SUPREME COURT OF INDIA
D.A. DESAI, A.P. SEN AND V. BALAKRISHNA ERADI, JJ.
Sudhir Chandra Sarkar, Appellant
Versus
Tata Iron and Steel Co. Ltd., and others, Respondents.
Civil Appeal No. 1803 (N) of 1970
Decided on 27-3-1984.
Advocates appeared
M/s D. N. Mukherjee, Ranjan Mukherjee, A,. K. Ganguli and S. C. Ghosh, Advocates, for Appellant; Mr. R. B. Datar, M/s. Vina Tamta Advocates, for Respondents.
Constitution of India, 1950 - Article 14 - Industrial Disputes Act, 1947 - Retiring Gratuity Rules, 1937 - Rule 6, 7, 10, 11 (2) (ii) and (iii), (4) 8 (a) and 22 – Company - Contract of service - Claimed payment of gratuity - Appellant, an employee of Tata Iron and Steel Company Limited (Company for short has been chasing a mirage - Wit to recover a paltry sum being amount of gratuity to which he was entitled for continuous service rendered by him under what are styled as Retiring Gratuity Rules, 1937 (Gratuity Rules for short) from Company and in this wholly unequal fight he laid down his life before enjoying pittance to which he was entitled after three decades of loyal service - What a dreadful return for abject loyalty - When appellant retired by resignation from service he was paid his provident fund dues but gratuity which he was entitled to be paid under relevant rules was not paid to him - When appellant claimed payment of gratuity, respondent turned deaf ears to it - Appellant served a notice dated - Respondent appeared and contested the suit inter alia contending that in terms of contract of service and particularly having regard to relevant rules under which gratuity can be claimed same is payable on certification of satisfactory service by head of department, and it is payable at absolute discretion of Company irrespective - Whether employee has or has not performed all or any of conditions stated in rules and no employee howsoever otherwise eligible is entitled as of right to any payment under the rules - Whether paid on monthly, weekly or on daily basis, including those borne on pay rolls of Company of Collieries and at Ore Mines and Quarries - Whether an employee has or has not performed all or any of conditions hereinafter stated, and no employee howsoever otherwise eligible shall be deemed to be entitled as of right to any payment under these Rules - Held, Absolute discretion uncontrolled by guidelines which may permit denial of equality before law is anti-thesis of rule of law - Absolute discretion not judicially reviewable inheres pernicious tendency to be arbitrary and is therefore violative of Article 14 - Equality before law and absolute discretion to grant or deny benefit of law are diametrically opposed to each other and cannot co-exist - Therefore, also conferment of absolute discretion by Rule 10 of Gratuity Rules to give or deny benefit of rules cannot be upheld and must be rejected as unenforceable - Further in Court opinion, company declined to meet its obligation on an utterly unreasonable stand and denied to plaintiff for a period of a quarter of a century what plaintiff was legitimately entitled without slightest shadow of doubt - Therefore, while allowing appeal in order to compensate loss suffered by plaintiff who died before enjoying fruits of his decree, Court direct that interest shall be paid at 15 per annum and full costs throughout - Court observed that to uphold such special agreement would mean giving a go-by to principle of three party participation, in settlement of terms of employment, as represented by Certified Standing Orders and therefore, inconsistent part of special agreement is ineffective and unenforceable - Claim to absolute discretion not to pay gratuity even when it is earned is a hangover of laissez faire days and utterly inconsistent with modern notions of fair industrial relations and therefore, it must be rejected as ineffective and hence unenforceable - Appeal allowed.
JUDGMENT
DESAI, J.:— Appellant, an employee of Tata Iron and Steel Company Limited (Company for short has been chasing a mirage : to wit to recover a paltry sum of Rs. 14040/- being the amount of gratuity to which he was entitled for the continuous service rendered by him from December 31, 1929 till August 31, 1959 : under what are styled as Retiring Gratuity Rules, 1937 (Gratuity Rules for short) from the Company and in this wholly unequal fight he laid down his life before enjoying the pittance to which he was entitled after three decades of loyal service. What a dreadful return for abject loyalty? When the appellant retired by resignation from service he was paid his provident fund dues but gratuity which he was entitled to be paid under the relevant rules was not paid to him. When the appellant claimed payment of gratuity, the respondent turned deaf ears to it. Appellant served a notice dated September 6, 1981 calling upon the respondent to pay the amount of gratuity being Rs. 14040/-. The Company did not respond to the notice Thereupon the appellant filed M. S. No, 452 of, 1962 in the court of Subordinate Judge. at Jamshedpur.
2. The respondent appeared and contested the suit inter alia contending that in terms of the contract of service and particularly having regard to the relevant rules under which gratuity can be claimed the same is payable on certification of satisfactory service by the head of the department, and it is payable at the absolute discretion of. the Company irrespective of whether the employee has or has not performed all or any of the conditions stated in the rules and no employee howsoever otherwise eligible is entitled as of right to any payment under the rules.
3. The learned trial Judge framed the issues on which parties were at variance. The learned Judge held that the plaint does disclose a cause of action and the plaintiff was entitled to claim and recover the amount of gratuity with interest thereon. Accordingly, the suit was decreed against the Company directing it to pay the amount claimed in the plaint with future interest at 6 per annum with costs.
4. The respondent Company preferred First Appeal No. 444 of 1963 in the High Court of Judicature at Patna. A Division Bench of the High Court held: (i) that the service conditions of the plaintiff were governed by the Works Standing Orders and that it was an implied condition of service that the plaintiff could get gratuity in accordance with the Gratuity Rules, (ii) that in view of Rule 6, an employee governed by the Gratuity Rules is not entitled to claim the same as a matter of right but he merely attains the benefit of eligibility or suitability for the retiring gratuity and not the right, (iii) that until and unless the Company has decided to pay the gratuity in accordance with Rule 7 or otherwise, the mere fact of the employee becoming eligible to get it under the relevant rules which can be enforced in a civil court because the matter of payment of gratuity is at the absolute discretion of the Company as provided in Rule 10, and the employee, howsoever unfortunate the position may be under the modern stage of the society, is not entitled to claim it as a matter of right because even though payment of gratuity under the Gratuity Rules is an implied condition of service, Yet the condition is further conditioned by the provisions made in the Rules and is subject to them; (iv) that such a claim may be enforced before the Industrial Tribunal under the Industrial Disputes Act, 1947 but it is not possible to hold that the law of contract or the law of master and servant which is the only law to be enforced in a civil court can justify on interpretation of the Gratuity Rules in question that the plaintiff can be granted decree for payment of gratuity on the footing that it was the unconditional or unconditioned contractual obligation of the employer to pay such a money; (v) the payment of gratuity money is not a gift pure and simple, but under the re
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