Dismissed

College of Engineering v. Vishal Singhal

Uttarakhand HC4 Dec 2024WPMS/3182/2024

Case brief

AI extract

What is this about?

The High Court of Uttarakhand dismissed a writ petition filed by an employer challenging an order mandating gratuity payment. The court held that Grade Pay forms part of wages, interest on delayed payment is statutory and mandatory regardless of prior conditional deposits, and statutory rights cannot be forfeited by failure to apply within 30 days under the Rules.

What did the court decide?

Writ petitions failed and were dismissed; employer liable to pay gratuity including interest on delayed payment as per statutory mandate.

College of Engineering Vs Vishal Singhal — Pension and Retirement Benefits | Uttarakhand HC (2024)

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2024:UHC:9005

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I N THE HI GH COURT OF UTTARAKHAND AT NAI NI TAL

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HON’BLE THE ACTI NG CHI EF JUSTI CE, SHRI JUSTI CE MANOJ KUMAR TI W ARI W r it Pet it ion ( M/ S) No. 3 1 5 9 of 2 0 2 4

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4^TH DECEMBER, 2 0 2 4

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College of Engineering Roorkee -Petitioner

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Ver su s

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Nirvikar –Respondent W it h W r it Pet it ion ( M/ S) No. 3 1 8 2 of 2 0 2 4 W r it Pet it ion ( M/ S) No. 3 1 8 4 of 2 0 2 4 W r it Pet it ion ( M/ S) No. 3 1 8 5 of 2 0 2 4 W r it Pet it ion ( M/ S) No. 3 1 8 7 of 2 0 2 4 W r it Pet it ion ( M/ S) No. 3 2 1 6 of 2 0 2 4 W r it Pet it ion ( M/ S) No. 3 2 1 7 of 2 0 2 4 W r it Pet it ion ( M/ S) No. 3 2 2 0 of 2 0 2 4 W r it Pet it ion ( M/ S) No. 3 2 3 9 of 2 0 2 4

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Counsel for the petitioner: Mr. Navneet Kaushi, learned counsel. Counsel for the respondent: Mr. Pradeep Kumar Chauhan, learned counsel.

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Counsel for the respondent:

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JUDGMENT

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Employer has filed these writ petitions challenging the order passed by Appellate Authority in his Appeals filed under Section 7 of Payment of Gratuity Act, 1972.

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Since common questions of law and fact are involved in these writ petitions, therefore they were heard together and are being decided by a common judgment. However, for the sake of brevity, facts of

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2024:UHC:9005 Writ Petition (M/ S) No.3159 of 2024 alone are being considered and discussed.

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Nirvikar (respondent in WPMS No.3159 of 2024) was employed as Associate Professor in College of Engineering, Roorkee and he served as such between 24.01.2005 to 19.09.2020. Since he was not paid gratuity, therefore, he moved an application under Section 7(4)(b) of Payment of Gratuity Act, 1972 stating that he rendered continuous satisfactory service in the College of Engineering for more than 15 years, however, despite requests, he has not been paid gratuity, therefore, the employer be directed to pay gratuity to him with 10% interest. In his application, respondent stated that at the time of his discharge from service on 19.09.2020, he was getting ₹79,199/as wages. Petitioner filed written statement before the Controlling Authority stating that although respondent was appointed on 24.01.2005; but, in 2007, he joined a different institution having separate approval from AICTE, where he served for some time and later joined the petitioner-college, where he worked till 31.08.2017. Thus, it was contended that respondent did not serve continuously in the petitioner-college for a continuous period of 5 years. It was further contended that respondent did not make any application for gratuity to the petitioner within 30 days from the date of cessation of employment, in terms of Rule 7(1) of Uttar Pradesh Payment of Gratuity Rules, 1975. The Controlling Authority allowed the respondent’s application vide order dated 29.09.2022 and petitioner was directed to

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pay ₹7,31,068/- as gratuity within 30 days with simple interest @ 10% per annum.

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Petitioner challenged the order passed by Controlling Authority in an Appeal filed under Section 7(7) of Payment of Gratuity Act, 1972. The Controlling Authority dismissed the Appeal vide judgment dated 12.09.2024, which is challenged in the writ petition.

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Heard learned counsel for the parties and perused the record. Learned counsel for the petitioner contended that the Controlling Authority as well as the Appellate Authority have erred by treating Grade Pay as part of wages; while, Grade Pay has to be excluded. He submitted that at the time of his discharge from service, respondent was getting ₹47,141/- as basic pay+ ₹16,028/- as Dearness Allowance, thus, his wages were ₹63,169/and gratuity was to be computed on the said amount; but, in the impugned judgment, gratuity has been calculated by treating wages of the respondent as ₹72,199/- per month. He further contended that, as per Uttar Pradesh Payment of Gratuity Rules, 1975, the employee is required to make an application within 30 days from the date gratuity becomes payable which, however, was not done by the respondent, thus, he is not entitled to interest on delayed payment of gratuity, therefore, the impugned judgment is unsustainable. He further contended that the Controlling Authority as well as Appellate Authority erred in granting interest @ 10% on the delayed payment of gratuity to the respondent, which is much in excess of the rate notified by the

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Central Government, as provided in Section 7(3-A) of the Act.

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The aforesaid submissions made by learned counsel for the petitioner are bereft of merit. The expression “wages” has been defined in Section 2(s) of Payment of Gratuity Act, 1972, as follows:

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“2(s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance”.

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As per the definition, “wages” includes all emoluments which are earned by an employee in accordance with the terms & conditions of the employment and are paid to him in cash; but, does not include bonus, commission, house rent allowance, overtime wages and any other allowance.

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Learned counsel for the respondent submits that earlier salary was paid to State Employees and Teachers serving in Universities/ Colleges in a particular pay scale, however, after implementation of recommendation of 6^th Pay Commission Report, salary to State Employees and Teachers serving in Universities/ Colleges is paid in a particular pay band and, for different category of employees, different Grade Pay is payable. Thus, he submits that Grade Pay is a integral part of salary/ wages, therefore, the contention made on behalf of petitioner that Grade Pay was wrongly included in wages, is bereft of merit.

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2024:UHC:9005 9. This Court finds substance in the submission made by learned counsel for the respondent. Grade Pay is as much a integral part of salary/ wages as pay band, therefore, Grade Pay cannot be excluded from wages. Even otherwise also, the term “wages” has been given a wide meaning in Section 2(s) and Grade Pay will definitely fall within the definition of “wages”, as it is an emolument, which is earned by an employee while in service and which is payable to him in cash and it is different from allowances. Thus, the first contention raised on behalf of petitioner, cannot be accepted.

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Reliance by the petitioner on Uttar Pradesh Payment of Gratuity Rules, 1975, is also misconceived. The Uttar Pradesh Payment of Gratuity Rules, 1975 were framed under the rule making power conferred by Section 15 of Payment of Gratuity Act, 1972. Although, Rule 7 of the said Rules provides that an employee, who is eligible for gratuity under the Act, shall apply ordinarily within 30 days from the date gratuity becomes payable to the employer, however, Rule 7(5) of the said Rules further provides that an application for payment of gratuity made after expiry of period specified in the Rules shall also be entertained by the employer and further that no claim for gratuity under the Act shall be invalid merely because the claimant failed to present his application within the specified period. Consequence of making claim for gratuity after the specified period has also not been indicated in the Rules. Thus, the contention that respondent is not entitled to interest, as he failed to make request for

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gratuity to the employer within 30 days, cannot be accepted.

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Learned counsel for the respondent submits that his client had made request for releasing the amount of gratuity well within 30 days and the delay was on the part of the employer.

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Even otherwise also, Section 7(2) of Payment of Gratuity Act, 1972 cast a duty upon the employer to determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the Controlling Authority, specifying the amount of gratuity so determined, whether or not, the employee has made an application for payment of gratuity. Section 7(3) of the said Act casts a duty upon the employer to make payment of gratuity within 30 days from the date it becomes payable. Section 7(3-A) provides that if gratuity is not paid within 30 days from the date it became due, the employer shall be liable to pay simple interest at such rate as notified by the Central Government for repayment of long-term deposits. The Rules relied by the petitioner cannot override provisions of the parent Act. Thus, for any delay in payment of gratuity, employer is liable to pay interest unless such delay is due to the fault of employee and employer has obtained permission in writing from the Controlling Authority for the delayed payment on this ground. Petitioner has not taken the defense of proviso to Section 7(3-A) of the Act, before the Appellate Authority or before this Court and his contention is that respondent had not made application

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for payment of gratuity within 30 days, which is not sufficient for invoking benefit of proviso to Section 7(3A) of the Act.

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From the provisions made in Section 7 of the aforesaid Act, a clear command can be seen mandating the employer to pay the gratuity within the specified time and to pay interest on the delayed payment of gratuity. No discretion is available to exempt or relieve the employer from payment of gratuity with or without interest, as the case may be. Thus, payment of gratuity with or without interest, does not lie in the domain of discretion, but it is a statutory compulsion. Specific benefits expressly given in a social beneficial legislation cannot be ordinarily denied. Employees on retirement have valuable rights to get gratuity and any culpable delay in payment of gratuity must be visited with the penalty of payment of interest was the view taken in the case of “State of Kerala Vs. M. Padmanabhan Nair”, reported in (1985) 1 SCC 429.

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In the case of “H. Gangahanume Gowda Vs. Karnataka Agro Industries Corpn. Ltd.”, reported in (2003) 3 SCC 40, Hon’ble Supreme Court considered the provision contained in Section 7(3-A) and Section 8 of Payment of Gratuity Act, 1972 and held that interest on delayed payment of gratuity is mandatory and not discretionary, if delay is not due to fault of the employee and employer has not obtained permission from the Controlling Authority for delayed payment on that ground. Paragraph nos.8, 9 & 10 of the said judgment are reproduced below:

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“ 8 . In the background of this legal position, now we turn to the facts of the present case. The appellant was under suspension from 153-1999 to 21-5-1999. On attaining the age of superannuation, he retired from services of the respondent Corporation on 1-1-2000. The learned Single Judge, after considering the rival contentions, disposed of the writ petition issuing directions to the respondent Corporation to settle the full salary and allowances for the period of suspension, gratuity, cash equivalent to leave salary, deferred leave, concession amount etc. As regards the claim of interest on gratuity, the learned Single Judge held as under:

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“Since there was a doubt as to whether the petitioner is entitled to the gratuity, cash equivalent of leave salary etc., in view of the divergent opinion of the courts during the pendency of an enquiry proceeding of a retired employee, in my view, the petitioner is not entitled to the relief of interest for the belated payment of gratuity and other amounts.”

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9 . It is clear from what is extracted above from the order of the learned Single Judge that interest on delayed payment of gratuity was denied only on the ground that there was doubt whether the appellant was entitled to gratuity, cash equivalent to leave etc., in view of divergent opinion of the courts during the pendency of enquiry. The learned Single Judge having held that the appellant was entitled to payment of gratuity was not right in denying the interest on the delayed payment of gratuity having due regard to Section 7(3-A) of the Act. It was not the case of the respondent that the delay in the payment of gratuity was due to the fault of the employee and that it had obtained permission in writing from the controlling authority for the delayed payment on that ground. As noticed above, there is a clear mandate in the provisions of Section 7 to the employer for payment of gratuity within time and to pay interest on the delayed payment of gratuity. There is also provision to recover the amount of gratuity with compound interest in case the amount of gratuity payable was not paid by the employer in terms of Section 8 of the Act. Since the employer did not satisfy the mandatory requirements of the proviso to Section 7(3-A), no discretion was left to deny the interest to the appellant on belated payment of gratuity. Unfortunately, the Division Bench of the High Court, having found

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2024:UHC:9005

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that the appellant was entitled to interest, declined to interfere with the order of the learned Single Judge as regards the claim of interest on delayed payment of gratuity only on the ground that the discretion exercised by the learned Single Judge could not be said to be arbitrary. In the first place in the light of what is stated above, the learned Single Judge could not refuse the grant of interest exercising discretion as against the mandatory provisions contained in Section 7 of the Act. The Division Bench, in our opinion, committed an error in assuming that the learned Single Judge could exercise the discretion in the matter of awarding interest and that such a discretion exercised was not arbitrary.

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1 0 . In the light of the facts stated and for the reasons aforementioned, the impugned order cannot be sustained. Consequently, it is set aside. The respondent is directed to pay interest @ 10% on the amount of gratuity to which the appellant is entitled from the date it became payable till the date of payment of the gratuity amount. The appeal is allowed accordingly with cost quantified at Rs 10,000.”

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Although, petitioner has challenged the judgment rendered by the Appellate Authority on the ground that the interest awarded by the Controlling Authority and affirmed by the Appellate Authority is higher than the rate of interest notified by the Central Government, however, neither the notification issued by the Central Government nor any other material has been brought on record to show that the rate of interest determined by the Central Government was less. Learned counsel for the petitioner also could not show any notification issued by the Central Government in support of his challenge to the impugned judgment on that count. Thus, the contention raised on behalf of petitioner, cannot be accepted.

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Learned counsel for the petitioner then

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submitted that petitioner had deposited ₹7,31,068/- at the time of filing Appeal against the order of Controlling Authority, in terms of second proviso to Section 7(7) of Payment of Gratuity Act, 1972, therefore, petitioner cannot be made liable to pay interest on the amount already deposited by him.

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Learned counsel for the respondent disputes the said contention and submits that the said amount was deposited by petitioner with the condition that it may not be released to the respondent and petitioner shall pay to the respondent whatever amount Appellate Authority determines after decision in the Appeal and such conditional deposit made by petitioner was not released in favour of the respondent, therefore, the said contention cannot be accepted. Learned counsel for the respondent relied upon the judgment dated 18.07.2018 rendered by Nagpur Branch of Hon’ble Bombay High Court in Writ Petition No.5153 of 2007. Paragraph no.14 of the said judgment is reproduced below:

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“ 1 4 . The above provisions clearly mandate the employer to pay gratuity to the person to whom it is payable whether such application claiming gratuity is made or not and further provides that such payment must be made within 30 days from the date it becomes payable and in case the payment is not made within 30 days the employer has to pay interest not exceeding the rate as may be notified by the Central Government. A bare reading of the above provisions clearly discloses that in the event the employer does not pay the gratuity payable under the Act, within the prescribed time, he is liable to pay interest thereon in terms of sub-section (3A) of section 7 of the Act. I am, therefore, unable to accept the submission of Mr. Deshpande, learned counsel for the petitioners that the deposit of the gratuity amounts before the

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2024:UHC:9005 Appellate Court in appeals preferred by the petitioners would absolve them from the payment of interest from the date of deposit. Mere deposit of the amount before the Appellate Authority would not disentitle the person entitled to claim gratuity from claiming interest on the gratuity payable under the Act. I, therefore, find no merit in the submission of Mr. Deshpande. I am in respectful agreement with the view taken by the learned Single Judge of Allahabad High Court in Rajendra's case (supra) relied upon by Mr. Harkare in which it has been held that the deposit of the amount with the appellate authority would not absolve the employer from paying interest once it is established that the employer has failed to discharge the obligation cast upon it by subsections (2) and (3) of section 7 of the Act. I n the present petitions, admittedly the petitioners have not discharged their obligation in terms of Sub-sections (2) and (3) of section 7 of the Act. Therefore, there is no illegality or perversity in the order passed by the respondent No. 2.”

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I am in respectful agreement with the view taken by Nagpur Branch of Hon’ble Bombay High Court in the said writ petition. A conjoint reading of Section 7 (3) and Section 7(3-A) of Payment of Gratuity Act, 1972 indicates the legislative intent that the employee should get the amount of gratuity within 30 days, it becomes due. If the amount payable as gratuity is not paid to the employee within 30 days, then the employer is liable to pay interest for the period of delayed payment of gratuity. Deposit of the amount as a pre-condition for filing Appeal under Section 7(7) of the Act, cannot be treated as payment of gratuity to the employee. Thus, the contention raised on behalf of petitioner that he is not liable to pay interest after the date of deposit of the amount in terms of second proviso to Section 7(7) of the Act, cannot be accepted.

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In such view of the matter, this Court does not find any reason to interfere in the matter. 20. Accordingly, the writ petitions fail and are dismissed.

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__________________________________ MANOJ KUMAR TI W ARI , A.C.J.

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Dt: 4^th December, 2024 Arpan

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Digitally signed by ARPAN JAISWAL DN: c=IN, o=HIGH COURT OF UTTARAKHAND, ARPAN ou=HIGH COURT OF UTTARAKHAND, 2.5.4.20=eabb68a3895e41937c266c23964c04853 65445e3a20dddb7393398f9fe45ba3e, postalCode=263001, st=UTTARAKHAND, serialNumber=060FC17022BEAE3DE215D68D9D4 54C5109CB987446351E4DF04AADAA2C2CEA66, JAISWAL cn=ARPAN JAISWAL Date: 2024.12.30 14:21:23 +05'30'

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College of Engineering v. Vishal Singhal

Case brief

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College of Engineering v. Vishal Singhal

Case brief

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