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Steel Authority Of India, Ltd. v. Regional Labour Commissioner (Central) And Others
Factual and Procedural Background
The case concerns Opposite Party 3, Gour Mohan Giri, who was appointed as an Accountant-cum-Cashier on 24 August 1955 under Hindustan Steel Ltd. (now Rourkela Steel Plant, Steel Authority of India Ltd.) with wages not exceeding Rs. 1600 per month. Upon his retirement on superannuation on 31 August 1984, when he was Assistant Manager (Administrative) earning Rs. 2850 per month, gratuity was not paid to him. He applied to the Controlling Authority for payment of gratuity. The Controlling Authority partially allowed the claim, granting Rs. 27,030.90 out of Rs. 41,827 claimed. Dissatisfied, Opposite Party 3 appealed to the appellate authority, which allowed the appeal and granted the full amount claimed. The employer challenged both orders by filing the present writ petition.
Legal Issues Presented
- Whether a person who ceases to be an "employee" as defined under Section 2(e) of the Payment of Gratuity Act, 1972, is entitled to receive better terms of gratuity as provided under Sub-section (5) of Section 4 of the Act.
- Whether the Controlling Authority under the Act is competent to grant relief based on better terms of gratuity under Sub-section (5) of Section 4 of the Act.
- Whether the gratuity entitlement should be computed differently for periods during which the employee's wages exceeded the ceiling prescribed under Section 2(e) of the Act.
Arguments of the Parties
Petitioner’s Arguments
- Opposite Party 3 was not an “employee” as defined under Section 2(e) of the Act after his wages exceeded Rs. 1600 per month from 1 January 1980.
- Since Opposite Party 3 held a managerial and supervisory post drawing wages above the ceiling, he ceased to be an employee under the Act and thus was not entitled to gratuity for the period after 1979.
- The appellate authority acted illegally in awarding the entire gratuity claim without distinguishing between periods when the employee was and was not covered under the Act’s definition.
Opposite Party 3’s Arguments
- The claim to gratuity arises upon superannuation under Sub-section (1) of Section 4 of the Act and is based on the contract of service for the entire period.
- Sub-section (5) of Section 4 protects the employee’s right to receive better terms of gratuity under any award, agreement, or contract with the employer, regardless of the wage ceiling in Section 2(e).
- He cannot be denied gratuity for the period when wages exceeded the ceiling, as the SAIL Gratuity Rules apply to all employees and provide for gratuity irrespective of wage amount.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Good Year India, Ltd. v. K.G Devessar [1985 - II L.L.N 822] | Interpretation of Section 4 read with definition of “employee” in Section 2(e) of the Payment of Gratuity Act regarding entitlement period. | Referenced to highlight that gratuity is payable only for the period during which the person qualified as an “employee” under the Act; however, the issue of better terms under Section 4(5) was not considered in that case. |
| Patna Electric Supply Company, Ltd. v. Sri Gopal Banerjee [I.L.R 1979 (58) Pat. 324] | Competence of the Controlling Authority to grant gratuity based on better terms under Section 4(5) of the Act. | Adopted the view that the Controlling Authority can grant gratuity based on better terms arising from awards, agreements or contracts, as Section 4(5) is part of the Act itself. |
| Eastern Coal Fields, Ltd. v. Regional Labour Commissioner (Central) [1982 - II L.L.N 91] | Support for the Controlling Authority’s jurisdiction to adjudicate gratuity claims under the Act. | Supported the principle that gratuity claims are to be adjudicated under the Payment of Gratuity Act and not under other statutes. |
| State of Punjab v. Labour Court, Jullundur [1980 - I L.L.N 39] | The Payment of Gratuity Act is a complete code with exclusive jurisdiction vested in the Controlling Authority. | Emphasized that gratuity claims must be pursued under the Act and not through other forums such as Industrial Disputes Act; the Court relied on this to reject alternative forum claims. |
Court's Reasoning and Analysis
The Court first examined whether Opposite Party 3 remained an “employee” under Section 2(e) of the Act throughout his service. It accepted the uncontested finding that he was an employee until 31 December 1979, when his wages did not exceed Rs. 1600 per month, but recognized that his wages exceeded the limit thereafter until superannuation.
The Court considered the petitioner’s argument that the employee ceased to be covered by the Act post-1979, relying on the definition in Section 2(e) and the Supreme Court’s observation in Good Year India, Ltd. However, the Court noted that the issue of entitlement under Section 4(5) of the Act—allowing better terms of gratuity under any award, agreement, or contract—was not considered in that precedent.
The Court then analyzed the applicability of Section 4(5), which protects the employee’s right to better gratuity terms, and referred to relevant case law from Patna and Calcutta High Courts affirming that the Controlling Authority has jurisdiction to grant relief based on such better terms.
Further, the Court emphasized that the Payment of Gratuity Act is a self-contained code with exclusive jurisdiction vested in the Controlling Authority, as held by the Supreme Court in State of Punjab v. Labour Court.
Given the admitted entitlement of Opposite Party 3 to gratuity and the employer's contention that another forum should be approached for the period beyond the wage ceiling, the Court found it unjust and inequitable to require the employee to seek relief elsewhere. The Court declined to interfere with the appellate authority’s order, which granted full gratuity including the period after wages exceeded Rs. 1600, consistent with Section 4(5).
Holding and Implications
The writ petition is dismissed.
The Court upheld the appellate authority’s order granting Opposite Party 3 the full gratuity claim, including the period when his wages exceeded Rs. 1600 per month, relying on the protection afforded by Section 4(5) of the Payment of Gratuity Act. The decision confirms the competence of the Controlling Authority to adjudicate claims based on better terms of gratuity under awards, agreements, or contracts, even when wages exceed the statutory ceiling. No new precedent was set; the ruling primarily enforces existing statutory provisions and case law, ensuring employees are not deprived of gratuity benefits due to wage increases during their service.
Patra, J.:— Whether a person after he ceases to be an employee' as defined in S. 2(e) of the Payment of Gratuity Act, 1972 (hereinafter referred to as the Act) is entitled to receive better terms of gratuity as provided in Sub-sec. (5) of S. 4 of (he Act and, if so, whether the Controlling Authority under the Act is competent to grant such relief? This is the moot question that arises for consideration in this writ petition.
2. The facts which are not in dispute may be briefly stated:
Opposite party 3 Gour Mohan Giri came to be appointed as a Accountant-cum-Cashier on 24 August 1995 under the erstwhile Hindustan Steel, Ltd., now renamed as Rourkela Steel Plant, Steel Authority of India, Ltd., on wages not exceeding Rs. 1600 per month. When he retired on superannuation (the date being 31 August 1984) he was the Assistant Manager (Administrative) and was drawing a salary of Rs. 2850 per month. As gratuity was not paid to him after his superannuation, opposite party 3 made an application in the prescribed form to the controlling authority-opposite party 2 for payment of the same from the petitioner. After hearing, the controlling authority by order, dated 19 October 1984, at Annexure 1, partly allowed the claim by granting Rs. 27,030.90 as gratuity against the claim of Rs. 41,827.00. Being dissatisfied with the rejection of a part of the claim, opposite party 3 preferred appeal before the appellate authority-opposite party 1 which allowed the appeal by order, dated 27 March 1991, at Annexure 2 holding that opposite party 3, is entitled to the entire claim as laid by him. The employer, Rourkela Steel Plant, seeks to quash these two orders, Annexures 1 and 2.
3. We have heard Sri Tripathy, counsel for the petitioner. Opposite party 3 himself argued the matter. We have also heard him at length.
4. The petitioner contested the claim before the controlling authority on the grounds, inter alia, that opposite party 3 was not an “employee” as defined in S. 2(e) of the Act inasmuch as prior to his superannuation he was in the capacity of Assistant Manager which was a managerial and supervisory post and had been drawing more than Rs. 1600 per month. The controlling authority came to hold that opposite party 3 was an “employee” in terms of the definition under S. 2(e) of the Act from 24 August 1955, till December 1979, when his salary did not exceed Rs. 1600 per month and accordingly directed payment of the total amount of Rs. 27,030.92. The break up is as follows:
(i) For the period from 24 August 1955 (date of joining) till 31 December 1979 during which period his salary did not exceed Rs. 1600 per month. Rs. 19,819.38.
(ii) For the period from 1 January 1980 till 31 August 1984 (date of superannuation) when opposite party 3 came under SAIL Gratuity Rules. Rs. 7,211.54.
5. The appellate authority held that the cause of action to receive gratuity arose on the date of superannuation of the opposite party 3 on the basis of the contract of the service he had with the employer for the entire period of service of 29 years subject to the limitations laid-down under S. 4 of the Act. It held that there is no provision in the Act to compute the amount of gratuity in two different rates for two different periods as has been done by the controlling authority. It also held that opposite party 3 is entitled to simple interest on the amount at the rate of 15 per cent per annum from 1 September 1984 till the actual payment.
6. It was argued by Sri Tripathy that opposite party 3 having lost the character of an “employee” since 1979 (his wages having exceeded Rs. 1600 per month) the appellate authority acted illegally in awarding the whole of the gratuity as claimed. Opposite party 3 on the other hand submitted that his claim to receive gratuity flows from Sub-sec. (1) of S. 4 of the Act consequent upon his superannuation and whatever favourable terms of contract of service he had with his employer on the date of superannuation cannot be taken away in view of Sub-sec. (5) of S. 4 of the Act.
7. In view of the rival contentions, the basic question first needs to be answered is whether the opposite party 3 was an “employee' within the definition of S. 2(e) of the Act. In other words, was he an “employee” throughout his career or was there interruption to it consequent upon enhancement of his monthly wages. Section 2(e) (as amended by Central Act 5 of 1984) so far as relevant, reads as follows:
“2. Definitions.— In this Act, unless the context otherwise requires:
(a) ****
(b) ****
(c) ****
(d) ****
(e) ‘employee’ means any person (other than an apprentice) employed on wages, not exceeding (one thousand and six hundred rupees) per mensem, in any establishment, factory, mine oil field….”
The counsel for the petitioner does not dispute the factual finding recorded by the controlling authority that opposite party 3 was an “employee” from 24 August 1955 to 31 December 1979 as he satisfied the definition of “employee.” The entire burden of his argument is that the wages of opposite party 3 having exceeded Rs. 1600 per month with effect from 1 January 1980, he cannot be held to be an “employee” from that day till his superannuation. Reliance was placed on the following observation of the Supreme Court in Good Year India, Ltd. v. K.G Devessar [1985 - II L.L.N 822], in Para. 1, at page 823:
“… We think the only reasonable way of construing S. 4 in the light of the definition of employee in S. 2(e) is to hold that a person whose services are terminated for any of the reasons mentioned in S. 4(1), after the coming into force of the Act is entitled to the payment of gratuity, if he has rendered continuous service for not less than five years, for that period during which he satisfied the definition of employee under S. 2(e) of the Act.…”
(emphasis supplied.)
8. The sheet-anchor of opposite party 3 is rule 2 of the SAIL Gratuity Rules which states that those rules are applicable to all the employees of the company except certain specified classes. According to opposite party 3, as per the rules the employees are entitled to gratuity irrespective of amount received by them as wages in view of the provision contained in S. 4(5) of the Act, he cannot be put in a disadvantageous position by denying the gratuity in full merely because from a particular time the wages drawn by him exceeded the ceiling imposed under S. 2(e). Section 4(5) provides that nothing in S. 4 shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer. It means that if under any award or agreement or contract with the employer higher amount of gratuity is available, S. 4 of the Act cannot stand on the way of the employee's right in getting such favourable terms. We may state here that in the case of Good Year India, Ltd. [1985 - II L.L.N 822] (vide supra), the question as to the entitlement of benefit on the basis of S. 4(5) of the Act did not come up for consideration. We have, therefore, to see whether the controlling authority is competent to grant relief to an employee basing on the provision of S. 4(5) of the Act. Such question came up for consideration before a Division Bench of the Patna High Court in Patna Electric Supply Company, Ltd. v. Sri Gopal Banerjee [I.L.R 1979 (58) Pat. 324], Justice Sri B.B Sinha in his separate judgment in Para. 18 observed as follows:
“While Sri Katriar conceded, and I think rightly to that under S. 4(5) an employee has a right to receive higher amount of gratuity as provided under S. 4(5) he has submitted that this right could not be inforced (sic) by the controlling authority. For the submission learned counsel relied upon S. 7(4)(a) which reads thus:
‘7(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.’
Learned counsel said that the controlling authority was only entitled to decide a dispute as to the amount of gratuity payable to an employee under the Act. According to him, as S. 4(5) merely gave the right to an employee to receive a higher amount of gratuity under any award, agreement or contract it was not a right to receive an amount under the Act. I am unable to appreciate this argument for the simple reason that Sub-sec. (5) of S. 4 also is a right given to an employee for better terms of gratuity under the Act itself and it further provides that such better terms is only available to an employee if he bases his claim under any award, agreement or contract.”
Same view was taken by a learned Single Judge of Calcutta High Court in Eastern Coal Fields, Ltd. v. Regional Labour Commissioner (Central) [1982 - II L.L.N 91]. At this stage it would be profitable to note the decision of the Supreme Court in State of Punjab v. Labour Court, Jullundur [1980 - I L.L.N 39], wherein it has been held that the Payment of Gratuity Act is a complete code by itself containing detailed provisions covering all the essential features of a scheme for payment of gratuity. For the enforcement of its provisions, the Act provides for appointment of a controlling authority who is entrusted with the task of administering the Act. He has been invested with powers for the full discharge of that responsibility. The Court further observed, in Para. 9, at page 43 of 1980 - I L.L.N:
“Upon all these considerations, the conclusion is inescapable that Parliament intended that proceedings for payment of gratuity due under the Payment of Gratuity Act must be taken under that Act and not under any other. That being so, it must be held that the applications filed by the employees-respondents under S. 33-C(2) of the Industrial Disputes Act did not lie and the Labour Court had no jurisdiction to entertain and dispose of them.”
9. The aforesaid being the gamut of operation of Payment of Gratuity Act which is a beneficial legislation, we cannot deny opposite party 3 his right to claim gratuity and get it adjudicated before the controlling authority for the period during which his wages came to be enhanced beyond the ceiling. It would be against the spirit of the Act to drive him to seek this remedy in some other forum since the entitlement of the employee-opposite party to get the gratuity is conceded and the only dispute by the employer being that for the subsequent period, another forum should be approached, we are of the considered opinion that the equitable jurisdiction of this Court should not be invoked under Art. 226 of the Constitution. It is well settled that where an inferior tribunal passes a just and correct order, the High Court may not interfere with the same, even if the order may be without jurisdiction. In the facts and circumstances of the present case, it would be wholly unjust and inequitable to require the employee to approach another forum for part of the service period to receive the gratuity.
10. On careful consideration of the submissions made at the Bar, we are not inclined to interfere with the impugned order of the appellate authority at Annexure 2.
11. In the result, the writ petition is dismissed. No costs.
12. G.B Patnaik, J.:— I agree.
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