious dispute about these factual details. Even in the counter affidavits, filed by the society in these writ appeals, there is no such denial or dispute on the above elemental factual aspects and their afore pleadings are mainly on legal contentions. So, in other words, the above factual details regarding the total wages, the number of qualifying years of service for gratuity computation and dates of retirement are not in dispute in these proceedings. It has to be borne in mind that, after resolution of the legal issues mentioned herein above, the factual aspects to be applied to the above legal position are quite simple and what is to be examined is as to whether the gratuity due to the appellants is in terms of Rule 59 of the KCS Rules (as it stood at the time of retirement of the appellants) and as to whether the said amount, so computed as per the KCS Rules, is higher than the ceiling of Rs. 3.5 lakhs, as per Sec. 4 (3) of the Central Act. If it is found that the amount so computed, on the basis of the formula in terms of Rule 59 of the KCS Rules, as it stood then, is higher than the ceiling limit of W.A Nos.1509 & 1547 of 2021 6 Rs.3.5 lakhs, then if the afore legal issue is decided in favour of the appellants, it is only to be consequentially held that the said higher amounts are due to the appellants, etc. So, in other words, if the legal issue is resolved in favour of the appellants, then its application is quite easy and simple, as there is no dispute regarding the factual details of basic pay, dearness allowance, number of qualifying years of service, date of retirement, etc.

7. Sec.2(s) of the Central Act defines "wages" as to mean all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance. Thus, both the basic pay and the dearness allowance can be reckoned as the wages of the claimants concerned, going by the definition contained in Sec.2(s) of the Central Act.

8. We are apprised by Sri.Ashok B.Shenoy, learned counsel appearing for the appellants in these cases that, going by the norms fixed by the Government Order, related to District Co-operative Banks, the pay is treated as inclusive of all other allowances, not only dearness allowance but certain other allowances as well. However, the learned Senior Government W.A Nos.1509 & 1547 of 2021 7 Pleader has cautioned us that, for the purpose of computation of gratuity, ordinarily, the basic pay and dearness allowance alone should be taken into account. Hence, to avoid any further dispute, we proceed with the premise that the gratuity claims of these appellants can be reckoned only on the basis of wages, as computed on the formula that it consists of only basic pay + dearness allowance. Going by this indisputable approach, the total wages/total pay of the appellant in the former W.A, would be Rs.24,140/- (basic pay) + Rs.9,897/- (DA) = Rs.34,037/-. So also, the total wages/total pay of the appellant in the latter W.A, would be Rs.18,940/- (Basic Pay) + Rs.13,826/- (DA), thus amounting to Rs.32,766/-. As mentioned hereinabove, the facts relating to total wages, number of qualifying years of service, dates of retirement, etc., are not in dispute.

9. In the case of an employee, who retires on superannuation, the right to secure gratuity will stand accrued from the date of his retirement on superannuation, going by Sec.4(1) of the Central Act. Sec.7(3) of the Central Act would mandate that the due gratuity amount shall be paid by the employer to the claimant, within 30 days from the date on which it becomes payable. Going by the stipulation contained in the operative portion of sub-section (2) of Sec.4 of the Central Act, for every completed year of service or part thereof in excess of six months, the employer shall W.A Nos.1509 & 1547 of 2021 8 pay gratuity to an employee at the rate of 15 days' wages, based on the rate of wages last drawn by the employee concerned. The two provisos at the Explanation appended to Sec.4(2), are not relevant for the present case. However, the Explanation appended to Sec.4(2) would stipulate that, in the case of a monthly rated employee, 15 days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by 26 and multiplying the quotient by 15 (viz., 15/26 days' formula).

10. The next most crucial provision contained in the Central Act is the one adumbrated in Sec.4(3) thereof, which mandates that the amount of gratuity payable to an employee shall not exceed such amount, as may be notified by the Central Government from time to time and the provisions contained in Sec.4(3), at the time of retirement of these appellants, stipulated that the amount of gratuity payable to an employee, shall not exceed Rs.3,50,000/- [later, the said ceiling limit of Rs.3.5 lakhs was enhanced as Rs.10 lakhs and subsequently, an amendment was made in Sec.4(3), which stipulated that the amount of gratuity payable to an employee, shall not exceed such amount, as may be notified by the Central Government from time to time and this provision appears to have been made prospectively w.e.f 29.03.2018. We are not concerned with those enhanced figures and amended provisions, as what is relevant is the law as W.A Nos.1509 & 1547 of 2021 9 per Sec.4(3), as it stood at the time of retirement of these claimants]. So, there is no dispute that, at the time of retirement of these appellants, the ceiling limit prescribed in Sec.4(3) of the Central Act, was upto Rs.3.5 lakhs. However, Sec.4(5) further clearly mandates that nothing in Sec.4 will affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.

11. Sec.4(5) of the Central Act reads as follows :

"Sec.4 Payment of gratuity (1) ....................

XXX XXX XXX XXX XXX XXX (5) 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."

12. Sec.7(3A) mandates that if the amount of gratuity payable under Sec.7(3) is not paid by the employer within the period specified therein, the employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the Central Government from time to time for repayment of long-term deposits, as that Government may, by notification, specify. Proviso to sub-section (3A) of Sec.7 further stipulates W.A Nos.1509 & 1547 of 2021 10 that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment on this ground, etc.

13. Sec.14 of the Central Act clearly mandates that the said Central Act shall override other enactments and it is mandated therein that the provisions of the said Central Act or any Rule made thereunder shall have the effect, notwithstanding anything inconsistent therewith, contained in any enactment other than the said Act or in any instrument or contract, having effect by virtue of any enactment other than this Act, etc.

14. Now, it will also be pertinent to refer to some of the relevant provisions of the Kerala Co-operative Societies Act and the Rules framed thereunder, since both the appellants are employees of the 3 rd respondent, which is a co-operative society registered under the provisions of the said State Act and the Rules framed thereunder. Sec.62 of the Kerala Co-operative Societies Act deals with gratuity and it is stipulated therein that the employees of a society shall be entitled to gratuity at such rates and on such conditions as prescribed. Sec.80(3) of the said State Act stipulates that the Government (meaning the State Government) shall make rules, either prospectively or retrospectively, regulating the qualification, W.A Nos.1509 & 1547 of 2021 11 remuneration, allowances and other conditions of service of the officers and servants of the different classes of societies specified in sub-section (1) thereof. Rule 59 of the Kerala Co-operative Societies Rules framed under the abovesaid State Act deals with gratuity. The said provisions contained in the said Rule 59 contains an operative portion and initially contained only a sole proviso thereto. Later, an amendment was made prospectively, with effect from 02.11.2010, as per SRO 1005/2010, published in Kerala Gazette Volume 55, No.2427, whereby the sole proviso was re-numbered as the first proviso and a new proviso was introduced as the second proviso to Rule 59. There is no dispute that the abovesaid amendment to Rule 59, introducing the second proviso, replacing the existing sole proviso as the first proviso thereto, has been made only prospectively w.e.f 02.11.2010. Since both the appellants have retired from service on 31.07.2007 and 31.12.2009 respectively, the amendment, made prospectively w.e.f 02.11.2010, will not affect their claims of gratuity, since the right to gratuity has been accrued to them on their respective dates of retirements, going by the mandate contained in Sec.4(1) of the Central Act as well as the operative portion of Rule 59. So, the gratuity claims of these appellants will have to be adjudged with reference to the provisions in the abovesaid statute book, as it stood at the time of their retirement from service. The W.A Nos.1509 & 1547 of 2021 12 operative portion and the sole proviso, as it stood prior to 02.11.2010, provided as follows :

"Rule 59. Gratuity.- Every society shall make in its bye- laws provision for payment of gratuity to its employees and frame regulations for its administration. Among other matters such regulations shall provide for the following--

(i) all monthly paid employee on the permanent establishment shall be eligible for gratuity;

                      (ii) service rendered by        employees     must   be
                continuous and satisfactory.

                       (iii) when an employee who has put in at least 5

years satisfactory service is retired voluntarily from service or if he is permanently disabled while in service or if he dies while in service the society shall pay to him or to his legal heirs as the case may be a gratuity not exceeding half months pay for every completed year of service:

Provided that in no case shall the gratuity exceed fifteen months pay."

15. After the abovesaid prospective amendment w.e.f 02.11.2010 onwards, there was no alteration in the wordings of the operative portion or the sole proviso, except that the sole proviso was re-numbered as the first proviso and the new provision was made as the second proviso. The second proviso made prospectively w.e.f 02.11.2010 stipulates as follows :

"Provided further that the amount of gratuity payable shall not exceed the amount which an employee is eligible as per the Payment of Gratuity Act, 1972 (Central Act 39 of 1972) or under the Act and these Rules, whichever is applicable irrespective of the amount received out of any scheme chosen or implemented by a society for the purpose."

W.A Nos.1509 & 1547 of 2021 13

16. Computation details of the gratuity claim of the appellant in W.A No.1509/2021 :-

Total wages of this appellant = Rs.34,037 (B.P Rs.24,140 + D.A Rs.9897) Qualifying years of service = 36 years (rounding off 35 years, 6 months & 13 days) • Calculation of Gratuity as per Section 4 of Payment of Gratuity Act, 1972.

Calculation as per Section 4(2) (15/26 days' formula):

34,037 x 15 x 36 = 7,06,922 26 Lumpsum Maximum Gratuity as per Section 4(3) of Payment of Gratuity Act : 3,50,000 • Calculation of Gratuity as per Rule 59 of KCS Rules Calculation as per main part of Rule 59 (Half months' pay formula):

34,037 x 36 = 6,12,666 2 Maximum Gratuity as per sole proviso to Rule 59 of KCS Rules (15 months' pay) :

34,037 x 15 : 5,10,555 Gratuity calculated as per Rule 59 of KCS Rules is better terms of gratuity and accordingly, balance gratuity works out as under:

                    Maximum Gratuity entitled to                 :       5,10,555
                    Less: Gratuity paid                          :       3,50,000
                    Balance Gratuity claimed                     :   Rs.1,60,555
                                                                     =========

17. Computation details of the gratuity claim of the appellant in W.A No.1547/2021 :-

Total wages of this appellant = Rs.32,766 (B.P Rs.18,940 + D.A Rs.13,862) Qualifying years of service = 32 years (rounding off 31 years, 6 months & 23 days) W.A Nos.1509 & 1547 of 2021 14 • Calculation of Gratuity as per Section 4 of Payment of Gratuity Act, 1972 Calculation as per Section 4(2) (15/26 days' formula):

32,766 x 15 x 32 = 6,04,910.76 26 Lumpsum Maximum Gratuity as per Section 4(3) of Payment of Gratuity Act : 3,50,000.00 • Calculation of Gratuity as per Rule 59 of KCS Rules Calculation as per main part of Rule 59 (Half months' pay formula):

32,766 x 32 = 5,24,256 2 Maximum Gratuity as per sole proviso to Rule 59 of KCS Rules (15 months' pay):

32,766 x 15 : 4,91,490 Gratuity calculated as per Rule 59 of KCS Rules is better terms of gratuity and accordingly, balance gratuity works out as under:

                  Maximum Gratuity entitled to                :       4,91,490
                  Less: Gratuity paid                         :       3,50,000
                  Balance Gratuity claimed                    :   Rs.1,41,490
                                                                     =======

18. It is pointed out that the matters in relation to the regulation of co-operative societies, including employment therein, are fully covered by the provisions contained in the KCS Act (State Act) and the Rules are framed thereunder by the State Government. Further that, Sec.80(3) specifically mandates and confers power on the State Government to frame statutory rules, either prospectively or retrospectively, for regulating W.A Nos.1509 & 1547 of 2021 15 service conditions, which is also inclusive of gratuity. That therefore, the provisions contained in Rule 59 of the KCS Rules, as it stood at the time of retirement of the appellant, that is the operative portion of Rule 59 and the sole proviso thereto, as mentioned above, would be a statutory provision regulating the contract of personal service as between an employee of a co-

operative society and the employer (co-operative society). It is urged that the Legislature has envisaged in Sec.4(5) that nothing in Sec.4, including Sec.4(3), shall affect the right of an employee to receive better terms of gratuity under an award or agreement or contract with the employer. That the word 'contract' or 'agreement' between the employer and employee would be a contract of personal service and where the statute covers the field, the said contract of personal service, has to be treated as a statutorily regulated contract of personal service and the freedom of contract of the parties cannot be exercised so as to infringe or violate any of the terms and conditions in the statutory rules. These are the specific contentions raised by Sri.Ashok B. Shenoy, learned counsel appearing for the appellants in these cases.

19. The specific and precise contention raised by Smt.Rosin Joseph, learned counsel appearing for R3 (Co-operative Society-Employer), is that only three categories are enumerated in Sec.4(5) to get the beneficial W.A Nos.1509 & 1547 of 2021 16 protection thereof, i.e. an award of an adjudicatory fora, like the Labour Court/Industrial Tribunal, as to the provisions contained in the Industrial Disputes Act, or any other such related labour welfare legislation, or, on the other hand, either an agreement or contract as between the employee and employer, and that the said three categories mentioned in Sec.4(5) are exhaustive and no other categories are included therein. In that regard, she would specifically point out that an arrangement has been made between the 3rd respondent-Co-operative Society-Employer and the Life Insurance Corporation of India to provide for the gratuity claims of the employees concerned and, as per the said arrangement made between the 3rd respondent and the LIC of India, the gratuity payable is only in terms of the ceiling limit applicable at the relevant time. That, at the time of retirement of these appellants, the ceiling limit, as per Sec.4(3) of the Central Act, was Rs.3.5 lakhs. That the entirety of the said ceiling limit amount of Rs.3.5 lakhs has been admittedly paid by the 3 rd respondent- Employer to these two appellants after their retirement and without much delay. The further contention is that the statutory rules framed in terms of Rule 59 and the proviso thereto, etc., cannot be included in the three categories of "award" or "agreement" or "contract" envisaged in Sec.4(5) of the Central Act and therefore, the reliance placed by the appellants on W.A Nos.1509 & 1547 of 2021 17 Rule 59 and the sole proviso thereto, as it stood at the relevant time, as contained in the KCS Rules, is bereft of any merit.

20. Smt.Rosin Joseph, learned counsel appearing for R3, would also urge that the learned Single Judge, while dismissing the above W.P(C)s and the R.Ps, was fully right in holding that effective statutory alternative remedy has been provided to these appellants in terms of the provisions contained in the Central Act and that the appellants will have to avail such statutory remedy as the Central Act, even if they have already availed the statutory remedy under the KCS Act. Yet another objection is that Rule 59 of the KCS Rules, as it stood prior to the amendment made effective from 02.11.2010, cannot be effectuated, in the manner contended by the appellants, as otherwise Rule 59 would infringe the ceiling limit fixed in Sec.4(3) of the Central Act, which is legally impermissible, as Sec.14 thereof gives overriding effect to the said Central Act, vis-a-vis any other enactment, including the KCS Act and the KCS Rules.

21. The contention of alternative remedy has been strongly rebutted by Sri.Ashok B.Shenoy, learned Advocate appearing for the appellants. We will initially deal with the contention based on alternative remedy. The appellants have already approached the State Co-operative Arbitration Court in terms of Sec.69 of the KCS Act and after being W.A Nos.1509 & 1547 of 2021 18 unsuccessful, availed the statutory appellate remedy in terms of Sec.82 of the said Act, which has been availed before the Kerala Co-operative Appellate Tribunal, which is presided over by a senior judicial officer of the rank of District Judge. It is challenging the said award of the Arbitration Court as well as the appellate verdict of the abovesaid fora, rejecting the claims of the appellants, that they had instituted the above Writ Petition (Civil). Therefore, it is rather too onerous for this Court to take the stand that they should again avail further alternative remedies, in terms of the Central Act. Hence, we have no hesitation to hold that the learned Single Judge was not right in holding that the appellants should necessarily invoke other alternative remedies, since they have already availed the two statutory remedies as above. Hence, we are constrained to overrule the abovesaid preliminary objections raised by the learned counsel appearing for the 3rd respondent-employer. Further, it is to be noted that it is now well established that where there is flagrant violation and contravention of statutory provisions in the decision making process of the Co-operative Society, then in appropriate cases, public law writ remedy by way of judicial review as per Article 226 of the Constitution of India, is maintainable and could be invoked in appropriate cases {Association of Milma Officers v. State of Kerala [2015 (1)KLT 849(LB)], John v. W.A Nos.1509 & 1547 of 2021 19 Liquidator [2006 (1) KLT 11 (FB)], Akalakunnam Village Service Co-operative Bank Ltd. & Anr. v. Binu.N & Ors. [(2014) 9 SCC 294]}.

22. Now, we will deal with the primary issue relating to the applicability or otherwise of the provisions contained in Rule 59 of the KCS Rules. At the outset, we have to hold that the second proviso to Rule 59, which has been introduced only prospectively with effect from 02.11.2010, cannot have any application to the claims of these appellants, inasmuch as the substantive right to receive gratuity has been accrued to them as on the date of the respective retirements, which is much before the date of introduction of the abovesaid prospective amendment w.e.f 02.11.2010. Hence, the second proviso would not regulate the case of these appellants.

23. Prima facie, it appears that if the employees of the Co-operative Society had retired from service on or after 02.11.2010, then this contention may not have been available to them, if the newly amended second proviso to Rule 59 of the KCS Rules mandated applicability of the ceiling limit of Sec.4(3) of the Central Act. But the facts of this case is not concerned with such a scenario, as the appellants have retired much prior to 02.11.2010. Initially, the formula as per the operative portion of Rule 59 will have to be applied. But the said amount is subject to the maximum W.A Nos.1509 & 1547 of 2021 20 limit fixed in the sole proviso thereto. In other words, if the gratuity amount computed as per the operative portion of Rule 59 is higher than the limit of 15 months' wages conceived in the proviso to that Rule, then the gratuity amount will be limited to the said limit of 15 months' wages. If, on the other hand, the amount computed as per the operative portion of Rule 59 is less than the limit of 15 months' wages as per the proviso, then the former amount is payable. It is on this basis that the gratuity amount is to be reckoned as per Rule 59 and its sole proviso. If the gratuity amount so payable as per Rule 59 of the KCS Rules, as above is higher than the ceiling limit of Rs.3.5 lakhs conceived as per the limit in Sec.4(3) of the Central Act, then the said higher amount is payable, as the provision in Rule 59 of the KCS Rules comes within the protective ambit of Sec.4(5) of the Central Act.

24. The main issue is as to whether the provisions contained in Rule 59 and the proviso thereto, can be taken as to be within the scope and ambit of the protective and beneficial provision contained in Sec.4(5) of the Central Act. The three categories which are mentioned within the ambit of Sec.4(5) are - (1) award, (2) agreement between the employer and the employee, (3) contract between the parties. The term 'award' is not defined in the Central Act and therefore, we have to understand the said W.A Nos.1509 & 1547 of 2021 21 term in the context of the various labour welfare legislations governing the field and ordinarily should partake awards, like the one rendered by the Labour Court, Industrial Tribunal and such other awards, as conceived in the Industrial Disputes Act or any other related labour welfare laws, to the extent it is contextually appropriate and relevant. Except this, we need not go into those details, for the simple reason that this case does not involve any application of an award, as conceived in Sec.4(5). The other two categories are agreement or contract between the parties. There can be no doubt that the term 'contract' or 'agreement' is in substance and essence, a contract of personal service or contract of personal employment as between the employer and the employee.

25. It has to be borne in mind that the provisions of the Central Payment of Gratuity Act applies to various categories of establishments of employees, both in the private sector and the public sector, to the extent it is applicable. It is also an elementary aspect of service jurisprudence and employment law that, if the parent enactment, made by the appropriate legislature or the subordinate legislation, framed under such enactments, provide for provisions to regulate the service conditions of the employees envisaged in such enactments, then the said contract of personal service will be controlled and regulated by those statutory provisions and in effect, W.A Nos.1509 & 1547 of 2021 22 such contract of personal service can be broadly denoted as statutory contract of personal service or contract of employment regulated and controlled by statutes. It is elementary that the conditions of service, prescribed in such enactments or subordinate legislation, would form part of the contract of personal service in the employer-employee relationship, going by the force and mandate of the statute. So, the general or common law giving freedom of contract to enter into contract of employment will be curtailed and regulated by such statutory provisions to the extent such provisions are made therein. In other words, such statutorily prescribed conditions of service would form part of the contract of employment or contract of personal service that regulates the employer-employee relationship.

26. The KCS Rules, including Rule 59 thereof, are framed under the enabling provisions contained in Secs.80(3), 109, etc., of the KCS Act. Therefore, we have no hesitation to hold that the provisions contained in the Kerala Co-operative Societies Act, as in Sec.62 & Sec.80(3), and Rule 59 of the Kerala Co-operative Societies Rules framed under the said Act, would be statutorily controlling and regulating the employer-employee relationship in the co-operative employment establishment. In other words, those conditions of service, prescribed by the statutory provisions as W.A Nos.1509 & 1547 of 2021 23 well as the statutory rules, will form an integral part of the conditions of service in the employer-employee relationship, going by the force and mandate of the statute. In other words, if the provisions contained in the State statutory rules confers a higher benefit, whereby it provides a gratuity amount, which is higher than the ceiling limit contained in Sec.4(3) of the Central Act, then such statutory provisions made by the State Government, as in the instant case, would also be controlling and regulating the contract of employment of the parties, as envisaged above and such statutory provisions conferring gratuity amounts higher than the ceiling limit would also come within the scope and ambit of the beneficial and protective provisions of Sec.4(5) of the Central Act. May be it is envisaging this problem of payment of higher liability of gratuity that the rule making authority stepped into the scene and amended Rule 59 to incorporate a second proviso thereto. Since the appellants have retired from service, prior to the introduction of the second proviso to Rule 59, they are not hit by the second proviso and their claims would be limited by the operative portion of Rule 59, subject to the limitation of the sole proviso thereto, as it stood then.

27. In the light of the facts and circumstances of the case, there is no necessity for us to get into the details of the dictum laid down by a Full W.A Nos.1509 & 1547 of 2021 24 Bench of this Court in the case in Chandrasekharan Nair v. Kerala State Co-operative Agricultural and Rural Development Bank Ltd. [2017 (4) KLT 276 (F.B)]. It may be that the claimants in those cases would have retired after 02.11.2010, in the result that their case would have been covered by the second proviso to Rule 59 or if they had retired from service prior to 02.11.2010, this contention based on the applicability of the then existing sole proviso to Rule 59 may not have been taken. The main bone of contention of the parties before the Full Bench was regarding the higher benefit assured in terms of the arrangement made by the co-operative society employees therein with the LIC of India. It appears that, based on the arrangement made between the co-operative society employees in those cases with the LIC of India, the gratuity amount that was payable by the LIC to the employer was an amount which was higher than the ceiling limit in terms of Sec.4(3). The arrangement or agreement was between the co-operative society-employer and the LIC of India and technically there was no privity of contract that could be claimed by the employees in that scenario. However, the Full Bench of this Court held in Chandrasekharan Nair's case supra [2017 (4) KLT 276 (F.B)] that the earlier dictum laid down by a Division Bench of this Court in Kerala Forest Research Institute, Peechi v. Dr.C.Renuka & Ors. W.A Nos.1509 & 1547 of 2021 25 [2015 KHC 926 (DB)], on the same issue, was based on the correct legal position and that the arrangement made between the employer and the insurance company should be seen as a trust arrangement, whereby the beneficiaries thereof are the employees and such a trust deed was envisaged as one executed as part of the service conditions of the employee in order to vouchsafe the payment of gratuity by the employer at the time of exit from service, etc. We need not get into those aspects any further, since the appellants in these cases have no such claim in that regard, except to state that the factual scenario envisaged by the Full Bench in Chandrasekharan Nair's case supra [2017 (4) KLT 276 (F.B)] as well as by the Division Bench in Kerala Forest Research Institute's case supra [2015 KHC 926 (DB)], was a more difficult scenario, compared to the present one at hand. Therein, the employees could not technically claim any privity of contract in the arrangement made between the co-operative society employer and the insurance corporation. Still, it was held by the Full Bench of this Court that the said arrangement made between the employer and the insurance corporation, should be seen as an arrangement made for the welfare and benefit of the employees and that the employees are the beneficiaries of the trust arrangement and that therefore, the said arrangement would form part of the service conditions of the employees W.A Nos.1509 & 1547 of 2021 26 and hence, it was held that the same would fall within the protective scope and ambit of Sec.4(5) of the Central Act.

28. However, it is relevant to note that the Full Bench of this Court in Chandrasekharan Nair's case supra [2017 (4) KLT 276 (F.B)] has held that the beneficial provisions contained in the Central Payment of Gratuity Act, including Sec.4(5) thereof, have primacy, in view of Sec.14 of the said Act, which has overriding effect and also in view of the doctrine of repugnancy envisaged in Article 254 of the Constitution of India, etc. We need not get into any further details in that regard, as the main issue in this case is as to whether the statutory rule framed by the State Government under Rule 59 and the proviso, as it stood then, would be within the scope and ambit of the beneficial provision contained in Sec.4(5) of the Central Act. We have already answered the issue, as above, in favour of the appellants and against the 3rd respondent-co-operative society employer. The contention that Rule 59 of the KCS Rules, as it stood prior to 02.11.2010, would be in derogation of the ceiling limit as per Sec.4(3) of the Central Act, is untenable. Sec.4(2) of the Central Act provides the formula for computing the gratuity as per that Act. But the said amount cannot exceed the ceiling limit as per Sec.4(3). However, if the employer- Organization is covered by a scheme or Rules, which envisages grant of W.A Nos.1509 & 1547 of 2021 27 gratuity, higher than the ceiling limit as per Sec.4(3), then the Parliament has consciously mandated, as per Sec.4(5) thereof, that nothing in Sec.4 shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract. So, if the Rules or scheme of the employer, providing better benefits, comes within the scope and ambit of Sec.4(5), then there is no question of the applicability of the ceiling limit as per Sec.4(3) and consequently, there is no question of the applicability of Sec.14, dealing with overriding effect of that Act.

29. We got into the facts and figures only because the appellants have retired from service more than one and a half decades back and since there is no dispute regarding the facts and figures of total pay, wages, basic pay, dearness allowance and length of qualifying service, etc. The computation details supra would clearly show that the appellant in W.A No.1509/2021 is entitled for total gratuity amount of Rs.5,10,555 as per Rule 59 of the KCS Rules, which is higher than the ceiling limit of Rs.3.5 lakhs, as per Sec.4(3). So also, the appellant in W.A No.1547/2021 is entitled for gratuity amount of Rs.4,91,490, as per Rule 59 supra, which is higher than the ceiling limit supra, as per Sec.4(3). In view of the resolution of the legal issues as above, the appellant in W.A No.1509/2021 and the appellant in W.A No.1547/2021 are entitled for the differential W.A Nos.1509 & 1547 of 2021 28 gratuity amount of Rs.1,60,555/- & Rs.1,41,490/- respectively.

30. Sri.Ashok B.Shenoy, learned counsel appearing for the appellants would point out that his parties have specifically claimed the differential amount of gratuity in the writ proceedings @ 10% p.a., which is the rate notified by the Central Government, in terms of Sec.7(3-A) of the Central Act. It is urged by the appellant's counsel that, in view of the overriding effect of the Central Act in terms of Sec.14 thereof, the appellants have a statutory right to get interest on the delayed payment of gratuity in terms of Sec.7(3-A) of the Central Act. Sec.7(3-A) of the Act and its proviso reads as follows :

"Sec.7 Determination of the amount of gratuity.-

(1) .................................

                                                XXX        XXX     XXX

                                                XXX        XXX    XXX

(3-A) If the amount of gratuity payable under sub-section (3) is not paid by the employer within the period specified in sub-section (3), the employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the Central Government from time to time for repayment of long-term deposits, as that Government may, by notification specify:

Provided that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment on this ground." W.A Nos.1509 & 1547 of 2021 29

31. Sec.7(3-A) and its proviso has been introduced as an amendment to the Central Act w.e.f 01.10.1987. The said provisions were in the statute book, at the time of retirement of the applicants and even now. In view of the overriding effect of the Central Act in terms of Sec.14 and in view of the well-settled legal position in that regard, the appellants can certainly claim for statutory interest for the delayed payment. We have considered the said issue in the case in Viswanathan v. Fertilizers and Chemicals Travancore Ltd. [2021 (2) KLT 899], wherein we have noted that the last of the statutory notification issued by the Government of India is one whereby the rate of interest is upto 10% p.a. It has to be borne in mind that Sec.7(3-A) of the Act only stipulates that for delayed payment of gratuity, the same entails payment of simple interest at such rate not exceeding the rate notified by the Central Government from time to time for repayment of long term deposits, as the Central Government may, by notification specify. So, the said notification of the Central Government prescribing the rate of 10%, is the maximum rate and it is not mandatory that the maximum rate should be granted in all cases.

32. Smt.Rosin Joseph, learned counsel appearing for R3, would urge that the financial condition of the 3rd respondent-Society is rather hard and difficult and that this Court, in its discretion, may avoid payment of W.A Nos.1509 & 1547 of 2021 30 interest altogether. In a similar case, the Division Bench has held in Viswanathan's case supra [2021 (2) KLT 899] (see paras 12 to 14 thereof) that taking into account the financial difficulties of the said employer-organization, the rate of interest therein was scaled down to 8% p.a. from the date of retirement of the claimant concerned upto the date of disbursal.

33. Since the 3rd respondent-employer is a co-operative society, we are inclined to scale down the rate of interest to 7% p.a. Accordingly, it is ordered that the respondent-Co-operative Society shall immediately pay to the appellants in these appeals the differential gratuity amount of Rs.1,60,555/- & Rs.1,41,490/- respectively, along with the interest thereon @ 7% p.a. from 30 days of the date of retirement of the appellants concerned (31.07.2007 & 31.12.2009 respectively) upto the date of disbursal, within two months from the date of receipt of a certified copy of this judgment. However, it is made clear that if the abovesaid differential gratuity amount, along with the interest thereon @ 7% p.a. as above, is not paid within the said outer time limit of two months as above, then the said interest will stand enhanced @ 9% p.a.

34. The abovesaid crucial aspects have not been duly taken note of in the rendering of the impugned verdicts of the learned Single Judge in the W.A Nos.1509 & 1547 of 2021 31 W.P(C)s and the R.Ps. In that view of the matter, it is ordered that the impugned judgments in the above W.P(C)s and the orders in the R.Ps will stand set aside. The impugned awards of the Arbitration Court and the Co-operative Appellate Tribunal impugned in the writ proceedings will stand quashed.

With these observations and directions, the above W.As will stand disposed of.

Sd/-

ALEXANDER THOMAS, JUDGE Sd/-

VIJU ABRAHAM, JUDGE vgd

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