Writ Petition No.248 of 2009

16th June, 2010

Petitioner Counsel: Shri. M. S. SONAK
Respondent Counsel: Shri. L. V. PALEKAR

Cases Cited:
Ramjilal C. Sharma Vs. Elphinstone Spg. & Wvg. Co. Ltd., 1985(I) LLN 228 [Para 11,13]
Ram Nath Sao Vs. Gobardhan Sao, 2002(2) ALL MR 588 (S.C.)=AIR 2002 SC 1201 [Para 12]
P. K. Ramachandran Vs. State of Kerala, AIR 1998 SC 2276 [Para 12]
Ratnagiri District Central Co-operative Bank Ltd. Vs. Dinkar K. Watve, 1989(II) C.L.R. 202 [Para 13]
The Straw Board Manufacturing Co. Ltd. Vs. Its Workmen, AIR 1977 SC 941 [Para 15,17,18]
Voltas Limited Vs. Chandrakant Y. Bhramhane, 2007(III) CLR 959 [Para 15,18]
AIR 1975 SC 1087 [Para 15]
Indian Overseas Bank, Chennai Vs. Regional Labour Commissioner (C) and Appellate Authority, 2009 (II) CLR 684 [Para 19]
V. Vaithyanathan Vs. Dy. Commissioner of Labour, 2002(3) L.L.N. 539 [Para 21]

JUDGMENT

JUDGMENT :- Rule. By consent heard forthwith.

2. This is an employer's writ petition and is directed against Order dated 30-1-2009 of the Appellate Authority (Respondent No.2) modifying the Order of the Controlling Authority dated 30-5-2008 (Respondent No.3) by which the Respondent No.1 (Employee, for short) has been held entitled to Rs.14,492/- being the difference in gratuity payable to Respondent No.1.

3. Some undisputed facts may be stated to dispose off this writ petition.

4. The Respondent No.1 was working as a Senior Assistant with the Petitioner-State Bank of India until his voluntary retirement on 31-3-2001. Respondent No.1 retired under Voluntary Retirement Scheme w.e.f. 31-3-2001, and was paid gratuity in the sum of Rs.3,03,007.00 which amount the Respondent No.1 received without any protest or demur.

5. Thereafter, on or about 9-5-2006 i.e. after a lapse of more than five years, the employee filed an application in form N before the Respondent No.3 i.e. Assistant Labour Commissioner(Central), Vasco-da-Gama claiming that there was deficit in the payment of gratuity which arose on account of the last drawn wage of the employee being computed at Rs.16,412-85 instead of Rs.17,556/-.

6. The Controlling Authority (Respondent No.3) and the Appellate Authority (Respondent No.2) are the authorities created under the Payment of Gratuity Act, 1972, and in terms of Rule 10 of the Payment of Gratuity (Central) Rules, 1972 an application in form N in relation to non-payment of gratuity or deficit in payment of gratuity is required to be filed within a period of 90 days from the date of the occurrence of the cause for the application. The proviso below Rule 10 gives discretion to the Controlling Authority to accept the application, after expiry of the specified period of 90 days in case sufficient cause is shown by the applicant.

7. Section 2(s) defines the expression "wages" to mean all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employments and which are paid or are payable to him in cash, and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.

7-A. Section 3 deals with the appointment of a Controlling Authority as an authority responsible for the administration of the Act. Section 4 provides that gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than 5 years.

Sub-Section (2) of Section 4 provides that for every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the right of wages last drawn by the employee concerned :

Provided that daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account :

Provided further that in case of an employee who is not employed in a seasonal establishment and who is not so employed throughout the year, the employer shall pay the gratuity at the rate of seven days' wages for each season.

Sub-Section(3) of Section 4 provides that the amount of gratuity payable to an employee shall not exceed three lakhs and fifty thousand rupees.

Sub-Section (4) provides that for the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.

8. Sub-Section (5) of Section 4, which is far more important, reads as follows:-

Nothing in this Section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.

Sub-Section (6) of Section 4, we are not concerned with, and Section 14 declares that the provisions of this Act or any Rule made thereunder shall have the effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or any instrument or contract having effect by virtue of any enactment other than this Act.

9. There is no dispute that the Respondent-employee was entitled to special compensatory allowance of Rs.550/- and fixed personal allowance/pay of Rs.615/-. By virtue of a bipartite settlement award arrived at between the management of the employer and the Union to which the employee belonged to, it was specifically agreed that a sum of Rs.380/- from the said fixed personal pay would be included for superannuation benefits and pursuant thereto a Circular dated 21-2-1995 was issued. Gratuity was paid to the employee by computing the said amount as part of wages. The Controlling Authority it appears considered both the allowances as part of wages whilst ordering Rs.24,073/- to be paid to the employee, being the difference of gratuity. The Appellate Authority recalculated the difference payable to Rs.14,492/-.

10. Shri. M. S. Sonak, the learned Counsel appearing on behalf of the Petitioner has raised two issues.

11. The first is that in the case at hand there was a delay of five years, one month and sixteen days in filing the application before the Controlling Authority and the said delay was condoned without showing any sufficient cause. Learned Counsel submits that the only cause shown was that the discrepancy in the payment of gratuity was noticed by the employee through a Judgment dated 10-10-2002 of the appellate authority of Jabalpur in M.P. and that the employee had not disclosed as to when the said Judgment came to his knowledge. Learned Counsel submits that the Controlling Authority did not even care to find out whether the Applicant had explained the delay satisfactorily i.e. a delay of five years, one month and sixteen days and merely accepting the statement of the employee that there was a discrepancy in calculation of gratuity which had come to his notice recently through the said Judgment proceeded to condone the delay. The Appellate Authority did not interfere with the said finding of the Controlling Authority based on a decision of this Court in the case of Ramjilal C. Sharma Vs. Elphinstone Spg. & Wvg. Co. Ltd. (1985(I) LLN 228) although the Appellate Authority observed that the delay had to be reasonably and satisfactorily explained.

12. In my view, the submissions made are well justified. Whether under Section 5 of the Limitation Act or for that matter under the proviso below Rule 10 of the Gratuity (Central) Rules, 1972 an application could be entertained after the expiry of the prescribed period of 90 days only on sufficient cause being shown, after the expiry of the specified period. In the case at hand except for the said casual and bare statement made by the employee there was no explanation whatsoever to condone the said delay of over five years inasmuch as the employee had not even set out as to when the said Judgment had come to his notice. An Appellate Authority should be slow in disturbing the exercise of jurisdiction by the Controlling Authority only in case the Controlling Authority had assigned some reasons to condone the delay and this was a case where there were none. Condonation of delay cannot be obtained for mere asking. There has to be sufficient cause to condone the delay though the expression "sufficient cause" is liberally construed and is elastic enough to enable the Court to apply the law in a meaningful manner. There can be no dispute that while condoning the delay what matters is not the length of the period but the acceptability of the explanation offered to condone the delay. The Courts should not lose sight of the fact that by not taking steps within the time prescribed a valuable right accrues to the other party which cannot be lightly defeated by condoning the delay in a routine manner. Sufficient cause has to be considered with pragmatism and with justice oriented approach but any cause whatsoever cannot be construed as a sufficient cause and it is necessary for the Courts or the authorities to apply their mind to the cause shown and to satisfy themselves and to find out whether the cause shown is sufficient or not. Although the expression "sufficient cause" is liberally construed it does not mean that the Courts should readily accept whatever the party has stated to explain his default. If the Courts or authority accept anything and everything stated by a party, then such a party will have the last laugh at the cost of his adversary Courts and authorities are required to scrutinize the cause shown and would be justified in considering the merits of the evidence led to establish the same. Elasticity of the expression "sufficient cause" does not mean that it can be stretched to a breaking point. As stated by the Apex Court in Ram Nath Sao and others Vs. Gobardhan Sao (AIR 2002 SC 1201 : [2002(2) ALL MR 588 (S.C.)]) a balance has to be maintained. Considering the facts of the case, the employee had not at all explained the delay of over five years. A casual statement made by the employee that there was a discrepancy in calculation which came to his notice recently through a Judgment without anything more certainly could not have been accepted as an explanation or sufficient cause for such long delay of five years, one month and sixteen days. The Appellate Authority was right in observing that delay had to be reasonably and satisfactorily explained and was wrong is not relying on the decision of the Apex Court in P. K. Ramachandran Vs. State of Kerala (AIR 1998 SC 2276) on the specious ground that the said decision dealt with Limitation Act. Sufficient cause was an expression used both in Section 5 of the Limitation Act and Rule 10. The Apex Court in P. K. Ramachandran Vs. State of Kerala and another (supra) has stated that the law of limitation has to be applied with all its rigour prescribed by a statute and the Courts have no power to extend the period of limitation on equitable grounds. The Apex Court has also stated that an order cannot be sustained which has been made without recording satisfaction of reasonable or satisfactory explanation for inordinate delay.

13. In Ratnagiri District Central Co-operative Bank Ltd. Vs. Dinkar K. Watve & others (1989(II) C.L.R. 202) (referred to in 2005(1) Bom.C.R. 261) a Division Bench of this Court has held that a delay in making an approach under the Bombay Industrial Relation Act, 1946 cannot be condoned if there is no satisfactory explanation for it. It further held that by merely submitting the application the period of limitation cannot be waived. The learned Appellate Authority was not right in importing the ratio of the Judgment of this Court in Ramjilal C. Sharma Vs. Elphinstone Spg. & Wvg. Co. Ltd. (supra). In that case the delay was condoned because the explanation given was accepted, and the explanation was that the workman was told by the employer that the amount would be paid only after he vacated the premises. It was also a case where the provision of sub-rule (5) of Rule 7 of the Gratuity (Maharashtra) Rules, 1972 provided that no claim for gratuity shall be invalid only because the claimant failed to present his application within the specified period-thirty days. It is in that context that the learned Single Judge observed that the Appellate Authority should have been very slow in disturbing the exercise of jurisdiction.

14. Therefore, the conclusions arrived at by both the authorities below in condoning the delay has to be considered as perverse and on this count alone the application of the employee to the Controlling Authority dated 17-5-2006 ought to have been dismissed.

15. Coming to the merits of the controversy, we have seen that the definition of wages in Section 2(s) is both inclusive and exclusive definition. Inclusive in the sense that it includes dearness allowance to the emoluments which are earned by an employee to compute them as wages. It is exclusive in the sense that it excludes bonus, commission, house rent allowance, overtime wages and any other allowance. The contention of the Petitioners is that fixed personal pay of Rs.615/- as well as special compensatory allowance of Rs.550/- could not have been considered as wages for the computation of gratuity payable to the employee as they are clearly excluded. In support of the submission, Shri. Sonak, the learned Counsel appearing on behalf of the Petitioners has placed reliance on the Judgment of the Apex Court in the case of The Straw Board Manufacturing Co. Ltd. Vs. Its Workmen (AIR 1977 SC 941) which has been followed by this Court in the case of Voltas Limited Vs. Chandrakant Y. Bhramhane and others (2007(III) CLR 959). The learned Appellate Authority before whom both the aforesaid Judgments were cited came to the conclusion that the first Judgment did not lay down any ratio but was only in the form of an obiter, forgetting for a moment that even obiter dictum of the Supreme Court is to be accepted as binding. (See AIR 1975 SC 1087). The Appellate Authority also did not follow the Judgment of this Court because the High Court had allowed only basic wages of Rs.2,350/- for the purpose of calculating gratuity, ignoring "conveyance allowance" and "site allowance" which formed the part of the total monthly emoluments on the specious ground that if only basic wages are allowed for contribution to P.F. and for payment of gratuity than the clever employers will adopt a practice in which a minimum payment will be paid as basic (pay) and the balance amount (will be paid) by way of other allowances which will deprive the employees of due legitimate retiral benefits.

16. The approach of the Appellate Authority in including both fixed personal allowance because its nomenclature was changed to fix personal pay and special compensatory allowance to wages for computing gratuity, which were otherwise payable on regular basis, cannot be accepted.

17. In the case of The Straw Board Manufacturing Co. Ltd. Vs. Its Workmen (AIR 1977 SC 941) the Apex Court was considering the correct principles to be followed in framing a scheme for payment of gratuity for factory workers and in para 28, the Apex Court made a position of law very clear in the following words :

"28. We clarify that wages will mean and include basic wages and dearness allowance and nothing else. This corresponds to Section 2(s) of the Act. Likewise, we declare that qualifying service is continuous service (counted with reference to completed years) as defined in Section 2(c)."

18. In other words, the Apex Court took note of the definition of wages in Section 2(s) of the Payment of Gratuity Act, 1972 and declared that wages would mean and include basic wages and dearness allowance and nothing more. This Court in Voltas Limited Vs. Chandrakant Y. Bhramhane and others (supra) was considering whether "conveyance allowance" and "site allowance" were to be included as part of wages and after taking note of the definition of wages in Section 2(s) as well as the decision of the Apex Court in The Straw Board Manufacturing Limited Vs. Its Workmen (supra), this Court held that the Supreme Court had clarified that wages should include basic wages and dearness allowance and nothing else and that the question raised in that petition was no longer res integra and was covered by the said Judgment. In my view, in this case also the question is squarely covered by the Judgment of the Apex Court in the case of The Straw Board Manufacturing Limited Vs. Its Workmen (supra) and followed by this Court in the case of Voltas Limited Vs. Chandrakant Y. Bhramhane and others (supra) and that being the position, in my view, the Appellate Authority was not right in including fixed personal allowance or pay and special compensatory allowance which are other allowances excluded by the definition within the meaning of wages for the purpose of computing gratuity payable to the employee.

19. The Petitioners have included a component of Rs.380/- out of Rs.615/- of the fixed personal pay in computing the gratuity payable to the employee and it has been submitted by Shri. Sonak, the learned Counsel on behalf of the Petitioners that inclusion has been done in the light of the provision of sub-section (5) of Section 4 of the Act which gives an employee a right to receive better terms of gratuity under any award, agreement or contract with the employer. It is submitted by Shri. Palekar, the employee, that a bipartite settlement or award cannot override the provisions of the Act and in this context, Shri. Palekar has placed reliance on Indian Overseas Bank, Chennai Vs. Regional Labour Commissioner (C) and Appellate Authority (2009 (II) CLR 684) wherein it is observed that the terms of the agreement cannot take away the rights of the parties, when better benefits is given to the employees.

20. A perusal of the said decision does not show that it is of any assistance to the case of the employee. Although fixed personal allowance or pay and special compensatory allowance would come within the expression of other allowances as defined under Section 2(s) of the Act, the Petitioners by virtue of bipartite settlement of awards dated 30-1-1995 has thought fit to treat a part of fixed personal pay or allowance for the purpose of superannuation benefits which would come within the scope of sub-section (5) of Section 4 of the Act.

21. Shri. Sonak has also placed reliance on V. Vaithyanathan and others Vs. Dy. Commissioner of Labour and another (2002(3) L.L.N. 539) wherein it is observed as follows :-

"The Payment of Gratuity Act in S.14, provides that the Act shall override other enactments to the extent of any inconsistency contained in any other such enactments. The settlement entered into by the workmen with the management was under S.18(1) of the Industrial Disputes Act. There is no inconsistency between S.18 of the Industrial Disputes Act and the provisions of the Payment of Gratuity Act. A settlement can be arrived at by a workmen with the management under S.18(1) of the Industrial Disputes Act in respect of matters which are subject to the provisions of the Industrial Disputes Act and on which the parties have reached an agreement. Section 18(1) of the Industrial Disputes Act provides thus :

"A settlement arrived at by agreement between the employer and the workman otherwise than in the course of conciliation proceeding shall be binding on the parties to the agreement"."

22. In view of the above discussion, the Petitioners are bound to succeed on both the counts, firstly because the application before the Controlling Authority was filed with much delay without any satisfactory explanation and, secondly both the allowances, namely fixed personal allowance/pay as well as special compensatory allowance had to be included within the expression "other allowances", as defined under Section 2(s) of the Act, and, therefore would not form part of wages for computing gratuity except to the component of fixed personal pay which was agreed to be included by virtue of the bipartite settlement/award.

23. Consequently, the petition succeeds. The impugned orders of the authorities below are hereby set aside and the application of the employee/Respondent No.1 dated 9-5-2006 is hereby dismissed with no order as to costs.

Petition allowed.