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Gujarat High Court
Judgename :K.A.Puj
LALITKUMAR D.THAKKAR - Appellant
Versus
CONTROLLING AUTHORITY and ASSTT.LABOUR COMMISSIONER - Respondent
SPECIAL CIVIL APPLICATION 1624 of 1999
Decided On : 11/18/2005
Claim for gratuity - Rejection - Not being an employee - Finding as to - Sustainability.
Head Note :
Payment of Gratuity Act, 1972 (Central Act 39 of 1972) (As amended in 1984 and 1994) - Sections 2(e) and 7(3-A) - Constitution of India, 1950 - Article 227 - Claim for gratuity - Rejection - Not being an employee - Finding as to - Sustainability - The Act was amended twice with the whole object to enlarge the scope of payment of gratuity to the employees - Court having gone, through, the relevant statutory rules and law was of the view that petitioner in the case was not having ultimate control over the affairs of the company and, therefore, he was not an employer but was merely employee - He was put incharge of the factory at Surat but he was answerable to the M.D. as well as Chairman and Board of Directors - All the powers were vested with the Board of Directors - Court, therefore, observing that both the authorities below committed an error in not granting the benefit to which petitioner was entitled as employee - Set aside and quashed the impugned orders and directed payment with interest @ 10%.
Held :
The Court is of the view that by no stretch of imagination, it can be said that the present petitioner is having ultimate control over the affairs of the Company. It is true that he was put in charge of the factory at Surat. However, he is answerable to the Managing Director as well as to the Chairman as well as to the Board of Directors. He has no power to take the policy decision with regard to payment of gratuity to any person. All these powers are vested with the Board of Directors. It is also on record that the petitioner was working as a Works Manager and the managerial function is squarely covered within the definition of an employee as given in Section 2(e) of the Act. The very fact that Act was amended twice, firstly in 1984 and secondly in 1994 which makes it clear that the whole object of amending the Act was to enlarge the scope of payment of gratuity to the employees. When the legislative intention is very clear, the Court should restrain itself from restricting the said scope. The Court is, therefore, of the view that both the authorities below have committed an error in not granting the benefit which the petitioner was otherwise entitled to. The Court, therefore, quashes both the orders passed by the Controlling Authority as well as Appellate Authority and declares that the petitioner is entitled to the payment of gratuity. [Para 16]
Section 7(3-A) introduced by amendment in 1987 gives clear command mandating the employer to pay gratuity within the specified time and to pay interest on its delayed payment. No discretion was available to exempt or relieve the employer from payment of interest to the employee on belated payment of gratuity. The Court in that case directed the respondent to pay interest @ 10% on the amount of gratuity to which the said employee was entitled from the date it became payable till the date of payment of the gratuity amount. Following the above decision of the Honble Supreme Court, the Court hereby directs the respondent No. 3 to pay interest @ 10% on the amount of gratuity to which the petitioner is entitled from the date it became payable till the date of payment of the gratuity amount. [Para 17]
Law Laid Down :
Amendment introduced in 1987 gives clear mandate to employer to pay gratuity within specified time and to pay interest on its delayed payment.
Case Law Analysis :
H. Gangahanume Gowda vs. Karnataka Agro Industries Corporation Limited, 2003 LLJ 1119 [Para 17].-Relied on
Conclusion :
It cannot be said that petitioner is having ultimate control over the affairs of the company. He is, therefore, employee entitled to payment of gratuity.
Case Referred :
Monitron Securities Private Limited vs. Mukundlal Khushalchand Dhavan, 2001 (1) GLH 639;; J.K. Industries Ltd. & Ors. vs. Chief Inspector of Factories and Boilers & Ors., 1996 (6) SCC 665;; Indian Oil Corporation Ltd. vs. Chief Inspector of Factories & Ors., 1998 (5) SCC 738
Decided in Favour of :
Petitioner
Petition Allowed
( 2 ). THE case of the petitioner was that the petitioner had joined the respondent No. 3 Factory in the year 1962 and left the said organization on 31. 07. 1995 by tendering his resignation. The petitioner was employed as Works Manager of a factory at Surat owned by the respondent Company, registered office of which is at Bombay. The petitioner has applied for gratuity vide his application dated 02. 09. 1995. Since the respondent Company has not taken any concrete action except for giving assurances, the petitioner has preferred an application dated 25. 02. 1997 before the Controlling Authority under the Payment of Gratuity Act, 1972. After hearing the parties, the Controlling Authority has rejected the application of the petitioner on the ground that (i) it has no jurisdiction, (ii) the petitioner is not an employee and (iii) that the petitioner has not put in 5 years of continuous service. Being aggrieved by the said order of the Controlling Authority, the petitioner preferred an appeal before the Appellate Authority under the Payment of Gratuity Act vide his appeal dated 24. 12. 1997 and after hearing the parties, the Appellate Authority rejected the appeal on the ground that the petitioner was not an employee. Being aggrieved by the said order of the Appellate Authority, the present petitioner has filed this petition invoking the writ jurisdiction of this Court under Article 227 of the Constitution of India seeking declaration from the Court that the orders passed by the authorities below are wholly erroneous, invalid and contrary to law and, therefore, the said orders deserve to be quashed and set aside. The petitioner has also sought for the declaration from this Court that the petitioner is entitled to the full amount of gratuity along with stipulated interest on the amount for the whole period from 01. 08. 1999 onwards till the gratuity is fully paid. Before the arguments are started, Mr. Naik, learned advocate appearing for the respondent Company has rightly conceded that he is not pressing the ground regarding jurisdiction and hence, the petition is merely concerned with other two grounds on which the petitioners application was rejected by the Controlling Authority.
( 3 ) MR. Rajesh P. Mankad, learned advocate appearing with Dr. Mukul Sinha for the petitioner has submitted that the Controlling Authority has committed an apparent error of law by holding that the petitioner does not fall within the definition of an employee but that he falls within the definition of employer. The Controlling Authority has completely overlooked the fact that the definition of the employee was amended by the Amending Act 34 of 1994 which came into effect on 24. 05. 1994 whereby the ceiling of the salary in the definition of employee was wholly omitted and further that by the amending Act 25 of 1984 which came into effect from 01. 07. 1984, the definition of employee had been modified to include that any person who is employed in a managerial or administrative capacity would also be included within the definition of employee. Mr. Mankad has, therefore, submitted that the impact of 1984 amendment read with the 1994 amendment would be that every employee whether is employed in a managerial or administrative capacity without any limit of amount of wage earned by the employee would become entitled to the benefits under the Payment of Gratuity Act. He has further submitted that the Controlling Authority, however, made an indigenous interpretation of the word employer to deprive the petitioner being included within the meaning of employee and held that as the petitioner was the
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