Gujarat High Court
Smt. Ashaben Jyotindraprasad . Dave vs State Of Gujarat & on 1 September, 2017
Author: Akil Kureshi
Bench: Akil Kureshi, Biren Vaishnav
C/LPA/1072/2016 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
LETTERS PATENT APPEAL NO. 1072 of 2016
In SPECIAL CIVIL APPLICATION NO. 6890 of 2001
==========================================================
SMT. ASHABEN JYOTINDRAPRASAD . DAVE....Appellant(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)
==========================================================
Appearance:
BHARGAV KARIA & ASSO, ADVOCATE for the Appellant(s) No. 1
GOVERNMENT PLEADER for the Respondent(s) No. 1 - 2
MR ND NANAVATI, SENIOR ADVOCATE WITH MR RD DAVE, ADVOCATE
for the Respondent(s) No. 2
NOTICE SERVED for the Respondent(s) No. 1
==========================================================
CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE BIREN VAISHNAV
Date : 01/09/2017
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. This appeal is filed by the original petitioner to challenge the judgement of the learned Single Judge dated 05.07.2016.
2. Brief facts are as under:
2.1 The appellant - petitioner was an employee of the Gujarat State Financial Corporation ('GSFC' for short). She joined her duties in the year 1973 as a Clerk and in due course of time retired on superannuation on 31.07.1999 from Page 1 of 11 HC-NIC Page 1 of 11 Created On Sat Sep 09 15:48:28 IST 2017 C/LPA/1072/2016 ORDER the post of Assistant Secretary. At the time of her retirement, she was drawing pay and allowances in the pay scale of Rs.12,750-18,000 with a basic pay of Rs.14,250/- and a gross pay of Rs.19,050/-. She was entitled to gratuity on the basis of last pay drawn as per the Payment of Gratuity To The Employees Regulations, 1964 ('the Regulations' for short).
The granting of pay scale to the petitioner and other employees of the Corporation was not yet sanctioned by the Government and the Corporation therefore paid 60% of the gratuity otherwise payable as per the petitioner's last pay drawn and withheld on adhoc basis 40% thereof awaiting resolution of various issues with the Government.
2.2 It appears that the employees of the Corporation were drawing pay and allowances as per the recommendations of the 4th Pay Commission when the Corporation appointed a private agency for carrying out what was referred to as "a strategic and financial restructuring" in the year 1994. The terms of the reference included carrying out financial restructuring, reviewing of existing organisational and operating structure to suggest improvement in the quality of loan portfolio and recommend improvement in the quality, productivity and profitability of the organisation. On the basis of the recommendations of such agency, which were accepted by the Board of Directors of the Corporation in its meeting held on or around 06.02.1998, the pay scales of the officers of the Corporation were revised with effect from 01.07.1997. This upward revision gave rise to demand by the employees of 'B' and 'C' cadre for similar pay revisions. The Board of Directors referred the issue to a committee who made its recommendations which were accepted by the Board of Page 2 of 11 HC-NIC Page 2 of 11 Created On Sat Sep 09 15:48:28 IST 2017 C/LPA/1072/2016 ORDER Directors in its meeting dated 06.09.1998 pursuant to which pay scales of the employees under the different cadres were revised with effect from 01.01.1996. It was pursuant to such decision of the Corporation that the petitioner was placed in the pay scale of Rs.12750 - 18000.
2.3 Even before the Board of Directors in its meeting dated 06.09.1998 decided to accept the recommendations of the specially constituted committee for revision of pay scales for Group 'B' and 'C' staff members, the Government had under its letter dated 19.08.1998 objected to the Board's decision to revise the pay scale of the officers of the Board pointing out that the same was without the sanction of the Government and the Chief Minister had conveyed his strong displeasure about the same. The Corporation had also disregarded the Finance Department's circular dated 16.10.1991. Yet another letter was written on 29.08.1998 strongly objecting to the decision of the Board of Directors to revise the salary of the officers.
2.4 Despite such strong objection from the Government, the Corporation proceeded to revise the pay scales of the Group 'B' and 'C' employees. Finally, the Government forced the Corporation to withdraw such pay revisions upon which all the employees of the Corporation were placed back in the original 4th Pay Commission scales. This gave rise to a bunch of petitions being Special Civil Applications No. 13936 of 2003 and connected petitions being filed before the High Court by the employees' unions. They objected to the downward pay revision by the Corporation and also the attempt of the Corporation to recover the excess salary paid in the Page 3 of 11 HC-NIC Page 3 of 11 Created On Sat Sep 09 15:48:28 IST 2017 C/LPA/1072/2016 ORDER interragnum. The learned Single Judge by order dated 27.03.2004 confirmed the interim injunction against implementing such decisions. The Corporation there upon approached the Division Bench of the High Court by filing Letters Patent Appeals which came to be decided by order dated 10.05.2005 in following terms:
"We have given serious thought to the entire matter. We are not unmindful of the fact that these appeals are directed against an order which essentially seeks to protect the pay-scales of the officers and employees which they were drawing till 1993. Ordinarily, we would have desisted from interfering with an interlocutory order of this nature, but having regard to the peculiar facts of the case, we are constrained to set aside a part of the impugned order in so far as it enables the members of the Union and Association and other similarly situated persons to continue to draw pay in the revised pay-scales. A glance at the revised pay-scales, which the officers and staff of the appellant started drawing pursuant to the decision taken by the Board of Directors in 1998 shows that the same are much higher than their counter-parts and even superior officers of the Government and other public authorities like GIIC. If the Board of Directors of the appellant had sanctioned revised pay-scales to the officers and staff after complying with the relevant statutory provisions, no exceptions could have been taken to the grant of largess on the ground that similar benefit has not been given to the officers and employees of the State Government and other instrumentalities of the State. However, the fact of the matter is that the Board of Directors decided to revise the pay- scales without obtaining prior sanction of the Government as required by Section 23 read with Section 48 of the Act and Regulation 64 of the Regulations. A bare reading of these provisions, which have been reproduced above, shows that prior sanction of the State Government is a condition precedent to the revision of the pay-Page 4 of 11
HC-NIC Page 4 of 11 Created On Sat Sep 09 15:48:28 IST 2017 C/LPA/1072/2016 ORDER scales of the officers and staff of the Corporation. But, in complete disregard of the relevant statutory provisions and despite the exception taken by the Government the Board of Directors of the appellant proceeded to revise the scales of pay of the officers and the staff and that too ignoring the stark reality that the appellant is continuously suffering loss and is under heavy financial burden.
At this stage we do not want to make any comment on the merits of the claim made by the respondents because the same is likely to prejudice the final adjudication of the writ petitions but are constrained to remark that the manner and method in which the then Managing Director of the appellant had taken up and dealt with the issue relating to revision of the pay-scale of the officers and staff shows his total contempt for the mandatory statutory provisions and his defiance of the authority of the Government which has got power to issue directions to the appellant in policy matters. It is indeed a matter of surprise that the Board of Directors of the Corporation did not revise its earlier decision despite categorical rejection by the Government of its resolution to revise the pay- scales of the officers and the staff. In our considered view, the stay order passed by the learned Single Judge without taking into consideration the impact of the wanton breach of mandatory provisions committed by the Board of Directors and the larger public interest and the fact that the unusual upward revision of the pay- scales of the officers and the staff of the appellant would give rise to frustration among their counter- parts in the State Government and other instrumentalities of the State deserves to be modified. It is true that reduction of the pay-scales of the members of the respondents and other similarly situated persons will adversely affect their life style but that by itself cannot be a ground to allow them to reap the benefit of an apparently illegal decision taken by the Board of Directors.
For the reasons stated above, the appeals are partly allowed. The stay order passed by the learned Single Judge, which is under challenge in Page 5 of 11 HC-NIC Page 5 of 11 Created On Sat Sep 09 15:48:28 IST 2017 C/LPA/1072/2016 ORDER these appeals is modified and it is directed that while the appellant shall not be entitled to recover the excess amount paid to the officers and staff pursuant to the upward revision of their pay-scales, they shall not be entitled to draw salary in future shall be paid salary in the old pay-scales.
While disposing the appeals in the manner indicated above, we make it clear that the observations made in this order shall not influence final adjudication of the writ petitions which are pending before the learned Single Judge."
2.5 We are informed that after the said order of the Division Bench, the employees of the Corporation were placed on the original pay scales. However, as directed by the Division Bench, no recoveries were affected. Subsequently the Government under its letter dated 27.10.2010 authorised the Corporation to implement 5th Pay Commission recommendations in favour of the employees with effect from 01.04.2010. Thereupon, the writ petitions came to be withdrawn by the Unions and the Corporation did not insist on recovering the excess pay from the employees.
2.6 When these developments were taking place, on June 02, 2001 the Corporation released further gratuity of Rs.15720/- in favour of the petitioner. This figure was worked out on the premise that as per the 5th Pay Commission pay scales, the petitioner would be entitled to receive gratuity of Rs.2,25,720/- out of which Rs.2,10,000/- was already paid shortly after retirement. The payment of gratuity on the basis of 5th Pay Commission scales also appears to have been done in anticipation of the Government's sanction to implement such scales.
Page 6 of 11HC-NIC Page 6 of 11 Created On Sat Sep 09 15:48:28 IST 2017 C/LPA/1072/2016 ORDER 2.7 Be that as it may. The petitioner was of the belief that with a gross salary of Rs.19050/- per month she was entitled to draw gratuity on the basis of such last pay drawn which would easily carry her gratuity entitlement to over Rs.3,50,000/- which was the then prevailing ceiling. When the Corporation did not agree to the same, the petitioner approached the High Court.
2.8 The learned Single Judge by impugned judgement rejected the petition. In the judgement, the learned Single Judge has referred to Regulation 3(e) of the said regulations which had a reference to the entitlement of gratuity on the basis of average pay of last twelve months for computing gratuity. The learned Judge referred to the judgement of the Division Bench in case of Gujarat State Financial Corporation vs. GSFC Staff's Union Through its Chairman dated 10.05.2005 rendered in Letters Patent Appeal No. 2129 of 2004 to hold that the question of permissibility of the Corporation fixing pay scales without the approval and sanction of the Government was already concluded by the Division Bench in the said judgement. The learned Single Judge was therefore of the opinion that the petitioner cannot get gratuity on the basis of the pay in the scale which was never sanctioned by the Government. It is this judgement which the petitioner has challenged in the present Letters Patent Appeal.
3. From the material on record, it can be seen that though the petitioner retired drawing gross salary of Rs.19,050/- in the pay scale of Rs.12750-18000, the said scale of pay was never sanctioned by the Government. The pay revision was Page 7 of 11 HC-NIC Page 7 of 11 Created On Sat Sep 09 15:48:28 IST 2017 C/LPA/1072/2016 ORDER adopted by the Corporation without sanction or even without approval of the Government and at a time when the Government had strongly objected to the Corporation revising pay scales of its officers. The fact that such pay revision could not have been adopted by the Corporation without the sanction of the Government is not even disputed by the petitioner. The Corporation is a creation of a statute framed by the State legislature and therefore had to act within the four corners of such statutory creation. If the statutory and the subordinate legislation required that the Corporation could implement the revision of the pay scales only with the sanction of the Government, it was simply not open for the Corporation to do so unilaterally and that too in the teeth of the Government's opposition. As it emerges, ultimately, when the Corporation implemented the 5th Pay Commission recommendations with the sanction of the Government from a later date, the Union withdrew the writ petition from the High Court. Culmination of this discussion would lead to one inescapable conclusion that the pay scale granted to the petitioner and other employees on the date of her retirement simply did not have the legal sanction. It was a unilateral decision of the Corporation against the objection from the Government. The pay and disallowances drawn by the employee therefore did not have legal authority. The employee not having contributed in drawing higher salary, the question of recovery of payments already made may have a different consideration altogether. When it comes to computing further benefits, such as the post retirement entitlements, the illegality committed by the Corporation cannot be perpetuated. Such benefits, in the facts of the case, would have to be computed on the basis of salary due and Page 8 of 11 HC-NIC Page 8 of 11 Created On Sat Sep 09 15:48:28 IST 2017 C/LPA/1072/2016 ORDER payable to the employee and not which may have been erroneously and perhaps illegally paid. The relevant portion of Regulation 3(e) of the Regulations reads as under:
"...
(ii) In any other case, the substantive pay and D.A. At the date of his/her retirement or death or the 'average pay' inclusive of D.A. (as defined in the Gujarat State Financial Corporation (Staff) Regulations, 1961, earned while on duty during the twelve calendar months immediately proceeding the month of retirement or, death, whichever is higher."
4. The gratuity is thus to be computed on the basis of substantive pay and Dearness Allowance on the date of retirement or death of the employee or the average pay inclusive of D.A earned by him or her while on duty during the twelve calendar months immediately preceding the month of retirement or death. Here the reference to substantive pay and D.A must partake the character of what is payable and not what is unearned or unauthorisedly paid. Any other interpretation would frustrate the very intention of the legislature. For example, if an employee has drawn the salary higher than his entitlement either erroneously, unauthorisedly or even fraudulently, literal interpretation of the term substantive pay and D.A may permit him to take the claim for further higher benefits on the basis of such erroneous pay drawn by him. It may be another matter that the excess pay may not have been recovered from the petitioner and other similarly situated employees, however, the petitioner cannot base the claim of further post retirement benefits on the basis of such higher pay.
Page 9 of 11HC-NIC Page 9 of 11 Created On Sat Sep 09 15:48:28 IST 2017 C/LPA/1072/2016 ORDER
5. Learned counsel for the petitioner however submitted that at the very outset the Corporation erred in withholding 40% of the gratuity which had no sanction in law. The petitioner was entitled to receive full gratuity and had that been done the question of adjusting the excess gratuity would not have arisen. In the present case, we are not concerned with the legality of the action of the Corporation in withholding the portion of the petitioner's gratuity whether paid or unpaid, if ultimately the gratuity was not payable, the same would be subject to corrections unless the regulations of the Corporation prevented any recovery thereof.
6. Before closing, a brief caveat. The learned Single Judge based his conclusions on the observations of the Division Bench in the case of Gujarat State Financial Corporation (supra), however, the Division Bench itself in the said judgement had provided that observations in the order shall not influence the final adjudication of the writ petitions which are pending before the learned Single Judge. The Division Bench itself therefore had amply clarified that the observations were tentative in nature and to meet with the interim situation. The observations were not meant to lay down any final proposition in law. However, we have come to our own independent conclusions.
7. In the result, Letters Patent Appeal is dismissed.
(AKIL KURESHI, J.) Page 10 of 11 HC-NIC Page 10 of 11 Created On Sat Sep 09 15:48:28 IST 2017 C/LPA/1072/2016 ORDER (BIREN VAISHNAV, J.) divya Page 11 of 11 HC-NIC Page 11 of 11 Created On Sat Sep 09 15:48:28 IST 2017