Patna High Court
Tata Iron & Steel Co. Ltd. vs Bir Singh And Anr. on 16 November, 1979
Equivalent citations: AIR1982PAT130, AIR 1982 PATNA 130, 1979 BLJR 58 1110, ILR (1979) 58 PAT 1110, 1982 BBCJ 307, (1982) PAT LJR 273, (1982) BLJ 312
JUDGMENT S.P. Sinha, J.
1. These two second appeals have been referred to Full Bench, but the point on which the reference is really made, arises only in Second Appeal No. 402 of 1967. This matter has been referred to Full Bench for testing the correctness of two decisions of this Court; one by a Division Bench in the case of Prabhunath Prasad v. Tata Iron & Steel Co. Ltd. (Miscellaneous Appeal No. 336 of 1965 decided on 3rd July, 1968) and the other by a learned single Judge in the case of Jainarain v. The Controller of Accounts, Tata Iron & Steel Co. Ltd. (Miscellaneous Appeal No. 163 of 1967 decided on 15th Jan. 1969).
In both these decisions, the protection under Section 10 of the Employees' Provident Funds Act, 1952 (Act 19 of 1952) (hereinafter referred to as the Act) has been extended to the fund created by the concerned establishment under its own scheme.
2. The questions as framed by the learned single Judge, who first referred the matter to a Division Bench, were :--
"1'. Whether in the absence of any provision in the Act to that effect the protection granted by Section 10 of the Act extends to a fund created under a scheme framed by an establishment exempted under Section 17 of the Act from the operation of any scheme framed under the Act?
2. If so, whether in the absence of any specific provision the protection extends to such part of the fund established by such an exempted establishment as are monies representing things other than basic wages, dearness allowance and retaining allowance which alone under Section 6 of the Act are said to be constituents of provident fund?'. These questions have been reframed by the Division Bench in the following words:--
"The question is as to what is the status in law of such a scheme or rules framed by a company in respect of the provident fund of an employee. Whether rules of the company will have the same status in law as a scheme framed by the Central Government under the Act?"
3. The Employees' Provident Funds Act provides for the institution of provident funds for employees in factories and other establishments. The extent of its application is laid under Section 1 of the Act. Section 2 of the Act, inter alia, defines "fund" as the "provident funds establishment under a scheme". Member means "a member of the fund". "Scheme" means "a scheme framed under this Act". Section 6 of the Act lays down how much out of what earnings of a member could be contributed towards the fund of the scheme under the Act. Section 10 provides a protection against attachment of the amount standing to the credit of any member in the fund under any decree or order of any court in respect of any debt or liability incurred by the member. Section 17 in so far as is relevant for the purpose of this case reads as under:--
"Power to exempt-- (1) The appropriate Government may, by notification in the Official Gazette, and subject to such conditions as may be specified in the notification, exempt from the operation of all or any of the provisions of any scheme --
(a) any establishment to which this Act applies if, in the opinion of the appropriate Government, the rules of its provident fund with respect to the rates of contribution are not less favourable than those specified in Section 6 and the employees are also in enjoyment of other provident fund benefits which on the whole are not less favourable to the employees than the benefits provided under this Act or any scheme in relation to the employees in any other establishment of a similar character; or
(b) any establishment if the employees of such establishment are in enjoyment of benefits in the nature of provident fund, pension or gratuity and the appropriate Government is of opinion that such benefits, separately or jointly, are on the whole not less favourable to such employees than the benefits provided under this Act or any scheme in relation to employees in any other establishment of a similar character."
By this section an establishment to which this Act applies is exempted from the operation of all or any of the provisions of the scheme under the Act, if its scheme is not less favourable than those specified in Section 6 of the Act or under any scheme in relation to employees in any other establishment of a similar character. Admittedly, the exemption under Section 17 had been granted to the employer company, namely, the appellant. The appellant framed its own provident fund rules (hereinafter referred to as the Rules) which rules were also approved by the Regional Provident Fund Commissioner, Bihar in the year 1955. Rule 5 of the Rules describes the "Fund" as consisting of --
(a) Contributions by the members out of their salaries or wages,
(b) Contributions by the Company :
(i) General contributions under Rules 9 and 10 hereof.
(ii) Contributions of a contingent nature under the profit sharing scheme as provided for in Rule 11 hereof,
(c) Contributions by members under Rule 12,
(d) sums forfeited to the fund under these rules,
(e) The interest and dividends which the investment of money forming the fund from time to time may produce,
(f) Transferred balances from other provident funds where such transfers are permitted by these rules, and
(g) Such other sums as may accrue to the fund from any source whatever. Rules 9, 10, 11 and 12, which are referred to in Rule 5 respectively relate to company's contributions, special contributions, Company's contributions of a contingent nature' which may be 331/2% of the bonus payable to each member, which is required to be retained by the company to be credited to the fund in a separately marked account, and lastly, members' voluntary contributions. Admittedly the 'fund' in terms of Rule 5 of the Rules consists of certain items which are not provided under Section 6 of the Act. Whereas according to Section 6 of the Act, contributions to the 'fund' could be only out of basic wages, dearness allowance and retention allowances; according to Rule 5 of the Rules, the sources of contribution to the 'fund' were not only those, but many others.
It is, therefore, that the aforesaid questions have been raised for consideration by this Bench. In substance, the primary question is, whether the protection under Section 10 of the Act would at all be available to a scheme other than a scheme under the Act; and the subsidiary question is whether such protection would be available to contributions made to the fund out of earnings other than basic salary, dearness allowance and retention allowance.
4. The facts may now be stated; Second respondent, A. N. Chatterjee (judgment-debtor) was an employee of the appellant-company. The first respondent filed a suit for money, being Money Suit No. 573 of 1960 of the court of Munsif, Jamshedpur against the second respondent and obtained a decree. An application for attachment before judgment had been filed by the first respondent (plaintiff) to attach the gratuity money amounting to Rs. 1400 and retention profit sharing bonus amounting to Rs. 1200 payable to the second respondent (judgment-debtor). An order of attachment before judgment was passed and the same was communicated to the appellant-company (Garnishee) on 17th Sept. 1960. After passing of the decree in the money suit, Execution Case No. 378 of 1961 was initiated and the Controller of Accounts of the Garnishee Company was called upon to deposit the attached amounts in court.
5. The Garnishee company raised objections stating that the judgment-debtor, namely, the second respondent, was not entitled to any gratuity money or to the profit sharing bonus, but was entitled only to an ad hoc bonus for the years 1959 to 1961, which amount was remitted to the court. The Executing Court, partially accepting the Garnishee company's objection, held that since no gratuity money was payable to the second respondent on the date on which the order of attachment before judgment was served on the Garnishee company, the latter could not be called upon to deposit the same in court. With regard to the profit sharing bonus, however, the Executing Court held that it represented an amount already earned by the second respondent and retained for the purpose of being deposited in his provident fund account under the rules of the company and the same having been attached before judgment must be deposited in the court 5. The Garnishee company as also the decree-holder, both felt aggrieved by the order of the Executing Court and both of them appealed against it. The decree-holder was aggrieved against the order refusing to call upon the Garnishee company to deposit the gratuity money in court. The appeal filed by him was numbered as Miscellaneous Appeal No. 23/12 of 1964.
The Garnishee company was aggrieved by the order calling upon it to deposit the profit sharing bonus in court. The appeal filed by it was numbered as Miscellaneous Appeal No. 25/19 of 1964. The Additional Subordinate Judge, Jamshedpur, who heard the two appeals, dismissed the appeal filed by the company and partly allowed the appeal filed by the decree-holder by directing the Garnishee company to deposit a sum of Rs. 750 out of the gratuity money payable to the second respondent. Second Appeal No. 401 of 1967 arises out of M. A. No. 23/12 of 1964 and Second Appeal No. 402 of 1967 arises out of M. A. 25/19 of 1964. The question which arises in Second Appeal No. 401 of T967, is whether the Garnishee company could at all be asked to pay out any sum as an amount of gratuity payable to the judgment-debtor,
6. I would like to dispose of this appeal first.
Second Appeal No. 401 of 1967 :
7. It has been urged by Mr. L. K. Choudhary, appearing on behalf of the appellant that the payment of gratuity was discretionary and, therefore, until an employees gets a right to receive the gratuity and the same is credited to the employees account, it does not become the property of the employee. No court has, therefore, the authority to call upon the employer company to grant, an entitlement to an employee to receive gratuity. In the instant case, it was submitted that although the appellate court was fully conscious of thy rules governing the payment of gratuity as framed by the appellant-company, yet it observed "... It must be presumed that in due course the form of application had been drawn up and submitted, It has also to be presumed that the necessary authority had accorded sanction for the gratuity amount because in the absence of any other evidence it will be presumed that the Officers of the company are efficient and carrying on duties assigned to them......"
Reference was also made to that portion of the appellate court's judgment wherein was observed that--
".........I quite agree that in the year 1960 when attachment before judgment was served the amount of gratuity may not have been sanctioned as it was too early. I, however, find from the record of the Execution case that a fresh attachment was issued on 30-1-1961 for attaching Rs. 750/- out of the gratuity money and unpaid wages of A. N. Chatterjee........"
It was, therefore, submitted that the order calling upon the appellant-company to pay a sum of Rs. 750/- out of gratuity amount of the judgment debtor was wholly illegal and without any basis.
8. The argument made on behalf of the appellant-company is sound and must be accepted. Rule 10 of the Retiring Gratuity Rules, 1937 framed by the appellant-company is to the following effect:--
"All retiring gratuity granted under these rules other than special gratuity to be paid under the provisions of Rule 22 hereof shall be at the absolute discretion of the company irrespective of whether an employee has or has not performed all or any of the conditions hereinafter stated, and no employee howsoever otherwise eligible shall be deemed to be entitled as of right to any payment under these rules".
Clearly the payment of gratuity to an employee was entirely at the discretion of the company and when the company categorically stated before the court that its employee A. N. Chatterjee (judgment-
debtor) was not entitled to payment of any gratuity, the Appellate Court could not presume facts and make an order like the one in question, on such presumption of facts.
The Retiring Gratuity Rules of the appellant-company came up for consideration in the case of Tata Iron & Steel Co. Ltd. v. Sudhir Chandra Sarkar (AIR 1989 Pat 53). After due consideration of the provisions thereof, Untwalia, J. as he then was, observed that (para 16):--
"......until and unless the Company has decided to pay the gratuity money, in accordance with Rule 7 or otherwise the mere fact of the employee becoming eligible to get it under Rule 6 does not create any right for the payment of gratuity under the Rules by enforcement of such a claim, in a Civil Court. The matter of payment of gratuity is at the absolute discretion of the Company and the employee, however unfortunate the position may be under the modern stage of the society, is not entitled to claim it as a matter of right even though payment of gratuity under the Rules is an implied condition of service, yet the condition is further conditioned by the provisions made in the rules and is subject to them." In another decision in which again the appellant was the appellant, in the case of Tata Iron & Steel Co. Ltd. v. Sultan Khan Kabuli (AIR 1968 Pat 297), a learned single Judge had expressed the view I hat a gratuity until it is paid out to the employee, could not be treated as a property of the employee. Payment of gratuity could not be equated with salary or wages.
9. In my opinion, the view expressed in the above decisions are legal and valid. 'Gratuity', as the very word connotes, is a gratuitous payment, a sort of present made to an employee when the employer felt pleased with the employee's work, Such a thing cannot be claimed as of right nor could any one else, much less a court of law, compel the employer to pay a gratuity to its employee.
10. In the instant case, admittedly, when attachment before judgment was served in the year 1960, the judgment-debtor did not have any gratuity amount to its credit and when a fresh attachment was issued on 30-1-1961, the employer categorically stated that its employee Mr. A. N. Chatterjee was not entitled to the payment of any gratuity. The court below, therefore, erred in presuming the existence of gratuity money to the credit of the judgment-debtor and calling upon the appellant to pay up that money in court.
11. Second Appeal No. 401 of 1967 is, therefore, allowed and the order passed in Miscellaneous Appeal No. 23/12 of 1964 by the Additional Subordinate Judge, Jamshedpur is set aside. The parties will bear their own costs throughout.
Second Appeal No. 402 of 196712. I now come to Second Appeal No. 402 of 1967. I have already stated the facts which led the case to be referred to a Full Bench.
13. I may, however, further state that both, the Execution Court as also the lower Appellate Court have held that the retention profit sharing bonus amounting to Rs. 1440 and odd was not a part of the employees' provident funds and on that ground alone they have held that the Garnishee company was liable to pay the said amount towards satisfaction of the decree.
Having regard, however, to the specific provisions contained in Rule 11, it is difficult to accept that reason as a valid one for the order. Sub-clause (b) of Rule 11 clearly states that-- "33 1/3 per cent of the bonus payable to each member of the Fund in accordance with the above Scheme shall be retained by the Company and shall be paid to the Trustees to be credited to the Fund in an account......". Rule 5 describes the composition of the Fund and clearly includes contribution of such a contigent nature, as the one laid under Rule 11, in it. It cannot, therefore, be argued with any logical justification that notwithstanding the said unambiguous rules, the retained profit sharing bonus was not a part of the provident fund account.
14. I now turn to a consideration of the question raised relating to the status of the rules and as to whether the protection granted under Section 10 of the Act would extend to the provident fund created under the Rules.
I have not been able to find any direct authority on the question and I think, it is a question of first impression. I have, however, been able to get some light from a decision of the Supreme Court in the case of Mohmedalli v. Union of India (AIR 1964 SC 980), wherein the vires of Section 17 of the Act was under challenge. In that context their Lordships observed (at p. 983) :--
"...... The Act has given sufficient indication of the policy underlying its provisions, namely, that it shall apply to all factories engaged in any kind of industry and to all other establishments employing 20 or more persons. This Court has repeatedly laid it down that where the discretion to apply the provisions of a particular statute is left with Government, it will be presumed that the discretion so vested in such a high authority will not be abused. The Government is in a position to have all the relevant and necessary information in relation to each kind of establishment enabling it to determine which of such establishments can bear the additional burden of making contribution by way of provident fund for the benefit of its employees. The power to exempt given to the appropriate Government under Section 17 is not uncanalised because both Clauses (a) and (b) of that section postulate that the exemption would be granted on ground that the employees of those establishments are already in the enjoyment of benefits in the nature of provident fund, pension or gratuity not less favourable to them than under the Act....."
Their Lordships have further observed (at p. 983):--
"...... The general rule as to the application of the Act has been laid down in that sub-section. By way of exception to that general rule, the appropriate Government has been authorised by Section 17 to exempt from the operation of all or any of the provisions of any scheme framed under the Act........."
Their Lordships, while dealing with the scope of Section 17 of the Act, observed at p. 984) :--
"......... The exemptions are to be granted by the appropriate Government only if in its opinion the exempted establishment has provisions made for provident fund, in forms at least equal to, if not more favourable to its employee. In other words, the exemption is with as view to avoiding duplication and permitting the employees concerned the benefit of the pre-existing scheme, which presumably has been working satisfactorily, so that the exemption is not meant to deprive the employees concerned of the benefit of a provident fund but to ensure to them the continuance of the benefit which at least is not in terms less favourable to them. As the whole scheme of provident fund is intended for the benefit of employees Section 17 only saves pre-existing schemes of provident fund pertaining to particular establishments......"
The observations quoted above indicate three things:--
(1) The exemption under Section 17 is incorporated in the Act for getting better benefits for the employees of an establishment;
(2) The exemption is granted with a view to avoiding duplication, that is to say, for framing a scheme by the appropriate Government on the line as framed by the establishment itself; and (3) that the exemption is not meant to deprive the employees concerned of the benefit of a provident fund, but to ensure to them the continuance of the benefit.
15. Bearing these in mind when I look at Section 17 of the Act, its purpose is the same as that of a scheme under the Act. The Scheme under the Act is that an employee and the employer, both will contribute to the fund standing to the credit of a member, which is meant specifically for the benefit of the member. The further benefit which the Act provides to the fund under the scheme is laid under Section 10 of the Act which makes the amount standing to the credit of any member in the fund immune from attachment under any decree or any order of any court in respect of any debt or liability incurred by the member. Section 17 also has the same purpose, but with this difference that whereas under the Act, the appropriate Government has framed the scheme itself, but now the scheme is permitted to be framed by the concerned establishment. The appropriate Government thereafter, only tests as to whether it is more beneficial to a member than what he would have got under the scheme of Section 6 of the Act, or what he would have got in an establishment of a like nature. If the appropriate authority is satisfied that the scheme is one such which fulfils these requirements, a stamp of approval is put on the scheme. Thus, the purpose of the exemptions under Section 17 is only to ensure a scheme better than the one under Section 6 of the Act and better than one offered by an establishment of of similar nature. The further purpose is labour saving; that is to say, the labour of framing the scheme is cast on the establishment, the appropriate Government reserving to itself the right of approval of the scheme. Section 17 is thus only an extension of the scheme under the Act, whereby, in order to avoid duplication, if the appropriate Government is satisfied that the scheme framed by the concerned establishment, in regard to the rules of its provident fund regarding the rates of contribution etc. are not less favourable than those specified in Section 6 of the Act or as available in any other establishment of like nature, authorises the establishment to substitute its own scheme in place of a scheme framed by the appropriate Government. Both the schemes are, however, schemes under the Act.
It must be borne in mind that notwithstanding the exemption granted under Section 17 of the Act, the appropriate Government does not loose its hold over the scheme framed by the establishment. There are built in safeguards in Section 17 itself to protect the interest of the member. These built in safeguards also lend support to the conclusion that a scheme prepared and enforced by an establishment, which has been granted the exemption in terms of Section 17 of the Act, is only an extension of the scheme under the Act and thereby being a scheme under the Act.
In my opinion, therefore, notwithstanding the fact that the scheme has been prepared by an establishment concerning its employees, it is very much a scheme under the Act. It would then logically follow that the benefits which the Act confers on the members of the fund under the scheme drawn up by the appropriate Government will also be available to the members under the scheme framed by an establishment which has been exempted under Section 17 of the Act and which scheme has been approved by the appropriate authority. May be that under the scheme framed by the establishment, the sources of contribution to the fund do not remain limited to the salary, the dearness allowance and retaining allowance, as laid under Section 6 of the Act, but all the same, if the appropriate Government is satisfied that the scheme laid by the establishment, in regard to the provident fund of the concerned employees, was not less favourable than those specified under Section 6 of the Act or those available to an employee in an establishment of like nature, it would be deemed to be a scheme under the Act. I, therefore, think that the scheme prepared by the appellant company, on getting exemption under Section 17 of the Act, which scheme had also been approved by the appropriate authority, has the same statutory force as a scheme under the Act. It, therefore, further follows that the protection against attachment as laid under Section 10 of the Act, applies to such scheme also.
16. I will accordingly answer the question raised, in the following manner:--
(1) the protection granted by Section 10 of the Act extends to a fund created under a scheme framed by an establishment exempted under Section 17 of the Act;
(2) such protection extends to all the components which go to make up the fund established under the scheme; and (3) the decisions in the cases of Prabhunath Prasad v. Tata Iron & Steel Co. Ltd. (M. A. 336 of 1965 decided on 3rd July, 1968) and in the case of Jainarain v. The Controller of Accounts, Tata Iron and Steel Co. Ltd. (M. A. No. 163 of 1967 decided on 15-1-1969) are correct and legal.
17. In view of the conclusions to which I have arrived, I hold that the retention profit sharing bonus being a part of the provident fund account of the judgment-debtor employee, could not be attached in satisfaction of the decree for money against him, the employee of that company and, therefore, the appellant-company could not be directed to deposit the same in court. The orders of the courts below are set aside. Second Appeal No. 402 of 1967 is allowed. The parties will, however, bear their own costs.
Hari Lal Agrawal, J.
I agree.
B.S. Sinha, J.
I agree.