Delhi High Court
Sail Ex-Employees Association vs Steel Authority Of India Ltd And ... on 13 August, 2009
Author: V. K. Jain
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ WP(C) No.2254/2002
Reserved on: 7th August, 2009
Pronounced on: 13th August, 2009
# SAIL EX-EMPLOYEES ASSOCIATION .......Petitioner
! Through: None
VERSUS
$ STEEL AUTHORITY OF INDIA LTD AND ANR.
......Respondents
^ Through: Mr. Anukul Chandra Pradhan,
Advocate, for the Respondent No.1.
CORAM:
HON'BLE MR. JUSTICE V.K.JAIN
1. Whether Reporters of Local newspapers may be
allowed to see the Judgment?
2. To be referred to the Reporter or not?yes
3. Whether the Judgment should be reported
in the Digest? yes
V.K.Jain, J.
The Petitioner No.1 is an Association of retired employees of
Steel Authority of India Limited (hereinafter referred to as „SAIL‟)
and is concerned with their welfare. Petitioner No.2 is the patron
of petitioner No.1. The employees of SAIL are divided into two
categories, viz. (a)Executives (b) non-executives. The Executives
are either promoted from non-executive cadres or appointed
directly. Vide Notification dated 1.2.1996, Government of India
raised the ceiling on the amount of gratuity payable to the
employees from Rs.1 lakh to Rs.2.5 lakhs for the Executives. This
ceiling was further raised to Rs.3.5 lakhs with effect from 1.1.1996
and according to the petitioners, it was applicable to all
Government employees of Public Sector Undertakings/Enterprises.
However, this enhanced ceiling on gratuity was adopted by
Respondent-SAIL only with effect from 22.9.1997.
2. Another grievance of the Petitioner is that the ceiling on
gratuity is applicable only to those employees who are in Executive
cadre and there is no ceiling in case of non-executive employees.
The Petitioners have sought setting aside of the lower ceiling fixed
by SAIL and have further sought removal of distinction between
Executives and non-executive employees in the matter of gratuity.
They have also sought payment of difference in gratuity amount
along with interest at the rate of 24 per cent per annum.
3. The Petition has been contested by the Respondent-Steel
Authority of India Limited. It has been stated in the Counter
Affidavit that Respondent No.1 is an independent Company having
its own policy and rules for its employees and is not a department
of Government of India and, therefore, the decisions of Government
of India in respect of Government employees are not applicable to
it. It has been further alleged that as per clause 3.2.1 of SAIL
Gratuity Rules, the amount of gratuity in respect of employees
governed by the Memorandum of Agreement, arrived at in the
National Joint Committee for Steel Industry, is to be decided as per
the terms of the agreement. Even the fixation of salary and other
benefits in respect of the non-executives is based on the agreement
arrived at National Joint Committee for Steel Industry. The
Memorandum of Agreements signed at the National level are
implemented by entering upon by-partite settlement at the
plant/unit level with the local management and local Union
representing the non-executives and the workmen. The
Memorandum of Agreement of Joint Wage negotiating Committee
for Steel Industries which was signed in October, 1970, provided
that there shall be no ceiling or limit on the amount of gratuity
payable. In all subsequent NJCS Agreements, it has been provided
that the benefits given under the previous Agreements will continue
and, therefore, upper limit on payment of gratuity has become non-
operative in case of non-executive employees.
4. It has also been alleged by the respondent that Executives
being Officers/Managers at various levels are different and distinct
class, compared to non-executives who constitute workmen. It has
also been pleaded that since promotions from non-executives posts
to executives post were accepted by the members of the Petitioner-
Association, at the terms and conditions applicable to the
Executives, they are stopped from raising a grievance on this
count. It has also been stated that Executive enjoys several
benefits and allowances which are not available to non-executives
and there cannot be any comparison since the two are distinct class
categories. It has further been stated in Counter Affidavit that vide
Government of India Ordinance dated 24.9.1997, under payment of
Gratuity Act, the amount of ceiling was increased from Rs.1 lakh to
Rs.2.5 lakhs and further vide Payment of Gratuity (Amendment)
Act, 1998 dated 23.6.1998, the ceiling was raised to Rs.3.5 lakhs.
The Rules of the Company were amended accordingly so as to raise
the ceiling from the date of amendments.
5. Let me first take up the grievance of the petitioners regarding
distinction between Executives and non-Executives in the matter of
payment of gratuity. Section 4(2) of the Payment of Gratuity Act,
1972 provides that for every completed year of service or part
thereof in excess of six months, the employer shall pay gratuity to
an employee at the rate of 15 days wages based on the rate of
wages last drawn by the employee concerned. Sub-section 5 of
Section 4 before its amendment with effect from 24.9.1997,
provided that the amount of gratuity payable to an employee shall
not exceed Rs. 1 lakh. It was increased first to Rs.2.5 lakhs and
then to Rs. 3.5 lakhs. The ceiling of Rs. 3.5 lakhs was prescribed by
Payment of Gratuity (Amendment) Act, 1998, with effect from 24 th
September, 1997. Therefore, as far as Section 4 (4) of Payment of
Gratuity Act, 1972 is concerned, the upper sealing was Rs.1 lakh
prior to 24th September, 1997, which was fixed at Rs.3.5 lakhs with
effect from 24.9.97.
6. Section 4(5) of the Payment of Gratuity Act, 1972 reads as
under:-
"Nothing in this section shall affect
the right of an employee to receive
better terms of gratuity under any
award or agreement or contract with
the employer."
Thus, despite the upper sealing prescribed by sub-section 4,
the employees are entitled to receive higher gratuity if it is so
agreed under any award or an agreement or contract between the
employer and the employees.
7. As disclosed in the counter affidavit, the salary and other
benefits of non-executive employees of Steel Industry were fixed
under an agreement arrived at the level of National Joint
Committee for Steel Industry, which was followed by by-partite
agreement at plants/unit level between the local management and
the local unions representing the workmen. The counter affidavit
shows that a Memorandum of Agreement of Joint Wage Negotiating
Committee for steel industry signed in October, 1970 provided that
there was to be no ceiling or limit on the amount of gratuity
payable. It further shows that in all subsequent NJC‟s agreements,
it was provided that the benefits provided under the previous
agreement would continue. Thus, in view of the agreement
between the respondent and its workmen, there is no ceiling on the
amount of gratuity payable to the non-executive employees and
such an agreement is specifically permitted by Section 4(5) of the
Payment of Gratuity Act, 1972.
8. It is true that differential treatment is being meted out by the
respondent/SAIL to its employees forming part of the executive
cadres and the employees who are non-executives/workmen. But,
such a differential treatment is not without authority of law and is
expressly permitted under Section 4(5) of The Payment of Gratuity
Act, 1972. The Constitutional validity of Section 4(5) of Payment of
Gratuity Act, 1972 has not been challenged by the petitioners.
They have also not challenged the agreement between the
respondent and its non-executive employees. So long as there is a
subsisting agreement between the respondents and its non-
executive employees to the effect that there will be no ceiling on
the gratuity payable to the workmen and such an agreement is
permissible in law, no fault can be found with the respondent
treating its employees forming part of executive cadres differently
from the employees who are workmen, in the matter of Payment of
Gratuity.
9. Even otherwise, the employees who are workmen, constitute
an altogether different class from the employees who are Managers
and officers, being members of various executive cadres of the
respondent/company. The pay structure, allowances and service
conditions of employees forming part of managerial/officer cadres
are altogether different from the pay structure, allowances and
service conditions of employees constituting non-executive cadres.
Those who belong to executive cadres get not only higher salary
but also better allowances, more perks and more favourable service
conditions. In fact, executive cadres and non-executive cadres are
altogether different classes and cannot be compared with each
other. Differential treatment based on intelligible differentia is
permissible under the Constitution so long as it has a reasonable
nexus with the objective sought to be achieved in this behalf. Only
those who are similarly situated are entitled to equal treatment.
Since the employees forming part of managerial cadres belong
altogether to a different class, they cannot claim, as a matter of
right, the same treatment which is given to the non-executive
employees on account of a binding agreement between them and
the respondent company. Therefore, this is no violation of Article
14 of the Constitution in payment of gratuity to the Executives as
per their statutory entitlements while paying gratuity to the Non-
Executives in terms of the agreement between them and the
management.
10. Another important aspect in this regard is that while taking
promotion from non-executive cadres to executive cadres, these
employees knew that once they are promoted to the executive
cadres, they will receive gratuity only as per their statutory
entitlement and not in terms of the agreement between the
management and the workmen. Having accepted the promotion,
knowing fully well its implication on their gratuity, they cannot now
claim the same gratuity which is payable to the non-executive
employees.
11. The issue of differential treatment to executive and non-
executive employees, in the matter of payment of gratuity came up
for consideration before this court in CWP No.486/1995 decided on
September 13, 1996. This court, after considering the provisions of
Payment of Gratuity Act and the agreement of the respondent with
its non-executive employees repelled the contentions that fixation
of higher gratuity to the non-executive class under the agreement
was inconsistent with the provisions of the Payment of Gratuity
Act, 1972. This court also held that the two categories, namely, the
executives and the non-executives belong to two different and
distinct classes, and there was a rationale relationship with the
object sought to be achieved in extending better terms of gratuity
to the non-executive employees in pursuance of the agreement and
in terms of sub-section 5 of Section 4 of the Payment of Gratuity
Act, 1972.
12. The respondent amended its Gratuity Rules as and when
there was amendment in the provisions of the Payment of Gratuity
Act, 1972 and those rules applied to all employees irrespective of
whether they are from executive cadres or from non-executive
cadres. The non-executives are getting gratuity without any ceiling
not on account of Rules but on account of their agreement with the
management.
13. For the reasons given above, I find no merit in the contention
that the executives are entitled to Payment of Gratuity without any
ceiling, as is being paid to the non-executive employees.
14. Coming to the plea that Government of India had increased
the ceiling on the amount of gratuity from Rs.1 lakh to Rs.2.5 lakhs
with effect from 1st April, 1995 and then to Rs. 3.5 lakhs with effect
from 1st January, 1996 and the enhanced ceiling was applicable not
only to Government employees but also to the employees of public
sector undertakings/enterprises, I find that the petitioner has not
placed on record any order or notification of Government of India
revising the ceiling for payment of gratuity to the employees of all
the public sector undertakings, to Rs. 2.5 lakhs with effect from 1st
April, 1995 and then to Rs. 3.5 lakhs with effect from 1.4.96. In
Steel Authority of India Ltd. V. Shri Ambica Mills Ltd & Ors.
AIR 1998 Supreme Court 418, the Hon‟ble Supreme Court
specifically held that Steel Authority of India was not a department
of the Government of India. In taking this view, the Hon‟ble
Supreme Court relied upon its earlier judgments, namely, Dr. S.L.
Agarwal vs. The General Manager, Hindustan Steel Ltd. AIR
1970 SC 1150; and Western Coalfields Ltd. vs. Special Area
Development Authority, Korba AIR 1982 SC 697.
Since neither the respondent is a department of Government
nor its employees are government employees, the ceiling fixed by
Government of India in respect of its employees does not ipso facto
apply to the employees of public sector undertakings. The
respondent is a company duly registered under Companies Act and
it has framed its own Rules in the matter of Payment of Gratuity to
its employees. The employees of the respondents are, therefore,
entitled to Payment of Gratuity only in terms of Payment of Gratuity
Act, 1972 and the Gratuity Rules framed by the respondent
company. In the absence of any order, notification or direction
from Government of India, for applying the same ceiling, in
payment of gratuity, to the employees of all the public sector
undertakings, as is fixed by it in respect of its own employees, the
employees of the respondent cannot claim that the ceiling
prescribed for Government employees should be applicable in their
case as well.
15. Coming to the effective date from which the revised ceiling
was applied by SAIL, I find that the Gratuity Rules were amended
by the respondent with effect from 24.9.97. Since the provisions of
Payment of Gratuity Act, 1972 were amended with effect from the
same date, it cannot be said that the aforesaid date was fixed
arbitrarily and was without any basis. In State of H.P. & Anr. Vs.
Piar Singh JT 2002 (8) SC 260, the State of Himachal Pradesh
framed Demobilised Armed Forces personnel (Reservation of
Vacancies in Himachal State Non Technical Services) Rules, 1972
to provide for reservation of vacancies to released army personnel,
who were commissioned to the army on or after 1.11.62. The cut
off date was challenged as arbitrary. The Hon‟ble Supreme Court
found that the cut off date had a direct bearing with the date on
which country faced disturbance on account of war with China. In
State of West Bengal Etc. Vs. Ratan Behari Dey & Ors. JT
1993 (4) SC 501, the Hon‟ble Supreme Court held as under:-
"the power of the State to specify a
date with effect from which, the
Regulations framed, or amended, as
the case may be shall come into force
is unquestioned. A date can be
specified both prospectively as well as
retrospectively. The only question is
whether the prescription of the date
is unreasonable or discriminatory."
In State of Bihar & Ors. Vs. Ramjee Prasad & Ors. AIR
1990 SC 1300, the Hon‟ble Supreme Court held as under:-
"the choice of a date as a basis for
classification cannot always be
dubbed as arbitrary even if no
particular reason is forthcoming for
the choice unless the circumstances
show it to be capricious and
whimsical. When it is necessary for
the Legislature or authorities to fix a
line or a date and there is no
mathematical or logical way of fixing
it precisely, the decision of the
Legislature or authority must be
accepted unless it is shown to be
capricious or whimsical or wide off
the reasonable mark."
The effective date fixed by the respondent being based upon
the date of amendment of Payment of Gratuity Act, I find no merit
in the contention that the date of 24th September, 1997 for the
purpose of revising the ceiling of gratuity was fixed arbitrarily.
For the reasons given above, I do not find any merit in the
petition and the same is hereby dismissed.
(V.K. JAIN)
JUDGE
August 13, 2009.
sn/sk
