2005 Supreme(Bom) 344

IN THE HIGH COURT OF BOMBAY
H. Jayarama Shetty
Versus
Sangli Bank Limited
Decided on : March 11, 2005

Headnote:Payment of Gratuity Act, 1972 - Sections 4(6) and 7(3-A) - Claim for payment of gratuity. - Where loss suffered by Bank was quantified therefore employees of Bank entitled to gratuity with interest. 1990 Mh LJ 50 : 1990 (1) LLJ 220; (1999) II LLJ 93; 2003 (II) LLJ 1125; 1998 (1) LLJ 907; 1981 (I) LLJ 79; AIR 1967 SC 1286 - Relied on.

       Payment of Gratuity Act, 1972 - Section 7 - Civil Procedure Code, Section 20 - Claim of gratuity. - A Bank employee upon cessation of his service entitled to gratuity under Act. - The petitioner, a Bank employee, submitted his representation to the Bank for releasing his terminal benefits to the authorities at the Head Office at Sangli and the letter of the Chief Personnel Manager of the Bank refusing his request was forwarded from Sangli and received by the petitioner at his address at Mumbai. On these facts, there can be absolutely no doubt about the position that the claim of the petitioner for the release of gratuity arose upon the cessation of his service as an officer of the Bank consequent upon his resignation. The resignation was submitted to the Bank at Sangli and was accepted by the Bank. The Appellate Authority in the face of these facts purported to hold that the Controlling Authority had no jurisdiction for the specious reason that the loss which had allegedly been caused to the Bank in Belgaum. The reasons which weighed with the Appellate Authority require only to be stated to be rejected. The foundation of the claim before the Controlling Authority was for the payment of gratuity on cessation of service. The loss which the Bank sought to set up in defence as a ground for forfeiture of gratuity cannot by any stretch of imagination divest the Controlling Authority in the State of Maharashtra of its jurisdiction to adjudicate the claim. The Appellate Authority constituted under the Payment of Gratuity Act, 1972, is expected to discharge a wholesome jurisdiction to facilitate the adjudication of disputes which arise under a social welfare legislation. The Court is constrained to observe that a hyper technical approach - an erroneous approach at that has been allowed by the Appellate Authority to deflect the course of justice, of a completely untenable reason. It may be noted that the only submission which has been urged before this Court under this head is that the Controlling Authority in Maharashtra had no jurisdiction. The submission is rejected for the aforesaid reasons.

       Payment of Gratuity Act, 1972 - Section 7 - Payment of Gratuity Rules, Rules 7 and 10 - Grant of gratuity. - Since failure of employer-Bank to pay gratuity of its employee was a continuing and recurring cause of action hence claim of employee for grant of gratuity not barred by limitation. - The Rules framed under the Payment of Gratuity Act, 1972, provide for two separate periods of time in relation to the making of an application. The first under Rule 7 is an application to the employer within 30 days from the date on which gratuity becomes payable. Rule 7(5), however, provides that an application for payment of gratuity filed after the expiry of the period specified shall also be entertained by the employer if the applicant adduces sufficient cause for delay and no claim for gratuity shall be invalid merely because the claimant failed to present his application within the specified period. This must be in a juxtaposed with Section 7(2) which requires the employer to make a determination of gratuity payable and to furnish a notice to the employee and to the Controlling Authority as soon as gratuity becomes payable whether or not an application under Section 7(1) has been made. Clearly therefore, the employer cannot set up limitation as defence on the ground that the application to him was not presented within thirty days. The clear answer to such a defence, if it is set up is that the employer is obliged to determine and make arrangement to pay gratuity whether or not an application is made. The second time period that is prescribed is under Rule 10. Rule 10 inter alia provides a period of 90 days for making an application before the Controlling Authority upon the employer failing to issue a notice as required under Rule 8 upon the receipt of an application from the employee under Rule 7. The delay under Rule 10 can be condoned by the Controlling Authority on sufficient cause being shown. The rules which were framed in 1972 must be read in a manner which is consistent with the statutory provisions of Section 7 particularly after the amendments that were introduced by Amending Act 25 of 1984 (with effect from 1st April, 1984) and by Amending Act 22 of 1987 (with effect from 1st October, 1987). The provisions of Section 7 emphasis that the obligation is that of the employer to determine and to make arrangements for the payment of gratuity and upon his failure to do so, to pay interest at the rate which is statutorily prescribed. Even if the period that is prescribed in the Rules is taken into consideration, the Rules themselves lay down that the delay on the part of the employer, if any, can be condoned if sufficient cause is shown. A breach of the employer to comply with his obligation under Section 7 provides a recurring and continuous cause of action. The Act is a piece of social welfare legislation and the employer cannot be permitted by reason of his own default in complying with his obligation to defeat the just entitlement of the employee. Finally, it may be noted that the employer has to determine and pay gratuity whether or not an application is filed to him. The filing of an application before the employer is not a condition precedent. Rule 7 makes procedural provisions for such an application. On receipt of an application under Rule 7, the employer has to issue a notice under Rule 8 either admitting the claim or to specify the reasons why he holds the claim inadmissible. It is thereafter that time is prescribed in Rule 10 for an application to the Controlling Authority. The making of an application under Rule 7 therefore, invokes a chain of events in Rules 8 and 10. Once the making of an application to the employer is not mandatory under the provisions of Section 7(2) of the substantive provisions of the Act, the limitation under the Rules which is triggered upon the filing of the application under Rule 7 can obviously not defeat the claim of the employee. On resignation of the petitioner on 17th September, 1995 which was accepted sometime in December, 1995, it was the bounden obligation of the respondent-employer to quantify and pay the gratuity. On 17th August, 1997, the employer declined to do so on the ground that the gratuity had been adjusted against a loss which the Bank unilaterally determined without holding disciplinary proceedings. The correctness of the adjustment will fall for determination in the final part of this order. Insofar as the question of limitation is concerned, the employee was justified in taking the position that the failure to pay his gratuity was a continuing and recurring cause of action and that there was no delay on his part. The appellate authority ought not to have adopted such a hyper-technical approach in the matter but ought to have furnished an opportunity to the employee even at that stage of explaining the delay, if it felt that there was any, in lodging his claim. If the employee was right that the breach on the part of the employer gave rise to a continuing cause of action, there was indeed no delay and this was the correct approach to adopt. The entire approach of the Appellate Authority is perverse. 2003 (I) CLR 705; AIR 1960 SC 260; 2002 (I) CLR 809; 2001 (II) CLR 448; 2002 (II) CLR 1071 - Relied on.