Telangana High Court
Electronics Corporation Of India ... vs The Appellate Authority Under Payment ... on 19 August, 2024
THE HON'BLE THE CHIEF JUSTICE ALOK ARADHE
AND
THE HON'BLE SRI JUSTICE J.SREENIVAS RAO
WRIT APPEAL No.887 OF 2024
JUDGMENT:
(Per the Hon'ble the Chief Justice Alok Aradhe)
Mr. G.Vidyasagar, learned Senior Counsel representing
Ms. K.Udaya Sri, learned counsel for the appellant.
Mr. B.Narasimha Sharma, learned Additional Solicitor
General of India representing Mr. Gadi Praveen Kumar, learned
Deputy Solicitor General of India for respondent Nos.1 and 2.
Mr. P.V.Krishnaiah, learned counsel for respondent Nos.3
to 5.
2. This intra court appeal emanates from an order dated
03.06.2024 passed in W.P.No.15840 of 2018 by the learned
Single Judge, by which writ petition preferred by the appellant
has been dismissed and orders of the Controlling Authority and
Appellate Authority under the Payment of Gratuity Act, 1972
(hereinafter referred to as "the Act") have been upheld. In order
to appreciate the grievance of the appellant, relevant facts need
mention which are stated infra.
3. The appellant, namely Electronic Corporation of India
Limited (hereinafter referred to as 'the Corporation') is a central
public sector undertaking. The employees of the Corporation, in
respect of payment of gratuity, are governed by the Act.
4. The Government of India, Ministry of Heavy Industries and
Public Enterprises, had set up a Pay Revision Committee under
the Chairmanship of former Judge of the Supreme Court of India
to recommend revision of pay and allowances for the categories
of employees following IDA pattern of pay scales. The aforesaid
Committee submitted recommendations for pay revision due
from 01.01.2007. The Government, after due consideration of
the recommendations of the Pay Revision Committee, issued an
office memorandum dated 26.11.2008, by which decision was
taken to revise the pay scale, allowances as well as gratuity. The
ceiling of gratuity of the executives and non-unionised
supervisors of Central Public Sector Enterprises (CPSEs) was
raised from Rs.3.50 lakhs to Rs.10.00 lakhs with effect from
01.01.2007. The Ministry of Heavy Industries and Public
Enterprises, Government of India issued an office memorandum
dated 02.04.2009 by which it was decided that the office
memoranda dated 26.11.2008 and 09.02.2009 have to be viewed
as a total package. It was further decided that pay revision
package as communicated by earlier office memoranda along
with aforesaid modifications would be applicable to all the
CPSEs. It is further provided that the ceilings imposed under
various items given in office memoranda dated 26.11.2008 and
09.02.2009 and the office memorandum dated 02.04.2009 are
the maximum permissible limits. However, lower limits against
these maximum permissible limits can be provided in the
Presidential Directives depending upon affordability, capacity to
pay and sustainability of all the concerned CPSEs.
5. The Board of Directors of the Corporation in its 226th
meeting decided to maintain the ceiling limit of gratuity at
Rs.3.50 lakhs, till the Gratuity Act is amended. The aforesaid
resolution taken in 226th meeting was approved by the Board of
the Corporation on 21.04.2009.
6. The Department of Atomic Energy by an order dated
01.05.2009 approved the decision taken by the Corporation in
its meeting on 21.04.2009. The relevant extract of aforesaid
order reads as under:
"(i) The pay revision of Board level executives
and below Board level executives and non-unionized
Supervisors of ECIL would be strictly in accordance
with the guidelines contained in DPE O.M.No.2(70)/08-
DPE (WC)-GL-DVI/03, dated 26.11.2008 and
O.M.No.2(70)/08-DPE(WC)-GL-VII/09 dated
02.04.2009. The revised pay scales will be effective
from 01.01.2007.
(ii) No budgetary support will be provided to the
company by the Government to meet the additional
liability on account of pay revision at any point of time
and it should be ensured that ECIL would be in a
position to sustain the revised pay perpetually through
its internal resource generation.
(iii) Payment of HRA based on the revised scales
will be effective from 26.11.2008.
(iv) Perks and other allowances will be strictly
subject to a maximum ceiling of 50% of basic pay and
will be effective from 26.11.2008.
(v) Adjustable/recoverable adhoc advances paid
towards pay revision should adjusted/recovered while
implementation of the pay revision and payment of
arrears."
7. The respondents No.3 to 5, who are the employees of the
Corporation, demitted office between the period from 31.01.2007
till 31.05.2008. The respondents No.3 to 5 submitted an
application under Section 7 of the Act before the competent
authority some time in 2014-2015 seeking difference of amount
of gratuity to them. The competent authority by an order dated
10.11.2007 held that the respondents No.3 to 5 are entitled to
enhanced amount of gratuity in view of the office memorandum
dated 26.11.2008. The aforesaid order was upheld in appeal by
an order dated 16.04.2018 by the Appellate Authority.
8. The Corporation challenged the aforesaid orders passed by
the Controlling Authority and Appellate Authority under the Act
in a writ petition. The learned Single Judge by an order dated
03.06.2024 inter alia held that the office memorandum dated
26.11.2008 contains a mandatory direction to all the Public
Sector Undertakings to follow the directives contained in the
aforesaid office memorandum. It was further held that the
benefit of enhanced amount of gratuity is applicable to all the
employees with effect from 01.01.2007. The learned Single
Judge while placing reliance on the decision of the learned
Single Judge of Uttarkhand High Court in W.P. (M/S) No.891 of
2016 (Nawab Khan vs. Union of India) and a decision dated
05.03.2021 of the Division Bench of Karnataka High Court in
W.A.No.443 of 2019 as well as the order passed in S.L.P. (S)
No.16004-16005 of 2021, dated 15.11.2021 dismissing the
Special Leave Petitions against the order passed by the Division
Bench of the Karnataka High Court held that respondents are
entitled to enhanced amount of gratuity of Rs.10.00 lakhs. The
learned Single Judge, therefore, dismissed the writ petition
preferred by the appellant. In the aforesaid factual background,
this intra court appeal arises for our consideration.
9. Learned Senior Counsel for the appellant has submitted
that clause 17 of the office memorandum dated 26.11.2008 left
discretion to the Corporation to take a decision with regard to
enhanced limits of gratuity. It is pointed out that the Board of
the Corporation in its meeting held on 21.04.2009 decided to
extend the benefit of enhanced limit of the gratuity with effect
from the date of amendment of the Gratuity Act. It is further
submitted that the decision taken by the Board was approved by
the Department of Atomic Energy. It is contended that the office
memorandum dated 26.11.2008 is merely advisory in nature
and is not binding on the appellant. It is argued that the office
memorandum dated 26.11.2008 is in the nature of a guideline
which is neither an award nor a contract or agreement within
the meaning of Section 4(5) of the Payment of Gratuity of Act.
10. It is also submitted that the decision by the learned Single
Judge of Uttarakhand High Court is in contravention of the
decision of the Supreme Court in Sureshchandra Singh vs.
Fertilizer Corporation of India Limited 1 . It is further
submitted that the aforesaid decision does not lay down the law
that the policy decision dated 26.11.2008 is binding and is in
contravention of law laid down by S.L.P. (S) No.16004-16005 of
2021, dated 15.11.2021.
11. It is contended that the provisions of Article 14 of the
Constitution of India do not apply to the facts and
circumstances of the case and each Corporation has been
granted the freedom to take a decision as financial constraints is
a relevant criteria. In support of the aforesaid submissions,
reliance has been placed on the decisions of the Supreme Court
in Krishena Kumar vs. Union of India 2, State of Punjab vs.
Amar Nath Goyal 3 and Tamil Nadu Electricity Board vs.
TNEB-THOZHILALAR Aykkiya Sangam 4.
12. On the other hand, learned counsel for the respondents
No.3 to 5 has supported the order passed by the learned Single
Judge and has contended that the Act is in the nature of
beneficial provision and a conscious decision was taken by the
(2004) 1 SCC 592
(1990) 4 SCC 207
(2005) 6 SCC 754
(2019) 15 SCC 235
State Government on the recommendations of the Pay Revision
Committee to extend the benefit of enhanced pay scale with
effect from 01.01.2007. It is further submitted that the office
memorandum dated 26.11.2008 is an agreement within the
meaning of Section 4(5) of the Act and the learned Single Judge
has rightly placed reliance on the decisions of the Uttarakhand
High Court and the Karnataka High Court. It is pointed out that
the Special Leave Petitions have been filed against the orders
passed by the Uttarakhand High Court and the Karnataka High
Court, which have been dismissed by the Supreme Court. It is
therefore contended that the order passed by the learned Single
Judge does not call for any interference in this intra court
appeal.
13. We have considered the rival submissions and have
perused the record.
14. The twin issues that arise for consideration in the writ
appeal are (i) Whether the office memorandum dated 26.11.2008
binds the Corporation? and (ii) Whether the office memorandum
dated 26.11.2008 is an award or agreement or contract within
the meaning of Section 4(5) of the Payment of Gratuity Act,
1972?
15. The Act is enacted with an object to provide for a scheme
for the payment of gratuity to employees engaged in factories,
mines, oilfields, plantations, ports, railway companies, shops or
other establishments and for matters connected therewith or
incidental thereto. The Act is a piece of social welfare legislation
and deals with payment of gratuity which is a kind of retiral
benefit like pension, provident fund etc. The provisions
contained in the Act are in the nature of social security
measures and the Act accepts in principle compulsory payment
of gratuity as a social security measure to wage earning
population in industries, factories and establishments. The
main purpose and concept of gratuity is to help workmen after
retirement, whether retirement is a result of rules of
superannuation or physical disablement or impairment of vital
part of the body. The expression "gratuity" itself suggests that it
is gratuitous payment given to an employee on discharge,
superannuation or death. Gratuity is an amount paid
unconnected with any consideration and not vesting upon it,
and has to be considered as something given freely, voluntarily
or without recompense. It is a sort of financial assistance to tide
over post retiral hardships and inconveniences (See Ahmedabad
Pvt. Primary Teachers' Assn. vs. Administrative Officer 5).
16. It is well settled legal proposition that gratuity is not a
charity but a statutory right provided in favour of the employees.
The gratuity has been held a valuable right acquired and is a
property in the hands of an employee (See Balbir Kaur vs. Steel
Authority of India Ltd. 6 and Gorakhpur University vs. Dr.
Shitla Prasad Nagendra 7).
17. The Government of India, Ministry of Heavy Industries and
Public Enterprises, had set up a Pay Revision Committee under
the Chairmanship of former Judge of the Supreme Court of India
to recommend revision of pay and allowances for the categories
of employees following IDA pattern of pay scales. The
Government of India undertakes to exercise the Pay Revision
every ten years. The aforesaid Committee submitted
recommendations for pay revision due from 01.01.2007. The
Government, after due consideration of the recommendations of
the Pay Revision Committee, issued an office memorandum
dated 26.11.2008, by which decision was taken to revise the pay
(2004) 1 SCC 755
(2000) 6 SCC 493
(2001) 6 SCC 591
scale, allowances as well as gratuity. The ceiling of gratuity of
the executives and non-unionised supervisors of CPSEs was
raised from Rs.3.50 lakhs to Rs.10.00 lakhs with effect from
01.01.2007.
18. The relevant extract of office memorandum dated
26.11.2008 is extracted below for the facility of reference:
"The last revision of the scale of pay of below Board
level and Board level executives and non-unionised
supervisors, in Central Public Sector Enterprises was made
effective from 1.1.1997 for a period of ten years. As the next
pay revision fell due from 1.1.2007, the Government had
set up a Pay Revision Committee (2nd PRC) under the
chairmanship of Justice M. Jagannadha Rao, Retd. Judge
of Supreme Court of India, to recommend revision of pay
and allowances for above categories of employees following
IDA pattern of pay scales. The Government after due
consideration of the recommendations of 2nd Pay Revision
Committee, have decided as follows...
xxx xxx xxx
13. Gratuity: The ceiling of gratuity of the executives and
non-unionised supervisors of the CPSEs would be raised to
Rs. 10 lakhs with effect from 1.1.2007.
xxx xxx xxx
17. Issue of Presidential Directive, effective date of
implementation and payment of allowances etc.: The
revised pay scales would be implemented by issue of
Presidential Directive in respect of each CPSE separately by
the concerned Administrative Ministry/Department. The
revised pay scales will be effective from 1.1.2007. The
payment of HRA, perks and allowances based on the
revised scales will, however, be from the date of issue of
Presidential Directive. The Board of Directors of each CPSE
would be required to consider the proposal of pay revision
based on their affordability to pay and submit the same to
the Administrative Ministry/Department for approval. The
concerned Administrative Ministry with the concurrence of
its Financial Advisor will issue the Presidential Directive. A
Copy of the Presidential Directive issued to the CPSEs
concerned may be endorsed to the Department of Public
Enterprises."
Thus, from the perusal of the aforesaid office
memorandum dated 26.11.2008, it is evident that the
recommendations of the 2nd Pay Revision Committee were
accepted and the Government of India had decided to grant the
benefit of gratuity with an enhanced ceiling limit to Rs.10.00
lakhs with effect from 01.01.2007. Clause 17 provides that the
Board of Directors of each CPSE would be required to consider
the proposal of pay revision based on their affordability to pay
and submit the same to be Administrative Ministry/Department
for approval. Thus, the liberty was granted to each CPSE only
with regard to pay revision and not allowances or gratuity.
19. Thereafter, an office memorandum dated 09.02.2009 was
issued by the Government of India, Ministry of Heavy Industries
and Public Enterprises by which illustrative of methodology for
implementation of performance related pay with reference of
MoU rating of CPSE and performance rating of individual
executives was illustrated by examples.
20. The Government of India issued another office
memorandum dated 02.04.2009. Paragraph 3 of the aforesaid
office memorandum reads as under:
"3. Government has also decided that benefits
under this O.M. read with the earlier decision as
conveyed vide O.M. dated 26.11.2008 and 09.02.2009
has to be viewed as a total package. It has also been
decided that the pay revision package as
communicated by earlier O.Ms. along with the above
modifications would be applicable to all the CPSEs."
21. Thus, it is evident that the benefits under the office
memoranda dated 16.11.2008 and 09.02.2009 have to be viewed
as a total package and the pay revision package along with the
modifications made in the office memorandum dated 02.04.2009
was made applicable to all the CPSEs. It is pertinent to note
that vide office memorandum dated 02.04.2009, no modification
was made with regard to the payment of gratuity.
22. The Board of Directors of the Corporation in its 226th
meeting dealt with agenda item No.19, which reads as under:
"The Government of India, vide OM No. 2 (70)/08-
DPE (WC) dated 26.11.2008. 09.02.2009 and 02.04.2009
(copies enclosed), have decided to revise the pay scales for
Board level and below Board level executives with effect
from 01.01.2007.
2.0 As per the recommendations of the 2nd Pay Revision
Committee (2nd PRC) on consideration of which the pay
revision has been ordered by the Government now, the
remuneration to the executives are divided in to three
components viz, fixed pay, variable pay or performance
related pay (PRP) and Superannuation benefits.
2.1 Fixed Pay
a) Fitment benefit: A uniform benefit @ 30% on basic
pay plus applicable DA as on 01.01.2007 (max 78.2%)
would be provided and the aggregate amount would be
rounded off to the next ten rupees aml pay fixed in the
revised pay, scale. Where executives drawing pay at 2 or
more consecutive stages in an existing scale get bunched,
then, for every 2 stages so bunched, benefit of one
increment shall be given
b) Increment: Annual increment will @ 1% of the revised
basic pay
c) Dearness Allowance: 100% DA neutralization will be
adopted linked to A1CPI 2001100, which was 126.33 as on
01.01.2007
d) HRA: Rate of HRA will be 30%/20%/10% for cities with
population of Rs 50 lakh and above/S-50 lakh/less than 5
lakh respectively
c) Other Allowances/Perks: This shall not exceed 50% of
basic pay Instead of fixed set of allowances as at present,
'Cafeteria Approach shall be followed allowing the
executives ic choose from a set of perks / allowances
However, Non practicing Allowance to Medical Officers,
which stands enhanced to 25% from 15% of basic pay will
be outside the ceiling of 50%.
City Compensatory Allowance: Stands dispensed with
2.2.0 Variable pay/ PRP: In addition to the above, Variable
pay / PRP has been introduced with effect from the
financial year 2007-08.
(دThis is applicable only for those Companies which sign
MoU with parent ministry Department holding conipany
and having Perfonnar.ce Management System (PMS)
b) The amount payable to the executives will depend on the
grade of the Executive and MoU rating of the Company.
c) Out of total PRP, 60% will be given within the ceiling of
3% of Profit before Tax (PBT) earned by the company. The
balance 40% will have to be out of 10% of incremental profit
of the company as compared to the previous year's profit.
d) Further, the total amount of PRP shall be limited to 5% of
the year's Profit. As PRP scheme begins from the year 2007-
08, there will be no incremental profit and hence the
maximum PRP will be limited to 3% of PBT fo: 2007-08.
221 All CPSEs would formulate Employees Stock Option
Plan (ESOP) and 100 25% of the PRP should be paid as
ESOPs. In order to see that Enterprises are able to operate
ESOP Scheme, the Adininistrative Ministry/Department
concemed should encourage the CPSEs coming under its
control to get them listed on the Stock Exchanges.
222 (PSEs will not be eligible for PRP unless Independent
Directors are on its Boards
2.2.3 Each CPSE will constitute a 'Remuneration
Cornmittee headed by an Independent Director which will
decide the annual bonus / variable pay pool and policy for
its distribution within the prescribed limits.
2.3.0 Superannuation Benefits:
Superannuation benefits may include Coninbutory
Provident Fund (CPF), Gratuity Pension and Post
Superannuation Medical Benefits.
2.3.1 Gratuity: The ceiling is raised to Rs. 10 Lakh from
the existing Rs 3.50 lakh with effect from 01.01.2007.
2.3.2 30% of Basic pay and D A will he allowed as
Superannuation benefits.
2.3.3 CPSEs can have their own schemes to manage these
schemes or these schonies could be operated through
Insurance Companies on fixed contribution basis.
2.3.4 The amount of Pension. Gratuity and Post Retirement
Benefit will be decided based on the returns from the
Schemer.
4.3.5 The Pension and Post Retirement Medical Benefits
can be extended to those executives who superannuate
from the CPSE, and have put in a minimum of 15 years of
service in the GPSE: prior to Superannuation.
NB: Provident Fund and Gratuity are statutory
requirements and ECIL. is having separate Trusts for
Provident Fund and Gratuity. As far as Post Retirement
Medical Scheme and Gratuity are concerned, the existing
schemes are operated through Insurance Company.
3.0 Affordability, Issue of Presidential Directive and
Effective Date of implementation:
3.1 The revised pay scales would be adopted subject to the
condition that the additional outgo due to the revision for a
period of 12 months shall not result in more than 20% dip
in PBT for the year 2007-08. In case, the additional outgo
will result in more than 20% dip in PBT for the year 2007-
08, then the revision can be implemented with part PRP or
no PRP or with reduced fitment benefit
7:2 The revised pay scales would be implemented with
effect from 01.01.2007 by issue of Presidential Directive.
However, HRA, perks and allowances based on the revised
scales of pay will be effective from the date of issue of
Presidential Directive
13 The additional financial implications on recount of pay
revision have to be met by the CPSEs from their own
resources without any budgetary support
3.4.1 The Board of Directors of CPSE would consider the
proposal of pay revision based on their affordability to pay
and submit the same to the administrative Department for
approval
3.5 The urgency in seeking approval and issue of
Presidential directive is in view of para 2(v) of DPE OM dt
2.4.2009.
4.0 Government Officers on deputation to CPSEs: The
Government Officers who are on deputation to CPSEs will
continue to draw the salary as per their entitlement in the
parent department. Only those who come on permanent
absorption basis will get the CPSE scales, perks and
benefits.
5.0 By revising the pay scales and, perks/other allowances
together with PRI as per order of Gol, the additional outgo
for 2007-08 does not go beyond 20% of PBT for the year
2007-08. Hence, ECIL can implement the pay revision in
full.
6.0 Arrears for the period from 01.01.2007 to 31" March
2009 due to pay revision is estimated to have the following
impact:
Sl.No Description Total 2006-07 2007- 2008-
Rs. Rs. 08 09
Rs. Rs.
Basic & DA 6579.12 701.94 2851.04 3026.14
HRA 426.54 0.00 0.00 426.54
@ Leave 45.87 0.00 0.04 45.87
encashment
7051.53 701.94 2851.04 3498.55
PF 785.42 84.14 340.73 360.55
* Perks and 7836.95 786.08 3191.77 3859.10
other
allowances
* * PRP
* * * Gratuity
@ Proposal to be effective from the date of OM vide No. 2
(70)/08 - ΠΡE (W) dated 26.11.2008 issued by the DPE,
Government of India
* Since revision, if any, of perks & other allowances
(70)/08-DPE (WC) dated 26.11.2008 issued by the
DIE, Government of India, same will not have impact
on Affordability criteria However, revision, if any, will
be within the prescribed ceiling rates of 50% on basic
pay.
** Will be implemented as per recommendations of the
Remuneration Committee being constituted and the
impact, if any will be within the limits o Affordability
criteria
*** Company proposes to maintain the ceiling limit on
Gratuity at Rs.3.5 lakhs till the Gratuity Act is
amended.
As per the Government Order, pay revision in full can be
implemented, if additional impact for 12 months will not
result in a dip of more than 20% of PBT during 2007-2008.
The PBT for 2007-08 as per audited accounts was
Rs.201.35 cr. This is after charging an amount of
Rs.20.01cr towards arrears of pay revision to the Board
level, below Board level executives and non unionized
supervisors. Hence, without any consideration for pay
revision, the PBT for 2007-08 was Rs.221.36 cr (Rs.201.35
+Rs.20.01). The impact of pay revision for 12 months (i.e.
full year of 2007-08) shall not be more than Rs.44.27cr,
which is 20% of Rs.221.36cr.
As the impact of pay revision by way of an additional outgo
is about Rs.29 cr only (for the purpose of affordability
criteria vide Para 3 of the Office Memorandum dt.
26.11.2008), which is much less than Rs.44.27 cr as
mentioned above, pay revision including perks and
allowances together with PRP can be implemented in full.
7.0 In view of the above it is proposed:
7.1 to revise the scales of pay with effect from
01.01.2007 in the company as follows:
Grade Designation Existing Scale of Revised Scale of Pay
Pay
Below Board Level
E0 Assistant Officer 6550-200-11350 12600-32500
E1 Officer 8600-250-14600 16400-40500
E2 Senior Officer 10750-300-16750 20600-46500
E3 Manager 13000-350-18250 24900-50500
E4 Senior Manager 14500-350-18700 29100-54500
E5 Deputy General Manager 16000-400-20800 32900-58000
E6 Sr Deputy General Manager 17500-400-22300 36600-62000
E7 Addl General Manager 18500-450-23900 43200-66000
E8 General Manager 20500-500-26500 51300-73000
E9 Executive Director 23750-600-28550 62000-80000
Board Level
Director Director 25750-650-30950 75000-100000
(A)
CMD (A) CMD 27750-750-31500 80000-125000
7.2 To pay revised DA with effect from 01.01.2007 as
follows:
Date of Dearness Allowance Rate of Dearness Allowance (%)
01.01.2007 0.0
01.04.2007 0.8
01.07.2007 1.3
01.10.2007 4.2
01.01.2008 5.8
01.04.2008 6.3
01.07.2008 9.2
01.10.2008 12.9
01.01.2009 16.6
01.04.2009 16.9
7.3 To revise the rates of HRA as in 2.1d above with
effect from the date of Office Memorandum dated
26.11.2008 after obtaining the requisite Presidential
Directive.
7.4 To draw the set of other allowances/perks in such
manner that the total of the same will not exceed 50% of
basic pay. A Committee of CMD, Director (Finance) and
Director (Technical) may be authorised to finalise the set of
other allowances/perks within the limit of 50% and report
to the Board for information.
7.5 To authorize the Remuneration Committee to finalise
the quantum and the policy for distribution of Variable
Pay/PRP for the year 2007-08 and thereon in accordance
with the Pay Revision Order of the Government of India,
and
7.6 To pay the arrears up to 31.03.2009 in 2 or 3
installments depending upon the liquidity/cash flow
situation of the Company.
8.0 The company has to constitute a Remuneration
Committee headed by an independent Director. This
Remuneration Committee will decide the Variable pay PRP
pay pool and policy for its distribution across the Board
level, below Board level executives and non unionized
supervisors within the prescribed limits. It is brought to
notice of the Board that only Dr M J Zarabi is the
Independent Director on the Board of the Company. In
view of the above, the Board may kindly consider
constituting the Remuneration Committee in line with the
above requirement.
9.0 The Board may also kindly consider and approve the
proposal mentioned above to submit the same to DAE for
approval and pass the following resolutions with/without
modifications as the Board may deem fit and proper:
9.1. "RESOLVED that the pay revision proposals as are
put up to Board in its 226th meeting be and are hereby
approved in toto."
9.2 "FURTHER RESOLVED that the Chairman &
Managing Director and the functional director in order of
seniority is hereby authorized to make necessary references
to the administrative ministry for obtaining approval for
implementation."
9.3 FURTHER RESOLVED to authorize the Chairman &
Managing Director and/or functional director in order of
seniority, is hereby authorized to implement the approved
scales of pay and all other benefits strictly in accordance
with said government approved guidelines and also pay the
arrears accordingly."
23. The aforesaid resolution was approved by the Board of
Directors of the Corporation in its meeting held on 21.04.2009.
The relevant extract reads as under:
"RESOLVED that the pay revision proposals as are
put up to Board in its 226th meeting be and are hereby
approved."
"FURTHER RESOLVED that the Chairman &
Managing Director and/or functional director in order of
seniority is hereby authorised to make necessary references
to the administrative ministry for obtaining approval for
implementation."
24. The Department of Atomic Energy vide communication
dated 01.05.2009 approved the resolution dated 21.04.2009
passed by the Board of the Corporation. The relevant extract
reads as under:
"The pay revision of Board level executives and below
Board level executives and non-unionized Supervisors of
ECIL would be strictly in accordance with the guidelines
contained in DEP O.M.No.2(70)/08-DEP(WC)-GL-XVI/08
dated 26.11.2008 and O.M.No.2(70)/08-DEP(WC)-GL-
VII/09 dated 02.04.2009. The revised pay scales will be
effective from 01.01.2007."
25. Thereafter, the provisions of the payment of the Gratuity
Act were amended by Act No.15 of 2010 with effect from
24.05.2010 and the ceiling limit of gratuity was enhanced to
Rs.10.00 lakhs.
26. From conjoint reading of office memoranda dated
26.11.2008 and 02.04.2009, it is evident that the aforesaid office
memorandum provides that the Government of India after
consideration of recommendations of 2nd Pay Revision
Committee has taken a decision inter alia to extend the benefit of
gratuity to the executives and non-unionised supervisors of
CPSEs to Rs.10.00 lakhs with effect from 01.01.2007. Clause 17
only grants the liberty to the Board of Directors of each CPSE to
consider the proposal of Pay Revision based on affordability to
pay and submit the same to the Administrative Department.
Thus, the decision with regard to payment of gratuity at the
enhanced rate of Rs.10.00 lakhs on 01.01.2007 is binding on
CPSEs which is also evident from clause 3 of office
memorandum dated 02.04.2009 issued by the Government of
India. Thus, it is evident that the office memorandum dated
26.11.2008 binds the Corporation. Therefore, the first issue is
answered in the affirmative.
27. Now we may advert to the second issue, whether the office
memorandum dated 26.11.2008 is an award or agreement or
contract within the meaning of Section 4(5) of the Act.
28. It is well settled legal proposition that the Act is a
beneficial statute. When two views are possible, having regard
to purpose the Act seeks to achieve being a social welfare
legislation, it may be construed in favour of workman (see
Regional Director, ESI Corporation vs. Ramanuja Match
Industries 8 and Beed District Central Coop. Bank Ltd. vs.
State of Maharashtra 9). It is equally well settled principle of
statutory interpretation that Court has to evolve concept of
purposive interpretation while interpreting with a social welfare
legislation. The Acts aimed at social amelioration giving benefits
for the have-nots should receive liberal construction. It is the
duty of the Court to give such a construction to a statute as
would promote the purpose of object of the Act. A construction
which promotes the purpose of the legislation should be
preferred to a literal construction. A construction which would
defeat the rights of have-nots should be avoided (see Bharat
Singh vs. Management of New Delhi Tuberculosis Centre,
(1985) 1 SCC 218
(2006) 8 SCC 514
New Delhi 10 and X vs. Principal Secretary, Health and Family
Welfare Department, Government of NCT of Delhi 11). A three
Judge Bench of Supreme Court in Mahanadi Coalfields Ltd. vs.
Rabindranath Choubey 12 ) while interpreting Section 4(1) and
Section 4(6) of the Act has held that aforesaid provisions have to
be given purposive interpretation.
29. Before proceeding further it is apposite to take note of
Section 4 of the Act which is extracted below for the facility of
reference:
"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
(1986) 2 SCC 614
(2023) 9 SCC 433
(2020) 18 SCC 71
same for the benefit of such minor in such 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 not so
employed throughout the year, the employer shall pay the
gratuity at the rate of seven days' wages for each season.
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 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, 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 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."
30. Section 4(3) of the Act mandates that amount of gratuity
payable to an employee shall not exceed such amount as may be
notified by the Central Government from time to time. Section
4(5) of the Act begins with a non obstante clause and has an
overriding effect over all other sub sections of Section 4. In view
of the mandate contained in Section 4(5) of the Act, an employee
is entitled to receive better terms of gratuity under any award or
agreement or contract. The aforesaid provision protects the
right of an employee to receive better terms of gratuity under an
award, agreement or contract.
31. The Government of India, Ministry of Heavy Industries and
Public Enterprises, had set up a Pay Revision Committee under
the Chairmanship of a former Judge of Supreme Court of India
to recommend pay and allowances. The aforesaid Committee
consulted all the stakeholders, including Managers of Public
Sector Undertakings, workers and employees etc., and thereafter
submitted its recommendations to the Government. The State
Government after due consideration of the recommendations of
Pay Revision Committee has issued an office memorandum.
32. The expression "agreement" used in Section 4(5) of the Act
has not been defined under the Act. Therefore, the meaning of
the expression "agreement", as is understood in common
parlance, has to be taken into account while interpreting it. The
expression "agreement" has been defined in Black's Law
Dictionary, Ninth Edition, as follows:
"agreement. (15c) 1. A mutual understanding between two
or more persons about their relative rights and duties
regarding past or future performances; a manifestation of
mutual assent by two or more persons. [Cases: Contracts -
1.] 2. The parties' actual bargain as found in their language
or by implication from other circumstances, including
course of dealing, usage of trade, and course of
performance. UCC § 1-201(3). [Cases: Contracts - 1.]
"The term 'agreement', although frequently used as
synonymous with the word 'contract,' is really an
expression of greater breadth of meaning and less
technicality. Every contract is an agreement; but not
every agreement is a contract. In its colloquial sense,
the term 'agreement' would include any arrangement
between two or more persons intended to affect their
relations (whether legal or otherwise) to each other. An
accepted invitation to dinner, for example, would be an
agreement in this sense, but it would not be a contract,
because it would neither be intended to create, nor
would it in fact create, any legal obligation between the
parties to it. Further, even an agreement which is
intended to affect the legal relations of the parties does
not necessarily amount to a contract in the strict sense
of the term. For instance, a conveyance of land or a gift
of a chattel, though involving an agreement, is... not a
contract; because its primary legal operation is to effect
a transfer of property, and not to create an obligation."
2 Stephen's Commentaries on the Laws of England 5
(L. Crispin Warmington ed., 21st ed. 1950).
"An agreement, as the courts have said, 'is nothing
more than a manifestation of mutual assent' by two or
more parties legally competent persons to one another.
Agreement is in some respects a broader term than
contract, or even than bargain or promise. It covers
executed sales, gifts, and other transfers of property."
Samuel Williston, A Treatise on the Law of Contracts §
2, at 6 (Walter H.E. Jaeger ed., 3d ed. 1957)."
33. The Act is a piece of beneficial legislation and its provisions
have to be interpreted liberally and in a purposive manner.
Therefore, the expression "agreement" used in Section 4(5) of the
Act has also to be construed liberally in a purposive manner so
as to protect the rights of the employees to receive better terms
of gratuity. Therefore, we hold that office memorandum dated
26.11.2008 is an agreement within the meaning of Section 4(5)
of the Act. The second issue is also answered in the affirmative.
34. Insofar as reliance placed by the learned Senior Counsel
for the Corporation on the decision of the Supreme Court in
Sureshchandra Singh (supra) is concerned, it is evident that in
the said case, O.M.No.18(6)/98-GM-GL-002, dated 19.05.1998
itself provided that increase in the age of superannuation would
come into force from the date the relevant rules and regulations
of PSEs concerned are amended by the Public Sector Enterprises
concerned. In the aforesaid factual context, it was held that the
instructions issued by Department of Public Enterprises or the
Administrative Ministry are advisory which the Board of
Directors of the Public Sector Undertakings concerned may in
their discretion adopt or not for reasons to be recorded in
writing. In the instant case, office memorandum dated
26.11.2008 read with office memorandum dated 02.04.2009
clearly provide that the office memorandum dated 26.11.2008 is
applicable to all the CPSEs. Therefore, the finding recorded by
the Supreme Court in para 4 of the judgment passed in
Sureshchandra Singh (supra) does not apply to the facts and
circumstances of the case.
35. For the aforementioned reasons, we agree with the
conclusion arrived at by the learned Single Judge. The learned
Single Judge while examining the orders passed by the
Controlling Authority as well as the Appellate Authority under
the Act, in exercise of supervisory jurisdiction, has rightly
affirmed the same.
In the result, the appeal fails and is hereby dismissed.
There shall be no order as to costs.
Miscellaneous petitions, pending if any, shall stand closed.
_______________________________
ALOK ARADHE, CJ
_______________________________
J.SREENIVAS RAO, J
19.08.2024
Pln/vs
