W.C.L. vs Gyanwati and Others

Sanjay Yadav, J—Shri Anoop Nair, learned counsel with Shri Sharad Punj, counsel for the petitioner.

Shri S.K. Dubey, learned counsel for respondent No. 1 on caveat.

Since the respondents have entered appearance by way of caveat the matter Is heard finally with consent of learned counsel for the parties.

Petition is directed against the order dated 20-5-2010 and 23-3-2011 respectively passed by the Controlling Authority and the Appellate Authority under Payment of Gratuity Act, 1972 (hereinafter to be referred to as Act of 1972).

Facts giving rise for a dispute before the authorities concern, briefly are that late husband of respondent No. 1 after his retirement from the services of the petitioner on attaining the age of superannuation since was deprived of the gratuity of Rs. 2,97,076 approached the controlling authority under the Act of 1972 claiming that the amount has been withheld without any authority.

On being noticed respondents protested the release of gratuity on the plea that the work man on his retirement has not obtained NOC from various departments nor had vacated the quarter which was allotted to him when he was In service. The controlling authority after considering, issued direction to the petitioner management on 20-5-2009 to pay an amount of Rs. 2,97,076 towards gratuity amount, but declined to award interest for the reasons that, the quarter was not vacated. The order passed by the controlling authority was questioned by the petitioner in an appeal under Section 7(7) of the Act of 1972, on the ground, that in absence of the no dues certificate and non-vacating of quarter, the management cannot be compelled to disburse the gratuity. The appellate authority while dismissing appeal directed the management to pay the principal amount of Rs. 2,97,076 as also the interest thereon for the period from 31-5-2007 to 10-12-2009 (2 years, 6 months, 8 days). Thus total sum of Rs. 3,71,996 has been directed to be paid to the petitioner, who is widow of Godhanlal who during the pendency of appeal expired on 11-8-2010. The appellate authority held that the management has no authority to withhold the amount of gratuity even if an employee has not vacated the quarter.

The appellate authority held:

In spite of non-vacation of quarter by the ex-employee the Management cannot retain the amount of gratuity with them. As per Sec. 7(4)(a) of the P.G. Act 1972 the employer under statutory obligation to deposit the gratuity amount, In case he feels that gratuity can be paid to the ex-employee only after submission of no dues certificate etc. As the management feels that there is a dispute in the matter, the appellant could have deposited the gratuity of Rs. 2,97,076 with the controlling authority. Whereas the appellant did not either disburse the gratuity amount to the ex-employee not deposited the amount with the controlling authority till 10-12-2009. The employer has deposited the gratuity amount with the appellate authority along with the Appeal under section 7(7) of the P.G. Act, vide D.D. dated 10-12-2009 belatedly without any valid reasons. The appellant has breached the provisions of Sec. 7(4)(a) of the P.G. Act. The opp. Party No. 1 is entitled for interest @ 10% p.a. from 31-5-2007 to 10-12-2009 on the amount of Rs. 2,97,076 which was lying with the employer, in accordance with Sec. 7(3-A) of the P.G. Act, 1972. The employer is liable to pay interest for the period in which the amount was under custody of the employer in breach of Section 7(4)(a). I hereby rely upon a some of the case laws as below (i) in H. Gangahanume Gowda v. Karnataka Agro Industries Corpn. Ltd. Payment of Interest for the delayed payment is mandatory under Section 7(3A) of the P.G. Act, 1972 as per the judgment of Supreme Court dated 2003-2-05. (2003 SOL case No. 056 dated 2003-2-5 (reported in H. Gangahanume Gowda Vs. Karnataka Agro Industries Corpn. Ltd., (ii) sections 4, 7, 8 of P.G. Act Liability of employer to pay gratuity employee need not give express claim for interest. Authority can grant Interest If delayed payment Champaran Sugar Co. Ltd. Vs. Joint Labour Commissioner and Appellate Authority and Others, , Patna HC Full Bench.

Regarding the issue of non-payment of gratuity till non-vacation of company''s quarter I hereby rely upon the following case laws (i) An employer cannot withhold or adjust the gratuity of an employee for unauthorised occupation of company accomodation Nov, 2003 LLR Guj. HC 1069 (ii) Regarding the issue of non-payment of gratuity till non- vacation of company''s quarters as per Texmaco Ltd. v. Ram Dhan, 1992 (65) FLR 742 Del HC. There is no provision in the Act for withholding of gratuity for non-vacation of company''s quarters. Remedy lies in Civil Court for vacation of quarters. On this ground the workmen cannot be deprived of payment of gratuity (iii) In another case, the Supreme Court held that for withholding gratuity termination of service for any of the causes enumerated in section 4(6) is imperative. In this case there is no such termination. Hence the action of the management in withholding the gratuity amount for non-vacation of quarters is not justified. The Management is liable to pay interest also for the period from 31-5-2007 to 10-12-2009 (2 years 6 months 8 days) on principal amount of Rs. 2,97,076 (Rupees Two Lakh ninety seven thousand and twenty only) which comes to Rs. 74,920 (Rs. Seventy four thousand nine hundred and twenty only) as per Sec. 7(3-A) of the P.G. Act, 1972 which has to be disbursed to the Opp. Party-1.

The order has been challenged by the management on the very same ground, as was raised before the authorities below that in absence of no-objection certificate and the vacating of quarter, they cannot be compelled to disburse gratuity.

Question is whether management are justified their stand.

Trite it is that gratuity Is earned by an employee for long and meritorious service rendered by him.

In The Garment Cleaning Works Vs. Its Workmen, , it was held:

5..........Gratuity is not paid to the employee gratuitously or merely as a matter of boon. It Is paid to him for the service rendered by him to the employer, and when it is once earned it is difficult to understand why it should necessarily be denied to him whatever may be the nature of misconduct for his dismissal........ 11A. Similarly in Calcutta Insurance Co. Ltd. Vs. Their Workmen, , it was observed:

13..........Gratuity cannot be put on the same level as wages. We are inclined to think that It is paid to a workman to ensure good conduct through-out the period he serves the employer. "Long and meritorious service" must mean long and unbroken period of service meritorious to the end. As the period of service must be unbroken, so must the continuity of meritorious service be a condition for entitling the workman to gratuity......... 12. In State of Kerala and Others Vs. M. Padmanabhan Nair, , it was held:

Pension and gratuity are no longer any bounty to be distributed by the Government to its employees on their retirement but have become, under the decisions of this Court, valuable rights and property In their hands and any culpable delay In settlement and disbursement thereof must be visited with the penalty of payment of interest at the current market rate till actual payment. 13. In R. Kapur Vs. Director of Inspection (Painting and Publication) Income Tax and Another, it was observed:

In this appeal before us the appellant urges that he would be entitled to 18% interest at least In view of judgment of this Court in State of Kerala and Others Vs. M. Padmanabhan Nair, . Relying on this ruling, it Is submitted that there Is unjustified culpable delay in issuing the No Demand Certificate. The Tribunal having held that DCRG cannot be withheld because of the pendency of the claim for damages should have awarded interest at the rate of 18% per annum.

The respondent has not entered appearance.

This Court in State of Kerala and Others Vs. M. Padmanabhan Nair, held as under: "Pension and gratuity are no longer any bounty to be distributed by the Government to Rs employees on their retirement but have become, under the decisions of this Court, valuable rights and property in their hands and any culpable delay in settlement and disbursement thereof must be visited with the penalty of payment of Interest at the current market rate till actual payment.

The Tribunal having come to the conclusion that DCRG cannot be withheld merely because the claim for damages for unauthorised occupation is pending, should in our considered opinion, have granted interest at the rate of 18% since right to gratuity is not dependent upon the appellant vacating the official accommodation. Having regard to these circumstances, we feel that it is a fit case in which the award of 18% is warranted and it is so ordered. The DCRG due to the appellant will carry interest at the rate of 18% per an num from 1-6-1986 till the date of payment. Of course this shall be without prejudice to the right of the respondent to recover damages under Fundamental Rule 48-A. Thus, the civil appeal is allowed. However, there shall be no order as to costs.

Thus it is no more res Integra that the gratuity which an employee earns cannot be withheld subject to the conditions as laid down in the statute whereunder it is payable.

In the case at hand, provisions contained in the Act of 1972 no where stipulates the withholding of gratuity for non-vacating of quarter or for non-issuance of no objection certificates by the department concerned.

Section 4 of the Act of 1972 provides for:

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 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 piece-rated 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 not so employed throughout the year"], the employer shall pay the gratuity at the rate of seven days wages for each season.

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 (three Lakhs and fifty thousand) rupees.

(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 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, willful omission or negligence causing any damage or loss to, or destruction of, property be longing 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 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.

The reliance on the decision in Secretary, O.N.G.C. Ltd. and Another Vs. V.U. Warrier, placed by the petitioner is of no assistance to the petitioner It is not their case that a recovery towards rent/penal rent has been effected and after deducting the same, the remainder is being disbursed. The case of the petitioner Is that in absence of no objection and of non-vacating the quarter the entire gratuity is not payable. The stand, in the considered opinion of this Court has no foundation of law, therefore, cannot be approved.

Having thus considered, this Court does not perceive any illegality In the impugned order as would warrant an interference.

In the result petition falls and is hereby dismissed. No costs.