Mr. Murali Venkataramana vs Philips Klin Services (India) Pvt. Ltd. & Anr.

By this Petition, Petitioner has challenged judgment and order dated 17 August 2026 passed by the Appellate Authority constituted under the Payment of Gratuity Act, 1972 (PG Act). By the impugned judgment and order, the Appellate Authority has partly allowed the Appeal (PGA) No. 25 of 2024 preferred by Respondent No.1 and has set aside the judgment and order dated 22 January 2024 passed by the Controlling Authority in Application (PGA) No.156 of 2013. The Controlling Authority had directed payment of gratuity of Rs.27,64,384/-to the Petitioner. The Appellate Authority, while setting aside the order of the Controlling Authority dated 22 January 2024 has reduced the amount of gratuity payable to the Petitioner to Rs.10,00,000/-, which is directed to be paid along with interest at the rate of 10% per annum from 17 October 2012. Petitioner is aggrieved by reduction of amount of gratuity payable to him from Rs.27,64,384/- to Rs.10,00,000/- and has accordingly filed the present Petition.

Petitioner joined the services of Respondent No.1 on 23 March 1995. He served with Respondent No.1 for 17 years and 6 months and rose to the position of Vice President. He was drawing basic wages of Rs.1,33,100/- per month and his annual package was Rs.48,00,000/-. Petitioner tendered the resignation from service of Respondent No.1 on 5 September 2012. According to Petitioner, 17 October 2012 was his last day of work.

Respondent No.1 has created a trust for administration of gratuity payable to its employees and has also obtained insurance policy from Life Insurance Corporation of India (Respondent No.2). Petitioner relies on email dated 14 February 2011 under which Respondent No.1 agreed to pay slab-wise gratuity for employees putting in over 10 years of service. Gratuity at the rate of 30 days’ for each completed year of service, was agreed to be paid under the email dated 14 February 2011.

Respondent No.1 issued legal notice to the Petitioner on 26 November 2012 leveling certain allegations, which was replied to by the Petitioner on 2 January 2013. According to the Petitioner, he was not paid gratuity despite orally demanding the same.

Since Petitioner was denied gratuity, he approached the Controlling Authority under the PG Act and filed Application (PGA) No.156 of 2013 and claimed gratuity of Rs.23,95,800/-. The Application was resisted by Respondent No.1 by filing Written Statement. After learning that Respondent No.1 had purchased policy from LIC, Petitioner applied for impleadment of LIC to the PG Application. Accordingly, LIC was impleaded as Respondent No.2 to the PG Application. The Application preferred by LIC for its deletion from PG Application was rejected by the Controlling Authority by order dated 1 September 2023. Respondent No.2-LIC also filed written statement. Petitioner examined himself. Respondent No.1 examined Mr. Vijay A. Vengurlekar, Accounts Executive, to prove its defence.

The Controlling Authority thereafter passed judgment and order dated 22 January 2024 directing Respondent No.1 to pay gratuity of Rs.27,64,384/- to the Petitioner with simple interest at the rate of 10% per annum from 17 October 2012 onwards.

Respondent No.1 filed Appeal before the Appellate Authority under Section 7(7) of the PG Act challenging the order of the Controlling Authority. It appears that Petitioner had filed SC Suit No.1687 of 2015 for payment of various legal dues in which Respondent No.1 had filed counterclaim. Parties settled the dispute and entered into Consent Terms dated 15 December 2025. Under the Consent Terms, Respondent No.1 paid amount of Rs.4,42,002/- to the Petitioner against various claims. It was also agreed that the accumulated balance in superannuation fund with LIC was Rs.24,19,690/-, to which Petitioner would be entitled to, without deductions. It was further agreed that the settlement was restricted to claims arising out of the suit and that gratuity claim pending before Appellate Authority would remain unaffected.

The Appellate Authority heard the Appeal preferred by Respondent No.1 and by judgment and order dated 17 August 2026, the Appeal has been partly allowed by setting aside the order of the Controlling Authority dated 22 January 2024. The Appellate Authority has held Respondent No.1 is liable to pay amount of Rs.10,00,000/-towards gratuity to the Petitioner with interest at the rate of 10% per annum from 17 October 2012 onwards. Petitioner is aggrieved by reduction of gratuity amount from Rs.27,64,384/- to Rs.10,00,000/- and has accordingly filed the present Petition.

Mr. Jalisatgi, the learned counsel appearing for Petitioner submits that the Appellate Authority has grossly erred in interfering in the order of the Controlling Authority. He submits that the Controlling Authority had rightly ascertained the gratuity payable to the Petitioner as Rs.27,64,384/-. That the email dated 14 February 2011 expressly provided for payment of gratuity as per revised terms. That under Section 4A of the PG Act, Petitioner is entitled to draw higher amount of gratuity than the one payable under the PG Act. He relies on Board Resolution dated 16 August 2012 in support of his plea that Respondent No.1 had specifically agreed to lift the maximum limit applicable under PG Act well before coming into effect of Petitioner's resignation. That subsequent execution of Deed of Variation on 19 November 2012 is mere ministerial act for giving effect to the Board Resolution. He submits that once a decision is taken to pay higher amount of gratuity, the same cannot be made subject to technical formalities of execution of Deed of Variation. He submits that similarly placed employees have been paid higher amount of gratuity by implementing orders passed by the Controlling Authority. He prays for setting aside the order passed by the Appellate Authority.

The Petition is opposed by Mr. Shivdasani, the learned counsel appearing for Respondent No.1. He submits that the Appellate Authority has rightly appreciated the position that the varied scheme of payment of gratuity without applying limit under PG Act was brought into effect from 20 November 2012. That at the time of cessation of Petitioner's service on 17 October 2012, the scheme introduced with effect from 1 April 2011 was in vogue which provided for application of maximum limit of PG Act to the slab-wise gratuity. That the maximum limit was lifted by revised scheme introduced from 20 November 2012. He invites attention of this Court to clause 9 of the Trust Deed in support of his contention that any variation in the scheme requires three-stage procedure of passing of board resolution, execution of variation deed, and securing approval of the Income Tax Department to the varied scheme. He submits that mere passing of board resolution is not sufficient for effecting variations in the scheme. That the varied scheme was ultimately incorporated in the Trust Deed on 19 November 2012 and came into effect from 20 November 2012. That therefore payment of gratuity without applicability of any limit would only apply to those ceasing in service after 20 November 2012. Mr. Shivdasani relies on judgment of this Court in Pune District Central Co-operative Bank Limited vs. Shivajirao Dinkarrao Jadhavrao and Ors.^{11.(2004) 4 Mh.L.J. 859} in support of his contention that mere passing of board resolution is not sufficient and that the revised scheme comes into effect only after approval is given to the scheme by the Income Tax authorities. He relies on judgment of this Court in Mercedes-Benz India Pvt. Ltd. and Ord. vs. Noshir Nani Desai^{22.2024 SCC OnLine 199} in support of its contention that mere email correspondence does not create any agreement between the parties. He prays for dismissal of the Petition.

Rival contentions urged on behalf of the parties now fall for my consideration.

Petitioner is aggrieved by reduction in the amount of gratuity by the Appellate Authority. The Controlling Authority had granted gratuity amount of Rs.27,64,384/- to the Petitioner, which is brought down to Rs.10,00,000/- by the Appellate Authority by the impugned judgment and order dated 17 August 2026.

It appears that Respondent No.1 has created a Trust for administration of gratuity payable to the employees and has also obtained policies from Life Insurance Corporation of India. Copy of the Trust Deed dated 20 June 2007 is placed on record. Under clause 11(a) of the Trust Deed, the trustees agreed to provide for payment of gratuity on termination of service, on death or retirement of the member or as provided in the rules of the Scheme. Under annexure to the Trust Deed, Group Gratuity Assurance Scheme was introduced with effect from 1 April 2007. Under the Scheme, gratuity was payable at the rate of 15 days salary for each year of service.

Respondent No.1-Company however decided to offer higher amount of gratuity to the employees and officers as a token of appreciation for their continued service in the Company. The Company voluntarily increased the gratuity entitlement as: 20 days basic salary for 5-7 years of service, 25 days of basic salary for 7-10 years of service and 30 days of basic salary for more than 10 years of service.

The decision of the management was communicated to the employees vide email dated 14 February 2011. The relevant part of email dated 14 February 2011 reads thus:

Thus, Respondent No.1-Company agreed to provide higher amount of gratuity depending on length of service for employees who had put in more than 10 years of service. Respondent No.1 agreed to pay gratuity at the rate of 30 days’ of basic salary per completed year of service. To give effect to the decision communicated to the employees by email dated 14 February 2011, a Deed of Variation was made on 21 April 2011 to the Trust Deed by which amendments were effected in various clauses of the Scheme. The amendment reflected in Annexure-A to the Deed of Variation dated 21 April 2011 reads thus:

Thus, the Revised Scheme of payment of slab-wise gratuity came into effect from 1 April 2011. However, though the email was silent on applicability of maximum limit, while executing the Deed of Variation, the trustees incorporated maximum limit specified under PG Act in each of the slabs. It was never the intention of Respondent No.1 to apply any maximum limit on payment of slab-wise gratuity. Respondent No.1 realized the mistake committed while executing the Deed of Variation, and accordingly the Board of Respondent No.1 adopted following resolution in meeting held on 16 August 2012:

Thus, it is emphatically stated in the board resolution dated 16 August 2012 that the maximum limit under PG Act was wrongly specified, though the intention of the Board was not to restrict maximum gratuity payable. The Board accordingly resolved to amend the Trust Deed to give effect to actual amount of gratuity payable as per the graded scale of benefits by removing the words "subject to maximum limit specified in the Payment of Gratuity Act, 1972, as amended from time to time".

Accordingly, a Deed of Variation dated 19 November 2012 was executed, in which following amendments were introduced in the Trust Deed:

The Petitioner resigned from service during this gap period of the two Deeds of Variation dated 21 April 2011 and 19 November 2012. He resigned on 5 September 2012 and his resignation took effect from 17 October 2012. According to Respondent No.1-Company, the amended scheme removing the maximum limit came into effect from 20 November 2012, and therefore the same does not apply to the Petitioner. Therefore, the short issue that arises for consideration is whether Petitioner can be extended the benefit of gratuity payable as per the decision taken by Board of Directors of Respondent No.1 without imposition of any maximum limit.

If proceedings filed before the Controlling Authority are perused, it appears that Respondent No.1 initially took a plea that no gratuity was payable to the Petitioner on account of non-submission of I-Form, commission of prejudicial acts, and cause of huge financial loss to Respondent No.1 leading to forfeiture of gratuity and in the Written Statement, Respondent No.1 levied serious allegations of cause of financial loss by the Petitioner and raised the plea of forfeiture of gratuity. Respondent No.1-Company also raised the plea that it was entitled to recover amount of Rs.6,40,000/- from Petitioner towards notice pay and further amount of Rs.4,01,507/- being paid excess to him. In paragraph 1(d) of the written statement, Respondent No.1 raised a vague plea that as per the provisions of PG Act, the Trust Deed and Insurance Policy obtained from LIC, no employee is entitled to gratuity above Rs.10,00,000/- and as on 17 October 2012, maximum amount of gratuity was capped at Rs.10,00,000/-.

The Controlling Authority adjudicated Petitioner's Application by judgment and order dated 22 January 2024 and held that since Board Resolution was passed prior to submission of resignation by the Petitioner, he was entitled to draw slab-wise gratuity without application of any upper limit. Accordingly, Respondent No.1-Company was directed by the Controlling Authority to pay gratuity of Rs.27,64,384/- alongwith interest.

When Respondent No.1-Company filed Appeal (PGA) No.25 of 2024, there was apparently a shift in its stand and it gave up the plea of non-entitlement of Petitioner to receive any amount towards gratuity. Respondent No.1 prosecuted the Appeal by raising the plea of applicability of maximum cap of Rs.10,00,000/- at the time of resignation of the Petitioner. The Appellate Authority has accepted the plea raised by Respondent No.1-Company by holding that the revised scheme introduced vide Deed of Variation dated 19 November 2012 came into effect on 20 November 2012 when Petitioner was not in service. It therefore held that the maximum cap of Rs.10,00,000/- was applicable as on the date of resignation of the Petitioner. This is how the Appellate Authority has capped the maximum amount of gratuity payable to the Petitioner at Rs.10,00,000/-.

In my view, the Appellate Authority has mechanically considered the case of the Petitioner without appreciating the intention of Respondent No.1 to extend the benefit of higher amount of gratuity to its employees. As observed above, there was an error on the part of the trustees while executing the Deed of Variation dated 21 April 2011. The email dated 14 February 2011 did not reflect imposition of any upper limit on amount of gratuity payable to the employees. The higher amount of gratuity as per applicable slab was extended as token of appreciation towards employees, who continued in service of the Company for more than five years. There was no intention on the part the management to apply any upper limit while introducing the scheme of grade-wise gratuity. However, while executing the Deed of Variation dated 21 April 2011, erroneously maximum limit specified in the PG Act came to be inserted while making applicable the grade-wise gratuity scheme.

The Board of Respondent No.1 realized the mistake in execution of the Deed of Variation dated 21 April 2011. The mistake was corrected by passing Board Resolution dated 16 August 2012. However, while giving effect to the Board Resolution dated 16 August 2012, the trustees once again committed the mistake of not making applicable the decision to delete maximum gratuity limit with effect from date of application of slab-wise gratuity i.e. 1 April 2011. The amendment was effected from 20 November 2012.

Thus, if a hyper-technical approach is adopted, Petitioner can be denied the benefit of slab-wise gratuity scheme by applying maximum limit of Rs.10,00,000/-. However, such hyper-technical approach needs to be shunned in the present case considering the intention of Respondent No.1. The Board Resolution dated 16 August 2012 expressly stated that “However, the intention of the Board was not to restrict the maximum gratuity payable as per the Gratuity Act”.

Also, application of limit of Rs.10,00,000/- to slab-wise gratuity scheme renders the objective of paying higher gratuity to the employees otiose in case of most of the employees. If a case of an employee drawing salary of Rs.50,000/- at the time of retirement and who has put in 25 years of service is taken into consideration, the gratuity payable under slab-wise scheme would be in excess of Rs.10,00,000/- and in such situation, applying the maximum limit of Rs.10,00,000/- would render the very objective of offering higher amount of gratuity ineffective.

Therefore, in the facts of the present case, intention of Respondent No.1-Company needs to be borne in mind and due importance needs to be given to the specific statement in the Board Resolution that the Company never intended to apply maximum limit while paying gratuity under slab-wise scheme. The intention was to pay gratuity under the slab-wise scheme without putting any upper limit. This objective must be given effect to rather than adopting a hyper-technical approach that the Deed of Variation removed the provision for maximum limit from 20 November 2012 i.e. after resignation of the Petitioner. In the facts of the case where a mistake was committed in applying maximum limit under the Deed of Variation dated 21 April 2011. Once the mistake was sought to be cured by execution of fresh Deed of Variation dated 19 November 2012, the benefit of removal of mistake must be extended to the Petitioner.

Respondent No.1 appears to carry some grudge against the Petitioner, which is the reason why no gratuity was paid to him and he was driven to the Controlling Authority for securing his gratuity. Before the Controlling Authority, a bitter battle was fought levelling several allegations of misconduct against the Petitioner. Otherwise, Respondent No.1 appears to have paid higher amount of gratuity to all other officers and employees. The witness of Respondent No.1 Mr. Vijay Audumbar Vengurlekar, gave an admission that Mr. Manisubramaniam, one of the Directors of the Company, received massive amount of gratuity of Rs.2,53,84,671/-. The other Director, Ms. Bhanumati Subramaniam, received gratuity of Rs.53,66,871/-.

The case also involves an element of unjust enrichment by Respondent No.1. As observed above, Respondent No.1 has obtained a policy from LIC for payment of gratuity to its employees. It appears that gratuity of Rs.27,64,385/- had accumulated in the account of Petitioner maintained with LIC. This is clear from email dated 5 June 2015. Mr. Shivdasani has sought to distance Respondent No.1 from email dated 5 June 2015 contending that the same is fabricated. However, cross-examination of the witness Vijay Vengurlekar would indicate that he gave express admission that the email was received by him from LIC. Since recipient of the email has himself admitted existence of the document, Respondent No.1 cannot contend that same is fabricated. Though the witness has denied contents of the email, he has admitted existence thereof. There is one more document on record being bank account extract which indicates an amount of Rs.29,80,808/- was transferred in the bank account of Respondent No.1 by LIC. It is the case of Respondent No.1 that gratuity amount accumulated with LIC is apportioned by Respondent No.1. This is disputed by Mr. Shivdasani contending that the remittance received under the relevant bank entry does not pertain to Petitioner alone. However there is no material placed by him on record that the said transmitted amount did not include the gratuity payable to Petitioner. Also the remittance is not restricted to Rs. 10,00,000/- Therefore there appears to be prima facie truth in the contention of the Petitioner about Respondent No. 1 receiving amount in excess of Rs. 10,00,000 from LIC. Thus, the gratuity payable by the Respondent No.1 to Petitioner is appropriated by Respondent No.1 and to this extent there appears to be unjust enrichment by Respondent No.1. However, it is not necessary to delve deeper into this aspect. What needs to be taken into consideration is that gratuity amount of Rs.27,64,385/- was available with LIC to be paid to the Petitioner and the said amount more or less matches the amount directed to be paid by the Controlling Authority.

Respondent No.1 has placed on record copy of letter dated 25 April 2011 addressed to Income Tax Authorities in support of its contention that variation in the Scheme required approval of Commissioner of Income Tax. However, no document is placed on record to demonstrate that similar approval was sought in respect of Deed of Variation dated 19 November 2012.

I am also not impressed by submission of Mr. Shivdasani that three-stage procedure was mandatory for giving effect to any variation in the Scheme. The three-stage procedure may be relevant for the purpose of effecting variation in the gratuity scheme. In the present case, variation was brought upon by Deed of Variation dated 21 April 2011. What is done subsequently is merely correction in the said Deed of Variation. For such correction, it was not necessary to procure fresh approval from Income Tax Authorities. Correction of error in the earlier Deed of Variation ordinarily ought to have been given effect from 1 April 2011. The same is erroneously given effect from 20 November 2012.

Reliance by Mr. Shivdasani on judgment of this Court in Pune District Central Cooperative Bank Limited (supra) is inapposite. In that case, the gratuity payable under the PG Act at the time of retirement of Respondent therein was Rs.1,00,000/- and the said amount was paid to him. Shortly before his retirement, a Board Resolution was passed on 3 February 1997 for introduction of group gratuity scheme alongwith Life Insurance Corporation, under which gratuity was to be raised to Rs.2,50,000/-. The scheme was introduced w.e.f. 1 April 1997. Respondent therein was denied the benefit of group gratuity scheme since he retired on 28 February 1997 i.e., prior to 1 April 1997. In the peculiar facts of that case, this Court held in paragraphs 6 and 7 of the judgment as under:

Thus, in Pune District Central Co-operative Bank (supra), the scheme for payment of higher gratuity was never placed before the Controlling Authority, which had directed payment of amount of Rs.2,50,000/- to Respondent therein only on account of other employees being paid the said amount. The Resolution dated 3 February 1997 was brought on record for the first time before the Appellate Court. This Court held that the revised scheme came into operation from 1 April 1997 when approval of Commissioner of Income Tax was accorded. The facts of the case in Pune District Central Co-operative Bank (supra) are clearly distinguishable, in that the said case did not involve commission of mistake in execution of Deed of Variation. In the present case, Respondent No.1 has admitted the mistake while executing the Deed of Variation and resolved to correct the said mistake. Therefore, the judgment in Pune District Central Cooperative Bank (supra) cannot be made applicable to the unique facts and circumstances of the present case.

Mr. Shivdasani relies on judgment of this Court in Mercedes Benz India Pvt. Ltd. (supra) in support of his contention that email does not constitute agreement between the parties. This Court held in paragraphs 10, 11 and 12 of the judgment as under:

In my view, the judgment in Mercedes Benz (supra) has no application to the facts of the present case. Here there is no issue involved as to whether email created agreement or not. The issue is about giving retrospective effect to correction of mistake committed in execution of Deed of Variation. There is an express admission by Respondent No.1 while passing Board Resolution that it never intended to apply maximum limit to payment of gratuity. Therefore, the judgment in Mercedes Benz (supra) has no application to the facts of the case.

Payment of Gratuity Act is a beneficial piece of legislation. It is enacted for the benefit of employees. Therefore, if there is any ambiguity, the interpretation must be in favour of person for whose benefit the PG Act is enacted. The present case involves unique circumstances where mistake got committed in execution of Deed of Variation and commission of mistake is admitted by Respondent No.1. An ambiguity is created on account of execution of subsequent Deed of Variation dated 19 November 2012 giving effect to deletion of maximum limit with effect from 20 November 2012. Thus, there is variance between the actual intention of Respondent No.1 and the amendment effected in the scheme. In these peculiar circumstances, the ambiguity needs to be removed by interpreting the stipulations of Deed of Variation in favour of the Petitioner and against Respondent No.1 who has clearly enriched itself unjustly. Respondent No.1 has acted arbitrarily by denying gratuity to the Petitioner. It initially raised a false plea of forfeiture of gratuity even though no charges were leveled against the Petitioner nor any finding of guilt was recorded against him. It appropriated the amount of gratuity generated in LIC gratuity fund. Before the Appellate Authority, Respondent No.1 changed its stance and agreed to pay gratuity of Rs.10,00,000/-. Thus, the conduct of Respondent No.1 in the entire episode is not above board.

Considering the above circumstances, I am of the view that the order passed by the Appellate Authority deserves to be set aside by confirming the order passed by the Controlling Authority. The Petition accordingly succeeds and I proceed to pass the following order:

Writ Petition is allowed in above terms with no order as to costs.

After the judgment is pronounced, Mr. Shivdasani, the learned counsel appearing for Respondent No.1 prays for stay on the withdrawal of the deposited amount of gratuity. Request is opposed by the learned counsel appearing for the Petitioner. Considering the fact that the Petitioner has ceased to be in service of Respondent No.1 since September 2012, and is denied gratuity for the last 14 long years, the request for stay is rejected.