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2024 Supreme(Online)(KER) 9372
HIGH COURT OF KERALA
Dinesh Kumar Singh, J
THE DY.GENERAL MANAGER AND CDO – Appellant
Versus
SHRI.RAJA KURUP – Respondent
WP(C) 1993/2013
The definition of 'wages' in the Payment of Gratuity Act excludes certain allowances, thereby clarifying which components qualify for gratuity calculations under the law.
Headnote:
Gratuity - Employment - Payment of Gratuity Act 1972, Section 2(s), Section 4(5), Section 14 - The court interpreted the definition of 'wages' under Section 2(s) of the Gratuity Act, establishing that certain allowances are excluded from gratuity calculations, affirming the Appellate Authority's determination regarding specific allowances.
Fact of the Case:
Both writ petitions challenged the Appellate Authority's order regarding the calculation of gratuity under the Payment of Gratuity Act, stemming from disputes about whether certain allowances should be counted as 'wages'. The employee was superannuated after 37 years and claimed specific allowances should contribute to his gratuity calculation.
Issues: The primary issues were whether the Fixed Personal Allowance, Special Balancing Allowance, and Special Compensatory Allowance should be considered 'wages' for gratuity calculations under the Gratuity Act.
Ratio Decidendi: The court upheld the Appellate Authority's decision, applying the definitions provided in the Gratuity Act to clarify the scope of 'wages', emphasizing the exclusive nature of allowances regarding gratuity calculations.
Final Decision: Both writ petitions are dismissed, affirming the Appellate Authority's order.
[WP(C) Nos.6381/2013, 1993/2013]
- Both writ petitions have been filed impugning the order passed in Ext.P13 dated 25.10.2012 by the Appellate Authority under Section 7(7) of the Payment of Gratuity Act 1972 (for short, ‘Gratuity Act’) read with Rule 18(1) of the Payment of Gratuity (Central) Rules 1972 (for short, ‘Gratuity Rules’).
2. The 1st respondent/employee in W.P.(C) No.1993/2013 [the petitioner in W.P.(C) No.6381/2013]
- commenced his service with the petitioner/Bank on 13.05.1974 and was superannuated on 31.03.2011 after rendering service for 37 years 8 months and 19 days, which included temporary service.
2.1 The grievance of the respondent/employee before the Controlling Authority was that he was drawing personal pay of Rs.1,050/- (excluding a portion of the House Rent Allowance frozen). Out of this Rs.800/- was reckoned as wages under Section 2 (s) of the Gratuity Act. Fixed Personal Pay was paid at Rs.190/- with effect from 01.07.1983 after reaching maximum scale and his stagnation in lieu of two increments, the frozen Dearness Allowance of Rs.60/- and HRA on the date of wage revision. The amount of Rs.975/- and Rs.1,594/-, paid as Special Compensatory Allowance and Special Balancing Allowance towards difference of pay suffered by the employees of the employer/Bank in comparison with other banks on pay revision, were not reckoned as wages. A sum of Rs.3,500/- was also paid as a Special Allowance to all the Senior Special Assistant employees who had completed 30 years of service for a few hours of extra work, which was not introduced as overtime and was paid on all the days, including holidays/leave.
3. The Controlling Authority held that the Fixed Personal Allowance, Special Balancing Allowance, and Special Compensatory Allowance would be ‘other allowances’ as defined in Section 2 (s) of the Gratuity Act and the said components could not be included as part of wages for the payment of gratuity. It was also said that certain components of wages, other than the Basic Pay and Dearness Allowance, were also included as part of ‘wages’ by virtue of Bipartite Settlement which provided for including those components for the purpose of calculation of superannuation benefits though they could be termed as ‘other allowances’, which would come within the scope of sub-section (5) of Section 4 of the Act. Therefore, the benefits could not be expected to be extended to the employee beyond what was agreed to by the Federation and the Bank Management under various Bipartite Agreements.
4. The Appellate Authority held that the four allowances come under the ambit of ‘any other allowance’ and cannot be reckoned for the purpose of payment of gratuity. However, in respect of the Special Allowance of Rs.3,500/- paid to the Senior Special Assistant was held to be a component of ‘wages’ within the meaning of Section 2 (s) of the Gratuity Act. Therefore, the direction was issued to the petitioner herein to pay the balance gratuity of Rs.3,500/- for 38 years but restricted to the maximum gratuity of Rs.10 lakhs. It was also said that the Management had already paid Rs.9,34,056/-
- towards gratuity, and the respondent would be entitled to a balance gratuity of Rs.65,944/- with simple interest at the rate of 10% with effect from 01.04.2011 till it is paid.
5. Learned Counsel appearing for the petitioner has stated that the Special Allowance of Rs.3,500/- is ‘other allowances’ paid to the Senior Special Assistant and would not come within the definition of ‘wages’ under Section 2 (s) of the Gratuity Act. He further submitted that the Bipartite Settlement [Ext.P7] dated 22.07.2003 is binding on the parties. The petitioner was a member of the Union who entered into the signed agreement dated 22.07.2003. It was agreed that the Special Compensatory Allowance would not undergo any revision on the revision of pay scales or allowances and would not rank for DA, CCA, HRA and superannuation benefits. Even in the Memorandum of Settlement dated 27.04.2
