State Farm Corporation Of India ... vs The Regional Labour Commissioner ...
2006 Latest Caselaw 1816 Del

JUDGMENT

Shiv Narayan Dhingra, J.

1. By this writ petitioner, the petitioner has challenged the legality of order dated 8th July, 2004, passed by the Appellate Authority under Payment of Gratuity Act(herein after referred to as 'the Act') whereby the petitioner was directed to pay 10% simple interest on the amount of gratuity already paid and also to pay an amount of Rs. 12549/- which was deducted by the petitioner out of gratuity as an excess payment already made to the petitioner.

2. Briefly, the facts are that the respondent No. 2 was working with the petitioner corporation. He sought voluntary retirement under the Voluntary Retirement Scheme(herein referred as VRS), promulgated by the petitioner. He received all benefits to which he was entitled under the scheme. By inadvertent mistake he was paid an excess amount of Rs. 12549/- which represented one month's notice pay to which he was not entitled as per rules. At the time, when the scheme was promulgated, it was made known to all the employees, who were seeking VRS that the payment of gratuity shall take around 8 months' time because of the financial implications.

3. The respondent No. 2 accepted VRS on 23.3.2001. He was paid gratuity of Rs. 1,78,536/- on 10th April, 2002. He was paid another amount of Rs. 5206/- on 19.4.2002 towards gratuity. He made an application before Controlling Authority under the Act, alleging that his due gratuity amounted to Rs. 1,90,905/- and he was not paid due gratuity on due date. The VRS was accepted on 23.3.2001, while he was paid gratuity after about 13 months. He claimed the amount of Rs. 12549/- and interest on the the entire amount for delayed period. His plea was rejected by the Controlling Authority on the ground that he had already received out of Rs. 12543/-, a sum of Rs. 5206/-. He was made excess payment while dues were paid to him after VRS. He was not entitled to claim interest since he had not completed legal formalities as per Rule 10(1) of PG(Central Rules, 1972).

4. Against the order of the Controlling Authority, the respondent No. 2 preferred an appeal before the Appellate Authority and the impugned order was passed by the Appellate Authority. A perusal of the order would show that the Appellate Authority did not take into account the amount already paid to the respondent. It was not disputed by the respondent No. 2 that he received an amount of Rs. 1,78,356/- on 10.4.2002 and another amount of Rs. 5206/- on 19.4.2002 but Appellate Authority again ordered payment of Rs. 12,543/-. The Appellate Authority observed that as per Section 13 of the Act, the deduction of Rs. 12549/- could not be made from the gratuity payable to the respondent No. 2 and the action of deducting excess amount already paid to the respondent No. 2, was therefore bad. It was further observed by the Appellate Authority that the gratuity becomes payable within 30 days from the date of retirement and no condition can be read in the rules of making an application by the employee or any other legal formality to be completed. Therefore, the Appellate Authority directed 10% interest to be paid to the respondent on the amount of delayed payment.

5. It is undisputed fact that the respondent No. 2 had sought VRS under the Scheme which was promulgated as per directions of Central Government. It is settled law that where a person accepts VRS under a scheme, the retirement gives effect to contractual obligations. The VRS was promulgated by the petitioner/corporation and other public sector undertakings to shed extra burden of employees and to make the enterprises economically viable. It was one of the conditions of VRS that there will be delay in disbursing of terminal benefits including gratuity because of financial crunch. The respondent No. 2 accepted VRS, knowing this condition.

6. The employees who work in public sector undertakings, State Instrumentalities or State are bound by the rules framed by the Government from time to time in respect of the different aspects of service. These rules form conditions of service. The rules are formed for the protection of the interest of the employees so that there is no arbitrary exercise of powers. The condition put by the payment of gratuity rules of making an application in prescribed format for claiming gratuity is for the safety of the workman, so that the procedure is followed in accordance with the rules and once gratuity is claimed, it is approved in the official channel as per rules. The format requires the necessary informations to be given by the employee in respect of his claim of gratuity. No inconvenience or disparity can be claimed by the respondent in filling the form for claiming gratuity. If gratuity is released without necessary formalities, there is possibility of somebody else taking gratuity of the genuine employee in connivance with staff. The completion of formalities and giving an application form in prescribed format is, therefore, necessary. The Appellate Authority did not consider this aspect of the matter and passed order holding that no condition can be attached to Rule 7 of the Act (Central Rules) which requires that the payment should be made within one month of its becoming due.

7. Section 13 of the Payment of Gratuity Act, which has been relied upon by the Appellate Authority, reads as under:

Section 13: Protection of gratuity-No gratuity payable under this Act(and no gratuity payable to an employee employed in any establishment, factory, mine, oilfield, plantation, port, railway company or shop exempted under Section 5 shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court.

8. A perusal of Section 13 of the Act would show that gratuity payable to an employee under the Act, is not liable to attachment in execution of any decree or order of any civil court, revenue court or criminal court. Section 13 does not prevent an employer from deducting excess amount already paid to an employee at the time of his retirement. An employer is supposed to pay all terminal benefits to an employee at the time of retirement. If, at the time of retirement some excess amount has been paid against one head, the same can always be deducted out of balance payable. The interpretation, which is sought to be given by the Appellate Authority of Section 13 of the Act, in fact, is contrary to express words used. Attachment of gratuity in execution of decree or order is not same thing as deduction of an excess payment made by the employer. No Act can be interpreted in a manner, that it contravenes public policy. The public policy is that everybody should get his due and nobody should be paid more than his dues. The law cannot be interpreted in a manner so to allow unjust enrichment. Since the respondent No. 2 had received excess amount of Rs. 12549/- at the time of receiving retirement benefits, this amount was liable to be returned by him or was liable to be deducted out of the further amount payable to him whether under Gratuity Act or under any other Act. The Appellate Authority's concept that the beneficial legislation should be so interpreted that an excess payment already made, cannot be deducted, is not acceptable. I find that the order of Appellate Authority is perverse for the reasons that the Authority had not taken into account the payment already made to the respondent even out of deducted amount. The Appellate Authority has wrongly directed payment of interest despite non completion of formalities by the respondent and has wrongly directed to pay an amount of Rs. 12549/-.

9. In Secretary, ONGC v. V.U. Worrier 2005 SCC (L&S) 676, Supreme court upheld the recovery of dues of rent of accommodation not vacated by the respondent out of gratuity amount. Supreme Court also upheld the validity of Regulation 5 of the Commission dealing with such recovery of dues out of gratuity payable to the employee.

10. The writ petition is allowed. The order of Appellate Authority is set aside. No orders as to cost.