Allahabad High Court
U.P. Financial Corporation vs Appellate Authority Under Payment Of ... on 11 July, 2019
HIGH COURT OF JUDICATURE AT ALLAHABAD Reserved AFR Court No. - 18 Case :- WRIT - C No. - 1302 of 2018 Petitioner :- U.P. Financial Corporation Respondent :- Appellate Authority Under Payment Of Gratuity Act And 2 Others Counsel for Petitioner :- Ateeq Ahmad Khan Counsel for Respondent :- C.S.C.,Ranjeet Kumar Mishra Hon'ble J.J. Munir,J.
1. The question involved in this writ petition is: whether interim relief being paid to an employee immediately before his retirement would fall within the meaning of 'wages' defined under Section 25 of the Payment of Gratuity Act, 1972 for the purpose of calculation of his gratuity, under Section 4 (2)?
2. The third respondent was employed with the petitioner-corporation in the month of December, 1972 and retired voluntarily from service in the month of July, 2005. He opted to retire under the Voluntary Retirement Scheme offered by the Corporation (for short the 'VRS'). At the time of his retirement in the month of July, 2005 respondent no.3 held the post of Assistant Manager (Finance) with the petitioner corporation.
3. The case of the petitioner in short is that at the time of his voluntary retirement, he was paid gratuity that was calculated taking into consideration his basic pay + dearness allowance. However, a sum of Rs. 800/- per month that he was in receipt of at that time, by way of interim relief, was not included in his wages last drawn for the purpose of calculation of his gratuity. Respondent no.3, admittedly rendered 32 years of service and taking the said respondent's wages last drawn to be his basic pay at the time, that is a sum of Rs. 3500/- per month + dearness allowance, that at the relevant time was at sum of Rs. 10,606/-, his wages last drawn were determined at a figure of Rs. 14,106/-. In whatever manner gratuity was calculated, the petitioner corporation reckoned the sum payable to the third respondent in gratuity at a figure of Rs. 2,22,222/-. This figure in whatever manner calculated by the petitioner according to their rules, and not in accordance with the Payment of Gratuity Act, 1972 (for short the 'Act'), did not take into reckoning a sum of Rs. 800/- per month, that respondent no.3 received by way of interim relief.
4. Aggrieved, the third respondent moved an application to the Controlling Authority, Payment of Gratuity Act (for short the 'Controlling Authority'), dated 10.05.2012, in substance claiming that he was entitled to receive gratuity in accordance with Section 4(2) of the Act, where the sum of interim relief that he was receiving as part of his wages last drawn, is required to be included while determining the gratuity payable. It was claimed that including the sum of interim relief that the third respondent was in receipt of when he retired, gratuity payable to him would workout to a figure of Rs. 2,83,787/-. Thus, deducting the sum of Rs. 2,29,222/- paid to the third respondent at the time of his voluntary retirement in gratuity, a balance of Rs. 54,565/- is still outstanding, that he is entitled to receive from the petitioners under Section 4(2) of the Act.
5. The aforesaid application was registered before the Controlling Authority as PG Case No. 57 of 2012. A reply dated 05.12.2012, signed by the Chief Manager, Law Department, of the petitioner was filed in opposition to the third respondent's claim. A further reply dated 15.05.2013 was filed on behalf of the petitioner. A rejoinder was filed on behalf of the third respondent, reiterating his claim about entitlement to difference in the sum of gratuity payable to him, in accordance with Section 4(2) of the Act. The Controlling Authority allowed the petitioner's application vide order dated 18.01.2016, calculating the gratuity payable, by including the sum of interim relief for the purpose of reckoning wages last drawn by the third respondent and determining the same at a figure of Rs. 2,83,787/-, in accordance with the provisions of Section 4(2) of the Act, read with Rule 10(1) of the U.P. Payment of Gratuity Rules, 1975 (for short the 'Rules').
6. The petitioners preferred an appeal from the aforesaid order to the Appellate Authority under the Act, invoking the provisions of Section 7(7) and praying that the order of the Controlling Authority, dated 18.01.2016 be set aside. The aforesaid appeal was heard and dismissed by the Appellate Authority, vide its order dated 11.10.2017.
7. Aggrieved, the present writ petition has been filed.
8. Heard Sri Mohd. Saleem Khan, learned counsel for the petitioner, Sri Ranjeet Kumar Mishra, learned counsel appearing for respondent no.3, and Sri Sandeep Kumar, learned counsel appearing on behalf of respondent no.1.
9. A reading of the case as urged by the petitioners before the authorities below, shows that there is no issue about the fact that the Act is applicable to the petitioner's establishment. The thrust of the petitioner's submission is two fold. The first is that the petitioner having accepted the Voluntary Retirement Scheme, and accepted terminal benefits under the said scheme, he has no further right to claim any sum of money on any count whatsoever, including gratuity payable under the Act. Learned counsel for the petitioner submits that acceptance of retirement under a Voluntarily Retirement Scheme is a 'take it or a leave it' offer, where whatever is offered by the employer under the scheme, if accepted, bars all claims to pay revision or higher wages, which the employee may be otherwise entitled under the Rules. In this regard, learned counsel for the petitioner has relied upon the decision of the Supreme Court in A.K. Bindal & Another vs. Union of India & others, (2003) 5 SCC 163, where it has been held thus:-
34.This shows that a considerable amount is to be paid to an employee ex gratia besides the terminal benefits in case he opts for voluntary retirement under the Scheme and his option is accepted. The amount is paid not for doing any work or rendering any service. It is paid in lieu of the employee himself leaving the services of the company or the industrial establishment and foregoing all his claims or rights in the same. It is a package deal of give and take. That is why in the business world it is known as "golden handshake". The main purpose of paying this amount is to bring about a complete cessation of the jural relationship between the employer and the employee. After the amount is paid and the employee ceases to be under the employment of the company or the undertaking, he leaves with all his rights and there is no question of his again agitating for any kind of his past rights with his erstwhile employer including making any claim with regard to enhancement of pay scale for an earlier period. If the employee is still permitted to raise a grievance regarding enhancement of pay scale from a retrospective date, even after he has opted for Voluntary Retirement Scheme and has accepted the amount paid to him, the whole purpose of introducing the Scheme would be totally frustrated.
10. Learned counsel for the petitioner submits that a reading of the aforesaid principle makes it clear that once an employee accepts to quit employment under the VRS, all that he is entitled to receive is whatever is part of that scheme. The VRS is a complete severance of all relationship and obligations between the employer and employee, and it comes subject to whatever is offered in remuneration as part of the VRS. He submits, therefore, that the petitioner is not entitled to rely upon the statutory fixation of gratuity under the Act, to which he would be entitled, in case he retired on attaining the age of superannuation. According to Sri Salim Ahmad Khan, learned counsel for the petitioner, reckoning of gratuity under the Act is an anathema to the concept of VRS, which is complete in all quantification of rights and obligations that are contracted by an employee, opting to retire under the said scheme.
11. Sri Sandeep Kumar Mishra has disputed the aforesaid proposition and submits that the liability of the employer to pay gratuity, governed by Section 4(2) of the Act cannot be defeated on the basis of attaching to the VRS an overshadowing effect, upon the statutory rights of the employee. He submits that the decision of their Lordships in A.K. Bindal and Another (Supra) is clearly distinguishable, as that did not relate to payment of gratuity.
12. This Court has considered the aforesaid submission with all the attention that it deserves. The VRS that may be an initiative in furtherance of a policy of the petitioner, is after all a scheme under which an employee is given an offer to retire, subject to benefits extended to him that are generally alluring enough for him/her to forsake the remainder of his tenure of service, in consideration of whatever he is to receive under the scheme. It is no doubt true that the scheme comes in standard form, where the condition of acceptance is "take it or leave it". But, the question that arises in that case is whether a statutory right, as sacrosanct as that created under the Act in favour of an employee to receive gratuity reckoned in accordance with the Act, can be excluded on the basis of a contract? The nature of the right to receive gratuity has been dealt with by their Lordships of the Supreme Court in a recent decision in Nagar Ayukt, Nagar Nigam, Kanpur vs. Mujib Ulla Khan and another, 2019 SCC Online SC 462, where it has been held in paragraph 11 and 12 of the report as under:-
11. We find that the notification dated 08.01.1982 was not referred to before the High Court. Such notification makes it abundantly clear that the Act is applicable to the local bodies i.e., the Municipalities. Section 14 of the Act has given an overriding effect over any other inconsistent provision in any other enactment. The said provision reads as under:
"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."
12. In view of Section 14 of the Act, the provision in the State Act contemplating payment of Gratuity will be inapplicable in respect of the employees of the local bodies." (Emphasis by Court)
13. No doubt this decision was rendered in the context of a local body, but that is besides the point, as it is nobody's case that the Act does not apply to the petitioner. If it does, Section 14 of the Act gives overriding effect to the Act, not only over any other enactment, but also over any other instrument or contract having effect by virtue of any enactment other than the Act. The language of Section 14, clearly spells this out. The VRS at best is a scheme that has been framed by the petitioners in furtherance of a policy, may be as their Lordships said in A.K.Bindal and Another (Supra) to reduce surplus staff and to bring about financial efficiency. But, the scheme would be no more than a contract framed under a policy of the petitioners, and would, therefore, be subservient to the Act; and a fortiori to the rights of an employee to receive gratuity on the date he retires, calculated in accordance with the provisions of the Act. Even if the VRS were framed under an Act or had statutory flavor, the provisions of the Section 14 of the Act would still give it overriding effect, over anything said to the contrary in the scheme.
14. So far as the decision of their Lordships in the case of A.K.Bindal and Another (Supra) is concerned, the observations giving priority and finality to all emoluments received under the VRS is in relation to a claim for enhancement of pay-scale, for an earlier period of time, when the employee was in service. There the entire framework of rights is different because the right to receive emoluments or a certain pay scale, arises from the employer-employee relationship, and the entitlement is governed by the prevalent pay scale. In the nature of things that were involved in A.K. Bindal and another (Supra) what the employee was enforcing was his right to a higher pay scale, in relation to a period of time prior to his retirement under the VRS. The right to receive emoluments or pay at a particular rate, being essentially a matter of contract between an employer and employee, may be governed or fixed by rules, would all sink behind a contract of voluntary retirement under the VRS, where in complete liquidation of all the employees' claims a lump sum is offered. In that case, however, there was no issue regarding payment of a statutory entitlement like gratuity, governed by an Act that prescribes the rate thereof and has overriding effect over any other enactment, instrument or contract having force of law, by virtue of Section 14. Therefore, the right to receive other emoluments at a higher scale, after accepting retirement under the VRS, cannot be compared to the statutory entitlement to receive gratuity at the rate prescribed under the Act. In fact, this Court thinks that it would be in the best interest of both the employer and employee that calculation of gratuity, which forms part of the VRS be always done in accordance with the provisions of the Act, considering the overriding effect given to it, by Section 14. Thus, this Court finds no force in the submission of Sri Khan, learned counsel appearing for the petitioner on this count.
15. The next submission of Sri Khan, learned counsel for the petitioner is that gratuity payable to the 3rd respondent is to be worked out on basis that the rate of wages last drawn by the employee, for the purpose of Section 4(2) of the Act, is to be calculated on the basis of his basic pay + dearness allowance. He submits that the third respondent's claim that interim relief be added for the purpose of calculating wages last drawn, is patently fallacious. He submits that it is so, going by the definition of wages, under Section 2(s) of the Act, which reads as follows:-
2. Definitions:-In this Act, unless the context otherwise requires,-
(a) x x (b) x x (c) x x (d) x x (e) x x (f) x x (g) x x (h) x x (i) x x (j) x x (k) x x (l) x x (m) x x (n) x x (o) x x (p) x x (q) x x (r) x x
(s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
16. Learned counsel for the petitioner has placed much emphasis on the fact that going by the definition of wages, read according to its plain meaning, it would include all emoluments that are earned by an employee while on duty or on permissible leave to which he is entitled, and also include dearness allowance. However, it excludes, according to learned counsel, bonus, commission, house rent allowance, overtime wages and any other allowance. He submits that interim relief paid to the petitioner would qualify under the category of "any other allowance", and, therefore, cannot be included in the wages last drawn by the employee, for the purposes of Section 4(2) of the Act. He, therefore, submits that the workman's claim asking Rs. 800/- to be added in determining his wages last drawn, on the basis of which his entitlement to gratuity is to be worked out, is contrary to the provisions of Section 2(s) of the Act.
17. Sri Ranjeet Kumar Mishra, learned counsel for the petitioner disputes the above submission and says that by application of no principle, can interim relief be included in any of the specifically named allowances, under Section 2(s) of the Act, or other allowances mentioned there, that are not to form part of the wages. In the context of emoluments paid to an employee, interim relief is something like a prompt relief that is provided to an employee in the interregnum between time that dearness allowance is revised appropriately, to bring it in tune with the prevalent price index etc. It may be likened to the temporary grant of a particular percentage of higher emoluments, awaiting an impending revision of pay scale, or emoluments properly understood, like D.A. From what interim relief means in the context of emoluments payable to an employee, it is certainly part of wages, if not the basic scale, most certainly those periodical revisions that are made by way of accretions to the salary, called dearness allowance, in order to keep the real wages of the employee apace with the price index and the escalating cost of living. It is by no means an allowance akin to house rent allowance, city compensatory allowance, traveling allowance or bonus or overtime wages, that are generically different from the substantive wages payable to an employee. Once wages are defined to mean and include dearness allowance, there is absolutely no basis to exclude interim relief from the definition of wages, that is nothing but a temporary addition to the principal component of wages, until a revision of the dearness allowance or the basic pay itself.
18. This Court is, therefore, of opinion that interim relief claimed by the employee to be part of his wages for the purpose of reckoning his wages last drawn at the time of voluntary retirement from service, would be indeed a part of it. Seen, thus, in the clear opinion of this Court, the authorities below did not commit any manifest error of law in including interim relief to the figure of wages last drawn by the third respondent, while working out his entitlement to gratuity, at the time of his voluntary retirement.
19. There is another issue that the learned counsel for the petitioner has raised, and about it too, learned Counsel for parties were heard at length. He has raised this issue because it has figured in the decision of the Controlling Authority, regarding a decision taken by the petitioner's Board in view of some Judgment in the case of one Shyamnarayan Tripathi, where interim relief was directed to be made part of wages last drawn, in reckoning gratuity payable to an employee retiring under the VRS. A copy of the resolution of the Board aforesaid, in that regard was filed before this Court through the second supplementary affidavit dated 13.02.2018. The document is an extract of the minutes of the 526th meeting of the petitioner's Board, held on 8th June, 2010. The resolution was passed under item No. 5 of the agenda, and reads as follows:-
EXTRACTS OF THE MINUTES OF THE 526TH BOARD MEETING HLED ON TUESDAY 8TH JUNE 2010 AT 11.30 AM IN THE BOARD METTING HALL, PICKUP BHAWAN, GOMTI NAGAR, LUCKNOW.
VOLUME-1 MATTER PUT BY ADMINISTRATION DEPARTMENT NOTE ON ITEM NO. 5 OF THE AGENDA.
CONSIDERATION OF THE ORDERS DATED 22.07.2009 AND 28.07.2009 IN THE CASES OF S/SRI S.N. AWASTHY & K.K. SHUKLA EX EMPLOYEES OF THE CORPORATION RESPECTIVELY, PASSED BY THE CONSTROLLING AUTHORITY UNDER THE PAYMENT OF GRATUITY ACT 1972 AND REPRESENTATONS OF SOME OF THE OTHER RETIRED EMPLOYEES OF THE COROPORATION FOR PAYMENT OF DIFFERENCE IN AMOUNT OF GRATUITY W.E.F. 24.09.1997.
The Board considered the note dated 24.05.2010 of the Managing Director and decided that all those employees who have retired between 24.09.1997 to March 2005 shall be entitled for the payment of arrear of Gratuity on account of enhanced limit of Gratuity of Rs. 3.50 Lacs and also on account of Interim Relief granted by the Corporation.
The Board further decided that the employees who have retired after 01.04.2005 and have been paid the amount of Gratuity calculated on the basis of Basic + D.A. + A.D.A. Shall also be eligible for arrear on the amount of Interim Relief by treating it as part and parcel of wages.
20. It is argued by Sri Khan, learned counsel for the petitioner that the benefit of the aforesaid resolution will not go to the 3rd respondent, as the decision of the Board of Directors taken in their meeting held on 08.06.2010, sanctioning inclusion of interim relief for the purpose of payment of gratuity, has been made with regard to those employees who retire on attaining the age of superannuation. The benefit of this resolution would not go to the 3rd respondent or any other employee who retires under the VRS, that has its own terms. Admittedly, the petitioner retired availing VRS from the services of the petitioner on 31.07.2005, which is a date after 01.04.2005. According to the petitioner's resolution dated 8th June, 2010 he would be entitled to arrears of gratuity, calculated on the basis of basic pay + D.A. + Additional D.A., including interim relief, which shall be treated as part and parcel of wages. Going by the precise phraseology of the petitioner's resolution there is absolutely no basis to be found in the resolution or outside it for drawing this classification, as learned counsel for the petitioners submits, between employees who retire on attaining the age of superannuation and those who have accepted retirement under the V.R.S.
21. This distinction drawn appears to have no basis in the decision of the petitioner's board to include interim relief as part and parcel of wages, for the purpose of calculating gratuity payable to a retiring employee. It is of little significance whether the employee retires on superannuation or voluntarily, once in principle, the petitioners have accepted that retired employees too are entitled to receive arrears of gratuity, worked out on basis that interim relief would form part of wages to reckon the gratuity payable. There is absolutely no reasonable classification between a superannuating employee and one retiring voluntarily, for the purpose of calculation of gratuity that is based on an intelligible differentia bearing a reasonable nexus with the object sought to be achieved by such a classification, between employees retiring from the petitioner's services. To make this kind of a classification would lead to promoting invidious and hostile discrimination, between two sets of similarly circumstanced employees, at least, as far as payment of gratuity is concerned.
22. This is, particularly, so as the right to receive gratuity, governed by the Act as it is, makes little distinction between retirement of an employee that comes about on superannuation or otherwise. Both kinds of retirements are treated at par under the Act, as would be evident from the provisions of Section 4(1) that are quoted below:-
4. Payment of gratuity.- (1) 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,-
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease:
Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement :
[Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.] Explanation.-For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.
(Emphasis by Court)
23. A perusal of Clause (a) of sub-section (1) of Section 4 of the Act, and clause (b) of sub-section (1) aforesaid would show that for the purpose of entitlement of an employee to gratuity, the mode of termination of his employment after rendering five years or more of continuous service, that have been placed at par, are superannuation under Clause (a), and retirement or resignation under Clause (b). Retirement other than superannuation under clause (b), in the opinion of this Court, would clearly take within its fold, voluntary retirement.
24. Of course, the Act adds to it by Clause (b) of sub-section (1), resignation also as an contingency which after five years or more of continuous service, would entitle an employee to payment of gratuity under the Act. Considering that the Act has overriding effect over any other law, or any contract or instrument having force of law to the contrary by virtue of Section 14, the distinction between retirement on reaching the age of superannuation and retirement that is voluntary under an option exercised availing the V.R.S., seems to be contrary to what the Act says. The resolution dated 08.06.2010 passed by the petitioner's Board, therefore, would equally apply to the third respondent's case, as it does in the case of a workman who retires on attaining the age of superannuation.
25. This Court, therefore, finds that the conclusions of the Controlling Authority and the Appellate Authority on this score, may be for different or added reasons, are right and unassailable.
26. In the result the writ petition fails and is dismissed with costs.
27. The amount of gratuity deposited with the Controlling Authority be paid to the petitioner within 15 days of receipt of a certified copy of this order by the said Authority.
Order Date :- 11/07/2019 BKM/-