Air India Ltd. vs Appellate Authority under Payment of Gratuity Act and others

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1998 Supreme(Bom) 607

IN THE HIGH COURT OF BOMBAY
A.V. Savant, J.
Air India Ltd. ..... Petitioner.
Versus
The Appellate Authority under Payment
of Gratuity Act others..... Respondents.
Writ Petition No. 1727 of 1995, decided on 10-11-1998.
Advocates appeared :
E.P. Bharucha, Z. Kamdin and Ms. Pereira i/by Bhasin Co., for the petitioner.
M.M. Vashi with Vasudeo Shetty, for the respondents.

Headnote:Sections 7, 4, 14 and Gratuity Scheme Clause V-Right of employee to receive gratuity on retirement is a statutory right-Employer cannot claim right to set-off and withhold payment of amount of gratuity due to the employee on the ground they continued to occupy service quarters unauthorisedly even after retirement-Even assuming that there was any specific assignment in favour of employer of the right of receive gratuity under the Agreement of Leave and Licence, Sections 13 and 14 of the Payment of Gratuity Act will override such an assignment-Clause V of the Gratuity Scheme had no application.- The respondents were the employees of the Air India Ltd. They had entered into a Leave and Licence agreement with the corporation under which the employees were allotted staff quarters. The agreement provided that the employee has to vacate the quarter within 30 days from the date of whatsoever. In the event of the employee failing to vacate the premises, the employee was liable to pay at double the rate as provided. This provision in clause 16 of the agreement was independent of the right of the employer to recover damages from the employee for any breach or non-observance of the terms and conditions of the agreement, as stated in clause 17 thereof. Under clause 21 of the agreement, the employer was entitled to deduct and reimburse and pay to itself every month and also as and when occasion may arise from the salary of the employee and from all other amounts which are or may be due and payable by the corporation to employee- licensee on any account whatsoever. The Controlling Authority held that the petitioner was not entitled to adjust the gratuity payable to the employees towards the dues and penal rent due to the petitioner from the employees. In writ petition by the employer challenging the concurrent findings.
       Held, that it was not possible to accept the contention that clause 21 of the agreement of leave and licence contained a specific assignment in favour of the employer. Even assuming that there was any such assignment in favour of the employer, having regard to the scheme of the provisions of Section 13 and 14 of the Gratuity Act, such clause will be hit by the provisions of Section 14 of the Gratuity Act which would clearly override such an agreement. The respondents-employees would, therefore, be entitled to receive the amount of gratuity independently of their liability to pay licence fee, rent, compensation in respect of the continued occupation of the service quarters. Having regard to the provisions of Sections 13 and 14 of the Payment of Gratuity Act, 1972 the petitioneremployer cannot claim the right of setoff in respect of its dues against the amount of gratuity payable to the respondents-employees relying upon the provisions of the leave and licence agreement. The petitioner employer cannot withhold the payment of the amount of gratuity due to the respondents-employees on the ground that they have continued to unauthorisedly occupy the service quarters allotted to them even after the termination cessation of their employment with the petitioner. A bare perusal of sub-clause (a) would show that the amount payable to the workman toward gratuity can be set-off only towards any amount due under the liability incurred by the workman to the Corporation and remaining outstanding against him on the date on which the workman ceases to be in service. What the petitioner is seeking to set-off is the liability of the workman to pay damages or compensation or penal rent which becomes payable after the expiry of 30 days from the date of termination/cessation of the employment. As per clause 8 of the agreement, the employee is entitled to remain in possession of the service quarter till the expiry of the period of 30 days from the date of termination of his service or cessation thereof. Thus, there was nothing in clause V(a) of the Gratuity Scheme which would entitle the petitioner to set-off its claim which had not yet arisen against the employee on the date of his ceasing to be in service. Clause V(a) of the Gratuity Scheme only permits the employer to set-off the liability which has been incurred by the workman to the corporation or any outstanding dues from the date on which the workman ceases to be in service. There was no such liability incurred. Sub-clause (a) of Clause V of the Scheme, therefore, had no application whatsoever. Similarly, sub-clause (b) of Clause V had no application whatsoever inasmuch for which they are removed/ dismissed from service. 1984 Lab IC 1703; 1990 Mh LJ 50; 1990 Mh LJ 947; 1996 (2) Mh LJ 55; AIR 1982 SC 917; 1996 Lab IC 1403; AIR 1981 SC 212 : 1997 FJR 370; AIR 1990 SC 1923, Relied on.
       Sections 13 and 14-Protection of gratuity payment-Not attachable in execution of any decree or order of Court-Provisions of Act having overriding effect-Held, even if there is any dues against employee gratuity amount cannot be withheld from payment to said employee.-Even assuming that there was a valid assignment by virtue of the provisions of clause 21 of the agreement of leave and licence, in my view, the provisions of Section 14 will override such an assignment. In the result, the respondents employees would be entitled to receive the amount of gratuity independently of their liability of pay the licence fee, rent, compensation, damages or penal rent, as the case may be, in respect of their continued occupation of the service quarters belonging to the petitioner.
       Sections 13 and 14-ScopeRight of employee to receive gratuity-Cannot be frittered away Cannot be confused with the right of employer to get back possession of service quarter-Employer has adequate remedy-Any assignment in favour of employer hit under Section 14 of Act.- The right to receive the retirement benefits is a statutory right which cannot be frittered away. Such a right cannot be confused with the right of the employer to get back possession of the service quarter for which the employer has adequate remedy under the ordinary law, including the Public Premises (Eviction of Unauthorised Occupants) Act, 1971.
       Even assuming that there was any such assignment in favour of the employer, having regard to the Scheme of the provisions of Section 13 and 14 of the Gratuity Act, such clause will be hit by the provisions of Section 14 of the Gratuity Act which would clearly override such an agreement.

JUDGMENT - A.V. SAVANT, J.:---Heard both the learned Counsel Mr. Bharucha for the petitioner and Mr. Vashi for respondents No. 9,11,17,21 and 22.

2.This petition under Article 226 of the Constitution of India is by the employer Air India Limited challenging the two orders viz. (i) Order dated 30th November 1994 passed by the Controlling Authority-respondent No. 2, and (ii) the Order dated 30th June, 1995, passed by the Appellate Authority respondent No. 1 under the Payment of Gratuity Act, 1972 (for short, "Gratuity Act"). There were separate orders passed by respondent No. 2 Controlling Authority though the issues involved were identical. Under the said orders, the respondents No. 3 to 26 employees were held eligible to recover the amount of their gratuity payable in accordance with the provisions of the Gratuity Act, together with interest at the rate of 10 % per annum on the said amount payable from different dates till the date of payment. The Appellate Authority has confirmed the findings recorded by the Controlling Authority. Against the different orders passed by the Controlling Authority in respect of individual workmen, only one appeal was preferred by the petitioner, which has been dismissed by the Appellate Authority. Pending this petition, orders have been passed in respect of respondents No. 8, 13, 19, and 20 in terms of the Minutes of the orders handed in and the petition has been disposed of in terms of those Minutes in so far as respondents No. 8,13, 19 and 20 are concerned.

3.A few facts necessary for appreciating the contentions raised now be stated. The respondents No. 3 to 26 were admittedly the employees of the petitioner Corporation-Air India Ltd. They were working in different departments of Air India, which has a Staff Housing Colony, at Kalina, Mumbai. The said employees entered into a leave and licence agreement with the petitioner, under which the employee was allotted the Staff Quarter in the Air India Housing Colony. The allotment was done purely on account of the employment with Air India. The agreement provides that the employee has to vacate the quarters 30 days from the date of employee's death, retirement, resignation, dismissal, removal, termination or cessation of employment on any account whatsoever. The employees were to pay licence fee ranging from 7.5% to 10% of the monthly basic pay and D.A. and other allowances which are taken into consideration for the purpose of provident fund contribution. In the event of the employee failing to vacate the premises within 30 days of the termination/cessation of his services, the employee was liable to pay at double the rate mentioned under the said agreement. However, this provision in Clause 16 of the agreement is independent of the right of the employer to recover damages from the employee for any breach or non-observance of the terms and conditions of the agreement of leave and licence, as stated in Clause 17 thereof. It is also provided therein that this right of the employer will be without prejudice and in addition to all other rights and remedies which the employer may have.

4.Under Clause 21 of the leave and licence agreement, the employer is entitled to deduct and re-imburse and pay to itself every month and also as and when occasion may arise from the salary (i.e. basic pay and all allowances) of the employee-licencee, and from all other amounts which are or may be due and payable by the Corporation to the employee-licencee on any account whatsoever, the licence fees and all amounts which are or may be done and payable by the employee to the employer in respect of the said flat. It is further stated in Clause 21 that in the event of the employee-licencee dying or retiring or resigning from the services of the Corporation or his service being terminated or his ceasing to be in the service of the Corporation for any reason whatsoever, then the Corporation will be entitled to call upon the Trustees of the Air India Employees' Provident Fund

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