General Manager, Malappuram District Co-operative Bank v. C. Janardhanan and Others

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE V.CHITAMBARESH & THE HONOURABLE MR. JUSTICE SATHISH NINAN THURSDAY, THE 12TH DAY OF JULY 2018 / 21ST ASHADHA, 1940 ## **WA.No. 524 of 2018 IN WPC. 5753/2014** AGAINST THE JUDGMENT IN WP(C) 5753/2014 of HIGH COURT OF KERALA DATED 01-12-2017 -------------- ## APPELLANT/2ND RESPONDENT GENERAL MANAGER,MALAPPURAM DISTRICT CO-OPERATIVE BANK REPRESENTED BY ITS GENERAL MANAGER, MALAPPURAM DISTRICT CO-OPERATIVE BANK HEAD OFFICE, MALAPPURAM BY ADV.SRI.I.V.PRAMOD ## RESPONDENTS/PETITIONERS/RESPONDENT NOS.1 & 3: 1. C.T.JANARDHANAN EXECUTIVE OFFICER(RETD),MALAPPURAM DISTRICT CO-OPERATIVE BANK, SREEJANYAM,P.O., ANGADIPURAM,PIN-679321. ## 2. E.GIRIJA, - EXECUTIVE OFFICER(RETD),MALAPPURAM DISTRICT CO-OPERATIVE BANK, KODURATH HOUSE, TRIKKADEERI-679502 ## 3. C. LAILA, DY. GENERAL MANAGER(RETD),MALAPPURAM DISTRICT CO-OPERATIVE BANK,THAZNEEM, EAST MOOZHIKKAL P.O, CHELAVOOR KOZHIKODE-673571 ## 4. T.K. RAVEENDRAN, ## DY. GNERAL MANGER (RETD),MALAPPURAM DISTRICT CO-OPERATIVE BANK, KANNANTHARA HOUSE, CHIRAKKAL, TANUR- 676302 ## 5. P.C. VIJAYALAKSHMI SENIOR MANAGER (RETD),MALAPPURAM DISTRICT CO-OPERATIVE BANK, SEEMA, P.O. AYIKKARAPADY - 676319 ## 6. P. KADEEJA, SENIOR MANAGER (RETD),MALAPPURAM DISTRICT CO-OPERATIVE BANK,MALAYIL P.O, CHETTIPPDY P.O. 676319 WA.No. 524 of 2018 -2- 7. SANTHA LAKSHMI A.P. W/O. LATE C.T. JANARDHANAN, RE4SIDING AT SREEJANYAM, ANGADIPPURAM P.O., MALAPPURAM-679321 8. BHAVYA JANARDHANAN, D/O. LATE C.T. JANARDHANAN, RESIDING AT SREEJANYAM, ANGADIPPURAM P.O., MALAPPURAM-679321 9. BHAVANA JANARDHANAN, D/O. LATE C.T. JANARDHANAN, RESIDING AT SREEJANYAM, ANGADIPPURAM P.O., MALAPPURAM-679321 10. STATE OF KERALA, REPRESENTED BY THE SECRETARY CO-OPERATIVE DEPARTMENT, GOVERNMENT OF KERALA, THIRUVANANTHAPURAM-695001 11. THE LIFE INSURANCE CORPORATION, REPRESENTED BY DIVISIONAL MANAGER, LIC DIVISIONAL OFFICE, MANANCHIRA, KOZHIKODE-673001 R1-R9 BY SRI.V.G.ARUN R10 BY SPL. GOVERNMENT PLEADER SRI.MOHAMAD HASHIM K.S. BY SRI.T.R.HARIKUMAR BY SRI.N.RAJAGOPALAN NAIR R11 BY SRI.P.P.JOY THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 06-07-2018, A/W WA 252/18 & CON. CASES, THE COURT ON **12-07-2018** , DELIVERED THE FOLLOWING: ## **V. CHITAMBARESH & SATHISH NINAN, JJ.** **= = = = = = = = = = = = = = = = = = W.A. Nos.524, 252, 309, 278, 431, 285, 286, 472, 242, 243, 526, 131, 57, 58 & 97 of 2018** **= = = = = = = = = = = = = = = = = = Dated this the 12[th] day of July, 2018** ## **J U D G M E N T** ## **Sathish Ninan, J.** What is the gratuity payable to employees of a Society covered by an LIC linked policy scheme where the Society is governed by the Payment of Gratuity Act, 1972, has been answered by a Full Bench of this Court in _**Chandrasekharan Nair v. Kerala State Co-operative Agricultural and Rural Development Bank Ltd. [2017 (4) KLT 276 (F.B).]** ._ The judgment of the Full Bench was affirmed by a three Judges Bench of the Apex Court in SLP(C) No. 009446-009451/2018 after notice to the other side on admission. ## 2. In _**Chandrasekharan Nair v. Kerala State Co-**_ ## _**operative Agricultural and Rural Development Bank**_ W.A. Nos.524, 252, 309, 278, 431, 285, 286, 472, 242, 243, 526, 131, 57, 58 & 97 of 2018 :- 2 :- ## _**Ltd.**_ (supra), the Full Bench held thus; “(i) In cases where gratuity is linked with LIC policies, it will be considered as, 'a right to receive better terms of gratuity', in terms of Section 4(5) of the Payment of Gratuity Act. (ii) The employee shall be entitled to the entire amount due under the policy. (iii) The mere fact that the employee is not eo-nominee a party to the agreement with the LIC is of no consequence. This is on the principle that a beneficiary under a contract in trust is eligible for the benefits under the contract. (iv) The above is the law for Societies with more than ten employees, to which 'The Payment of Gratuity Act, 1972' applies in terms of Section 1(3) (c) of that Act.” 3. The appellant societies in all these appeals contain more than ten employees and therefore, Payment of Gratuity Act, 1972 (hereinafter referred to as the “Gratuity Act”), applies. 4. The challenge in these writ appeals are mainly three fold, (i) First proviso to Rule 59 of the Kerala W.A. Nos.524, 252, 309, 278, 431, 285, 286, 472, 242, 243, 526, 131, 57, 58 & 97 of 2018 :- 3 :- Co-operative Societies Rules restricts the eligible gratuity to 15 months pay. - (ii) There has been no adjudication in terms of Section of the Gratuity Act, 1972. - (iii) The non-payment was in view of relevant circulars in the regard and hence they cannot be mulcted with the liability to pay interest. 5. Sub Rule (iii) to Rule 59 of The Kerala Cooperative Societies Rules and the provisos thereto read as follows:- “(iii) when an employee who has put in at least 5 years satisfactory service is retired voluntarily from service or if he is permanently disabled while in service or if he dies while in service the society shall pay to him or to his legal heirs as the case may be a gratuity not exceeding half months pay for every completed year of service. Provided that in no case shall the gratuity exceed fifteen months pay. Provided further that the amount of gratuity W.A. Nos.524, 252, 309, 278, 431, 285, 286, 472, 242, 243, 526, 131, 57, 58 & 97 of 2018 :- 4 :- payable shall not exceed the amount which an employee is eligible as per the Payment of Gratuity Act, 1972 (Central Act 39 of 1972) or under the Act and these Rules, whichever is applicable irrespective of the amount received out of any scheme chosen or implemented by a society for the purpose.” The first proviso puts a cap on the maximum amount of gratuity payable. The second proviso provides that, notwithstanding any scheme chosen by the Bank, as regards societies covered by the Gratuity Act, the maximum amount payable will be the eligible amount under the Gratuity Act; as regards societies covered by the Societies Act, the maximum amount payable shall be the maximum amount eligible under that Act. Interpreting the second proviso, the Full Bench held that, in cases where the Gratuity Act applies, in view of Section 4(5) thereof, the entire amount due under the Scheme shall be payable to the employee. Section 4(5) of the Gratuity Act acknowledges the right of the employee to receive better terms of gratuity irrespective of the restrictions regarding the W.A. Nos.524, 252, 309, 278, 431, 285, 286, 472, 242, 243, 526, 131, 57, 58 & 97 of 2018 :- 5 :- quantum fixed in Section 4 of that Act. Therefore, as held by the Full Bench, in view of the second proviso, with regard to societies to which the Payment of Gratuity Act is applicable, in view of Section 4(5) thereof, if a better term of gratuity is available, the restriction under the first proviso does not apply. However, in cases of societies to which the Payment of Gratuity Act is not applicable, since there is no provision in the Co-operative Societies Act or Rules akin to Section 4(5) of the Gratuity Act, the maximum amount payable cannot in view of the first and second provisos, exceed fifteen months pay as stipulated in first proviso even if any special scheme has been opted by the society for payment of gratuity. 6. To put it pithily, if the Payment of Gratuity Act is applicable, in view of Section 4(5) of the said Act, the employee shall be entitled to the entire amounts due under the special terms of gratuity irrespective of any restriction regarding the quantum and in cases of societies not covered W.A. Nos.524, 252, 309, 278, 431, 285, 286, 472, 242, 243, 526, 131, 57, 58 & 97 of 2018 :- 6 :- by the Central Act, the restriction under the first proviso applies irrespective of the availability of any scheme. 7. As regards the contention regarding adjudication, the only issue that has arisen for determination in these writ appeals is the right of the employees to receive the better terms of gratuity in terms of the LIC scheme. In none of these cases, the very eligibility of the respective employees-writ petitioners to claim gratuity is challenged. Under such circumstances, we do not think that they are to be relegated for a further adjudicatory proceeding under Section 7 of the Gratuity Act. 8. As regards the liability to pay interest, as contended by the appellants, the non-payment was in view of the circulars in vogue and on a bona fide misinterpretation of the law. Though Section 7 and 8 of the Gratuity Act provide for payment of interest for non-payment of gratuity within the time stipulated, the omission could not be considered W.A. Nos.524, 252, 309, 278, 431, 285, 286, 472, 242, 243, 526, 131, 57, 58 & 97 of 2018 :- 7 :- wilful or deliberate. Hence they need not be burdened with the liability for interest at the rates as prescribed under the Gratuity Act. However, the fact remains that the amounts due to the employees were in the hands of the appellants and they were enjoying the benefit of the same. They are bound to pay it to the employees with reasonable interest. We fix the rate of interest at 6% per annum, simple interest. Accordingly, these Appeals are disposed of, modifying the judgment of the learned single judge to the above extent. **Sd/V. CHITAMBARESH JUDGE** **Sd/SATHISH NINAN JUDGE** kns/- //True Copy// P.S. to Judge