The Travancore Cements Employees Vs. Ramachandran Nair.E.V. - Court Judgment

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN FRIDAY, THE28H DAY OF FEBRUARY20149TH PHALGUNA, 1935 WA.No. 1757 of 2009 IN RP.90/2008 --------------------------------------- AGAINST THE ORDER

/JUDGMENT

IN RP902008 of HIGH COURT OF KERALA DATED3003-2009 APPELLANT/1ST RESPONDENT/REVIEW PETITIONER: ---------------------------------------------- THE TRAVANCORE CEMENTS EMPLOYEES CO-OPERATIVE BANK LTD, K.234, REP.BY ITS SECRETARY, NATTAKOM P.O, KOTTAYAM. BY ADV. SRI.RAJU K.MATHEWS RESPONDENTS/PETITIONER & RESPONDENTS2& 4: --------------------------------------------- 1.ERUMBANATH RAMACHANDRAN NAIR.E.V. HOUSE, CHANNANIKKAD, KOTTAYAM, (SECRETARY, T.C.E. CO.OPERATIVE BANK , RETIRED) 2.(KUMARAKOM THE INSPECTOR OF CO.OPERATIVE SOCIETIES, CO-OPERATIVEUNIT) OFFICE OF THE ASSISTANT REGISTRAR OF SOCIETES (GENERAL), KOTTAYAM. 3.KOTTAYAM. THE ASST.REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), 4.JEEVAN INDIA, REP.BY SENIOR DIVISIONAL MANAGER, LIC OF JYOTHI, STAR JUNCTION, KOTTAYAM. R4 BY ADV. SMT.PRABHA R.MENON R2&3 BY SR.GOVERNMENT PLEADER SRI.MOHAMMED SHAFI R1 BY ADV. SRI.K.GOPALAKRISHNA KURUP (SR.) R1 BY ADV. SRI.S.MANU BY SRI.GOPALAKRISHNA KURUP THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON2901-2014, THE COURT ON2802-2014 DELIVERED THE FOLLOWING: WA.No.1757 of 2009 IN RP.90/2008 APPENDIX PETITIONER'S ANNEXURES:- ANNEXURE I : COPY OF THE RULES OF THE GRATUITY SCHEME. ANNEXURE II : COPY OF THE MASTER POLICY ISSUED TO THE NAME OF THE APPELLANT. ANNEXURE III : COPY OF THE JUDGMENT

DTD.11/12/2007 IN W.P.(C).23491/2007. ANNEXURE IV : COPY OF ORDER

DTD.30/3/2009 IN R.P.NO.90/2008 IN W.P.(C).23491/2007. ANNEXURE V : COPY OF PETITION DTD.31/8/2007 FILED BY THE APPELLANT BEFORE THE MANAGER LIC. RESPONDENTS' EXHIBITS : EXHIBIT R1(a) : COPY OF THE LETTER DTD.24/1/2014 ISSUED BY THE BRANCH MANAGER OF THE4H RESPONDENT. EXHIBIT R1(b) : COPY OF THE COST & BENEFIT SCHEDULE. True copy P.S. To Judge "CR" ANTONY DOMINIC & ANIL K.NARENDRAN, JJ.

-------------------------------------------------- Writ Appeal No.1757 OF2009-------------------------------------------------- DATED THIS THE28h DAY OF FEBRUARY, 2014 JUDGMENT

ANIL K.NARENDRAN, J.

This Writ Appeal is filed by the 1st respondent in W.P.(C) No.23491/2007, who is the review petitioner in R.P.No.90/2008 in W.P.(C)No.23491/2007.

2. The writ petitioner, the 1st respondent herein, was the Secretary of the appellant-Bank, who retired from service on 31.5.2007. He filed W.P.(C)No.23491/2007 seeking a declaration that, on retirement he is entitled to receive the entire amount paid by the Life Insurance Corporation of India (LIC), the 4th respondent herein, to the appellant-Bank as gratuity due to him under the Group Gratuity Cash Accumulation Scheme and for other consequential reliefs. According to him, the LIC issued a cheque for `5,36,567/- to the appellant-Bank for payment of gratuity due to him, however, the Bank disbursed only an amount of `3.5 Lakhs. He submitted Exhibit P1 representation before the President of the W.A.No.1757/09 -2- Bank requesting to disburse the balance amount. But, vide Exhibit P2 letter, the Secretary of the Bank informed that, though the Managing Committee had decided to sanction the balance amount of `1,86,567/-, the said decision could not be implemented in view of the instructions issued by the Inspector of Co-operative Societies (Kumarakom Unit), the 2nd respondent herein, based on a complaint made by one of the members of the Bank, before the Co-operation Department, against disbursement of gratuity in excess of `3.5 Lakhs. According to the 1st respondent, withholding of a portion of gratuity due to him is illegal and contrary to the law laid down by this Court in Retnavally V. Ambalapadu Service Co-operative Bank Ltd., (2005 (3) KLT320.

3. The learned Single Judge by his judgment dated 11.12.2007 allowed the writ petition, placing reliance on the judgment in Retnavally's case (supra), directing that the entire amount as paid by the LIC to the appellant-Bank shall be released to the 1st respondent. The Bank was directed to release the balance amount due, i.e., `1,86,567/- to the 1st respondent within W.A.No.1757/09 -3- a period of three weeks from the date of receipt of a copy of the judgment.

4. Seeking review of judgment, the appellant-Bank filed R.P.No.90/2008, contending, inter alia, that going by the statement of accounts as on 11.10.2006 issued by the LIC, dated 22.9.2006, produced as Annexure I along with the review petition, the LIC received contribution from the Bank limiting the maximum gratuity payable to `3.5 Lakhs, which is the maximum limit prescribed under the Payment of Gratuity Act. But, as stated in Annexure II letter dated 25.9.2007, the LIC made available `5,36,567/- to the Bank purportedly acting on a resolution dated 14.5.2007 of the Managing Committee by which it was decided to request the LIC to sanction gratuity amount to the employees without any ceiling limit, on the Bank continuing to pay proportionate contribution. Later, vide Annexure III resolution dated 23.10.2007, the Managing Committee decided to withdraw amount from the LIC limiting the maximum gratuity payable to `3.5 Lakhs, since any additional liability on account of payment of higher rate of contribution, in order to pay gratuity above ceiling W.A.No.1757/09 -4- limit, would adversely affect the financial stability of the Bank, which is running at a loss. The Managing Committee further decided to fix the gratuity payable to the 1st respondent at `3.5 Lakhs and to remit back the excess amount of `1,86,567/- to the LIC. Pursuant to the said decision, the Bank remitted back the excess amount of `1,86,567/- to the LIC vide Annexure IV receipt dated 12.11.2007.

5. The learned Single Judge by his order dated 30.3.2009 dismissed R.P.No.90/2008 in view of the fact that the decision in Retnavally's case (supra) stands affirmed by the Division Bench of this Court by judgment dated 8.8.2008 in W.A.No.1250/2004. It is challenging judgment dated 11.12.2007 in W.P.(C)No.23491/2007 and order dated 30.3.2009 in R.P.No.90/2008 of the learned Single Judge, the appellant filed the present Writ Appeal.

6. We heard the learned counsel for the appellant-Bank, learned Senior Counsel for the 1st respondent, learned Government Pleader for respondents 2 and 3 and the learned Standing Counsel for the 4th respondent.

7. The learned counsel for the appellant-Bank contended W.A.No.1757/09 -5- that, as per the Group Gratuity Scheme of the LIC implemented by the Bank, the 1st respondent on retirement is entitled to get only `3.5 Lakhs as gratuity, which was the maximum amount of gratuity payable to an employee in terms of Sub-section (3) of Section 4 of the Payment of Gratuity Act, as it stood during the relevant time. According to the learned counsel, the decision of this Court in Retnavally's case (supra) is on an entirely different set of facts. The learned Standing Counsel for the LIC supported the arguments of the appellant-Bank.

8. Per contra, the learned Senior Counsel for the 1st respondent contended that, the actual amount of gratuity payable to the 1st respondent is `5,36,576/- and the ceiling provided in the Payment of Gratuity Act does not prevent the appellant-Bank from paying a higher sum in view of Sub-section (5) of Section 4 of the said Act, as explained by this Court in its decision in Retnavally's case (supra) and affirmed by the Division Bench in Nedupuzha Service Co-operative Bank Ltd. v. Rugmini (2011(3)KLT134. The learned Senior Counsel further contended that, the resolution adopted by the Managing Committee on 23.10.2007 to cancel its earlier resolution adopted on 14.5.2007 is only subsequent to W.A.No.1757/09 -6- 31.5.2007, the date of retirement of the 1st respondent and hence the 1st respondent is entitled for disbursement of gratuity without limiting the same to the statutory ceiling of `3.5 Lakhs.

9. We have considered the rival contentions advanced by the learned counsel for the parties and gone through the documents on record.

10. The appellant-Bank is a Co-operative Society, which is governed by the Kerala Co-operative Societies Act, 1969, and the rules made thereunder. As per Section 62 of the said Act, the employees of a society shall be entitled to gratuity at such rates and on such conditions as prescribed. As per Rule 59 of the Kerala Co-operative Societies Rules, 1969, every society shall make in its bye-laws provision for payment of gratuity to its employees and frame regulations for its administration. The appellant-Bank comes under the purview of the Kerala Shops and Commercial Establishments Act, 1960 and accordingly, in the matter of payment of gratuity to the employees, it is governed by the Payment of Gratuity Act. As per Sub-section (3) of Section 4 of the Payment of Gratuity Act, as it stood prior to the W.A.No.1757/09 -7- amendment by Act 15 of 2010, the amount of gratuity payable to an employee shall not exceed three lakhs and fifty thousand rupees and going by Sub-section (5) of Section 4, nothing in the said Section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer. The question which arises for consideration is whether the 1st respondent is entitled to a higher amount of gratuity or is the amount of gratuity subject to the ceiling limit as prescribed under sub-section (3) of Section 4 of the Payment of Gratuity Act, as it stood during the relevant time.

11. In order to meet the gratuity liability of the employees, the appellant-Bank had enrolled in a contribution linked Group Gratuity Cash Accumulation Scheme of the LIC. As per the statement of accounts as on 11.10.2006, issued by the LIC dated 22.9.2006, produced as Annexure I along with the review petition, the LIC received contribution from the appellant- Bank limiting the maximum gratuity payable to `3.5 Lakhs, which was the maximum limit prescribed under Sub-section (3) of Section 4 of the Payment of Gratuity Act, as it stood during the W.A.No.1757/09 -8- relevant time. In the counter affidavit filed in R.P.No.90/2008, the 1st respondent has admitted that Annexure I statement of account is the annual statement issued by the LIC to the appellant-Bank giving the calculations on the basis of which the annual premium(contribution) to be paid is demanded. In Annexure I statement of account, the amount of gratuity lying to the credit of the 1st respondent is shown as `3.5 Lakhs only. Moreover, in the Cost and Benefit Schedule dated 22.9.2006 issued by the LIC, produced as Exhibit R1(b) along with I.A.No.126/2014 in W.A.No.1757/2009, the maximum gratuity in respect of the policy is limited to `3.5 Lakhs and the annual renewal contribution payable as on 11.10.2006 has been calculated accordingly. In addition to this, the LIC in its letter dated 24.2.2014, produced as Exhibit R1(a) along with I.A.No.126/2014 in W.A.No.1757/209, has stated in categoric terms that, the gratuity limit of the policy is `3.5 Lakhs, as provided in the Cost and Benefit Schedule, which forms part of the policy document.

12. Sub-section (5) of Section 4 of the Payment of W.A.No.1757/09 -9- Gratuity Act provides that nothing in Section 4 shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer. This only means that if under any award or agreement or contract with the employer higher amount of gratuity is available, Section 4 of the Act will not stand on the way of the employee's right in getting such higher benefit under those favourable terms. In the case on hand, the documents referred to above make it abundantly clear that the Group Gratuity Cash Accumulation Scheme of the LIC limited the maximum gratuity payable to an employee of the appellant-Bank to `3.5 Lakhs, which was the maximum limit prescribed under Sub-section (3) of Section 4 of the Payment of Gratuity Act, as it stood during the relevant time, and that the LIC had collected contribution from the Bank only for the said statutory limit of gratuity payable to each of the employees. In Annexure I statement of account, the amount of gratuity lying to the credit of the 1st respondent is also shown as `3.5 Lakhs. In such circumstances, in the absence of an agreement or contract to receive better terms of gratuity, the 1st respondent has absolutely W.A.No.1757/09 -10- no legal right to claim gratuity in excess of the statutory limit of `3.5 Lakhs from the appellant-Bank and the contention to the contra deserves to be rejected and we do so.

13. We shall now deal with the contention of the learned Senior Counsel for the 1st respondent that, as the decision of the Managing Committee dated 23.10.2007 to cancel its earlier resolution dated 14.5.2007 came only subsequent to the date of retirement of the 1st respondent, he is legally entitled for disbursement of gratuity amount exceeding `3.5 Lakhs. As borne out from the documents on record and the pleadings of both sides, while the 1st respondent was about to retire from service on 31.5.2007, the Managing Committee of the appellant-Bank, vide resolution dated 14.5.2007, produced as Annexure I along with the writ appeal, decided to request the LIC to sanction gratuity amount to the employees without any ceiling limit, on the Bank continuing to pay proportionate contribution. On the retirement of the 1st respondent, the LIC made available `5,36,567/- to the appellant-Bank purportedly acting on the said resolution dated 14.5.2007. The appellant-Bank, vide letter dated 31.8.2007, W.A.No.1757/09 -11- produced as Annexure V along with the writ appeal, sought clarification from the LIC as to whether the Bank has to remit any additional contribution if gratuity amount in excess of ceiling limit is disbursed to the employees. The LIC vide its letter dated 25.9.2007, produced as Annexure II along with the review petition, replied that its Group Gratuity Cash Accumulation Scheme is based on the principle of pooled arrangement and the appellant-Bank being the master policy holder has to make contributions and sufficient fund has to be maintained in the running account of the fund and the liability on the part of the LIC is limited only to the extent of the fund available in the scheme.

14. It was in such circumstances, the Managing Committee of the appellant-Bank vide resolution dated 23.10.2007, produced as Annexure III along with the review petition, decided to withdraw amount from the LIC limiting the maximum gratuity payable to `3.5 Lakhs, since any additional liability on account of payment of higher rate of contribution, in order to pay gratuity above ceiling limit, would adversely affect the financial stability of the Bank, which is running at a loss. The Managing Committee decided further to fix the gratuity payable to W.A.No.1757/09 -12- the 1st respondent at `3.5 Lakhs and to remit back the excess amount of `1,86,567/- to the LIC. It was also decided to cancel the decision based on Resolution No.8 dated 14.5.2007 to release the entire amount of `5,36,567/- received from the LIC to the 1st respondent. Pursuant to the said decision, the appellant-Bank remitted back the excess amount of `1,86,567/- to the LIC vide receipt dated 12.11.2007, produced as Annexure IV along with the review petition.

15. Therefore, it is abundantly clear that, as on the date of retirement of the 1st respondent, i.e., as on 31.5.2007, the liability covered by the policy was limited to `3.5 Lakhs and the contribution paid by the appellant-Bank was only for covering the aforesaid ceiling limit. In Annexure I statement of account issued by the LIC dated 22.9.2006, the amount of gratuity lying to the credit of the 1st respondent is shown as `3.5 Lakhs only. It is also the admitted case of the 1st respondent, in his counter affidavit to R.P.No.90/2008, that the calculations in Annexure I is the basis on which the annual contribution to be paid by the appellant-Bank is demanded by the LIC. Moreover, the 1st W.A.No.1757/09 -13- respondent has no case that after the resolution of the Managing Committee dated 14.5.2007, the appellant-Bank has remitted any additional contribution for disbursement of gratuity amount to its employees in excess of the ceiling limit. If that be so, only for the reason that, the resolution adopted by the Managing Committee on 23.10.2007 to cancel its earlier resolution adopted on 14.5.2007 came only subsequent to the date of retirement, the 1st respondent cannot contend that he is legally entitled for disbursement of gratuity without limiting the same to the statutory ceiling of `3.5 Lakhs. The contention to that effect is untenable, which is only to be rejected, and we do so.

16. We shall now deal with the decisions of this Court in Retnavally's case (supra) and in Nedupuzha Service Co- operative Bank's case (supra) relied upon by the learned Senior Counsel for the 1st respondent. In Retnavally's case (supra), the issue before this Court was whether the gratuity payable to retired employees of Co-operative Societies should be restricted to the maximum prescribed under Sub-section (3) of Section 4 of the Payment of Gratuity Act, Rule 59 of the Kerala Co-operative Societies Rules, 1969, and the bye-laws framed under the said W.A.No.1757/09 -14- rules, even in cases where the societies have entered into arrangement with the LIC to have their liability for payment of gratuity to its employees insured as per the Employees Group Gratuity Life Assurance Scheme of the LIC, as per which more amounts than the statutory maximum payable as per Sub-section (3) of Section 4 of the Payment of Gratuity Act, Rule 59 of the Kerala Co-operative Societies Rules, 1969, and the bye-laws of the society are payable to the employees. In the said case, the total amount of gratuity due to the employee calculated in terms of the policy with the LIC was `1,23,473/-. Out of this, `1,00,000/- was paid as gratuity, which was the maximum amount of gratuity payable at the relevant time (prior to 24.9.1997) under Sub-section (3) of Section 4 of the Payment of Gratuity Act and the remaining amount of `23,473/- was withheld by the society. This Court held that, the society is bound to pass on the entire amount paid by the LIC pursuant to the policy, in respect of the gratuity liability of the society towards each employee, taken over by the LIC in full, without withholding any amount therefrom, even if it is in excess of the amount prescribed W.A.No.1757/09 -15- as per Rule 59 or the bye-laws of the society. It was further held that, the scheme is not intended to enrich the Society's coffers by appropriating the amount in excess of the maximum gratuity as per the bye-laws of the society, out of the amount paid by the LIC in accordance with the policy.

17. In Nedupuzha Service Co-operative Bank's case (supra) this Court affirmed the view in Retnavally's case (supra) and held that the excess amount over statutory limit received by banks under the policy for retired employees should be given to them and cannot be retained by the bank. However where the group gratuity policies taken by the banks with the LIC limited the gratuity liability to each of the employees at the maximum amount of `3.5 Lakhs provided under Sub-section (3) of Section 4 of the Payment of Gratuity Act, the employees cannot claim gratuity in excess of statutory limit. Paragraph 6 of the judgment of this Court in Nedupuzha Service Co-operative Bank's case (supra) reads thus:- 6. So far as other Writ Appeals are concerned, the appellant Banks have passed on the entire benefits received under the policies from the LIC to each of the W.A.No.1757/09 -16- retired employees. However, the learned Single Judge held that the respondent employees are entitled to gratuity in terms of the Act, i.e. @ 15 days' wages for each year completed in service. The claim is in excess of statutory limit of `3.5 lakhs provided under S.4(3) of the Act. It is seen that Group Gratuity Policies taken by the appellant Banks with the LIC limited the gratuity liability to each of the employee including the respondents at the maximum amount of `3.5 lakhs provided under S.4(3) of the Act. Admittedly, the LIC has collected premium from the appellants for the maximum amount of gratuity payable under the statute to each of the employee. We do not know on what basis the respondents can claim gratuity in excess of statutory limit, which is covered in the policies taken by the appellant Banks. As already held above, benefit of the employees is limited to the gratuity amount receivable under the policy, and when it is limited to the statutory amount of `3.5 lakhs, the LIC passes on only the said amount to the appellants, which in turn should go to the employees. The respondents' case is based on circular No. 25/99, which also does not say that the appellants have any liability over the statutory limit of `3.5 lakhs. We, therefore do not find any basis for the learned Single Judges to hold that appellants are entitled to gratuity W.A.No.1757/09 -17- over and above the statutory limit, which is covered by the policies and passed on by the appellants to the respondent employees on receipt from the LIC. Accordingly, WA Nos. 980, 982, 1233, 1666, 1924 of 2010, 470 & 472 of 2011 are allowed vacating the judgments of the learned Single Judges under appeals.

18. In the case on hand, as borne out from the documents on record and the pleadings of both sides, the Group Gratuity Scheme with the LIC limited the maximum gratuity payable to an employee of the appellant-Bank to `3.5 Lakhs, which was the maximum limit under Sub-section (3) of Section 4 of the Payment of Gratuity Act during the relevant time and the LIC had collected contribution from the Bank only for covering the said statutory limit. Moreover, in Annexure I statement of account the gratuity lying to the credit of the 1st respondent is shown as `3.5 Lakhs only. Though, on 14.5.2007, the Bank decided to request the LIC to sanction gratuity amount to its employees without any ceiling limit, the said decision was cancelled on 23.10.2007, since it attracts additional liability on account of payment of higher rate of contribution. Pursuant to W.A.No.1757/09 -18- the said decision, the Bank has also remitted back the excess amount of `1,86,567/- to the LIC on 12.11.2007 itself and as such no case of any unjust enrichment by the appellant-Bank could be made out in the facts and circumstances of the case pleaded by the 1st respondent. The benefit available to the 1st respondent who is an employee of the appellant-Bank under the Group Gratuity Scheme with the LIC is limited to the statutory ceiling of `3.5 Lakhs, prescribed under Sub-section (3) of Section 4 of the Payment of Gratuity Act, during the relevant time. In the absence of a contract or agreement to receive better terms of gratuity, the 1st respondent is not legally entitled for gratuity over and above the statutory limit of `3.5 Lakhs, especially when the contribution paid by the employer is only for such statutory limit. In such circumstances, the finding in the impugned judgment that the 1st respondent is entitled for disbursement of the balance amount of `1,86,567/- towards gratuity is legally unsustainable. Therefore, the judgment of the learned Single Judge dated 11.12.2007 in W.P.(C)No.23941/2007 and the order dated 30.3.2009 in R.P.No.90/2008 are set aside and we allow W.A.No.1757/09 -19- this Writ Appeal dismissing W.P.(C)No.23941/2007 filed by the 1st respondent. Sd/- ANTONY DOMINIC, JUDGE Sd/- ANIL K.NARENDRAN, JUDGE dsn