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Judgment
The Honourable Mr. Justice M. Venugopal
The Appellant/Defendant has filed the present appeal as against the judgment and decree dated 6/8/1997 in O.S. No. 2771 of 1996 passed by
the learned VII Additional Judge, City Civil Court, Chennai.
Plaint Facts: The Appellant/Defendant, a Company registered under the Companies Act has been managed and administered more in the nature
of a partnership concerned. The First Respondent/Plaintiff (Deceased), in his capacity as the first Managing Director and then Director of the
Appellant/Defendant Company has contributed extensively to its growth and success. Due to relentless efforts of the First Respondent/Plaintiff, the
Appellant/Defendant''s company''s record was unblemished and its turnover and profit increased by leaps and bounds.
The First Respondent /Plaintiff was not reelected as Director in the Appellant/Defendant company in the meeting held on 6/4/1981. The First
Respondent/Plaintiff (since deceased) during his life time, requested the Appellant/Defendant''s company to settle all the dues to be paid to him
during his tenure as Director and subsequently in the Appellant/Defendant Company. But the Appellant/Defendant Company intentionally withheld
the payment due to the First Respondent/Plaintiff, his state of accounts relating to him.
The Appellant/Defendant Company sent several reminders to furnish him with the statement of accounts, wrote a letter to the
Appellant/Defendant on 10/4/1982, calling upon it to send its statement of accounts or face the consequences. The Appellant/Defendant
Company, by its letter dated 26/4/1982, sent the statement of accounts to the First Respondent/Plaintiff. The First Respondent/Plaintiff through its
letters dated 29/5/1982, 30/7/1982, 17/2/1983 and 28/3/1983, requested the Appellant/Defendant Company to '' set right the statement of
accounts and pay him his legal and actual dues that he is entitled to towards which due credit would have to be given to his account. According to
the First Respondent/Plaintiff, the Appellant/Defendant Company owed him a sum of Rs. 2,38,559,76 as on 30/9/1982. But the
Appellant/Defendant Company showed that there is a debit balance of Rs. 6,805/- due by the First Respondent/Plaintiff to the
Appellant/Defendant Company.
A sum of Rs. 2,38,559.76 due by the Appellant/Defendant Company to the First Respondent/Plaintiff represented his remuneration, sales
commission, gratuity and miscellaneous expenses that the plaintiff was entitled to receive, expend and be reimbursed. The First Respondent/Plaintiff
was entitled to the gratuity as claimed in the statement of account which was substantiated as per the Board Resolution of the Appellant/Defendant
Company dated 3/3/1981.
The First Respondent/Plaintiff issued a legal notice to the Appellant/Defendant Company dated 27/12/1983 for which the Appellant/Defendant
Company sent a reply dated 24/2/1984 denying his legitimate claims.
Hence, the First Respondent/Plaintiff, filed a suit for recovery of the principal sum of Rs. 2,38,559.76 with interest at 12% p.a., which came to
Rs. 57,127.92 and thus, in all, the Appellant/Defendant Company, have to pay a sum of Rs. 3,35,687.68 with further interest at the rate of 6% p.
a., from the date of plaint till the date of realisation.
Written Statement Averments: According to the Appellant/Defendant Company, the First Respondent/Plaintiff was the Director of the Company
for about 30 years and he was the Managing Director for about 10 yeaRs. The first Managing Director of the Appellant/Defendant Company was
one C.A. Chettiar and thereafter, the First Respondent/Plaintiff became the Managing Director. The First Respondent/Plaintiff was not re-elected
as Director of the Appellant/Defendant Company at the Annual General Meeting of the Company held on 6/4/1981. Whatever the payments were
due to the First Respondent/Plaintiff was partly paid to him during his tenure as the Director and whatever, the balance left was adjusted for, the
payments due from him to the Appellant/Defendant.
The Appellant/Defendant company was incorporated as per the Companies Act, 1913 and its Accounts were audited every year and approved
by the shareholders in the Annual General Body Meeting. The Appellant/Defendant Company had not fabricated the accounts. Whatever the
amounts that were due to the First Respondent/Plaintiff were properly accounted for in the books of the Appellant/Defendant Company.
As per the Statement of Accounts filed together with a plaint as on 5/4/1982, the First Respondent/Plaintiff did not take into account the
various debits to his accounts amounting to an amount of Rs. 13,370.35 upto 30/9/1981 and a sum of Rs. 17,575/- pertaining to the period from
1/10/1981 to 30/9/1982. The aforesaid amounts were debited to the First Respondent/Plaintiff''s accounts. The First Respondent/Plaintiff as the
Managing Director lent large sums of money to one late MRs. Nagarajalakshmi Ammal, sole proprletrix of M/s. United Industrial and
Commercials. The said MRs. K. Nagarajalakshmi Ammal was the First Respondent/Plaintiff''s maternal aunt from whom he had the Power of
Attorney to look after the entire affairs of M/s. United industrial and Commercials.
When other Directors of the Appellant/Defendant''s Company, questioned the First Respondent/Plaintiff, then he guaranteed the due
repayments of the outstanding of K. Nagarajalakshmi Ammal. In spite of repeated reminders, neither the First Respondent/Plaintiff nor MRs. K.
Nagarajalakshmi Ammal repaid the monies due to the Appellant/Defendant. Hence, the Appellant/Defendant filed C.S. No. 604 of 1981 on the
file of High Court of Madras for recovering the amount of Rs. 5,28,066.11 against the said K. Nagarajalakshmi Ammal the First
Respondent/Plaintiff after giving credits to a sum of Rs. 57,127.92 payable by the Appellant/Defendant to the First Respondent/Plaintiff. As per the
accounts of the Appellant/Defendant, the First Respondent/Plaintiff still owed a sum of Rs. 6,270.10.
The First Respondent/Plaintiff as an Officer, drew a salary of more than Rs. 1,500/- and hence was not entitled to gratuity as per the Gratuity
Act, much less a sum of Rs. 1,50,000/-. The appointment of the First Respondent/Plaintiff as a Director and Managing Director of the
Appellant/Defendant Company, does not visualise a payment of the gratuity. Therefore, the Appellant/Defendant was not liable to pay any gratuity
of the First Respondent/Plaintiff. The First Respondent/Plaintiff did not give credit to the various payments which he withdrew from the
Appellant/Defendant. After debiting those payments, he was liable to pay a sum of Rs. 6,270.10 to the Appellant/Defendant.
The Appellant/Defendant through its counsel, gave a reply dated 22/2/1984 to the First Respondent/Plaintiff''s lawyer''s notice dated
26/12/1983 mentioning that only a sum of Rs. 6,270.10 was due to the First Respondent/Plaintiff and the Appellant/Defendant was not liable to
pay any amount. The Appellant/Defendant was not liable to pay a sum of Rs. 2,38,559.76 and further, it was not liable to pay any interest.
The Appellant/Defendant Company had a counter claim against the First Respondent/Plaintiff amounting to Rs. 6,270.10. The aforesaid
amount of Rs. 6,270.10 was payable with interest at the rate of 18% p.a., from 30/9/1982 till date which came to Rs. 8,245.10. Hence, the
Appellant/Defendant had prayed for a passing of a decree that against the First Respondent/Plaintiff for a sum of Rs. 8,245.10 with interest at 18%
p.a., from 17/7/1984 till date with payment together with costs.
Before the trial Court in the main suit, 1 to 5 issues were framed for adjudication. On behalf of the First Respondent/Plaintiff, witness P.W. 1
was examined and Exs. A.1 to A. 27 were marked. On the side of the Appellant/Defendant, witness D.W. 1 was examined and Exs. B.1 to B.7
were marked.
The trial Court on appreciation of oral and documentary evidence available on record came to the resultant conclusion that the First
Respondent/Plaintiff was entitled to claim a sum of Rs. 1,57,057/- from the Appellant/Defendant Company together with interest at 12% p.a., from
1/5/1981 together with costs and decreed the suit accordingly. However, the counter claim filed by the Appellant/Defendant Company was
dismissed.
Being dissatisfied with the judgment and decree of the trial Court in O.S. No. 2771 of 1996 dated 6/8/1997, the Appellant/Defendant
Company had preferred this appeal before this Court.
The points that arise for consideration in this appeal are:
(i). Whether the Appellant/Defendant Company is liable to pay the gratuity amount of Rs. 1,50,000/- to the First Respondent/Plaintiff (since
Deceased)?
(ii). Whether the Appellant/Defendant Company has debited a sum of Rs. 13,370.35 till 30/9/1981 and a further sum of Rs. 17,575/- pertaining to
the period from 1/10/1981 to 30/9/1982 into the account of the First Respondent/Plaintiff?
The Contentions, Discussions And Findings On Point No. (i): The Learned counsel appearing for the Appellant/Defendant submits that the
First Respondent/Plaintiff (since Deceased) was not entitled to any sum much less a sum of Rs. 1,50,000/- towards gratuity as per the Payment of
Gratuity Act, 1972, because of the simple fact that his salary as on 6/4/1981 was more than Rs. 2,500/-.
It is the further contention of the learned counsel for the Appellant/Defendant Company that as per Section 2(e) of the Payment of Gratuity
Act, as on 6/4/1981, individuals were drawing wages more than Rs. 750/-p.m, were not entitled to any amount as gratuity and further, the said
amount was increased to Rs. 1,600/- p.m., by Act 22 of 1987 only. But these aspects of the matter were not appreciated by the trial Court in a
proper perspective.
Expatiating his submission, the learned counsel for the Appellant/Defendant Company submits that as per Section 4(iii) of the Payment of
Gratuity Act, 1972 the maximum amount payable under the Gratuity Act, which was then in force to an employee was only Rs. 50,000/- and the
trial Court erred in awarding an amount of Rs. 1,50,000/- as Gratuity to the First Respondent/Plaintiff.
Proceeding further, the Learned counsel for the Appellant/Defendant Company submits that Ex. A.1 Resolution of the Board Meeting dated
3/3/1981 of the Appellant/Defendant Company was applicable to the employees and Directors of the Company as per relevant provisions of the
enactments and the contra view taken by the trial Court was an incorrect one.
Per contra, the Learned counsel for the respondents 2 to 7 submits that the trial Court placed reliance on Ex. A.1 Board Meeting Resolution
dated 3/3/1981 in and by which it was resolved that the provision was to be made in the accounts of the Appellant/Defendant Company as on
30/9/1979 for the contribution towards gratuity fund for the year ended 30/9/1979 both for employees and Directors for a sum of Rs. 74,995/-
and accordingly, came to the right conclusion that the First Respondent/Plaintiff (since Deceased) was entitled to claim gratuity from the
Appellant/Defendant Company and therefore, the said finding need not be disturbed by this Court.
It is the evidence of P.W. 1 (First Respondent/Plaintiff) that he joined the Appellant/Defendant Company as Director from the year 1950 to
1981 and that Adikesavalu Chetti, Srinivasan, K.L. Manohar were the Directors and that Adikesavalu Chetti served as the Managing Director and
from the year 1970 to 1976, he served as the Managing Director. He further deposed that he served as the Managing Director from 1976 till 1981
and from March 1981, he was not elected as Managing Director.
The evidence of P.W. 1 was to the effect that all the Managing Directors viz., Adikesavalu Chetti, Srinivasan were to be paid a monthly sum of
Rs. 500/- as remuneration/salary, early business commission, bonus and also to be paid the gratuity at the time of retirement. In the General Body
Meeting held on 29/9/1976 and 3/3/1989, these were directed to be given as per Resolution and Ex. A.1 is the Board Meeting Resolution dated
3/3/1981 and when he retired in the year 1981, he was not paid the outstanding amount due to him.
P.W. 1 in his evidence further deposed that Ex. A.2 dated 10/4/1982 was the letter sent by him to the Appellant/Defendant and Ex. A.3 dated
23/4/1982 was the reply furnished by the Appellant/Defendant and along with Ex. A.3 reply letter, the annual statement of Accounts for the year
1980 - 81 was enclosed for which, he sent a reply mentioning that the account details were not proper as per Ex. A. 4 for which no reply was sent
to the Appellant/Defendant and Ex. A.6 was the letter of reminder dated 30/7/1982.
Continuing further, it was the evidence of P.W. 1 that Ex. A.12 letter dated 10/5/1983 was sent to the Appellant/Defendant praying for
statement of accounts for which reply Ex. A. 13 was sent by the Appellant/Defendant and again, he sent a reply dated 13/6/1983 mentioning that
account details were not proper which marked as Ex. A.14. The evidence of P.W. 1 was that on 23/3/1996, in the General Body Meeting minutes
book, it was recorded as that the First Respondent/Plaintiff was to be paid the gratuity and Ex. A.20 notice was issued to the Appellant/Defendant
for which Ex. A.21 reply was issued. Again on 13/8/1996, he issued a notice Ex. A.22 and Ex. A.23 is another notice and the reply notice dated
3/9/1996 was Ex. A.24. On 5/9/1996, he sent a copy of the notice Ex. A.25 and Ex. A.26 was another notice dated 1/10/1996 and the reply
dated 4/10/1996, Ex. A.27 was furnished by the Appellant/Defendant and that the Appellant/Defendant together with interest was to pay a sum of
Rs. 3,35,687.68 to him.
The evidence of D.W. 1 (Director of the Appellant/Defendant Company) was to the effect that he was the Director for the past fifty years and
that in the Appellant/Defendant Company, the First Respondent/Plaintiff served as the Managing Director for the past ten years and as per
Company accounts, no amount was due to be paid to the First Respondent/Plaintiff and that the First Respondent/Plaintiff alone was to pay the
amount to them and Ex. B.1 was the business ledger of the Appellant/Defendant relating to the year 1980 -- 81, which was audited and in Ex. B.1
ledger, a sum of Rs. 17,500/- was given credit to at page No. 562 and another sum of Rs. 15,583/- was also given credit to and a sum of Rs.
77,090 was also credited and further Ex. B.2 was the credit entry for Rs. 17,500/- and Ex. B.3 was the credit entry for Rs. 15,583/- and Ex. B.4
was the credit entry for Rs. 77,090/-and Ex. B.5 was the credit entry for Rs. 7,174/- and for the payment of money to Krishnagana sabha,
Industrial Herauld, the Appellant/Defendant Company was not liable to pay any amount and that one Sharma had made the credit entry and he left
the Company and he knew about his hand writing.
P.W. 1 also deposed that Ex. B.6 page No. 555 was the ledger for the year 1981 - 82 and Ex. B.7 was the credit entry for sales commission
of Rs. 71,998/-, which was returned by L.K. Sharma whose hand writing he knew and these ledgers were audited and in Ex. A.3, accounts were
enclosed and Exs. B.1 and 6 were the enclosures and along with Ex. B.13 two ledger copies were enclosed and as per Ex. A.13, the First
Respondent/Plaintiff was to pay a sum of Rs. 6,805.30 to the Appellant/Defendant and this amount was claimed in the counter claim and for
persons receiving a salary of more than Rs. 1,000/-, gratuity was not to be paid and that the First Respondent/Plaintiff was getting a salary of more
than Rs. 3,000/- and in United Industrial Company, the First Respondent/Plaintiff was the Manager and for recovery of money, the suit was filed
against the First Respondent/Plaintiff and aunt, the credit entry was made to an extent of Rs. 57,157.92 as the amount due to be paid to the First
Respondent/Plaintiff and that the Appellant/Defendant was not liable to pay any amount to the First Respondent/Plaintiff.
It is to be noted that the Payment of Gratuity Act, 1972, was enacted to introduce a scheme for payment of gratuity for certain Industrial and
Commercial Establishments as a measure of social security. As a matter of fact, the payment of Gratuity Act, aims at achieving uniformity and
reasonable degree of certainty and it is a comprehensive code pertaining to gratuity containing detailed provisions covering all the essential features
of the scheme as per the decision State of Punjab Vs. Labour Court Jullunder and Others, .
Admittedly, Gratuity as a retiral benefit of a very different kind because it is earned by giving service. At this stage, this Court worth, recalls the
decision of Honourable Supreme court in Municipal Corporation Of Delhi Vs. Dharam Prakash Sharma reported in 1999 SC 293, wherein, it is
laid down as follows:
The payment of Gratuity Act being a special provision for payment of gratuity unless there is any provision therein which excludes its applicability
to an employee who is otherwise governed by the provisions of the Pension Rules it is not possible for us to hold that the respondent is not entitled
to the gratuity under the Payment of Gratuity Act. The only provision which was pointed out is the definition of ''employee'' in Section 2(c) which
excludes the employees of the Central Government and State Governments receiving pension and gratuity under the Pension Rules, but not an
employee of the MCD. The MCD employee therefore would be entitled to the payment of gratuity under the Payment of Gratuity Act. The mere
fact that the gratuity is provided for under the Pension Rules will not disentitle him to get the payment of gratuity under the Payment of Gratuity Act
in view of the overriding provisions contained in Section 14 of the Payment of Gratuity Act, the provision for gratuity under Pension Rules will have
no effect. Possibly for this reason, Section 5 of the Payment of Gratuity Act has conferred authority on the appropriate government to exempt any
establishment from the operation of the provisions of the Act if in its opinion the employees of such establishment are in receipt of gratuity or
pensionary benefits not less favourable than the benefits conferred under this Act. Admittedly MCD has not taken any steps in invoke the power of
the Central Government u/s 5 of the Payment of Gratuity Act. In the aforesaid premises, we are of the considered opinion that the employees of
the MCD would be entitled to the payment of gratuity under the payment of gratuity under the Payment of Gratuity Act notwithstanding the fact
that the provisions of the Pension Rules have been made applicable to them for the purpose of determining the pension. Needless to mention that
the employees cannot claim gratuity available under Pension Rules.
It cannot be gainsaid that Section 14 of the Payment of Gratuity Act, 1972 states that the said Act or the rules framed thereunder shall have
effect notwithstanding anything inconsistent there with contained in any enactment other than this Act or in any instrument or contract having effect
by virtue of any enactment other than the Payment of Gratuity Act.
Sub-Section 5 of Section 4 of the Act, mentions that the right of an employee to receive better terms of gratuity under any award or agreement
or contract with the employer is not affected. Indeed, the payment of Gratuity Act, 1972, Section 14 enjoins that the Act shall override other
enactments to the extent of any inconsistency contained in any other such enactment.
Ho wonder the Payment of Gratuity Act is a Social Welfare Legislation introduced for the purpose of social control and necessitated by social
interest.
This Court aptly points out the decision Delhi Cloth And General Mills Company Limited Vs. Their Workmen reported in 1969 2 LLJ 755,
wherein, it is held that
the object of introducing a gratuity scheme is to provide a retiral benefit to workman to have unblemished service to the employer and thereby
contributed to the prosperity of the employer Generally, employees those who are not covered as per Section 2(e) of the Act, are not eligible for
gratuity.
In Vishwanath Vs. M.P.S.R.T Corp And Others reported In 1987 55 I.L.R 1, it is observed as follows:
It is clear that in many cases sometimes it is not quite easy to distinguish between the supervisory capacity and the managerial or administrative
capacity of an employee who at times has to do incidental and additional work in addition to his principal or main duties for which he is employed.
There can be no quarrel with the proposition that if the main duties of an employees are only supervisory in nature, then certainly he cannot be
excluded from the category of ''employee'' nor can be deprived of the benefits of the payment of Gratuity Act, even though for a short period he is
required to discharge additional or incidental functions nor can be excluded from getting the gratuity even though at the time of his retirement or
resignation he might be drawing salary more than Rs. 1,000/- (now by amendment it is Rs.1600/-) if it is found proved that for a continuous period
of more than five years during his employment the employee was drawing salary less than Rs. 1,000/-.
Further in the aforesaid decision at page 2, it is also inter alia observed that
...Therefore, even if some of the nature of duties of the petitioner, as was urged by him were supervisory even though there is no satisfactory
evidence to that effect, the administrative powers which the petitioner enjoyed clearly indicate that he was discharging functions in the
administrative capacity and, therefore, the contention of the petitioner that he continued to be an employee upto the time of his retirement or at least
upto 18.6.1973 on the basis of which he is entitled to the payment of gratuity under the said Act cannot be accepted. It is not the case of the
petitioner that only at the time of retirement certain administrative powers and functions were assigned to him so that on that basis he could be
deprived of getting the benefit of the provisions of the said Act. even though for a substantial period of service he continued to be employed as an
employee as defined under the said Act. On the contrary, according to the petitioner himself though he was initially appointed as Asstt.
Accountant, from time to time he was promoted as Assistant Accounts Officer, then Chief Accountant, then Divisional Accounts officer and lastly
as Deputy Chief Accounts officer and there is nothing on record to indicate what was the main function or nature of duties of the petitioner of these
various posts held by him from time to time.
In Godbole N.M. Vs. Tata Consulting Engineers Reported In 1994 I.L.J 666 (Bombay High Court), it is held that
A person whose wages exceeds the wage limit prescribed u/s 2(e) before completion of five years service was held not an employee u/s 2(e) of
the Act and therefore, not entitled to any gratuity as per Section 4 of the Act. Gratuity is, in its essence, a payment in consideration of past service,
made only at the end of the said service, when the employment terminates. Therefore, the very essence of gratuity is the past and not the present. It
is for this reason that the definition of the expression ""employee"" is couched in a language which admits of no periodical limitations.
Whether a person is an employee within the meaning of Section 2(e) is not a pure question of fact but is a mixed question of law and fact as
per decision Khanderao P. Rajapadhye Vs. United Wesern Bank Ltd reported in 1985 1 LLN 55 (Bombay High Court). An employee cannot
claim any benefit of both Pension and Gratuity in the considered opinion of this Court. An individual who ceases to be an employee, as per section
2(e) due to his Managerial position drawing salary exceeding the ceiling is entitled to receive better and favourable terms of gratuity under any
award, contract or agreement with the employer as per the decision Steel Authority of India Vs. Regional Labour Commissioner (Central) and
Others, (Orissa Division Bench).
In Ramjilal Chimanlal Sharma Vs. Elphinstone Spg & Wvg. Co. Ltd., Reported In 1985 1 L.I.J 288 (Bombay High Court), it is among other
things held thus:
The right to claim gratuity is conferred under the Act and what is done by the settlement or an award is merely to vary the rate of amount of
gratuity. The settlement between the parties in the present case does not create a fresh right to claim gratuity, but the right is conferred by a
statutory provision. The Act prescribes certain rate of amount of gratuity and what the parties did under the settlement was to improve upon that
rate. It is difficult to comprehend that the petitioner could not approach the authority for enforcing his right to get the gratuity and claim that the
amount should be determined not in accordance with the rate prescribed by the Act, but in accordance with the settlement. The appellate authority
has overlooked the distinction between ""right to claim gratuity"" and the ""rate at which it is to be granted"". If this distinction was borne in mind, then
the authorities below would not have declined to grant the entire amount of gratuity claimed by the petitioner on the ground that the higher amount
is permissible only on application u/s. 33 - C (2) of the Industrial Disputes Act. The reliance by Miss Pradhan in this connection on the decision of
the Calcutta High Court reported in Eastern Coal Fields Ltd., Vs. Regional Labour Commissioner (Central) & ors {1982 I LLN 508}, is very
appropriate. The learned Judge held that the application for a gratuity amount to be determined in accordance with settlement is permissible before
the Controlling Authority, and I am in respectful agreement with the conclusion of the learned Judge.
In Darshan Engineering Works Vs. Controlling Authority under Payment of Gratuity Act, 1984 1 LLN 773, it is held that
The petitioner cannot disown the liability to pay the gratuity to the respondent under the Act on the ground that the latter hand attained the age of
fifty eight years before the Act came into force.
In Eastern Coal Fields Ltd., Vs. Regional Labour Commissioner (Central), Calcutta Reported In 1982 ILJ 324 (Calcutta High Court), it is
held inter alia as
... In my view, it will not be a proper construction in keeping with the beneficial purpose of the legislation, that although u/s. 4(5) of the Act an
employee may be entitled to a higher payment of gratuity, but, for enforcing such favourable terms of service for higher gratuity, he should move a
different forum and the Authority under the Gratuity Act cannot entertain such claim of higher amount of gratuity...
The very essence of gratuity is ''past service'' and not the ''present service'', as per decision Hindustan Bron Bovari Ltd., Baroda Vs. Panchal
C.A. 1977 ILJ 127 (Gujarat - Division Bench). In AIR 1985 1759 (SC) , wherein the Honourable Supreme Court has held as follows:
...The date of coming into force of the Act has relevance to the date on which gratuity becomes payable. Gratuity becomes payable on the
termination of employment and, therefore, in order to be eligible to payment of gratuity, the termination of employment whether it be due to
superannuation or retirement or resignation or death or disablement, has to be after the date of coming into force of the Act...
Section 2(e) of the Payment of Gratuity Act deals with the term ""employee"" which means,
any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of
work, manual or otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port railway company, shop or other
establishment, to which this Act applies, but does not include any such person who holds a post under the Central Government or a State
Government and is governed by any other Act or by any rules providing for payment of gratuity.
Section 2A of the Act, speaks of continuous in service.
Section 7(1) of the Payment of Gratuity Act reads thus:-
A person who is eligible for payment of gratuity under this Act or any person authorised, in writing, to act on his behalf shall send a written
application to the employer, within such time and in such form, as may be prescribed, for payment of such gratuity.
As per Section 7(7) of the Payment of Gratuity Act, 1972, an appeal is maintainable against the final order of the controlling authority.
In the instant case on hand, proceedings of the meeting of the Board of Directors of the Appellant/Defendant Company dated 3/3/1981
speaks of provision being made in the accounts of the Appellant/Defendant company as on 30/7/1997 for the contribution towards gratuity fund
for the year ended 30/9/1979 both for employees and Directors for a sum of Re.74,995/-. The Appellant/Defendant company had taken a specific
stand that as per statement of accounts filed along with the plaint, the First Respondent/Plaintiff was to be paid a sum of Rs. 1,50,000/- as gratuity
and that the First Respondent/Plaintiff was not entitled to gratuity as per the Act much less a sum of Rs. 1,50,000/-. Also a specific plea was
projected on behalf of the Appellant/Defendant that the appointment of the First Respondent/Plaintiff as a Director and Managing Director of the
Appellant/Defendant company, does not contemplate payment of gratuity. It is true that Ex. A.1 proceedings of the minutes of the Board of
Directors of the Appellant/Defendant Company dated 3/3/1981 speaks of contribution be made in the accounts of the Company as on 13/9/1979
for the contribution towards gratuity fund for the year ended 30/9/1979 both for employees and Directors for a sum of Rs. 74,995/- since Section
7 of the Payment of Gratuity Act, speaks of determination of the amount of gratuity and in this behalf, an individual who is eligible for payment of
gratuity under this Act or any person authorised, in writing, to act on his behalf shall send a written application to the employer, within such time
and in such form, as my be prescribed and therefore, it is for the appropriate authority under the Act to determine the same viz., as to whether the
First Respondent/Plaintiff (since deceased) was entitled to claim the gratuity amount as per the Gratuity Act much less a sum of Rs. 1,50,000/-or
otherwise. When the Act visualises the appropriate authority/competent authority/controlling authority to determine the amount and also when
Section 4 of the Payment of Gratuity Act envisages that gratuity shall be payable to an employee on the termination of his employment after he had
rendered continuous service for not less than five years:
a. on his superannuation, or
b. on his retirement or resignation or
c. On his death or disablement due to accident or disease.
Then, this Court is of the considered view that it is for the controlling authority/competent authority under the Payment of Gratuity Act to determine
the eligibility or otherwise of the First Respondent/Plaintiff to claim any amount as gratuity under the Payment of Gratuity Act much less a sum of
Rs. 1,50,000/- and therefore, the contra view taken by the trial Court that the First Respondent/Plaintiff had rightly claimed the gratuity amount as
per Ex. A.1 proceedings of the meeting of the Board of Directors of the appellant Company dated 3/3/1981 was not a correct and legally
sustainable one in the eye of law and the point is answered against the First Respondent/Plaintiff and in favour of the Appellant/Defendant
company.
The Contentions, Discussions And Findings Oh Point No. (ii): In Ex. B.1, the Appellant/Defendant company''s ledger for the year 1980 -- 81,
there was a credit entry for a sum of Rs. 17,500/- in favour of the First Respondent/Plaintiff. Further, a sum of Rs. 15,580/- was given credit to.
That apart, a sum of Rs. 77,090/- was given credit to. The aforesaid amounts viz., Exs. B.2 to B.4 were given credit note as seen from Ex. B.5
which speaks of a sum of Rs. 7,174/- was given credit in the First Respondent/Plaintiff''s account and these entries were made by one Sharma.
The evidence of D.H.1 was to the effect that Ex. B.2 speaks of credit entry for a sum of Rs. 17,500/- and Ex. B.3 refers to the credit entry of
Rs. 15,583/- and Bx.B.4 speaks of credit entry of Rs. 77,090/- and. Ex. B.5 deals with credit entry of Rs. 7,174/-. Therefore, from the evidence
of D.W. 1, it was quite candidly clear that a sum of Rs. 17,500/- and a further sum of Rs. 15,500/- were given credit to in the account of the First
Respondent/Plaintiff. It was the stand of the Appellant/Defendant company that a sum of Rs. 77,090/- representing sales commission for the year
1979 -- 80 was also paid to the First Respondent/Plaintiff as seen from Ex. B.4. For the month of July 1980, a sum of Rs. 7,174/- was paid as
per Ex. B.5. As such, the First Respondent/Plaintiff''s due amount was credited into his account. As per Bx.B.7 towards sales commission, a sum
of Rs. 71,998/- was given credit to on 17/4/1981. Exs. B.1 to B.7 entries show that the sales commission was given credit to being the amounts
due to the First Respondent/Plaintiff. As such, it is held, the Appellant/Defendant was not liable to pay balance sales commission and July 1980
voucher amounts to the First Respondent/Plaintiff. Further, more, it is the evidence of D.W. 1 that a case was instituted against the First
Respondent/Plaintiff and her aunt for recovery of amount and in that, a sum of Rs. 57,157.92 was given credit to and therefore, the
Appellant/Defendant company was not liable to pay any amount to the First Respondent/Plaintiff.
A perusal of the judgment of this Court, in C.S. No. 604 of 1981 dated 30/7/1990 shows that on the date of filing of the civil suit by the
present Appellant/Defendant company as plaintiff therein, a total amount of Rs. 5,85,194.03 was due from the first defendant therein and the said
sum was guaranteed by the First Respondent/Plaintiff (who figured as second defendant in C.S. No. 604 of 1981) with interest less the deduction
of amounts due to the second defendant and therefore, a claim of Rs. 57,127.92 payable to the First Respondent/Plaintiff (second defendant) in
C.S. No. 604 of 1981 by the plaintiff therein was credited and after deductions, the suit claim was outstanding and the said amounts were reflected
in the books of the company as payable by the first defendant therein.
In the judgment in C.S. No. 604 of 1981 dated 30/7/1990, the Appellant/Defendant company who figured as plaintiff in the said suit, who
through P.H.1 had claimed ""that out of Rs. 60,000/-, the company accepted and adjusted only Rs. 57,127.92 and that all other debit items were
not accepted since they were not directly involved. Only after giving the credit a sum of Rs. 57,127.92 payable to the First Respondent/Plaintiff
(second defendant in C.S. No. 604 of 1981), the suit claim in C.S. No. 604 of 1981 was said to be outstanding. In the said suit, a sum of Rs.
5,85,194.03 was said to be the amount representing the principal as guaranteed with interest less than the deductions of the amounts due to the
second defendant therein. When the Appellant/Defendant, as plaintiff in C.S. No. 604 of 1981 had himself admitted that a sum of Rs. 57,127.92
payable to the First Respondent/Plaintiff was credited in his account etc., then the contra finding of the trial. Court that the plea of the
Appellant/Defendant company that a sum of Rs. 57,157.92 was given effect to could not be accepted was not correct and accordingly, the said
finding is set aside by this Court to promote substantial cause of justice.
It is to be borne in mind that in the suit C.S. No. 604 of 1981 filed by the Appellant/Defendant company against the First Respondent/Plaintiff
and others, the suit was decreed on 30/7/1990 for a sum of Rs. 5,14,436.11 with interest there on at 15% p.a., from the date of plaint till the date
of payment with proportionate costs. As against the judgment and decree dated 30/7/19900 in C.S. No. 604 of 1981 passed by this Court in
O.S. No. 229 of 1990 was filed and this Court on 7/2/1997 allowed O.S.A in part and ordered the First Respondent/Plaintiff (appellant/second
defendant in O.S.A. No. 229 of 1990) to pay to the Appellant/Defendant company (first respondent) a sum of Rs. 4,22,273.13 with interest
thereon at 15% p.a., from the date of suit till the date of payment etc.
The First Respondent/Plaintiff while he was the President gave an advertisement relating to Krishnagana Sabha and also incurred expenditure
of Rs. 5,856.59, towards Hindustan Chamber expenses and industrial Herald expenses of Rs. 350/- and Krishnagana Sabha expenses at Rs.
300/-. Though this was repelled by D.H.1 in his evidence and in his cross-examination, he deposed that item Nos. 1 to 4 was not paid on behalf of
the company, this Court is of the considered view that the First Respondent/Plaintiff during his service with the Appellant /Defendant had made the
expenditure for and on behalf of the Appellant/Defendant company and therefore, he has held that he is entitled to claim these amounts. The trial
Court has also in paragraph 11 of the judgment, came to the conclusion that the First Respondent/Plaintiff was not entitled to claim salary
outstanding amount, sales commission amount but in respect of Hindustan chamber amounting to Rs. 5,856.59, Industrial Herald, Krishnagana
sabha expenses, he was entitled to claim a sum of Rs. 1,200/-. Accordingly, these findings of the trial Court are affirmed and answered in favour of
the First Respondent/Plaintiff.
As regards the counter claim, the Appellant/Defendant in the written statement had taken a stand that the First Respondent /Plaintiff had not
given credit to the various payments, he had withdrawn from the Appellant/Defendant company and after debiting those payments, the First
Respondent/Plaintiff was payable to the Appellant/Defendant a sum of Rs. 6,270.10 together with 18% p.a., from 30/9/1982 till the date of
payment together with costs. In Ex. A. 13 it was mentioned that the First Respondent/Plaintiff had to pay a sum of Rs. 6,805.10 to the
Appellant/Defendant company. As seen from Ex. A.13, it transpired that as per statement of account with the calendar year 1982, there was a
debit balance of Rs. 6,805.10 and the First Respondent/Plaintiff was requested by the Appellant/Defendant company''s Director to reimburse the
said debit balance at an early date. Also, Ex. A.13 letter of the Appellant/Defendant company mentioned that subsequent to 1/1/1993, a few more
debit entries were there and interest was to be calculated etc. Just because in Ex. A.13 letter of the Appellant/Defendant company mentioned that
the balance sum of Rs. 6, 805.10 in the absence of details, the same could not be accepted by this Court, Since the counter claim of Rs. 6,805.10
was not proved to the subjective satisfaction of this Court. Further, no appeal has been filed by the Appellant/Defendant as against the dismissal of
the counter claim. Therefore, the trial Court rightly negatived the counter claim.
In the result, the appeal is allowed in part, leaving the parties to bear their own costs. The Legal Heirs of the First Respondent/Plaintiff viz.,
R.R.2 to 7 are given the liberty to approach the controlling authority/competent authority under The Payment of Gratuity Act, 1972 in regard to the
claim of gratuity made by the First Respondent/Plaintiff in the manner known to law and in accordance with law. Since the Appellant/Defendant
company was to pay a sum of Rs. 7,056.56 to the First Respondent/Plaintiff and since this was not paid immediately and belatedly paid, this Court
awards 12% p.a., interest from 1/5/1981 till date of payment to be paid by the Appellant/Defendant company to the Legal Heirs of the First
Respondent/Plaintiff viz., R.R.2 to 7 to promote the substantial cause of justice. One month time is granted to the Appellant/Defendant for making
payment of the amount awarded by this Court from the date of receipt of a copy of this judgment. The judgment and decree of the trial Court in
O.S. No. 2771 of 1996 dated 6/8/1997 are modified accordingly. Consequently, the connected Miscellaneous Petition No. 5212 of 1998 is
closed.