Important point
Amount of gratuity payable to employees including teachers of the aided educational institutions under Rajasthan Non-Government Educational Institution Act has not to be taken into consideration, for determining the amount of grant-in-aid.

Headnote:Rajasthan Non-Government Educational Institution Act, 1989—Sections 2(b), 2(q) and 2(a)—Rajasthan Non-Government Educational Institutions (Recognition, Grant-in-Aid and Service Conditions Etc.) Rules, 1993—Rules 9, 14 and 82—Aided educational institutions—Aid—Question whether amount of grauity payable to employees of aided educational institutions was to be taken into consideration or not for determining the amount of grant-in-aid—Division Bench by impugned judgment held that State Government was not liable to reimburse said amount as it was not a part of approved expenditure—Appeal—Amount to be paid as gratuity could not be said to be a part of actual salary—Gratuity could not be included in the approved expenditure as provided under any of four categories mentioned in Rule 9—No infirmity in impugned order.
Held : The gratuity cannot be termed to be an emolument for the time being payable to the employees so as to come within the definition of salary defined in Section 2(r) of the Act. Further, Rule 14 uses the word ‘actual salary’. Be that as it may, it seems clear the non-recurring payment of this nature cannot be included in the definition of salary. Gratuity is payable at the time of retirement/termination of the employment. Reliance on the decision in the case of Metal Box Company of India Limited v. Their Workmen [(1969) 1 SCR 790] can render little assistance to the appellant. It is a case under Payment of Bonus Act. It was only dealing with accountancy principles. Observations were made that an estimated liability under the gratuity schemes even if it amounts to a contingent liability and is not a debt under the Wealth Tax Act, if properly ascertainable and its present value is fairly discounted, is deductible from the gross receipts while preparing the profits and loss account. In trading circles or in rule or direction in the Bonus Act, there was no prohibition from such a practice. The question in that case was whether while working out the net profits the trader can provide from his gross receipts his liability to pay a certain sum for every additional year of service which he receives from his employees. It was answered in affirmative. If such liability was properly ascertainable, it was possible to arrive at a proper discounted value. This decision, in our view, is not relevant to determine the point in issue in the present case. Further, gratuity cannot be included in the approved expenditure as under Rule 9 the State Government can sanction the grants under four Heads provided therein and gratuity does not fall under any one of them. It is not claimed that the gratuity falls under Heads 2 to 4. The Head No. 1 is ‘maintenance or recurring grant’. Admittedly a gratuity cannot come under the category of maintenance. It is also not a recurring grant as already noticed hereinbefore. It is, thus, clear that payment of gratuity cannot come under any of the four categories mentioned in Rule 9. In view of the aforesaid, the gratuity within the meaning of the Act and the Rules cannot form part of recurring grant. It is not includable as part of approved expenditure for the purposes of computing the amount of grant payable to the appellant. In this view, communication dated 26th May, 1994 of Government of Rajasthan to the effect that the Rules do not provide for grant-in-aid on amount of gratuity, the same being not included in the approved expenditures, cannot be held to be illegal. This will, however, not effect the rights of the employees to get the gratuity from the concerned institution. (Paras 13 to 15)

Judgment

Y.K. Sabharwal, J.—Gratuity is to be paid to an employee on the termination of his employment in terms of the provisions of the Payment of Gratuity Act, 1972. The question for determination in the present case is whether the amount of gratuity payable to the employees of the aided educational institutions has to be taken into consideration or not for determining the amount of grant-in-aid. The question has to be examined in the context of Rajasthan Non-Government Educational Institution Act, 1989 (for short, ‘the Act’) which came into force with effect from 1st January, 1993.

2. The power of the State Government to make rules is contained in Section 43 of the Act. Section 43 of the Act, inter alia, provides that the Rules may provide for the terms and conditions for grant of recognition to Non-Government Educational Institutions. Rules can also be framed for the giving of grants-in-aid. In exercise of powers conferred by Section 43 and all other powers enabling the State Government in this behalf, Rules called the Rajasthan Non-Government Educational Institutions (Recognition, Grant-in-Aid and Service Conditions Etc.) Rules, 1993 (for short, ‘the Rules’) have been made.

3. The appellant is running an aided educational institution. The expression ‘aided institution’ has been defined in Section 2(b) of the Act to mean a recognized institution which is receiving aid in the form of maintenance grant from the State Government. The Act has been enacted to provide for better organization and development of education in the non- Government Educational Institutions in the State of Rajasthan. The expression ‘recognised institution’ is defined in Section 2(q) of the Act to mean a Non-Government Educational Institution affiliated to any University or recognized by the Board, Director of Education or any officer authorized by the State Government or the Director of Education in this behalf. The educational institution being run by the appellant is a recognized institution.

4. Section 2(a) defines ‘aid’ to mean any aid granted to a recognized educational institution by the State Government. The educational institution of the appellant has been granted aid within the meaning of the Act. The expression ‘employee’ includes a teacher and every other employee working in a recognized institution. The expression ‘salary’ has been defined in Section 2(r) as follows:

“ `Salary’ means the aggregate of the emoluments of an employee including dearness allowance or any other allowance or relief for the time being payable to him but does not include compensatory allowance.”

5. Section 7 of the Act provides for grant-in-aid to recognized institutions. It, inter alia, provides that no aid shall be claimed by an institution as a matter of right. Section 7(4) provides that “the aid may cover such part of the expenditure of the institution as may be prescribed”. Section 16 of the Act enables the State Government to regulate the terms and conditions of employment. It, inter alia, provides that the State Government may regulate the recruitment and conditions of service, including conditions relating to qualifications, pay, gratuity, insurance, age of retirement, entitlement of leave, conduct and discipline, of persons appointed as employees of aided institutions in the State. Section 29 of the Act provides that the scales of pay and allowances except compensatory allowances with respect to all the employees of an aided institution shall not be less than those prescribed for the staff belonging to similar categories in Government institutions. The expression `compensatory allowance’ is defined in Section 2(d) to mean an allowance granted to meet personal expenditure necessitated by the special circumstances in which duty is performed and shall include a travelling allowance but shall not include a sumptuary allowance nor the grant of a free passage to or from any place outside India.

6. Chapter III of the Rules deals with ‘AID, ACCOUNTS AND AUDIT’, containin

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2005 Supreme(SC) 584

Important pointAmount of gratuity payable to employees including teachers of the aided educational institutions under Rajasthan Non-Government Educational Institution Act has not to be taken into consideration, for determining the amount of grant-in-aid.

Cases Referred (1)

Important point
Amount of gratuity payable to employees including teachers of the aided educational institutions under Rajasthan Non-Government Educational Institution Act has not to be taken into consideration, for determining the amount of grant-in-aid.