Kerala High Court
K.Prakasan vs State Of Kerala on 24 September, 2024
Author: N.Nagaresh
Bench: N.Nagaresh
2024:KER:70809
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE N.NAGARESH
TUESDAY, THE 24TH DAY OF SEPTEMBER 2024 / 2ND ASWINA, 1946
WP(C) NO. 20702 OF 2020
PETITIONERS:
1 K.R.UNNIKRISHNAN,
AGED 59 YEARS, S/O. RAMAN, CODE 1130,
RAMA VIHAR, KAYYARA, NOCHUPPULLY P.O.,
PALAKKAD DISTRICT, PIN-678 592.
2 M.LUIS,
AGED 61 YEARS, CODE 842,
NALLUVEETUKULAM, MENONPARA P.O.,
PALAKKAD DISTRICT, PIN-678 556.
3 K.JAYARAJAN,
AGED 61 YEARS
CODE 676, KIZHAKKEKARA HOUSE,
UMMANAZHI P.O., PULAPOTTA,
PALAKKAD-678 632.
4 B.VISWABARAN PILLA,
AGED 61 YEARS
CODE 729, VISWAGOWTHAM,
NEAR GHS KANJIKKODE,
PALAKKAD-678 621.
5 N.K.KRISHNADAS,
AGED 60 YEARS
CODE 411, VISHNU BADRA,
GANESH NAGAR, KALLEPULLY P.O.,
PALAKKAD-678 003
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6 A.MUHAMMED ALI,
AGED 60 YEARS
CODE 1127, SANTHAMMA MANZIL,
ATHIKKODE P.O., NATTUKAL VIA,
KOZHINJAMPARA, PALAKKAD-678 554.
BY ADV A.R.GANGADAS
RESPONDENTS:
1 THE STATE OF KERALA,
REPRESENTED BY THE PRINCIPAL SECRETARY
INDUSTRIES, ELECTRONICS AND IT DEPARTMENT,
SECRETARIAT, THIRUVANANTHAPURAM-695 001.
2 THE MANAGING DIRECTOR,
MALABAR CEMENTS LTD., WALAYAR P.O.,
PALAKKAD-678 624.
BY ADVS.
SMT.ANIMA M, GOVERNMENT PLEADER
SMT.LATHA ANAND
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY
HEARD ON 11.09.2024, ALONG WITH WP(C).18792/2022, THE
COURT ON 24.09.2024 DELIVERED THE FOLLOWING:
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE N.NAGARESH
TUESDAY, THE 24TH DAY OF SEPTEMBER 2024 / 2ND ASWINA, 1946
WP(C) NO. 18792 OF 2022
PETITIONERS:
1 K.PRAKASAN,
AGED 59 YEARS, S/O. KUNCHAPPAN,
KANNATH HOUSE, PALLANCHATHANNUR POST,
PALAKKAD-678571.
2 V.K. ARUNKRIPAN,
S/O. KRIPANIDHI, G/1, SUNANDHA,
SANTHI COLONY, CHANDRANAGAR POST,
PALAKKAD-678007.
3 V. MURALEEDHARAN,
S/O. M.P. VELAYUDHAN,
SREENANDHANAM, KOLAKKAPADAM,
KODUMBU P.O., PALAKKAD-678551.
4 AZIZ M.I.,
S/O. ISMAIL, MADATHIL KULANGARAVATTATHIL,
KARINGATHURUTHU, KONGORPPILLY P.O.,
ERNAKULAM - 683512.
5 P.G. PAULACHAN,
S/O. P.P. GEORGE, PALATHURUTHIL HOUSE,
PONNURUNNI, BHUVANESWARY ROAD,
VYTTILA P.O., ERNAKULAM-682019.
BY ADVS.
T.M.CHANDRAN
S.SUJITH
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RESPONDENTS:
1 STATE OF KERALA,
REPRESENTED BY THE PRINCIPAL SECRETARY,
INDUSTRIES (H) DEPARTMENT, GOVERNMENT
SECRETARIAT, THIRUVANANTHAPURAM-695001.
2 THE COMPANY SECRETARY,
MALABAR CEMENTS LIMITED, WALAYAR P.O.,
PALAKKAD-678624.
3 THE MANAGING DIRECTOR,
MALABAR CEMENTS LIMITED, WALAYAR POST,
PALAKKAD-678624.
4 BOARD OF DIRECTORS,
MALABAR CEMENTS LIMITED, REPRESENTED BY
CHAIRMAN, MALABAR CEMENTS LIMITED, PALAKKAD-
678624.
BY ADVS.
SMT.ANIMA M, GOVERNMENT PLEADER
SMT.LATHA ANAND
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY
HEARD ON 11.09.2024, ALONG WITH WP(C).20702/2020, THE
COURT ON 24.09.2024 DELIVERED THE FOLLOWING:
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CR
N. NAGARESH, J.
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W.P.(C) Nos.20702 of 2020 and 18792 of 2022
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Dated this the 24th day of September, 2024
JUDGMENT
~~~~~~~~~
Petitioners are retired non-managerial employees
of Malabar Cements Limited, Palakkad. The petitioners seek
to direct the respondents to allow revised Gratuity to them.
2. The petitioners state that though the Malabar
Cements Limited, Palakkad is in the A Grade category
among the Public Sector Undertakings, the wages paid to the
non-managerial employees in the Company are only half of
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the salaries drawn by the non-managerial employees in other
A Grade Public Sector Undertakings. The wage structure in
the Malabar Cements Limited is governed by the Central
Board Settlements reached at National level between
Cement Manufacturers Associations and National Trade
Unions.
3. The salary structure under Cement Wage Board
Award comprises various components, such as Basic pay,
Variable Dearness Allowance ((VDA), Fixed Dearness
Allowance (FDA) and a group of other allowances, which
constitutes 35% of the total pay. These allowances will be
excluded while determining the Gratuity amount. Therefore,
the non-managerial employees of the Company get a very
low amount of Gratuity compared to employees of other
Public Sector Undertakings, where the salary elements to be
excluded for computing gratuity would be less than 5%.
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4. The petitioners state that the non-managerial
employees, who have rendered service around more than
30-35 years in Malabar Cements Limited, are getting an
average amount of ₹4 lakhs as Gratuity, as against ₹10 lakhs
received by the non-managerial employees who have
rendered service of about 20-25 years in other Public Sector
Undertakings. Taking into consideration the aforementioned
facts, the Malabar Cements Limited passed Ext.P1 resolution
deciding to include various allowances comprising more than
35% of the wage part, for determining Gratuity.
5. Ext.P1 proposal with the recommendations of the
Company was forwarded to the Government of Kerala for
approval, as per Ext.P2 communication dated 06.10.2017.
The Government of Kerala, by Ext.P3 letter dated 17.3.2019
(in W.P.(C) No.18792/2022), approved the proposal and
informed the Company that the Government has no objection
to frame a scheme/agreement to provide higher Gratuity
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amount, to those category of employees, by including all
allowances, for determining the Gratuity amount.
6. In spite of Ext.P3, the Company took no steps to
implement Ext.P1 decision. A representation was therefore
submitted to the Minister for Industries as per Ext.P4 (in W.P.
(C) No.18792/2022). The said representation was forwarded
to the Managing Director of the Malabar Cements Limited as
per Ext.P5 (in W.P.(C) No.18792/2022) directing to forward a
report. The Government, however, without waiting for a
report, took Ext.P6 decision (in W.P.(C) No.18792/2022)
rejecting the request to provide Gratuity amount in terms of
Ext.P1 decision stating that the financial position of the
Company is not conducive to bear the additional expenses.
7. The petitioners state that Ext.P6 decision is not
sustainable in law or on facts. The balance sheets of the
Company unmistakably reveal profits made by the Company.
Every year the Company is paying dividend to the
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Government of Kerala on the basis of profits made. The
petitioners therefore seek to quash Ext.P6 order of the 1 st
respondent and to allow revised Gratuity to the petitioners.
8. The respondent-Managing Director of Malabar
Cements Limited filed counter affidavit in both the writ
petitions. The respondent stated that as per the Payment of
Gratuity Act, 1972, the definition of 'wages' does not include
any Bonus, Commission, HRA, Overtime Wages or any other
allowances. The Hon'ble Apex Court has clarified the
meaning of the expression 'wages' under Section 2(s) of the
Payment of Gratuity Act, 1972 and has held that wages will
mean and include Basic Wages and Dearness Allowance
and nothing else.
9. The respondent further stated that as the
Company was running in profit continuously till the financial
year 2016-2017, the Management took a lenient view and
made a proposal to include other allowances also for
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calculating gratuity. The Board of the Company sought
Government approval to the proposal. The Resolution
passed by the Company specified that this method of
calculation shall be applicable only up to the implementation
of new wage structure to the non-managerial employees of
the Company.
10. Though the Company forwarded the proposal to
the 1st respondent-State of Kerala, the 1 st respondent did not
approve the same. In the meanwhile, the Company incurred
losses. As per the Government Order, the Management is at
liberty to make enhancement of Gratuity only if there exists
legally binding agreement/scheme. No such agreement or
scheme does exist now. The writ repetition is therefore,
without any merit, it was urged by the respondent-Managing
Director.
11. I have heard the learned counsel for the
petitioners, the learned Standing Counsel appearing for the
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Company and the learned Government Pleader appearing
for the State of Kerala.
12. The petitioners seek to direct the respondents to
allow revised Gratuity as requested for and approved by the
Malabar Cements Limited. It is not in dispute that the non-
managerial employees of the Company receive much lesser
amount of Gratuity when compared to other Public Sector
Undertakings in the State. In fact, the Board of Malabar
Cements Limited has admitted in its resolution dated
31.08.2017 (Ext.P1 in W.P.(C) No.18792 of 2022) that the
non-managerial employees are paid ''meager amount of
gratuity''.
13. The Board of the Malabar Cements Limited
therefore resolved and approved to include the various
allowances which comprise more than 30% of the wage part
of non-managerial employees for calculation of Gratuity
retrospectively with effect from 01.04.2017. The Company
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resolved that this method of calculation shall be applicable
only up to the implementation of new wages structure to the
non-managerial employees of the Company, subject to
Government approval.
14. The reason advanced by the Company for not
giving revised Gratuity to the petitioners is that the
Government has not approved the revision. The said reason
is unsustainable. The Principal Secretary to the Industries
Department has issued Ext.P3 communication (in W.P.(C)
No.18792/2022) to the Managing Director of Malabar
Cements Limited, stating that there is no bar in providing
higher amount of Gratuity than the statutory gratuity, if there
is any agreement or scheme. It is evident from Ext.P3 that
the Government has given its approval to provide revised
Gratuity to the employees of the Malabar Cements Limited.
15. The Malabar Cements Limited would now contend
that there is no agreement or Scheme for revision of gratuity.
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It is to be noted that in view of Section 5 of the Payment of
Gratuity Act, an employer is at liberty to give higher Gratuity
amount to his employees, not less favourable than the
benefits conferred under the Payment of Gratuity Act, 1972
subject to obtaining exemption from appropriate
Government. The Principal Secretary to Industries
Department in his communication dated 17.03.2019 (Ext.P3
in W.P.(C) No.18792 of 2022) has categorically stated that
the Government has no objection in providing higher amount,
if there is an agreement or Scheme.
16. The Management of the Company would contend
that there is no agreement or Scheme to give a higher
amount of Gratuity. Ext.P1 cannot be treated as one
satisfying Section 7 of the Contract Act. It cannot be treated
as final acceptance of the demand made by the employees,
since Ext.P1 is conditional and is subject to Government
approval.
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17. Ext.P1 Resolution of the Board of Directors of the
Company acquires importance in this regard. The Resolution
reads as follows:
AGENDA ITEM NO.214-16:
PAYMENT OF GRATUITY-EXEMPTION OF
ALLOWANCES-REG.
The Board noted that in view of the meager amount
of Gratuity paid to Non-Managerial employees of the
Company when compared to other leading to Public
Sector Undertakings in the State, recognized Trade
Unions of the Company were requesting for a higher
amount of Gratuity. Determination of Gratuity amount
is calculated based on last drawn wage of a particular
employee which comprises of Basic + Dearness
Allowance (DA) excluding all allowances, as the wage
structure of the Non-Managerial employees are
covered under the Cement Wage Board Award, which
includes various allowances, which amounts to more
than 30% of the total emoluments. In case of other
PSU's the allowances part contains only less than 5%
of the total emoluments. The Payment of Gratuity Act
does not prevent employer in paying better benefits to
the employees.
After discussions, the following Resolution was
passed:
RESOLUTION NO.2994
RESOLVED THAT the Board be and hereby
approved to include the various allowances which
comprise more than 30% of the wage part of Non-
Managerial employees for calculation of Gratuity
retrospectively w.e.f. 01.04.2017. This method of
calculation shall be applicable only upto the
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implementation of new wage structure to the the non-
managerial employees of the Company, subject to
Government approval.
Though Ext.P1 resolution is not an agreement between
employer and employees, it is a complete Scheme by itself.
18. Ext.P1 states that various allowances being paid
to the non-managerial employees, which amounts to more
than 30% of the total emoluments, should be taken into
account for calculation of Gratuity. Ext.P1 states that such
inclusion shall have retrospective effect from 01.04.2017.
Ext.P1 further states that this method of calculation shall be
applicable only upto the implementation of new wage
structure to the non-managerial employees of the Company.
When the Company has passed a resolution to give higher
amount of Gratuity, giving all necessary parameters for
calculation of Gratuity and the period during which the
employees would be eligible for the revised Gratuity, the
unanimous resolution passed by the Board of Directors itself
should be treated as a complete Scheme in itself. The
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Management cannot be permitted to shirk from its obligation
based on the resolution for the reason that a separate
document is not drafted describing it as a Scheme.
19. By Ext.P6 communication dated 01.01.2022, the
Government has subsequently taken a stand that since there
is no Scheme for grant of higher Gratuity and since the
Company cannot afford to pay higher Gratuity due to the
present financial position, only the Gratuity prescribed under
the Act, 1972 can be paid to the petitioners. The defence of
the Government as regards absence of a Scheme to pay
higher gratuity cannot be accepted as I have already held
that Ext.P6 constitute a Scheme. Let us now consider the
suitability of the defence based on financial position of the
Company.
20. Ext.P7 decision to pay higher Gratuity was taken
by the Company on 31.08.2017. Ext.P1 is an unconditional
resolution to pay higher Gratuity, subject only to Government
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approval. The Government has given approval as per Ext.P3
communication dated 17.03.2019. Hence, it is to be assumed
that there was no financial issues to pay higher Gratuity in
the year 2017-2018. Ext.P8 information provided by the
Public Information Officer under the Right to Information Act,
2005 would show that the Company made ₹931.68 lakhs
profit before tax, in the year 2020-2021.
21. Ext.P10 notice dated 03.09.2022 of the Managing
Director of the Company would disclose that the Company
had decided to pay ₹36,500/- as ex-gratia payment to all
serving employees. In October, 2022, the Company, as per
Ext.P11, decided to pay pro-rata incentive to serving
employees.
22. Ext.P9 minutes of the Company would show that
Company had provided financial assistance in the form of
Loan and Equity to the following state PSU's based on
Government order and accounted for Accrued interest on the
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PSU loans based on GO from the date of loan given to the
PSU's till 31.03.2017 as per detail given below:
Sl. Name of PSU G.O Reference Loan Equity Accrued
No. Interest
Provided in
books
Rs Lakhs Rs Lakhs Rs Lakhs
1 Kerala Small G.O(Ms) No.147/2010/ID 400 400 183.65
Industries Dev dated 30.06.2010
Corp Ltd
2 United Electrical G.O (Rt) No.931/2010/ID 250 250 9.59
Ind.Ltd dated 30.06.2010
Balance 0.00 100.00
3 KSTC Ltd/ G.O(Ms) No.939/2010/ID 200 200 92.02
Trivandrum dated 01.07.2010 &
Spinning Mill
G.O(Rt) No.955/2016/ID
dated 23.09.2016
4 Traco Cable Ltd G.O(Rt) No.930/2010/ID 400 400 183.96
dated 30.06.2010
5 KELTRON G.O(Rt) No.146/2010/ID 400 400 214.98
dated 30.06.2010
6 KSIE Ltd G.O(Ms) No.148/2010/ID 250 250 98.97
dated 1.7.2010
Balance 190 0.00
7 Kerala Ceramics G.O (Rt) No.462/2012/ID 50 0 4.5
dated 17.3.2012
8 Kerala Electrical & G.O (Rt) No.474/12/ID 300 0 28.03
Allied Eng Co Ltd dated 20.03.2012
Cements dated 12.01.2018 &
G.OIND-H2/344/2017-IND
dated 22.12.2017
Total ---------- --------- -----------
1790 1500 815.71
--------- --------- -----------
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The total accrued interest on the outstanding of PSUs loan
on 31.03.2017 is ₹815.71 lakhs.
23. Taking note of aforementioned facts, it is evident
that the Malabar Cements Limited was a profit making
Company in the year 2017 when Ext.P1 decision was taken
and had no serious financial problems in the ensuing years
at least till the year 2021-2022. If the Company has incurred
losses in subsequent years, that cannot be a reason to deny
the revised Gratuity benefit of Ext.P1 decision to the non-
managerial employees who have rendered their valuable
service and retired from the services of the Company. Those
employees are entitled to get the benefit of Ext.P1 Resolution
of the Company.
Ext.P6 communication dated 01.01.2022 in W.P.
(C) No.18792 of 2022 is therefore set aside. The writ
petitions are disposed of directing the respondents to extend
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the benefits of Ext.P1 Resolution to the petitioners within a
period of two months.
Sd/-
N. NAGARESH, JUDGE
aks/23.09.2024
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APPENDIX OF WP(C) 20702/2020
PETITIONER'S EXHIBITS
EXHIBIT P1 TRUE COPY OF THE EXTRACT OF RESOLUTION
DATED 31.8.2017 PASSED BY THE BOARD OF
DIRECTORS MALABAR CEMENTS LTD.
EXHIBIT P2 TRUE COPY OF THE LETTER DATED
6.10.2017 ISSUED BY THE MANAGING
DIRECTOR MALABAR CEMENTS.
EXHIBIT P3 TRUE COPY OF THE LETTER NO.31/H2/2007
ISSUED BY THE PRINCIPAL SECRETARY
DATED 11.3.2018.
EXHIBIT P4 TRUE COPY OF THE REPRESENTATION DATED
28.1.2020 FILED BY THE PETITIONERS
BEFORE THE PRINCIPAL SECRETARY.
RESPONDENT'S EXHIBITS
Exhibit R2(A) TRUE COPY OF THE LETTER NO. PA-1/AD-
13/H2-337/2021 DATED 19.11.2021 SENT
BY THE COMPANY.
Exhibit R2(B) TRUE COPY OF ENGLISH TRANSLATION OF
LETTER DATED 19.11.2021.
Exhibit R2(C) TRUE COPY OF GOVERNMENT LETTER NO.
H2/337/2021/ID DATED 01.01.2022 ISSUED
BY THE INDUSTRIES (H) DEPARTMENT.
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APPENDIX OF WP(C) 18792/2022
PETITIONER'S EXHIBITS
Exhibit P1 TRUE COPY OF EXTRACT OF RESOLUTION
DATED 31/08/2017 PASSED BY THE BOARD
OF DIRECTORS OF MALABAR CEMENTS
LIMITED.
Exhibit P2 TRUE COPY OF LETTER DATED 06/10/2017
TO ADDITIONAL SECRETARY TO GOVERNMENT
FROM MALABAR CEMENTS LIMITED.
Exhibit P3 TRUE COPY OF LETTER DATED 17/03/2019
BY PRINCIPAL SECRETARY TO GOVERNMENT
TO MANAGING DIRECTOR OF MALABAR
CEMENTS LIMITED.
Exhibit P3(a) TRUE ENGLISH TRANSLATION OF EXT.P3.
Exhibit P4 TRUE COPY OF REPRESENTATION DATED
30/09/2021 SENT BY THE CONVENER OF
PETITIONER NO.1 TO THE MINISTER FOR
INDUSTRIES, TRIVANDRUM.
Exhibit P4(a) TRUE ENGLISH TRANSLATION OF EXT.P4.
Exhibit P5 TRUE COPY OF LETTER DATED 10/11/2021
SENT BY THE PRINCIPAL SECRETARY TO
GOVERNMENT TO THE CONVENER OF
PETITIONER NO.1.
Exhibit P5(a) TRUE ENGLISH TRANSLATION OF EXT.P5.
Exhibit P6 TRUE COPY OF LETTER DATED 01/01/2022
SENT BY THE PRINCIPAL SECRETARY TO
GOVERNMENT TO THE CONVENER OF
PETITIONER NO.1.
Exhibit P6(a) TRUE ENGLISH TRANSLATION OF EXT.P6.
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Exhibit P7 TRUE COPY OF REPRESENTATION DATED
27/01/2022 SENT BY THE CONVENER OF
PETITIONER NO.1 TO THE MANAGING
DIRECTOR OF MALABAR CEMENTS LIMITED.
Exhibit P7(a) TRUE ENGLISH TRANSLATION OF EXT.P7.
Exhibit P8 TRUE COPY OF LETTER DATED 08/02/2022
OBTAINED FROM MALABAR CEMENTS LIMITED
UNDER RIGHT TO INFORMATION ACT.
Exhibit P8(a) TRUE ENGLISH TRANSLATION OF EXT.P8.
Exhibit P9 TRUE COPY OF THE PROCEEDING DATED
02.08.2022 OF THE 230TH BOARD MEETING
OF MALABAR CEMENTS LIMITED.
Exhibit P10 TRUE COPY OF NOTICE DATED 3.9.2022
ISSUED BY THE RESPONDENT NO.3
Exhibit P10 (a) TRUE ENGLISH TRANSLATION OF P10.
Exhibit P11 TRUE COPY OF NOTICE DATED 20.10.2022
ISSUED BY RESPONDENT NO.3
Exhibit P11A TRUE ENGLISH TRANSLATION OF P11.
RESPONDENT'S EXHIBITS
Exhibit R3 (a) TRUE COPY OF THE LETTER NO.PA-1/AD-
13/H2-337/2021DATED 19.11.2021 SENT BY
THE COMPANY.
Exhibit R3 (b) TRUE COPY OF ENGLISH TRANSLATION OF
LETTER DATED 19.11.2021
