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2025 Supreme(Mad) 2219
IN THE HIGH COURT OF JUDICATURE AT MADRAS
A.D. MARIA CLETE, J.
Chevalier T. Thomas Educational Trust, Rep. by its Managing Trustee, Sri. L.Palamalai - Petitioner
Versus
The Joint Commissioner of Labour, Appellate Authority Under the Payment of Gratuity Act and Ors. – Respondents
W.P.No. 14354 of 2020 and WMP No. 17828 of 2020
Decided On : 29-04-2025
For the Petitioner:Mr. S. Vennimalai, Advocate
For the Respondents:Mr. R. Kumaravel, AGP., M/s. S. Ravi and A. Meena, Advocates
Gratuity is a statutory right under the Payment of Gratuity Act, 1972, and cannot be substituted by pension payments unless an exemption is obtained.
Headnote:
(A) Payment of Gratuity Act, 1972 - Sections 4 and 14 - Writ petition by educational trust regarding entitlement of gratuity for a retired employee - Trust contended that pension payments exempted it from gratuity obligations - Controlling Authority ruled in favor of employee, stating pension cannot substitute gratuity - Appellate Authority upheld this ruling, emphasizing that gratuity is a statutory right. (Paras 5, 8, 18)
(B) Statutory Rights - The right to gratuity is independent of pension payments, and an employer must comply with statutory provisions unless exempted under Section 5 of the Act. (Paras 13, 17)
Facts of the case:
The petitioner trust managed a college and school, and the deceased employee, a driver, claimed gratuity after retirement. The trust denied the claim, asserting pension payments negated gratuity entitlement. The Controlling Authority ruled in favor of the employee, leading to an appeal by the trust.
Findings of Court:
The court found that the trust's argument was unfounded, as pension does not exempt it from gratuity obligations under the Act. The trust's resolution to stop pension payments was arbitrary and unjustified.
Issues: The main issues were whether pension payments exempt the trust from gratuity obligations and the validity of the trust's actions regarding pension cessation.
Ratio Decidendi: The court held that gratuity is a statutory right that cannot be negated by pension payments, and the trust failed to obtain necessary exemptions under the Act.
Result: Writ petition dismissed as misconceived.
JUDGMENT :
A.D. MARIA CLETE, J.
Heard.
2. The writ petitioner is an educational trust managing boondary school. The 3rd Respondent, now deceased, was appointed as a driver by the Trust on 10.12.1973 and retired from service on 31.05.2012. It was contended that he was covered under the Pension Scheme extended to both teaching and non-teaching staff who had completed more than 20 years of service. In February 2015, the 3rd Respondent requested the settlement of his gratuity. However, the Petitioner Trust informed him that, since he was already receiving a pension under the scheme, he was not entitled to claim gratuity.
3. The 3rd Respondent filed an application for gratuity before the 2nd Respondent–Controlling Authority, which was taken on file as P.G. Case No. 12 of 2016. Notice was issued to the Petitioner Trust, which raised a similar defense before the Authority. In the proceedings, the 3rd Respondent examined himself as PW1 and filed eight documents, which were marked as Exhibits P1 to P8. On behalf of the Trust, one Ramakrishnan was examined as RW1, and six documents were filed on their side, marked as Exhibits R1 to R6.
4. Among the documents filed by the Petitioner Trust was the resolution of the Trust dated 18.12.2009, marked as Ex.R4. In the said resolution, the Trust set out the genesis of the pension scheme formulated for the benefit of teaching and non-teaching staff employed by it. It was also recorded that employees who were not covered under the pension scheme would be paid gratuity upon their superannuation.
5.Notwithstanding the defense raised by the Petitioner Trust, the Controlling Authority, by order dated 04.09.2018, held that the action of the Trust in denying gratuity was not justified and that the monthly payment of pension could not be a substitute for the statutory gratuity payable under the Payment of Gratuity Act, 1972 . Accordingly, the Authority, after calculating the total service of the 3rd Respondent as 38 years, 5 months, and 21 days (rounded off to 38 years) and taking into account his last drawn salary of Rs.24,316/-, computed the gratuity amount at Rs.5,33,082/- and directed that the said sum be paid along with interest at the rate of 10% per annum.
6.Aggrieved by the order directing the payment of gratuity to the 3rd Respondent, the Petitioner Trust preferred an appeal before the 1st Respondent–Appellate Authority under Section 7(7) of the Payment of Gratuity Act, 1972 , by filing an appeal dated 31.12.2018. Although the Act mandates the pre-deposit of the entire amount of gratuity awarded by the Controlling Authority as a condition for entertaining the appeal, the Petitioner Trust deposited a sum of Rs.5,33,082/- towards gratuity and Rs.3,46,503/- towards interest only by way of a Demand Draft dated 20.12.2018.
7. Even before the Appellate Authority, the sole contention raised by the Petitioner Trust was that, since it was paying pension to its employees, it was not liable to pay gratuity under the Payment of Gratuity Act, 1972 . However, during the pendency of the appeal, the Petitioner Trust passed a resolution at its meeting held on 10.01.2019, whereby it decided to discontinue the payment of pension. The minutes of the meeting, which were communicated to the 3rd Respondent, read as follows:–
“The Board considered the payment of Pension amounting to Rs.5,60,110/- to Mr.A.M.Sundar, retired employee upto 31.12.2018 under the scheme of Pension operated by the Management in addition to the deposit of a sum of Rs.8,79,585/- towards Gratuity and interest thereon in terms of order of the Controlling Authority, Chennai-6 as ordered in P.G.No.12/2016 dated 04.09.2018 received on 11.12.2018, pending filing of an appeal against the order.
After discussions, the Board has resolved that a retired employee of the Trust receiving pension under the scheme operated by the management cannot receive the ‘double benefit’ of pension as well as Gratuity. Taking into account the payment of Pension to the extent of Rs.
