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Judgment
K. Chandru, J.—Heard the arguments of Mr. S. Ayyathurai, learned Counsel appearing for the petitioner and Mrs. Geetha Thamaraiselvan,
learned Government Advocate representing the respondents 1 and 2 and Mr. A.L. Somayaji, learned Senior Counsel assisted by Mr. Giridhar
Rao, for the third respondent and perused the records.
The petitioners 78 in number, were all erstwhile employees of the third respondent factory in Salem. By a notice dated 10.7.1994, the said
factory introduced Voluntary Retirement Scheme (VRS). The said scheme included payment of salary for the substantial period of service left out
and also special gratuity. All the 78 petitioners accepted the VRS including the special gratuity. Subsequently, the Trade Unions and the third
respondent Management, on 06.02.1995, entered into a settlement u/s 18(1) of the Industrial Disputes Act, 1947 [for short, ''I.D. Act''] providing
for wage revision. Paragraphs 1, 36 and 37 of the said Settlement read as follows:
The terms and conditions of the Settlement shall apply only to those Permanent workmen on the Rolls of the Company as of date of signing the
Settlement in Mettur Scale of Pay at Mettur, Sankari and Vedaranyam.
Arrears payable under this Settlement will be paid on or before 18th February 1995, (including to those permanent workmen who have retired
on superannuation or died while in service between 01.4.1994 and the date of signing this Settlement). Income Tax deductions will be made from
the arrears arising out of this Settlement.
This Settlement shall come into force from 01.4.1994 and shall be in force till 31.3.1998 and thereafter until terminated by either of the parties
in accordance with law.
The petitioners having left the service along with the lump sum amount paid, filed two sets of proceedings, viz., one claiming difference in gratuity
and the other claiming arrears of salary in terms of paragraph 36 of the said Settlement.
Before the Labour Court at Salem, they filed a petition u/s 33(C)(2) of the Industrial Disputes Act being C.P. Nos. 13 to 160 of 1996 and C.P.
Nos. 192 to 195 of 1996. The Labour Court computed the amount claimed towards arrears of backwages by its order dated 06.01.1997. As
against the said order, the third respondent Management filed W.P. Nos. 5395 of 1996 and 3145 of 1997. Those two writ petitions were
dismissed by this Court vide order dated 04.02.2005. The learned Judge referred to the terms of Settlement and interpreted the same in favour of
VRS retirees and held that they are eligible for the arrears of wages arising out of revision of wages done pursuant to the Settlement. It is necessary
to refer to paragraphs 38 and 43 of the said judgment.
Para 38: In the said background, I am inclined to hold that if the intention was to exclude employees under the Voluntary Retirement Scheme from
the benefit of the settlement, it should have been specifically stated in Clause 36 expressing exclusion of the employees who have left the service on
voluntary retirement on and after 1.4.2004.
Para 43: In conclusion, I am inclined to hold that the expression"" retire on superannuation"" would include also cases of voluntary retirement. The
said conclusion is arrived at not only on the basis of the above discussion, but also the fact that various issues of dispute between the Management
and Labour were admittedly under negotiation between the Unions and the Management at the time when V.R.S. was formulated, the earlier
settlement having lapsed. It is only in those circumstances, Clause 36 was made applicable to the employees who were in service even as on and
from 1.4.1994. There is no explanation as to why the Management had to accept the said condition of applying the settlement retrospectively from
1.4.1994. The settlement was a culmination of a prolonged negotiation, taking into account the rights of the employees who were on the rolls as on
1.4.1994 and subsequently. That being so, there is no justification to deny the benefits to the claimants.
However, it is now stated that the above judgment is pending in appeal before the Division Bench of this Court. The same set of petitioners have
also moved the Controlling Authority under the Gratuity Act (second respondent herein) claiming differential gratuity on account of the wage
revision that took place between the Union and the Management through a Settlement u/s 18(1) of the I.D. Act. Their applications were numbered
as P.G. Case Nos. 31 to 109 of 1995. The authority, by his order 27.11.1996, dismissed the applications and held in paragraph 8 as follows:
At the end, I come to the conclusion that the petitioners accepted Voluntary Retirement Scheme without coercion as alleged by them, received
attractive payments including due gratuity and also were relieved from their jobs. The claims of the petitioners are not maintainable both legally and
factually. Hence I dismiss the claims.
Aggrieved by the said order, the petitioners filed an appeal before the first respondent, who is the appellate authority under the Gratuity Act.
Their appeals were taken on file as P.G. Appeal Nos. 3/97, 4/97 and 6/97. The appellate authority, by his order dated 27.6.1997, confirmed the
order of the second respondent and dismissed all the appeals. In paragraphs 29 and 30, the appellate authority recorded his findings, which read
as follows:
From the above analysis it is crystal clear that the employees were paid better terms of gratuity under VRS Scheme. This is not denied or
disputed by the appellants. Hence the stand taken by the appellant to calculate gratuity based on the settlement has not merits to be considered.
Whereas in the instant case, the employees themselves voluntarily accepted VRS without coercion or compulsion. They left the services on
their own accord. Therefore, it is clear that Clause 36 of the Settlement has in commensuration with Clause 22 of the Standing Orders i.e.,
Retirement"" that is on the completion of 58 years or found unfit to be continued on medical grounds by the employer. If these two conditions are
applicable to the claimants, then it will be good that the claim of the workmen are sustainable in law or on facts. The claimants left the services
voluntarily by submitting petitions before attaining the age of superannuation and was duly accepted and orders passed by the employer. The
claimants in the petitions are permanent workers who were not gone either on retirement or superannuation or died while in service or found to be
medically unfit found by the employer. If so the stand taken by the claimants are perfectly alright and eligible for balance of gratuity. Since the
above conditions don''t fit as per Clause 36 of the settlement, the claimants are not entitled to get any benefit.
It is as against this order, the employees have come on appeal in the present writ petition.
The writ petition was admitted on 16.10.1997. It is in the meanwhile, the order of the Labour Court was upheld by a learned Judge of this
Court.
Mr. S. Ayyathurai, learned Counsel appearing for the petitioners, made the following submissions:
(a) Inasmuch as this Court had upheld the order of the Labour Court by an order dated 04.02.2005 in W.P. Nos. 5395 of 1996 and 3145 of
1997, this Court must take the same view in terms of interpretation of the said Settlement.
(b) Section 4(1) of the Payment of Gratuity Act, 1972 [for short, ''P.G. Act''] will cover even the case of employees who had gone on Voluntary
Retirement.
(c) Paragraph 36 of the Settlement dated 06.02.1995 is retrospective in nature (ie., w.e.f. 01.4.1994), which term includes even persons, who
have gone on voluntary retirement. Since the petitioners'' request for VRS was accepted only on 10.7.1994, they are eligible for the benefit of the
said Settlement and the gratuity must include by taking into account the revision of wages as basis for calculating the last drawn wage.
The learned Counsel relied upon the judgment of the Supreme Court in State of Punjab Vs. Labour Court Jullunder and Others, . He placed
reliance on the following passages found in paragraphs 4 and 5 of the said judgment:
Para 4: The second contention on behalf of the appellant is that retrenchment does not fall within Section 4(1) of the Payment of Gratuity Act,
under which gratuity is payable to an employee on the termination of his employment. The termination envisaged occurs either
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease.
Para 5: Having regard to the definition of ''superannuation'' in Section 2(r) of the Act, it is clear that the case is not one under Clause (a). Nor,
admittedly, is it a case which falls under Clause (c). As regards Clause (b) it is not a case of resignation. The only question is whether it can be
regarded under Clause (b) as a case of retirement. The expression ''retirement'' has been defined by Section 2(q) to mean ''termination of the
service of an employee otherwise than on superannuation''. The definition is framed in the widest terms. Except for superannuation, any termination
of service would amount to ''retirement'' for the purposes of the Act. Retrenchment is a termination of service. It is immaterial that the termination is
occasioned by the need to discharge surplus labour. That retrenchment implies the discharge of surplus labour was explained in Barsi Light Railway
Co. Ltd. v. K.N. Joglekar. Nonetheless, it amounts to termination of service. We are of opinion that the retrenchment of the employee
respondents falls within the scope of Section 4(1) of the Payment of Gratuity Act, and the employee respondents are therefore entitled to gratuity
under that provision.
Taking advantage of the observation that the definition u/s 2(q) of the P.G. Act is framed in wider terms, the learned Counsel argued that it will
cover even the case of employees gone on voluntary retirement. In support of this submission, he also referred to paragraphs 34 to 37 of the order
passed by the learned Judge with reference to the interpretation of the very same Settlement, which read as follows:
Para 34: It is true that Clause 36 uses only the expression ""retired on superannuation"". It is pertinent to note that it does not also mention ""voluntary
retirement"". It is equally true that it does not specifically mention or restrict superannuation only on reaching the age of retirement.
Para 35: In my opinion, there is no variation between the expression ""retirement"" and ""superannuation"". Both mean the same. Retirement could
result either on reaching the age of retirement or by compulsory retirement or by voluntary retirement, which involves the necessity of consent
between both parties. While the age of retirement is automatic on completion of age, compulsory retirement is a unilateral action of the employer in
terms of the service regulations. Voluntary retirement is on consent by both parties, one party making the offer and the other party accepting the
same, without waiting for the completion of the age.
Para 36: Though it is within the powers of the employer to prescribe the age of retirement, it is settled proposition that most of the terms of
employment are contractual in nature, including the fixation of the retirement age. When an individual is appointed, one of the terms under which the
employer offers the employment is that he shall retire on attaining the age of retirement. The employee accepts the contract of service, one of the
terms of the contract being that he will retire on attaining the age of superannuation. In the case of voluntary retirement also, both parties agree that
the employee shall retire even earlier to the date of retirement subject to the conditions as may be agreed to between the parties. That these are
matters in the realm of contract, is not disputed by the Management. In one of the judgments of the Supreme Court relied on by the Management
itself, it is clearly brought out that the offer and acceptance of the proposals of voluntary retirement is a contractual issue vide Bank of India and
Others Vs. O.P. Swaranakar etc.,
Para 37: Therefore, voluntary retirement is no more and no less than an accelerated form of retirement or superannuation on agreement between
both parties. It follows that voluntary retirement is also superannuation from service. The only difference, if any, is that superannuation is
accelerated on agreement by parties instead of the employee reaching the age of retirement.
Per contra, Mr. A.L. Somayaji, learned Senior Counsel appearing for the third respondent, contended that the said order of the learned Judge
is under appeal and an interim stay has also been obtained. Therefore, the claim of the workmen should not be based upon the order of the learned
Judge. He further submitted that a person, who leaves the Company under VRS, cannot be equated with the categories like the retirement,
resignation or death, etc. He also submitted that the VRS is a package and once it is accepted, in the absence of any other right, the workmen
cannot claim for wage revision or differential amount of gratuity, etc.
In this context, the learned Senior Counsel referred to the judgment of the Supreme Court in Hindustan Machines Tools Ltd. and Another Vs.
M.S. Kang/P.N. Kashyap, . It is necessary to refer to the following passage found in paragraph 10 of the said judgment:
Para 10: It is seen that the Office Order No. 45 dated 1.3.1991 provides that the revised pay scales shall be effective from 1-1-1987 and will
remain in force for a period of five years up to 31.12.1991. Clause 2.2 provides that the revised pay scales shall also be applicable on a pro rata
basis to those categories of employees who were on the rolls of the company as on 31-12-1986 but have subsequently separated due to
superannuation and voluntary retirement etc. Those who retired on attaining the age of 58 years or voluntarily retired under Rule 24.2(b) or (c), as
the case may be, under the Conduct, Discipline and Appeal Rules referred to hereinbefore are the persons referred to in Clause 2.2.2 of the office
order. The benefits of the revision of pay scales shall not be applicable to those persons who were on the rolls of the Company as on 31-12-1986
but subsequently left the service of the Company before the date of issue of Office Order No. 45 of 1990 for any reason, whatsoever, including
resignation except the category mentioned in Clause 2.2 above. Thereby, the necessary implication is that all those who are covered and stand on
the same footing are excluded except to the extent of gratuity, revision of the terminal benefits as mentioned in para 6.13 which postulates that
gratuity paid or payable to employees covered under Clause 2.2 will be recalculated on the revised pay subject to the prescribed ceiling. Thus, it
could be seen that the distinction has been drawn between employees who retired voluntarily under Rule 24.2 of the Conduct, Discipline and
Appeal Rules or the employees who retired under the Special Scheme operating from time to time. The respondents having retired under the
Special Scheme are not employees covered under the voluntary retirement under Rule 24.2 of the Conduct, Discipline and Appeal Rules referred
to hereinbefore. Accordingly, the High Court was not right in directing recomputation of the compensation under Office Order No. 45 dated
1.3.1991.
Learned Senior Counsel also submitted that the subsequent wage revision will have no bearing on the employees who left under VRS For this
purpose, he relied upon the passage found in paragraph 34 of the judgment in A.K. Bindal and Another Vs. Union of India (UOI) and Others, ,
which reads as follows:
Para 34: This shows that a considerable amount is to be paid to an employee ex gratia besides the terminal benefits in case he opts for voluntary
retirement under the Scheme and his option is accepted. The amount is paid not for doing any work or rendering any service. It is paid in lieu of the
employee himself leaving the services of the company or the industrial establishment and foregoing all his claims or rights in the same. It is a
package deal of give and take. That is why in the business world it is known as ''golden handshake''. The main purpose of paying this amount is to
bring about a complete cessation of the jural relationship between the employer and the employee. After the amount is paid and the employee
ceases to be under the employment of the company or the undertaking, he leaves with all his rights and there is no question of his again agitating for
any kind of his past rights with his erstwhile employer including making any claim with regard to enhancement of pay scale for an earlier period. If
the employee is still permitted to raise a grievance regarding enhancement of pay scale from a retrospective date, even after he has opted for
Voluntary Retirement Scheme and has accepted the amount paid to him, the whole purpose of introducing the Scheme would be totally frustrated.
He also submitted that the Supreme Court in almost similar circumstances dealt with the case of retrospective wage revision and its impact on
the VRS He referred to the decision of the Supreme Court in HEC Voluntary Retd. Emps. Welfare Soc. and Another Vs. Heavy Engineering
Corporation Ltd. and Others, and relied on the following passages found in paragraphs 18 to 22 and 26, which read as follows:
Para 18: The Voluntary Retirement Scheme speaks of a package. One either takes it or rejects it. While offering to opt for the same, presumably
the employee takes into consideration the future implication also.
Para 19: It is not in dispute that the effect of such Voluntary Retirement Scheme is cessation of jural relationship between the employer and the
employee. Once an employee opts to retire voluntarily, in terms of the contract he cannot raise a claim for a higher salary unless by reason of a
statute he becomes entitled thereto. He may also become entitled thereto even if a policy in that behalf is formulated by the Company.
Para 20: We have indicated hereinbefore that before floating such a scheme both the employer as also the employee take into account the financial
implications in relation thereto. When an invitation to offer is floated by reason of such a scheme, the employer must have carried out exercises as
regards the financial implication thereof. If a large number of employees opt therefor, having regard to the financial constraints, an employer may
not accept offers of a number of employees and may confine the same to only a section of optees. Similarly when an employer accepts the
recommendations of a Pay Revision Committee, having regard to the financial implications thereof it may accept or reject the whole or a part of it.
The question of inclusion of employees who form a special class by themselves, would, thus, depend upon the object and purport thereof. The
appellants herein do not fall either in Clause 3.2 or 3.3 expressly. They would be treated to be included in Clause 3.2, provided they are
considered on a par with superannuated employees. They would be excluded if they are treated to be discharged employees.
Para 21: We have noticed that admittedly thousands of employees had opted for voluntary retirement during the period in question. They
indisputably form a distinct and different class. Having given our anxious consideration thereto, we are of the opinion that neither are they
discharged employees nor are they superannuated employees. The expression ''superannuation'' connotes a distinct meaning. It ordinarily means,
unless otherwise provided for in the statute, that not only he reaches the age of superannuation prescribed therefor, but also becomes entitled to the
retiral benefits thereof including pension. ''Voluntary retirement'' could have fallen within the aforementioned expression, provided it was so stated
expressly in the Scheme.
Para 22: Financial considerations are, thus, a relevant factor both for floating a scheme of voluntary retirement as well as for revision of pay. Those
employees who opted for voluntary retirement, make a planning for the future. At the time of giving option, they know where they stand. At that
point of time they did not anticipate that they would get the benefit of revision in the scales of pay. They prepared themselves to contract out of the
jural relationship by resorting to ''golden handshake''. They are bound by their own act. The parties are bound by the terms of contract of voluntary
retirement. We have noticed hereinbefore that unless a statute or statutory provision interdicts, the relationship between the parties to act pursuant
to or in furtherance of the Voluntary Retirement Scheme is governed by contract. By such contract, they can opt out of such other terms and
conditions as may be agreed upon. In this case the terms and conditions of the contract are not governed by a statute or statutory rules.
Para 26: Considering the matter from that context, we are of the opinion that it cannot be said that the Company intended to extend the said
benefits to those who had opted for voluntary retirement. Clause 3.2 of the circular includes only those who were on the rolls of the Corporation as
on 1-1-1992, as also those who ceased to be in service on that date on account of superannuation or death. The appellants do not come in the
said category. In view of the fact that they have not been expressly included within the purview thereof, we are of the opinion that although they
have not been excluded by Clause 3.3, they would be deemed to be automatically excluded.
The learned Senior Counsel also referred to the latest decision of the Supreme Court in Vijay Kumar and Others Vs. Whirlpool of India Ltd.
and Others, where more or less similar situation was dealt with. He placed reliance upon paragraphs 9 and 10 of the said judgment, which read as
follows:
Para 9: Few portions of the settlement which throw considerable light on the controversy need to be noted:
0.1. Coverage
All paras of this settlement shall cover all permanent workmen, except casuals, of Kelvinator of India Ltd., Faridabad and Ballabgarh on the rolls
(of its various specified divisions) as on 30-6-1995 (hereinafter called eligible workmen).
0.6. Financial benefits
The parties decided to grant the undernoted financial benefits to the workmen:
Increase in basic wage
Period Amount
1-7-1995 Rs. 800
1-7-1996 Rs. 400
1-7-1997 Rs. 300
The amount of financial benefit shall be added to the workman concerned''s basic wage as on 30th June, 1995 and the total thereof would be the
revised basic wage of that workman. The second and third instalments of the financial benefits shall be given only on attainment of the specified
production target and the current 15 per cent special worker allowance shall be added to the workmen''s basic wage from 1-10-1995.
Para 10: A bare reading of the above quoted portion clearly shows that the settlement covered only cases of existing employees. The question of
any erstwhile workman attaining specified production target does not arise.
The argument advanced by Mr. S. Ayyathurai, learned Counsel for the petitioners by placing reliance upon the State of Punjab v. Labour
Court, Jullunder (Cited supra), is of no assistance to him. There, the Supreme Court while dealing with the case of ""retrenchment"", which term was
read into the word ""retirement"" found in Section 2(q) of the I.D. Act. However, the Supreme Court in HEC Voluntary Retired Employees''
Welfare Society case (cited supra) has held that unless there is an express inclusion of the term ""voluntary retirement"", it cannot be read into the
term ""superannuation"", which has got a distinct meaning. The learned Judge, who dealt with the same Settlement went by a diametrically opposite
conclusion in paragraph 38 of the said judgment, which is already extracted above. He has rendered a finding that if there is no exclusion of
employees under the VRS from the benefit of the Settlement, they will be included. Unfortunately, the Management did not place all the decisions
of the Supreme Court in this regard before the learned Judge.
In the light of the above binding legal precedents, there is no other option except to hold that paragraph 36 of the Settlement does not include
persons, who have gone on Voluntary Retirement. The interpretations given by the respondents 1 and 2 in the impugned orders are perfectly in
consonance with law.
Therefore, the writ petition lacks in merits and accordingly, will stand dismissed. However, there will be no order as to costs.