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2024 Supreme(Online)(Ker) 85895
IN THE HIGH COURT OF KERALA AT ERNAKULAM
N.NAGARESH, J
K.R.UNNIKRISHNAN, M.LUIS, K.JAYARAJAN, B.VISWABARAN PILLA, N.K.KRISHNADAS, A.MUHAMMED ALI – Appellant
Versus
THE STATE OF KERALA – Respondent
WP(C) NO. 20702 OF 2020 | WP(C) NO. 18792 OF 2022
For the Appellants/Petitioners: A.R.GANGADAS, T.M.CHANDRAN, S.SUJITH
For the Respondents: SMT.ANIMA M, SMT.LATHA ANAND
The court affirmed that a board resolution for higher gratuity, even without a formal agreement, is valid and enforceable under applicable law.
Headnote:(A) Payment of Gratuity Act, 1972 - Resolution by Malabar Cements Limited to include allowances in Gratuity calculation - Petitioners are non-managerial employees seeking revised Gratuity based on company resolution and government approval - Company management contends absence of a legally binding agreement for increased Gratuity - Court finds the resolution constitutes a sufficient Scheme and holds that the non-managerial employees, who have served considerably long tenures, are entitled to revised Gratuity benefits. (Paras 12, 14, 19, 23)
(B) Jurisprudence of Gratuity - Proper computation of Gratuity under the Act and legal provisions for granting higher amounts - Non-managerial employees of Malabar Cements Limited receive significantly lower Gratuity compared to counterparts in other Public Sector Undertakings. (Paras 3, 5, 7, 20)
Facts of the case:
Petitioners are retired employees who argue for inclusion of allowances in Gratuity calculations to ensure fair compensation reflective of their service tenure. Despite approval from the government, the implementation by the company is lacking.
Findings of Court:
The court establishes that the resolution is valid and that non-managerial employees are entitled to revised Gratuity benefits within two months.
Issues: Whether the resolution provides a legal basis for increased Gratuity despite management's insistence on the absence of an agreement.
Ratio Decidendi: The court affirms that the board's resolution constitutes a Scheme allowing for higher Gratuity compensation, overridden by the management's financial claims.
Result: Writ petitions allowed; benefits of Ext.P1 Resolution to be extended to petitioners.
| Table of Content |
|---|
| 1. petitioners argue for inclusion of allowances in gratuity. (Para 1 , 2 , 3 , 4) |
| 2. respondent argues against revising gratuity based on existing act definitions. (Para 8 , 9 , 10) |
| 3. court finds merit in petitioners' claims and views the resolution as legally binding. (Para 12 , 14) |
| 4. the resolution constitutes an enforceable scheme for higher gratuity. (Para 17 , 22) |
CR N. NAGARESH, J.
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W.P.(C) Nos.20702 of 2020 and 18792 of 2022 `````````````````````````````````````````````````````````````
Dated this the 24th day of September, 2024
J U D G M E N T
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Petitioners are retired non-managerial employees of Malabar Cements Limited, Palakkad. The petitioners seek to direct the respondents to allow revised Gratuity to them.
2. The petitioners state that though the Malabar Cements Limited, Palakkad is in the A Grade category among the Public Sector Undertakings, the wages paid to the non-managerial employees in the Company are only half of the salaries drawn by the non-managerial employees in other A Grade Public Sector Undertakings. The wage structure in the Malabar Cements Limited is governed by the Central Board Settlements reached at National level between Cement Manufacturers Associations and National Trade Unions.
3. The salary structure under Cement Wage Board Award comprises various components, such as Basic pay, Variable Dearness Allowance ((VDA), Fixed Dearness Allowance (FDA) and a group of other allowances, which constitutes 35% of the total pay. These allowances will be excluded while determining the Gratuity amount. Therefore, the non-managerial employees of the Company get a very low amount of Gratuity compared to employees of other Public Sector Undertakings, where the salary elements to be excluded for computing gratuity would be less than 5%.
4. The petitioners state that the non-managerial employees, who have rendered service around more than 30–35 years in Malabar Cements Limited, are getting an average amount of ₹4 lakhs as Gratuity, as against ₹10 lakhs received by the non-managerial employees who have rendered service of about 20–25 years in other Public Sector Undertakings. Taking into consideration the aforementioned facts, the Malabar Cements Limited passed Ext.P1 resolution deciding to include various allowances comprising more than 35% of the wage part, for determining Gratuity.
5. Ext.P1 proposal with the recommendations of the Company was forwarded to the Government of Kerala for approval, as per Ext.P2 communication dated 06.10.2017. The Government of Kerala, by Ext.P3 letter dated 17.3.2019 (in W.P.(C) No.18792/2022), approved the proposal and informed the Company that the Government has no objection to frame a scheme/agreement to provide higher Gratuity amount, to those category of employees, by including all allowances, for determining the Gratuity amount.
6. In spite of Ext.P3, the Company took no steps to implement Ext.P1 decision. A representation was therefore submitted to the Minister for Industries as per Ext.P4 (in W.P. (C) No.18792/2022). The said representation was forwarded to the Managing Director of the Malabar Cements Limited as per Ext.P5 (in W.P.(C) No.18792/2022) directing to forward a report. The Government, however, without waiting for a report, took Ext.P6 decision (in W.P.(C) No.18792/2022) rejecting the request to provide Gratuity amount in terms of Ext.P1 decision stating that the financial position of the Company is not conducive to bear the additional expenses.
7. The petitioners state that Ext.P6 decision is not sustainable in law or on facts. The balance sheets of the Company unmistakably reveal profits made by the Company. Every year the Company is paying dividend to the Government of Kerala on the basis of profits made. The petitioners therefore seek to quash Ext.P6 order of the 1st respondent and to allow revised Gratuity to the petitioners.
8. The respondent-Managing Director of Malabar Cement
