Important point
What was the amount the petitioners received. It was "advance"- They called it special advance; the Corporation called it "recoverable advance"- Either way it was an advance-Earlier the Government that held the purse-strings converted that advance into a benefit a la an incentive or an allowance- Later, it did not- So the Corporation wanted to recover the amounts- And that recovery was based on the petitioners` undertaking.

Introduction:

A batch of employees receives “special advance” for many years from its employer, a State Government Corporation. For a few years, the employees receive it with the Government’s consent, and other years they receive that with the Government’s consent pending. Without the Government’s contribution, the Corporation cannot shoulder the burden, though. So the employees undertake to refund the special advances if the Government does not approve the disbursement. To get the approval, the Corporation tries and fails. In the meanwhile, the employees retire. So the Corporation deducts the special advances from their gratuity.

2. After a few years, the employees challenge the deduction. They contend that the deduction is against the law and cite Section 4 (6) of the Payment of Gratuity Act, 1972 (“the Act”) in support. That provision provides for forfeiture, however. Then, does the Corporation’s enforcing an employee’s undertaking and deducting from his gratuity amount to forfeiture beyond that mentioned in Section 4(6) of the Act?

Facts:

3. All the fifteen petitioners worked as plant workers in the second respondent Corporation: Kerala State Bamboo Corporation Limited. On superannuation, they retired from service, in different years beginning from 2001.

4. When the petitioners were in service, until 2006-07 they were given special advance—during Onam. The Government sanctioned the amounts and allotted the funds to the Corporation. From 2007-08 onwards, the Government did not sanction the advance, much less has it allotted the funds. But the Corporation continued to pay its employees the special advance. When the petitioners retired, as is evident from Exts.P1 to P15; the Corporation settled their terminal benefits, including the gratuity. But it deducted from the petitioners’ gratuity all the special advances it had paid to them earlier. Assailing that deduction, the petitioners have filed this writ petition.

Discussion:

Petitioners’:

5. Smt. Anitha Mathai Muthirenthy, the petitioners' counsel, has contended that the petitioners never secured a benefit by misrepresenting. They only received from the Corporation what they had been entitled to. According to her, just because the Government did not sanction the amount, the special advance could not become illegal. In this context, she draws my attention to the Ext.P17 Government sanction for 2006-07.

6. Section 4(6) of the Payment of Gratuity Act 1972, Smt Anitha Mathai also contends, enumerates the circumstances under which deductions can be made from the gratuity. In this context, she stresses that the Gratuity Act is a self-contained code and that no deductions can be effected from the gratuity beyond what has been statutorily stipulated.

7. Smt. Mathai has also drawn my attention to the Ext.P18 judgment, dated 7th March 2012. According to her, similarly placed retired employees from the Corporation were allowed to enjoy the benefit without deduction, even though those employees, too, had no Government sanction. To support her contention, Smt Mathai has relied on State of Punjab v. Rafiq Masih, AIR 2015 SC 696 Gujarat State Fertilizers and Chemicals Ltd. v. Surendra T. Amin, 2004 GLH (3) 752 Mathew v. Plantation Corporation of Kerala Ltd., 2000 (3) KLT 107 Jaswant Singh Gill v. Bharat Coking Coal Ltd. and Ors., 2007 (1) SCC 663

Respondents’:

8. On the other hand, Sri Joseph Sebastian Parackal, appearing for the Corporations’ Standing Counsel, has submitted that despite the Corporation's best efforts, the Government did not sanction the special advance to its employees from 2007-08 onwards. According to him, the Corporation has always been under losses since its inception; it has been struggling to pay even the salaries. To pay the special advance, the Corporation, Sri Parackal submits, has no corpus. On the contrary, it is the Government that releases the grant.

9. To elaborate, Sri Parackal also contends that from 200708 the Corporation, only as a matter of a goodwill gestu