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Karnataka High Court
Sri Ganeshwar Textile Mills Ltd. - Appellant
Versus
Appellate Authority under Payment of Gratuity Act - Respondent
Decided On : 11-17-00
W.P. : 14248 of 1996
PAYMENT OF GRATUITY ACT - [SUBJECT] - SECTION 2(C), 2(E), 4, 7(4)(B), 15(1) - [ACT SECTION LIST] - 1. Whether both the companies are one and the same or distinct identities. 2. Whether the gratuity is payable to the employee when the Payment of Gratuity Act is not in force at the relevant point of time. 3. Whether the petitioner is entitled to payment of gratuity when he was drawing a salary more than that fixed under the Act. 4. Whether the order of the authorities is sustainable. Held: 1. Both the companies are distinct identities. 2. The gratuity is not payable to the employee when the Payment of Gratuity Act is not in force at the relevant point of time. 3. The petitioner is not entitled to payment of gratuity when he was drawing a salary more than that fixed under the Act. 4. The order of the authorities is not sustainable.
Fact of the Case:
The employee, Y. M. Basavaraj, joined Sri Ganeshwar Textile Mills Ltd. as Assistant Spinning Master on November 11, 1958. He resigned on June 26, 1962 and rejoined the same company as Spinning Master on December 7, 1966. He was appointed as Chief Executive and Factory Manager in 1980 and worked in that capacity till September 2, 1984, the date of his resignation. He was drawing a salary of Rs. 2,500 per month at the time of his resignation. The employee filed an application before the Controlling Authority claiming gratuity under Section 4 of the Payment of Gratuity Act, 1972 against both the mills. The Controlling Authority directed Sri Ganeshwar Textiles Mills to pay the gratuity of Rs. 15,579 along with interest. The Appellate Authority dismissed the appeal preferred by the petitioner. The employee filed writ petitions challenging the orders of the Controlling Authority and the Appellate Authority.
Finding of the Court:
1. Both the companies are distinct identities. 2. The gratuity is not payable to the employee when the Payment of Gratuity Act is not in force at the relevant point of time. 3. The petitioner is not entitled to payment of gratuity when he was drawing a salary more than that fixed under the Act. 4. The order of the authorities is not sustainable.
Issues: 1. Whether both the companies are one and the same or distinct identities. 2. Whether the gratuity is payable to the employee when the Payment of Gratuity Act is not in force at the relevant point of time. 3. Whether the petitioner is entitled to payment of gratuity when he was drawing a salary more than that fixed under the Act. 4. Whether the order of the authorities is sustainable.
Ratio Decidendi: 1. The definition of 'company' under Section 5(iii) of the Companies Act, 1956 was considered. The Court held that the two companies were distinct identities as they had different Managing Directors, different offices, and different administrations. 2. The Court held that the gratuity is not payable to the employee when the Payment of Gratuity Act is not in force at the relevant point of time. The employee was not eligible for gratuity under the Act as he was drawing a salary of more than Rs. 2,500 per month. 3. The Court held that the order of the authorities was not sustainable as it was based on an erroneous finding that the two companies were one and the same.
Final Decision: Both the writ petitions were allowed and the impugned orders were quashed.
( 1 ) BOTH the writ petitions are connected in as much as both are against the common order dated February 21, 1994, and the letter dated april 25, 1996, bearing No. ALCD/pga /cr-6/92-93 and the order, dated November 30, 1995, bearing No. FGA-G/gratuity/ appeal/cr- 4/94-95, Annexures C, E and D respectively.
( 2 ) IN Writ Petition No. 14248 of 1996 one sri Ganeshwar Textile Mills Ltd. , is the petitioner in the third respondent Siddeswara textile Mills (Private) Ltd. , is the petitioner in the other writ petition, i. e. , WP. No. 14420 of 1996. The employee of the said companies one y. M. Basavaraj is the 4th respondent in both the writ petitions and the first and second respondents are again common as appellate authority and Controlling Authority under the payment of Gratuity Act, 1972.
( 3 ) THE common facts that have led up to the above two writ petitions are that the petitioners are two textiles companies established under the Companies Act. It is claimed that they are separate legal entities having a separate registered office at davangere and they have been managed by separate Board of Directors having maintained separate accounts, balance sheet and muster-roll of their employees. The 4th respondent Y M. Basavaraj joined Sri ganeshwar Textile Mills Ltd. (the mills will be referred by their name for the purpose of convenience and easy reference ). The 4th respondent joined in Sri Ganeshwar Textile mills Ltd. , as Assistant Spinning Master from november 11, 1958. On June 26, 1962 he resigned the post and on December 7, 1966 he joined the same company as spinning master on a consolidated payment of Rs. 1,000 per month. His pay was increased from time to time. Finally in 1980 he was appointed as Chief executive and Factory Manager with a pay scale of Rs. 2,800 per month and he worked in the said capacity till September 2, 1984, that is, date of his resignation. At the time of his resignation he was drawing a salary of Rs. 2,500 per month. It is further case of the petitioners that from the date of appointment till date of his resignation the wages of the 4th respondent was above the limits prescribed by the Payment of Gratuity Act and the nature of work he was performing was managerial- administrative. As he was not entitled in law to any gratuity at the time of his resignation, he was informed about the same. After a lapse of nearly eight years from the date of his resignation, the fourth respondent on May 18, 1992 filed an application before the second respondent controlling authority claiming gratuity under Section 4 of the Payment of gratuity Act against both the mills. Though the preliminary objection was raised regarding joint application filed against both the mills, it was not considered but it was directed to be taken at the time of final disposal. Ultimately, on February 21, 1994 an order was passed directing Sri Ganeshwar Textiles Mills to pay the gratuity of Rs. 15,579 together with interest at the rate of 5 per cent per annum from October 6, 1984 to February 20, 1994 and interest at the rate of 10 per cent from February 20, 1994 till date of payment. The second respondent herein gave a finding that the gratuity is payable from January 1, 1958 to June 30, 1980 for a period of 18 years and an appeal was preferred therefrom to the first respondent which was dismissed on November 30, 1995. However, it is claimed that the petitioner was not aware of such dismissal till a letter was issued on April 25, 1996 calling upon them to pay the interest. Thus, the writ petition came to be filed to quash the said order.
( 4 ) IT is the case of the other petitioner Sri siddeshwara Textile Mills Ltd. , that the fourth respondent joined the petitioner's company on june 20, 1962 and he was working as a spinning Master till December 4, 1966 when he submitted his resignation. The total period of service was less than five years and on the date of termination of his employment, the payment of Gratuity Act was no
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