Writ Appeal No.1705 of 2022

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **&** **THE HONOURABLE MR.JUSTICE C. JAYACHANDRAN** **TUESDAY, THE 17[TH] DAY OF OCTOBER 2023 / 25TH ASWINA, 1945** **WA NO.1705 OF 2022 JUDGMENT IN WP(C) 25144/2022 OF HIGH COURT OF KERALA DATED 28.9.2022** **----------------** ## **- APPELLANTS/PETITIONERS :** 1 NARAYANAN NAIR, AGED 62 YEARS RETIRED ACCOUNTANT, THE MULIYAR SERVICE CO-OPERATIVE BANK LTD., P.O. KANTHALLUR, KASARAGOD DISTRICT. S/O A.KUNHIRAMAN NAIR, R/AT RAMANILAYAM, 5TH MILE, P.O.KOLATHUR, CHENGALA VIA, KASARAGOD DISTRICT, PIN – 671 541 2 NARAYANAN.T., AGED 62 YEARS (DIED) RETIRED SENIOR CLERK, MULIYAR SERVICE CO-OPERATIVE BANK LTD., KANATHUR, P.O. MULIYAR, KASARAGOD DISTRICT. S/O APPA.T., R/AT NOOVAMBAIR HOUSE, KOOTTOOR.P.O., MULIYAR, KASARAGOD DISTRICT, PIN – 671 542. *ADDL.APPELLANTS 3 TO 6 IMPLEADED ADDL.3 OMANA W/O T.NARAYANAN, R/AT NOOVAMBAYAL HOUSE, P.O.,MULIYAR, MULIYAR VILLAGE, KASARAGOD DISTRICT. ADDL.4 SUJATHA D/O T.NARAYANAN, R/AT NOOVAMBAYAL HOUSE, P.O, MULIYAR, MULIYAR VILLAGE, KASARAGOD DISTRICT ADDL.5 ANEESHKUMAR S/O T.NARAYANAN, R/AT NOOVAMBAYAL HOUSE, P.O.,MULIYAR, MULIYAR VILLAGE, KASARAGOD DISTRICT. ADDL.6 SUDHEESHKUMAR S/O T.NARAYANAN, R/AT NOOVAMBAYAL HOUSE, P.O.,MULIYAR, MULIYAR VILLAGE, KASARAGOD DISTRICT. *ADDITIONAL APPELLANTS 3 TO 6 IMPLEADED AS PER ORDER DATED 13.09.2023 IN I.A.NO.1/2023 IN W.A.No.1705/ 2022. WA NO.1705 OF 2022 -: 2 :- BY ADV KODOTH SREEDHARAN ## **- RESPONDENTS/RESPONDENTS :** 1 THE JOINT REGISTRAR OF CO OPERATIVE SOCITIES (GENERAL), CO-OPERATIVE SOCIETIES, KASARAGOD, PIN – 671 323 2 THE DEPUTY LABOUR COMMISSIONER GRATUITY CONTROLLING AUTHORITY, OFFICE OF THE DEPUTY LABOUR COMMISSIONER, KASARAGOD – 671 323. 3 THE MULIYAR SERVICE CO-OPERATIVE BANK LTD., KANATHUR.P.O., MULIYAR, KASARAGOD DISTRICT-671 542 REPRESENTED BY ITS SECRETARY. 4 LIFE INSURANCE CORPORATION OF INDIA LTD (LIC) REPRESENTED BY ITS MANAGER, LIFE INSURANCE CORPORATION OF INDIA LTD., JEEVAN JYOTHI, M.G. ROAD, KASARAGOD DISTRICT, PIN – 671 121 BY ADVS. JAWAHAR JOSE S.EASWARAN ABRAHAM P.MEACHINKARA SRI.B.UNNIKRISHNA KAIMAL, SR.GP THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 11.10.2023, THE COURT ON 17.10.2023 DELIVERED THE FOLLOWING: WA NO.1705 OF 2022 -: 3 :- **ANU SIVARAMAN, J. & C. JAYACHANDRAN, J. -----------------------------------------------------------------W.A. No.1705 of 2022 ------------------------------------------------------------Dated this the 17[th] day of October, 2023** ## **JUDGMENT** ## **Anu Sivaraman, J.** This writ appeal is preferred by the two former employees of the 3[rd] respondent Co-operative Society, who were the writ petitioners in W.P.(C) No.25144/2022. While the appeal was pending, the 2[nd] appellant passed away and additional appellants 3 to 6 were impleaded by order dated 13.9.2023 in I.A. No.1/2023 in the writ appeal. 2. The contention in the writ petition was that the petitioners were entitled to the higher amount of gratuity received from the LIC over and above the maximum amount payable as notified under Section 4(3) of the Payment of Gratuity Act (for short, 'the Act'). They contended specifically that a higher amount had been received from the LIC towards the policy taken by the Society for payment of gratuity to them and therefore, the said higher amount is liable to be released to them. They contended that in the light of the judgment of WA NO.1705 OF 2022 -: 4 :- the Full Bench in **Chandrasekharan Nair G. and others** v. **Kerala State Co-operative Agricultural and Rural Development Bank Ltd. and others** [2017 (4) KLT 276], they are entitled to the higher amounts released by the LIC. 3. When the matter came up along with other connected cases for disposal in terms of the judgment of the Full Bench, the learned counsel appearing for the 3[rd] respondent submitted that the 3[rd] respondent had not been put on notice before the writ petition was disposed of and that a counter affidavit may be permitted to be filed. Thereafter, a counter affidavit was placed on record by the 3[rd] respondent. It is stated therein that the 1[st] appellant had retired from service on 30.6.2006. He had a continuous service of 41 years 1month and 15 days and his last pay drawn was Rs.17,087/-. It is submitted that in view of Rule 59 of the Kerala Co-operative Societies Rules (for short, 'the Rules') and limiting the amount payable as per the 1[st] proviso thereto, the 1[st] appellant would be entitled only to an amount of Rs.2,56,305/- as gratuity. It is submitted that the 3[rd] respondent had received only an amount of Rs.1,61,946/- from the LIC on 7.6.2006. However, the 3[rd] WA NO.1705 OF 2022 -: 5 :- respondent had paid an amount of Rs.3,50,000/- to the 1[st] appellant by recouping Rs.1,88,054/- from their own funds. Ext.R3(c) communication is produced to show that only an amount of Rs.1,61,946/- was received by the 3[rd] respondent from the LIC towards the payment of gratuity to the 1[st] appellant. 4. It is stated that the 2[nd] appellant retired from service on 31.5.2017 and he had a continuous service of 34 years and 8 months and his last drawn salary was Rs.69,597/-. The 2[nd] appellant is entitled to Rs.10,43,955/- as gratuity. However, in accordance with the 2[nd] proviso, it is stated that he is entitled to receive only Rs.10 lakhs as gratuity. Ext.R3(d) is produced and relied on to contend that only Rs.10 lakhs was forwarded by the LIC to the bank in respect of the gratuity due to the 2[nd] appellant. 5. It is stated that Section 4(3) of the Act determines the amount to be paid to an employee as gratuity. As the 1[st] appellant retired on 30.6.2006, he is entitled only to Rs.3,50,000/- as gratuity as on the date of his retirement as notified under Section 4(3) of the Act. It is further stated that WA NO.1705 OF 2022 -: 6 :- the 2[nd] appellant retired on 31.5.2017 and he is entitled only to Rs.10 lakhs as per Section 4(3). 6. The learned counsel for the appellants submits that Rule 59 of the Rules provides for better terms of gratuity payable to employees of Co-operative Societies. It is contended that since the amount payable under Rule 59 is higher than the amount provided as cap by notifications under Section 4(3) of the Act, the appellants are entitled to the said higher amounts. Reliance is placed on a judgment of the Full Bench as also a Division Bench of this Court in **General Manager, Malappuram District Co-operative Bank** v. **C.T.Janardhanan and others** [2018 (5) KHC 73] and of the Apex Court in **Singla Y. K.** v. **Punjab National Bank and others** [2012 KHC 4765] in support of the contentions. 7. The learned counsel for the 3[rd] respondent, on the other hand, contends that there must be some agreement or award or contract, apart from the provisions of the Act, which provides a better payment of gratuity for the provisions of Section 4(5) of the Act to be applicable. It is only if there is such a better provision either under an agreement or under the WA NO.1705 OF 2022 -: 7 :- insurance policy or even an instrument as found by the Full Bench that the cap under Section 4(3) would become inapplicable and a better term under Section 4(5) would govern the issue. It is contended that in the instant case, the LIC had made payment only of the lesser amount than the cap as provided in Section 4(3) in the case of the 1[st] appellant and an amount equivalent to the cap amount under Section 4(3) in the case of the 2[nd] appellant. It is stated that if Rule 59 is read as a whole with its proviso, there is no entitlement in the appellants for any better term of gratuity and therefore, there can be no payment in excess of the cap amount. 8. Having considered the contentions advanced, we notice that Rule 59 of the Rules specifically provides for payment of gratuity not exceeding half months pay for every completed year of service. However, the 1[st] proviso to the Rule is that in no case shall the gratuity exceed 15 months pay. The 2[nd] proviso which states that the amount of gratuity payable shall not exceed the amount which an employee is eligible under the Payment of Gratuity Act, 1972 or under the Act and these Rules, whichever is applicable irrespective of the amount WA NO.1705 OF 2022 -: 8 :- received out of any scheme chosen or implemented by a society for the purpose has been found to be not applicable by the Full Bench because of the overriding effect of the Payment of Gratuity Act as provided under Section 14 thereof. Therefore, if the gratuity payable under Rule 59 including its 1[st] proviso exceeds the cap as notified under Section 4(3) of the Act then the employee would clearly be eligible to the higher amount as provided in the Rules which can be construed to be an instrument which provides for better terms under Section 4(5) of the Act. 9. In the case of the 1[st] appellant, the amount as computed under Rule 59 read with its 1[st] proviso would be a lesser amount than the amount to which the employee was entitled as gratuity under the Act. If that be so, the 1[st] appellant would be entitled only for an amount of Rs.3,50,000/as has been paid in the instant case. However, with regard to the 2[nd] appellant, we notice from the counter affidavit filed by the 3[rd] respondent that the entitlement of the 2[nd] appellant who has since passed away and therefore of appellants 3 to 6 would be entitled to an amount of Rs.10,43,955/-, that is, the last WA NO.1705 OF 2022 -: 9 :- drawn pay x 15. If that be so, going by the decision of the Full Bench, the 3[rd] respondent cannot contend that the 2[nd] proviso would be applicable and therefore, only an amount of Rs.10 lakhs is liable to be paid to the 2[nd] appellant. Even if only Rs.10 lakhs is paid by the LIC, the further amount of Rs.43,955/-, which is liable to be paid as gratuity in terms of Rule 59 read with its 1[st] proviso has to be paid by the 3[rd] respondent Society. In the above view of the matter, we dismiss the appeal as far as the 1[st] appellant is concerned. However, we hold that the 2[nd] appellant would be entitled to the amount of gratuity payable taking note of half months pay for every completed year of service limited to 15 months pay. If the said amount has not been disbursed, the same will be disbursed without delay, at any rate, within one month from the date of receipt of a copy of this judgment. Though the learned counsel appearing for the 3[rd] respondent contended that no interest would be payable on the amount of Rs.43,955/-, which was not paid by the Society only because of the 2[nd] proviso to Rule 59 and that the overriding WA NO.1705 OF 2022 -: 10 :- effect of the Gratuity Act stands clarified only by the Full Bench decision of this Court, we are of the opinion that since the payment of interest on unpaid gratuity is a statutory claim, this Court would not be justified in negating such statutory payments. The amount of Rs.43,955/- found due shall be paid to the legal heirs of the 2[nd] appellant or the nominee entitled to receive the gratuity, as the case may be, with the statutory interest under Section 7(3-A) of the Payment of Gratuity Act. **Sd/ANU SIVARAMAN Sd/C. JAYACHANDRAN JUDGE** **JUDGE** Jvt/10.10.2023 WA NO.1705 OF 2022 -: 11 :- ## **APPENDIX OF WA 1705/2022** PETITIONER ANNEXURES Annexure1 TRUE COPY OF THE JUDGMENT IN WA NO.758/2022 RESPONDENT ANNEXURES Annexure-R(3)(a) True copy of the communication dated 27-122022 with regard to the decision taken by the Board of Directors of the 3rd respondent Society on 26-12-2022 which was send to the 1st appellant. - Annexure-R(3)(b) True copy of the communication dated 27-122022 with regard to the decision taken by the Board of Directors of the 3rd respondent Society on 26-12-2022 which was send to the 2nd appellant. Annexure-R(3)(c) True copy of the Communication dated 7-62006 issued by the Life Insurance Corporation of India to the 3rd respondent. Annexure-R(3)(d) True copy of the Communication dated 16-52017 issued by the Life Insurance Corporation of India to the 3rd respondent.