Vazhathope Service Co-Operative Bank Ltd. v. Chandra K. and The Deputy Labour Commissioner and The Joint Registrar (General) of Co-Operative Societies, Idukki District

# **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ## **`THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH`** ``` TUESDAY, THE 21[ST] DAY OF MAY 2024 / 31ST VAISAKHA, 1946 ``` ``` WP(C) NO. 22792 OF 2021 ``` ## **`PETITIONER:`** ``` THE VAZHATHOPE SERVICE CO-OPERATIVE BANK LTD.NO E 202, REPRESENTED BY ITS SECRETARY, THADIAMPADU P. O., IDUKKI DISTRICT - 685 602. ``` ``` BY ADVS. SRI. JOICE GEORGE SMT. LIJI J. VADAKEDOM ``` ## **`RESPONDENTS:`** ``` 1CHANDRA K., AGED 62 YEARS, W/O. SUKUMARAN K. P., RETIRED SECRETARY, THE VAZHATHOPE SERVICE CO-OPERATIVE BANK LTD NO. E 202, THADIAMPADU P. O., IDUKKI DISTRICT - 685 602. RESIDING AT KALLURUMBIL , CHURULI, CHELACHUVADU P. O., IDUKKI DISTRICT, PIN 685 606. ``` - **`2 THE DEPUTY LABOUR COMMISSIONER, OFFICE OF THE DEPUTY LABOUR COMMISSIONER, NEAR ETTUMMANOOR TEMPLE, KOTTAYAM DISTRICT, PIN - 686 631.`** - **`3 THE JOINT REGISTRAR (GENERAL) OF CO-OPERATIVE SOCIETIES, IDUKKI DISTRICT, PIN - 685 602.`** ``` BY ADVS. SRI. S. JAYAKRISHNAN SRI. S. PARAMESWARA PRASAD SRI. DHEERAJ A. S. - GP ``` ``` THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON ``` ``` 21.05.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` WP(C) NO. 22792 OF 2021 ``` ``` 2 ``` ## **DINESH KUMAR SINGH, J.** -------------------------- ## **W.P.(C) No. 22792 of 2021** ------------------------- Dated this the 21[st] day of May, 2024 ## **JUDGMENT** 1. The petitioner is a Co-operative Society registered under the provisions of the Kerala Co-operative Societies Act, 1969. The total number of employees as per the averments in the writ petition of the petitioner Society is 21. The petitioner Society has not enrolled itself under the Group Gratuity Scheme with LIC. 2. The 1[st] respondent was employed as Secretary of the petitioner Society. She demitted the Office on 31.05.2017 on attaining the age of superannuation and applied for the payment of gratuity. The 1[st] respondent was paid Rs. 10,00,000/-, the gratuity amount under Section 4 (3) of the Payment of Gratuity Act, 1972 as per the ceiling limit prescribed at the relevant time. 3. The 1[st] respondent, however claimed that her last drawn salary was of Rs. 1,11,711/- and she had rendered 38 years long service in the petitioner Society and, therefore, she was entitled to get a total amount of Rs. 24,49,049/- as the gratuity amount. ``` WP(C) NO. 22792 OF 2021 ``` ``` 3 ``` 4. The 1[st] respondent filed petition under Section 7 of the Payment of Gratuity Act, 1972 before the 3[rd] respondent Competent Authority appointed under the said Act being No. GC 54 of 2021. While the said petition was pending before the Controlling Authority, the 1[st] respondent filed W.P.(C) No. 22785 of 2020 before this Court. This Court vide the Judgment and Order dated 23.02.2021 directed the 2[nd] respondent, Controlling Authority to consider and dispose of the petition No. GC 54 of 2021 in accordance with the law within a period of four months from the date of receipt of a copy of the Judgment (Exhibit P-2 Judgment). The petitioner Society filed its objection in Exhibit P-3 before the Controlling Authority to the petition filed by the 1[st] respondent. The 2[nd] respondent Controlling Authority relying on the Rule 59 (iii) of the Kerala Co-Operative Societies Rules, 1969 passed the impugned order in Exhibit P-4 holding that the 1[st] respondent would be entitled for gratuity equivalent to half monthly wages of number of years of her service rendered in the Society. It has been held that irrespective of the ceiling limit prescribed under Subsection (3) of Section 4 of the Payment of Gratuity Act, 1972, the 1[st] respondent would be entitled to the gratuity calculated ``` WP(C) NO. 22792 OF 2021 ``` ``` 4 ``` on the basis of her total service and last drawn wages. The 2[nd] respondent in the impugned order has directed the petitioner to make payment of Rs. 14,49,049/- as unpaid gratuity along with interest @ 10% to the 1[st] respondent. 5. The said order passed by the 2[nd] respondent is subject matter of challenge before this Court. The learned Counsel for the petitioner has submitted that the order impugned in the present writ petition is without jurisdiction as the Competent Authority appointed under Section 7 of the Payment of Gratuity Act, 1972 is empowered to adjudicate or determine the amount of gratuity payable to an employee under the Payment of Gratuity Act. The Competent Authority has no power to adjudicate/determine the amount of gratuity payable under any other Act or Rules and, therefore, it is submitted that the order passed by the Competent Authority is without jurisdiction. 6. It is further submitted that the 2[nd] respondent has held that the 1[st] respondent is entitled to receive gratuity as per Rule 59 (iii) of the Kerala Co-Operative Societies Rules, 1969 and, therefore, the dispute regarding the amount of gratuity is not under the Payment of Gratuity Act but, under Rule 59 (iii) of the Kerala Co-Operative Societies Rules, 1969 and thus, the ``` WP(C) NO. 22792 OF 2021 ``` ``` 5 ``` impugned order in Exhibit P-4 is without jurisdiction as the Competent Authority traveled beyond the jurisdiction conferred on him under Section 7 of the Payment of Gratuity Act. It is submitted that the Competent Authority should have relegated the parties to get the dispute decided by raising an arbitration under Section 69 of the Kerala Co-Operative Societies Act, 1969 and he ought not have decided the issue by himself. 7. The second submission of the learned Counsel for the petitioner is that the Competent Authority has omitted the proviso to Rule 59 of the Kerala Co-Operative Societies Rules, 1969 which limits the payment of gratuity under the said Rule to 15 months pay. However, the Competent Authority has directed for payment of gratuity which exceeds the ceiling limit prescribed under the proviso i.e. for 15 months pay and, therefore, the impugned order is unsustainable and liable to be set aside. 8. The third submission raised by the learned Counsel for the petitioner is that under Section 2(e) of the Payment of Gratuity Act, 1972 which defines ‘ _employee_ ’ excludes the employee governed by any other Act or the Rules providing for payment of gratuity. In the present case, the employees of the Co- ``` WP(C) NO. 22792 OF 2021 ``` ``` 6 ``` operative Societies like the petitioner are governed by the Kerala Co-Operative Societies Act and Rules made thereunder for payment of gratuity and, therefore, the provisions of Payment of Gratuity Act, 1972 are not applicable in case of the 1[st] respondent and thus, the order impugned is without jurisdiction. 9. The learned Counsel for the petitioner has placed reliance on the following Judgments in support of his submissions; - (1) _**Allahabad Bank and Another v. All India Allahabad Bank Retired Employees Association [2010 (2) SCC 44];**_ - (2) _**Shankara Narayanan P. A. v. Kerala State Beverages (M and M) Corporation Ltd. [2024 KHC Online 293].**_ 10. On the other hand, the learned Counsel for the 1[st] respondent has supported the impugned order on the ground that the 1[st] respondent had rendered 38 years continuous long service in the petitioner Society and her last drawn monthly wage was Rs. 1,11,711/-. It has been further submitted that the petitioner has admitted in the writ petition that the provisions of Payment of Gratuity Act, 1972 are applicable in respect of the ``` WP(C) NO. 22792 OF 2021 ``` ``` 7 ``` employees of the petitioner Society. In paragraph 2 of the writ petition it has been stated that ‘ _the petitioner Society is governed by the Payment of Gratuity Act 1972’_ . Therefore, it would not lie in the mouth of the petitioner Society to say that the employees of the petitioner Society would not come within the purview of the provisions of the Payment of Gratuity Act, 1972. 11. It has been further submitted that Sub-Section (7) of Section 7 provides for statutory appeal against an order passed by the Competent Authority under Sub-Section (4) of Section 7 to the appropriate Government or such authority as may be specified by the appropriate Government in this behalf. Instead of resorting to the appeal against the impugned order, the petitioner has approached this Court and, therefore, the writ petition is not maintainable in view of the alternative remedy of appeal provided under the Act itself. The learned Counsel for the 1[st] respondent has therefore, submitted that the writ petition is liable to be dismissed with cost. 12. Before enactment of the Payment of Gratuity Act, 1972 there was no Central Act to regulate payment of gratuity to industrial workers, except the Working Journalists (Conditions ``` WP(C) NO. 22792 OF 2021 ``` ``` 8 ``` of Service) and Miscellaneous Provisions Act, 1955. The Government of Kerala enacted legislation in 1971 for payment of gratuity to workers employed in factories, plantations, shops and establishments. The West Bengal Government promulgated an Ordinance on 3[rd] June, 1971 prescribing similar scheme of gratuity. The said Ordinance was replaced by West Bengal Employees’ Payment of Compulsory Gratuity Act, 1971 which received assent of the President on 28[th] August, 1971. Since the enactment of Kerala and West Bengal Acts came into force, other State Governments had raised voice expressing their intentions of enacting similar measures in their respective States and, therefore, need was felt to have a Central Law on the subject so as to ensure a uniform pattern of payment of gratuity to the employees throughout the Country. 13. The Statement of Object Reasons would disclose that it was felt that the enactment of the Central Law was necessary to avoid different treatments to the employees of the establishments having branches in more than one State, when, under the conditions of their service, the employees could be transferred from one State to another. 14. The proposal for Central legislation on gratuity was ``` WP(C) NO. 22792 OF 2021 ``` ``` 9 ``` discussed in the Labour Ministers’ Conference held at New Delhi on 24[th] and 25[th] August, 1971 and also in the Indian Labour Conference held on 22[nd] and 23[rd] October, 1971. The consensus emerged that Central legislation on payment of gratuity should be enacted as early as possible. Thus, the Central legislation, the Payment of Gratuity Act, 1972 came to be enacted and enforced. 15. The Payment of Gratuity Act is a beneficial legislation. It is social legislation which aims to provide social security to an employee after retirement, resignation, whenever he become eligible. The Act applies to every factory, mine, oil field, plantation, port and every company and every shop and establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed or were employed on any day of the preceding twelve months. 16. The petitioner himself admitted that the employees of the petitioner Society are governed by the Payment of Gratuity Act and its provisions are applicable to the Society. 17. The payment of gratuity becomes payable to an employee on the termination of his employment after he has rendered ``` WP(C) NO. 22792 OF 2021 ``` ``` 10 ``` continuous service for not less than five years either on his superannuation or on his retirement or resignation or on his death or disablement due to accident or disease as per Section 4 of the Payment of Gratuity Act, 1972, which reads as under; ## **Section: 4 Payment of gratuity.** (1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years, - (a) on his superannuation, or (b) on his retirement or resignation, or (c) on his death or disablement due to accident or disease: Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement: [Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such ``` WP(C) NO. 22792 OF 2021 ``` ``` 11 ``` bank or other financial institution, as may be prescribed, until such minor attains majority.] Explanation. - For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he, was capable of performing before the accident or disease resulting in such disablement. (2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days wages based on the rate of wages last drawn by the employee concerned: Provided that in the case of a piecerated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account: Provided further that in the case of [an employee who is employed in a seasonal establishment and who is riot so employed throughout the year], the employer shall pay the gratuity at the rate of seven days’ wages for each season. ``` WP(C) NO. 22792 OF 2021 ``` ``` 12 ``` [Explanation: In the case of a monthly rated employee, the fifteen days wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen]. (3) The amount of gratuity payable to an employee shall not exceed [such amount as may be notified by the Central Government from time to time]. (4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced; (5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer. (6) Notwithstanding anything contained in sub-section (1), - (a) the gratuity of an employee, whose services have been terminated for any act, ``` WP(C) NO. 22792 OF 2021 ``` ``` 13 ``` wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused; (b) the gratuity payable to an employee [may be wholly or partially forfeited] - (i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or (ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment. [***] 18. In terms of the provisions of the Payment of Gratuity Act, 1972, the ceiling limit of the amount of gratuity has been fixed from time to time and at the relevant time it was Rs. 10,00,000/, when the 1[st] respondent retired from service on 31.05.2017. The rate of gratuity however has to be determined @ 15 days salary for every completed year of service subject to the ``` WP(C) NO. 22792 OF 2021 ``` ``` 14 ``` maximum limit fixed under the statute. Despite the ceiling limit and calculation of the gratuity, Sub-Section (5) of Section 4 provides that if an employee has right to receive better terms of gratuity under any award or agreement or contract with the employer, his right would not get affected for payment of better terms of gratuity under other provisions of law. SubSection (5) has thus overriding effect to receive better terms of gratuity by the employee under any award or agreement or contract with the employer. 19. Section 7 empowers the prescribed/competent authority to determine the amount of gratuity to an eligible person for payment of gratuity under the Act and Sub-Section (7) of Section 7 provides for an appeal against the order passed by the prescribed authority under Sub-Section (4) of Section 7 before the appropriate Government or the designated appellate authority. Section 14 prescribes that the provisions of Payment of Gratuity Act shall have overriding effect on any other law or rules inconsistent with the provisions and Rules made under the Payment of Gratuity Act or any instrument or contract having the effect by virtue of an enactment. Thus, in case of conflict between the provisions of the Payment of Gratuity Act and ``` WP(C) NO. 22792 OF 2021 ``` ``` 15 ``` Rules made thereunder with any other enactment or rules made thereunder, the provisions of Payment of Gratuity Act and Rules made thereunder will have overriding effect and are to be given effect to. In view of the statutory provision and the beneficial nature of the legislation, the issue involved in this writ petition needs to be decided. It is not in dispute that the provisions of the Payment of Gratuity Act are applicable to the petitioner Society as per their own admission in paragraph 2 of the writ petition. 20. Further, Section 2 (e) of the Act cannot be given the interpretation as advanced by the learned Counsel for the petitioner inasmuch as the phrase _‘but does not include any person who hold post under Central Government or a State Government and is government by any other Act or by Rules provided for payment of gratuity’_ does not have any disjunct between person who holds post under the Central Government or a State Government and is governed by any other Act………………. 21. The provision simply means that a person who holds the post under the Central Government or State Government and he is governed for payment of gratuity by any other Act, he shall ``` WP(C) NO. 22792 OF 2021 ``` ``` 16 ``` not be governed by the provisions of the Payment of Gratuity Act. However, it does not mean that any person who is governed for payment of gratuity by any other Act could not be entitled for the beneficial provisions under the Payment of Gratuity Act, 1972. It may be further said that in view of Section 14 of the Payment of Gratuity Act, 1972 which has overriding effect, even if person is governed by the provisions of any other enactment who is not the employee of the Central Government or State Government, he would be entitled for beneficial provision of the Payment of Gratuity Act, 1972. 22. Once it is held that the petitioner Society is governed for payment of gratuity under the provisions of the Payment of Gratuity Act, 1972, Section 5 (4) has to be given full effect. Under Rule 59 of the Co-operative Societies Rules, 1969, the gratuity amount should not exceed 15 months pay. Rule 59 on reproduction reads as under; 59. Gratuity. - Every society shall make in its bye-laws provision for payment of gratuity to its employees and frame regulations for its administration. Among other matters such regulations shall provide for the following - ``` WP(C) NO. 22792 OF 2021 ``` ``` 17 ``` (i) all monthly paid employee on the permanent establishment shall be eligible for gratuity; (ii) service rendered by employees must be continuous and satisfactory; (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 irrespective of the amount received out of any scheme chosen or implemented by a society for the purpose]. 23. Comparing Sub-Section (4) of Section 5 of the Payment of Gratuity Act, 1972 with Rule 59 of the Co-operative Societies Rules, 1969 it can be seen that Rule 59 provides for better terms for payment of the gratuity to an employee of the Co-operative Society. Considering the said fact, the Section 5(4) has to be ``` WP(C) NO. 22792 OF 2021 ``` ``` 18 ``` given effect to by directing for payment of the gratuity to the 1[st] respondent under Rule 59. I therefore, find no substance in the submission of the learned Counsel for the petitioner that the employees of petitioner Society are not governed under the provisions of the Payment of Gratuity Act, 1972 for payment of gratuity and the prescribed authority has no jurisdiction to determine the payment of gratuity. Such a contention is belied of any substance and is hereby rejected. It is held that the 1[st] respondent’s gratuity is to be calculated as per Section 5 of the Payment of Gratuity Act, 1972 and since Rule 59 of the Cooperative Societies Rules provides for better terms of payment in respect of payment of gratuity, payment of gratuity has to be granted as per Rule 59 of the Co-operative Societies Rules, 1969. 24. Another contention of the learned Counsel for the petitioner that since the payment has been determined under Rule 59 of the Co-operative Societies Rules, 1969, the matter ought to have been relegated to the arbitration under Section 69 of the Co-operative Societies Act, 1969 is also liable to be rejected. The payment has been determined as per the provisions of the Payment of Gratuity Act, 1972. Section 5(4) ``` WP(C) NO. 22792 OF 2021 ``` ``` 19 ``` itself provides for determination of the gratuity under the better terms of conduct of employment etc. Once the Rule 59 provides for better terms of payment of gratuity to an employee under the Co-operative Society governed under the Co-operative Societies Act, 1969, there is no question of the matter to be referred to the arbitration. Therefore, the said contention is also rejected. 25. There is no doubt that there is alternative remedy of appeal provided under Sub-Section 7 of Section 7 against an order passed under Sub-Section (4) of Section 7 by the prescribed authority. However, since the pleadings have been exchanged and the matter was admitted, no purpose would be served for sending the matter to the appellate authority at this stage and, therefore, despite availability of alternative remedy this Court has taken up the matter on merit and decided accordingly. 26. From perusal of the impugned order, it may be noticed that the prescribed authority has omitted the proviso of Rule 59 which limits the payment of gratuity to 15 months pay. The prescribed authority has not taken into consideration the said proviso and, therefore, an error has crept in while determining ``` WP(C) NO. 22792 OF 2021 ``` ``` 20 ``` the amount of gratuity to be paid to the 1[st] respondent. The facts are not in dispute that the last drawn salary of the 1[st] respondent is Rs. 1,11,711/-. The 1[st] respondent would be entitled for gratuity amount which would be Rs. 1,11,711 x 15 = Rs. 16,75,665/-. Rs. 10,00,000/- was already paid to her before filing the claim petition before the prescribed authority. Thus, the 1[st] respondent would be entitled for further payment of Rs. 6,75,665/- + 8% interest from the date of filing of the claim petition before the prescribed authority i.e. w.e.f. 10.12.2020 till the date of payment. Petitioner is directed to make payment of Rs. 6,75,665/- + 8% interest w.e.f. 10.12.2020 till the date of payment made to her within one month from today. In the aforesaid terms the present writ petition is finally disposed of. **Sd/DINESH KUMAR SINGH JUDGE** Svn ``` WP(C) NO. 22792 OF 2021 ``` ``` 21 ``` ## **`APPENDIX OF WP(C) 22792/2021`** ## **`PETITIONER’S EXHIBITS`** ``` EXHIBIT P1 ``` ``` THE COPY OF THE PETITION FILED BY THE 1ST RESPONDENT (UNDER SECTION 7 OF PAYMENT OF GRATUITY ACT) ``` ``` EXHIBIT P2THE COPY OF THE JUDGMENT DATED 23-02- 2021 IN W.P(C) NO. 22785/2020 OF THIS HONOURABLE COURT ``` ``` EXHIBIT P3THE COPY OF THE OBJECTION FILED BY THE PETITIONER IN GC 54/2021 BEFORE THE 2ND RESPONDENT ``` ``` EXHIBIT P4THE COPY OF THE ORDER DATED 20-09-2021 IN GC 54/2021 PASSED BY THE 2ND RESPONDENT ``` ``` TRANSLATED COPYTRANSLATED COPY OF EXHIBIT P4 OF EXHIBIT P4 ```