V.S.N. Sastry and others vs A.P. State Warehousing Corporation, Hyderabad

The petitioners arc the retired employees of the Andhra Pradesh State Ware-Housing Corporation. In this writ petition, they have sought for a writ in the nature of mandamus declaring the action of the respondent in calculating the gratuity contrary to the Explanation to sub-section (2) of Section 4 of the Payment of Gratuity Act (for short the Act) as illegal and arbitrary, and for a consequential direction to the respondent Corporation to calculate the gratuity strictly in accordance with Section 4(2) read with the Explanation.

Let the Court first state the undisputed facts. They are:

The petitioners were the employees of the A.P. State Ware-Housing Corporation. The petitioners are the employees within the meaning of that term as defined u/s 2(e) of the Act and the A.P. State Ware-Housing Corporation is an establishment to which the Act applies. All the petitioners on attaining age of superannuation retired on different dates, but before the end of October, 1997. At the relevant point of time, the maximum quantum of gratuity that could be paid to a retired employee was fixed at Rs.One Lakh under the Act. But, that ceiling was enhanced to Rs.2,50,000/- by Ordinance No.18 of 1997 which ultimately resulted in the enactment of Amendment Act 22 of 1997, which came into force on 24-9-1997. After the retirement of the petitioners, the Management of the respondent-Corporation proceeded to calculate the gratuity payable to the petitioners as provided u/s 4 of the Act. At that stage, the petitioner filed WP No.2889 of 1997 in this Court complaining that the Management was bound to calculate gratuity payable to them in terms of Regulation (4) of the Andhra Pradesh State Ware-Housing Corporation Employees Gratuity Fund Regulations, 1974 (for short "the Regulations"). A learned single Judge of this Court upheld the contention of the petitioner and disposed of the writ petition on 30-3-1998 directing the respondent Corporation to consider payment of gratuity to the petitioners in terms of Regulation (4). The Management of the respondent Corporation preferred Writ Appeal No.945 of 1998 against the said Order of the learned single Judge, and the Division Bench by its Order dated 24-6-1998 dismissed the appeal. It is stated that the Orders made by this Court have become final. When the matter stood thus, the Management of the respondent-Corporation without adhering to the method specified in the Explanation to sub-section (2) of Section 4 of the Act for the purpose of determining "15 days wages" calculated the wages in terms of Regulation (4) of the Regulations and paid the gratuity accordingly to the petitioners. At that stage, the present writ petition was filed in this Court seeking the above noted reliefs.

Sri G. Vidya Sugar, learned Counsel for the petitioners, contended that the Management of the respondent Corporation is bound by the procedure specified in the Explanation to sub-section (2) of Section 4 of the Act for the purpose of determining what should be the "15 days wages", for the purpose of calculation of total gratuity payable to each of the petitioners-employees and in the instant case, admittedly, that procedure was not followed by the Management of the respondent Corporation. It is not the case of the Management of the respondent Corporation that they calculated "15 days wages" by employing the method provided in the Explanation to sub-section (2) of Section 4 of the Act. Therefore, the only question that falls for consideration and decision is whether the Management of the respondent Corporation is bound to apply the method specified in the Explanation to sub-section (2) of Section 4 of the Act for the purpose of determining, in the instant case, "15 days wages" for the purpose of calculating total sum of money payable to each of the petitioners towards gratuity. Should it be noted at the threshold that the Explanation to sub-section (2) of Section 4 of the Act was part of the Statute even on the date on which each of the petitioners retired on attaining the age of superannuation. It may be apposite to note that Explanation was added to sub-section (2) with effect from 1-10-1987 by Amendment Act 22 of 1987. This amendment was preceded by the pronouncement of the Supreme Court in Jeewanlal (1929) Ltd. Vs. Appellate Authority under the Payment of Gratuity Act and Others, . In that case, the Supreme Court was called upon to interpret the term "15 days wages". The Supreme Court for the reasons stated by it in paras 7, 10 and 12, opined that although a month understood to consist of 30 days, gratuity payable under the Act is in fact towards the actual working days. So opining, the Supreme Court modulated the method for calculating "15 days wages". That judgment led to the enactment of the Amendment Act 22 of 1987 substituting Explanation to sub-section (2) of Section 4 of the Act. Explanation reads as under :

"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."

The applicability of the Act to the respondents establishment is not in controversy. If that is so, the respondent Corporation is bound by the method specified in the Explanation. The Regulations do not provide for a different method for calculating "15 days wages". Therefore, it goes without saying that the Management of the respondent Corporation ought to have adopted the method specified in the Explanation to sub-section (2) of Section 4 of the Act to initially determine what should be the "15 days wages" in respect of each of the petitioners and on the basis ofthat determination, it ought to have computed the total sum of money payable to each of the petitioners towards gratuity. Since the Management has failed to do so, the grievance of the petitioners is justified. A case is made out for interference of the Court.

In the result, writ petition is allowed. A direction shall issue to the respondent-Corporation to compute the gratuity payable to each of the petitioners by strictly adopting the method specified in the Explanation to sub-section (2) of Section 4 of the Act and determine the total sum of gratuity payable to each of the petitioners. After such determination, the respondent Management shall pay the arrears of gratuity to each of petitioners. This direction shall be carried out by the Management of the respondent Corporation within a period of three months from the date of receipt of a copy of this Order. The parties are directed to bear their own costs in the writ petition.