Kerala High Court
Adhyapaka Urban Co-Op.Bank Ltd.No.794 vs The Life Insurance Corporation Of India on 5 February, 2021
Author: Amit Rawal
Bench: Amit Rawal
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE AMIT RAWAL
FRIDAY, THE 05TH DAY OF FEBRUARY 2021 / 16TH MAGHA,1942
WP(C).No.15216 OF 2011(B)
PETITIONER/S:
1 ADHYAPAKA URBAN CO-OP.BANK LTD.NO.794,
PUTHUPALLY, KOTTAYAM, REPRESENTED BY ITS GENERAL
MANAGER.
2 ABRAHAM JACOB,
ALUMKAL HOUSE, PARIYARAM POST, MALLAPPALLY WEST,
PATHANAMTHITTA DISTRICT - 689 585.
3 JOSE T. MOSES,
THENGUMTHURUTHIL HOUSE, MANARCAD POST, KOTTAYAM - 686
019.
4 P.I. ABRAHAM,
PALACKAL HOUSE, PUTHUPALLY POST, KOTTAYAM - 686 011.
BY ADV. SRI.MATHEW JOHN (K)
RESPONDENT/S:
THE LIFE INSURANCE CORPORATION OF INDIA,
REPRESENTED BY THE, BRANCH MANAGER (P AND GS),
DIVISIONAL OFFICE, KOTTAYAM - 686 001, THROUGH THE
HANDS OF ITS, MANAGER (LEGAL AND HOUSING PROPERTY
FINANCE).
R1 BY ADV. SRI.T.A.ABDUL RASHEED
R1 BY ADV. SRI.ADEEP ANWAR
R1 BY ADV. SRI.VARGHESE C.KURIAKOSE
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 27-01-
2021, THE COURT ON 05-02-2021 DELIVERED THE FOLLOWING:
WP(C).No.15216 OF 2011(B)
2
JUDGMENT
Dated this the 5th day of February 2021 The question raised in this writ petition is whether the insurance Corporation is liable to pay amount of gratuity as per the terms and conditions of the contract or up to the limit of Rs.3,50,000/- as prescribed in terms of Section 4 (3) of the Payment of Gratuity Act.
2. Learned Counsel for the petitioner Sri.Mathew John submitted that the controversy in the present case is squarely covered by the decision rendered by a Division Bench of this Court in writ appeal No.1823/2010 in W.P.(C) 29137/2009, referring to the similar terms and conditions of the insurance policy containing Clause (b) of Rule 12, whereby the Life Insurance Corporation indemnified the insurer to the sum assured under the Pure Endowment Assurance ie. an amount equal to 15 days salary of the member as on the Entry date or the annual renewal date as the case may be for each year of service up to the normal retirement date subject to the maximum of 20 months salary. The aforementioned Clause was referred to WP(C).No.15216 OF 2011(B) 3 in the judgment and it was held that there was no Clause which would indicate any limit over the maximum amount to be paid as gratuity except the limit of maximum of 20 months salary. In other words, the credit shown in the account of all the employees was mandatorily required to be insured as per the provisions of the Kerala Co-operative Societies Act, 1969 and the Rules framed thereunder, more than a limit of Rs.3,50,000/-, particularly when the Corporation after adjustment of the excess payment for the subsequent year cannot absolve itself from liability of the entire amount. The employer is not required to pay any amount over and above the amount of Rs.3,50,000/-. It is the duty of the insurance Corporation to ward off the entire liability. It was also contended in the decided judgments, the gratuity of the employee was shown as more than 3,50,000/-. But taking into consideration all those factors and the provisions of the Payment of Gratuity Act, the judgment of the learned Single Bench was upheld and contention of the Corporation of limiting the liability to Rs.3,50,000/- towards - guarantee was rejected. The present case pertains to similar terms and conditions of the policy, which was also considered in the decided matter and therefore, the insurance Corporation cannot restrict the liability WP(C).No.15216 OF 2011(B) 4 to Rs.3,50,000/-, but liable to pay the entire amount. The petitioner No.1 Co-operative Bank is not required to pay the balance amount to Petitioner Nos.2, 3, and 4 - the employees.
3. On the contrary, Sri.Varghese Kuriakose appearing on behalf of the Insurance Corporation relied upon the judgment rendered by the Full Bench of this Court in Chandrasekharan Nair v. Kerala State Co-operative Agricultural and Rural Development Bank Ltd. [2017 4) KLT 276 (F.B) , whereby referring to the judgment of the Division Bench relied upon by Sri.Mathew John and noticing Rule 59 of the Kerala Co-operative Rules, it has been held that the employees are entitled to higher amount and the liability to pay the balance amount, ie. over and above Rs.3,50,000/- would be met by the employer and not by the insurance Corporation.
4. It was next contended that the Judgment relied upon by the other side is not applicable to the facts and circumstances of the present case. The Division Bench judgment of this Court rendered in writ appeal No.1823/2010 would not be applicable, wherein on examination of master policy and the Rules, it is held that none of the Clause spell out fixing of any limit over the maximum amount payable as gratuity except limit of maximum WP(C).No.15216 OF 2011(B) 5 of 20 months salary. It was also the case where the annual renewal premium was charged on the gratuity amount with a ceiling limit of maximum Rs.3.50 lakhs and the excess premium was adjusted to the subsequent years, whereas the Full Bench held that liability to pay the gratuity would not be shifted to the insurer, by compulsory insurance, but only that maturity value would go to the credit of the employees. The attention of this Court was also drawn to the judgment of this Court in Nedupuzha Service Co-operative Bank Ltd. Vs. Rugmini [2011 (3) KLT 134], and submitted that the Division Bench did not notice the 2nd Proviso to Rule 59 and also the provisions of Section 4 (5) of the Central Act, which clearly envisages that any deficit in the amount due as gratuity to the employee after the payment by insurer has to be met by the employer only per the provisions of Section 4 (5) of the Central Act. The insurer cannot be liable to pay any amount in excess of the maturity value of master policy.
5. In order to answer the question raised herein above, it would be obligatory on the part of this Court to refer the operative part of the judgment relied upon by the respective parties. In writ appeal No.1823/2010 decided on 5.6.2015, on WP(C).No.15216 OF 2011(B) 6 comparison of documents brought on record the Division Bench in Paragraph 14, 15, 20 and 21 rejected the contention of the insurance Corporation. Paragraphs 14,15,20 and 21 read thus:
14. Neither in the master policy nor in the rules, there is any clause which may indicate that there is any limit over the maximum amount payable as gratuity except the limit of maximum of 20 months' salary. The Corporation which had given the master policy delineating the terms and conditions cannot shirk its responsibility for making the payment to the employee on its retirement at the normal retirement age as per policy. The submission which has been pressed by learned counsel for the appellant is that the Schedule of Cost and Benefit which have been brought on record indicate that the annual renewal premium was charged on the gratuity amount with a ceiling limit of maximum Rs.3.50 lakhs. It is also true that in few years the credit shown was more than Rs.3.50 lakhs, but it is submitted that the excess premium was adjusted to the subsequent years. The Bank has filed a counter affidavit to I.A.No.952 of 2010 by which reply has been given to the additional documents brought on record by the Corporation. The original proposal submitted by the Bank, the details of the employee and the rules of Group Gratuity cum Life assurance scheme were brought on record which documents do not indicate that there was any ceiling on the maximum amount of gratuity to be paid. Learned counsel for the respondent has also referred to Appendix I which gives the contingency on the happening of which the benefit become payable. In the Appendix I following was mentioned :
"Fifteen days salary of the Member as on the date of WP(C).No.15216 OF 2011(B) 7 retirement of death, as the case may be, for each year of service subject to a maximum of 20 months salary."
15. As noted above, the Cost and Benefit Schedule has also been annexed by the Bank as Annexure R3(c) and R3(d) which indicate that there are employees whose gratuity is shown as more than Rs.3.50 lakhs. The Corporation has explained that it was by mistake that higher amount of gratuity was shown. Be as it may, there being clear stipulation in the master policy and in the rules that employee on his retirement, is entitled for gratuity for 15 days' salary of each completed year and upto a maximum of 20 times of the salary and no other limit can be read in the entitlement of gratuity.
20. The crux of the matter is "what is the contract with the insurer". The relevant clause of the master policy and the scheme under which the master policy was granted are crucial to determine the entitlement of gratuity amount. As noted above, the master policy and the Scheme clearly contemplated the payment of gratuity to the extent of 15 days salary of each completed year subject to a maximum of 20 times of the salary. Thus the only limit for payment of gratuity was 20 times of the salary and no other limit, limiting the gratuity to Rs.3.50 lakhs, was envisaged.
21. The submission of the Corporation that there was limit of Rs.3.50 lakhs in payment of gratuity can also not be accepted due to another reason. The limit of Rs.3.50 lakhs was not even there in the Payment of Gratuity Act, 1972 when the policy was taken i.e. on 01.11.1979. At the time when policy was introduced by the Corporation, the statutory limit as per Section 4(3) was only Rs.50,000/- which was increased to one lakh on 24.05.1996 and subsequently it was substituted as WP(C).No.15216 OF 2011(B) 8 Rs.3.50 lakhs. Thus it cannot be even imagined that when the policy was taken any limit of Rs.3.5 lakhs towards the maximum payment of gratuity was envisaged. The Bank had always paid renewal premium as demanded by the Corporation. The Ombudsman in its judgment has rightly observed that in the event the Corporation failed to realise any other premium from the Bank, the employee shall not suffer. In view of the aforesaid, we are of the view that the payment of gratuity to the respondent could not have been limited to Rs.3.50 lakhs and no error was committed by learned Single Judge in holding that the payment was not restricted to the amount of Rs.3.50 lakhs. In view of the above discussion WA No.1823/2010 deserves to be dismissed.
6. In the judgment rendered by Full Bench ie. Chandrasekharan Nair's Case (supra) after noticing the provisions of Section 4 and 4A of the Payment of Gratuity Act and Rule 59 of the Kerala Co-operative Societies Rules, held that the decision rendered by the Division Bench in Life Insurance Corporation of India v. K.P.Varughese [2015 (3) KLT SN 57] did not consider the second Proviso to Rule 59 (iii) of the Co-operative Rules substituted with effect from 2.11.2010 and thus do not help to resolve the controversy with regard to the extent of liability on behalf of the employer vis a vis the Insurance Corporation. The law on the applicability of the WP(C).No.15216 OF 2011(B) 9 judgment is no longer res integra as the judgment of the Division Bench has been considered by the Full Bench of this Court and by noticing the provisions of Section 4(iii), 4A of the Payment of Gratuity Act as well as Rule 59 of the Co-operative Rules, the Full Bench found that the liability to pay the gratuity does not get shifted to the insurer by compulsory insurance and the effect is only that the maturity value of master policy would go to the credit of the dues of the employee. Any amount in excess of the gratuity due would also go to the employee since the contract of insurance would fall within the ambit of Section 4 (5) of the Central Act. Any deficit in the amount due as gratuity to the employee after the payment by insurer has to be met by the employer as liability. In other words, the insurer cannot be liable to pay the amount in excess of the maturity value of the master policy as the same would be dependent on the premium paid to him.
7. Paragraphs 5, 7 and 8 of the Full Bench judgment read thus:
5. The liability to pay gratuity does not get shifted to the insurer by the compulsory insurance and the effect is only that the maturity value of the master policy would go to the credit of the dues of the employee. Any amount in excess of the gratuity due would also go to the employee since the contract of insurance would fall within the ambit of S.4(5) of WP(C).No.15216 OF 2011(B) 10 the Central Act. Any deficit in the amount due as gratuity to the employee after payment by the insurer has to be met by the employer only as the liability squarely rests on him under S.4(2) of the Central Act. The insurer cannot be made liable to pay any amount in excess of the maturity value of the master policy as the same would be dependent on the premium paid to him. The compulsory insurance under S.4A of the Central Act is only to facilitate the employer to discharge his liability and the premium paid is part of the wages only. Of course the wording of the second proviso to R.59(iii) of the Rules gives rise to a doubt that the employee would be pinned down to the amount of gratuity specified in the Central Act. Such an interpretation would render S.4(5) of the Central Act otiose whereunder the employee has a right to receive better terms of gratuity under any award or agreement or contract with the employer. The provisions of the Central Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other enactment or instrument or contract. The overriding effect of the Central Act over other enactments is explicit from S.14 of the Central Act which is to the following effect:
"14. Act to override other enactments, etc.- The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act."
7. The dominant intention of the Central Act is to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments. The dominant intention of the State Act is to provide for the orderly development of the co-operative societies in the State as self-governing democratic institutions. A provision in the Central Act to give effect to its dominant purpose may incidentally be on the same subject as covered by the provision in the State Act. But such partial coverage of the same area in a different context and to achieve a different purpose does not bring about the repugnancy which is intended to be covered by Article 254(2) of the Constitution. We shall quote the decision in Vijay Kumar Sharma v. State of Karnataka ((1990) 2 SCC 562) wherein it is held as follows:
"53. The aforesaid review of the authorities makes it clear that whenever repugnancy between the State and WP(C).No.15216 OF 2011(B) 11 Central legislation is alleged, what has to be first examined is whether the two legislations cover or relate to the same subject matter. The test for determining the same is the usual one, namely, to find out the dominant intention of the two legislations. If the dominant intention i.e., the pith and substance of the two legislations is different, they cover different subject matters. If the subject matters covered by the legislations are thus different, then merely because the two legislations refer to some allied or cognate subjects they do not cover the same field. The legislation, to be on the same subject matter must further cover the entire field covered by the other. A provision in one legislation to give effect to its dominant purpose may incidentally be on the same subject as covered by the provision of the other legislation. But such partial coverage of the same area in a different context and to achieve a different purpose does not bring about the repugnancy which is intended to be covered by Article 254(2). Both the legislations must be substantially on the same subject to attract the article." (emphasis supplied) There is no repugnancy (in the sense that one Act cannot be obeyed without disobeying the other) and therefore every endeavour has to be made to reconcile the provisions and give a harmonious construction.
8. The following decisions were cited at the Bar by the counsel for either sides:
(i) Retnavalli v. Ambalapadu Service Co-operative Bank Ltd. (2005 (3) KLT 320).
(ii) Nedupuzha Service Co-operative Bank Ltd. v. Rugmini (2011 (3) KLT 1 34(D.B.)).
(iii) Mathew Korah v. Kaduthuruthy Urban Co-operative Bank (2013 (4) KLT 558).
(iv) The Travancore Cements Employees' Co-operative Bank Ltd. v. Ramachandran Nair (2014(1) KLT 889 (D.B.)) and
(v) Life Insurance Corporation of India v. K.P.Varughese (2015 (3) KLT SN 57 (C.No.78) = ILR 201 5(3) Ker. 420 (D.B.)).
None of the above decisions dealt with the second proviso to R.59(iii) of the Rules substituted with effect from 2.11.2010 only and hence do not help to resolve the controversy in this bunch of cases. The second proviso to R.59(iii) of the Rules referable to the amount received out of any scheme WP(C).No.15216 OF 2011(B) 12 implemented by a society shall be construed in the context explained above. The employee in other words is entitled to the higher amount if he has opted in terms of S.4(5) of the Central Act even if a lesser amount is due under S.4(2) thereof. The decision in Nedupuzha's case (supra) to the extent that excess amount if any received by the employer under the policy would inure to the employee is affirmed. The said decision does not lay down the proposition that the entitlement of the employee is confined to the amount received under the policy even it fit falls short of the statutory limit. Circular No.5/2016 and similar circulars issued by the Registrar of Co-operative Societies stem out of a misconception of the statutory provisions and are quashed to this extent. The reference is answered accordingly and the Writ Petitions shall be posted before the single Judge as per roster for disposal dependent on individual facts.
8. In the instant case, the Corporation has laid reliance to Ext.R1 (b) communication of the 1 st petitioner dated 20.10.2008 whereby ad-hoc premium was sought from the employer. For the sake of brevity the contents of Ext. R1 (b) read thus:
" We are forwarding herewith Staff Data, Form Nos.6202 & 6204 and a cheque amounting to Rs.3,87,000/- as required in your letter cited, kindly acknowledge the receipt."
9. On a perusal of the cost and benefit schedule Ext.R1
(c), it is evident that the insured amount of all the employees have been shown to the limit of Rs.3,50,000/.
10. On examination of documents on record as well as the findings arrived at by the Full Bench and the Division Bench, I WP(C).No.15216 OF 2011(B) 13 am of the considered view that the Division Bench of this Court in writ appeal No. 1823/2010 did not consider Rule 59 of the Co- operative Society Rules, which provide that in no case gratuity shall exceed 15 months of pay and the second Proviso to Rule 59 substituted with effect from 2.11.2010 provides that the gratuity amount shall not exceed the amount which an employee is eligible as per the Payment of Gratuity Act and Rules. Rule 59 of the Kerala Co-operative Societies Rules read thus:
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.
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.
11. It is settled law that if any judgment omits to refer to WP(C).No.15216 OF 2011(B) 14 the statutory rules, the said judgment cannot be treated as a judgment in 'rem' and would be 'per incurium'. The Full Bench has already taken note of the judgment rendered by the Division Bench and did not consider the ratio decidendi culled out therein.
12. For the reason aforementioned I am of the view that there is hardly any merit in the contention advanced by the Sri.Mathew John, learned Counsel, that the entire amount of gratuity over and above Rs.3,50,000/- is to be paid by the insurance company is not acceptable; in fact the liability to pay excess amount has to be met by the employer ie., petitioner No.1. The writ petition is thus dismissed.
Sd/ AMIT RAWAL JUDGE Jm/ WP(C).No.15216 OF 2011(B) 15 APPENDIX PETITIONER'S/S EXHIBITS:
EXHIBIT P1 A TRUE COPY OF THE MASTER POLICY.
EXHIBIT P2 A TRUE COPY OF THE PROPOSAL FORM ALONG WITH STAFF DATA AS ON 01.11.1979.
EXHIBIT P3 A TRUE COPY OF THE STATEMENT SHOWING THE AMOUNTS PAYABLE TO THE 2ND PETITIONER.
EXHIBIT P4 A TRUE COPY OF THE STATEMENT SHOWING THE AMOUNTS PAYABLE TO THE 2ND PETITIONER.
EXHIBIT P5 DO. TO THE 3RD PETITIONER.
EXHIBIT P6 DO. TO THE 4TH PETITIONER.
EXHIBIT P7 A TRUE COPY OF THE LETTER DATED 03.03.2011
BY THE 2ND PETITIONER.
EXHIBIT P8 DO.BY THE 3RD PETITIONER DATED 19.02.2011.
EXHIBIT P9 DO. BY THE 4TH PETITIONER DATED 21.02.2011.
EXHIBIT P10 A TRUE COPY OF THE REPLY DATED 21.03.2011
TO THE 2ND PETITIONER.
EXHIBIT P11 A TRUE COPY OF THE REPLY DATED 21.03.2011
TO THE 3RD PETITIONER.
EXHIBIT P12 A TRUE COPY OF THE REPLY DATED 21.03.2011
TO THE 4TH PETITIONER.
EXHIBIT P13 A TRUE COPY OF THE JUDGMENT DATED
27.07.2010 IN W.P.(C)NO.29137 OF 2009.
RESPONDENT'S/S EXHIBITS:
EXHIBIT R1(A) TRUE PHOTOSTAT COPY OF THE LETTER OF
INTIMATION WAS GIVEN TO THE 1ST PETITIONER.
EXHIBIT R1(B) TRUE PHOTOSTAT COPY OF THE LETTER OF COMMUNICATION DATED 20.10.2008 ISSUED BY THE 1ST PETITIONER.
EXHIBIT R1(C) TRUE PHOTOSTAT COPY OF THE DECLARATIONS SIGNED BY THE EMPLOYER ALONG WITH THE STAFF DATA.
WP(C).No.15216 OF 2011(B) 16 EXHIBIT R1(D) TRUE PHOTOSTAT COPY OF THE COST AND BENEFIT SCHEDULE FOR THE RENEWAL DATED OF 01.11.2008.
EXHIBIT R1(E) TRUE PHOTOSTAT COPY OF THE INTIMATION OF THE 1ST PETITIONER DATED 13.03.2009.
EXHIBIT R1(F) TRUE PHOTOSTAT COPY OF THE INTIMATION OF THE 1ST PETITIONER DATED 14.05.2009.