Managing Director, State Bank of India vs T. Gopalachari

A. Gopal Rao, J.—Defendant No. 2 State Bank of India, Local Head Office, Hyderabad is the appellant in this appeal. The respondent filed the suit O.S. No. 968 of 1978 on the file of the IV Additional Judge, City Civil Court, Hyderabad, for recovery of Rs. 15,785/- with interest at 10% per annum, on Rs. 13,200/- from, November 29, 1978 till the date of realisation.

The case of the plaintiff, as stated in the plaint, is that the plaintiff was appointed as a Probationary Officer in the defendant''s Bank by the Executive Committee of the Central Board of Directors, State Bank of India, on September 20, 1965 on a scale of pay of Rs. 400/- per month plus other allowances. His probation was later declared and services regularised and confirmed on April 1, 1967 by the Executive Committee of the Central Board of the defendant''s Bank. In appreciation of his efficiency and the qualifications, he was granted advance increments at the time when he was selected as a Probationary Officer and was also exempted from passing the written test, which is a compulsory one for all the candidates. After confirmation the plaintiff was transferred to Gudivada Branch, thereafter to Department. Later he was transferred to Advances Department in Local Head Office and then posted as Officer Grade-I in Region-in, incharge of Control and Audit. Subsequently, recognizing his academic qualifications, he was posted as Instructor in the defendant Staff Training Centre at Banzara Hills, Hyderabad. In 1974 he was transferred to Visakhapatnam Branch as Manager (Commercial and Industrial Division) where he worked till November, 1975. Due to domestic circumstances he resigned from the post with effect from November 30, 1975, after giving three months notice. At the time of his resignation he was drawing a basic pay of Rs. 1,320/- per mensum plus other allowances, totalling to Rs. 2,500/- per month. The plaintiff claims that there is an established principle and practice in the defendant''s bank to pay gratuity in the form of ex-gratia payment, i.e., gratuity to all the Officers who resign or retire from the service with good record, in recognition of their valuable services renderd to the Bank, atleast for 10 years. This practice, according to the plaintiff, has attained the force and efficacy of a rule of law culminating as a benefit attached to the office. This, according to the plaintiff, is apart from the provisions of the Payment of Gratuity Act (Act 39 of 1972).

On August 19, 1975 and on November 29, 1975 the plaintiff made applications to the 1st defendant, viz., Managing Director, State Bank of India, Central Office, Bombay, who is the competent authority, through the 2nd defendant and also to the 2nd defendant, respectively, for payment of gratuity. The 2nd defendant with mala fide intentions and motives delayed in processing the application to the 1st defendant. Second defendant, however, later recommended and forwarded the application to the 1st defendant for payment of gratuity. First defendant accordingly allowed the gratuity and sent a Telex message on December 14, 1976 to the 2nd defendant directing him to pay Rs. 13,200/- to the plaintiff immediately as the matter was unnecessarily delayed. The plaintiff had already applied on September 6, 1976 itself to the Controlling Authority under the Payment of Gratuity Act, 1972 (Assistant Labour Commissioner, Hyderabad) against the defendant- State Bank of India for payment of gratuity. But, on account of the decision taken by the 1st defendant and the Telex message given on December 14, 1976 directing the 2nd defendant to pay the gratuity to the plaintiff/in good faith the plaintiff withdrew the application from the Controlling Authority. The defendants, however, failed to pay the amount to the plaintiff. Therefore, he gave a notice and called upon the defendants to produce the letters written by the 1st defendant on November 22, 1976 and November 8, 1976 as well as the Telex message sent on December 14, 1976 to the 2nd defendant. After several reminders sent by the plaintiff, the 2nd defendant, by letter dated May 9, 1977, refused to pay the gratuity. The Plaintiff also alleged that Sri H.E. Chatlier and Sri N. Vagulabaranam along with some others, who resigned from the defendant''s service earlier than the plaintiff, were paid gratuity. He, therefore, claims that the defendants are discriminating between the plaintiff and other Officers in the matter of payment of gratuity. Hence, the plaintiff, after issuing the suit notice on September 28, 1977, filed the present suit.

1st defendant-Managing Director, State Bank of India, Central Office, Bombay, who is competent authority to sanction payment, remained absent, and, therefore, the 1st defendant was set exparte on February 1, 1979.

The 2nd defendant-State Bank of India, Local Head Office, Hyderabad, who is the present appellant herein, filed a written statement contending inter alia, that the suit for recovery of gratuity does not lie; there are no terms and conditions in the appointment letter of the respondent fixing the liability on the 2nd defendant-appellant to pay gratuity, other than the payment if any payable under the Payment of Gratuity Act; the plaintiff is also not covered by the Payment of Gratuity Act entitling him to receive any amount under that Act; there is also no statutory provision or right to the plaintiff to make a claim on the basis of an implied contract fixing the liability on the defendants to make any such payment under the service conditions and, hence, the same cannot be enforced against the defendant. The payments made to Mr. Vagulabaranam and others is under different circumstances which cannot be extended in favour of the plaintiff and merely because they were paid, the plaintiff automatically will not be entitled to make such a claim against the defendants. The Civil Court can enforce a contract, if any, as such, which is subsisting in between the parties and cannot go beyond the terms of the contract.

The trial Court, on the basis of the pleadings, framed appropriate issues. On appreciation of the entire evidence on record the trial Court decreed the suit holding that:

(1) there was an existing practice to pay some amount by way of gratuity to the employees who resign after unblemished record in service for a period not less than 10 years;

(2) as D-1 direted D-2 to pay gratuity as calculated on Ex, A-12 at Rs. 13,200/- to the plaintiff, the defendants are estopped from going back from their decision;

(3) there is no need to give a finding regarding the eligibility of the petitioner for payment of gratuity under the Payment of Gratuity Act;

(4) the resolution dated December 15, 1976 of the Central Board not to pay to those who resign is not binding on the plaintiff as the said resolution has no retrospective effect; and

(5) there is no need to give any findings regarding the mala fides alleged by the plaintiff against the defendants.

The 2nd defendant i.e., State Bank of India, Local Head Office, Hyderabad, assailing the above findings, filed the present appeal.

The Learned Counsel for the appellant contended that the findings recorded by the lower Court are erroneous; the suit filed by the plaintiff for recovery of gratuity is not maintainable; there is no contract between the plaintiff and the defendants for payment of gratuity; plaintiff is not eligible to claim any amount under the Payment of Gratuity Act; the decree passed by the lower Court on the ground of implied contract is not sustainable merely on the ground that some other Officers of the Bank were paid some ex-gratia amount from the defendant Bank; and that the plaintiff cannot rely upon the inter-departmental correspondence for maintaining the present suit.

It is, however, contended by the learned Counsel for the respondent that the 2nd defendant produced all the records available with them as per the memo filed by the 2nd defendant, including the correspondence, which are marked as Exhibits in the suit; therefore, the documentary evidence produced by the defendants can be relied upon to establish the case of the plaintiff and the lower Court has rightly relied upon the same to hold that there was an existing policy for payment of some amount to the Officers who resign from the service with unblemished record for a period not less than 10 years; that the lower Court is also right in holding that as other Officers, similarly placed as that of the plaintiff, were paid some amount, the defendants are bound to pay to the plaintiff also. Finally it is contended that the judgment and Decree of the lower Court are correct and do not call for any interference by this Court in this appeal.

In view of the rival contentions put forward in this appeal, the point that arises for determination is whether the lower Court is right in decreeing the suit of the plaintiff by ordering payment of Rs, 15,785/- with future interest at 10% per annum, on Rs. 13,200/- from the date of the suit, i.e., November 29, 1978 till final payment with costs, by way of gratuity.

The respondent by his letter, Ex. A-2, dated November 29, 1975 in the first instance claimed for payment of gratuity to him. The appellant-bank did not, however, take any decision for payment of gratuity to the respondent. The respondent, therefore, gave a notice Ex. A-4 dated September 4, 1976 to the appellants claiming that he reached the total wages of Rs. 1,000/-per month after completion of five years of service in the bank and, therefore, he is entitled to gratuity under the Payment of Gratutity Act, 1972. Section 4 of the Payment of Gratuity Act lays down the grounds for entitlement of an Officer to claim gratuity. Section 4 of the Payment of Gratutity Act, 1972 is in the following terms:

"An employee will be entitled to gratuity if he has rendered continous 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:

Provided that the completion of continuous service of five years shall not be necessary where the termination of the service of any employee is due to death or disablement."

The Payment of Gratuity Act, 1972, came into force on September 16, 1972. The respondent resigned on August 19, 1975, as established by Ex-1 resignation letter and his resignation was accepted on November 30, 1975 by the appellants. The respondent was paid wages over Rs. 1,000/- per month even before the completed five years of service in the appellant bank. The appellant-bank, therefore, were of the opinion that the respondent is not entitled to gratuity as he has not completed five years of continuous service with 240 days per calendar year. According to the appellant-bank, the respondent had put in only four and half years of continuous service with remuneration of less than Rs. 1,000/- per month. The respondent filed application for payment of gratuity under the Act, under Ex. A-6, dated September 6, 1976. Thereafter, the respondent filed an application, Ex. A-15, dated January 25, 1977, for withdrawing the case for payment of gratuity filed by him before the competent authority. In that application, the respondent categorically stated - "in view of the fact that the respondent-bank is kind enough to intimate to the petitioner that the claim for payment of gratuity is under consideration, the petitioner hereby withdraws the present application before your honour with liberty and without prejudice to his rights to proceed according to law." The respondent, in his evidence, has admitted that he comes under "non-award staff and that he is governed by the State Bank of India Supervisor-Staff Service Rules. He also admitted that there is no rule entitling him to claim for payment of gratuity and that he is not claiming the amounts under the provisions of the said Act. In view of the admission made by the respondent himself, he is not entitled for payment of gratuity under the Payment of Gratuity Act, as he did not satisfy the provisions of the said Act, entitling him for claiming gratuity.

The respondent, notwithstanding the withdrawal of the application filed by him before the competent authority under the Payment of Gratuity Act, claims that he is entitled for payment of gratuity, as the appellant-bank has paid gratuity to other officers, who are similarly placed as that of the respondent- viz., Mr. Vagulabaranam (under Ex. A-10, dated March 26, 1976) and Mr. B.A. Kumar(underEx.A-8, dated August 16, 1976) and also for the reason that the appellant-bank has assured the respondent that he will also be paid gratuity if he withdraws the application filed by him before the competent authority for payment of gratuity. In otherwords, the respondent puts his claim for payment of gratuity on the ground of admission made by the appellant-bank for payment of gratuity to him also as was done in the case of Mr. Vagulabaranam and Mr. B.A. Kumar and others, more so, he has himself withdrawn the application filed by him before the competent authority for payment of gratuity, on the basis of the assurance given by the appellant-bank to him for payment of gratuity. Therefore, it is necessary to examine as to whether the respondent is entitled for payment of gratuity on the basis of the alleged assurance given by the appellant-bank to him that he will also be paid gratuity amount as was done in the case of other officers, who resigned from service.

Learned Counsel for the appellant-bank has contended that the respondent should not be allowed to rely upon the inter- departmental correspondence and the office copies of the records of the bank, to claim any relief in this appeal. In other words, the learned Counsel for the appellant-bank submits that the respondent has not substantiated his claim for payment of gratuity by producing any material evidence and that the respondent should not be allowed to rely upon the inter-deparmental correspondence and the office copies of the records of the bank to establish his claim for payment of gratuity. This contention of the appellants is without force, for the simple reason that all the documents were produced by the appellant-bank in the lower Court on an application filed by the respondent for production of the documents listed out by him. That application was ordered by the lower Court and in compliance with the said order, the appellant-bank itself had produced all the documents before the lower Court. These documents were not produced from the custody of the respondent/plaintiff, but were marked when the respondent/plaintiff himself was being examined as P. W. 1. Therefore, I hold that all the documents produced by the appellant- bank and marked as evidence, can be relied upon by the respondent.

In order to establish that the appellants have paid gratuity without reference to the Payment of Gratuity Act to some of the officers of the Bank who are similarly placed as that of the respondent when they resigned from the service of the bank, the respondent-plaintiff placed reliance upon Ex. A-9, dated May 22, 1972 where-under Sri H.E. Chatlier who resigned from the service of the bank with effect from July 15, 1972 was paid gratuity on May 22, 1972 even though his resignation came into effect from July 15, 1972; Ex. A-10, dated March 26, 1976 whereunder Sri N. Vagulabarnam was paid gratuity on his resignation from service with effect from March 1, 1976; Ex.A-8 dated August 16, 1976, whereunder Sri B. Atchutakumar was paid gratuity even before his resignation came into effect i.e., September 1, 1976, While admitting the payment of gratuity to the above said Officers of the Bank who resigned from the service, learned Counsel for the appellants tried to justify the same on the ground that they were paid gratuity as they are the employees of the Imperial Bank and hence, as of right, they were entitled to be paid the said amounts. The explanation is not based on any material evidence produced by the appellants. There is no such plea justifying the explanation now offered by the learned Counsel for the appellants.

Th respondent/plaintiff had tendered his resignation on November 30, 1975 and he made applications to the appellants requesting them to pay him all amounts due to him including the gratuity, on August 19, 1975 and November 29, 1975. In spite of the reference made by the respondent in these applications to pay him gratuity as per the policy of the appellant-bank, appellants failed to send any reply to the respondent denying the existence of such a policy or the entitlment of the respondent for payment of gratuity without reference to the Payment of Gratuity Act. No doubt, Sri H.E. Chatlier was paid gratuity prior to the resignation of the respondent-herein, whereas the gratuity was paid to N. Vagulabarnam and Sri B. Atchutakumar subsequent to the date of resignation of respondent-herein from the service of the Bank. This itself discloses that the bank has paid gratuity to the above said officers without reference to the Payment of Gratuity Act, depending upon the long and meritorious service rendered by those officers.

The Officers of the appellant-bank were examined as D.W.I and D.W.2 testifying the existence of the policy of payment of ex-gratia gratuity to the officers who resigned from the service of the bank after rendering meritorious service for a period of ten years or more. D.W. 1 who is an Officer in the Funds Department of the appellant-bank, has deposed thus:

"...... The policy of payment of ex-gratia was in force when plaintiff joined service ... ... ... In spite of our not recommending plaintiff''s case for payment of gratuity D-1''s office indicated for payment in Ex.A-11 ....The plaintiff''s application for gratuity was pending when Sarvasri Vagulabarnam and B. Atchutakumar resigned and were paid their gratuity. They and the plaintiff were placed in similar circumstances and there was no disqualification for the plaintiff to disentitle him for gratuity as paid to them."

D.W.2, - the Manager of the Viajayawada Branch of the State Bank of India, who worked as officer in-charge of Funds Department of the appellant Bank at the appropriate time, has deposed in his chief-examination, thus:-

"D-1'' s office asked us to recommend his case in normal course." "In cross-examination, D.W.2 admitted - "We sent recommendations to D-1 for payment in normal course.... Ex. A-12, message, was to the effect as to the calculation of gratuity. On its basis I calculated it as Rs. 13,200/- payable to plaintiff. The pencil noting at the bottom of Ex. A-12 is mine."

The observations of the Directors'' meeting held on December 28, 1976 were communicated to the second appellant by the first appellant by their letter dated December 28, 1976 marked as Ex. B-2. In that letter it was stated thus:

"..... It was mentioned by the Chairman that, in a few cases in the past, gratuity was paid to members of supervising staff who had resigned from the Bank''s service, although provision exists for payment of compassionate gratuity alone in the case of deceased employees........ Even in the case of persons who had resigned from the services of the Bank and were drawing salary above Rs. 1,000 per mensem, gratuity would be compulsory for the period of service during which they draw salary upto Rs. 1,000/- per mensem."

A reading of this letter will establish the fact of existence of a policy in the appellant-bank to pay compassionate gratuity to the officers who resign from the Bank''s service after putting in long years of exemplary and meritorious service.

Ex.A-10 is the memorandum of the Executive Committee of the Central Board, dated March 26, 1976, by which decision was taken for payment of gratuity to Sri Vagulabarnam, in that it was stated thus:

"In this connection, we have taken a view in the past that, where an employee leaves the services of the Bank after 10 years of satisfactory service, he may ordinarily be granted the benefit of gratuity."

Similarly, in Ex. A-8 Memorandum of the Executive Committee of the Central Board, dated August 16, 1976, a decision was taken for payment of gratuity to Sri B.A. Kumar. In that it was stated thus:

"In this connection, we have taken a view in the past that, where an employee leaves the service of the Bank after 10 years of satisfactory service, he may ordinarily be granted the benefit of gratuity. Accordingly, we recommend that Sri Kumar be sanctioned payment of gratuity on the basis of one month''s salary for each year of service."

The documentary evidence mentioned above establishes beyond doubt the existence of a policy in the appellant-bank for payment of grauity to the officers of the bank, without reference to the Payment of Gratuity Act, in case of their resignation from service after rendering 10 years or more of meritorious/satisfactory service.

That apart, the respondent/plaintiff gave Ex.A-28, suit notice, on September 28, 1977, to the appellants demanding payment of gratuity on par with the other Officers to whom gratuity was paid. In that notice, Ex.A-28, a specific and categorical reference has been made by the respondents/plaintiff about the accepted and established policy of the bank to pay ex-gratia payments to all Officers who resigned or retired from the service of the bank, having good record, in recognition of their valuable and meritorious service rendered to the bank irrespective of their length of service. In Ex.A-28 the respondent/plaintiff also asserted that the first appellant/lst defendant has approved payment of Rs. 13,200/- to him with a direction to the second appellant/2nd defendant/Local Head Office of the appellant-bank, to make payment accordingly by issuing a Telex Message on December 14, 1976 followed by letter of confirmation by D-1/1st appellant. To this legal notice (Ex.A- 28), 2nd appellant/2nd defendant gave replies i.e., Ex. A-29 dated April 10, 1977 and Ex. A-30, dated January 3, 1978. A reading of these two replies (Exs.A-29 and A-30) will disclose that both the assertions made by the respon dent/plaintiff in his notice Ex.A-28 referred to above, have not been denied or controverted by the second appellant/2nd defendant, except mentioning that the respondent/plaintiff is not; eligible for payment of gratuity under the Rules of the Bank. It is significant to note that the 1st appellant/1st defendant Central Office of the ap pellant-bank had remained ex parte in the suit. Ex. A-13 letter dated November 8, 1976 written by the 2nd appellant/2nd defendant to the 1st appellant/1st defendant indicates that the second appellant/2nd defendant sought clarification from the 1st appellant/1st defendant in the fol lowing terms:

"In this connection, we understand that a few Officials of the bank have been paid gratuity by Central Office as ex-gratia payment consequent on their resignation. Kindly advise us the basis for arriving at the quantum of gratuity for such staff and the procedure for obtaining sanction therefor."

First appellant/lst defendant in their reply Ex. A-12 dated November 22, 1976, to the above said letter Ex. A-13 of the 2nd appellant/2nd defendant, has given a direction to the following effect:

"With reference to your letter F.N. 28-826 of November 8, 1976, you may recommend to the Executive Committee of the Central Board through the usual channel the payment of gratuity to Sri T. Ramagopala Chary on the basis of one moth''s basic pay last drawn for each completed year of service."

D.W.2, who worked as an officer in the Funds Department of the 2nd Appellant/2nd defendant Office during 1972-77 admits about calculating in Ex. A-13 the amount payable to the respondent/plaintiff with a pencil, fixing the figure at Rs. 13,200/- as mentioned above. The 1st appellant/1st defendant reiterated its earlier stand again in Ex.A-11 letter dated December 8, 1976 that, an employee leaving the bank''s service after ten years of satisfactory service may ordinarily be granted the benefit of gratuity. No doubt, there is an endorsement on Ex. A- 11 letter to the effect that one Mr. Pathak of Central Office (appellant No. 1) rang up on December 14, 1976 to inform the 2nd appellant/2nd defendant that no action should be taken on that letter until the first appellant/1st defendant further advises in the matter. None from the office of the 1st appellant/lst defendant has been examined to establish the fact of the above telephonic message from Mr. Pathak of Central Office, Bombay and also none from the office of the 2nd appellant/2nd defendant has been examined to show that such a message has been received in their office from the office of the 1st appellant/lst defendant. D.W.I has deposed that they could not trace out the office copy of the telex message alleged to have been sent by 1st appellant''s office to the 2nd appellant''s office advising payment of gratuity to the respondent/plaintiff. Significantly, the records earlier and subsequent to the date of the telex message are available and Record Keeper who maintains the records has not been examined to substantiate the claim made by the 2nd appellant/2nd defendant that there was no such telex message from the office of the 1st defendant. As mentioned already, first appellant/1st defendant remained exparte in the suit and there is no denial on the part of the 1st defendant/1 st appellant regarding the telex message. In the circumstances, as adverse inference has to be necessarily drawn against the appellant/defendants and in favour of the respondent/plaintiff regarding the receipt of the telex message by the 2nd appellant/2nd defendant office from the office of the 1st appellant/lst defendant. The policy decision, taken by the Central Board of Directors of the bank, in the meeting of the Central Board held on November 26, 1976 (vide Ex.B-2), to the effect that "the consensus was that, with the exception of statutory obligation, Officers who resign from the Bank''s service should not be paid any gratuity", has no retrospective effect and this resolution cannot be given effect for denying the payment of gratuity or ex-gratia to the plaintiff/respondent, having regard to the fact, as mentioned already, that a decision was in fact taken by appellants for payment of ex-gratia payment to the plaintiff/respondent.

Learned Counsel for the appellants contended that the decision to pay the gratuity or ex gratia payment to any employee resigning the bank''s service has to be taken only by the Board of Directors of the appellant-bank and not by the 1st appellant/1st defendant and there is no such decision taken by the Board of Directors of the bank for payment of ex-gratia to the respondent/plaintiff. This contention is without any force or merit. The first appellant/1st defendant is the Managing Dirctor of the State Bank of India Central Office at Bombay. The 1st appellant/1st defendant himself had not taken any exception as is now put up by the learned Counsel for the appellants. Moreover it is not the case of the appellants/defendants that the other officers who resigned from the bank''s service viz., Sarvasri Vakulabharnam and B.A. Kumar, were paid ex-gratia pursuant a decision taken by the Board of Directors of the Bank. The documentary evidcence on record, as mentioned already, discloses that as directed by the 1st appellant/first defendant, the ex-gratia was paid to those officers who were similarly placed as that of the respondent/plaintiff. It, therefore, follows that the first appellant/lst defendant is the competent person or, at any rate, represents the Board of Directors of the State Bank of India also in the matter of taking a decision for payment of ex-gratia to any officers resigning from the bank''s service.

The respondent/plaintiff claimed for payment of ex-gratia to him, and it is not a claim under the Payment of Gratuity Act, but is based on the policy of the bank that was being consistently followed by the appellants in payment of ex-gratia to the officers resigning from the bank''s service after putting in ten years or more of meritorious/satisfacotry service in the bank. Respondent/plaintiff has established the existence of this policy of making ex-gratia payment by letting in evidence in support of the same, i.e., for payment of ex-gratia to other officers who are similarly placed as that of him. In those circumstances, it does not lie in the mouth of the appellants/defendants to deny the payment of ex-gratia to the respondent/plaintiff for extraneous reasons. The decision taken by the appellants/defendants not to pay any gratuity to officers resigning from the bank''s service, as disclosed by Ex. B-2, has no retrospective effect and hence, the respondent/plaintiff, having resigned from the bank''s service prior to this decision, is entitled for payment of ex-gratia.

Yet another contention urged by the learned Counsel for the appellants/defendants is that, where there is no statutory provision or right to a party to make a claim for payment of ex-gratia, by implication of such a right, under the Service Conditions, it cannot be enforced. This contention has no force and deserves to be rejected for the simple reason that the Appellants/defendants themselves have, in fact, paid ex-gratia to other officers, who resigned from the service of the bank, without there being a statuotry right to do so. As stated already, the respondent/plaintiff, in all aspects, is similarly placed as that of the other Officers to whom ex-gratia was paid. It is not the specific case of the appellant-bank that the long service rendered by the respondent/plaintiff in the appellant-bank was either unsatisfactory or unmerited. Moreover, the 1st appellant/first defendant who is the sanctioning authority, remained ex parte in the suit, after issuing instructions to the second appellant/second defendant to pay ex-gratia to the respondent/plaintiff also. In the circumstance the respondent/plaintiff can successfully enforce the said right against the appellant-bank, an institution wholly owned by the Government of India. Hence, the appellant-bank cannot show discrimination between the officers working in the bank.

For all the reasons stated above, I do not find any infirmity or illegality in the judgment under appeal. Confirming the same, this appeal is dismissed but, in the circumstances of the case, without costs.