1. Petitioner has called in question the order of the Authority under the Payment of Gratuity Act 1972 dated 12.3.2009 produced at Annexure-A confirmed by the Appellate Authority dated 29.01.2011 produced at Annexure-B.

2. Brief facts leading to this case are:

Petitioner retired as an Assistant Traffic Inspector on 30th September 2005. He had put in 37 years 3 months of service without any break. His basic salary was Rs.9,000/-and the Dearness Allowance was Rs.6,390/-and he was entitled for 10% of basic towards the price index. As such, the component for the purpose of determination of payment of gratuity was Rs.16,290/-. However, the Controlling Authority as well as the Appellate Authority erroneously only took the basic pay and number of years of service, accordingly, calculated the gratuity at Rs.3,31,500/-. Though the petitioner is entitled for additional gratuity of Rs.2,71,230/-, the Appellate Authority also concurred with the findings of the Gratuity Authority and committed an error in not noticing the settlement of 1981 and 1989.

3. Learned Counsel for the petitioner submitted that, under the settlement, the Corporation employee is entitled for calculation of the gratuity by taking into consideration one month’s wages multiplied by number of years of service. The “wages” as defined under Section 2 clause (s) of the Payment of Gratuity Act is inclusive of the Dearness Allowance. The Apex Court in a judgment reported in 2007-1-LLJ page 231 in the matter of Management of KSRTC The Chief Law Officer –vs-R. Krishna Reddy has held that, wages means inclusive of the Dearness Allowance and under the Corporation Scheme, 30 days’ wages for each completed year of service has to be taken. Following the said judgment, this Court in W.P.Nos.828-849/2009 and connected matters dated 13th February 2009 has held that, addition of Dearness Allowance is different from merger of wages, merger means the inclusion of Dearness Allowance i.e., basic pay + Dearness Allowance for one month of every completed year of service for the purpose of calculating the gratuity. The said judgment was confirmed by the Division Bench in Writ Appeal No.1470/2009 and connected matter dated 9th March 2010 and submitted that, what is taken by the Controlling Authority as well as the Appellate Authority is only the basic pay and thereby has denied the legitimate difference of amount of gratuity by both the authority. He relied on the settlement dated 27th September 1981 clause (7) and also 1989 settlement and submitted that, in terms of the settlement by the Corporation, the gratuity has to be calculated.

4. On the other hand, learned Counsel for the Corporation submitted that, the Dearness Allowance as permissible to the Government employee has been adopted by the Corporation in terms of 1989 settlement i.e., the portion of Dearness Allowance would be merged in the basic pay and the basic pay component is inclusive of the Dearness Allowance. During the tenure of the service of the petitioner, there was only one merger and Dearness Allowance @ 138% one time has been merged in the basic pay and accordingly, in terms of the calculation at Arrnexure-R10, the basic pay as permissible has been determined. Referring to Annexure-R10, it is stated that, as on the date of retirement, the basic pay of the petitioner was Rs.9,000/-, that is with the merger of portion of Dearness Allowance i.e., inclusive of 138% of basic Dearness Allowance i.e., Rs.3,961 + Rs.2,945/-+ 10% City benefit i.e., Rs.294.50 paise and increment at Rs.75/-, in all, it worked out to Rs.7,275/-and basic pay became Rs.8,025/-and after inclusion of the additional factors, it comes to Rs.9,000/-in 2005. As such, the basic pay is inclusive of permissible portion of the Dearness Allowance.

5. To support the same, learned Counsel for the Corporation relied on Annexure-R9 and submitted that, the Dearness Allowance admissible on basic pay existed on 1.4.1998 at the rates specified in the Government