Writ Petition No. 1011 of 1995

12th March, 1996

Petitioner Counsel: Mr. P. K. RELE with Mr. P. M. PALSHIKAR
Respondent Counsel: Mr. V.R. SHETTY

Cases Cited:
1985 (51) F.L.R.550 [Para 12]
AIR 1990 S.C. 463 [Para 10]

JUDGMENT

MAJITHIA, J. :- The petitioner, Hindustan Petroleum Corporation Limited, has challenged the order of the Competent Authority under the Payment of Gratuity Act, 1972, hereinafter 'the Act', dated March 27, 1991, confirmed in appeal by the Appellate Authority under the Act on March 26, 1993, in this petition under Article 226 of the Constitution of India.

2. The factual matrix is as under.

3. The third respondent was employed as a Clerk by erstwhile ESSO Company on December 28, 1950. He was promoted in the management cadre as Purchase Officer in the Materials Department with effect from June 1, 1983 on basic salary of Rs. 1930/- per mansem and D.A. of Rs. 516/- (then prevailing) vide letter dated May 23, 1983. In the letter of promotion it was stated that the promotee would be bound by the Rules, Regulations and Orders promulgated by the petitioner from time to time in relation to conduct, discipline, medical retirement and any other matter as these rules, regulations and orders were part of this contract of promotion. Under the regulations, the third Respondent in addition to pension was entitled to gratuity as per the policy applicable to New Hindustan Petroleum Corporation Management Staff for the period of his service as such management staff.

4. The erstwhile ESSO Company had introduced with effect from April 1, 1965 retiral benefits in the form of pension and gratuity. The employees who opt for pension were not entitled to gratuity and vice versa. In December, 1984, or thereabout the petitioner decided to pay gratuity under the Act even to those who opted for pension. The third respondent became entitled to receive gratuity, under the Act, for the period he was covered, in addition to pension and gratuity payble to the management staff as stated above.

5. The third respondent reached the age of superannuation on September 27, 1987 and thus according to Rules he superannuated on September 30, 1987 and paid the retirement benefits.

6. The third Respondent moved respondent No.1 for awarding benefits of the amended provisions of the Act which came into force on October 1, 1987. The act was amended by Act No.27 of 1987 with effect from October 1, 1987. His case was that he retired from service on October1, 1987 and not on September 30, 1987 and as such he is entitled to the benefits of Section 2(e) read with Section 4 of the Act. The first respondent accepted the contention of the third respondent and directed the petitioner to pay the third respondent gratuity amount of Rs. 40, 86.787 after deducting the amount of Rs. 21,878.20 which was already paid. The amount was ordered to be paid within 30 days of the receipt of the order.

7. The petitioner unsuccessfully challenged the order of the Competent Authority before the Appellate Authority under the Act.

8. The only question which requires determination is when in law upon superannuation of an employee his contract of employment will come to an end. The third respondent joined the services of the erstwhile ESSO Company on December 28, 1950. The petitioner is a Government of India undertaking functioning under the administrative jurisdiction of the Ministry of Petroleum products. The Government of India in 1974 or thereabout acquired the erstwhile ESSO Company and transferred the assets and liabilities including the workforce of the said ESSO Company to the petitioner. Thus, the third respondent became an employee of the petitioner. The petitioner promoted the third respondent as a Purchase Officer. The third respondent is thus bound by the rules and regulations issued by the petitioner from time to time.

9. On September 30, 1982 the petitioner issued directions regarding the date of retirement. It would be relevant to reproduce this letter.

" The employees who were governed by the erstwhile ESSO/LIL/service conditions retire on the 1st day of the calender month coincident with or immediately following that in which they attain the age of 58 years. Under this provision, such an employee whose date of birth is the 1st of a month presently retires effective 1st of the same month in which he attains the age of retirement.

On the other hand, all employees who were governed by the erstwhile CORIL service conditions retire on the last day of the month in which they attain the age of 58 years. With a view to follow a uniform procedure for all employees in the Corporation, it has been decided that in all cases the effective date of retirement shall be the close of business on the last day of the month in which the employee attains the age of 58 years. Accordingly, employees of the erstwhile ESSO/LIL whose date of birth is 1st of a month shall hereafter retire from the 1st of the following month upon attaining the age of 58 years.

The above will come into force with immediate effect. The payroll offices are requested to be guided by the above in issuing the retirement advices to the employees.

S..K.Ray

Compensation & BenefitsAdvisor ".

A reading of this letter postulates that those employees who retired on the first day of the calendar month in which they attain the age of 58 years, the effective date of retirement will be the close of the business on the last day of the month in which the employee attains the age of 58 years. The intent of this circular is that if an employee attains the age of superannuation during the continuance of the month he will be deemed to be in service till the last date of the month and his retirement will become effective from the close of the last day of the month. The third respondent indisputably attained the age of 58 years on September 27, 1987. In view of the provisions of the above circular he will continue in service till the close of that month. The month closes on the 30th. The third respondent will be retired from service on September 30, 1987. Although he had attained the age of 58 years on September 27, 1987 he will be entitled to other benefits till September 30, 1987. On the mid-night of September 30, 1987 the contract of service will come to an end and the 3rd Respondent will cease to be in the employment of the petitioner. The matter is not res integra.

10. Reliance can be usefully placed on AIR 1990 S.C. 463 (C.L.Verma v/s. State of M.P. and another). The appellant before the Apex Court was superannuated on March 26, 1974 on attaining the age of 58 years. He was suspended from service on March 28, 1974 and thereafter he was subjected to disciplinary proceedings on a set of charges. The appellant challenged the action of the employer on the ground that he ceased to be in the employment of the Municipal Council of Chhidwada. Rule 29 of the M.P. State Municipal Service (Executive) Rules, (1973) is in the following terms :-

" 29. Superannuation-(1) A member of the service shall attain the age of superannuation on the date he completes his 58 years of age and he shall retire on such date:

Provided that the State Government may allow a member of the service to continue in employment in the interest of Municipal Council or in public interest. However, no member of service shall continue in service after he attains the age of 60 years."

The appellant's contention was that after he has reached his superannuation the contract of service came to an end and he was not within the sphere of disciplinary jurisdiction. The State Government defended the action relying upon the notification dated May, 15, .........

The notification reads thus :-

" It has been decided by the State Government vide S. NO. 2368/2072/18/1/18 that like the Government servants to retire the officers/employees of Municipalities also on the last day of the month in which they complete their 58 years of age (60 years in case of fourth class employees). Accordingly, the required amendments shall be done in Madhya Pradesh Municipalities Employees (Recruitment and Service conditions) Rules, 1968 and Madhya pradesh State Municipalities Services ( Executive) Rules, 1973.

Till the amendment is done, it is hereby ordered to retire the Municipal Officers/employees, on the last date of the month. "

The notification provided that the employees of the Municipality shall retire from service on the last date of the month in which they complete 58 years of age. The Government's case was that the appellant continued to be in service till the last date of March, 1974 and the action was valid. Repealing the contention of the Government, the Apex Court held thus :-

" We are, therefore, of the view that the appellant, in terms of R. 29, ceased to be a Government employee on his attaining the age of 58 years, two days prior to the order of dismissal. In view of the fact that he had already superannuated, Government had no right to deal with him in its disciplinary jurisdiction available in regard to employees. "

The Apex Court further observed that the administrative instructions cannot override with a statutory rule. The appellant would be governed by the statutory rules and not by the administrative instructions.

11. The amended provisions of the Act will only be applicable if the third respondent was in service of the petitioner on the day when the amended Act came into force. The amended Act came into force on October 1, 1987 and the third respondent was not in service of the petitioner on that day. Since the third respondent was not in service he is not eligible for payment of the additional benefit under the amended provisions.

12. In the Management of Good year India Ltd. and K.G. Bavssar (1985) (51) F.L.R. 550) the Apex Court observed thus :-

" The date of coming into force of the Act has relevance to the date on which gratuity becomes payble. Gratuity becomes payble on the termination of employment and therefore, in order to be eligible to payment of gratuity, the termination of employment whether it be due to superannuation or retirement or resignation or death or disablement, has to be after the (date) of coming into force of the Act. Once that condition is satisfied, the further question would be regarding the amount of gratuity payble. "

13. Thus the third respondent was not entitled to the benefit under the Act as on the date when the Act came into force the third respondent had ceased to be in the employment of the petitioner.

14. For the reasons stated above, the writ petition succeeds. Rule is made absolute in terms of prayer clause (a) with no order as to costs.

15. At the time of admission of the writ petition, the third respondent was permitted to withdraw 50 per cent of the amount deposited by the petitioner in the Appellate Authority on furnishing a Bank Guarantee in favour of the petitioner. It is stated at the Bar that the Bank Guarantee was not furnished by the third Respondent, consequently he could not avail the benefit of the order. The petitioner is permitted to withdraw the money with interest accrued thereon forthwith. No order as to costs.

Certified copy expedited.

Petition allowed.