Indian Kanoon - Search engine for Indian Law

CIVIL APPELLATE JURISDICTION: Civil Appeal From the Judgment and order dated 6.8.1968 of Patna High Court in first appeal No. 444 of 1967.

D.N. Mukherjee, Ranjan Mukherjee, A.K. Ganguli & S.C. Ghosh for the appellant.

R.B. Datar and Ms. Vina Tamta for the respondents. The Judgment of the Court was delivered by DEASI J. Appellant, an employee of Tata Iron and Steel Company Limited (`Company' for short) has been chasing a mirage. to wit to recover a paltry sum of Rs 14040 being the amount of gratuity to which he was entitled for the continuous service rendered by him from December 31, 1929 till August 31, 1959 under what are styled as Retiring Gratuity Rules, 1937 (`Gratuity Rules' for short) from the Company and in this wholly unequal fight he laid down his life before enjoying the pittance to which he was entitled after three decades of loyal service. What a dreadful return for abject loyalty? When the appellant retired by resignation from service he was paid his provident fund dues but gratuity which he was entitled to be paid under the relevant rules was not paid to him. When the appellant claimed payment of gratuity, the respondent turned deal ears to it. Appellant sevred a notice dated September 6, 1981 calling upon the respondent to pay the amount of gratuity being Rs. 14040-. The Company did not respond to the notice. Thereupon the appellant filed M.S. No. 452 of 1962 in the court of Subordinate Judge at Jamshedpur.

The respondent Company preferred First Appeal No. 444 of 1963 in the High Court of Judicature at Patna. A Division Bench of the High Court held: i) that the service conditions of the plaintiff were governed by the Works Standing orders and that it was an implied condition of service that the plaintiff could get gratuity in accordance with the Gratuity Rules; (ii) that in view of Rule 6, an employee governed by the Gratuity Rules is not entitled to claim the same as a matter of right but he merely attains the benefit of eligibility or suitability for the retiring gratuity and not the right; iii) that until and unless the-Company has decided to pay the gratuity in accordance with Rule 7 or otherwise, the mere fact of the employee becoming eligible to get it under the relevant rules which can be enforced in a civil court because the matter of payment of gratuity is at the absolute discretion of the Company as provided in Rule 10, and the employee, howsoever unfortunate the position may be under the modern stage of the society is not entitled to claim it as a matter of right because even though payment of gratuity under the Gratuity 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; iv) that such a claim may enforced before the Industrial Tribunal under the Industrial Disputes Act, 1947 but it is not possible to hold that the law of contract or the law of master and servant which is the only law to be enforced in a civil court can justify on interpretation of the Gratuity Rules in question that the plaintiff can be granted decree for payment of gratuity on the footing that it was the unconditional or unconditioned contractual obligation of the employer to pay such a money; v) the payment of gratuity money is not a gift-pure and simple, but under the relevant rules it is in the nature of an inchoate claim or interest and not a right enforceable by a suit in court, because under the contract of service, the grant of gratuity has been left to the sole discretion of the employer as the relevant rules provided that no employee howsoever otherwise eligible shall be deemed to be entitled as of right to any payment under the rules. Accordingly the appeal was allowed and the judgment and decree of the trial court were set aside and the plaintiff's suit was dismissed, directing the parties to bear their costs.

Rule 7, in our opinion, has hardly any relevance because it enables the Company to pay gratuity by instalments.

It is Rule 10 which is material for the purpose. It provides that payment of retiring gratuity under the Gratuity Rules, other than special gratuity to be paid under the provisions of Rule 22 which is not the case herein, 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 the rules. The stand taken by the respondent to deny gratuity to the plaintiff is that gratuity payable under the rules is a matter of employer's largesse to be distribute at the absolute discretion of the Company and cannot be claimed as a matter of right even if the concerned employees has fulfilled the eligibility criteria. It is the interpretation of this Rule which would govern the outcome of this appeal.

The High Court recorded the finding that service conditions of the plaintiff were governed by the Works Standing Orders. No exception has been taken to this finding. It may at once be noted that the Works Standing Orders of the Company are Certified Standing Orders, under the 1946 Act evidenced by Certificate No. 45 dated March 18, 1950. S.O. 54 provides that every uncovenanted employee of the Company shall retire from service on attaining the age of 60 years. This S.O. 54 is bodily incorporated in Rule 5 of the Gratuity Rules. Relying on S.O. 54 and the evidence recorded in the case, the High Court reached the conclusion that payment of gratuity was an implied condition of service of the plaintiff. Rule 6(a) provides that 'subject to the conditions prescribed in the rules, every permanent uncovenanted employee of the Company will be eligible for a retiring gratuity in the manner and to the extent for a retiring gratuity in the manner and to the extent mentioned therein. Retiring gratuity becomes payable on retirement, which means termination of service by reason of any cause other than removal by discharge due to misconduct. On a combined reading of S.O. 54 and the Rule 5 of the Gratuity Rules the High Court rightly concluded that payment of gratuity was a condition of service but somehow the High Court qualified it by saying that it was an implied condition of service. It is well-settled by a catena of decisions, that Certified Standing Orders bind all those in employment at the time of service as well as those who are appointed thereafter.' Agra Electricity Supply Co. Ltd. v. Sri Alladin & Ors. Now upon a combined reading of S.O. 54 along with Rule 5 and 6(a) of the Gratuity Rules, it becomes distinctly clear that payment of gratuity was an express or statutory condition of service and to this limited extent the finding of the High Court has to be modified.