Judgment:
Tarun Agarwala, J.
1. Since the issues raised in these writ petitions are common, the same are being decided together. For facility and convenience, the facts of Writ Petition No. 16472 of 2002 is being taken into consideration.
2. The respondent No. 3 was promoted on the post of Senior Manager and became a Member of the Centralized Services in the year 1988. The respondent No. 3 worked as a key personnel (Senior Manager) in District Cooperative Bank Limited, Ghaziabad and retired from the service on 31.1.1998 after putting a total period of 36 years, one month and 3 days of service. The petitioner computed and paid the gratuity amounting to Rs. 2,36,430/- Since the amount was not fully paid, the respondent No. 3 made a representation to the, authorities for the payment of the balance amount. Since nothing was done on his application, the respondent No. 3 preferred a time barred claim before the prescribed authority under Section 4 of the Payment of Gratuity Act along with an application under Section 5 of the Limitation Act for condoning the delay. It was indicated that the last, drawn salary of respondent No. 3 was Rs. 15,503/- and on the basis of the length of service, die total amount payable was Rs. 2,79,045/- and, that, only a sum of Rs. 2,36,430 was paid and therefore, the balance amount of Rs. 42,615 was required to be paid.
3. The petitioner filed their objections before the prescribed authority submitting that the gratuity had been paid in accordance will the provisions of Regulation 67 of the Cooperative Banks Centralized Services Regulations framed under Rule 7(c) of the Cooperative Banks Centralized Service Rules, 1976 as well as in accordance with the Cooperative Banks Centralized Service Group, Gratuity-cum-Life Assurance Scheme and that no further amount Was payable to respondent No. 3. The petitioner further contended that the provisions of the Payment of Gratuity Act 1972 was not applicable and that no proceedings could be initiated against the petitioner. Further, the Controlling Authority, Ghaziabad Region, was not competent nor had the territorial jurisdiction to decide the matter against the petitioner.
4. The Controlling Authority allowed the claim petition of respondent No. 3 and computed the gratuity and directed that respondent No. 3 was entitled to receive Rs. 85,555/- towards the balance amount of gratuity plus interest @ 10% per annum W.e.f. 6.8.1998 till the dale of the payment. Aggrieved by the said order, the petitioner filed an appeal which was partly allowed and the amount of gratuity was reduced to Rs. 42,625/- along with interest @ 10% per annum. The petitioner being aggrieved by the aforesaid order, has filled the present writ petition.
5. Heard Sri Sudeep Seth, the learned Counsel for the petitioner and Sri Y.K. Sinha, the learned Counsel for respondent No. 3 and Sri K.R. Sirohi, the learned Counsel appearing for the respondents in the connected writ petitions.
6. The learned Counsel for the petitioner submitted that the provisions of the Payment of Gratuity Act was not applicable to the petitioner in view of Section 1(3) of the Act inasmuch as the petitioner is neither a shop nor an establishment. The learned Counsel for the petitioner submitted that the petitioner had been granted an exemption under the U.P. Dookan Aur Vanijya Adhisthan Adhiniyam, 1962 (hereinafter referred to as the 'Shop Act') and since the provisions of the said Act was not applicable to the petitioner consequently, the petitioner could not be treated to be an establishment under Section 1(3) of the Act. The learned Counsel further submitted that the petitioner is an authority created under Rule 4 of the Cooperative Banks' Services Rules, 1976 and since the provisions of the said Act was not applicable to the petitioner consequently, the petitioner could I not be treated to be an establishment under Section 1(3) of the Payment of Gratuity Act. The learned Counsel for the petitioner further submitted that assuming without admitting that the Act was applicable, even then, the petitioner was not liable to pay the amount, inasmuch as, the petitioner had calculated the gratuity as per the scheme and as per the Regulations of 1976. The learned Counsel for the petitioner submitted that as per Clause 8 of the Scheme, the compution of the gratuity was required to be made on the basis of the salary drawn on the annual renewal date last preceding the superannuation date and submitted that the respondent No. 3 retired on 31.1.1998 and therefore, as per Clause 8 of the Scheme, the last annual renewal date would be 1st March, 1997, on which date, the salary of respondent No. 3 on 1.3.1997 was Rs. 13,135/- and, it is on this salary, that gratuity was required to be calculated whereas, the controlling authority under the Gratuity Act had calculated the gratuity on the basis of the salary which respondent No. 3 had received at the time of fell, his retirement, i.e., salary as on 31.1.1998. The learned counsel for the petitioner submitted that the calculation had to be made while taking one month as 30 days whereas, the controlling authority had calculated the gratuity taking 26 days as equivalent to one month. The learned Counsel for the petitioner further submitted that the payment of interest was wholly arbitrary and was also excessive. The petitioner had released the entire gratuity within the shortest possible period and had not delayed the matter. Consequently, the payment of interest was wholly unwarranted and, in any case, the interest awarded @ 10% per annum was wholly excessive.
7. On the other hand, Sri Y.K. Sinha, the learned Counsel for the respondents submitted that the petitioner is an establishment and is covered under the definition clause of a commercial establishment as defined under the Shop Act and, even though, it is an authority created under Rule 4 of the Cooperative Banks' Service Rules 1976, nonetheless, it is an establishment and is covered under the provisions of the Gratuity Act. The learned Counsel for the respondent submitted that the exemption granted under the Shop Act would not give the petitioner an automatic exemption under the Gratuity Act and that the petitioner was still required to seek an exemption under Section 5 of the Gratuity Act, if it wanted to escape from the applicability of the Gratuity Act. The learned Counsel for the respondent No. 3 submitted that the computation made by the controlling authority was correct and did not require any interference and that the computation was made on the basis of the salary last drawn by respondent No. 3 at the time of retirement of respondent No. 3 and that the computation was not required to be made on the basis of the annual renewal date contemplated under Clause 8 of the Scheme. The learned counsel submitted that under the Gratuity Act, the gratuity was required to be calculated @ 15 days wages based on the rate of wages last drawn by the employee. Since the Payment of Gratuity Act is a beneficial piece of legislation, the provisions of the Gratuity Act which are more beneficial to the employee would be applicable. In any case, Clause 17 of the Scheme clearly states that in case any provision of the scheme was in contravention with any provision of the Gratuity Act or the. Rules made thereunder, in that event, the provisions of the Gratuity Act or the Rules framed thereunder would prevail.
8. Sri K.R. Sirohi, the learned Counsel for the respondents in the connected writ petitions also invited my attention to the provisions of Sections 122 and 122-A of the U.P. Cooperative Societies Act, 1965 under which the Cooperative Banks Centralized Service Rules 1976 were framed and which led to the creation of the cadre authority under the Cooperative Banks Centralized Services Rules and submitted that the cadre authority was nothing else but an establishment and was covered under the provisions of the Shop Act. Further, the Gratuity determined by the Controlling authority was also in accordance with the Regulation 67 of the Regulations framed under Rule 7(c) of the Rules of 1976. The learned Counsel submitted that the cadre authority had in fact made a wrong computation which was rectified by the controlling authority and that the authority was justified in imposing the interest on account of delayed payment.
9. Upon hearing the submissions of the learned Counsel for the parties, this Court is of the opinion that the petitioner is not entitled for any relief. The submission that the Payment of Gratuity Act is not applicable to the petitioner is erroneous. For facility, Section 1 of the Payment of Gratuity Act reads as under:
1. Short title, extent, application and commencement - (1) This Act may be called the PAYMENT OF GRATUITY ACT,1972.
(2) It extends to the whole of India;
Provided that insofar as it relates to plantation or ports, it shall not extend to the State of Jammu and Kashmir.
(3) It shall apply to-
(a) every factory, mine, oilfield, plantation' port and railway company;
(b) every shop or establishment with in the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any date of the preceding twelve months;
(c) such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day or the preceding twelve months, as the Central Government may, by notification, specify in this behalf.
(3-A) A shop or establishment to which this Act has become applicable shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time after it has become so applicable falls below ten.
(4) It shall come into force on such date as the Central Government may, by notification, appoint.
10. The provision of Section 1(3)(b) of the said Act indicates that the Act would apply to every shop of establishment within the meaning of any law for the time being in force in relation to shops and establishments in the State. The law which is in force relating to shops and establishments is called the U.P. Dookan Aur Vanijy Adhisthan Adhiniyam 1962. Section 2(4) of this Act defines a commercial establishment as under:
(4) 'Commercial establishment' means any premises, not being the premises of a factory, or a shop, wherein any trade, business, manufacture or any work in connection with, or incidental or ancillary thereto, is carried on for profit and includes a premises wherein journalistic or printing work, or business of banking insurance, stocks and shares, brokerage or produce exchange is carried on, or which is used as theatre, cinema, or for any other public amusement or entertainment or where the clerical and other establishment of a factory, to whom the provisions of the Factories Act, 1948, do not apply, work;
11. From a perusal of the aforesaid definition, it is clear that the establishment would cover a premise where the business of banking is being done. The word 'establishment' will have to be understood as the 'establishment within the meaning of any law for the time being in force in relation to shop and establishment in the State'. The question that now arises is as to what is the meaning of the words 'within the meaning of any law' as contemplated in Section 1(3)(b) of the Gratuity Act. Given the ordinary meaning to these words would mean any establishment so defined to be an establishment in such law in relation to shops and establishment in a State. The word establishment has not been defined under the Gratuity Act and is defined under the Shop Act. Admittedly the law which is in force relating to shop and establishment is the Shop Act. Thus, it would complete the test provided by Section 1(3)(b) of the Gratuity Act. The words 'within the meaning of any law' is only for identification of such establishment. Once the identity of an establishment is identified under the Shop Act, the further fact as to whether the Shop Act is applicable to that establishment loses its significance for the purposes of the Gratuity Act.
12. In the present case, the petitioner is engaged in the business of banking and therefore, cannot escape from the definition of a 'commercial establishment' under the Shop Act. Consequently, this Court holds that the petitioner, being engaged in the business of banking, is an establishment covered under tire Gratuity Act.
13. The contention that the petitioner is an authority created under Rule 4 of the Rules 1976 is also erroneous. The authority has been created for the purpose of carrying out the functions contemplated under Section 122-A of the U.P. Cooperative Societies Act, 1965 and the Rules of 1976 and is nothing else but an establishment contemplated under the Payment of Gratuity Act read with the provisions of Section 2(4) of the Shop Act.
14. The submission of the learned Counsel for the petitioner that the petitioner has been exempted under Section 3(3) of the Shop Act from the applicability of the provisions of the Shop Act and therefore, by that exemption, the petitioner was outside the purview of the provisions of the Gratuity Act, in my opinion, is patently erroneous. The mere fact that the petitioner has been given an exemption under Section 3 of the Shop Act will not give the petitioner an automatic exemption under the Gratuity Act. The petitioner is still required to obtain an exemption under Section 5 of the Gratuity Act and, unless the petitioner meets the parameters and the conditions contemplated under Section 5 of the Gratuity Act, there cannot be an automatic exemption. A specific order is required to be passed by the appropriate government under Section 5 of the Gratuity Act to exempt an establishment, etc. from the operation/applicability of the Gratuity Act. In the present case, no such notification under Section 5 of the Gratuity Act has been placed before this Hon'ble Court, if Consequently, it cannot be said that the petitioner's establishment is exempted under Section 5 of the Gratuity Act.
15. There is another aspect of the matter. If the petitioner was not an establishment as defined under the Shop Act, the question of being exempted from the applicability of the Shop Act would not have arisen. This is on account of the fact, that the appropriate authority could only grant an exemption to an establishment under the Shop Act provided the establishment came under the purview of an establishment as defined under the Shop Act. It is, therefore, absolutely clear that the petitioner is an establishment and is covered E. under the Gratuity Act.
16. In Principal, Bhartiya Mahavidyalaya, Badnera Road and Anr. v. Shri Ramkrishna 1994 L.I.C. 404, the Bombay High Court held that even if an establishment was exempted under the Shop Act, nonetheless, the said establishment would still be covered as an establishment under the Gratuity Act, unless exempted under the Gratuity Act.
17. The submission of the learned Counsel for the petitioner that the computation had to be made on the basis of the salary received by the respondent on the basis of last renewal date as contemplated under Hr Clause 8 of the scheme is also erroneous. In my opinion, the said clause is not applicable. However, assuming that it is applicable, Clause 8 is in contravention to the provisions of Sub-clause (2) of Section 4 of the Gratuity Act and in view of Clause 17 of the Scheme, read with Section 14 of the Gratuity Act in case of any contradiction of any provision of the Scheme with that of the Gratuity Act, in that event, the provisions of the Gratuity Act would prevail. For facility, Clauses 8 and 17 of the Schema and Section 4(2) and Section 14 of the Gratuity Act is quoted hereunder:
8. BENEFITS OF SURVIVAL TO SUPERANNUATION DATE:
Upon a Member's retirement at Superannuation Date there shall become payable to the Trustees, for the benefit of the Member an amount equal to 15 days salary as on the Annual Renewal Date last preceding the Superannuation Date multiplied by the total number of years of service completed by the member, subject to a maximum of 20 months Salary.
The Trustees shall pay the benefits to the Member in accordance with the provisions of Appendix (I).
Members who have not rendered 5 years service shall not be entitled to any benefits hereunder. The Assurances effected in respect of such members would be surrendered by the Trustees and the Surrender Value credited to Surplus Account.
17. JURISDITION : All assurances issued under the scheme shall be Indian Contracts. They will be subject to the laws of Indian including the Indian Insurance Act, 1938, as amended, the Estate Duty Act, 1953, as amended, the Life Insurance Corporations Act, 1956, the Income Tax Act, 1961, the Payment of Gratuity Act, 1972 and any other legislation subsequently introduced. All benefits under the Scheme shall be payable only in India. Should anything contained in these Rules, or in any amendment made thereof be repugnant to any provision or provisions of the Income Tax Act, 1961, or the Income Tax Rules 1962, it shall be ineffective to the extent of such repugnance. Any such repugnance shall be removed by the Trustee if so directed by the Commissioner of Income Tax.
If anything contained in these Rules is in contravention of the Provisions of the Payment of Gratuity Act, 1972, or the Rules made thereunder the provisions of the said Act and Rules shall prevail.
4. (2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee al the rate of fifteen days wages based on the rate of wages last drawn by the employee concerned:
Provided that in the case of a piece-rated employee, 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 hot be taken into account.
Provided further that in the case of [an employee who is 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.
14. Act to override other enactments, etc.- The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act.
18. Sub-clause (2) of Section 4 of the Gratuity Act provides that gratuity would be payable @ 15 days wages based on the rate of wages last drawn by the employee concerned whereas, Clause 8 of the Scheme provides for payment on the basis of 15 day's salary as on the annual renewal date last preceding the superannuation date. On this basis the learned Counsel for the petitioner submitted that as per Clause 8 of the Scheme, the calculation had to be made on the basis of Rs. 13,135/- which the respondent was receiving whereas, the calculation has been made on the basis of Rs. 15,503/- which was the wages last drawn by the respondent at the time of his retirement.
19. In my opinion, there is an inconsistency between Clause 8 of the Scheme and Section 4(2) of the Gratuity Act. The Gratuity Act is a beneficial piece of legislation and if the provisions of the Act is favourable to the employee, the said provision would prevail.
20. Further Clause 17 of the Scheme and Section 14 of the Gratuity Act makes it absolutely clear that in the event of any inconsistency between any provisions of the Scheme with that of the provisions of the Gratuity Act, in that event, the provisions of the Gratuity Act would prevail. Consequently, I hold that the calculation has to be made on the basis of last drawn salary as per Section 4(2) of the Gratuity Art.
21. The learned Counsel for the petitioner further submitted that under Rule 67 of the Regulations, the calculation was required to be made on the basis is of 15 days salary for every completed year and, submitted that instead of calculating the salary on the basis of 15 days salary, the controlling authority had calculated 15 days salary on the basis of 26 working days in a month instead of 30 days in a month. In my view, the submission of the learned Counsel for the petitioner is bereft of merit inasmuch as the matter has been concluded by various judgments.
22. In Sri Digvijay Woollen Mills Ltd. v. Shri Mahendra Prataprai Buch 1980 (41) F.L.R. 153, the Supreme Court approved the calculation of the gratuity on the basis of 26 days a month holding that-
Ordinarily, a month is understood to mean 30 days, but the manner of calculating gratuity payable under the Act to the employees who work for 26 days a month should be taken as what they got for 26 working days and their fifteen days' wages worked out accordingly and not by just faking half of their wages for a month of 30 days or fixing their daily wages by dividing their monthly wages by 30. In other words, for the purpose of computing the amount of gratuity in respect of a monthly rated employee, his monthly wages should be taken as what he got for 26 working days, his daily wages should be ascertained on that basis and his fifteen days' wages worked out accordingly and not by just taking half of his wages for a month of 30 days or fixing his daily wages by dividing his monthly wages by 30. Treating monthly wages as wages for 26 working days is not anything unique or unknown.
23. Similar view was again held in Jeewanlal (1929) Ltd. etc. etc. v. The Appellate Authority (S.C.) and Ors. 1984 (49) F.L.R. 313. wherein the Supreme Court held, as under:
The question is whether the words 'fifteen days' wages' occurring in Sub-section (2) of Section 4 of the Payment of Gratuity Act, 1972 in the case of monthly-rated employees, can only mean half a month's wages, i.e., wages which they would have earned in a consecutive period of 15 days or in 13 working days and therefore, in calculating the amount of gratuity payable to such employees, the rate of wages earned by them has to be multiplied by 'thirteen' there being 26 working days in a month and not by 'fifteen.
For the purpose of computation of 'fifteen days' wages' of a monthly rated employee under Sub-section (2) of Section 4 of the Act, the monthly wages last drawn by him should be treated as wages for 26 working days and his daily rate of wages should be ascertained on that basis and not by taking the wages for a month of 30 days or fixing his daily wages by dividing his monthly wages by 30.
24. In Delhi Cloth & General Mills Co. Ltd. v. Workmen and Ors. etc. 1970 (20) F.L.R. 176, the Supreme Court held-
The expression 'average of the basic wages' can only mean the wage earned by a workman during a month divided by the number of days for which he has worked and multiplied by 26 in order to arrive at the monthly wage for the computation of gratuity payable. Counsel for the employers agree to this interpretation.
25. In view of the aforesaid, the mode of submissions of the learned Counsel for the petitioner with regard to the mode of calculation of the gratuity is bereft of merit and is rejected.
26. The learned Counsel for the petitioner further submitted that payment of interest on the unpaid gratuity was wholly illegal and excessive. In my opinion, since the full amount of gratuity was not paid to which the respondent was entitled, consequently, the authority was justified in directing the payment of the interest. This Court is not inclined to interfere in the awarding of the interest exercised by the controlling authority.
27. In view of the aforesaid, this Court is of the opinion that no ground exists for interference in the impugned order. The writ petition fails and is dismissed. In the circumstances of the case, there shall be no order as to cost.