1. The Petition impugns an order dated 7th September, 2006, passed by Respondent No.2, who is the Appellate Authority under the Payment of Gratuity Act, 1972. By the said order the Appellate Authority confirmed the order of the Controlling Authority dated 5th March, 2001, which held that the Respondent-employee was entitled to gratuity of Rs. 2,59,409.49p.

2. The question which arises for consideration in the Petition is whether the Respondent-employee is entitled to a higher gratuity or is the amount of gratuity subject to the ceiling limit as prescribed under section 4(3) of the Payment of Gratuity Act, 1972 (hereinafter referred to as said Act).

3. There is no dispute about the fact that the Respondent was an employee of the Petitioner-company and he was entitled to gratuity. It is only the quantum of entitlement which is in dispute. According to the Petitioner-company, the Respondent-employee was governed by the Personnel Policy of the company which interalia states that the payment of gratuity to the employees would be governed by Payment of Gratuity Act, 1972 and therefore the Respondent-employee was not entitled to gratuity over and above the ceiling limit as specified in Section 4(3) of the said Act.

4. According to the Respondent-employee, however, it was the letter dated 29th January, 1992, which set out the terms of the contract of employment between the Petitioner-company and him that would govern the quantum of entitlement of gratuity. It is the Respondent-employee's case that the said letter would constitute an agreement between the parties and since the terms set out in the said letter were better than what has been statutorily provided, having regard to section 4(5) of the said Act, which saves the right of an employee to receive the better terms of gratuity, he was entitled gratuity amount computed on the basis of the said letter.

5. I have heard the learned Counsel for the parties and perused the record including impugned order dated 7th September, 2006 passed by the Appellate Authority.

6. The statutory ceiling under the Payment of Gratuity Act, 1972 at the relevant time when the Respondent-employee retired on attaining superannuation was Rs. 1 lac. The dispute is therefore whether the Petitioner is entitled to Rs. 2,59, 409.49 (without application of statutory ceiling) or Rs. 1 lac (applying statutory ceiling).

7. The material portion of the Personnel Policy (as revised on 1st August, 1988) of the Petitioner-company with regard to the payment of gratuity to its employees reads thus:

"Payment of Gratuity

Gratuity shall be payable to employees who have served the Company over five (5) years and whose monthly wages are less than 2500 Rupees and provided that the employment contracts terminate on the basis of the following reasons:

(a) Retirement or Resignation

(b) Death or disability to perform his duty due to accident or illness.

The scale of gratuity payment and the definition of continuous years of service shall be governed by the Payment of Gratuity Act of 1972 and Industrial Dispute Act of 1947 or subsequent amendments thereafter"

8. The letter dated 29th January, 1992, which according to the Respondent-employee sets out the terms and conditions of the employment, reads as follows:

"Ethiopian,

Airlines S.C.

Going to great lengths to please

To : Mr. Noel Henriques From : Area Manager-India

Sales Manager City : Bombay

City: Bombay.

Date : January 29, 1992

Sub: GENERAL SALARY ADJUSTMENT EFF DEC 1, 1991

It gives me great pleasure to advise you that our Management has approved a General Salary Adjustment for Bombay based staff effective December 1, 1991.

This is to inform you that your salary has been increased by 20% and herebelow please find the detailed breakdown.

1. Monthly Salary : INR 15,236,64 (inclusive of Housing Allowance)

2. Housing Allowance : INR 825.00

3. Meal Reimbursement for each day worked : INR 40/-

4. Bonus : One month's salary

5. Vacation Allowance : Half Mont