The Managing Director, MECOFED vs Tikender Singh and Others

U.N. Singh, C.J.

We have heard learned counsel for parties and perused the pleadings of writ appeal.

This writ appeal has been filed by the Meghalaya State Cooperative Marketing and Consumers Federation Ltd. (hereinafter to be referred as MECOFED). It is a co-operative society registered under the Meghalaya Co-operative Societies Act (Assam Act 1 of 1950). It was adopted and modified by the Meghalaya Adaptation Laws Order (No. 3) of 1973. The service conditions of the employees, respondents herein are governed by the MECOFED Service, Classifications, Appointment, Control and Appeal (CACA) Rules, 1980. It being an instrument of the State comes within the meaning of a State or other authorities under Article 12 of the Constitution of India. This organization is said to be totally dependent upon the State for financial assistance and for day-to-day functions. The Managing Director of the organization is always appointed directly by the State Government and its senior officers virtually do not have any say in this regard. Even in the case of policy matter, the MECOFED is not competent to take any action without prior approval of the State Government. The State Government is said to have approximately 95% investment in paid up share capital of the MECOFED. Thus, there is a deep and pervasive control of the Government of Meghalaya over this organization. The Scheme of Golden Handshake, whereby the respondents employees parted company with the organization was prepared at the instance of the Government of Meghalaya and all the dues etc. are said to have been paid only by the Govt. of Meghalaya. It appears that in WP(C) No. (SH) 251 of 2004 vide order dated 25.08.2006, the appellant organization was directed to dispose of the representation of the respondents with a speaking order within a period of eight weeks from the date of receiving copies of the order. The two representations dated 18.06.2004 and 16.08.2008 were submitted by the respondents before the appellant organization while urging that they were dissatisfied with regard to terms of settlement of dues under the Golden Handshake Scheme with particular reference to payment of gratuity, leave salary, duty salary and the arrears of pay due on account of pay revisions in 1987 and 1996 in the State of Meghalaya which was adopted by the appellant organization for its employees. Without settling the terms and conditions in the light of representation made by the respondents, the appellant organization allowed the retirement of the respondents on 31.08.2004. Thus, the respondents were not given any chance of hearing in this matter. It is only in this background that WP(C) No. (SH) 251 of 2004 was filed wherein vide order dated 25.08.2004 liberty was granted to the respondents to file fresh representation before the appellant organization. The appellant organization was also directed to dispose of the representation by way of passing a speaking order, and thus, the representations were disposed of by the orders dated 01.12.2006 and 02.12.2006. Thereafter, the respondents filed WP(C) No. 52 of 2007 for payment of leave encashment and arrears of salary etc. Regarding the question of payment of gratuity, this Court vide order dated 02.06.2010 had directed the appellant organization/controlling authority to dispose of the representations filed by the respondents on 22.02.2010 within a period of two months. The controlling authority, thus, by misusing the power under the payment of Gratuity Act, 1972 passed the order dated 30.07.2010 holding that the respondents were entitled to claim payment of gratuity under the Act. Not being satisfied with the order dated 30.07.2010 passed by the controlling authority, the appellant-organization herein filed a review application before the controlling authority/Labour Commissioner against the order dated 30.07.2010 contending that the said order was passed without granting an opportunity of hearing. Thus, the order requires a review. The grounds taken in the review, inter alia, were that the service rules of MECOFED did not provide for payment of gratuity on retirement, termination of service or resignation and that there was no instance of payment of gratuity to any of its employees in the past. As the review petition remained pending with the authority, the respondents filed a writ petition in the Court, wherein, vide the order passed, the appellant organization/controlling authority was directed to dispose of the petition within a period of two months. Thereafter, upon hearing both the parties, the appellant organization/controlling authority passed the order dated 30.05.2012, whereby, the claims of the respondents were disallowed. Thus, the respondents filed a writ petition against the order dated 30.05.2012 on the ground that the order in question was non-speaking; findings recorded vide the earlier order by the competent authority dated 30.07.2010 was not over ruled; the order was passed on total non-application of mind, and the controlling authority failed to exercise the jurisdiction vested in it by the law. It was also submitted that no order was passed under Section 5 of the Payment of Gratuity Act, 1972. It was also the contention of the respondents that the gratuity is a nature of statutory payment and thus such payment has to be cleared within a stipulated time. The appellant organization comes within the definition of establishment under Section 1(3)(b) of the Payment of Gratuity Act, 1972. The authority concerned exceeded jurisdiction in passing the order on review petition and the payment of gratuity was the component of this Scheme.

On the other hand, the appellants being respondents in the writ petition took the plea that the MECOFED under the Classification, Appointment, Control and Appeal Rules, 1980 is silent on the issue of payment of gratuity to its employees and thus the gratuity was never paid to any of the employees in the past.

Learned single Judge having discussed the matter threadbare in the light of rival submission decided the writ petition in favour of the respondents after placing reliance on a judgment of Hon''ble the Apex Court in Allahabad Bank and Another Vs. All India Allahabad Bank Retired Emps. Assn., , wherein it was held that there cannot be a waiver of statutory rights and also that the principles of estoppel cannot be raised to defeat the provisions of statute. The relevant portion of the aforesaid judgment has also been quoted extensively in the impugned judgment.

Learned single Judge has also placed reliance on a judgment of Hon''ble the Apex Court in Dr. Ashok Kumar Maheshwari Vs. State of U.P. and Another, to come to the conclusion that there cannot be estoppel against the statutory right. If the rules provide for certain benefits, it cannot be given up and no waiver, would not bind the authority. This view has been taken in the case of Mathra Prashad and Sons Vs. State of Punjab, . Learned single Judge having considered the submissions on behalf of the appellant organization on the basis of Hon''ble the Apex Court''s judgments in the case of (i) State of Punjab Vs. Labour Court Jullunder and Others, (ii) Guruvayur Devaswom Managing Commit. and Another Vs. C.K. Rajan and Others, (iii) Coal India Ltd. and Others Vs. Saroj Kumar Mishra, and (iv) N. Kannadasan Vs. Ajoy Khose and Others, , did not agree with the submissions of the authority and passed the impugned order. Now being aggrieved by the judgment passed by learned single Judge in WP(C) No. (SH) 154 of 2012 dated 10.07.2013 the appellant organization has filed this appeal.

Dr. ODV Ladia, learned senior counsel, reiterated the submissions made by the appellant organization before the learned single Judge also filed written arguments. The gist of contention is that the appellant organization, namely, Meghalaya State Cooperative Marketing & Consumers'' Federation (MECOFED) is registered under the Meghalaya Cooperative Societies Act. The appellant organization is running at a huge loss since the year 1982-83. Presently, it has huge financial liabilities towards the Meghalaya Cooperative Apex Bank. In view of the poor financial condition of the appellant organization, the Board of Directors resolved to reduce its staff and worked out a better retirement package to downsize the strength of employees. The appellant organization is a sick Public Sector Undertaking (PSU) in the state of Meghalaya. The Government of Meghalaya vide Cabinet Memorandum made a draft Scheme called "Voluntary Retirement Scheme/Golden Handshake Scheme" for all such PSUs in the state of Meghalaya. The Draft Scheme, thus, finalized by the government provided guidelines to be followed by the PSUs. The guidelines provided that since the Service Rules adopted by different PSUs are not similar, therefore, the financial facilities and benefits offered by such different organizations would also be different. The appellant organization has framed its own Service and Conduct Rules called "the Meghalaya State Cooperative and Marketing and Consumers Federation Classification, Appointment, Control and Appeal Rules (CACA) Rules". According to the appellant organization, the rule does not provide for payment of gratuity to its employees. The appellant organization also sought the opinion of Government as to the applicability of the Gratuity Act since the year 1998. The Government by the letter dated 3rd August, 1998 clarified that the Gratuity Act of 1972 does not seem to be applicable to the MECOFED. The appellant organization submitted detailed components of Voluntary Retirement Scheme (VRS), to be offered to its employees, to the State Government seeking financial assistance for implementing the Scheme. The statement clearly indicated that no VCRG/Leave Encashment will be paid to its employees under the VR Scheme as the same is not contained in the Service Rules. The respondents having accepted the retirement benefits have filed several rounds of representations/applications for review to the authorities and also instituted repeated petitions before this Court to seek the benefits which are not admissible under the Service Rules. They also went to the controlling authority as provided under Section 10 of the Payment of Gratuity Act, 1972. The controlling authority pursuant to the order of the High Court dated 02.06.2010 in WP(C) 52 (SH) of 2007, vide the order dated 30.07.2010, passed without hearing the parties, held that the MECOFED comes within the Gratuity Act and the employees are entitled to claim it. The appellant organization, thus, filed review petition before the authority. The appellant also sought the opinion of State Government during the pendency of review petition. The Government vide the letters dated 3.11.2010/10.12.2010 clarified that the MECOFED employees who retired after the acceptance of VRS/Golden Handshake are not entitled to claim gratuity and leave encashment. It appears that the respondents filed another writ petition, namely, WP(C)(SH) 7 of 2012, which was disposed of at Motion Stage by the order dated 02.02.2012 directing the controlling authority to dispose of the review petition. Thus, the review petition of the appellant organization was disposed of and the authority held that the payment of gratuity had never featured as a component of the scheme and the employees are not entitled to claim it. The respondents then filed WP(C)(SH) 154 of 2012 against the order dated 30.05.2012 passed by the controlling authority and also for direction to the appellant organization to pay gratuity irrespective of the fact that they have accepted benefit under the VRS. Learned single Judge by the order dated 10.07.2013 quashed the order dated 30.05.2012 passed by the controlling authority and directed the appellant organization to pay the amount of gratuity as provided under Section 7 of the Payment of Gratuity Act, 1972 within a period of four months. Being aggrieved, the appellant organization has filed the instant writ appeal. It is a submission of the appellant organization that the Draft Cabinet Scheme has left the discretion to the concerned PSU to include the payment of gratuity and leave encashment as per their Service Rules. The appellant organization while preparing the components of VRS excluded the gratuity and leave encashment as per the Service Rules. The respondents having accepted the Scheme and the components are not at liberty to raise issue of payment of gratuity. Learned counsel referred to a judgment of Hon''ble the Apex Court in HEC Voluntary Retd. Emps. Welfare Soc. and Another Vs. Heavy Engineering Corporation Ltd. and Others, , wherein it has been held that pursuant to acceptance of component of a VRS there is a concluded contract between the employer and the employee. The employee gets the salary for the period mentioned therein but also compensation calculated in the manner specified therein. The effect of VRS is cessation of the jural relationship between employer and employee. Learned counsel also referred to another judgment of Hon''ble the Apex Court in A.K. Bindal and Another Vs. Union of India (UOI) and Others, . In the judgment, it is held that having taken advantage of VRS and having accepted the amount without any demur, the relationship of employer and employee ceased to exist. The payment in the VRS is made 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. There is no question of his again agitating for any kind of his past rights like enhancement of pay scale for earlier period. He has also cited the judgment of Hon''ble the Apex Court in Officers and Supervisors of I.D.P.L. Vs. Chairman and M.D. I.D.P.L. and Others, , to argue that it is not open to the person to claim for pay revision once they have opted for VRS.

On the other hand, learned counsel for the respondents Mr. A Khan submitted that the appellant organization have not taken the exemption as required under Section 5 of the Payment of Gratuity Act, 1972, therefore, they are in continuous violation of the relevant provisions of the Act. Mr. Khan also submitted that vide para 4 of the Cabinet Memorandum dated 01.12.2006, the respondents are entitled to claim gratuity as well. It is also a submission of Mr. Khan that the controlling authority vide order dated 30.07.2010 has also held that the respondents are entitled to claim the payment of gratuity.

On careful consideration of rival submissions, we do not find any merit in the contentions of learned counsel for the appellant organization for various reasons, namely, that the Payment of Gratuity is a financial aspect of legislation which was enacted after consultation with the Labour Minister of States as well as the Central Government in different conferences. There is a specific provision, namely, Section 5 which provides for power to exempt payment in favour of the establishment. However, admittedly no such exemption was ever applied for or granted by the competent authority. For ready reference, Section 5 is reproduced herein below:

"5. Power to exempt - (1) The appropriate Government may, by notification, and subject to such conditions as may be specified in the notification, exempt any establishment, factory, mine, oilfield, plantation, port, railway company or shop to which this Act app[lies from the operation of the provisions of this Act if, in the opinion of the appropriate Government, the employees in such establishment, factory, mine, oilfield, plantation, port, railway company or shop are in receipt of gratuity or pensionary benefits not less favourable than the benefits conferred under this Act."

Section 4 of the Act deals with the payment of gratuity as:

"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 no 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."

That Section 4(a) enjoins upon the employer to provide compulsory insurance. We are informed that no such compulsory insurance was provided for by the appellant organization for its employees. Section 4(a) reads as under:

"4.A. Compulsory insurance.--(1) With effect from such date as may be notified by the appropriate Government in this behalf, every employer, other than an employer or an establishment belonging to, or under the control of, the Central Government or a State Government, shall, subject to the provisions of sub-section (2), obtain an insurance in the manner prescribed, for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India established under the Life Insurance Corporation of India Act, 1956 (31 of 1956) or any other prescribed insurer:

Provided that different dates may be appointed for different establishments or class of establishments or for different areas.

(2) The appropriate Government may, subject to such conditions as may be prescribed, exempt every employer who had already established an approved gratuity fund in respect of his employees and who desires to continue such arrangement, and every employer employing five hundred or more persons who establishes an approved gratuity fund in the manner prescribed from the provisions of subsection (1).

(3) For the purpose of effectively implementing the provisions of this section, every employer shall within such time as may be prescribed get his establishment registered with the controlling authority in the prescribed manner and no employer shall be registered under the provisions of this section unless he has taken an insurance referred to in sub-section (1) or has established an approved gratuity fund referred to in sub-section (2).

(4) The appropriate Government may, by notification, make rules to give effect to the provisions of this section and such rules may provide for the composition of the Board of Trustees of the approved gratuity fund and for the recovery by the controlling authority of the amount of the gratuity payable to an employee from the Life Insurance Corporation of India or any other insurer with whom an insurance has been taken under subsection (1), or as the case may be, the Board of Trustees of the approved gratuity fund.

(5) Where an employer fails to make any payment by way of premium to the insurance referred to in subsection (1) or by way of contribution to an approved gratuity fund referred to in sub-section (2), he shall be liable to pay the amount of gratuity due under this Act (including interest, if any, for delayed payments) forthwith to the controlling authority.

(6) Whoever contravenes the provisions of subsection (5) shall be punishable with fine which may extend to ten thousand rupees and in the case of a continuing offence with a further fine which may extend to one thousand rupees for each day during which the offence continues".

That apart, Section 8 of the Act provides for recovery of gratuity from the employers, Section 9 contains the provisions for penalties including imprisonment and Section 13 contains the provisions relating to protection of gratuity.

The protection in respect of payment of gratuity has been discussed by the Delhi High Court in M/s Texmaco Limiteds Vs. Shri Roshan Singh and others, , wherein it was held that the payment of gratuity cannot be withheld even for failing to vacate staff quarters. In view of the clear provisions which provide for mandatory statutory requirement to make payment of gratuity in all eventualities, the appellant-organization cannot escape the liability to make payment of gratuity. That apart, it is also doubtful as to whether the controlling authority can exercise the power of review against its administrative decision. Thus, in the premises discussed hereinabove, we do not find any merit in the writ appeal and the same is hereby dismissed.