Allowed

The Chittoor District Co-operative Central Bank Retired Employees Welfare Association, v. The Chittoor District Co-operative Central Bank Ltd.

Andhra Pradesh HC27 Sept 2022WP/2413/2022

Case brief

AI extract

What is this about?

The High Court allowed writ petitions filed by retired employees of cooperative banks seeking a writ of mandamus. The Court held that gratuity must be calculated using 26 working days per month rather than 30 days, following the precedent set in Jeewanlal Ltd.. The Court directed the respondent bank to pay the difference in gratuity amounts to the petitioners.

What did the court decide?

Directed the respondent bank to pay the difference of gratuity to the members of the petitioner association as per the formula using 26 working days in a month.

The Chittoor District Co-operative… — Pension and Retirement Benefits | Andhra Pradesh HC (2022)

¶1

THE HON’BLE DR. JUSTICE K. MANMADHA RAO WRIT PETITION Nos.18627 and 2413 OF 2022

¶2

ORDER :

¶3

The two Writ Petitions are filed under Article 226 of the Constitution of India, seeking the following relief:

¶4

“…..to issue a Writ, Order or direction more particularly one in the nature of Writ of mandamus declaring the action of the respondent bank in not paying the difference of gratuity amount as per the prescribed formula “Last drawn Salary/ 26 X 30 X 20’ by taking into account as 26 working days in a month as arbitrary, illegal, null and void and against the principles of natural justice, contrary to the Scheme of Payment of Gratuity Act and the Circular issued by the A.P. Cooperative Central Bank Ltd., and consequently to direct the respondent bank to pay the difference of gratuity to the members of the petitioner association as per the above formula by taking into account 26 working days in a month and to pass such other orders....”

¶5

Since the facts and issue involved in both the writ

¶6

petitions is one and the same, I find it expedient to decide both the matters by common order.

¶7

Heard Mr.Balaji Medamalli, learned counsel for the petitioners and Mr. Venati Siva Prasad Reddy, learned counsel for the 1^st respondent and Mr.V.R.Reddy Kovvuri, learned counsel for the 2^nd respondent in W.P.No.2413 of 2022.

¶8

The brief case of the petitioners is that the members of the association were worked as the employees in different categories

¶9

¶10

and retired from service from the 1^st respondent Bank. As per the agreement between the federation of the District Co-operative Central Banks and its employees, every employee is entitled for one month of his/ her last drawn pay as gratuity for every one year of his/ her service with a maximum of 20 months with the formula i.e Last Drawn Salary / 26 x 30 x 20 months. Therefore each employee will get an amount equal to their 30 days wages for every one year of service as gratuity. Whereas the respondent bank while calculating the gratuity to the members of the petitioners association had calculated the gratuity by multiplying the last drawn salary with 20. Due to which the petitioner association has lost 4 days in every month i.e 20 x 4 = 80 days of gratuity. Therefore the petitioners made several representations to the respondent bank to pay the difference of gratuity to its members as per prescribed formula as stated supra, but the respondents did not take any action so far. Hence inaction of the respondents is questioned in this writ petition.

¶11

Per contra, the respondents 1 and 2 filed counter-affidavit in W.P.No.2413 of 2022 denying all material averments in the writ affidavit and mainly contended that A.P Co-Operative Banks Association representing all 13 District Co-operative Central Banks Employees Association on 22.04.2016 for Cadre II to V Employees and for officers on 07.04.2017 have entered into a Memorandum of

¶12

¶13

Understanding, which is binding between the petitioners and respondents. As per Clause 69 of the Agreement an employee is eligible for gratuity for one month pay for each year of service with a minimum of 5 months of pay and maximum of 15 months of law drawn salary to heirs in case of the death of the employee while in service. In case of attaining superannuation the gratuity shall be calculated at the rate of one month’s last drawn salary for each year of service put in with a maximum of 20 months of service. Therefore the contention of the petitioners that while the calculating the quantum of gratuity for 30 days is being considered instead of 26 days, due to which the petitioners are facing huge losses is untenable pas provisions of Gratuity Act, 1972 (in short “the Act”).

¶14

It is further contended that as per Section 4(5) of the Act, if there is any agreement or settlement between the employer and employee, then such agreement shall supersede the formula, which has been prescribed in the Act. As there exist, a Memorandum of Agreement between the Employees Association and Banks Association, the 1^st respondent bank is obligated to follow the formula prescribed in the Agreement, dated 22.04.2016, therefore no other formula can be applied. As per Section 4 of the Act the formula prescribed for calculation of gratuity payable is “last drawn salary x 15/26 x number of service years. Therefore the

¶15

¶16

members of the petitioner association will be paid a lesser gratuity amount if the gratuity amount is paid as per the formula prescribed in the act, than the Memorandum of Agreement. Further the petitioners are the employees of Co-operative Banks, and they are the employees of State Government are not eligible for payment of gratuity other than the service conditions of their employment. At the cost of repetition the members of petitioner association are governed by the service conditions of their employment and the Memorandum of Agreement and as per the same one month pay + DA is paid for each service year, maximum of 20 years and no other formula can be adhered for calculation of gratuity. Therefore the petitioners are not entitled to claim the relief and the writ petitions are liable to be dismissed.

¶17

During hearing learned counsel for the petitioners would contend that the members of the petitioner association has lost 4 days of gratuity in every month in contravention of the agreed between the federation of Co-operative Central Banks and its employees as per circular issued by the A.P. Co-operative Central Bank, which is an Apex body of the District Co-operative Central Banks. He further draws the attention of this Court in similar circumstances, this Court passed an order in W.P.No.7569 of 2013 and also W.P.No.36770 of 2014, wherein this Court directed the respondents pay the difference of gratuity to the members of the

¶18

¶19

petitioner association as per formula by taking into consideration of 26 working days in a month. Later all the District Co-operative Central Banks have implemented the same and paid difference of amounts of gratuity to their retired employees along with interest. Therefore learned counsel for the petitioners requested this Court to pass appropriate orders in this writ petition.

¶20

Learned counsel for the respondents would contend that there exist a Memorandum of Agreement between the Employees Association and Banks Association, the Bank is obligated to follow the formula as prescribed in the Agreement dated 22.04.2016. Therefore the formula as suggested by the petitioner cannot be applied. As per Section 4 of the Gratuity Act, 1972 the formula prescribed for calculation of gratuity payable is “last drawn salary x 15/26 x number of service years”. Therefore the respondents denied the formula suggested by the petitioners in this case. Further the members of the association are the employees of Cooperative Banks and they are the employees of State Government and hence they are not eligible for payment of gratuity other than the service conditions of their employment.

¶21

Learned counsel for the petitioners relied on a decisions of the High Court of Judicature at Hyderabad for the State of Telangana and the State of A.P in W.P.No.7569 of 2013, dated

¶22

¶23

04.04.2016, holding that directed the respondents to take appropriate action in terms of Memorandum of Settlement dated 07.07.2008 and the consequential circular dated 14.08.2010 within a period of three months. Similarly in W.P.No.36770 of 2014 the Court passed interim direction dated 02.12.2014, directed the bank to pay difference of gratuity to the members of the petitioner’s association as per formula by taking into account 26 working days in a month. Therefore, learned counsel for the petitioners prays this Court by taking into consideration of all aspects and allow the writ petition as prayed for.

¶24

The petitioners filed rejoinder in W.P.No.2413 of 2022, wherein it is contended that as per Memorandum of Settlement dated 07.07.2008, it was agreed to give 20 months salary as gratuity for the employees of the District Co-operative Central Banks. Pursuant to which a Circular dated 14.08.2010 was issued, wherein it is stated that depending upon the length of service of an employee maximum of 20 months salary shall be paid as gratuity. The said issue decided by erstwhile High Court in W.P.No.7569 of 2013 as stated supra. Thereafter almost all the District Cooperative Central Banks, except few banks have implemented the same and granted 20 months’ salary as gratuity. This respondent bank had also granted 20 months’ salary as gratuity to all its

¶25

¶26

retired employees, which is undisputed. The only dispute is with regard to method of calculation adopted by the bank.

¶27

It is further contended that as per formula prescribed in the Payment of Gratuity Act the employer has to compute the last drawn salary 26 x 30 x 20 months and whereas in this case, it was calculated as last drawn salary x 20 by taking the month as 30 days. As per formula a day wage has to be ascertained by dividing the monthly salary of the employee with 26 by taking into account the number of working days in a month as 26. Due to the calculation done by the respondent bank, the petitioners lost 4 days salary in a month i.e 80 days, which will more than 3 months. The petitioner association are retired employees and drawing meagre EPS 1995 pension amount of Rs. 500/- to 1500/per month, which is not sufficient to meet their medical expenses and their family necessities.

¶28

The only issue involved in this Writ Petitions is method of calculation of gratuity. In view of calculation done by the respondent bank the petitioners had lost 4 days in every month. Therefore the petitioners raise the issue to calculate with a formula i.e Last Drawn Salary/ 26 x 30 x 20 months. Therefore each employee will get an amount equal to their 30 days wages for every one year of service as gratuity. Further the directions of the

¶29

¶30

erstwhile High Court in the writ petitions filed earlier have complied by some of the Co-operative banks and the subject matter in the said writ petition and this writ petitions is similar in nature.

¶31

Learned counsel for the petitioners placed reliance on the decision of the Hon’ble Supreme Court in the case of “Jeewanlal

¶32

Ltd., and Others Vs. Appellate Authority under the Payment of

¶33

Gratuity Act and Others”¹ wherein it was held as follows:

¶34

“ 7. These submissions, broadly stated, give rise to two question. The first is whether for the purpose of computation of “fifteen days wages” of a monthly-rated employee under subsection (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. The second question is whether the words “twenty months’ wages occurring in sub-section (3) of Section 4 of the Act must be construed to mean wages for 520 days taking the actual working days in twenty months or must mean wages for 600 days taking that a month consists of 30 days. As regards the first, the answer must be in the affirmative in view of the decision of this Court in Shri Digvijay Woollen Mills case, but learned counsel for the appellant want usd to take a second look at it as, according to them, nothing was settled in that case. As regard the second question, the learned counsel contend that sub-sections (2) and (3) of Section 4 of the Act must receive a harmonious construction as they provide for the mode of calculating the total amount of gratuity payable to an employee upon termination of his services under sub-section (1) of Section 4 of the Act and it is said that a

¶35

1 (1984) 4 SCC 356

¶36

¶37

month cannot mean 26 working days for the purposes of subsection (2) and 30 days for the purpose of sub-section (3).

¶38

Following the above decision, having regard to the facts and circumstances of the case, upon perusal of the record and considering the submissions of learned counsel, this Court inclined to allow the writ petitions as per Jeewanlal Ltd., and Others case (cited supra).

¶39

Accordingly the Writ Petitions are allowed, while directing the respondent bank to pay the difference of gratuity to the members of the petitioner association as per formula by taking into consideration of 26 working days in a month. There shall be no order as to costs.

¶40

As a sequel, miscellaneous applications pending, if any, shall also stand closed.

¶41

___________________________ DR.K. MANMADHA RAO, J

Date: 27.09.2022

THE HON’BLE DR. JUSTICE K. MANMADHA RAO

¶46

WRIT PETITION Nos.18627 and 2413 OF 2022