C. Balakrishnan, N. Baby, C. Thampan, M. Manappa Gatty v. Kasaragod District Co-Operative Bank Ltd., Life Insurance Corporation of India and State of Kerala

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN** **MONDAY, THE 4TH DAY OF DECEMBER 2017 / 13TH AGRAHAYANA, 1939** **WP(C).No. 3325 of 2015** **-------------------** ## **PETITIONER(S): --------------** - **1 C. BALAKRISHNAN, S/O.AMBU, AGED 58, ASHADAM, KARAKUZHI, AJANOOR P.O., KASARAGOD DISTRICT.** - **2 N.BABY, W/O.NARAYANAN NAIR, SAI PRABHA, NEAR MUTHAPPANAR KAVU, KANHANGAD SOUTH P.O., KASARAGOD DISTRICT.** - **3 C.THAMPAN, S/O.KUNHAMBU NAIR, KALICHAN KUZHI, MELANKOT, KANHANGAD, KASARAGOD DISTRICT.** - **4 M.MANAPPA GATTY, S/O.KRISHNA GATTY, UMANILAYAM, SEETHANGOLI, P.O. EDANAD, KUMBLA, KASARAGOD DISTRICT.** **BY ADVS.SRI.SUNIL NAIR PALAKKAT, SRI.K.N.ABHILASH, SMT.P.SHEEBA.** ## **RESPONDENTS:** ## **------------** **1. KASARAGODE DISTRICT CO-OPERATIVE BANK LTD. REPRESENTED BY ITS GENERAL MANAGER, P.B.NO. 48, NAYAK'S ROAD, KASARAGOD - 671 121.** **2. THE LIFE INSURANCE CORPORATION OF INDIA, REPRESENTED BY ITS SENIOR BRANCH MANAGER, P & GS UNIT, 7TH FLOOR, DIVISIONAL OFFICE, JEEVEN PRAKASH, HUZUR ROAD, KOZHIKODE - 673 001.** **3. THE STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, DEPARTMENT OF CORPORATION, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM - 695 001.** - **R1 BY SRI.JAWAHAR JOSE, SC. SRI.M.SASINDRAN,SC. R2 BY ADV. SRI.LAL GEORGE, SC. R3 BY SR. GOVT. PLEADER SRI.BIMAL K.NATH.** **THIS WRIT PETITION(CIVIL) HAVING BEEN FINALLY HEARD ON 04-12-2017, ALONG WITH W.P.(C)NO.27900 OF 2015, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **rs.** **WP(C).No. 3325 of 2015 (M)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXT.P1: COPY OF THE RELEVANT PROVISIONS IN THE BYE - LAW OF THE 1ST RESPONDENT BANK. EXT.P2: COPY OF THE COMMUNICATION DATED 04/08/2006 ISSUED BY THE 2ND RESPONDENT. EXT.P3: COPY OF THE REPRESENTATION DATED 03/05/2014 SUBMITTED BEFORE THE FIRST RESPONDENT BY THE FIRST PETITIONER. EXT.P4: COPY OF THE REPRESENTATION SUBMITTED BY THE 3RD PETITIONER. EXT.P5: COPY OF THE JUDGMENT DATED 13/10/2011 IN W.P.(C)NO.16107/2011. EXT.P6: COPY OF THE JUDGMENT DATED 05/03/2013 IN W.P.(C)NO.18276/2012. EXT.P7 COPY OF THE MASTER POLICY ISSUED BY THE 2ND RESPONDENT IN RESPECT OF THE EMPLOYEES OF THE 1ST RESPONDENT. EXT.P8 COPY OF THE COMMUNICATION DATED 24/10/1996 ISSUED BY THE REGISTRAR OF CO-OPERATIVE SOCIETIES. RESPONDENT'S EXHIBITS: EXT.R1A COPY OF THE TRUST DEED SO CONSTITUTED BY THE 1ST RESPONDENT FOR THE MANAGEMENT OF GRATUITY FUND, TOGETHER WITH THE RULES SO FRAMED. EXT.R2A COPY OF THE EXTRACT OF RESOLUTION. EXT.R2B COPY OF THE PERFORMA. EXT.R2C COPY OF THE PERFORMA. EXT.R2D COPY OF THE CLAIM FORM. EXT.R2E COPY OF THE CLAIM CALCULATION SHEET. //TRUE COPY// P.S. TO JUDGE** **rs.** ## **ANIL K. NARENDRAN, J. ----------------------------------------------W.P.(C)Nos.3325 & 27900 of 2015 -----------------------------------------------** Dated this the 4[th] day of December, 2017 ## **J U D G M E N T** W.P.(C)Nos.3325 of 2015:- The petitioners in this Writ Petition are retired employees of the first respondent Cooperative Bank, which is a society registered under the Kerala Cooperative Societies Act, 1969. The 1[st] petitioner retired from service on 31.5.2014 while working as Deputy General Manager; the 2[nd] petitioner retired from service on 31.7.2014 while working as Regional Manager; the 3[rd] petitioner retired from service on 31.3.2014 while working as Regional Manager; and the 4[th] petitioner retired from service on 31.10.2013 while working as Senior Manager. They have approached this Court in this Writ Petition feeling aggrieved by the refusal on the part of the 1[st] respondent Bank in disbursing the full gratuity amount payable on the basis of the Group Gratuity Scheme with the second respondent Life Insurance Corporation of India, notwithstanding the restriction contained in the second proviso to Rule 59(iii) of the Kerala Co-operative Societies Rules, 1969 as it is ultravires to W.P.(C)Nos.3325 & 27900 of 2015 :-2-: Section 4(5) of the Payment of Gratuity Act, 1972. The petitioners have sought for a writ of mandamus commanding the first respondent Bank to disburse them the entire gratuity amount payable under the Group Gratuity Scheme with the Life Insurance Corporation of India. They have also sought for an order to quash the second proviso to Rule 59 of the Kerala Co-operative Societies Rules as ultravires to Section 4(5) of the Payment of Gratuity Act, and also a consequential declaration. 2. W.P.(C)Nos.27900 of 2015:- The petitioners in this Writ Petition are also retired employees of the first respondent Bank. The 1[st] petitioner retired from service on 31.8.2015 while working as Senior Manager; the 2[nd] petitioner retired from service on 31.8.2015 while working as Senior Manager; and the 3[rd] petitioner retired from service on 31.3.2015 while working as Manager. They are also feeling aggrieved by the refusal on the part of the 1[st] respondent Bank in disbursing the full gratuity amount payable on the basis of the Group Gratuity Scheme with the second respondent Life Insurance Corporation of India, notwithstanding the restriction contained in the second proviso to W.P.(C)Nos.3325 & 27900 of 2015 :-3-: Rule 59(iii) of the Kerala Co-operative Societies Rules, 1969 as it is ultravires to Section 4(5) of the Payment of Gratuity Act, 1972. The petitioners have sought for a writ of mandamus commanding the first respondent Bank to disburse them Rs.15,31,000/-, Rs.3,81,000/- and Rs.9,68,000/- respectively, being the balance gratuity amount payable under the Group Gratuity Scheme with the Life Insurance Corporation of India. They have also sought for an order to quash the second proviso to Rule 59 of the Kerala Cooperative Societies Rules as ultravires to Section 4(5) of the Payment of Gratuity Act, and also a consequential declaration. 3. The 1[st] respondent Bank and also the 2[nd] respondent LIC have filed counter affidavits. 4. Heard the learned counsel for the petitioners in these Writ Petitions, the learned counsel for the 1[st] respondent Bank, the learned Standing Counsel for the 2[nd] respondent LIC and also the learned Government Pleader for the 3[rd] respondent State. 5. The issue raised in these Writ Petitions regarding the entitlement of the employees of the Co-operative Societies covered by the provisions under the Payment of Gratuity Act to W.P.(C)Nos.3325 & 27900 of 2015 :-4-: receive better terms under Section 4(5) of the said Act is now settled by the decision of the Full Bench of this Court in **Chandrasekharan Nair G. and others v. Kerala State Cooperative Agricultural and Rural Development Bank Ltd. and others (2017 (4) KLT 276)** . Paragraphs 5 to 8 of the said decision read thus; “5. The liability to pay gratuity does not get shifted to the insurer by the compulsory insurance and the effect is only that the maturity value of the master policy would go to the credit of the dues of the employee. Any amount in excess of the gratuity due would also go to the employee since the contract of insurance would fall within the ambit of Section 4 (5) of the Central Act. Any deficit in the amount due as gratuity to the employee after payment by the insurer has to be met by the employer only as the liability squarely rests on him under Section 4(2) of the Central Act. The insurer cannot be made liable to pay any amount in excess of the maturity value of the master policy as the same would be dependent on the premium paid to him. The compulsory insurance under S.4A of the Central Act is only to facilitate the employer to discharge his liability and the premium paid is part of the wages only. Of course the wording of the second proviso to Rule 59(iii) of the Rules gives rise to a doubt that the employee would be pinned down to the amount of gratuity specified in the Central Act. Such an W.P.(C)Nos.3325 & 27900 of 2015 :-5-: interpretation would render Section 4(5) of the Central Act otiose whereunder the employee has a right to receive better terms of gratuity under any award or agreement or contract with the employer. The provisions of the Central Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other enactment or instrument or contract. The overriding effect of the Central Act over other enactments is explicit from Section 14 of the Central Act which is to the following effect: "14. Act to override other enactments, etc.- The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act." 6. The co-operative societies wherein the employees are engaged is Entry 32 of List II - State List and gratuity to which a claim is laid is Entry 24 of List III - Concurrent List of the Seventh Schedule to the Constitution of India. The Central Act which is the law made by the Parliament shall prevail over the law made by the Legislature of the State i.e. the second proviso to Rule 59(iii) of the Rules. The inconsistency between laws made by Parliament and laws made by the Legislatures of States can be ironed out by calling in aid Article 254 of the Constitution of India. The W.P.(C)Nos.3325 & 27900 of 2015 :-6-: same reads as follows: "254. Inconsistency between laws made by Parliament and laws made by the Legislatures of States.-- (1) If any provision of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament, which Parliament is competent to enact, or to any provision of an existing law with respect to one of the matters enumerated in the Concurrent List, then, subject to the provisions of Clause (2), the law made by Parliament, whether passed before or after the law made by the Legislature of such State, or, as the case may be, the existing law, shall prevail and the law made by the Legislature of the State shall, to the extent of the repugnancy, be void. (2) Where a law made by the Legislature of a State with respect to one of the matters enumerated in the Concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State: Provided that nothing in this clause shall W.P.(C)Nos.3325 & 27900 of 2015 :-7-: prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the Legislature of the State." (emphasis supplied) There is no case that the second proviso to Rule 59(iii) of the Rules made by the Legislature of the State has received the assent of the President in order to prevail in the State under Article 254(2) of the Constitution of India. Every amendment to the State Act or the Rules has also to obtain the assent of the President which is absent in regard to the second proviso to Rule 59(iii) of the Rules. The irresistible conclusion is that Section 4(5) of the Central Act which enables an employee to opt for a better terms of gratuity will prevail over the second proviso to Rule 59(iii) of the Rules. Only the case of employees who are both covered under the Central Act and the Rules framed under the State Act is dealt with in this bunch of writ petitions since the Central Act does not apply to all establishments. Section 1 (3)(b) of the Central Act is categoric that the same applies only to an establishment in which ten or more persons are employed or were employed during the preceding twelve months. 7. The dominant intention of the Central Act is to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway W.P.(C)Nos.3325 & 27900 of 2015 :-8-: companies, shops or other establishments. The dominant intention of the State Act is to provide for the orderly development of the co-operative societies in the State as self-governing democratic institutions. A provision in the Central Act to give effect to its dominant purpose may incidentally be on the same subject as covered by the provision in the State Act. But such partial coverage of the same area in a different context and to achieve a different purpose does not bring about the repugnancy which is intended to be covered by Article 254(2) of the Constitution. We shall quote the decision in Vijay Kumar Sharma v. State of Karnataka, 1990 KHC 805 wherein it is held as follows: "53. The aforesaid review of the authorities makes it clear that whenever repugnancy between the State and Central legislation is alleged, what has to be first examined is whether the two legislations cover or relate to the same subject matter. The test for determining the same is the usual one, namely, to find out the dominant intention of the two legislations. If the dominant intention i.e. the pith and substance of the two legislations is different, they cover different subject matters. If the subject matters covered by the legislations are thus different, then merely because the two legislations refer to some allied or cognate subjects they do not cover the same field. The W.P.(C)Nos.3325 & 27900 of 2015 :-9-: legislation, to be on the same subject matter must further cover the entire field covered by the other. A provision in one legislation to give effect to its dominant purpose may incidentally be on the same subject as covered by the provision of the other legislation. But such partial coverage of the same area in a different context and to achieve a different purpose does not bring about the repugnancy which is intended to be covered by Article 254(2). Both the legislations must be substantially on the same subject to attract the article." (emphasis supplied) There is no repugnancy (in the sense that one Act cannot be obeyed without disobeying the other) and therefore every endeavor has to be made to reconcile the provisions and give a harmonious construction. 8. The following decisions were cited at the Bar by the counsel for either sides: - (i) Retnavalli v. Ambalapadu Service Cooperative Bank Ltd. [2005 (3) KLT 320] - (ii) Nedupuzha Service Co-operative Bank Ltd. v. Rugmini [2011 (3) KLT 134 (DB)] - (iii) Mathew Korah v. Kaduthuruthy Urban Cooperative Bank [2013 (4) KLT 558] - (iv) The Travancore Cements Employees' Co-operative Bank Ltd. v. Ramachandran Nair W.P.(C)Nos.3325 & 27900 of 2015 :-10-: [2014 (1) KLT 889 (DB)] and (v) Life Insurance Corporation of India v. K.P.Varughese [ILR 2015 (3) Kerala 420 (DB)]. None of the above decisions dealt with the second proviso to Rule 59(iii) of the Rules substituted with effect from 2.11.2010 only and hence do not help to resolve the controversy in this bunch of cases. The second proviso to Rule 59(iii) of the Rules referable to the amount received out of any scheme implemented by a society shall be construed in the context explained above. The employee in other words is entitled to the higher amount if he has opted in terms of Section 4(5) of the Central Act even if a lesser amount is due under Section 4(2) thereof. The decision in Nedupuzha's case (supra) to the extent that excess amount if any received by the employer under the policy would inure to the employee is affirmed. The said decision does not lay down the proposition that the entitlement of the employee is confined to the amount received under the policy even if it falls short of the statutory limit. Circular No.5/2016 and similar circulars issued by the Registrar of Co-operative Societies stem out of a misconception of the statutory provisions and are quashed to this extent. The reference is answered accordingly and the writ petitions shall be posted before the single Judge as per roster for disposal dependent on individual facts.” ## 6. In **Chandrasekharan Nair's case (supra)** , the Full W.P.(C)Nos.3325 & 27900 of 2015 :-11-: Bench of this Court held that, the liability to pay gratuity does not get shifted to the insurer by the compulsory insurance and the effect is only that the maturity value of the master policy would go to the credit of the dues of the employee. Any amount in excess of the gratuity due would also go to the employee since the contract of insurance would fall within the ambit of Section 4 (5) of the Central Act. Any deficit in the amount due as gratuity to the employee after payment by the insurer has to be met by the employer only as the liability squarely rests on him under Section 4(2) of the Central Act. The insurer cannot be made liable to pay any amount in excess of the maturity value of the master policy as the same would be dependent on the premium paid to him. The compulsory insurance under Section 4A of the Central Act is only to facilitate the employer to discharge his liability and the premium paid is part of the wages only. 7. In **Chandrasekharan Nair's case (supra)** the Full Bench held further that, the wording of the second proviso to Rule 59(iii) of the Rules, of course, gives rise to a doubt that the employee would be pinned down to the amount of gratuity W.P.(C)Nos.3325 & 27900 of 2015 :-12-: specified in the Central Act. Such an interpretation would render Section 4(5) of the Central Act otiose whereunder the employee has a right to receive better terms of gratuity under any award or agreement or contract with the employer. The provisions of the Central Act or any rule made thereunder shall have effect, notwithstanding anything inconsistent therewith contained in any other enactment or instrument or contract. The overriding effect of the Central Act over other enactments is explicit from Section 14 of the Central Act. The Co-operative Societies wherein the employees are engaged is Entry 32 of List II-State List and gratuity to which a claim is laid is Entry 24 of List III-Concurrent List of the Seventh Schedule to the Constitution of India. The Central Act, which is the law made by the Parliament shall prevail over the law made by the Legislature of the State, i.e., the second proviso to Rule 59(iii) of the Rules. The inconsistency between laws made by Parliament and laws made by the Legislatures of States can be ironed out by calling in aid Article 254 of the Constitution of India. There is no case that the second proviso to Rule 59(iii) of the Rules made by the Legislature of the State has W.P.(C)Nos.3325 & 27900 of 2015 :-13-: received the assent of the President in order to prevail in the State under Article 254(2) of the Constitution of India. Every amendment to the State Act or the Rules has also to obtain the assent of the President which is absent in regard to the second proviso to Rule 59(iii) of the Rules. Therefore, the irresistible conclusion is that Section 4(5) of the Central Act, which enables an employee to opt for a better term of gratuity will prevail over the second proviso to Rule 59(iii) of the Rules. 8. In **Chandrasekharan Nair's case (supra)** , the Full Bench held that, the second proviso to Rule 59(iii) of the Rules referable to the amount received out of any scheme implemented by a society shall be construed in the context explained above. The employee in other words is entitled to the higher amount if he has opted in terms of Section 4(5) of the Central Act even if a lesser amount is due under Section 4(2) thereof. The Full Bench affirmed the decision of the Division Bench in **Nedupuzha's case (2011 (3) KLT 134)** to the extent that excess amount, if any, received by the employer under the policy would inure to the employee. The Full Bench noticed that, the said decision does not W.P.(C)Nos.3325 & 27900 of 2015 :-14-: lay down the proposition that the entitlement of the employee is confined to the amount received under the policy, even if it falls short of the statutory limit, and that, Circular No.5/2016 and similar circulars issued by the Registrar of Co-operative Societies stem out of a misconception of the statutory provisions and are therefore quashed to that extent. The Full Bench has made it clear that, it has dealt with only the case of employees who are both covered under the Central Act and the Rules framed under the State Act, since the Central Act does not apply to all establishments. 9. In view of the law laid down by the Full Bench of this Court in **Chandrasekharan Nair's case (supra)** , an employee of a Co-operative Society, who is covered both under the Payment of Gratuity Act, 1972 and the Kerala Co-operative Societies Rules, 1969 framed under the Kerala Co-operative Societies Act, 1969 is entitled to the higher amount, if he has opted in terms of Section 4(5) of the Payment of Gratuity Act, even if a lesser amount is due under Section 4(2) thereof. Therefore, the excess amount, if any, received by the employer Society under the policy would W.P.(C)Nos.3325 & 27900 of 2015 :-15-: ## inure to the benefit of such an employee. In such circumstances, these Writ Petitions are disposed of by directing the 1[st] respondent Bank to pay the respective petitioners the excess amount, if any, received by the said Bank from the 2[nd] respondent LIC under the policy of Group Gratuity Scheme, in excess of the amount prescribed under Section 4(2) of the Payment of Gratuity Act. Such amounts, if any, remaining payable shall be computed by the 1[st] respondent Bank and intimated to the respective petitioners within two weeks from the date of receipt of a certified copy of this judgment, which shall be disbursed as expeditiously as possible, at any rate, within two months from the date of receipt of a certified copy of this judgment, together with interest at the rate of 9% per annum from the respective dates on which the said amount has fallen due. No order as to costs. ## **Sd/-** **ANIL K. NARENDRAN JUDGE** //True Copy// P.A to Judge ab