Karnataka High Court

Karnataka Vikasa Grameena Bank vs The Appellate Authority on 11 January, 2024

Author: N.S.Sanjay Gowda

Bench: N.S.Sanjay Gowda

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                                                         WP No. 103664 of 2023




                                IN THE HIGH COURT OF KARNATAKA,
                                        DHARWAD BENCH

                           DATED THIS THE 11TH DAY OF JANUARY, 2024
                                              BEFORE
                           THE HON'BLE MR JUSTICE N.S.SANJAY GOWDA

                           WRIT PETITION NO. 103664 OF 2023 (L-PG)
                                                            (L

                      BETWEEN:
                      KARNATAKA VIKASA GRAMEENA BANK,
                      REGIONAL
                          IONAL RURAL BANK, CONSTITUTED
                      UNDER R.R.B ACT, 1976, HEAD OFFICE,
                      DHARWAD, R/BY ITS GENERAL MANAGER,
                      SHRI CHANDRASHEKAR
                      S/O DATTAJI KRISHNARAO MORO.
                                                                  ... PETITIONER
                      (BY SMT.. BHAGYASHREE N.BIKKANNAVAR,
                                            N.B            ADVOCATE)


                      AND:


                      1.   THE APPELLATE AUTHORITY
                           UNDER PAYMENT OF GRATUITY ACT, 1972 AND
         Digitally
                           DY. CHIEF LABOUR COMMISSIONER, (CENTRAL)),
         signed by
         MANJANNA
MANJANNA E
E        Date:
                           BANGALORE, SHRAM SADAN, III CROSS,
         2024.01.18
         11:28:23
         +0530             III
                            II MAIN, II PHASE, TUMKUR ROAD,
                           YESWANTHPUR, BANGALORE-560022.
                                           BANGALORE
                      2.   THE CONTROLLING AUTHORITY UNDER
                           PAYMENT OF GRATUITY ACT AND ASST.
                                                       ASST. LABOUR
                           COMMISSIONER (CENTRAL), KADRI AMENITY
                                                               TY BLOCK,
                            ST
                           1 FLOOR, NEXT TO BSNL STAFF QUARTERS,
                           NH 66, PADAVU, MANGALURU-04.
                      3.   SHRI. R.P. BHAVI,
                                      BHAVI DEVAGIRI,
                           DHARESHWAR, KUMTA-581327.
                                         KUMTA
                                                                ... RESPONDENTS
                      (BY SRI. MADHUSUDHAN P.N. AND
                       SRI. BHARATKUMAR S., ADVOCATES)
                                            ADVOCATE
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                                          NC: 2024:KHC-D:649
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                                             WP No. 103664 of 2023




     THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA, PRAYING TO CALL FOR
RELEVANT RECORDS AND ISSUE A WRIT OF CERTIORARI OR
ANY OTHER WRIT OR ORDER IN THE LIKE NATURE QUASHING
THE IMPUGNED ORDER DATED 16/06/2021 PASSED BY THE     TH
RESPONDENT     NO.2     IN  APPLICATION   NO.48/02/17
                                          NO.48/02/17-A/M
PRODUCED AT ANNEXURE-A
              ANNEXURE A AND THE IMPUGNED ORDER DATED
11/01/2023 PASSED BY THE RESPONDENT
                             RESPONDENT NO.1 IN APPEAL
NO.36(132)/2022
NO.36(132)/2022-B1    PRODUCED AT ANNEXURE--B, AS THE
SAME BEING TOTALLY ARBITRARILY, ILLEGAL AND NOT
SUITABLE
       LE IN LAW, IN THE INTEREST OF JUSTICE AND EQUITY.

    THIS PETITION, COMING ON FOR ORDERS,, THIS DAY, THE
COURT MADE THE FOLLOWING:

                             ORDER

1. This petition is filed by the Bank, challenging the

decision of the Controlling Authority, by which the

Controlling Authority has determined that the 3rd

respondent was was entitled to a total gratuity of

Rs.10,63,860.63 and since only a sum of Rs.10,00,000/-

Rs.10,00,000/

had been paid as gratuity by the Bank, the Bank was

directed to pay the difference amount of Rs.63,860.63/-.

Rs.63,860.63/

2. This order has also been conformed in Appeal.

3. It is the case of the Bank that the gratuity

payable to the petitioner was higher under the Payment of

Gratuity Act, 1972 (for short the Act 1972) at

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Rs.12,27,531.50/ as against the gratuity payable under Rs.12,27,531.50/-

the Bank's regulations, regulations which was Rs.7,98,095/-

Rs.7,98,095/ and since

the gratuity payable under the Act 1972 was more

beneficial, the petitioner was paid, paid as per the provisions of

the Act 1972, the maximum sum of Rs.10,00,000/-

Rs.10,00,000/ payable

under the Act.

4. It is contended that the authorities have

committed an error in calculating the pay of the petitioner,

of the third respondent by including the component of

dearness arness allowance, which was contrary to the definition of

'pay' under the Bank's Regulations.

5. It is contended that the Controlling Authority

was not right in incorporating the component of dearness

allowance while calculating the gratuity under the Bank's

regulations, since the regulations clearly stipulated that pay

only meant basic pay drawn per month by an officer was to

be taken for the purpose of calculating gratuity and

therefore, the inclusion of the dearness allowance was

incorrect.

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6. Regulation 72 of the Karnataka Vikas Grammar

Bank (Officers and Employees Service Regulations-2010) Regulations

reads as follows:

72. Gratuity :-

:

(1) An officer or employee shall be eligible for payment of gratuity either as per the provisions of the Payment of Gratuity Act, 1972 (39 of 1972) or as per sub-regulation sub (2), whichever is higher.

(2) Every officer or employee shall be eligible for gratuity on,

(a) retirement,

(b) death,

(c) disablement rendering him unfit for further service as certified by a medical officer approved by the Bank, or

(d) resignation after completing 10 years of continuous service, or

(e) termination of service in any other other way except by way of punishment after completion of 10 years of service:

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Provided that in respect of an employee there shall be no forfeiture of gratuity for dismissal on account of misconduct except in cases where such misconduct causes financial loss loss to the bank and in that case to that extent only.

(3) The amount of gratuity payable to an officer or employee shall be one month's month s pay for every completed year of service or part thereof in excess of six months subject to a maximum of 15 month's pay:

Provided rovided that where an officer or employee has completed more than 30 years of service, he shall be eligible by way of gratuity for an additional amount at the rate of one half of a month's pay for each completed year of service beyond 30 years:

Provided further further that in respect of an officer the gratuity is payable based on the last pay drawn:

Provided also that in respect of an employee pay for the purposes of calculation of the gratuity shall be the average of the basic pay (100%), dearness allowance and special allowance and officiating allowance payable during the 12 months preceding death, disability, retirement, resignation or termination of service, as the case may be."

be.

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7. As could be seen from Sub ub Regulation (1) of

Regulation 72, it is clearly stated that that an officer or an

employee would be eligible for payment of gratuity either

under the 1972 Act or under Sub Regulation (2), whichever

is higher. Thus, if it is found that the gratuity payable to an

officer or an employee is found to be more under the

Bank's regulations, that amount of gratuity would have to

be paid. If, however, the gratuity payable under the 1972

Act is higher, the said amount would have to be paid.

8. As could also be seen from regulation Sub

Regulation (3), the gratuity payable to an officer would be

one month's pay for every completed year of service. As

per the proviso, however, in respect of an officer and an

employee who had ha completed more than 30 years, years they

would also be eligible for an additional amount at the rate

of one half of a month's pay for each completed year of

service beyond 30 years.

9. Since, it is not in dispute that the respondent

had rendered more than 30 years of service, he would be

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entitled for one month's month salary for 30 years of service and

for 1 ½ month's month s pay for each completed year of service

beyond 30 years.

10. The controversy, controversy however, raised by the learned

counsel for petitioner-Bank petitioner Bank is that pay has been defined

under the regulations to only mean the basic pay and

therefore, the inclusion of the component of dearness

allowance by the Controlling Authority would be incorrect.

11. The third proviso to sub regulation (3) states

that in respect of an employee, pay for the purposes of

calculation of gratuity gratuity would be the average of basic pay,

dearness allowance, special allowance and officiating

allowance payable during the twelve months preceding the

retirement. Thus, for the purposes of calculating gratuity in

respect of an employee of the Bank, the component comp of

Dearness is required to be included.

12. However, it it is contended that because the third

proviso is made applicable only to an employee and the

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second proviso is specifically made applicable to an Officer,

for the purposes of calculating the gratuity to an Officer, Officer

only the basic pay as provided in the second proviso is

required to be taken into consideration.

13. Section 2(s) of the Payment of Gratuity Act,

reads as follows:

"2. Definitions. XXXXX Definitions.--

(s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employments and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance."

14. Thus, as per the definition of wages under the

Act, Dearness Allowance also forms form a component of wages.

The third proviso to the regulations also incorporates this

fact, but the argument of the Bank is that this is applicable

only to an employee and not to an officer.

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15. It is to be stated here that the Officer of the

Bank is also an employee em of the Bank. Merely erely because the

expression "Officer Officer" and "Employee" are used separately

that would not mean that the Officer is not an employee of

the Bank.

16. Since, the Officer is also an employee of the

Bank, for the purposes of calculating the gratuity in respect

of the Officer, the third proviso would w stand attracted and

consequently the Dearness allowance would also have to be

taken into consideration for the purposes of calculating the

gratuity.

17. It is to be noticed here that different yardsticks

cannot be applied for calculating gratuity for the employees

of the same organisation and a common yardstick would

have to be adopted. Since the 3rd proviso provides for

calculation of gratuity of an employee of the bank, which

would obviously include even an officer of the Bank, the

said proviso which mandates that Dearness allowance will

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also have to be taken into consideration for calculating

gratuity, would be applicable.

18. The Controlling Authority has calculated calcu the

gratuity as follows:

"One Month's pay for every completed year of service or part thereof in excess of six months subject to a maxdimum of 15 month's pay

Rs.68,636.17 x 15 years = Rs.10,29,542.55

Provided that where an officer or employee has completed mpleted more than 30 years of service, he shall be eligible by way of gratuity for an additional amount at the rate of one half of a month's pay for each completed year of service byond 30 years.

One half of Rs.68,636.17 - Rs.34,318.08 x 1 year = Rs.34,318.08

Total Rs. Rs.10,29,542.55 + Rs.34,318.08 = Rs.10,63,860.63

Total Gratuity payable : Rs.10,63,860.63

Less Gratuity paid as per : Rs.10,00,000.00 Per the Act

Different of Gratuity payable : Rs.63,860.63

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Since gratuity payable under the Act is confined to the ceiling limit of Rs.10,00,000, though the actual calculation works out to Rs.12,27,531, payment of gratuity under the service Regulations of the Respondent is more beneficial to the Applicant, which works out ut to Rs.10,63,860.63."

19. In my view, this calculation cannot be found fault

with.

20. However, reliance is placed on the decision of

the Division Bench of the Calcutta High Court rendered in

FMA No.657/2020, decided on 4th February 2021 and the

Single Judge judgment of the Kerala High Court in the case

Co operative1.

of Thomas Kurian Vs. Idukki District Co-operative

This decision can be of no avail.

21. In the decision of the Calcutta High Court,

though the Division Bench has stated that the pay in

respect of an Officer would only mean the basic pay, it is to