Sasikumar G. Nandanam v. Cherukole Service Co-Operative Bank Ltd and others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN** **FRIDAY ,THE 05TH DAY OF OCTOBER 2018 / 13TH ASWINA, 1940** ## **WP(C).No. 16484 of 2018** ## **PETITIONER:** **SASIKUMAR G. NANDANAM, KATTOOR.P.O.KOZHENCHERRY, PATHANAMTHITTA.** **BY ADV. SRI.P.P.JACOB** ## **RESPONDENTS:** - **1 CHERUKOLE SERVICE CO-OPERATIVE BANK LTD.NO.Q 488 CHERUKOLE.P.O., KOZHENCHERRY, PATHANAMTHITTA REPRESENTED BY ITS SECRETARY** - **2 THE MANAGING COMMITTEE OF THE CHERUKOLE SERVICE CO-OPERATIVE BANK LTD NO.Q488 CHERUKOLE.P.O.KOZHENCHERRY, PATHANAMTHITTA REPRESENTED BY ITS PRESIDENT** - **3 THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (G) PATHANAMTHITTA, OFFICE OF THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES(G), PATHANAMTHITTA.** ## **BY ADV. SRI.MVS.NAMBOOTHIRY** ## **SMT MABLE C.KURIEN, GOVERNMENT PLEADER** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 05.10.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.P.(C) No.16484/2018 2 ## **JUDGMENT** The petitioner, who retired from service while working as Secretary in the first respondent Co-operative Society, on 31.03.2017, on attaining the age of superannuation, after rendering a total service of more than 28 years, has filed this Writ Petition under Article 226 of the Constitution of India, seeking a writ of mandamus commanding respondents 1 and 2 to pay the gratuity amount together with 10% interest from the date of retirement payable to him, in terms of the Full Bench decision 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]** . The petitioner has also sought for other consequential reliefs, including a writ of mandamus commanding the third respondent to consider and dispose of Exhibit-P2 representation ensuring that the first respondent Society and the Committee pay the balance amount of gratuity of Rs.8,05,653/- with 10% interest till payment, along with arrears of pay revision benefits. 2. On 22.05.2018, when this Writ Petition came up for consideration, this Court admitted the matter on file. Notice was ordered to respondents 1 and 3 by speed post. Learned Government Pleader took notice for the third respondent. 3. A counter affidavit has been filed by respondents 1 and 2, W.P.(C) No.16484/2018 3 opposing the reliefs sought for in this Writ Petition. A reading of the counter affidavit would show that the said respondents have not raised any serious dispute as to the amount of gratuity claimed by the petitioner to the tune of Rs.8,05,653/-. 4. On 28.09.2018, when this Writ Petition came up for consideration, this Court passed the following order: “Learned counsel for the petitioner would submit that respondents 1 and 2 have not raised any serious dispute a to the amount of gratuity claimed by the petitioner to the tune of Rs.8,05,653/-. Learned counsel would also point out that the only objection raised in the counter affidavit if the financial stringency of the Society. Learned counsel for respondents 1 and 2 seeks time to get instructions as to whether the amount of gratuity payable to the petitioner can be disbursed in two or three monthly instalments.” 5. Heard the learned counsel for the petitioner, the learned counsel for respondents 1 and 2 and also the learned Senior Government appearing for the third respondent. 6. 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 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** W.P.(C) No.16484/2018 4 ## **(2017 (4) KLT 276)** . 7. 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 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. 8. 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 W.P.(C) No.16484/2018 5 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 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 W.P.(C) No.16484/2018 6 the second proviso to Rule 59(iii) of the Rules. 9. 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 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. 10. 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 W.P.(C) No.16484/2018 7 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. 11. The judgment of the Full Bench in Chandrasekharan Nair's case (supra) is affirmed by the Apex Court in SLP (C) No.94469451/2018, after notice to the other side on admission. 12. In W.A.No.524 of 2018 and connected cases dated 12.07.2018), a Division Bench of this Court, after referring to the law laid down by the Full Bench in Chandrasekharan Nair's case (supra), held that, 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 Cooperative 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 W.P.(C) No.16484/2018 8 any special scheme has been opted by the society for payment of gratuity. The Division Bench held further that, when the eligibility of the respective employees, who are the writ petitioners, to claim gratuity is not under challenge, the employees need not be relegated for a further adjudication proceedings under Section 7 of the Payment of Gratuity Act. The Division Bench has also held that, though non-payment gratuity was in view of the circulars in vogue and on a bonafide mis-interpretation of law, the omission could not be considered wilful or deliberate. However, since the amounts due to the employees were in the hands of the employers who were enjoying the benefit of the same they are bound to pay simple interest at the rate of 6% per annum. Paragraphs 5 to 8 of the said judgment read thus; “5. Sub Rule (iii) to Rule 59 of The Kerala Co-operative 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 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 W.P.(C) No.16484/2018 9 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 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. W.P.(C) No.16484/2018 10 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 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 bonafide 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 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. W.P.(C) No.16484/2018 11 We fix the rate of interest at 6% per annum, simple interest.” (Underline supplied) 13. As far as the claim made by the petitioner for gratuity amounting to Rs.8,05,653/- is concerned, the said claim is not in serious dispute in the counter affidavit filed by respondents 1 and 2. The submission made by the learned counsel for respondents 1 and 2 is that on account of financial stringency, the Society is not in a position to disburse the amount of gratuity payable to the petitioner. 14. Having considered the submissions made by the learned counsel on both sides, this Court finds that there is absolutely no justification on the part of respondents 1 and 2 in not disbursing the gratuity payable to the petitioner to the tune of Rs.8,05,653/- especially when the said respondents have not raised any serious dispute as to the entitlement of the petitioner for the said sum. 15. As far as the claim made by the petitioner for pay revision arrears is concerned, in the counter affidavit the Society has raised some dispute as to the entitlement of the petitioner for that benefit. In such circumstances, it is for the petitioner to invoke the statutory remedy available under Section 69 of the Kerala Societies Act, 1969 for redressal of his grievances in respect of the said sum. 16. In such circumstances, this Writ Petition is disposed of by directing the third respondent Joint Registrar to take necessary steps to W.P.(C) No.16484/2018 12 ensure that the gratuity amount payable to the petitioner amounting to Rs.8,05,653/- is disbursed to the petitioner by the first respondent Society within a period of one month from the date of receipt of a certified copy of this judgment together with interest at the rate of 6%, with effect from 01.05.2017 till payment. The claim made by the petitioner for pay revision arrears is left open to be raised before the appropriate authority under Section 69 of the Act. Sd/- **JUDGE** **ANIL K. NARENDRAN** W.P.(C) No.16484/2018 13 ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 TRUE PHOTOCOPY OF THE RESOLUTION NO 62 DATED 9.3.18 OF THE SECOND RESPONDENT** **EXHIBIT P2 TRUE PHOTOCOPY OF THE REPRESENTATION DATED 12.4.2018 FILED BEFORE THE THIRD RESPONDENT** **RESPONDENTS' EXHIBITS:** **EXHIBIT R1 A TRUE COPY OF THE AUDIT REPORT DATED 13/12/2017 EXHIBIT R1 B TRUE COPY OF THE MINUTES DATED 12/1/2017, RECORDED IN THE MINUTES BOOK BY THE PETITIONER HIMSELF.** csl //True Copy// P.S. to Judge