Directors in control of a company do not qualify as employees under the Payment of Gratuity Act unless a binding agreement for gratuity exists.

JUDGMENT

1) These two petitions are filed by the ex-promoters and directors of first Respondent-Company raising grievance about non- payment of gratuity. They have challenged orders passed by the Controlling Authority-cum-Labour Court dated 6 December 2018 rejecting their Application PGA Nos. 10/2015 and 11/2015. The orders of the Controlling Authority are confirmed in Appeal by the Appellate Authority-cum-Industrial Court vide judgments and orders dated 10 July 2023, which are also subject matter of challenge in the present petition.

2) Petitioners founded the Company ‘Innovative Technomics Private Limited’ and were its Directors. Petitioner-Anil Govind Ganu claims that during the period from 26 March 1993 to 16 October 2012, he worked for the Company as its employee. His last drawn salary was Rs.8,60,000/-. It is also claimed that Petitioner- Ashwini Anil Ganu worked for the Company from 1 January 1996 to 3 October 2010 and drew salary as an employee. Her last drawn salary was Rs.3,00,000/-. Petitioners claimed that in the annual accounts for the year ending 31 March 2012, a provision was made for payment of amount of Rs. 1,21,96,154/- towards gratuity. Petitioners transferred 100% equity stake in the Company- Innovative Technomics Private Limited in favour of the purchasers by executing Share Purchase Agreement (SPA) dated 20 September

2012. After execution of the SPA, Petitioners tendered their resignations on 1 October 2012. Petitioners thereafter demanded payment of outstanding gratuity from Respondents and sent legal notice dated 29 September 2015 alongwith Form No. I for outstanding gratuity amount. Petitioners thereafter filed applications bearing No. 10/2015 and 11/2015 before the Controlling Authority under the Payment of Gratuity Act-cum-Labour Court, Pune (Controlling Authority) for payment of gratuity. In respect of service from 26 March 1993 till 16 October 2012 and on the basis of his last drawn salary of Rs. 8,60,000/-, Petitioner-Anil Govind Ganu demanded gratuity of Rs. 94,26,923/-. Similarly, Petitioner- Ashwini Anil Ganu demanded gratuity of Rs.27,69,231/- on the strength of her service from 1 January 1996 till 3 October 2012 and last drawn salary of Rs.3,00,000/-. Both the Petitioners contended in their respective applications that during their service tenure, it was decided between them and the First Respondent-Company that Petitioners would be entitled to receive better terms of gratuity, which will be paid at actuals and that the maximum amount of cap as prescribed under the Payment of Gratuity Act, 1972 shall not be applicable in their case. The applications were resisted by the Respondents by filing written statements. Both the parties led evidence. The Controlling Authority-cum-Labour Court passed orders dated 6 December 2018 rejecting the applications filed by the Petitioners, inter-alia, holding that they were in control over the affairs of the Company and therefore did not fit in definition of the term ‘employee’.

3) Petitioners filed Appeal (PGA) No. 1/2019 and Appeal (PGA) No.2/2019 before the Appellate Authority-cum-Industrial Court, Pune (Appellate Authority) challenging the decision of the Controlling Authority. By orders dated 10 July 2023, the Appellate Authority has dismissed the Appeals filed by Petitioners. Aggrieved by the decisions of the Controlling Authority and Appellate Authority, Petitioners have filed the present petitions.

4) Mr. Bapat, the learned senior advocate appearing for Petitioners would submit that the Controlling and Appellate Authorities have failed in not appreciating that Petitioners drew wages from the First Respondent-Company and therefore clearly fit into the definition of the term ‘employee’ under Section 2(e) of the Payment of Gratuity Act. That every person who is employed for wages becomes an employee and that therefore once the salary slips are produced, both the Authorities ought to have treated Petitioners as employees of the First Respondent-Company. That mer