Andhra Pradesh State Road Transport Corp. Hyderabad versus P. Venkateswara Rao etc.

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24.8

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A ANDHRA PRADESH STATE ROAD TRANSPORT CORP. HYDERABAD

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v.

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P. VENKATESW ARA RAO ETC.

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August 19, 1976

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B

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[A. N. RAY, C.J., M. H. BEG AND P. N. SHINGHAL, HA

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Gratuity, entitlement tO-Whether a fdrmer employee of the Nizam's State Railway can claim grQtuity as of right i~ addition to Provident Fu11d-Governme11!, of Hyderabad Railway EstCJblishment Code, 19'49, Rule 8.01, 8.02, 8.05, 8, t .. , 8.13, 8.15, 8.16, 8.17 adn 8.19 read with para 17 Chapter Vfl..--lmer practice of. ·

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.

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c .Code <>! Civil Procedure, Act V of 1908--Section 11-Princip/e of res jud1cata,-Applicabi1ity when gratuity was awarded in a previous proceedings .under the Paymen~ of Wage Act i1~ the teeth of the clear provision of Rufe 8.01-Scape of Rule 8.01. Provid,.nt Fund-l/lef?a/ payment of gratuity in the past will not affect legal claims to Provident Fund. ' · In APSRTC v. Rammohan Rao (Civil revision petition No. 1598/1968, "' D dated April 25, 1%9), the' High Court of Andhra: Pradesh held: (i) that wages under s. 2(iv) (d) of the Payment of Wa~s Act included gratuily and (ii) that Rule 8.01 of the Hyderabad Government Railway Establishment Code, 1949, did not stahd alone and read with Rule 8.15 it meant that an employee! who hmi received the Provideni Fund was not disentitled to gratuity. Following the said decision, the labour court in all the appeals allowed the claims of the respondents to gratuity in addition to Provident Fund vide its order dated August 25, 1970.

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E Dis:mis.sing the appeals by special leave the Court,

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HEID : (i) Rule 8.15 of the Hyderabad Government Railway Establishment Oxle, 1949', cannot be read in the same manner as tlie Andhra Pradesh High Court had done it in the earlier case. Rule 8.15 only explains how Rule 8.05 wrui to> be applied in oertain cases. Rule 8.05 Jays down that the period for which! gratuity on retiremeht or contribution to the Provident Fund has been received will count towards the qualifications in Rule 8.05 and further clarifies that the per•od will not, however, affect ilie calculation of the amount F of gratuity under Rule 8.19. The obvious intention of Rule 8.15 was that the amount already received either as gratuity or contribution to the PrOVideht Fund will not be paid again to the employee. The periods for which payments had already been made, which may happen in certain cases, would nevertheless count towards the qualifyihg period prescribed by Rule 8.05. [242 F-Hl

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(2) When gratuity was awarded in a previous proceeding as a part of wages in the teeth of the clear provision of Rules 8.01 imposing a condition G precedent which v1as not satisfied to eligibility for it, the contention hat such a patently illegal view could or should be h_eld to be binding on the parties ih a subsequent claim for gratuity on the same footing is unacceptable. The mcst the court can say is that the previous recognition of a claim to gratuity. practically in excess of jurisdiction to do so, debas the lbour court from going into the question whethr the respohdent was. ~1ghtly paid that amount as gratuity in the past. In the mGtant case, the prov1s10ns of s. 11 of the C.P.C. have no application. [253 D.G]

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H (3) It is true that the whole idea of the Provident Fund to which the employer also contributes, seems to be different from a gratuity to which "good. continuous, efficient and faithful" service may entitle an employee yet he cannot claim the benefit of both the guaranteed or other Provident Fund to which the

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"

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A. P. ROAD TRANSPORT V. P. VENKATESWARA RAO (Beg, J.) 249

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employer contributes as well as to gratuity· as of right in the face of the provisions of Rule 8.01 and 8.02 of the Gratu'ty rules. Illegal payments of gra·uity in the r.ast will not affect legal claims to Provident Fund. [253 H. 254, A]

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A

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Andhra l'radesh State Road Transport Corporation v. M. Rammohan Rao (Civil) Revision Petition No. 1598/1968 decided on April 25, 1969), (AP.), over-ruled. ·

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CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 36 to 54 of 1971.

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Appeals by special leave from thei judgment and order dated 25-8-1970 of the Labour Court, Hyderabad in CivH Misc. Petitions Nos. 133 to 147 and 165 to 168 of 1970.

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Civil Appeal No. 1153 of 1972.

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C

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Appeal by special leave from the judgment and order dated 20-10-71 of the Labour Court, Hyderabad i•a Misc. Petition No. 64/71. AND .

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Civil Appeal No. 312 of 1973.

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Appeal by special leave from the judgment and order dated 11-2-1972 of the Labour Court, Hyderabad in Misc. Petition No. 239/70.

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Civil Appeals Nos. 325 to 339 of 1973 .

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Appeals by special leave from the judgment and order dated 7th, 9th, 11th and 15th February, 1972 of the Labour Court Hyderabad in Misc. Petitions Nos. 231-238/70, and 240-246/70.

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E

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L. N. Sinha, Sol. General of India and B. Parthasarthy, fbr the appellants.

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G. Narayana Rao and K. S. Ramanuja.charyulu, for the respondents.

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The Judginent of the court was delivered by

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BEG, J. A number of appeals filed by the Andhra Pradesh State Road Transport Corporation are before us by grant of special leave under Article 136 of the Constitution of India, against orders of a Labour Court passed under section 33C(2) of the Industrial Disputt<S Act, 1947. The facts of the first of these appeals may be stated to illustrate the ki!ad of circumstances in which a common question of law involved in these appeals arises.

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The respondent P. Venkateswara Rao, who was employed on 6th October, 1933, retired on 10th February, 1958, after putting in more than 34 years of service. As he was a former employee of the Nizam's State Railway, his service conditions were governed by the provisions of the Government of Hyderabad, Railway Department ES'tablishment Code of 1949 (hereinafter referred to as 'the Code'). He claimed that he was entitled to receive a gratuity at a half month'~ salary for 18-1003 SCil76

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[ 1977] 1 S.C.R.

SUPREME COURT REPORTS

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250

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A oach year of qualifying service subject to a maximum of 15 months' salary as laid down in Rule 8.01 of the Code, which says. :

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"8.01. Condition of eligibility.-Gratuity is granted at

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the discretion of Government in the Railway Department as a reward for good, efficient, continuous, and faithful service to a perma:aent railway servant if he is not a subscriber to the

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B Provident Fund or to the Guaranteed Provident Fund, on his quitting the service, or, in the event of his de'ilth before receipt of gratuity to his widow or widows and/ or dependent children. For purposes of this rule a monthly paid railway servant borne on the temporary establishment whose pay is charged to open line capital and revenue works on which he is employed shall be deemed to be a permanent railway ser-

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c vant only after he had rendered 4 years' continuous service, railway servants belonging to the category of workshop staff, employed otherwise than in a supervisory capacity, shall also be considered as permanent railway servants only after they have rendered 4 years' oontinuous service".

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The other rules which seemed to h•ave a bearing on the question before us are as follows : D

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"8.02. A gratuity cannot be claimed as of right.

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8.04. No gratuity shall be granted to a railway servant who has been removed from service by reason of any miscCJ1,1duct on his part, save with the express sanction of the authority competent to sanction the gratuity.

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8.05. Qualifying service.-Except where otherwise provided for in these rules, service must be continuous and must also, in the opinion of the General Manager, be "good", "efficient" and "faithful" service to qualify for the gratuity. A gratuity may be granted on the fulfilmetnt of the following conditions :-

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(i) Completion of thirty years' service; or

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..

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(ii) Attainment of the age of fifty-five years, provided not less than fifteen years' service has been completed; or

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(iii) Retirement or resignation after fifteen years' service, on grounds admitted by the authority

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G competeii1t to sanction the gratuity as good and sufficient from the point of view of the Administration; or

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(iv) Retirement with less tlran fifteen years' service, due to

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(a) permanent physical or mental 'incapacity, or (b) abolition of appointment if other suitable employment cannot be found for the railway servant.

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A. P. ROAD TRANSPORT V. P. VENKATESWARA RAO (Beg, J.) 25 l

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8.12. The maximum period of service qualifying for gratuityisthirty years.
8.13. A railway servant whoisretired in service after he has attained theageoffifty-fiveyears may be permitted to count the whole ofhisservice, subject to the limit of thirty years,asqualifying for, gratuity.
8.15. Service forwhicha railway servant has already re- ceived a retiring graturty or special contribution to the provident fund or to the guaranteed providoot fund countsasqualifying service for the purpose0f rule 8.05 but it shall be excluded in calculating the amount of gratuity admissible under rule·8.19.
8.16. When a railway servantisinjured in theperformanct< ofhisduty andisobliged to leave the service, he may begiventhegroatuityhe had earned under these rules in addition to any compensation gratuity awarded to him on account of his injury.
8.17. Breaks inservice.-
(i) Ordinarily, a breakinllie service of a railway servant entails forfeiture of his past service, but, in deserving cases, this rulemayberelaxed under orders of theGoverinmentin the Railway Department, orin cases of breaks not exceeding fifteen days in respect of railway servants other than Class I or ClassII under the orders of the General Manager, the period of break whether in permanent or temporary service or both being treatedas_dies non._
(ii) A railway servantwhohas been discharged from the service may, subject to the othercoinditionsof these rules, on re-employmentonthe Railway, be permitted to add the period ofhisformer qualifying service to his future service for the purpose of deter- mining the gratuity admissible to him.
8.19. Amount of gratuity.-The amount of gratuityoadll,lis- sible shall beasfollows:
(i)In cases of less than fifteen years' qualifying service falling under rule 8.05{iv) above, a gratuity limited ordinariJy to half a month's pay, and, in special cases, where circumstances warrant, to one month's pay, for each year of qualifying service, subject to a maximum of six months' pay inall.
{ii)Inallother cases falling under the rules in this chapter half a month's pay for each year of qualifying service, subject to amoaximumof fifteen months' pay".

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[1977] 1 S.C.R.

SUPREME COURT REPORTS

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252

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A The respondent claimed Rs. 3962.50 as gratuity. The defence of the appellant was, inter-alia, that a sum of Rs. 3962/- had already been paid to the respondeat on 13th March, 1968, as a special contribution to Provident Fund. It was urged that no employee is entitled to any grant at all if he is a subscriber to Provident Fund. It is pointed out that Rule 8.01 set out above made a claim of payment of gratuity admissible in those cases where the employee was not a subscriber to B the Provident Fund. On the face of it, this cOiatention, which has been repeated before us, seems to be sound and unanswerable.

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The Labour Court had, however, over-ruled the main defence of the appellant on the strength of a pre~ious proceeding under section 15(2) of the Payment of Wages Act, in which the respondent had claimed a payment out of his gratuity, to the extent of 2,000/-, on the c ground that the gratuity claimable fell within the definition of "wages" under the Payment of Wages Act. It had been held that he was entitled to such payment although he was a subscriber to a Provident fund. In that case, the respondent had applied only for deducting RJS. 1256.79 due from him to the Co-operative Credit Society of the appellant Corporation from the gratuity which would have become payable to him on retirement. He was declared entitled to Rs. 1630/D only. The two issues framed in that case were as follows :

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Whether gratuity is wages within the meaning of payment of Wages Act?

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Whether the Corporation had the discretion to refuse to pay the gratuity to the respondent and whether it cannot be questioned ?

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The case had gone up to the High Court of Andhra Pradesh in revision under Section 115 Civil Procedure Code. The High Court, while rejecting the objection advanced on behalf of the appellant Corporation in ·a case arising out of the proceeding under the Payment of Wages' Act, had observed that Rule 8.15 indicated that Rule 8.01 did not stand in the way of awarding gratuity to a person who is also F entitled to the Provident Fund.

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We are unable to read Rule 8.15 in the same way as the High Court had done it in the earlier case. We think that Rule 8.15 only explains how Rule 8.05 was to be applied in certain cases. It lays down that the period for which gratuity of retirement or contribution G to the Provident Fund had been received will count towards the qualifications laid down in Rule 8.05. It then clarifies that this period will not, howev,er, affect the calculation of the amount of gratuity under Rule 8.19. The obvious intention of Rule 8.15 was that the amount already received either as gratuity or contribution to the Provident Fund will not be paid again to the employee. The period for which payments had already been made, which may happen in H certain cases, such as those of broken service or of anticipatory payments, like the one to satisfy debt of the respondent P. Venkateswara Rao, to the Cooperative Society, would, nevertheless, count towards the qualifying period prescribed by Rule 8.05.

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A. P. ROAD TRANSPORT V. P. VENKATESWARA RAO (Beg, J.) 253

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On the strength of the judgment of the High Court, in the pre- A vious proceeding, which was the basis of the decision of the Labour Court, Learned Counsel for the respondent had put forward a preliminary objection that the matter cannot be reagitated. It is clear that the provisions of Section 11 C.P.C. have no application to such a case. The nature of the proceedings and of authorities before which the claims were made were different. It is, however, urged that the principles of res judicata should bar raising the same ques- B tion once again in a subsequent proceeding. It is true that the High Court had made observiations which had a clear bearing on the question to be decided subsequently, but, it will be noticed that the question now before us was not directly the subject matter of th~ issues framed in the previous proceeding which have been set out above. Nevertheless, an objection was taken on behalf of the appellant that a basic condition for the eligibility of a claim for gratuity C had not been satisfied inasmuch as the respondent was a subscriber to a Provident Fund. This objection had been over-ruled. It was held that the gratuity could be claimed as of right. We do not know what direction was exactly given in that case. The finding, however, that the petitioner was entitled to a 'payment of gratuity, as of right, to the extent of Rs. 1630/-, appears to have been given as a result D of the decision that he ~as entitled to the payment of this much gratuity and no more for the purposes of the claim made in the proceedings under the Payment of Wages Act.

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It seems to us that, when gratuity was awarded in a previous proceeding, as a part of Wages, in 'the teeth of the clear provision of Rule 8.01 imposing a condition precedent, which was not satisfied, E to eligibility for it, it is difficult to hold that 1such a patently illegal view could or should be held to be binding on the parties in a subsequent claim for gratuity on the same footing, before the Labour Court. We find that, even if we were to hold, as we think we must, as the matter was not taken further, that the declaration of entitlement to Rs. 1630/- in the previous proceeding should be held to be binding between parties, we cannot apply the same reasoning to the F subsequent claim made before the Labour Court which is now before us. The Labour Court had not even deducted the amount already awarded earlier from the amount awarded by its judgment now before us. The most we can say is that the previous recognition of a claim to gratuity, practically in excess of jurisdiction to do so, debars the Labour Court from going into the question whether the respondent was rightly paid that amount as gratuity in the past. We G have already set out the rule which disentitles him from being eligible for the award of gratuity when he contributes to a provident fund also. We have also interpreted the rule which was misunderstood earlier by the High Court.

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We need not here set out the relewint provident fund rules contained in Chapter 7 of the Code. It is true that the whole idea of H the Provident Fund, to which the employer also contributes, seems to be different from a gratuity to which "good, continuous, efficient and faithful servant" may entitle an employee, yet, we are unable to hold

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[1977] 1 S.C.R.

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SUPREME COURT REPORTS

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254

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A that the employee is able to claim the benefit of ,both a guaranteed or other Provident_ Fund, to which the employer contributes, as well as to gratuity, as of right, in the face of the provisions of Rule 8.01 and 8.02 of the gratuity rules set out above.

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Although we have held that a claim ito gratuity, as of right, cannot be put forward, under the Code, by an employee who gets the 8 benefit of a Provident Fund also, yet illegal payments of gratuity in the past will not affect legal claims to Provident Fund. In Civil Appeal No. 1153 of 1972, the amount awarded to an employee was in respect of payment due towards the guaranteed Provident Fund which had nothing to do with a claim for gratuity. This claim was, therefore. rightly allowed.

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c Civlil Appeals No. 36 to 54 of 1971 and Civil Appeals Nos. 325 to 339 of 1973 involve only claims to gratuity by persons who are entitled to Provident Fund. These claims, according to the view taken by us, are not admissible under the law. Simila.I'. is the position in Civil Appeal No. 312 of 1973.

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For the reasons given above, we allow Civil Appeals Nos. 36 to D 54 of 1971, and Civil Appeal No. 312 of 1973, and CiWl Appeals Nos. 325 to 339 of 1973, and dismiss the claims under Section 33C (2) of the Industrial Disputes Act, 1947, of the respondents in these appeals. We, however, dismiss the Civil Appeal No. 1153 of 1972.

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The parties will bear their own costs.

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S.R.

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C.As. 36-54/71, 312/73 and 329-339/73 allowed. C.A. No. 1153/72 dismissed.

Andhra Pradesh State Road Transport Corp. Hyderabad v. P. Venkateswara Rao etc.

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Andhra Pradesh State Road Transport Corp. Hyderabad v. P. Venkateswara Rao etc.

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