Standard Stonewares and Tiles Vs. Appellate Authority - Court Judgment

Excerpt:
service - gratuity benefits - sections 7 (4) and 7 (7) of payment of gratuity act, 1972 - respondents (employees) claimed interest amount on delayed payment of gratuity - appellate authority rejected appeal of employer on ground that entire amount not deposited - whether deposit of entire amount under section 7 (4) (c) was condition precedent for admitting appeal under section 7 (7) - clause (1) of sub-section 4 would mandate employer to deposit admitted amount before controlling authority and such deposit infact prior to passing of order under sub-section 4 (c) - deposit as contemplated under second proviso to sub-section 7 of section 7 is in respect of amount of gratuity ordered to be paid or deposited by employer - such deposit would relate only to balance amount of gratuity if admitted amount of gratuity had already been deposited - statute prescribes only deposit of gratuity amount and not interest thereon. - - as the above establishment was facing severe financial problems the petitioner-establishment had been declared on 20.3.1990 as a sick industrial company under the sick industrial companies (special provisions) act, 1985. the board of industrial and financial reconstruction, new delhi had prepared a rehabilitation scheme envisaging certain sacrifices from the part of the petitioner as well as its employees. provided that the appropriate government or the appellate authority, as the case may be, may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of sixty days, extend the said period by a further period of sixty days: or ii) where the applicant is not the employee, to the nominee or, as the case may be, the guardian of such nominee or heir of the employee if the controlling authority is satisfied that there is no dispute as to the right of the applicant to receive the amount of gratuity'.in the case of any dispute as to gratuity, an order has to be passed under clause (c) of sub-section 4 of section 7 of the act. an order under sub-section 4(c) would include the gratuity amount as well as interest on the above amount due from the date of default. clause (c) stipulates that an order shall be passed in respect of the amount found to be payable to the employee and such amount shall include the gratuity as well as the interest thereon in view of section 7(3a) of the act. thus, it is clear that an order to be passed under section 7(4)(c) of the act should include the amount of gratuity as well as the interest thereon. as per sub-section 4(c) of section 7 of the act, the controlling authority should direct the employer to pay such amount liable to be payable by the employee and the above amount would include both gratuity as well as the interest for delayed payment.r. rajendra babu, j.1. the question for consideration was whether the deposit of the entire amount directed to be paid under section 7(4)(c) of the payment of gratuity act (hereinafter referred to as 'the act'), was a condition precedent for admitting an appeal under section 7(7) of the act,2. the petitioner establishment, standard stonewares and tiles, thaikkattukara, aluva, was a unit of sudarsan clay and ceramics ltd., aluva. respondents 2 to 15 were employees of the petitioner and they had retired from service. they were paid gratuity. respondents 2, 3 and 8 to 12 preferred claim before the authority under the payment of gratuity act, (for short, 'the authority'), claiming interest on the gratuity amount alleging delayed payment. respondents 4 to 7 and 13 to 15 filed claim for arrears of gratuity with interest and also interest on the amount already paid on the ground of delay. the authority allowed the claim made by r2 to r15 by ext.p2 order. the petitioner filed an appeal before the appellate authority challenging the above order. they deposited the arrears of gratuity amount ordered to be paid by the authority, but did not remit the amount ordered to be paid towards interest on the delayed payment of gratuity. the appellate authority rejected the appeal by ext.p9 order on the ground that the entire amount ordered to be paid by the authority was not deposited as stipulated by the 2nd proviso to section 7(7) of the act. the above order, ext.p9, is under challenge.3. heard the learned counsel for the petitioner, learned counsel for the employees and the learned government pleader.4. the petitioner-establishment, standard stonewares & tiles was a unit of sudarsan clay and ceramics ltd., situated at aluva. as the above establishment was facing severe financial problems the petitioner-establishment had been declared on 20.3.1990 as a sick industrial company under the sick industrial companies (special provisions) act, 1985. the board of industrial and financial reconstruction, new delhi had prepared a rehabilitation scheme envisaging certain sacrifices from the part of the petitioner as well as its employees. accordingly, matter had been discussed in between the representatives of the petitioner and the workmen before the district labour officer, ernakulam and it resulted in ext.p1 settlement, 25.6.1991. as per clause 1(9) of ext.pl settlement, it had been agreed that the gratuity arrears of the retired employees would be paid within three months from the date of lifting the lock out. the establishment was under lock out for nearly four years as it was lifted on 14.3.1994. there was a further settlement reached on 1.10.1994 by which the unions had agreed to re-start production from 10.11.1994 and the gratuity dues to the retired employees was agreed to be paid on or before 31.10.1994. the above agreement had been approved by the bifr. respondents 2 to 5 had received the gratuity amount from the company during october 1, 994. later, the respondents 2 to 15 filed claim petitions before the authority for delayed payment of gratuity and also claiming balance of gratuity and interest. the authority allowed the entire claim and the above order had been challenged before the appellate authority constituted under the act. 5. the main argument advanced by the learned counsel for the petitioner wasthat the second proviso to section 7(7) of the act would mandate only the deposit of theamount equal to the amount of gratuity required to be deposited under sub-section(4) of'the act'. it was further submitted that the statute did not envisage or stipulate thedeposit of the interest awarded by the authority as a condition for filing or admittingan appeal. it would be relevant to consider sub-section(7) of section 7, which reads:'(7) any reason aggrieved by an order under sub-s.(4) may, within sixty days from the date of the receipt of the order, prefer an appeal to the appropriate government or such other authority as may be specified by the appropriate government in this behalf:provided that the appropriate government or the appellate authority, as the case may be, may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of sixty days, extend the said period by a further period of sixty days:provided further that no appeal by an employer shall he admitted unless at the time of preferring the appeal, the appellant either produces a certificate of the controlling authority, to the effect that the appellant has deposited with him an amount equal to the amount of gratuity required to be deposited under sub-section(4) or deposits, with the appellate authority such amount':-the second proviso to section 7(7) says that at the time of preferring the appeal, the appellant shall either produce a certificate of the controlling authority to the effect that the appellant has deposited with him an amount equal to the amount of gratuity required to be deposited under sub-section(4) or deposits with the appellate authority such amount. the proviso stipulates the deposit of an amount equal to the amount of gratuity to be required to be deposited and it does not say that the entire amount as ordered to be deposited by the authority under section 4(c) should be deposited. it would be relevant to consider sub-section(4) of section 7 of the act, which reads:(4)(a) if there is any dispute as to the amount of gratuity payable to an employee under this act or as to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the person entitled to receive the gratuity, the employer shall deposit with the controlling authority such amount as he admits to be payable by him as gratuity.b) where there is a dispute with regard to any matter or matters specified in clause(a), the employer or employee or any other person raising the dispute may make an application to the controlling authority for deciding the dispute.c) the controlling authority shall, after due inquiry and after giving the parties to thedispute a reasonable opportunity of being heard, determine the matter or matters indispute and if, as a result of such inquiry any amount is found to be payable to theemployee, the controlling authority shall direct the employer to pay such amount ofas the case may be such amount as reduced by the amount already deposited by theemployer'd) the controlling authority shall pay the amount deposited, including the excess amount, if any deposited by the employer, to the person entitled thereto.e) as soon as may be after a deposit is made under clause(a), the controlling authority shall pay the amount of the deposit- i) to the applicant where he is the employee: orii) where the applicant is not the employee, to the nominee or, as the case may be, the guardian of such nominee or heir of the employee if the controlling authority is satisfied that there is no dispute as to the right of the applicant to receive the amount of gratuity'. in the case of any dispute as to gratuity, an order has to be passed under clause (c) of sub-section 4 of section 7 of the act. an order under sub-section 4(c) would include the gratuity amount as well as interest on the above amount due from the date of default. clause (c) stipulates that an order shall be passed in respect of the amount found to be payable to the employee and such amount shall include the gratuity as well as the interest thereon in view of section 7(3a) of the act. sub-section 3a of section 7 deals with the liability of an employer to pay the interest. sub-section 3(a) of section 7 reads:'3-a. if the amount of gratuity payable under sub-section (3) is not paid by the employer within the period specified in sub-section (3), the employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the central government from time to time for repayment of long-term deposits, as that government may, by notification specify:provided that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment on this ground'.a consideration of sub-section 3a of section 7 would reveal that an employer is obliged to pay the interest on the gratuity from the date on which the gratuity had become payable till it was paid with simple interest at such rate fixed by the central government. the supreme court in h. gangahanume gowda karnataka agro industries corporation ltd., (2003) 3 scc 40 held that the interest on delayed payment of grauity under section 7(3-a), was mandatory and the exception could be allowed only when the delay was due to the fault of the employee and the employer had obtained permission from the controlling authority for delayed payment on that ground. thus, it is clear that an order to be passed under section 7(4)(c) of the act should include the amount of gratuity as well as the interest thereon. as per sub-section 4(c) of section 7 of the act, the controlling authority should direct the employer to pay such amount liable to be payable by the employee and the above amount would include both gratuity as well as the interest for delayed payment. the wording in the second proviso to sub-section 7 of section 7 is not identical with the wording in section 7(4)(c) and it says that the petitioner shall deposit an amount equal to the amount of gratuity required to be deposited under sub-section 4 of section 7. as per clause (a) of sub-section 4 of section 7, when there is a dispute as to the amount of gratuity payable to an employee and if the employer admits the payment of any amount the above admitted amount of gratuity will have to be deposited. the controlling authority shall disburse the above deposit amount to the employee in view of sub clauses (d) and (e). the 2nd proviso to section 7(7) deals with the deposit of the gratuity amount alone where as clause (c) of section 7(4) deals with the order directing the payment of the gratuity and interest thereon by the employer. thus the difference in the language used by the legislature in clause (c) of sub-section 4 and the 2nd proviso to sub-section 7 of section 7 would make it clear that the legislature intended to direct the deposit of the gratuity amount alone before the authority or before the appellate authority as a condition precedent for admitting the appeal and it did not contemplate that the entire amount ordered to be paid or deposited under sub-clause (c) of sub-section4 need be deposited before admitting the appeal. it was further made clear from clauses (d) and (e) of sub-section 4 of section 7 which would say that the entire amount deposited before the authority, even when there was excess amount, should be released to the claimant. the learned counsel for the petitioner placed reliance of a decision of the calcutta high court in gloster jute mills ltd. v. deputy secretary, labour department and ors., 2002 (3) llj 908. there the high court of calcutta had taken the view that the appellant need deposit the admitted amount. i do not think that the above decision is in accordance with the statutory provision. clause (1) of sub-section 4 would mandate the employer to deposit the admitted amount before the controlling authority and such a deposit is infact prior to the passing of an order under sub-section 4(c). sub clause (d) and (e) of sub-section 4 of section 7 direct the authority to disburse the amount immediately to the employee. that is a direction to disburse the amount even prior to the adjudication of the amount by the authority. so, the deposit contemplated under sub-section 4(a) of section 7 is in respect of the deposit of the admitted amount before the adjudication under clause (c) of section 7(4). the deposit contemplated under the second proviso to section 7(7) of the act was in respect of the entire gratuity amount ordered to be paid by the employer under clause (c) of sub-section (4). thus the deposit as contemplated under second proviso to sub-section 7 of section 7 is in respect of the amount of gratuity ordered to be paid or deposited by the employer. such deposit would relate only to the balance amount of gratuity if the admitted amount of gratuity had already been deposited under clause (a) of sub-section 4 of section 7. the statute prescribes only the deposit of the gratuity amount and not the interest thereon. the supreme court decision (2003) 3 scc 40 relied on the respondent would stipulate that it was mandatory on the part of the controlling authority to allow interest on the delayed payment. but it does not say that the entire amount should be deposited as a precondition for the admission to the appeal. the rejection of the appeal due to the non-deposit of the entire amount covered by ext.p2 order is illegal and is liable to be set aside.in the result, this o.p. is allowed. ext.p9 order rejecting the appeal is set aside and the appellate authority is directed to admit the appeal and dispose of the same on merits in accordance with law.