Kerala High Court
The Vazhathope Service Co-Operative ... vs Chandra K on 21 May, 2024
Author: Dinesh Kumar Singh
Bench: Dinesh Kumar Singh
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH
TUESDAY, THE 21ST DAY OF MAY 2024 / 31ST VAISAKHA, 1946
WP(C) NO. 22792 OF 2021
PETITIONER:
THE VAZHATHOPE SERVICE CO-OPERATIVE BANK LTD.NO E 202,
REPRESENTED BY ITS SECRETARY,
THADIAMPADU P. O., IDUKKI DISTRICT - 685 602.
BY ADVS.
SRI. JOICE GEORGE
SMT. LIJI J. VADAKEDOM
RESPONDENTS:
1 CHANDRA K.,
AGED 62 YEARS, W/O. SUKUMARAN K. P.,
RETIRED SECRETARY,
THE VAZHATHOPE SERVICE CO-OPERATIVE BANK LTD NO. E 202,
THADIAMPADU P. O., IDUKKI DISTRICT - 685 602.
RESIDING AT KALLURUMBIL , CHURULI,
CHELACHUVADU P. O., IDUKKI DISTRICT, PIN 685 606.
2 THE DEPUTY LABOUR COMMISSIONER,
OFFICE OF THE DEPUTY LABOUR COMMISSIONER,
NEAR ETTUMMANOOR TEMPLE, KOTTAYAM DISTRICT,
PIN - 686 631.
3 THE JOINT REGISTRAR (GENERAL) OF
CO-OPERATIVE SOCIETIES,
IDUKKI DISTRICT, PIN - 685 602.
BY ADVS.
SRI. S. JAYAKRISHNAN
SRI. S. PARAMESWARA PRASAD
SRI. DHEERAJ A. S. - GP
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
21.05.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WP(C) NO. 22792 OF 2021
2
DINESH KUMAR SINGH, J.
--------------------------
W.P.(C) No. 22792 of 2021
-------------------------
Dated this the 21st day of May, 2024
JUDGMENT
1. The petitioner is a Co-operative Society registered under
the provisions of the Kerala Co-operative Societies Act, 1969.
The total number of employees as per the averments in the writ
petition of the petitioner Society is 21. The petitioner Society
has not enrolled itself under the Group Gratuity Scheme with
LIC.
2. The 1st respondent was employed as Secretary of the
petitioner Society. She demitted the Office on 31.05.2017 on
attaining the age of superannuation and applied for the
payment of gratuity. The 1st respondent was paid Rs.
10,00,000/-, the gratuity amount under Section 4 (3) of the
Payment of Gratuity Act, 1972 as per the ceiling limit prescribed
at the relevant time.
3. The 1st respondent, however claimed that her last drawn
salary was of Rs. 1,11,711/- and she had rendered 38 years long
service in the petitioner Society and, therefore, she was entitled
to get a total amount of Rs. 24,49,049/- as the gratuity amount.
WP(C) NO. 22792 OF 2021
4. The 1st respondent filed petition under Section 7 of the
Payment of Gratuity Act, 1972 before the 3 rd respondent
Competent Authority appointed under the said Act being No.
GC 54 of 2021. While the said petition was pending before the
Controlling Authority, the 1st respondent filed W.P.(C) No.
22785 of 2020 before this Court. This Court vide the Judgment
and Order dated 23.02.2021 directed the 2 nd respondent,
Controlling Authority to consider and dispose of the petition
No. GC 54 of 2021 in accordance with the law within a period of
four months from the date of receipt of a copy of the Judgment
(Exhibit P-2 Judgment). The petitioner Society filed its
objection in Exhibit P-3 before the Controlling Authority to the
petition filed by the 1st respondent. The 2nd respondent
Controlling Authority relying on the Rule 59 (iii) of the Kerala
Co-Operative Societies Rules, 1969 passed the impugned order
in Exhibit P-4 holding that the 1st respondent would be entitled
for gratuity equivalent to half monthly wages of number of
years of her service rendered in the Society. It has been held
that irrespective of the ceiling limit prescribed under Sub-
section (3) of Section 4 of the Payment of Gratuity Act, 1972,
the 1st respondent would be entitled to the gratuity calculated
WP(C) NO. 22792 OF 2021
on the basis of her total service and last drawn wages. The 2 nd
respondent in the impugned order has directed the petitioner
to make payment of Rs. 14,49,049/- as unpaid gratuity along
with interest @ 10% to the 1st respondent.
5. The said order passed by the 2nd respondent is subject
matter of challenge before this Court. The learned Counsel for
the petitioner has submitted that the order impugned in the
present writ petition is without jurisdiction as the Competent
Authority appointed under Section 7 of the Payment of Gratuity
Act, 1972 is empowered to adjudicate or determine the amount
of gratuity payable to an employee under the Payment of
Gratuity Act. The Competent Authority has no power to
adjudicate/determine the amount of gratuity payable under any
other Act or Rules and, therefore, it is submitted that the order
passed by the Competent Authority is without jurisdiction.
6. It is further submitted that the 2 nd respondent has held
that the 1st respondent is entitled to receive gratuity as per Rule
59 (iii) of the Kerala Co-Operative Societies Rules, 1969 and,
therefore, the dispute regarding the amount of gratuity is not
under the Payment of Gratuity Act but, under Rule 59 (iii) of the
Kerala Co-Operative Societies Rules, 1969 and thus, the
WP(C) NO. 22792 OF 2021
impugned order in Exhibit P-4 is without jurisdiction as the
Competent Authority traveled beyond the jurisdiction conferred
on him under Section 7 of the Payment of Gratuity Act. It is
submitted that the Competent Authority should have relegated
the parties to get the dispute decided by raising an arbitration
under Section 69 of the Kerala Co-Operative Societies Act, 1969
and he ought not have decided the issue by himself.
7. The second submission of the learned Counsel for the
petitioner is that the Competent Authority has omitted the
proviso to Rule 59 of the Kerala Co-Operative Societies Rules,
1969 which limits the payment of gratuity under the said Rule to
15 months pay. However, the Competent Authority has directed
for payment of gratuity which exceeds the ceiling limit
prescribed under the proviso i.e. for 15 months pay and,
therefore, the impugned order is unsustainable and liable to be
set aside.
8. The third submission raised by the learned Counsel for the
petitioner is that under Section 2(e) of the Payment of Gratuity
Act, 1972 which defines 'employee' excludes the employee
governed by any other Act or the Rules providing for payment
of gratuity. In the present case, the employees of the Co-
WP(C) NO. 22792 OF 2021
operative Societies like the petitioner are governed by the
Kerala Co-Operative Societies Act and Rules made thereunder
for payment of gratuity and, therefore, the provisions of
Payment of Gratuity Act, 1972 are not applicable in case of the
1st respondent and thus, the order impugned is without
jurisdiction.
9. The learned Counsel for the petitioner has placed reliance
on the following Judgments in support of his submissions;
(1) Allahabad Bank and Another v. All India
Allahabad Bank Retired Employees Association
[2010 (2) SCC 44];
(2) Shankara Narayanan P. A. v. Kerala State
Beverages (M and M) Corporation Ltd. [2024 KHC
Online 293].
10. On the other hand, the learned Counsel for the 1 st
respondent has supported the impugned order on the ground
that the 1st respondent had rendered 38 years continuous long
service in the petitioner Society and her last drawn monthly
wage was Rs. 1,11,711/-. It has been further submitted that the
petitioner has admitted in the writ petition that the provisions
of Payment of Gratuity Act, 1972 are applicable in respect of the
WP(C) NO. 22792 OF 2021
employees of the petitioner Society. In paragraph 2 of the writ
petition it has been stated that 'the petitioner Society is
governed by the Payment of Gratuity Act 1972'. Therefore, it
would not lie in the mouth of the petitioner Society to say that
the employees of the petitioner Society would not come within
the purview of the provisions of the Payment of Gratuity Act,
1972.
11. It has been further submitted that Sub-Section (7) of
Section 7 provides for statutory appeal against an order passed
by the Competent Authority under Sub-Section (4) of Section 7
to the appropriate Government or such authority as may be
specified by the appropriate Government in this behalf. Instead
of resorting to the appeal against the impugned order, the
petitioner has approached this Court and, therefore, the writ
petition is not maintainable in view of the alternative remedy of
appeal provided under the Act itself. The learned Counsel for
the 1st respondent has therefore, submitted that the writ
petition is liable to be dismissed with cost.
12. Before enactment of the Payment of Gratuity Act, 1972
there was no Central Act to regulate payment of gratuity to
industrial workers, except the Working Journalists (Conditions
WP(C) NO. 22792 OF 2021
of Service) and Miscellaneous Provisions Act, 1955. The
Government of Kerala enacted legislation in 1971 for payment
of gratuity to workers employed in factories, plantations, shops
and establishments. The West Bengal Government promulgated
an Ordinance on 3rd June, 1971 prescribing similar scheme of
gratuity. The said Ordinance was replaced by West Bengal
Employees' Payment of Compulsory Gratuity Act, 1971 which
received assent of the President on 28th August, 1971. Since the
enactment of Kerala and West Bengal Acts came into force,
other State Governments had raised voice expressing their
intentions of enacting similar measures in their respective
States and, therefore, need was felt to have a Central Law on
the subject so as to ensure a uniform pattern of payment of
gratuity to the employees throughout the Country.
13. The Statement of Object Reasons would disclose that it
was felt that the enactment of the Central Law was necessary to
avoid different treatments to the employees of the
establishments having branches in more than one State, when,
under the conditions of their service, the employees could be
transferred from one State to another.
14. The proposal for Central legislation on gratuity was
WP(C) NO. 22792 OF 2021
discussed in the Labour Ministers' Conference held at New Delhi
on 24th and 25th August, 1971 and also in the Indian Labour
Conference held on 22nd and 23rd October, 1971. The consensus
emerged that Central legislation on payment of gratuity should
be enacted as early as possible. Thus, the Central legislation,
the Payment of Gratuity Act, 1972 came to be enacted and
enforced.
15. The Payment of Gratuity Act is a beneficial legislation. It is
social legislation which aims to provide social security to an
employee after retirement, resignation, whenever he become
eligible. The Act applies to every factory, mine, oil field,
plantation, port and every company and every shop and
establishment within the meaning of any law for the time being
in force in relation to shops and establishments in a State, in
which ten or more persons are employed or were employed on
any day of the preceding twelve months.
16. The petitioner himself admitted that the employees of the
petitioner Society are governed by the Payment of Gratuity Act
and its provisions are applicable to the Society.
17. The payment of gratuity becomes payable to an employee
on the termination of his employment after he has rendered
WP(C) NO. 22792 OF 2021
continuous service for not less than five years either on his
superannuation or on his retirement or resignation or on his
death or disablement due to accident or disease as per Section 4
of the Payment of Gratuity Act, 1972, which reads as under;
Section: 4 Payment of gratuity.
(1) Gratuity shall be payable to an employee
on the termination of his employment after
he has rendered continuous service for not
less than five years, -
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to
accident or disease:
Provided that the completion of continuous
service of five years shall not be necessary
where the termination of the employment of
any employee is due to death or disablement:
[Provided further that in the case of death of
the employee, gratuity payable to him shall
be paid to his nominee or, if no nomination
has been made, to his heirs, and where any
such nominees or heirs is a minor, the share
of such minor, shall be deposited with the
controlling authority who shall invest the
same for the benefit of such minor in such
WP(C) NO. 22792 OF 2021
bank or other financial institution, as may be
prescribed, until such minor attains majority.]
Explanation. - For the purposes of this
section, disablement means such disablement
as incapacitates an employee for the work
which he, was capable of performing before
the accident or disease resulting in such
disablement.
(2) 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 fifteen days wages based on
the rate of wages last drawn by the employee
concerned:
Provided that in the case of a piece-
rated employee, daily wages shall be
computed on the average of the total wages
received by him for a period of three months
immediately preceding the termination of his
employment, and, for this purpose, the wages
paid for any overtime work shall not be
taken into account:
Provided further that in the case of [an
employee who is employed in a seasonal
establishment and who is riot so employed
throughout the year], the employer shall pay
the gratuity at the rate of seven days' wages
for each season.
WP(C) NO. 22792 OF 2021
[Explanation: In the case of a monthly rated
employee, the fifteen days wages shall be
calculated by dividing the monthly rate of
wages last drawn by him by twenty-six and
multiplying the quotient by fifteen].
(3) The amount of gratuity payable to
an employee shall not exceed [such amount
as may be notified by the Central
Government from time to time].
(4) For the purpose of computing the
gratuity payable to an employee who is
employed, after his disablement, on reduced
wages, his wages for the period preceding his
disablement shall be taken to be the wages
received by him during that period, and his
wages for the period subsequent to his
disablement shall be taken to be the wages
as so reduced;
(5) 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.
(6) Notwithstanding anything contained
in sub-section (1), -
(a) the gratuity of an employee, whose
services have been terminated for any act,
WP(C) NO. 22792 OF 2021
wilful omission or negligence causing any
damage or loss to, or destruction of, property
belonging to the employer, shall be forfeited
to the extent of the damage or loss so
caused;
(b) the gratuity payable to an employee
[may be wholly or partially forfeited] -
(i) if the services of such employee have
been terminated for his riotous or disorderly
conduct or any other act of violence on his
part, or
(ii) if the services of such employee
have been terminated for any act which
constitutes an offence involving moral
turpitude, provided that such offence is
committed by him in the course of his
employment.
[***]
18. In terms of the provisions of the Payment of Gratuity Act,
1972, the ceiling limit of the amount of gratuity has been fixed
from time to time and at the relevant time it was Rs. 10,00,000/-
, when the 1st respondent retired from service on 31.05.2017.
The rate of gratuity however has to be determined @ 15 days
salary for every completed year of service subject to the
WP(C) NO. 22792 OF 2021
maximum limit fixed under the statute. Despite the ceiling limit
and calculation of the gratuity, Sub-Section (5) of Section 4
provides that if an employee has right to receive better terms of
gratuity under any award or agreement or contract with the
employer, his right would not get affected for payment of
better terms of gratuity under other provisions of law. Sub-
Section (5) has thus overriding effect to receive better terms of
gratuity by the employee under any award or agreement or
contract with the employer.
19. Section 7 empowers the prescribed/competent authority
to determine the amount of gratuity to an eligible person for
payment of gratuity under the Act and Sub-Section (7) of
Section 7 provides for an appeal against the order passed by the
prescribed authority under Sub-Section (4) of Section 7 before
the appropriate Government or the designated appellate
authority. Section 14 prescribes that the provisions of Payment
of Gratuity Act shall have overriding effect on any other law or
rules inconsistent with the provisions and Rules made under the
Payment of Gratuity Act or any instrument or contract having
the effect by virtue of an enactment. Thus, in case of conflict
between the provisions of the Payment of Gratuity Act and
WP(C) NO. 22792 OF 2021
Rules made thereunder with any other enactment or rules made
thereunder, the provisions of Payment of Gratuity Act and Rules
made thereunder will have overriding effect and are to be given
effect to. In view of the statutory provision and the beneficial
nature of the legislation, the issue involved in this writ petition
needs to be decided. It is not in dispute that the provisions of
the Payment of Gratuity Act are applicable to the petitioner
Society as per their own admission in paragraph 2 of the writ
petition.
20. Further, Section 2 (e) of the Act cannot be given the
interpretation as advanced by the learned Counsel for the
petitioner inasmuch as the phrase 'but does not include any
person who hold post under Central Government or a State
Government and is government by any other Act or by Rules
provided for payment of gratuity' does not have any disjunct
between person who holds post under the Central Government
or a State Government and is governed by any other
Act...................
21. The provision simply means that a person who holds the
post under the Central Government or State Government and
he is governed for payment of gratuity by any other Act, he shall
WP(C) NO. 22792 OF 2021
not be governed by the provisions of the Payment of Gratuity
Act. However, it does not mean that any person who is
governed for payment of gratuity by any other Act could not be
entitled for the beneficial provisions under the Payment of
Gratuity Act, 1972. It may be further said that in view of
Section 14 of the Payment of Gratuity Act, 1972 which has
overriding effect, even if person is governed by the provisions
of any other enactment who is not the employee of the Central
Government or State Government, he would be entitled for
beneficial provision of the Payment of Gratuity Act, 1972.
22. Once it is held that the petitioner Society is governed for
payment of gratuity under the provisions of the Payment of
Gratuity Act, 1972, Section 5 (4) has to be given full effect.
Under Rule 59 of the Co-operative Societies Rules, 1969, the
gratuity amount should not exceed 15 months pay. Rule 59 on
reproduction reads as under;
59. Gratuity. - Every society shall
make in its bye-laws provision for payment
of gratuity to its employees and frame
regulations for its administration. Among
other matters such regulations shall provide
for the following -
WP(C) NO. 22792 OF 2021
(i) all monthly paid employee on the
permanent establishment shall be eligible for
gratuity;
(ii) service rendered by employees
must be continuous and satisfactory;
(iii) when an employee who has put in
at least 5 years satisfactory service is retired
voluntarily from service or if he is
permanently disabled while in service or if he
dies while in service the society shall pay to
him or to his legal heirs as the case may be
a gratuity not exceeding half months pay for
every completed year of service:
Provided that in no case shall the
gratuity exceed fifteen months pay.
[Provided further that the amount of
gratuity payable shall not exceed the amount
which an employee is eligible as per the
Payment of Gratuity Act, 1972 (Central Act
39 of 1972) or under the Act and these
Rules, whichever is applicable irrespective of
the amount received out of any scheme
chosen or implemented by a society for the
purpose].
23. Comparing Sub-Section (4) of Section 5 of the Payment of
Gratuity Act, 1972 with Rule 59 of the Co-operative Societies
Rules, 1969 it can be seen that Rule 59 provides for better terms
for payment of the gratuity to an employee of the Co-operative
Society. Considering the said fact, the Section 5(4) has to be
WP(C) NO. 22792 OF 2021
given effect to by directing for payment of the gratuity to the
1st respondent under Rule 59. I therefore, find no substance in
the submission of the learned Counsel for the petitioner that
the employees of petitioner Society are not governed under the
provisions of the Payment of Gratuity Act, 1972 for payment of
gratuity and the prescribed authority has no jurisdiction to
determine the payment of gratuity. Such a contention is belied
of any substance and is hereby rejected. It is held that the 1 st
respondent's gratuity is to be calculated as per Section 5 of the
Payment of Gratuity Act, 1972 and since Rule 59 of the Co-
operative Societies Rules provides for better terms of payment
in respect of payment of gratuity, payment of gratuity has to be
granted as per Rule 59 of the Co-operative Societies Rules,
1969.
24. Another contention of the learned Counsel for the
petitioner that since the payment has been determined under
Rule 59 of the Co-operative Societies Rules, 1969, the matter
ought to have been relegated to the arbitration under Section
69 of the Co-operative Societies Act, 1969 is also liable to be
rejected. The payment has been determined as per the
provisions of the Payment of Gratuity Act, 1972. Section 5(4)
WP(C) NO. 22792 OF 2021
itself provides for determination of the gratuity under the
better terms of conduct of employment etc. Once the Rule 59
provides for better terms of payment of gratuity to an
employee under the Co-operative Society governed under the
Co-operative Societies Act, 1969, there is no question of the
matter to be referred to the arbitration. Therefore, the said
contention is also rejected.
25. There is no doubt that there is alternative remedy of
appeal provided under Sub-Section 7 of Section 7 against an
order passed under Sub-Section (4) of Section 7 by the
prescribed authority. However, since the pleadings have been
exchanged and the matter was admitted, no purpose would be
served for sending the matter to the appellate authority at this
stage and, therefore, despite availability of alternative remedy
this Court has taken up the matter on merit and decided
accordingly.
26. From perusal of the impugned order, it may be noticed
that the prescribed authority has omitted the proviso of Rule 59
which limits the payment of gratuity to 15 months pay. The
prescribed authority has not taken into consideration the said
proviso and, therefore, an error has crept in while determining
WP(C) NO. 22792 OF 2021
the amount of gratuity to be paid to the 1 st respondent. The
facts are not in dispute that the last drawn salary of the 1 st
respondent is Rs. 1,11,711/-. The 1 st respondent would be
entitled for gratuity amount which would be Rs. 1,11,711 x 15 =
Rs. 16,75,665/-. Rs. 10,00,000/- was already paid to her before
filing the claim petition before the prescribed authority. Thus,
the 1st respondent would be entitled for further payment of Rs.
6,75,665/- + 8% interest from the date of filing of the claim
petition before the prescribed authority i.e. w.e.f. 10.12.2020 till
the date of payment. Petitioner is directed to make payment of
Rs. 6,75,665/- + 8% interest w.e.f. 10.12.2020 till the date of
payment made to her within one month from today.
In the aforesaid terms the present writ petition is finally
disposed of.
Sd/-
DINESH KUMAR SINGH
JUDGE
Svn
WP(C) NO. 22792 OF 2021
APPENDIX OF WP(C) 22792/2021
PETITIONER'S EXHIBITS
EXHIBIT P1 THE COPY OF THE PETITION FILED BY THE
1ST RESPONDENT (UNDER SECTION 7 OF
PAYMENT OF GRATUITY ACT)
EXHIBIT P2 THE COPY OF THE JUDGMENT DATED 23-02-
2021 IN W.P(C) NO. 22785/2020 OF THIS
HONOURABLE COURT
EXHIBIT P3 THE COPY OF THE OBJECTION FILED BY THE
PETITIONER IN GC 54/2021 BEFORE THE 2ND
RESPONDENT
EXHIBIT P4 THE COPY OF THE ORDER DATED 20-09-2021
IN GC 54/2021 PASSED BY THE 2ND
RESPONDENT
TRANSLATED COPY TRANSLATED COPY OF EXHIBIT P4
OF EXHIBIT P4
