TaxTMI 
TaxTMI 
2020 (5) TMI 33
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....956 on one hand and three trustees on the other, an "Approved Gratuity Fund" was constituted "for the purpose of providing Gratuities to the employees of the Company under the Payment of Gratuity Act, 1972 (hereinafter referred to as 'the Act') and the Gratuity Scheme of the Company". Clauses 4, 11 and 15(a) of the Trust Deed are as under:- "4. RULES: The Fund shall be governed by the Rules and any reference to the Rules in these presents shall mean the Rules for the time being in force which shall be binding on the Members, their Beneficiaries and on the Company. A copy of the current Rules is annexed to and the same shall be deemed to form part of these presents. 11. MEMBERS TO HAVE NO LEGAL RIGHT Except as provided in these presents and in the Rules, no Member or his Beneficiary shall have any legal claim, right or interest in the Fund. Provided always that the Trustees shall administer the Fund for the benefit of the Members and their Beneficiaries in accordance with the provisions of these presents and the Rules. 15. PAYMENT OF GRATUITY: (a) On behalf of the Company, the Trustees shall provide for the payment of gr....
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....the service of the Company, or retirement at the age of 55 years or if retained by the Company after 55 years, then at the time of separation from the Company: 15 days basic salary for each completed year of service subject to maximum of 20 months basis pay, payable to the employees or payable to his heirs, executors or nominee in case of death of the employee. (b) On termination of Service: i. Beyond five years upto 8 years of continuous service at the rate of 5 (five) days basic pay for every completed year of service. ii. Beyond 8 years upto 10 years of continuous service at the rate of 10 days (ten) basic salary for every completed year of service. iii. Beyond 10 years upto 15 years of continuous service at the rate of 12 (twelve) days basic salary for every completed year of service. iv. Beyond 15 years of continuous service at the rate of 15 (fifteen) days basic salary for every completed year of service subject to maximum of 20 months basic salary. (c) On resignation or voluntary retirement: After completion of 5 years of continuous service or more at the rate of 15 days basic salary per year of complete....
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....laim petition, the appellant relied upon Clause 15 of the Trust Deed and Rule 6(b) of the Rules. It was submitted:- "(iv) From bare reading of the above Clause 15 read with Rule 6(b), it is apparent that the employees of the respondent No.1 Company, if covered by the provisions of the Gratuity Act were entitled for gratuity in accordance with the provisions of the Gratuity Act. (v) As per the aforementioned prescribed scheme, the gratuity was always determined as per the method prescribed under the Gratuity Act and when the gratuity for any employee exceeded the maximum limit (as prescribed from time to time), under the Gratuity Act, it was capped at the prevailing upper limit at the relevant time i.e. the gratuity amount was reduced so as to stay within the upper caps prescribed by the Gratuity Act." While responding to the submission that some of the employees had received gratuities in excess of Rs. 10 lakhs, it was submitted that the respondent as Chief Executive officer was responsible for making such excessive payments to said employees and that the respondent reserved its rights to take appropriate remedy in that behalf. It was further stated:- ....
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....n as regards the amount payable towards gratuity was as under:- "The last drawn salary of the applicant is therefore taken as Rs. 24,50,000/-. The gratuity payable under the scheme is therefore determined as under:- 24,50,000 X 15 X 13/26 = 1,83,75,000/- Since there is no cap on the gratuity under the scheme of the employer, same is more beneficial to the applicant and he is entitled to receive full gratuity amount of Rs. 1,83,75,000/- under the said scheme." 9. The appellant being aggrieved, filed appeal before the Appellate Authority under the Act challenging the aforesaid order dated 31.07.2017 passed by the Controlling Authority and applied for waiver of the requirement of pre-deposit of the amount directed to be paid to the respondent. Submitting that said application for waiver was not being considered by the Appellate Authority, Writ Petition (Civil) No.10319 of 2017 was preferred in the High Court by the appellant. The Writ Petition was disposed of by the High Court on 22.11.2017 directing the appellant to submit appropriate bank guarantee in the sum representing the amount of gratuity along with interest till the date of filing of the appeal. ....
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....in conflict with the provisions of the PG Act. In fact, contrary to what has been contended by the petitioner, Section 4(5) categorically protects the respondent's right to receive gratuity under better terms than those prescribed under the said Act." 10.1. While considering these submissions, it was observed:- "24. In my considered opinion, there is nothing in the Trust Deed dated 19.03.1979 or the Rules thereunder that curbs the respondent's entitlement to gratuity to the ceiling limit prescribed under Section 4(3). The relevant Rule 6(b) of petitioner's gratuity scheme only stipulates that the amount of gratuity payable to an employee shall be calculated in accordance with the provisions of the PG Act. The "provisions of the PG Act" is a broad phrase that not only contemplates the rate statutorily prescribed under Section 4(2) and the ceiling limit under Section 4(3), but also the exception carved out under Section 4(5) for employees who have better terms of gratuity under an award, or agreement/contract with the petitioner. Therefore, in the absence of a specific clause that caps the maximum amount of gratuity payable to the respondent, a broad stipulation ....
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....lso of Section 4(5). Like Rule 6(b) under the Trust Deed dated 19.03.1979, the interpretation of clause 11 relied upon by Mr. Sethi has such a broad implication that it cannot be read so selectively to apply the ceiling limit under Section 4(3) to the amount of gratuity that can be claimed by the respondent. Thus, looked at from every possible angle, there is nothing in the documents relied upon by the learned counsel for the petitioner that curbs the gratuity payable to the respondent to the statutory ceiling limit under Section 4(3)." 10.2. As regards, the decision of this Court in Beed District Central Cooperative Bank Ltd. v. State of Maharashtra and others (2006) 8 SCC 514, it was observed:- "31.Similarly, the decision in Beed District Central Coop. Bank Ltd. v. State of Maharashtra and Ors.4, is also not applicable to the present case. In that case, the appellant/employer's internal gratuity scheme provided a better rate for computing the gratu9ity of the respondent/workman, but the ceiling limit thereunder was lower than that prescribed by the PG Act. When the respondent/workman sought to avail the benefit of the appellant/employer's internal gratuity scheme as a....
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..... The EEs were issued under the signature of the CMD before being handed over to the Respondent in original, thereby becoming a part of the contract between the Appellant and the Respondent. In 2007-08 the gratuity amount was Rs. 6,34,920/- which was nearly twice the then ceiling limit of Rs. 3.5 lakhs under the PGA. In 2011-12 it was Rs. 11,54,400/- which was higher than the ceiling limit of Rs. 10 lakhs." 12. In this appeal challenging the view taken by the High Court, we heard Mr. C.U. Singh, learned Senior Advocate for the appellant and Mr. J.P. Cama, learned Senior Advocate for the respondent. 13. In the submission of Mr. C.U. Singh, learned Senior Advocate, the respondent was clearly covered by the Payment of Gratuity Act, 1972 and subject to the ceiling or limit of Rs. 10 lacs as provided under Section 4(3). He submitted that while an employee would be entitled to receive better terms of gratuity under Section 4(5) of the Act, such better terms could be claimed only under specific circumstances as set out in Section 4(5); that at no stage any claim was raised regarding existence of any award, agreement or contract nor was there any pleading about the existence of an....
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....cal or clerical work, whether the terms of such employment are express or implied, but does not include any such person who is employed in a managerial or administrative capacity, or who holds a civil post under the Central Government or a State Government, or who is subject to the Air Force Act, 1950, the Army Act, 1950, or the Navy Act, 1957. Explanation.- In the case of an employee, who, having been employed for a period of not less than five years on wages not exceeding one thousand rupees per mensem, is employed at any time thereafter on wages exceeding one thousand rupees per mensem, gratuity, in respect of the period during which such employee was employed on wages not exceeding one thousand rupees per mensem, shall be determined on the basis of the wages received by him during that period;" The original text of Sub-Sections (2) and (3) of Section 4 of the Act was as under:- "Payment of gratuity: 4. (1) ... ... ... (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....
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....e Act to "three thousand and five hundred rupees". 15.4 Act 35 of 1994 made further amendments and expression "not exceeding two thousand five hundred per mensem, or such higher amount as the Central Government may, having regard to the general level of wages, by notification specify" occurring in Section 2(e) was omitted. The explanation to Section 2(e) was also omitted. Consequently, the definition of "employee" now ceased to have any limit on wages and all employees, who otherwise answer the description in the definition, regardless of wages that they would receive, now stand covered. This Amendment Act also substituted expression "one lakh" in place of the earlier expression "fifty thousand" occurring in Section 4(3) of the Act. 15.5 By Act 47 of 2009, for Clause (e) of Section 2 following Clause was substituted:- "(e) "employee" means any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of work, manual or otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway company, shop or other establishment to which this Act applies, but d....
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....k 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 riot 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 three lakhs....
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....ceive better terms of gratuity under "any award or agreement or contract with the employer". 18. For Section 4(5) of the Act, to get attracted, there must be better terms of gratuity available and extendable to an employee "under any award or agreement or contract with the employer" as against what has been provided for under and in terms of the Act. In other words, as against what is made applicable by the Act, if better terms are available under any such arrangement with the employer, Section 4(5) stipulates that nothing in Section 4 shall affect the right of any employee to receive such better terms. Thus, when two choices are available, one under provisions of the Act and one under such arrangement with the employer and if the latter offers better terms, the employee cannot be denied right to receive those higher benefits. 19. But the question still remains whether in the present case there was such a choice available or not. According to Mr. C.U. Singh, learned Senior Advocate, the case of the respondent would be clearly covered by the provisions of the Act and not under the Scheme at all. Similar submissions were advanced on behalf of the appellant before the High Court....
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..... The Scheme on which heavy reliance was placed to submit that it afforded and made available better terms of gratuity itself emphasizes that in case of the employees who are covered under the Act, the amount payable as gratuity shall be in terms of the provisions of the Act. The Scheme does not therefore offer to the employees covered by the Act any other alternative apart from what is payable under the Act. 22. Rather than making available an alternative to the model and modalities of calculation of amount of gratuity, as placed on statute book by the provisions of the Act, the Trust Deed and the Scheme contemplates two kinds of employees. One, who are covered under the provisions of the Act and the other, who are not so covered. The historical background and the changes that the provisions of Section 2(e) and Section 4 have undergone show that not all employees were initially sought to be covered under the Act. Those, who were in wage-brackets greater than what was stipulated in Section 2(e) till it was finally amended to do away with the wage-bracket, were not covered by the Act. The Trust Deed and the Scheme sought to devise an apparatus and make provision for those who wer....