Allowed

M.Sraju v. Cherpulassery Co-Operative Urban Bank LTD.NO.1696

Kerala HC13 Dec 2017WP(C)/24566/2016

Case brief

AI extract

What is this about?

The Court held that retired employees are entitled to retain the entire gratuity amount exceeding ₹10,00,000 as per the Payment of Gratuity Act and Section 4(5) thereof. The bank was directed to revise earlier orders and disburse pending salary arrears with interest. The relevant circular restricting gratuity was quashed.

What did the court decide?

Orders directing refund of excess gratuity and conditional payment of arrears were set aside; Bank directed to pay salary arrears with interest within two months.

M.Sraju Vs Cherpulassery Co-Operative Urban… — Pension and Retirement Benefits | Kerala HC (2017)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN

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WEDNESDAY, THE 13TH DAY OF DECEMBER 2017/22ND AGRAHAYANA, 1939

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WP(C).No. 24566 of 2016 (U)

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PETITIONER(S) :

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M.SRAJU, AGED 59 YEARS, S/O. LATE KUNHAPPU, SAJ COTTAGE, PUTHANALIKKAL, CHERUPLASSERY, PALAKKAD DISTRICT.

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KUNJULAKSHMI, W/O. RAMACHANDRAN, UJJAYANI, VATTAPARAMBIL, PALAPPURAM P.O., OTTAPALAM, PALAKKAD DISTRICT.

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BY ADVS. SRI.K.M.SATHYANATHA MENON SMT.KAVERY S THAMPI

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RESPONDENT(S) :

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CHERPULASSERY CO-OPERATIVE URBAN BANK LIMITED NO.1696, CHERPULASSERY, PALAKKAD DISTRICT, PIN-679 503, REPRESENTED BY ITS SECRETARY.

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2. JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES, PALAKKAD, PIN- 678 001.

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REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM-695 001.

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STATE OF KERALA, REPRESENTED BY ITS SECRETARY TO CO-OPERATION DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM-695 001.

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R1 BY ADV. SRI.V.K.BALACHANDRAN R2 TO R4 BY GOVERNMENT PLEADER SMT.MABLE C.KURIAN

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 13-12-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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Msd.

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WP(C).No. 24566 of 2016 (U)

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APPENDIX

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PETITIONER(S)' EXHIBITS :

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EXT. P1	TRUE COPY OF THE COMMUNICATION DATED 22.02.2016 ISSUED TO THE 1ST PETITIONER BY THE 1ST RESPONDENT.
EXT. P1(A)	TRUE COPY OF THE COMMUNICATION DATED 22.02.2016 ISSUED TO THE 2ND PETITIONER BY THE 1ST RESPONDENT.
EXT. P2	TRUE COPY OF REPLY TO EXT. P1 DATED 01.03.2016 SUBMITTED BY THE 1ST PETITIONER TO THE 1ST RESPONDENT.
EXT. P2(A)	TRUE COPY OF REPLY TO EXT. P1(A) DATED 04.04.2016 SUBMITTED BY THE 2ND PETITIONER TO THE 1ST RESPONDENT.
EXT. P3	TRUE COPY OF THE COMMUNICATION DATED 02.06.2016 ISSUED TO THE 1ST PETITIONER BY THE 1ST RESPONDENT.
EXT. P3(A)	TRUE COPY OF THE COMMUNICATION DATED 02.06.2016 ISSUED TO THE 2ND PETITIONER BY THE 1ST RESPONDENT.
EXT. P4	TRUE COPY OF THE DECISION NO.9 DATED 28.05.2016 OF THE GOVERNING COMMITTEE OF THE 1ST RESPONDENT.
EXT. P5	TRUE COPY OF THE REPRESENTATION DATED 13.06.2016 SUBMITTED BY THE 1ST PETITIONER BEFORE THE 1ST RESPONDENT.
EXT. P6	TRUE COPY OF THE COMMUNICATION DATED 23.06.2016 ISSUED TO THE 1ST PETITIONER BY THE 1ST RESPONDENT.
EXT. P6(A)	TRUE COPY OF THE COMMUNICATION DATED 02.07.2016 ISSUED TO THE 2ND PETITIONER BY THE 1ST RESPONDENT.
EXT. P7	TRUE COPY OF CIRCULAR NO. 5/2016 ISSUED BY THE 3RD RESPONDENT.
EXT. P8	TRUE COPY OF THE JUDGMENT DATED 23.06.2015. IN W.P(C).NO.1404 OF 2015.

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RESPONDENT(S)' EXHIBITS :

NIL

//TRUE COPY//

P.S.TO JUDGE.

Msd.

ANIL K.NARENDRAN, J.

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W.P.(C).No.24566 of 2016

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Dated this the 13^th day of December, 2017

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J U D G M E N T

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The petitioners, who are retired employees of Cherpulassery Co-operative Urban Bank Ltd., the 1^st respondent Bank, are before this Court in this writ petition filed under Article 226 of the Constitution of India, seeking a writ of certiorari to quash Exts.P1, P1(a), P3, P3(a), P6, P6(a) and also Ext.P4 decision. The petitioners have also sought for a declaration that the amount received by the 1^st respondent Bank on their behalf from the Life Insurance Corporation of India, under the Group Gratuity Cash Accumulation Scheme No.44096, cannot be retained by the Bank and as such, the Bank has no authority to recover the amount which has already been paid to them under the said Scheme. The further

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relief sought for in this writ petition is a writ of mandamus commanding the 1^st respondent Bank to pay arrears, which became payable to the petitioners on account of pay revision dated 01.04.2013 together with interest at the rate of 12% per annum from the date on which it became due.

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A counter affidavit has been filed on behalf of the 1^st

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W.P.(C).No.24566 of 2016

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respondent Bank and the petitioners have also filed a reply affidavit.

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Heard the learned counsel for the petitioners, the learned counsel for the 1^st respondent Bank and also the learned Government Pleader appearing for respondents 2 to 4.

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The 1^st petitioner retired from the service of the 1^st respondent Bank on 30.11.2014, while working as General Manager, after rendering 34 years of service. Similarly, the 2^nd petitioner retired from service on 30.11.2013, while working as Branch Manager/Chief Accountant, after rendering service for 31 years. The payment of Gratuity of the employees under the 1^st respondent Bank is covered by the Payment of Gratuity Act, 1972. In terms of Circular No.46/1979 issued by the 3^rd respondent-Registrar of Co-operative Societies, the 1^st respondent Bank had joined the Group Gratuity Insurance Scheme of the Life Insurance Corporation of India, on 01.01.1976. Thereafter, the 1^st respondent Bank joined the Group Gratuity Cash Accumulation Scheme, under Master Policy No.44924, with effect from 01.03.1997.

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Prior to the retirement of the 1^st petitioner, he had

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W.P.(C).No.24566 of 2016 3

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submitted a representation before the Governing Committee of the 1^st respondent Bank for disbursement of the Gratuity, Provident Fund and Earned Leave surrender. Based on the decision of the Governing Committee of the 1^st respondent Bank, the petitioners were disbursed with their retirement benefits including Gratuity. As the last drawn salary of the 1^st petitioner was 81,810/-, he was paid a sum of 16,04,735/-₹ ₹ towards Gratuity. Similarly, the 2^nd petitioner, whose last drawn salary was 69,542/-, was paid with an amount of₹ ₹12,43,732/-.

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The petitioners were issued with Exts.P1 and P1(a) communications dated 22.02.2016 of the 1^st respondent, whereby, they were directed to refund the Gratuity amount in excess of 10,00,000/- and the said communications have₹ been issued based on an objection raised by the Auditor, following the decision of the 2^nd respondent-Joint Registrar that the Gratuity amount paid to an employee should not exceed ₹ 10,00,000/-. On receipt of Exts.P1 and P1(a), the petitioners submitted Ext.P2 and P2(a) replies. Thereafter, the 1^st respondent Bank issued Ext.P3 and P3(a) communications

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W.P.(C).No.24566 of 2016

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dated 02.06.2016, whereby the objections made by the petitioners were turn down. Exts.P3 and P3(a) were accompanied by Ext.P4 decision No.9 dated 28.05.2016 of the Governing Committee of the 1^st respondent Bank. The 1^st petitioner submitted Ext.P5 representation dated 13.06.2016. Thereafter, the petitioners were issued with Exts.P6 and P6(a) communications dated 23.06.2016 and 02.07.2017, respectively, intimating that they have to refund the amount received under the head Gratuity in excess of 10,00,000/-₹ and only if the said direction is complied with, the salary arrears on account of pay revision will be paid to them. It was in such circumstances that the petitioners have approached this Court in this writ petition seeking various reliefs.

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On 26.07.2016, when this writ petition came up for admission, this Court admitted the matter on file and issued urgent notice by speed post to the 1^st respondent Bank. The learned Government Pleader took notice for respondents 2 to 4.

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The issue raised in this writ petition regarding the entitlement of the employees of Co-operative Societies

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W.P.(C).No.24566 of 2016

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covered by the provisions under the Payment of Gratuity Act to receive better terms under Section 4(5) of the said Act is now settled in their favour by a Full Bench decision of this Court in Chandrasekharan Nair G. and others v. Kerala State Cooperative Agricultural and Rural Development Bank Ltd. and others (2017 (4) KLT 276) . Paragraphs 5 to 8 of the said decision read thus;

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“5. The liability to pay gratuity does not get shifted to the insurer by the compulsory insurance and the effect is only that the maturity value of the master policy would go to the credit of the dues of the employee. Any amount in excess of the gratuity due would also go to the employee since the contract of insurance would fall within the ambit of Section 4(5) of the Central Act. Any deficit in the amount due as gratuity to the employee after payment by the insurer has to be met by the employer only as the liability squarely rests on him under Section 4(2) of the Central Act. The insurer cannot be made liable to pay any amount in excess of the maturity value of the master policy as the same would be dependent on the premium paid to him. The compulsory insurance under S.4A of the Central Act is only to facilitate the employer to discharge his liability and the premium paid is part of the wages only. Of course the wording of the second proviso to Rule 59(iii) of the Rules gives rise to a doubt that the employee

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W.P.(C).No.24566 of 2016

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would be pinned down to the amount of gratuity specified in the Central Act. Such an interpretation would render Section 4(5) of the Central Act otiose whereunder the employee has a right to receive better terms of gratuity under any award or agreement or contract with the employer. The provisions of the Central Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other enactment or instrument or contract. The overriding effect of the Central Act over other enactments is explicit from Section 14 of the Central Act which is to the following effect:

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"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."

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The co-operative societies wherein the employees are engaged is Entry 32 of List II - State List and gratuity to which a claim is laid is Entry 24 of List III - Concurrent List of the Seventh Schedule to the Constitution of India. The Central Act which is the law made by the Parliament shall prevail over the law made by the Legislature of the State i.e. the second proviso to Rule 59(iii) of the Rules. The inconsistency between laws made by Parliament and laws made by the Legislatures of States can be ironed out by calling in aid Article 254 of the Constitution of

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India. The same reads as follows:

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"254. Inconsistency between laws made by Parliament and laws made by the Legislatures of States.-- (1) If any provision of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament, which Parliament is competent to enact, or to any provision of an existing law with respect to one of the matters enumerated in the Concurrent List, then, subject to the provisions of Clause (2), the law made by Parliament, whether passed before or after the law made by the Legislature of such State, or, as the case may be, the existing law, shall prevail and the law made by the Legislature of the State shall, to the extent of the repugnancy, be void.

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(2) Where a law made by the Legislature of a State with respect to one of the matters enumerated in the Concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State: Provided that nothing in this clause shall

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W.P.(C).No.24566 of 2016

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prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the Legislature of the State."

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(emphasis supplied)

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There is no case that the second proviso to Rule 59(iii) of the Rules made by the Legislature of the State has received the assent of the President in order to prevail in the State under Article 254(2) of the Constitution of India. Every amendment to the State Act or the Rules has also to obtain the assent of the President which is absent in regard to the second proviso to Rule 59(iii) of the Rules. The irresistible conclusion is that Section 4(5) of the Central Act which enables an employee to opt for a better terms of gratuity will prevail over the second proviso to Rule 59(iii) of the Rules. Only the case of employees who are both covered under the Central Act and the Rules framed under the State Act is dealt with in this bunch of writ petitions since the Central Act does not apply to all establishments. Section 1(3)(b) of the Central Act is categoric that the same applies only to an establishment in which ten or more persons are employed or were employed during the preceding twelve months.

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The dominant intention of the Central Act is to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments. The

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W.P.(C).No.24566 of 2016

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dominant intention of the State Act is to provide for the orderly development of the co-operative societies in the State as self-governing democratic institutions. A provision in the Central Act to give effect to its dominant purpose may incidentally be on the same subject as covered by the provision in the State Act. But such partial coverage of the same area in a different context and to achieve a different purpose does not bring about the repugnancy which is intended to be covered by Article 254(2) of the Constitution. We shall quote the decision in Vijay Kumar Sharma v. State of Karnataka, 1990 KHC 805 wherein it is held as follows:

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"53. The aforesaid review of the authorities

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makes it clear that whenever repugnancy between the State and Central legislation is alleged, what has to be first examined is whether the two legislations cover or relate to the same subject matter. The test for determining the same is the usual one, namely, to find out the dominant intention of the two legislations. If the dominant intention i.e. the pith and substance of the two legislations is different, they cover different subject matters. If the subject matters covered by the legislations are thus different, then merely because the two legislations refer to some allied or cognate subjects they do not cover the same field. The legislation, to be on the same subject

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matter must further cover the entire field covered by the other. A provision in one legislation to give effect to its dominant purpose may incidentally be on the same subject as covered by the provision of the other legislation. But such partial coverage of the same area in a different context and to achieve a different purpose does not bring about the repugnancy which is intended to be covered by Article 254(2). Both the legislations must be substantially on the same subject to attract the article." (emphasis supplied)

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There is no repugnancy (in the sense that one Act cannot be obeyed without disobeying the other) and therefore every endeavor has to be made to reconcile the provisions and give a harmonious construction.

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The following decisions were cited at the Bar by the counsel for either sides:

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(i) Retnavalli v. Ambalapadu Service Cooperative Bank Ltd. [2005(3) KLT 320]

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(ii) Nedupuzha Service Co-operative Bank Ltd. v. Rugmini [2011(3) KLT 134(DB)]

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(iii) Mathew Korah v. Kaduthuruthy Urban Cooperative Bank [2013(4) KLT 558]

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(iv) The Travancore Cements Employees' Co-operative Bank Ltd. v. Ramachandran Nair [2014(1) KLT 889(DB)] and

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(v) Life Insurance Corporation of India v.

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W.P.(C).No.24566 of 2016

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K.P.Varughese [ILR 2015(3) Kerala 420(DB)].

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None of the above decisions dealt with the second proviso to Rule 59(iii) of the Rules substituted with effect from 2.11.2010 only and hence do not help to resolve the controversy in this bunch of cases. The second proviso to Rule 59(iii) of the Rules referable to the amount received out of any scheme implemented by a society shall be construed in the context explained above. The employee in other words is entitled to the higher amount if he has opted in terms of Section 4(5) of the Central Act even if a lesser amount is due under Section 4(2) thereof. The decision in Nedupuzha's case (supra) to the extent that excess amount if any received by the employer under the policy would inure to the employee is affirmed. The said decision does not lay down the proposition that the entitlement of the employee is confined to the amount received under the policy even if it falls short of the statutory limit. Circular No.5/2016 and similar circulars issued by the Registrar of Co-operative Societies stem out of a misconception of the statutory provisions and are quashed to this extent. The reference is answered accordingly and the writ petitions shall be posted before the single Judge as per roster for disposal dependent on individual facts.”

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9. In Chandrasekharan Nair's case (supra) , the

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Full Bench of this Court held that, the liability to pay gratuity

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does not get shifted to the insurer by the compulsory insurance and the effect is only that the maturity value of the

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W.P.(C).No.24566 of 2016

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master policy would go to the credit of the dues of the employee. Any amount in excess of the gratuity due would also go to the employee since the contract of insurance would fall within the ambit of Section 4(5) of the Central Act. Any deficit in the amount due as gratuity to the employee after payment by the insurer has to be met by the employer only as the liability squarely rests on him under Section 4(2) of the Central Act. The insurer cannot be made liable to pay any amount in excess of the maturity value of the master policy as the same would be dependent on the premium paid to him. The compulsory insurance under Section 4A of the Central Act is only to facilitate the employer to discharge his liability and the premium paid is part of the wages only.

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In Chandrasekharan Nair's case (supra) the Full

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Bench held further that, the wording of the second proviso to Rule 59(iii) of the Rules, of course, gives rise to a doubt that the employee would be pinned down to the amount of gratuity specified in the Central Act. Such an interpretation would render Section 4(5) of the Central Act otiose whereunder the employee has a right to receive better terms of gratuity under

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any award or agreement or contract with the employer. The provisions of the Central Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other enactment or instrument or contract. The overriding effect of the Central Act over other enactments is explicit from Section 14 of the Central Act. The Co-operative Societies wherein the employees are engaged is Entry 32 of List II-State List and gratuity to which a claim is laid is Entry 24 of List III-Concurrent List of the Seventh Schedule to the Constitution of India. The Central Act which is the law made by the Parliament shall prevail over the law made by the Legislature of the State, i.e., the second proviso to Rule 59(iii) of the Rules. The inconsistency between laws made by Parliament and laws made by the Legislatures of States can be ironed out by calling in aid Article 254 of the Constitution of India. There is no case that the second proviso to Rule 59(iii) of the Rules made by the Legislature of the State has received the assent of the President in order to prevail in the State under Article 254(2) of the Constitution of India. Every amendment to the State Act or the Rules has also to obtain the

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assent of the President which is absent in regard to the second proviso to Rule 59(iii) of the Rules. The irresistible conclusion is that Section 4(5) of the Central Act which enables an employee to opt for a better term of gratuity will prevail over the second proviso to Rule 59(iii) of the Rules. The Full Bench has also made it clear that, it has dealt with only the case of employees who are both covered under the Central Act and the Rules framed under the State Act, since the Central Act does not apply to all establishments.

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In view of the law laid down by the Full Bench of this Court in Chandrasekharan Nair's case (supra) , the stand taken by the 1^st respondent Bank in Exts.P1, P1(a), P3, P3(a), P6, P6(a) and also in Ext.P4 decision that the entitlement of the petitioners for payment of Gratuity has to be limited to 10,00.000/- cannot be sustained. Therefore, the₹ aforesaid orders are set aside, thereby, holding that the petitioners are legally entitled to retain the entire Gratuity amount of ₹16,04,735/- and ₹12,43,732/- respectively, received from the 1^st respondent Bank.

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The further relief sought for in this writ petition is

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payment of arrears in respect of pay fixation made with effect from 01.04.2013. The stand taken by the 1^st respondent Bank in Exts.P6 and P6(a) is that the petitioners will be paid arrears of salary on account of pay revision, once they refund the Gratuity amount received in excess of the ceiling of ₹ 10,00,000/-. In the counter affidavit filed by the 1^st respondent Bank it has been stated that the arrears of salary on account of pay revision as stated in Exts.P6 and P6(a) will be paid to the petitioners as soon as they return the excess amount collected under the head Gratuity. Once the entitlement of the petitioners for payment of Gratuity in excess of 10,00,000/- is₹ upheld in view of the law laid down by the Full Bench of this Court in Chandrasekharan Nair's case (supra) , they are entitled for an order directing the 1^st respondent Bank to disburse the pay revision arrears with effect from 01.04.2013, without any further delay.

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In such circumstances, there will be a direction to the 1^st respondent to disburse the pay revision arrears due to the petitioners with effect from 01.04.2013, as expeditiously as possible at any rate within a period of two months from the

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date of production of a certified copy of this judgment.

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The learned counsel for the petitioners would submit that since the amount payable to the petitioners towards pay revision arrears were withheld, without any legal basis, they are entitled for payment of the said amount together with interest. It is for the petitioners to make a representation before the 1^st respondent Bank for that purpose. If any such representation is received, within two weeks from the date of receipt of a certified copy of this judgment, the 1^st respondent shall consider the same and pass appropriate orders thereon, strictly in accordance with law.

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Sd/ANIL K. NARENDRAN JUDGE

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M.Sraju v. Cherpulassery Co-Operative Urban Bank LTD.NO.1696

Case brief

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M.Sraju v. Cherpulassery Co-Operative Urban Bank LTD.NO.1696

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