Life Insureance Corporation Of … vs Regional Labour Commissioner … on 23 August, 2000

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Andhra High Court
Life Insureance Corporation Of … vs Regional Labour Commissioner … on 23 August, 2000
Equivalent citations: 2000 (5) ALD 450, 2000 (5) ALT 232, 2000 (87) FLR 522, (2000) IILLJ 1462 AP
Bench: V Rao


1. In these writ petitions, the Life Insurance Corporation of India (‘the LIC’ for brevity) impugns the order of the controlling authority dated 21-9-1998, as confirmed by the appellate authority on 11-10-1999, under Payment of Gratuity Act, 1972 (hereafter referred to as ‘the Act’) directing payment of gratuity amount to the third respondent/employee. As the question that arises for consideration is the same and the petitioner is also the same, the writ petitions are being disposed by this common order.

2. The facts are in a narrow compass. The respondent-employee served the LIC as Class-III employee and was promoted to Class-I later. The employee retired after a total service of 33 years. While calculating gratuity LIC followed its own rules, which resulted in payment “of less amount. The employee preferred an application before the authority claiming the difference of amount towards gratuity. He alleged that the LIC is covered by the Act, that the LIC displayed the Act prominently in all its offices, that after Payment of Gratuity (Amendment) Act, 1994 (‘Amendment Act’ for brevity) the Administrative Officers and Managers were also brought under the purview of the Act and that instead of calculating gratuity on the basis of last drawn salary, LIC calculated gratuity on a notional salary drawn by the employee as higher grade assistant and thereby wrongly determined gratuity amount. The employees, who are arrayed as third respondent in the writ petitions, claimed difference of gratuity at Rs.51/-, 338.73 in WP No.10624 of 2000, Rs.38, Rs.153.62 in WP No.10632 of 2000 and Rs.43, 628.12 in WP No. 10637 of 2000.

3. The LIC opposed the cases filed by the employees under Section 7 of the Act inter alia objecting the jurisdiction of the authority under the Act to hear the case and also on the ground that LIC employees are not entitled to claim gratuity under the Act, but are entitled for the gratuity under LIC of India Class-I Officers (Revision of terms and Conditions) Rules, 1985 (hereinafter called the LIC Rules’) as amended from time to time. The LIC also stated before the authority that Class-I Officers are governed by the LIC Rules and therefore the respondent-employee is entitled to claim gratuity at the rate of one month’s terminal basic pay for each completed year of continuous service or part thereof in excess of six months subject to a maximum of fifteen months basic pay upto thirty years of service and for service over thirty years,

half a month’s terminal basic pay for each completed year of service or part thereof in excess of six months. It also stated that as there is no specific Rule in the Act for paying gratuity to Class-I Officers of LIC they are not paid the gratuity under the Act and they are paid gratuity under the LIC Rules only.

4. The original authority held that the LIC did not follow the principle of calculating gratuity on the basis of last drawn salary and that the LIC Rules do not disentitle an employee to claim higher benefits under the Act. The original authority also held that though a Class-Ill employee like respondent/employee is promoted as Class-I Officer (Assistant Administrative Officer) LIC still calculated gratuity in such a manner that employee was paid less gratuity. Had the employee continued a Class-Ill Officer and retired after attaining the age of superannuation the employee would have been entitled for higher gratuity than what is now paid by the LIC. Accordingly, controlling authority directed the LIC to pay the difference of gratuity amount to the employee.

5. Aggrieved by the order of the original authority dated 21-9-1998, Zonal Manager of LIC, Hyderabad, preferred an appeal before the appellate authority under sub-section (7) of Section 7 of the Act. The appellate authority by a well-reasoned order dated 11-10-1999 rejected the appeal. It was held that the officers of LIC are not exempted from the provisions of the Act and that the LIC Rules are not comprehensive or exhaustive as far as gratuity is concerned. Relying on sub-section (2) of Section 4 of the Act the appellate authority held that the method adopted by the LIC in calculating the gratuity payable to the respondent/ employee taking into consideration the last drawn pay of the employee as Class-III official is incorrect. As the Act has overriding effect on other laws agreement,

contract etc., and as there is no exemption granted to LIC the promulgamation of LIC Rules by itself cannot be treated as exemption from the provisions of the Act,

6. The writ petitions are filed by the Standing Counsel of LIC Sri Mandadi Gandhi on 19-6-2000 with eight months delay. Be that as it may, when the cases are listed before this Court in the Motion List on 21-6-2000 Sri Mandadi Gandhi was absent. One Sri T. Damodar, advocate and Junior Counsel, sought for an adjournment. As the matters are listed in the Motion List the matters were directed to be posted for dismissal on 23-6-2000. The matters came up on 27-6-2000. The Standing Counsel was absent even on that day. This time another junior of Sri Mandadi Gandhi sought for an adjournment. When the matters are listed again on 29-6-2000 for dismissal, only Sri T. Damodar, advocate appeared and he was not able to assist the Court properly (The Court does not intend any discourtesy to the learned Counsel). Therefore the matters were adjourned to next date. When the matters were called on 3-7-2000 the learned Counsel Sri T. Damodar submitted written submissions and also filed a compilation consisting of the extract of LIC (Amendment) Act, 1981 and the judgments of the Supreme Court in Sukhdev Singh v. Bhagatram, , A.V. Nachane v. Union of India, and Venugopal v. Divisional Manager, LIC of India, Machilipatnam, . Sri Mandadi Gandhi was absent even on that date. Without intending any discourtesy to the learned Counsel to Sri T. Damodar there was no assistance or substantiation of the various grounds taken in the affidavit accompanying the writ petitions as well the written submissions. Therefore, this Court is constrained to observe that the Zonal Manager, LIC of India, Hyderabad, the petitioner herein, failed to take necessary action for proper prosecution of the case.

7. In the affidavit the main contention is that in view of the LIC Rules and in view of the provisions of Section 48(2C) of the LIC Act as amended by the Amendment Act, 1981, the Rules made by the LIC in exercise of powers under clauses (cc) of sub-section (2) and sub-section (2B) of Section 48 have overriding effect over the provisions of the Act and therefore the respondents/employees are governed by the LIC Rules only. In other words, the submission is that the Act has no application to the employees and officers of the LIC.

8. The submission is wholly misplaced. The decisions relied on by the learned Counsel do not support the contention. Indeed the decision in Sukhdev Singh’s case (supra) categorically lays down that being an authority within the meaning of Article 12 of the Constitution of India, the LIC is bound to comply with the Rules and Regulations imposed by law. By relying on Rule 9 of the LIC Rules, which provides for payment of gratuity to Class-I Officers, the petitioner cannot deny the benefits conferred by the Act.

9. The Act is a Legislation to provide for payment of gratuity to employees engaged in establishments. LIC is an establishment for the purpose of the Act. The provisions of the Act subject to Section 2(e) of the Act govern all its employees. Section 4 provides for the method and manner for payment of gratuity. Sub-section (5) of Section 4 of the Act lays down that right of an employee to receive better terms of gratuity under any Award or agreement or contract with the employer shall not be effected by Section 4. Section 5 of the Act enables the appropriate Government to exempt any establishment from the operation of the provisions of the Act if in the opinion of the appropriate Government the employees in such establishments are in receipt of gratuity or pensionary benefits not less favourable

than the benefits conferred under the Act. Section 14 of the Act gives overriding effect. The provisions of the Act shall have effect notwithstanding anything contained in any enactment or instrument or contract.

10. A reference to the provisions of Sections 2(e), 4, 5 and 14 leads to an irresistible conclusion that either Section 48(2B) of the LIC Act or the LIC Rules for Class-I Officers do not take away the right of an employee to claim the benefits under the provisions of the Act. Indeed, sub-section (5) of Section 4 provides that an employee is entitled to better terms of gratuity other than the gratuity payable under subsection (2) of Section 4 and Section 5 enables the appropriate Government to exempt any establishment from the operation of the Act only if the gratuity payable by the LIC is more favourable to the employees than the benefits under the Act.

11. In Calcutta Dock Labour Board v. Sandhya Mitra, , the Supreme Court considered the question whether gratuity payable to a workman employee by Calcutta Dock Labour Board is attachable for satisfaction of a decree. Making a reference to Sections 13 and 14 of the Act the Hon’ble Supreme Court observed as under:

“In the absence of any notification within the meaning of Section 5 of the Act, the amendment is not relevant for consideration. Section 14 has overriding effect and Section 13 gives total immunity to gratuity from attachment. The Preamble of the Act clearly indicates the Legislative intention that the Act sought to provide a scheme for payment of gratuity to all employees engaged in, inter alia, ports and under this Act gratuity was payable to workers like Md. Safiur Rehman. The gratuity which was payable to him squarely came within the purview of the Act and therefore, became

entitled to immunity under Section 13 thereof.”

12. The Payment of Gratuity Act was enacted in 1972. The LIC Rules were made in 1985 in exercise of powers under clause (cc) of sub-section (2) of Section 48 of the LIC Act as amended by Act 1 of 1981. The said provision in sub-section (2C) of Section 48 contains a non obstante clause and gives overriding effect over the Industrial Disputes Act and any other law in force. The LIC Amendment Act being later Act, by virtue of non obstante clause in subsection (2C) of Section 48 of the LIC Act, cannot override the provisions of the Act.

13. It is well settled that when the scope of the provisions of earlier enactment is clear the same cannot be cut down by resorting to non obstante clause in later enactment. (See R.S. Raghunath v. State of Karnataka, ). The contention of the LIC is therefore devoid of any merit.

14. Further, as rightly observed by the original authority as well as the controlling authority Rule 9 of the Rules provides the method of calculation of gratuity of Class-III Officers promoted as Class-I Officers taking the last drawn salary as Class-III Officers and, paying gratuity only for a period of thirty years when they have completed thirty three years of service is most unreasonable and cannot stand scrutiny on the touch stone of the Article 14 of the Constitution of India.

15. For the above reasons, the writ petitions are devoid of any merits and the same are dismissed at the stage of admission, with costs. The petitioner shall pay an amount of Rs.2,000/- to the third respondent in each case towards costs.

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