IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 25-3-2010 Coram The Honourable Mr.Justice ELIPE DHARMA RAO and The Honourable Mr.Justice N.PAUL VASANTHAKUMAR W.A.No.1341 of 2007 & M.P.No.1 of 2007 W.P.No.28292/2004 & WPMP.No.34346/2004, WVMP.No.760/2006 W.P.No.9847 of 2008 & M.P.No.1 of 2008 W.A.No.1341 of 2007 Neyveli Lignite Corporation Ltd., rep.by its Chairman-cum-Managing Director, Neyveli 607 801. ... Appellant Vs. 1. The Appellate Authority and Regional Labour Commissioner (Central) Chennai, Shastri Bhavan, Chennai 600 006. 2. A.R. Kasturi 3. S. Ramanathan 4. S. Venkatasubramaniam 5. R. Badrinath 6. B.R. Satagopan 7. S. Natarajan 8. V. Balasubramaniam 9. C.N. Ramasubramaniam 10. T.K. Mallikeswaran 11. R. Balasubramaniam 12. K.T.P. Menon 13. K.R. Damodaran 14. T.K. Venkatasubramaniam 15. Loganathan Mudaliar 16. C.R. Palaniswamy 17. M.R. Vedantam 18. R. Ramachandran 19. K. Balakumar 20. B. Parthasarathy 21. C.R. Krishnamurthy 22. S. Vinayagam 23. D. Srinivasan 24. K. Sampath 25. T.G. Rangan 26. M.K. Parthasarathy 27. T.K. Srinivasan 28. N. Ganapathy 29. S. Sivakumar 30. V. Sundaresan 31. V. Balasubramanian 32. A. Ramaswamiah 33. N.R. Rajendran 34. T.R. Sivaraman 35. C.V. Chellam 36. T.P. Suryanarayana 37. V. Seetharamaiah 38. R.S. Ramamoorthy 39. C.R. Vittal Rao 40. C. Venkatraman 41. S.A. Lakshmipathy 42. C. Mohammed Haroon 43. G.R. Bandari 44. T.L. Anantharaman 45. R. Sundararaman 46. M.S. Kailasam 47. M. Venkatraju 48. T.N. Venugopalan 49. R. Alavandar 50. S. Swaminathan 51. Parthasarathy 52. N. Subramania Pillai 53. R. Desikan 54. N. Ramachandran 55. K.R. Vasudeva 56. V. Irajaram 57. V. Srinivasan 58. R. Veerasamy 59. D. Retnaraj 60. M. Arumugam 61. G. Radhakrishnan 62. K.A. Doraiswamy 63. V. Thayaraj 64. L.V. Srinivasan 65. R. Krishnan 66. S. Kailasanathan 67. Sankaranarayanan 68. T.K. Dhathathri 69. K. Srinivasaradhan 70. T.G. Rangan 71. S. Abiramasarma 72. C.R. Santhanagopalan 73. Mar Meyappan 74. P. Athmanathan 75. S. Dasaratha Ramiah 76. H. Sundararajan 77. N. Balakrishnan 78. R.S. Sivaraman ... Respondents This writ appeal is preferred under Clause 15 of the Letters Patent against the order of the learned single Judge dated 14.9.2007 in W.P.No.3896 of 2004. W.P.No.28292 of 2004 Neyveli Lignite Corporation Ltd., rep.by its Chief Manager, (Personnel & Industrial Relations), P & A Department, Corporate Office, Neyveli 607 801. ... Petitioner Vs. 1. The Regional Labour Commissioner (Central) and the Appellate Authority under the Payment of Gratuity Act, 1972, 4, Haddows Road, Shastri Bhavan, Chennai 600 006. 2. The Assistant Labour Commissioner (Central) II and the Controlling Authority under the Payment of Gratuiry Act, 1972, 4, Haddows Road, Shastri Bhavan, Chennai 600 006. 3. Drawing & Disbursing Officer and Labour Enforcement Officer (Central), 4, Haddows Road, Shastri Bhavan, Chennai 600 006. 4. The Pay & Accounts Officer, DGET-II, Guindy, Chennai 600 032. 5. T. Chandrasekaran ... Respondents This writ petition is filed under Article 226 of the Constitution of India, praying this Court to issue a writ of certiorari calling for the records relating to the order of the first respondent passed in Gratuity Appeal No.308 of 2003 dated 25.8.2003, and quash the same. W.P.No.9847 of 2008 Neyveli Retirees Welfare Association (Regd.No.461/2000) rep.by its Secretary, 20, Rangan Street, T.Nagar, Chennai 17. ... Petitioner Vs. 1. The Appellate Authority & Regional Labour Commissioner (Central) Chennai, Shastri Bhavan, Chennai 6. 2. The Controlling Authority & the Assistant Labour Commissioner (Central), 26, Haddown Road, Shastri Bhavan, Chennai 6 3. The Neyveli Lignite Corporation Ltd., rep.by its Chairman-cum-Managing Director, Neyveli 607 801. ... Respondents This writ petition is filed under Article 226 of the Constitution of India, praying this Court to issue a writ of Certiorarified mandamus calling for the records on the file of the first respondent in connection with the order passed by him in his proceedings No.M.39/430 to 506-PGA/2003-D1, dated 31.1.2004 and quash the same to the extent of not granting interest on the payment of Gratuity to the members of the petitioner Association and direct the respondents to pay the Gratuity amount with interest awarded by the second respondent in his proceedings dated 14.5.2003 with interest. For Appellant in W.A.No.1341/2007,: Mr.N.A.K.Sarma Petitioner in W.P.No.28292/2004 & 3rd Respondent in W.P.No.9847/2008 For Petitioner in W.P.No.9847/2008: Mr.R.Singaravelan For 5th Respondent in W.P.28292/2004: Mr.V.Ajoy Khose COMMON JUDGMENT N. PAUL VASANTHAKUMAR, J.
W.A.No.1341 of 2007 is filed against the order made in W.P.No.3896 of 2004 dated 14.9.2007, dismissing the writ petition filed by the appellant, challenging the order of the first respondent passed in Gratuity Appeal Nos.430 to 506 of 2003 dated 31.1.2004.
2. The appellant also filed W.P.No.28292 of 2004 against the order passed by the first respondent in Gratuity Appeal No.308 of 2003 dated 25.8.2003.
3. W.P.No.9847 of 2008 is filed by the Neyveli Retirees Welfare Association, challenging the order of the Gratuity Appellate Authority in Appeal Nos.430 to 506 of 2003 dated 31.1.2004 insofar as denial of interest.
4. Since the issues involved in the writ appeal as well as both the writ petitions are one and the same, all these cases are disposed of by this common judgment.
5. For the sake of brevity, the parties in this common judgment are described as ‘NLC management’ and ‘Retired Employees of NLC’.
6. The brief facts of the cases are, NLC is a Central Public Sector Undertaking, coming under the Administrative control of the Ministry of Coal, Government of India, engaged in mining lignite from the mines situated in Neyveli and generating power using lignite. NLC in its roll is having about 18,000 employees. In the year 1972, when the Payment of Gratuity Act was enacted, upper ceiling limit of gratuity was fixed at Rs.30,000/- under Section 4(3) of the Act and subsequently the same was enhanced to Rs.1,00,000/-. The NLC increased the ceiling limit to Rs.2.50 lakhs with effect from 24.11.1997. The said ceiling limit was further increased to Rs.3.50 lakhs under section 4(3) by Amendment Act 11 of 1998.
7. The employees retired from 1.4.1995 to 24.11.1997 applied for payment of enhanced amount of gratuity and in terms of Rule 7 of the Payment of Gratuity Rules, 1972, the NLC paid the gratuity at the rate of Rs.1,00,000/- to each of its employees within the prescribed time and according to the NLC, all the retired employees received the gratuity without raising any objection. The retired employees subsequently formed an Association and filed W.P.No.9025 of 2000 before this Court and prayed for approving the payment of gratuity to the employees of the Corporation, who had retired after 1.4.1995 upto a ceiling of Rs.2.50 lakhs and also for payment of interest at the rate of 15% per annum from the date of retirement. During the pendency of the said writ petition before this Court, Retired Employees Association went before the Assistant Labour Commissioner (C-2), Chennai, and prayed for relief, who in turn in his capacity as the Controlling Authority under the Payment of Gratuity Act, 1972, directed the NLC to pay the difference amount of gratuity as per Form ‘R’ with interest. NLC having aggrieved by the decision of the Controlling Authority, filed batch of Gratuity Appeals before the Gratuity Appellate Authority under Section 7 of the Act, and the same was partly allowed by the appellate authority by a common order dated 31.7.2004 and directed the NLC to pay the difference amount as gratuity without interest. Aggrieved by the order of the appellate authority, the NLC has filed W.P.No.3896 of 2004, which was dismissed by the learned single Judge, against which this writ appeal is filed.
8. The employees Association, during the pendency of writ appeal, has filed W.P.No.9847 of 2008 and challenged the denial of interest and prayed for a direction to grant interest, which was awarded by the Appellate Authority in his proceedings dated 14.5.2003 i.e, in respect of one other employee namely, T.Chandrasekaran. The award of interest insofar as the said T.Chandrasekaran and the order enhancing the rate of gratuity from Rs.1.00 lakh to Rs.2.50 lakhs is challenged by the NLC in W.P.No.28292 of 2004. Though the writ petition was filed in the year 2008, notice of motion was ordered on 22.4.2008 by this Court as connected W.A.No.1341 of 2007 was pending.
9. Heard Mr.N.A.K.Sarma, learned counsel for the NLC, Mr.R.Singaravelan, learned counsel for the petitioner in W.P.No.9847 of 2008, and Mr.V.Ajoy Khose, learned counsel for the 5th respondent in W.P.No.28292 of 2004.
10. It is contended by the learned counsel for the NLC that the Corporation can function on its own independently within the framework of its memorandum and Articles of Association. Article 77(16) of the Articles of Association of NLC confers specific power to award better benefit to its employees however there was a requirement for the Company to get approval for providing better benefits to its employees from the Ministry of Coal, Government of India. The request of the retired employees seeking enhanced amount of gratuity was considered and a resolution was passed by the NLC Board in its meeting held in September, 1995 and resolved to pay gratuity based on the enhanced ceiling of Rs.2.50 lakhs subject to the approval of the Ministry of Coal, Government of India. It is also submitted by the learned counsel for the NLC that the Retired Employees of the Corporation moved the Controlling Authority under the Payment of Gratuity Act, 1972, for appropriate relief and the Controlling Authority came to an erroneous conclusion that the retired employees are entitled to receive the enhanced gratuity amount with 10% interest as per section 4(5) of the Act. The said finding of the Controlling Authority was confirmed by the Appellate Authority and directed to pay the said amount without interest, and while filing appeal, NLC deposited the entire amount. The learned counsel also submitted that the learned single Judge has also committed an error by not accepting the case of the NLC as the Government of India has not granted approval of its Board decision dated 13.9.1995 and therefore the retired employees are entitled to get enhanced rate of gratuity as ex-gratia without interest. The learned counsel also submitted that the appellate authority also ordered interest in one case in favour of the 5th respondent in W.P.No.28292 of 2004 by treating the enhanced amount as arrears of gratuity in its order dated 25.8.2003 and the same has to be set aside.
11. The learned counsel for the Retired Employees Welfare Association on the other hand contended that when a decision was taken by the Board of NLC to enhance the rate on 13.9.1995 and the implementation of the same was deferred only on the ground of seeking approval from the Central Government and the Central Government having stated that no approval from the Central Government is required to enhance the gratuity by replying that it is for the Public Sector Undertakings to take their own decisions, and the decision having been taken by the NLC already, the retired employees are not only entitled to get enhanced rate of gratuity but also interest as per the provisions of the Payment of Gratuity Act, 1972. The learned counsel also submitted that the appellate authority dismissed the appeal and confirmed the order of the Controlling Authority with 10% interest in favour of one T.Chandrasekaran and the denial of interest to other employees, who are similarly placed, is discriminatory and the Association challenged the denial of interest in W.P.No.9847 of 2008 and the same is bound to be allowed on the same lines to maintain parity among retired employees.
12. In short, the case of the NLC before the Gratuity Authority was that the NLC employees, retired from 1.4.1995 to 24.11.1997, are not entitled to claim the gratuity amount as enhanced from Rs.1.00 lakh to Rs.2.50 lakhs and the enhanced amount is to be treated as ex-gratia to the employees retired from 1.4.1995 to 24.11.1997. The authorities are not justified in ordering the said amount as gratuity due and ordering interest at 10% p.a. from the date it became due till the date of payment, as if it is a gratuity payment to the 5th respondent in W.P.No.28292 of 2004. It is the case of the NLC Retired Employees that the difference in the amount is to be treated as gratuity due and since interest in favour of one employee was ordered, all other employees are also entitled to get interest for the belated payment.
13. We have considered the rival submissions made by the learned counsel on either side and perused the documents filed.
14. The issues to be decided in this writ appeal as well as in the writ petitions are,
(1) Whether the NLC is justified in contending that the enhanced amount paid or payable, is to be treated as ex-gratia or gratuity due ? and
(2) Whether the NLC is liable to pay interest for the differential amount for the belated payment ?
ISSUE No.1:
15. It is not in dispute that the Government of India has enhanced the minimum amount of gratuity payable to its employees from Rs.1.00 lakh to Rs.2.50 lakhs with effect from 1.4.1995. Though the said enhancement was not covering the employees of the Public Sector Undertakings, there is a provision in the Payment of Gratuity Act, 1972, i.e., under Section 4(5), that the employees can receive better payment of benefits based on any award or any special decision. It is also not in dispute that based on the request made by the senior employees of NLC, the Board of management of NLC in its meeting held on 13.9.1995, approved the enhancement of maximum amount of gratuity payable from Rs.1.00 lakh to Rs.2.50 lakhs, subject to the clearance from the Ministry of Coal, Government of India. It is also brought to our notice that the said decision was not implemented solely due to awaiting of clearance from the Ministry of Coal, Government of India. It is an admitted fact that other Public Sector Undertakings, like Oil and Natural Gas Commission (ONGC), Indian Oil Corporation (IOC), etc., have already implemented the enhanced gratuity to its employees with effect from 1.4.1995. The Ministry of Coal, Government of India, in its reply to NLC dated 16.10.2003 stated that the matter regarding payment of enhanced gratuity needs to be decided by the NLC management itself in terms of Section 4(5) of the Payment of Gratuity Act, 1972 and the Ministry of Coal has no role to play in the said matter and therefore the same need not be referred to the Ministry. The decision of the Board of management of NLC dated 13.9.1995 as well as the stand of the NLC before the Central Government is explained in its letter dated 1.2.2003 addressed to the Ministry of Coal & Mines, which is extracted hereunder:
"Lr.Ref.CO/P&A/1001/2003 Dated:01.02.2003 To Shri S.C.Khurana, Under Secretary, Ministry of Coal & Mines, Dept. Of Coal, Govt. Of India, New Delhi 110 001. Respected Sir, Sub: Payment of Gratuity at the enhanced rate - Reg. Ref: F.No.37023/2/2003 Lig., dated 08.01.2003 --- With reference to the communication from the Ministry dated 8th January, 2003 referred above, the following details are furnished for favour of information.
The Government of India has enhanced the maximum amount of gratuity payable to its employees from 1 lakh to 2.5 lakhs with effect from 01.04.1995. Though this enhancement was not covering the employees of PSUs, as there is a provision in the Payment of Gratuity Act under section 4(5) that employees can receive better terms of gratuity under any award or agreement and based on appeal by senior employees of NLC, the Board of NLC in its meeting held on 13.09.1995 has approved for enhancement of maximum limit of gratuity payable from Rs.1 lakh to 2.5 lakhs subject to clearance from the Ministry of Coal.
While NLC is yet to implement the enhanced gratuity for want of clearance from the Ministry, few PSU like ONGC, IOC and NMDC have already implemented enhanced gratuity to its employees with effect from 01.04.1995.
The issue is pending for long time for want of clearance from Coal Ministry which in turn awaiting for clarification from Department of public Enterprises. Retired employees have been representing collectively as well as individually requesting time and again for enhancing the gratuity with effect from 01.04.1995.
We shall be grateful if the issue is taken up with the DPE for early clearance, which will be helpful to the senior retired employees who have toiled for the organization at the initial stages of the project and retired with meagre retiral compensation.
Thanking you,
Yours faithfully,
for Neyveli Lignite Corporation Ltd.,
Sd/- xxxxxxxxxxxxxxxxxxx
Chief General Manager”
(Emphasis Supplied)
The reply of the Ministry dated 16.10.2003 is also extracted hereunder:
“F.No.37023/5/2002-Lig.,
Government of India,
Ministry of Coal
Shastri Bhavan, New Delhi,
the 13th October, 2003
To
The Chairman-Cum-Managing Director,
Neyveli Lignite Corporation Ltd.,
Corporate Office,
Neyveli 607801.
Sub: Payment of Gratuity Regarding.
Sir,
I am directed to refer to NLC’s letter No.CO/P&A/1001/2003 dated 1.2.2003 on the above subject and to inform that the matter regarding payment of enhanced gratuity needs to be decided by NLC management alone in terms of Section 4(5) of the Payment of Gratuity Act, 1972. This Ministry has no role to play in the matter and therefore it need not be referred to this Ministry any further.
Yours faithfully,
Sd/- xxxxxxxxxx
(NEERA SHARMA)
Section Officer”
(Emphasis Supplied)
From the perusal of the letters extracted above, it is evident that decision was arrived at by the Board of management of NLC in its meeting held on 13.9.1995 to enhance the amount of gratuity from Rs.1.00 lakh to Rs.2.50 lakhs subject to clearance from the Central Government, Ministry of Coal. The decision is in terms of Section 4(5) of the Payment of Gratuity Act, 1972.
16. Section 4(5) of the Payment of Gratuity Act, 1972 reads as follows:
“Section 4(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.”
The Board of management having resolved already, as stated supra, which is legal as per Section 4(5) of the Act, the amount payable to the retired employees become due on the date of retirement of the respective employees and for the belated payment of gratuity, under Section 7(3-A) of the Payment of Gratuity Act, 1972, the management is liable to pay interest at the fixed rate. Therefore, the contention of the NLC that the enhanced amount must be treated as ex-gratia and the same cannot be treated as gratuity arrears, cannot be sustained, since being contrary to the NLC Board decision dated 13.9.1995. As the NLC management has already decided to enhance the gratuity, by order dated 13.9.1995 from Rs.1.00 lakhs to Rs.2.50 lakhs and the Government of India also affirmed that its clearance/approval is not required, NLC is bound to honour its own decision already taken. One can understand, if no decision is taken by the NLC with regard to the enhancement of gratuity prior to the Central Government communication dated 13.10.2003. In this case, as stated supra, decision was already taken by the Board of management of NLC as early as on 13.9.1995 giving effect to the enhancement of gratuity to its employees with effect from 1.4.1995. Thus, the decision arrived at by the learned single Judge in dismissing the writ petition filed by the appellant is just and proper and no case is made out for allowing the writ appeal. This issue is answered accordingly.
Issue No.2:
17. The next issue to be considered is with regard to the ground raised in the writ petition filed by NLC in W.P.No.28292 of 2004 and the Retired Employees Welfare Association in W.P.No.9847 of 2008 regarding payment of interest. Section 4 of the Payment of Gratuity Act, 1972 reads as follows:
“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 bank or other financial institution, as may be prescribed, until such minor attains majority.”
(Emphasis supplied)
We have already arrived at a finding about the decision of the Board of NLC about the enhancement of gratuity from Rs.1.00 lakh to Rs.2.50 lakhs with effect from 1.4.1995 and the same is as per Section 4(5) of the Payment of Gratuity Act, 1972. For the delayed payment, interest at such rate, not exceeding the rate notified by the Central Government, is payable as per Section 7(3-A). At this juncture, it is useful to refer to Section Section 7, which reads thus,
“Section 7. Determination of the amount of gratuity.- (1) A person who is eligible for payment of gratuity under this Act or any person authorised, in writing, to act on his behalf shall send a written application to the employer, within such time and in such form, as may be prescribed, for payment of such gratuity.
(2) As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub-section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity so determined.
(3) The employer shall arrange to pay the amount of gratuity, within thirty days from the date it becomes payable to the person to whom the gratuity is payable.
(3-A) If the amount of gratuity payable under sub-section (3) is not paid by the employer within the period specified in sub-section (3), the employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the Central Government from time to time for repayment of long-term deposits, as that Government may, by notification specify:
Provided that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment on this ground.”
In the decision reported in AIR 1985 SC 356 : (1985) 1 SCC 429 (State of Kerala v. M.Padmanabhan Nair) the Supreme Court considered the very same issue of payment of interest for belated payment of gratuity and pension. In para 1, the Supreme Court held as follows:
“1. Pension and gratuity are no longer any bounty to be distributed by the Government to its employees on their retirement but have become, under the decisions of this Court, valuable rights and property in their hands and any culpable delay in settlement and disbursement thereof must be visited with the penalty of payment of interest at the current market rate till actual payment.”
As the payment of interest is a statutory liability after the amount becomes payable after the introduction of sub-section (3-A) of Section 7, the appellate authority is justified in ordering interest in Gratuity Appeal No.308 of 2003 and there is no perversity in the said finding. The Supreme Court, in the decision reported in (2003) 3 SCC 40 (H. Gangahanume Gowda v. Karnataka Agro Industries Corporation Ltd.) in paragraphs 7, 9 and 10 held thus,
“7. It is evident from Section 7(2) that as soon as gratuity becomes payable, the employer, whether any application has been made or not, is obliged to determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity. Under Section 7(3), the employer shall arrange to pay the amount of gratuity within 30 days from the date it becomes payable. Under sub-section (3-A) of Section 7, if the amount of gratuity is not paid by the employer within the period specified in sub-section (3), he shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate not exceeding the rate notified by the Central Government from time to time for repayment of long-term deposits; provided that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment on that ground. From the provisions made in Section 7, a clear command can be seen mandating the employer to pay the gratuity within the specified time and to pay interest on the delayed payment of gratuity. No discretion is available to exempt or relieve the employer from payment of gratuity with or without interest as the case may be. However, under the proviso to Section 7(3A), no interest shall be payable if delay in payment of gratuity is due to the fault of the employee and further condition that the employer has obtained permission in writing from the controlling authority for the delayed payment on that ground. Under Section 8, provision is made for recovery of gratuity payable under the Act, if not paid by the employer within the prescribed time. The Collector shall recover the amount of gratuity with compound interest thereon as arrears of land revenue and pay the same to the person entitled. A penal provision is also made in Section 9 for non-payment of gratuity. Payment of gratuity with or without interest, as the case may be, does not lie in the domain of discretion but it is a statutory compulsion. Specific benefits expressly given in a social beneficial legislation cannot be ordinarily denied. Employees on retirement have valuable rights to get gratuity and any culpable delay in payment of gratuity must be visited with the penalty of payment of interest was the view taken in State of Kerala v. M. Padmanabhan Nair ((1985) 1 SCC 429). Earlier there was no provision for payment of interest on the delayed payment of gratuity. Sub-section (3-A) was added to Section 7 by an amendment, which came into force with effect from 1-10-1987. In the case of Charan Singh v. Birla Textiles ((1988) 4 SCC 212) this aspect was noticed in the following words: (SCC pp.214-15, para 4)
4. There was no provision in the Act for payment of interest when the same was quantified by the controlling authority and before the Collector was approached for its realization. In fact, it is on the acceptance of the position that there was a lacuna in the law that Act 22 of 1987 brought about the incorporation of sub-section (3-A) in Section 7. That provision has prospective application.
9. …………….. It was not the case of the respondent that the delay in the payment of gratuity was due to the fault of the employee and that it had obtained permission in writing from the controlling authority for the delayed payment on that ground. As noticed above, there is a clear mandate in the provisions of Section 7 to the employer for payment of gratuity within time and to pay interest on the delayed payment of gratuity. There is also provision to recover the amount of gratuity with compound interest in case the amount of gratuity payable was not paid by the employer in terms of Section 8 of the Act. Since the employer did not satisfy the mandatory requirements of the proviso to Section 7(3-A), no discretion was left to deny the interest to the appellant on belated payment of gratuity. Unfortunately, the Division Bench of the High Court, having found that the appellant was entitled to interest, declined to interfere with the order of the learned Single Judge as regards the claim of interest on delayed payment of gratuity only on the ground that the discretion exercised by the learned Single Judge could not be said to be arbitrary. In the first place in the light of what is stated above, the learned Single Judge could not refuse the grant of interest exercising discretion as against the mandatory provisions contained in Section 7 of the Act. The Division Bench, in our opinion, committed an error in assuming that the learned Single Judge could exercise the discretion in the matter of awarding interest and that such a discretion exercised was not arbitrary.
10. In the light of the facts stated and for the reasons aforementioned, the impugned order cannot be sustained. Consequently, it is set aside. The respondent is directed to pay interest @ 10% on the amount of gratuity to which the appellant is entitled from the date it became payable till the date of payment of the gratuity amount.”
17. Insofar as the prayer in W.P.No.9847 of 2008 is concerned, the rejection of interest by the appellate authority insofar as the members of the Neyveli Retirees Welfare Association cannot be sustained since the Controlling Authority as well as the Appellate Authority ordered interest at the rate of 10% in favour of one of the NLC retired employees viz., T.Chandrasekaran, in their orders dated 5.5.2003 and 28.8.2003 respectively. As we find the enhanced rate of gratuity was payable within 30 days from the date it became due i.e, from the date of retirement of the respective employees, the NLC management is bound to pay interest for the belated payment and the authority having allowed interest in favour of one retired employee, all other similarly placed retired employees are also entitled to get interest for the belated gratuity payment.
18. The Payment of Gratuity Act, 1972 is a Labour Welfare legislation, which was enacted in fulfilment of the directive principles of State Policy enshrined in the Constitution. How the Labour Welfare legislations are to be construed by the Courts is decided in the recent decision of the Supreme Court reported in (2010) 1 MLJ 1472 (SC) (Allahabad Bank v. All India Allahabad Bank Retired Employees Association) wherein in paragraphs 11 to 13 it is held thus,
“11. We shall proceed to examine the point urged by the learned counsel for the appellant. Remedial statutes, in contra distinction to penal statutes, are known as welfare, beneficient or social justice oriented legislations. Such welfare statutes always receive a liberal construction. They are required to be so construed so as to secure the relief contemplated by statute. It is well settled and needs no restatement at our hands that labour and welfare legislation have to be broadly and liberally construed having due regard to the Directive Principles of State Policy. The Act with which we are concerned for the present is undoubtedly one such welfare oriented legislation meant to confer certain benefits upon the employees working in various establishments in the country.
12. KRISHNA IYER, J. in Som Prakash Rekhi v. Union of India AIR 1981 SC 212 : (1981) 1 SCC 449 : 1981-I-LLJ 79, stated the principle in his inimitable style that benignant provisions must receive a benignant construction and, even if two interpretations are permissible, that which furthers the beneficial object should be preferred. It has been further observed:
“We live in a welfare State, in a “socialist” republic, under a Constitution with profound concern for the weaker classes including workers (Part IV). Welfare benefits such as pensions, payment of provident fund and gratuity are in fulfilment of the Directive Principles. The payment of gratuity or provident fund should not occasion any deduction from the pension as a “set-off”. Otherwise, the solemn statutory provisions ensuring provident fund and gratuity become illusory. Pensions are paid out of regard for past meritorious services. The root of gratuity and the foundation of provident fund are different. Each one is a salutary benefaction statutorily guaranteed independently of the other. Even assuming that by private treaty parties had otherwise agreed to deductions before the coming into force of these beneficial enactments they cannot now be deprivatory. It is precisely to guard against such mischief that the non obstante and overriding provisions are engrafted on these statutes.”
13. Interpreting the provisions of the said Act this Court in Sudhir Chandra Sarkar v. Tata Iron and Steel Co. Ltd. AIR 1984 SC 1064 : (1984) 3 SCC 369 : 1984-II- LLJ 223, observed that pension and gratuity coupled with contributory provident fund are well recognised retiral benefits governed by various statutes. These statutes are legislative responses to the developing notions of the fair and humane conditions of work, being the promise of Part IV of the Constitution. It was observed:
“the fundamental principle underlying gratuity is that it is a retirement benefit for long service as a provision for old age. Demands of social security and social justice made it necessary to provide for payment of gratuity. On the enactment of Payment of Gratuity Act, 1972 a statutory liability was cast on the employer to pay gratuity.”
19. Applying the said decisions to the facts of this case and having regard to the fact that the Controlling Authority as well as the Appellate Authority found that there is delay in payment of differential amount and that the Controlling Authority having ordered to pay 10% interest per annum in W.P.No.9847 of 2008, we hold that the appellate authority is not justified in denying interest to the retired employees. Hence the NLC is directed to calculate the interest payable at the rate of 10% per annum to all its retired employees from the date of their retirement till the date of actual payment for the enhanced amount of gratuity and pay the same within six weeks from the date of receipt of copy of this order.
20. In the result, W.A.No.1341 of 2007 and W.P.No.28292 of 2004 are dismissed. W.P.No.9847 of 2008 is ordered with the above directions. There will be no order as to costs. Connected miscellaneous petitions are closed.
Index : Yes/No. (E.D.R.,J.) (N.P.V.,J.) Website : Yes/No. 25-3-2010 vr ELIPE DHARMA RAO, J. and N. PAUL VASANTHAKUMAR, J. vr Common Judgment in W.A.No.1341/2007, W.P.No.28292/2004 & W.P.No.9847/2008 25-3-2010