N. D. JOSEPH v. STATE OF KERALA and others

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN** **MONDAY, THE 15TH DAY OF JANUARY 2018 / 25TH POUSHA, 1939** **WP(C).No. 6455 of 2016** ## **PETITIONER(S)** ## **-------------** **N.D. JOSEPH, NADUKUDIYIL HOUSE, KARUMPALAMATTOM, KARIMANNOOR P.O., THODUPUZHA, IDUKKI DISTRICT.** **BY ADV.SRI.SAJEEV KUMAR K.GOPAL** ## **RESPONDENT(S):** - **-------------** **1. THE STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, CO-OPERATION DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM-695001.** **2. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), ERNAKULAM-682 030.** **3. THE KOTHAMANGALAM TALUK CO-OPERATIVE AGRICULTURAL** - **& RURAL DEVELOPMENT BANK LIMITED NO.E.1192, KOTHAMANGALAM, ERNAKULAM - 686 691, REPRESENTED BY ITS PRESIDENT.** **4. LIFE INSURANCE CORPORATION OF INDIA (LIC) ERNAKULAM DIVISIONAL OFFICE, P&GS DEPARTMENT, 4TH FLOOR, JEEVAN PRAKASH, M.G.ROAD, ERNAKULAM - 689 643.** **R1 & R2 BY SENIOR GOVERNMENT PLEADER SR.BIMAL K.NATH R3 BY ADVS. SRI.P.V.BABY SRI.JOSHY THANNICKAMATTAM** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 15-01-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **TS** ## **WP(C).No. 6455 of 2016 (F)** ## **--------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS** **------------------------** **EXT.P1: TRUE COPY OF THE COMMUNICATION FROM THE 4TH RESPONDENT TO THE 3RD RESPONDENT DATED 14.5.2014.** **EXT.P2: TRUE COPY OF THE COMMUNICATION FROM THE 2ND RESPONDENT TO THE 3RD RESPONDENT DATED 04.05.2015.** **EXHIBIT P2(A):- TRUE COPY OF THE ENGLISH TRANSLATION OF EXHIBIT P2** **EXT.P3: TRUE COPY OF THE ENGLISH TRANSLATION OF THE 3RD RESPONDENT BANK VIDE RESOLUTION NO.6 DATED 27.03.2014.** **RESPONDENT(S)' EXHIBITS -NIL** **-----------------------------** **/TRUE COPY/** **PS TO JUDGE** **TS** ## **ANIL K. NARENDRAN, J. ----------------------------------------------W.P(C) No.6455 of 2016 -----------------------------------------------** Dated this the 15[th] day of January, 2018 ## **J U D G M E N T** The petitioner, who retired from service while working as Secretary of the 3[rd] respondent Society, is before this Court in this writ petition seeking a declaration that the proviso to Rule 59 of the Kerala Co-operative Societies Rules which restricts the amount of gratuity to that prescribed under the Payment of Gratuity Act irrespective of whether the amount received out of any scheme implemented by a Society is repugnant to the provisions of the Payment of Gratuity Act and hence unconstitutional. The petitioner has also sought for a writ of certiorari to quash Ext.P2 communication dated 4.5.2015 of the 2[nd] respondent Joint Registrar, whereby the 3[rd] respondent Society was directed to recover the gratuity paid to the petitioner in excess of the statutory limit of 10 lakhs. ₹ 2. On 22.2.2016, when this writ petition came up for admission, the learned Senior Government Pleader took notice for the 1[st] respondent. Notice by speed post was ordered to **W.P(C) No.6455 of 2016 :2:** respondents 2 to 4. 3. Heard the learned counsel for the petitioner, the learned Senior Government Pleader appearing for respondents 1 and 2 and also the learned counsel for the 3[rd] respondent Society. 4. The petitioner retired from service on superannuation on 31.5.2014 while working as the Secretary of the 3[rd] respondent Society. The employees of the 3[rd] respondent Society are covered by a Group Gratuity Scheme of the 4[th] respondent Corporation. At the time of retirement, the 4[th] respondent Life Insurance Corporation disbursed a sum of ₹15,12,955/- to the 3rd respondent Society towards the gratuity payable to the petitioner. Accordingly, the entire amount of gratuity was paid to him. Later, the 2[nd] respondent Joint Registrar issued Ext.P2 communication dated 4.5.2015 to the 3[rd] respondent Society in order to recover the amount of gratuity paid to the petitioner in excess of 10 lakhs. ₹ 5. The issue raised in this writ petition 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) No.6455 of 2016 :3:** 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 ## **W.P(C) No.6455 of 2016 :4:** rise to a doubt that the employee would be pinned down to the amount of gratuity 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 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 ## **W.P(C) No.6455 of 2016 :5:** 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 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 ## **W.P(C) No.6455 of 2016 :6:** 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 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 ## **W.P(C) No.6455 of 2016 :7:** 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 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 ## **W.P(C) No.6455 of 2016 :8:** 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 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." ## **W.P(C) No.6455 of 2016 :9:** (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 Co-operative Bank [2013 (4) KLT 558] (iv) The Travancore Cements Employees' Co-operative Bank Ltd. v. Ramachandran Nair [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 ## **W.P(C) No.6455 of 2016 :10:** 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 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 **W.P(C) No.6455 of 2016 :11:** 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 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 **W.P(C) No.6455 of 2016 :12:** 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 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 **W.P(C) No.6455 of 2016 :13:** 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 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 **W.P(C) No.6455 of 2016 :14:** 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 inure to the benefit of such an employee. 10. Admittedly, the petitioner received a sum of ₹15,12,955/- towards gratuity from the 3rd respondent Society in terms of the Group Gratuity Scheme with the 4[th] respondent Life Insurance Corporation. It was thereafter that the 2[nd] respondent Joint Registrar has issued Ext.P2 notice whereby 3[rd] respondent Society was directed to recover the gratuity paid to ## **W.P(C) No.6455 of 2016 :15:** the petitioner in excess of 10 lakhs. In view of the law laid₹ down by the Full Bench of this Court in **Chandrasekharan Nair's Case** (supra) the petitioner is entitled for payment of the entire amount of gratuity of 15,12,955/- received by the 3₹ rd respondent Society from the 4[th] respondent Life Insurance Corporation and as such Ext.P2 cannot be sustained. In such circumstances, this writ petition is disposed of by setting aside Ext.P2 communication dated 4.5.2015 issued by the 2[nd] respondent, addressed to the 3[rd] respondent Society and declaring that the petitioner is entitled for the entire amount of gratuity received by the 3[rd] respondent Society from the Life Insurance Corporation, the 4[th] respondent herein. Sd/- ## **ANIL K. NARENDRAN JUDGE** //True Copy// P.A to Judge ab