High Court of KeralaSingle Judge2019-06-20Petition allowed; Exts. P13–P16 quashed; no fur...

Manikuttan B. and others v. State of Kerala and others

Case / Petition Number:WP(C).No.38626 of 2018

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: Devan Ramachandran
Judgment Date: 2019-06-20
Court Decision / Holding: Writ petition allowed; Exts. P13–P16 quashed; no further action based on Ext. P12 audit will be taken against the petitioners. The fifth respondent Bank is directed to pay Rs. 73,496 to the first petitioner with interest at 6% from the date of receipt by the Bank, and to disburse the amount expeditiously but not later than three months from receipt of a copy of this judgment.
Final Disposition: Petition allowed; Exts. P13–P16 quashed; no further action based on Ext P12 audit; Bank directed to pay Rs. 73,496 to petitioner 1 with 6% interest within three months.

Parties to the Case

Appellants / Petitioners

Manikuttan B.
Keerthysree K.R.
Padmakumari S.
Pushkaran N.

Respondents

State of Kerala
Registrar of Co-operative Societies
Joint Director of Co-operative Audit
Joint Registrar of Co-operative Societies (Audit)
Thekkumbhagom Service Co-operative Bank Ltd.
The Managing Committee of Thekkumbhagom Service Co-operative Bank Ltd.
Manager, Life Insurance Corporation of India

Legal Representation & Advocates

Counsels for Petitioners

• I. Vinayakumari
• Shoba Nair

Counsels for Respondents

• C.S. Ramanathan
• S. Rajalekshmi Amma
• Bimal K. Nath
• S. Easwaran

Case Synopsis & Summary

This writ petition filed by four superannuated employees of Thekkumbhagom Service Cooperative Bank challenges gratuity payments arranged through a Group Gratuity Insurance Scheme with the Life Insurance Corporation (LIC). The petitioners allege that the Bank, after LIC remitted gratuity funds to cover all petitioners, disbursed Rs 20,00,000 to petitioner 1 but paid full amounts to petitioners 2–4, and illegally retained Rs 73,496 in the first petitioner’s case. Following an audit, Exts. P13–P16 issued by the Bank demanded return of gratuity amounts paid beyond Rs 10,00,000 under the statutory ceiling of the Payment of Gratuity Act, 1972. The petition seeks quashing of the audit-based recovery notices and payment of the balance to petitioner 1. The Court notes that a Full Bench decision in Chandrasekharan Nair v. Kerala State Co-operative Bank Ltd. (2017 (4) KLT 276 (FB)) holds that, notwithstanding the ceiling, parties may contract for higher gratuity amounts and employees are entitled to such sums. LIC’s counsel confirms full payment to the Bank, which was disbursed to petitioners 2–4, with Rs 73,496 allegedly retained for petitioner 1. The Court allows the petition, quashes Exts. P13–P16, directs the Bank to pay Rs 73,496 to petitioner 1 with 6% interest (from receipt by Bank) within three months, and declares no further action based on Ext P12 audit will be taken.

Provisions of Law Cited

Payment of Gratuity Act, 1972 – Sections 4(2), 4(5)

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners argue that after superannuation, gratuity as per the Group Gratuity Insurance Scheme with LIC was to be paid in full. The Bank paid the entire LIC amount to petitioners 2–4 and Rs 20,00,000 to petitioner 1, retaining Rs 73,496 without lawful justification. Audit notices (Exts. P13–P16) demanded repayment of the gratuity amounts beyond Rs 10,00,000 under the statutory ceiling of the Payment of Gratuity Act, 1972. They rely on a Full Bench decision (Chandrasekharan Nair) which held that higher gratuity amounts can be agreed between employer and employee. They seek quashing of the audit notices and payment of the balance due to petitioner 1 with interest.

Contentions of Respondents

The respondents contend that gratuity is governed by the statutory ceiling of the Payment of Gratuity Act, and the audit-dictated recoveries (Exts. P13–P16) were legitimate. LIC’s counsel confirms that the LIC paid the full amount due to the Bank, which disbursed to petitioners 2–4, with petitioner 1’s balance of Rs 73,496 allegedly retained. The Bank did not sustain appearance in court; reliance is placed on statutory limits and the audit report, subject to the Full Bench ruling cited by the petitioners.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
Chandrasekharan Nair v. Kerala State Co-operative Agricultural and Rural Development Bank Ltd.	2017 (4) KLT 276 (FB)	Positive	Full Bench decision held that despite statutory gratuity ceilings, parties may contract for higher gratuity amounts; the present court relies on this principle to allow higher gratuities under LIC arrangements.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN** ## **THURSDAY, THE 20TH DAY OF JUNE 2019 / 30TH JYAISHTA, 1941** ## **WP(C).No.38626 of 2018** ## **PETITIONERS:** - **1 MANIKUTTAN.B., AGED 59 YEARS S/O.BHASKARA PILLAI, CHAITHRAM, VADAKKUMBHAGOM, CHAVARA SOUTH P.O., KOLLAM DISTRICT.** - **2 KEERTHYSREE.K.R., AGED 59 YEARS W/O.SASIDHARAN, SREE SAILOM, NADUVATHUCHERRY, CHAVARA, SOUTH P.O, KOLLAM DISTRICT.** - **3 PADMAKUMARI.S., AGED 59 YEARS W/O.MOHANAN PILLAI, VAISHNAVAM, MANNAKKARA, SASTHAMKOTTA P.O., KOLLAM DISTRICT.** - **4 PUSHKARAN.N., AGED 59 YEARS S/O.NANU, ADARSALAYAM, THEKKUMBHAGOM, CHAVARA SOUTH P.O., KOLLAM DISTRICT.** - **BY ADVS. SMT.I.VINAYAKUMARI SMT.SHOBA NAIR** ## **RESPONDENTS:** - **1 STATE OF KERALA, REPRESENTED BY SECRETARY TO GOVERNMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM- 695001.** - **2 THE REGISTRAR OF CO-OPERATIVE SOCIETIES, JAWAHAR SAHAKARANA BHAVAN, DPI JUNCTION, THYCADU P.O., THIRUVANANTHAPURAM.** - **3 THE JOINT DIRECTOR OF CO-OPERATIVE AUDIT, KERALA STATE CO-OPERATIVE DEPARTMENT, CHAVARA UNIT, KARUNAGAPALLY CIRCLE, KOLLAM DISTRICT, KERALA STATE.** - **4 THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (AUDIT), KOLLAM- 691584.** - **5 THEKKUMBHAGOM SERVICE CO-OPERATIVE BANK LTD., NO.1731, REPRESENTED BY ITS SECRETARY, CHAVARA SOUTH P.O., KOLLAM, PIN- 691584.** WP(C).No.38626 of 2018 2 **6 THE MANAGING COMMITTEE OF THE THEKKUMBHAGOM SERVICE CO-OPERATIVE BANK LTD.NO.1731, REPRESENTED BY ITS PRESIDENT, CHAVARA SOUTH P.O., KOLLAM, PIN- 691584.** **7 THE MANAGER, LIFE INSURANCE CORPORATION OF INDIA, DIVISIONAL OFFICE, PATTOM, THIRUVANANTHAPURAM, PIN- 695004.** **SRI.C.S.RAMANATHAN SMT.S.RAJALEKSHMI AMMA SRI.BIMAL K.NATH-SR.GP** SRI.S.EASWARAN,SC. **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 20.06.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** WP(C).No.38626 of 2018 3 ## **JUDGMENT** The petitioners say that they have all superannuated from the services of the fifth respondent - Thekkumbhagom Service Cooperative Bank Ltd. in the year 2017 and concede that they, except the first petitioner, were paid the full gratuity eligible to them, by the said Bank. According to them, the Bank had entered into a Group Gratuity Insurance Scheme with the seventh respondent - Life Insurance Corporation of India (LIC) and that on the requisition made by them, the LIC had remitted the requisite amounts to cover the entire gratuity for all the petitioners; but that the Bank had paid such amounts only to petitioners 2 to 4 and only Rs.20,00,000/- to the first petitioner, thus illegally retaining an amount of Rs.73,496/-. 2. The petitioners say that, subsequently, apparently on the basis of an audit conducted by the Authorities, the fifth respondent - Bank has issued Exts.P13 to P16 notices to them, to return the gratuity amounts paid to them in excess of Rs.10,00,000/-, on the allegation that, under the Payment of Gratuity Act, the maximum amounts payable to them can only be that amount. 3. The petitioners, therefore, pray that the fifth respondent WP(C).No.38626 of 2018 4 be directed to pay the first petitioner the balance amount of Rs.73,496/-, being the balance of the amounts received by them from the LIC and to quash Exts.P13 to P16 as being illegal and unlawful. 4. When I hear Smt.Vinayakumari I., the learned counsel for the petitioners in the afore lines, it is obvious that these issues have already been concluded affirmatively by a Full Bench Judgment of this Court in **Chandrasekharan Nair v. Kerala State Co-operative Agricultural and Rural Development** **Bank Ltd.** [2017 (4) KLT 276 (F.B.)]. The declaration therein is that notwithstanding the ceiling of gratuity stipulated in the Statute, the employer and employee can enter into an agreement for an higher amount; and that in such event, the latter is entitled to such higher amounts towards gratuity. When the declaration of law is so explicit, I fail to understand how there could be an objection against the fifth respondent - Bank in having paid the entire amounts they received from the LIC to petitioners 2 to 4 and how they can still withhold the balance amount of Rs.73,496/to the first petitioner. 5. Sri.C.S..Ramanathan, the learned standing counsel for the LIC confirms that his client has paid the entire amount due under the Policy to the Bank and that the Bank has disbursed the said WP(C).No.38626 of 2018 5 amounts fully to petitioners 2 to 4; conceding that they appear to have retained an amount of Rs.73,496/-, as far as the first petitioner is concerned. 6. In the afore circumstances and since the fifth respondent has chosen not to be represented through counsel in these proceedings, I allow this writ petition and quash Exts.P13 to P16 notices and declare that no further action based on Ext.P12 audit report will be taken against the petitioners; and I further direct the fifth respondent to pay the amount of Rs.73,496/- to the first petitioner, which is stated to be the balance due to him, along with interest at the rate of 6% from the date on which this amount was received by the fifth respondent - Bank. I clarify that the amounts to be paid to the first petitioner shall be disbursed by the fifth respondent - Bank as expeditiously as is possible but not later than three months from the date of receipt of a copy of this judgment. ## **Sd/- DEVAN RAMACHANDRAN** Stu **JUDGE** WP(C).No.38626 of 2018 6 ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 A TRUE COPY OF THE PENSION PAYMENT ORDER NO.966/KLM SHOWING THE GENERAL INFORMATION ABOUT THE 1ST PETITIONER.** - **EXHIBIT P2 A TRUE COPY OF THE PENSION PAYMENT ORDER NO.967/KLM SHOWING THE GENERAL INFORMATION ABOUT THE 2ND PETITIONER.** - **EXHIBIT P3 A TRUE COPY OF THE PENSION PAYMENT ORDER NO.971/KLM SHOWING THE GENERAL INFORMATION ABOUT THE 3RD PETITIONER.** - **EXHIBIT P4 A TRUE COPY OF THE PENSION PAYMENT ORDER NO.968/KLM SHOWING THE GENERAL INFORMATION ABOUT THE 4TH PETITIONER.** - **EXHIBIT P5 A TRUE COPY OF THE LETTER DATED 12.05.2017 OF THE LIC SENT TO THE BANK TOWARDS RS 10,00,000/- OF GRATUITY CLAIM EACH DUE TO THE 1ST, 2ND , 3RD AND 4TH PETITIONERS RESPECTIVELY.** - **EXHIBIT P6 A TRUE COPY OF THE LETTER DATED 15.05.2017 OF THE LIC SENT OT THE BANK-TOWARDS THE BALANCE GRATUITY CLAIM EACH DUE TO THE 1ST, 2ND, 3RD AND 4TH PETITIONERS RESPECTIVELY.** - **EXHIBIT P7 A TRUE COPY OF THE RESOLUTION NO.323 DATED 15.05.2017 PASSED BY THE MANAGING COMMITTEE OF THE RESPONDENT BANK.** - **EXHIBIT P8 A TRUE COPY OF THE STATEMENT OF ACCOUNT NO.826 OF THE 1ST PETITIONERS SHOWING THE TOTAL AMOUNT RS 20 LAKHS OF GRATUITY DEPOSITED IN HIS ACCOUNT DATED 26.05.2017.** - **EXHIBIT P9 A TRUE COPY OF THE STATEMENT OF ACCOUNT NO.1175 OF THE 2ND PETITIONER SHOWING THE TOTAL AMOUNT OF GRATUITY OF RS 14,40,519/- WAS DEPOSITED IN HER JOINT ACCOUNT DATED 06.05.2017.** **EXHIBIT P10 A TRUE COPY OF THE STATEMENT ACCOUNT NO.1508 OF THE 3RD PETITIONER SHOWING THE TOTAL AMOUNT OF RS 12,93,283/- WAS DEPOSITED IN HER ACCOUNT DATED 26.05.2017.** WP(C).No.38626 of 2018 7 |**EXHIBIT P11**|**A TRUE COPY OF THE STATEMENT ACCOUNT NO.952 OF THE**| |---|---| ||**4TH PETITIONER SHOWING THE TOTAL AMOUNT OF RS**| ||**13,12,197/- WAS DEPOSITED IN HIS ACCOUNT DATED**| ||**06.05.2017.**| |**EXHIBIT P12**|**A TRUE COPY OF THE AUDIT CERTIFICATE AND AUDIT**| ||**MEMORANDUM OF THE 3RD RESPONDENT ISSUED TO THE 5TH**| ||**RESPONDENT BANK DATED 03.07.2018.**| |**EXHIBIT P13**|**A TRUE COPY OF THE RECOVERY DEMAND NOTICE**| ||**NO.82/2018-19 ISSUED TO THE 1ST PETITIONER BY THE**| ||**SECRETARY OF THE 5TH RESPONDENT BANK TOWARDS**| ||**DIRECTING TO REFUND GRATUITY OF RS 10LAKHS.**| |**EXHIBIT P14**|**A TRUE COPY OF THE RECOVERY DEMAND NOTICE**| ||**NO.84/2018-19 DATED 17.10.2018 ISSUED TO THE 2ND**| ||**PETITIONER BY THE 5TH RESPONDENT TOWARDS DIRECTING**| ||**TO REFUND THE GRATUITY OF RS 4,40,519/-.**| |**EXHIBIT P15**|**A TRUE COPY OF THE RECOVERY DEMAND NOTICE**| ||**NO.85/2018-19 DATED 17.10.2018 ISSUED TO THE 3RD**| ||**PETITIONER BY THE 5TH RESPONDENT TOWARDS DIRECTING**| ||**TO REFUND THE GRATUITY OF RS 2,93,283/-**| |**EXHIBIT P16**|**A TRUE COPY OF THE RECOVERY DEMAND NOTICE**| ||**NO.86/2018-19 DATED 17.10.2018 ISSUED TO THE 4TH**| ||**PETITIONER BY THE 5TH RESPONDENT TOWARDS DIRECTING**| ||**TO REFUND THE GRATUITY OF RS 3,12,197/-**| |**EXHIBIT P17**|**A TRUE COPY OF THE FULL BENCH DECISION OF THE**| ||**HON'BLE COURT REPORTED IN 2017(4)KLT 276 TOWARDS**| ||**THE TOTAL AMOUNT OF GRATUITY DUE TO THE EMPLOYEES**| ||**AS PER S4(2) and S4(5) OF THE PAYMENT OF GRATUITY**| ||**ACT, 1972 AND RULE 1973.**| |**EXHIBIT P18**|**A TRUE COPY OF THE JUDGMENT OF THIS HON'BLE COURT**| ||**IN WP(C)NO.34463/2017 DATED 21.11.2017 DECIDED**| ||**TOWARDS THE FULL AMOUNT OF GRATUITY RECEIVED FROM**| ||**LIC.**| |**EXHIBIT P19**|**A TRUE COPY OF THE JUDGMENT OF THIS HON'BLE COURT**| ||**IN WP(C)NO.6571/2018 DATED 10.04.2018 DECIDED**| ||**TOWARDS THE FULL AMOUNT OF GRATUITY RECEIVED FROM**| ||**LIC.**| |**EXHIBIT P20**|**A TRUE COPY OF THE JUDGMENT OF THIS HON'BLE COURT**| ||**IN WP(C)NO.11737/2018 DATED 25.05.2018 DECIDED**| ||**TOWARDS THE FULL AMOUNT OF GRATUITY RECEIVED FROM**| ||**LIC.**| WP(C).No.38626 of 2018 8 **EXHIBIT P21 A TRUE COPY OF THE DIVISION BENCH JUDGMENT OF THIS HON'BLE COURT IN W.A.NO.524/2018 DATED 12.07.2018.** RESPONDENT'S EXHIBITS : NIL //TRUE COPY// P.A TO JUDGE.