IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 9489 of 2006(D)
1. K.J. JULIUS, AGED 66 YEARS,
... Petitioner
Vs
1. UNION OF INDIA,
... Respondent
2. THE CHAIRMAN,
For Petitioner :SRI.T.C.GOVINDA SWAMY
For Respondent :SRI.K.R.SUNIL, CGC
The Hon'ble MR. Justice P.R.RAMACHANDRA MENON
Dated :19/02/2009
O R D E R
P.R.RAMACHANDRA MENON, J.
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W.P.(C) No.9489 of 2006
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Dated, this the 19th day of February, 2009
J U D G M E N T
“C.R.”
The challenge involved in this writ petition is as to
the proper method of calculating gratuity payable to the
petitioner, particularly as to the computation of the “per
day wage” as contemplated under the relevant scheme. The
question is whether it has to be arrived at by dividing the
monthly wages by the deviser of 30 (the total number of
days in the month) or by 26 (after excluding the four
Sundays/holidays). It is also in dispute whether the
petitioner is justified in taking a ‘U’ turn to contend that the
computation of the “per day wages” shall only be in
conformity with the stipulation under the statute i.e.,
Section 4(2) of the Payment of Gratuity Act (‘Act’ in short)
after praying for and obtaining the benefit under a Scheme.
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2. The petitioner while working as Assistant
Executive Engineer (Electrical) under the second
respondent retired from the service on 30-6-1997 after
attaining at the age of superannuation. In fact, the second
respondent being an autonomous body and separate legal
entity, the C.C.S. (Pension) Rules are not applicable as
such. However, the Board of Trustees, on the basis of a
resolution passed has adopted the C.C.S.(Pension) Rules,
which govern the service conditions, particularly as to the
retirement benefits payable to the employees. However, in
the case of gratuity, it is contended by the second
respondent that the benefits payable to the
workers/employees were under the provisions of the Act,
calculation under the Act being more beneficial and as a
natural consequence, the amounts payable thereunder had
to be limited to the maximum amount of Rs.one lakh as
stipulated thereunder.
W.P.(C) No. 9489/2006 -:3:-
3. Pursuant to retirement of the petitioner, the
benefits were worked out under the Act, the calculation
according to the second respondent being more favourable
to the employees and the maximum amount of Rs.one lakh
was disbursed to him. After obtaining this amount, the
petitioner approached this Court stating that he was eligible
to get much higher benefits under Exhibit P1 scheme. It is
to be noted that the maximum amount of gratuity payable
under both the Payment of Gratuity Act, 1972 as well as
under the C.C.S. (Pension) Rules were originally Rs.one
lakh. The Pension Rules were amended and the maximum
ceiling was enhanced to Rs.2.5 lakhs with effect from 1-4-
1995, whereas, the Act was amended raising the ceiling
initially to Rs.2.5 lakhs and thereafter, to Rs.3.5 lakhs with
effect from 24-9-2007.
4. After delivering Exhibit P1 scheme, taking note of
the fact that the Act was amended only with effect from 24-
9-1997, the first respondent/Government brought about a
W.P.(C) No. 9489/2006 -:4:-
rider confining the benefit of Exhibit P1 scheme to those
employees who have retired on or after 24-9-1997 i.e., date
of the amendment of the Act. Aggrieved by the above
restrictive provision, the petitioner challenged Exhibit P2
before this Court by filing O.P.No.24282 of 2001.
5. During the pendency of the O.P.No.24282 of
2001, the first respondent, after considering the grievance
exposed from different corners, issued a further
clarification vide communication dated 20-2-2004 (Exhibit
P3) whereby, it was specified that the maximum ceiling of
gratuity payable under Exhibit P1/P2 would stand enhanced
from Rs.one lakh to Rs.2.5 lakhs with effect from 1-4-1995
to 31-12-1996 and from Rs.2.5 lakhs to Rs.3.5 lakhs with
effect from 1-1-1997. A copy of the said proceedings was
produced by the petitioner in O.P.No.24282 of 2001 as
‘Exhibit P6’ and after hearing, the said original petition was
disposed of vide Exhibit P4 judgment directing the second
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respondent to pay the balance amount as might be payable
to the petitioner pursuant to Exhibit P6 therein (Exhibit P3
in the instant case). It was pursuant to the said verdict that
the second respondent computed the actual gratuity
payable to the petitioner as Rs.1,62,560/-, instead of Rs.one
lakh as originally paid vide Exhibit P5, correctness of which
is subjected to challenge in the present writ petition.
6. It is submitted by the learned counsel for the
petitioner that neither Exhibit P1 nor Exhibit P3 does speak
about the manner of computation of “per day wages” and
in the said circumstances, it was very much essential for the
second respondent to have effected the computation only in
accordance with the Payment of Gratuity Act, particularly in
view of the “Explanation” given in Section 4(2) of the Act.
Exhibit P5 has been sought to be intercepted in so far as the
second respondent has computed the benefit under Rule 50
(1)(a) of the C.C.S. (Pension) Rules.
W.P.(C) No. 9489/2006 -:6:-
7. The learned counsel for the second respondent
highlighted the inconsistent stand being pursued by the
petitioner simultaneously seeking to have the benefits both
under the Act and under the Scheme so as to suit to his
requirements and convenience. The learned counsel
submits that the petitioner, after having succeeded in
getting Exhibit P1 Judgment from this Court getting rid of
the maximum ceiling of Rs.1 lakh prescribed under the Act,
stating that he was eligible to have the benefit under
different Scheme, it was no more open to him to approach
this Court to have the gratuity calculated/computed
following the norms under the Act. In other words, the
petitioner wants to have the best out of both the streams,
which is not permissible, submits the learned counsel. It is
further pointed out by the learned counsel for the second
respondent that the second respondent being an
autonomous body was not bound by Exhibit P1 scheme
since the Board of Trustees had not adopted the same and
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never implemented or given effect to.
8. True, though such a contention has been raised by
the second respondent in paragraph 7 of the counter
affidavit, the petitioner has not rebutted the same by filing
any reply affidavit. But it is pertinent to note that there was
no case for the second respondent ever before, when the
earlier proceedings were finalised vide Exhibit P4 judgment
passed on 15-3-2004. On the other hand, Exhibit P3 in the
present case prescribing the extent of benefit payable under
Exhibit P1 scheme, was produced before this Court in
O.P.No.24282 of 2001 (as Exhibit P6), and it was
accordingly that Exhibit P4 judgment was passed by this
Court directing the second respondent to pay all benefits
flowing therefrom to the petitioner. Admittedly, the said
verdict has not been challenged by either side and it has
become final.
W.P.(C) No. 9489/2006 -:8:-
9. Payment of Gratuity Act, 1972 is a beneficial piece
of legislation. It is also true, by virtue of Section 4(5) of the
Act, the employee is entitled to choose the better option, if
there exists any other scheme/provision for payment of
Gratuity. But the crucial question whether an employee can
opt to have the best from both the streams simultaneously;
had come up for consideration before the Apex Court in
Beed District Central Co-operative Bank Limited v.
State of Maharashtra and Others [(2006) 8 SCC 514].
10. In the said case, the factual situation was that
besides the provision for payment of gratuity under the Act
there existed a scheme as well, wherein the ‘rate’ for
calculating the computation of gratuity was much higher,
though the maximum ceiling was lower than the ceiling
specified under the Act. Under the said scheme, gratuity
had to be computed reckoning the “per day wages” and
the amount payable was 26 days’ wages for every
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completed year of service, subject to the maximum/ceiling
of Rs.1.7 lakhs from 20-7-1996 to 30-11-1999, which was
subsequently raised to Rs.2.5 lakhs from 1-12-1999 to 17-9-
2005. The contention of the employees was that the amount
should be worked out by adopting the “higher rate” (26
days’ wages for every completed year of service) as
prescribed under the Scheme and the maximum ceiling had
to be taken as provided under the Act – in view of Section 4
(5) of the Act providing for the better option.
11. The Apex Court observed that the Scheme of the
Bank in the above case was one of the terms of contract of
employment between the parties and under the Scheme, the
employees were entitled to Gratuity on the following terms:-
(i) eligibility to receive gratuity – Minimum 5
years of service.
(ii) rate of gratuity – 26 days’ wages for every
completed year of service.
(iii) the maximum amount
of gratuity - Rs.2,50,000/-
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The contention raised by the employees was that the third
stipulation prescribing the maximum ceiling at Rs.2.5 lakhs
was repugnant to Section 4(3) of the Act, and void under
Section 23 of the Contract Act, which hence should have
been severed from the rest of the contract applying the
“Blue pencil doctrine”, to be replaced by Section 4(3) of
the Act.
12. After considering the rival contentions, it was
specifically held by the Apex Court that the said “Blue
pencil doctrine” cannot be said to have any application to
the said case and instead, applying “golden rule of
interpretation of statute” (as discussed in paragraph 14), it
was held that the Act did not contemplate that the workman
would be at liberty to opt for better terms of the contract,
while keeping the option open in respect of a part of the
statute. Accordingly, the law was declared and the
impugned verdicts were set aside holding that the workman
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had to confine to the benefits provided either under the Act
or under the Scheme (emphasis supplied).
13. Coming to the instant case, the issue stands
entirely on a different footing. By virtue of the declaration
of law by the Apex Court, it is true that it is no more open to
the petitioner to contend that he should be given the best of
both under the Act and under Exhibits P1/ P3 Scheme. But
the question is whether the second respondent was right in
not calculating the “per day wages” so as to compute the
gratuity payable at the rate of 15 days wages for every
completed year of service as contemplated under the
Scheme, which benefit has been ordered to be given by
Exhibit P4 judgment. Obviously, calculation of “per day
wages” was never a subject matter involved in the decision
of the Apex Court reported in Beed District Central Co-
operative Bank Limited v. State of Maharashtra and
Others[(2006) 8 SCC 514]. The learned counsel for the
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second respondent contends that the extent of benefits
payable to the petitioner having been finalized on the basis
of Exhibit P4 judgment, it is not correct or proper to go
back to the stipulation given under the head “explanation”
to Section 4(2) of the Act enabling the calculation of “per
day wages” by dividing the monthly wages by “26” (after
excluding the holidays).
14. The payment of Gratuity Act, 1972 was amended
incorporating the above head “explanation” under Section
4(2) only with effect from 19-10-1997. But even much prior
to that, the position of law had been crystallized by virtue of
the decision rendered by the Hon’ble Supreme Court in
Digvijay Woolen Mills Limited v. Mahendra Prataprai
Buch reported in AIR 1980 SC 194, wherein it was held
that the “per day wages” were to be calculated by dividing
the monthly wages by the deviser of “26” (after excluding
the Sundays) and not by 30. The above decision was
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considered and re-affirmed in the subsequent decision
reported in AIR 1984 SC 1842 as well. This being the
position, it can easily be said that even if no reference is
made to the “explanation” provided under Section 4(2) of
the Payment of Gratuity Act, 1972, the law laid down by the
Apex Court is quite unambiguous and the “per day wages”
had to be computed by dividing the monthly wages by the
deviser of ’26’. The law declared by the Apex Court being
the law of the land by virtue of Article 141 of Constitution of
India, this Court and every other Court/Authority in India
are very much bound to follow the same. In such
circumstances, it is clear that the calculation made by the
second respondent vide Exhibit P5 under Rule 50(1)(a) of
the C.C.S. (Pension) Rules is not correct or sustainable.
15. In the above facts and circumstances, Exhibit P5
order passed by the second respondent is set aside. The
second respondent is directed to re-consider the quantum of
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gratuity payable to the petitioner reckoning the “per day
wages” by dividing the monthly wages by ’26’, and by
granting the benefit flowing from Exhibit P3 as ordered to
be paid vide Exhibit P4 Judgment (where it is marked as
Exhibit P6). Final orders in this regard shall be passed and
the balance amount flowing therefrom shall be disbursed to
the petitioner as expeditiously as possible and at any rate,
within a period of three months from the date of receipt of a
copy of this judgment. Petitioner shall produce a copy of
this judgment before the second respondent for pursuing
further steps. It is made clear that the petitioner will not be
entitled to get interest on the due amount, the said prayer
having already been rejected by this Court vide Exhibit P4.
The writ petition is allowed to the above extent.
P.R.RAMACHANDRA MENON,
JUDGE.
skr