Andhra HC (Pre-Telangana)
P. Galemma And Ors. vs Appellate Authority Under Payment Of ... on 24 December, 1987
Equivalent citations: (1994)IIILLJ791AP
ORDER Jeevan Reddy, J.
1. In this Writ Petition, the legality and validity of the order passed by the Controlling Authority (under Section 3 of the Payment of Gratuity Act, 1972) dated 30.12.1981 confirmed in the Appellate order dated 10.11.1982 passed by the 1st respondent (the Appellate Authority under the Payment of Gratuity Act) is questioned. The 3rd respondent, Chegu Krishnamurthy & Company, Guntur, was engaged in tobacco business at Guntur. It appears that, in the cyclone which occurred in the year 1977, the 3rd respondent's property and stocks were damaged. Its business seriously affected and it almost came to a stop in the year 1977. The writ petitioners are the workers engaged by the 3rd respondent. Since the provident fund, gratuity and other terminal benefits were not paid to them, they filed applications (marked Exs.P-2 to P-9 and P-11 to P-33) before the 2nd respondent for refund of the provident fund. They were paid the provident fund due to them in 1979. In this Writ Petition, we are concerned only with one terminal benefits, viz., the gratuity payable to the workers. We are not concerned with the other terminal benefits. In the year 1977 itself, the petitioner filed applications before the Labour Court under Section 33-C(2) of the Industrial Disputes Act against the 3rd respondent for realisation of the gratuity due to them. Pending these applications, the workers resorted to dharna, which led to an agreement between the management and workers. It is appropriate to extract the said agreement, dated 9.5.1979, in full:
"Minutes of the Meeting held on 8th and 9th May, 1979 between the Management of M/s. Chegu Krishnamurthy & Co., Guntur and the representatives of Guntur Pattna Pogaku Karmika Sangham, Guntur.
Parties Present-
On behalf of the Management-
Sri Chegu Krishnaurthi . Sri Chegu Subbarao.
On behalf of the Union-
Sri C.V.Krishnarao Sri C. Suryanarayana.
The Union demanded the management to pay gratuity to all the workmen in the Company and the management expressed their inability to pay now, stating their business conditions.
The Secretary of the Indian Tobacco Association Sri K.V. Raghavan and the Managing Committee member of the Association Sri D.V. Appa Rao intervened in the matter and after prolonged discussions the following terms were accepted by both the parties.
1. The management has agreed to give a portion of their Factory premises to any party to take and work in the premises including the Redrying factory.
2. The Gratuity entitlement of the workmen will not be ceased even though the same workers are engaged by any other party in the same premises. This period will be counted as continuous service and will be treated as no work period.
3. The Gratuity claims which were filed previously by the workmen and negated by the management will be taken into account for settlement of Gratuity at the time of payment.
The implementation of the above conditions should be in true spirit and free of any legal obligation as per the Arbitration Act.
In view of the above settlement, the dharna commenced in the morning was lifted from the afternoon.
On behalf of the Management.
Sd/- XX XX XX XX XX On behalf of the Union Sd/- XX XX XX XX 9.5.1979.
2 In view of the settlement contained in the said agreement, the writ petitioners got their applications filed under Section 33-C(2) of the Industrial Disputes Act dismissed as not pressed.
3. It is evident that no third party ever came forward to carry on the 3rd respondent's business in his premises, with the result that the workers were never engaged as contemplated by the aforesaid agreement. Nothing was paid to them towards gratuity, whereupon they purported to resign from the service of the 3rd respondent on 1.11.1980. The resignation letters are of the same date. Having so ''resigned" from the service of the 3rd respondent, the writ petitioners filed claims before the 3rd respondent (employer) under Rule 7(1) of the Payment of Gratuity (Central) Rules, 1972 on 7.11.1980. Through his reply, dated 1.12.1980, the 3rd respondent denied and disputed his liability in that behalf. Thereupon, the workers approached the 2nd respondent (Controlling Authority under Section 3 of the Payment of Gratuity Act, 1972 and Industrial Relations Officer II, Guntur) on 17.1.1981. The said applications before the 2nd respondent were filed under Rule 10(1) of the said Rules and were numbered as P.G. Case Nos. 2 to 33 of 1981. After receiving notice in the said Cases, the 3rd respondent appeared and filed a counter denying his liability to pay the gratuity to the petitioners and also raising a plea of limitation. The Controlling Authority did not go into the merits of the Claims but dismissed them on the ground that the applications filed by the workers are barred by limitation. He also observed that no reasonable cause is shown by the petitioners-workers for the delay in submitting the said applications. The Controlling Authority observed that from the very applications filed by the workers for the refund of provident fund (Exs.P-2 to P-9 and P-11 to P-33 before him) it is clear that, according to the petitioners, they left the service of the third respondent on their own accord in 1977 itself and that they had also drawn the provident fund in 1979, but chose to keep quiet all these days. In view of the fact that they were assisted by their Union, he observed, the petitioners cannot claim to be ignorant of the contents of the said applications, Exs.P-2 to P-9 and P-11 to P-33.
4. The petitioners preferred an appeal to the 1st respondent against the order of the Controlling Authority, which was dismissed on 10th November, 1982. The Appellate Authority agreed that the applications for gratuity filed by the petitioners before the Controlling Authority were barred by limitation and were rightly dismissed by the Controlling Authority. He further held that though the appeals before him were filed in time, they are not maintainable since no appeal lies against an order dismissing the applications as time-barred. Evidently, the Appellate Authority was of the view that an appeal lies against the order of the Controlling Authority only where the order is passed on merits. It is then that the workers approached this Court by way of this Writ Petition.
5. Sri D.S. Varma, learned counsel for the petitioner-workers, urged the following contentions: (1) The Controlling Authority was in error in holding that the application filed before him under Rule 10(1) of the Rules were barred by time. The said applications having been filed within 90 days of the 3rd respondent's reply/denial contained in his letter, dated 1.12.1980, the applications are perfectly within time. (2) In view of the agreement, dated 9.5.79, between the 3rd respondent and the petitioners, it cannot be suggested that the petitions filed by the workers before the employer under Rule 7 on 7.11.1980 were beyond time. (3) In any event, the circumstances of the case do warrant the condonation of delay in filing the applications, if any; the Controlling. Authority ought to have gone into the merits and determined whether the petitioners are eligible for payment of gratuity and, if so, to how much and ought to have directed payment of the amounts found due.
6. On the other hand, Sri K. Srinivasa Murthy, learned Counsel for the 3rd respondent-employer, supported the reasoning and conclusion of the respondents 1 and 2 that the applications filed by the petitioners were barred by time. He further submitted that the very applications filed by the employer under Rule 7 were hopelessly barred by time and that, in any event, the 3rd respondent cannot be made liable for paying any gratuity. The Counsel submitted further that, as a matter of fact, only four of the petitioners are entitled to payment of gratuity having put in five years service and that the other petitioners are not entitled, not having put in five years of service as required by Section 4 of the Act.
7. It is clear from the order of the Controlling Authority (2nd respondent) that he dismissed the applications filed before him under Rule 10 as barred by time. It is not as if he held that the applications filed by the workers before the employer under Rule 7 were barred by time. The following observations from his judgment make the position clear:
"The main point for consideration is whether the applications have been filed in time..........Thus it is clear that these applications are barred by time and no reasonable cause is shown for delay in submission of applications for gratuity."
I am clarifying this aspect for the reason that during the course of arguments before me, Sri K. Srinivasa Murthy, Learned Counsel for the 3rd respondent, sought to argue that the very applications under Rule 7 filed by the workers before the employer were barred by time. He sought to argue that since those applications are barred by time, the applications filed by the workers before the Controlling Authority under Section 10 were equally barred by time. Let me now refer to the relevant provisions of the Act and the Rules.
8. The Payment of Gratuity Act was enacted by the Parliament to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, etc., and for matters connected therewith and incidental thereto. "Continuous Service" is defined in Clause (c) of Section 2, while the expression, "Controlling Authority" is defined in Clause (d) of Section 2 as referring to an authority appointed by the appropriate Government under Section 3. The expression "prescribed" is defined by Clause (o) of Section 2 as meaning prescribed by rules made under the Act. Section 3 empowers the appropriate Government to appoint an officer to be a controlling authority, who shall be responsible for the administration of the Act. Different controlling authorities may be appointed for different areas. Section 4(1) says that gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years. The gratuity is payable either on the employee's superannuation, or on his retirement or resignation, or on his death or disablement due to accident or disease. However, in the last eventuality, "death or disablement due to accident or disease", continuous service of five years is not required. In the case of death of the employee, fratuity is payable to his nominee or to is heirs as the case may be. Section 7 provides for determination of the amount of gratuity. Sub-section (1) says:
"A person who is eligible for payment of gratuity under this Act or any person authorised, in writing, to act on his behalf shall send a written application to they employer, within such time and in such form, as may be prescribed, for payment of such gratuity."
Rule 7(1) says that an employee who is eligible for payment of gratuity under the Act, or any person authorised in writing, to act on his behalf, shall apply, ordinarily within 30 days from the date the gratuity became payable, in Form 'I' to the employer. Rule 7(2) and (3) provide for thirty clays and one year limitation period respectively for making a similar application by the nominee and legal heir respectively. Sub-rule 5 of Rule 7 is relevant and reads thus:
"An application for payment of gratuity filed after the expiry or the period specified in this rule shall also be entertained by the employer, if the application adduces sufficient cause for the delay in preferring his claim, and no claim for gratuity under the Act shall be invalid merely because the claimant failed to present his application within the specific period. Any dispute in this regard shall be referred to the controlling authority for his decision."
9. Sub-section (2) of Section 7 casts an independent obligation upon the employer to pay the amount of gratuity due to an employee, whether he asks for it or not. It reads thus:
"As soon as gratuity becomes payable, the employer shall, whether an application referred to in Sub-section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity so determined."
Sub-section (3) of Section 7 says that the employer shall arrange to pay the amount of gratuity, within such time as may be prescribed, to the person to whom the gratuity is payable. Rules 8 and 9 are relevant in this behalf but need not be referred to in detail, not being necessary for the present purpose.
10. Sub-section 4 of Section 7 provides that, if there is any dispute as to the amount of gratuity payable to an employee or with respect to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or with respect to the person entitled to receive the gratuity, the employer shall deposit with the controlling authority such amount as he admits to be payable by him as gratuity, whereupon the controlling authority shall, after due inquiry, pass appropriate orders, determine the amount payable to persons entitled to and so on. Sub-Section (7) of section 7 provides for an appeal against an order passed under Sub-section (4).
11. Rule 10 provides that, if an employer refuses to entertain an application sought to be filed under Rule 7, or having received the application fails to pay the gratuity, the claimant-employee "may within ninety days of the occurrence of the cause for the application, apply in Form 'N' to the controlling authority for issuing a direction under Sub-section (4) of Section 7". The proviso to Sub-rule (1) of Rule 10 empowers the controlling authority to accept any application under the said sub-rule on sufficient cause being shown by the applicant after the expiry of the specified period.
12. It is unnecessary to refer to the other provisions of the Act and the Rules.
13. The provisions mentioned above make it clear that gratuity becomes payable to an employee on termination of his service provided he has rendered five years' service (except where the termination comes about on account of death or disablement due to accident or disease). Vide Section 4 as soon as the gratuity becomes payable, the employer is under a statutory obligation to determine the amount of gratuity payable and give notice to the person entitled to receive the same and also intimate the Controlling Authority of the amount so determined. This obligation is placed upon the employer and he has to perform it whether the employee makes a demand for the said gratuity or not. This is clear from Sub-section (2) of Section 7. Sub-section (3) of Section 7 obliges the employer to pay the amount so determined to the persons entitled to receive the same. At the same time, the Act entitles the employee to whom the gratuity is payable to file an application before the employer within such time and in such form as may be prescribed. Rule 7 is made in pursuance of and as contemplated by Section 7(1). Rule 7(1) provides that such an application by an employee before an employer shall be made "ordinarily within thirty days from the date the gratuity became payable". If we read Sub-rule (1) and Sub-rule (5) of Rule 7 together, it is clear that not so much importance is attached to the time-limit of thirty days prescribed by Rule 7(1). Firstly, Rule 7(1) says that such application should be filed "ordinarily within 30 days". More important is the language of Sub-rule (5). It says that an application for payment of gratuity, filed even after the expiry of the period specified, shall be entertained by the employer if the applicant adduces sufficient cause for the delay. The sub-rule does not stop there but proceeds further and says that, "...and no claim for gratuity under the Act shall be invalid merely because the claimant failed to present his application within the specified period". The provision contained in sub-sec. (2) of Section 7 is highly significant in this context. The intent and object is clear, viz, (i) no claim should ordinarily be disallowed on the ground that it is preferred beyond thirty days prescribed by Rule 7(1), and (ii) the delay in filing such applications should be liberally condoned. The position is entirely and totally different from the one obtained under Section 5 of the Limitation Act. Indeed, this underlying object is thoroughly consistent with the overall objective underlying the enactment itself. I am, therefore, of the opinion that the applications filed by the employees before the employer on 7.11.1980 under Rule 7(1) of the Act could not have been ignored or rejected on the ground of limitation prescribed in Rule 7(1). Now, that is not what the Controlling Authority, has said. The Controlling Authority does not say that the applications filed by the employees before the employer under Rule 7(1) were barred by time. On the other hand, he held that the applications filed before him under Rule 10(1) are barred by time. Now, coming to this aspect, I am unable to see how the applications filed before the Controlling Authority under Rule 10(1) can be said to be barred. According to Rule 10, an application thereunder has to be filed "within ninety days of the occurrence of the clause for the application". Now, in this case, the clause for filing the application arose on 1.12.1980 when the 3rd respondent-employer denied his liability to pay the gratuity in reply to the employees' applications filed on 7.11.1980. The applications under Rule 10(1) before Controlling Authority were filed on 17.1.1981, i.e. very much within ninety days from 1.12.1980. In the circumstances, the Controlling Authority must be held to have misunderstood the relevant provisions of law and must be held to have erred in holding that the applications before him were barred by limitation. It is precisely in view of this legal position that Sri K. Srinivasamurthy sought to argue and justify the Controlling Authority's order on the basis that the applications under Rule 7(1) filed before the employer were barred by time and consequently the applications filed under Rule 10 before the Controlling Authority were equally barred. I cannot, however, accept the said argument. Firstly, that is not the reason given by Controlling Authority or the Appellate Authority. Neither the 1st respondent nor the 2nd respondent had said that the applications under Rule 7(1) before the employer were barred by time and consequently the applications under Rule 10(1) before the 2nd respondent were barred. Secondly, if by any stretch of reasoning, that is what the respondents 1 and 2 meant, I am of the opinion that it would be unjust and unreasonable to say so in the circumstances mentioned hereinafter.
14. The employees had filed applications under Section 33-C(2) for payment of gratuity under the Industrial Disputes Act in 1977 itself. While these applications were pending, the settlement dt. 7.5.1979 took place between the employer and the employee. A reading of the said agreement/settlement shows that the employer did not dispute the employees' demand for payment of gratuity. The employer merely "expressed their inability to pay now stating their business conditions". In view of the unsatisfactory financial situation of the employer, the said agreement was entered into at the instance of certain third-parties. The agreement was that the factory and premises of the 3rd respondent could not be given to any third-party prepared to recommence the work and business of the premises and that the gratuity entitlement of the workmen will not cease even though they are employed by such third-party and that the gratuity claims, which were previously filed by the workmen but negated by the management, will be taken into account for settlement of gratuity at the time of payment. Pausing here for a moment, I may say that both the parties are construing the agreement in a different manner. According to the Counsel for the petitioners-workmen, the said agreement means that the 3rd respondent himself would pay the gratuity later, i.e. after a third-party comes in and after his own financial position is improved, while according to Sri Srinivasamurthy, learned Counsel for the 3rd respondent, the agreement contemplates the workers being reemployed by such third-party coming and recommencing the 3rd respondent's business and such third-party alone paying the gratuity payable to them on their termination of service under such third-party. I do not, however, think it necessary to pronounce upon this controversy. Even assuming that Sri K. Srinivasamurthy's interpretation is correct, it is clear and evident that the situation contemplated by the said agreement did not materialise. No third-party ever came in nor did recommence or carry on business in the said premises and factory. It is in the above circumstances that the workers purported to resign from the service of the 3rd respondent on 1.11.1980 and filed Claims for gratuity before the employer on 7.11.1980 under Rule 7(1). In other words, the agreement failed to take effect since no third-party ever came in, nor did he reemploy the petitioners-workers, in such a situation, the original liability of the 3rd respondent for payment of gratuity remained and continued.
15. The only objection in such a situation could be one of limitation. But, even here, it must be remembered that the workers had filed the applications for payment of gratuity under Section 33-C(2) of the Industrial Disputes Act and they were got dismissed as not pressed by the workers in view of the aforesaid settlement, dt. 9.5.1979. In the circumstances, rejection of the petitioners' claim for gratuity on the ground of limitation provided by Rule 7(1) would be totally unjust and unreasonable. It is but just and proper that their claim for gratuity is disposed of on merits. Whether any or all of them are entitled to gratuity or not and, if entitled to, in what sum, should now be determined. In coming to this conclusion or giving this direction, I am not impressed by the fact that the petitioners purported to "resign" from service on 1.11.1980. I am not attaching any importance to the said circumstance. Even assuming that the petitioners had ceased to be in service of the 3rd respondent in 1977 or 1979 as is alleged, still I am of the opinion that their claim for gratuity should be disposed of on merits and should not be rejected on the ground of limitation for the several reasons mentioned hereinbefore.
16. For the above reasons, the Writ Petition is allowed, the impugned orders of the respondents 1 and 2 are quashed and the matter is remitted to the 2nd respondent for disposal of the claims made by the petitioners in P.G. Cases Nos. 2 to 33 of 1981, on merits. Since a long time has already elapsed in this litigation, I direct that the Controlling Authority shall dispose of the matter within three months of the receipt of a copy of this order. There shall be no order as to costs.