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SUPREME COURT OF INDIA
Uday Umesh Lalit, Sanjiv Khanna, JJ.
BCH ELECTRIC LIMITED – Appellant
VERSUS
PRADEEP MEHRA – Respondent
Civil Appeal No. 2379 of 2020 [Arising Out of SLP (C) No. 5269 of 2019] with Civil Appeal No. 2380 of 2020 [Arising Out of SLP (C) No.6322 of 2019], Civil Appeal No. 2381 of 2020 [Arising Out of SLP (C) No. 6164 of 2019] and Civil Appeal No. 2382 of 2020 [Arising Out of SLP (C) No.6307 of 2019]
Decided on : 29-04-2020
Payment of Gratuity Act, 1972 – Sections 4 and 7 read with Rule 6(b) of Rules – Gratuity – Claim petition – As on the day when respondent resigned from his service, relevant ceiling in Sub-Section (3) of Section 4 was at the level of ten lakh rupees and for an employee to be covered by definition obtaining in Section 2(e) of the Act, there was no wage-bracket or ceiling – In terms of Section 4(1) of Act gratuity shall be payable to an employee in eventualities referred to therein if he had rendered continuous service for not less than five years – For Section 4(5) of Act to get attracted, there must be better terms of gratuity available and extendable to an employee under any award or agreement or contract with the employer as against what has been provided for under and in terms of the Act – When two choices are available, one under provisions of Act and one under such arrangement with employer and if latter offers better terms, employee cannot be denied right to receive those higher benefits – Governing principles as regards amount to be calculated and rates to be applied have to be in accordance with provisions of the Act, if an employee is covered by provisions of the Act – If amount is to be so calculated according to provisions of Act, in case of employees covered by the provisions of the Act, there is no other alternative which is offered by Company or which is part of any award or agreement or contract entered into between employer and employees – No reliance could be placed on Section 4(5) of Act to submit that employees are entitled to some greater advantage than what is available under the Act – Scheme does not offer to employees covered by the Act any other alternative apart from what is payable under the Act – Rates and the modalities of calculations of gratuity as available under Scheme of Rules are to apply only to those employees who are not covered by provisions of the Act – Appellant was right in going by provisions of Act in present matter and by ceiling prescribed under Section 4(3) of Act. Any mistakes on its part in making some extra payments to some of other employees would not create a right in favour of others in face of stipulations in Trust Deed and Scheme – Impugned judgment and order set aside and Claim Petition preferred by respondent dismissed. (Paras 16, 17, 18, 21, 23, 24 and 25)
Facts of the Case:
Present appeal challenges the judgment and order dated 12.2.2019 passed by the High Court1 dismissing Letters Patent Appeal No.97 of 2019 and thereby affirming the decision of the Single Judge of the High Court in Writ Petition No.10318 of 2017. By Trust Deed executed on 19.03.1979 between the appellant, a company registered under the Indian Companies Act, 1956 on one hand and three trustees on the other, an “Approved Gratuity Fund” was constituted “for the purpose of providing Gratuities to the employees of the Company under the Payment of Gratuity Act, 1972 and the Gratuity Scheme of the Company”.
Findings of the Court:
The Trust Deed and the Scheme sought to devise an apparatus and make provision for those who were otherwise not covered by the Act and for this reason contemplated two kinds of employees. The Trust Deed and the Scheme were executed and formulated in the year 1979 when the wage-bracket was a definite parameter for an employee to be covered under the Act. The intent of the Trust Deed and the Scheme has to be understood in that perspective. The idea was not to afford to the employees who are covered by the provisions of the Act, a package better than what was made available by the Act, but it was to extend similar benefit to those who would not be covered by the Act.
Result : Appeals allowed.
JUDGMENT
Uday Umesh Lalit, J.
Leave granted.
2. This appeal challenges the judgment and order dated 12.2.2019 passed by the High Court [The High Court of Delhi at New Delhi] dismissing Letters Patent Appeal No.97 of 2019 and thereby affirming the decision of the Single Judge of the High Court in Writ Petition No.10318 of 2017.
3. By Trust Deed executed on 19.03.1979 between the appellant, a company registered under the Indian Companies Act, 1956 on one hand and three trustees on the other, an "Approved Gratuity Fund" was constituted "for the purpose of providing Gratuities to the employees of the Company under the Payment of Gratuity Act, 1972 (hereinafter referred to as 'the Act') and the Gratuity Scheme of the Company".
Clauses 4, 11 and 15(a) of the Trust Deed are as under:-
"4. RULES:
The Fund shall be governed by the Rules and any reference to the Rules in these presents shall mean the Rules for the time being in force which shall be binding on the Members, their Beneficiaries and on the Company. A copy of the current Rules is annexed to and the same shall be deemed to form part of these presents.
11. MEMBERS TO HAVE NO LEGAL RIGHT Except as provided in these presents and in the Rules, no Member or his Beneficiary shall have any legal claim, right or interest in the Fund. Provided always that the Trustees shall administer the Fund for the benefit of the Members and their Beneficiaries in accordance with the provisions of these presents and the Rules.
15. PAYMENT OF GRATUITY:
(a) On behalf of the Company, the Trustees shall provide for the payment of gratuity on termination of service, on death or retirement of the Member or otherwise as provided in the Rules of Scheme."
3.1 In the Rules appended to the Scheme the expressions "Company", "Employee" and "Gratuity" are defined as under:-
"2. (a) "Company" shall mean Bhartia Cutler Hammer Limited and its successors or assigns or any Company or body corporate which may by purchase or amalgamation acquire or take over in whole or in part, the undertaking of the company and with the previous approval of the Commissioner undertakes to perform the obligations of the Company under the Trust Deed or the Rules.
(b) "Employee" shall mean a person in the permanent, whole-time and bona fide employment of the Company, including a whole-time Director, but shall not include (i) any member of the staff who is or may be on probation or who is temporary or part-time (ii) any apprentice or (iii) a personal or domestic servant.
(m) "Gratuity" shall mean Gratuity payable under these Rules."
3.2 Rules 4(b) and 6 of the Rules are as under:-
"4. (a).........
(b) The Company shall pay to the Trustees in respect of each member an ordinary annual contribution in each year based on an actuarial valuation by a Qualified Actuary subject to Rule 103 of the Income Tax Rules 1962 or any statutory enactment or any modification thereof from time to time.
6. A member on ceasing to be a member of the Fund shall be entitled to be paid by the Trustees, the amount due as computed in the manner laid down hereunder in this Scheme: -
(a) The amount of Gratuity payable to the beneficiary shall be calculated in the manner provided in the Company's Gratuity Scheme.
(b) Notwithstanding the provision herein contained, if any member is covered by the provisions of the Payment of Gratuity Act 1972, the amount of gratuity shall be calculated in accordance with the provisions of that Act."
3.3 The Appendix to the Scheme prescribes the rates at which gratuity will be payable as under:-
"Gratuity will be payable to the Employees to whom the Payment of Gratuity Act, 1972 applies as per the rates prescribed by the said Act. Gratuity will be payable to the other employee of the company at the following rates:-
(a) On the death or permanent total physical disablement, while in the service of the Company, or retirement at the age of 55 years or if retained by the Company after 55 years, then at the time of separation from the Company:
15 days basic
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