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Judgment
R. Banumathi, J.—The Petitioner seeks for the issuance of Writ of Certiorarified Mandamus to quash the order of the third Respondent
made in P.G. Case No. 15 of 1999 dated 11.02.2000 and to direct the first Respondent Management to pay the balance of Gratuity of Rs. 4,558
along with interest.
Two points that arise for consideration in the Writ Petition are:
Whether under the Payment of Gratuity Act, the Petitioner is entitled to claim gratuity on the basis of revised rate of wages last drawn by him for
the month of July 1998, during which he retired ? and;
Whether the Management has unilaterally declared one year break-in-service ?
Background facts in a nutshell � The first Respondent is a manufacturer of steel forgings and stampings. The Petitioner joined the services of
the first Respondent and attained superannuation on 09.07.1998. Taking into account the salary for the month of June 1998 [Rs.3,958.78], the
Petitioner was paid Rs. 70,802/- towards Gratuity. According to the Petitioner, his last drawn wages for the month of July, 1998 was at the rate of
Rs. 4,082.04 [Basic Wages Rs. 131.04 + Dearness Allowance Rs. 3,951/-] and the Gratuity should have been calculated according to the salary
which the Petitioner received during the month of July, 1998. Further case of the Petitioner is that even though he had put in 31 years and 7 months
service, the management has taken only 31 years of service for computing the Gratuity. According to the Petitioner, he is entitled to the Gratuity of
Rs. 75,360.73, but he was paid only a sum of Rs. 70,802/-and hence the management has to pay a balance of Rs. 4,558.73.
The management resisted the claim of the employee stating that his services was interrupted by the illegal strike. According to the first
Respondent, the last drawn wages for the month of June, 1998 i.e. Rs. 3,958.78/- is the last drawn wages, which was taken as the basis for
calculating Gratuity. The management has alleged that the Petitioner has participated in the illegal strike during 1983-84 and there was one year
break in service.
The Controlling Authority and the Appellate Authority, under Payment of Gratuity has dismissed the Petitioner''s claim, inter-alia finding:
As per Section 4(2) of Payment of Gratuity Act, 1972, an employee is entitled to Gratuity at the rate of 15 days'' wages last drawn, for each
completed year of service and the Act does not say wages payable, but only wages last drawn. Since the payment has worked out for nine days in
July 1998, his last drawn wages for the month of June 1998 was rightly taken for the calculation of the Gratuity amount;
The Respondent Management has proved there was strike and there was break in service of one year due to the intervening strike;
The employee has received the Gratuity amount as full and final settlement of his claims against the management and having received without any
objection, the employee cannot at a later stage, dispute the calculations made by the Management.
Assailing the impugned order, the learned Counsel for the Petitioner has submitted that the Payment of Gratuity Act being a beneficial legislation,
the provisions are to be interpreted for the benefit of the employee. The learned Counsel further submitted that the rate of wages means one day''s
wage and not the wages of the last month and hence the management ought to have taken the wages payable for the month of July. The learned
Counsel for the Petitioner urged that for the alleged period of strike, no notice was served upon the Petitioner and the Management arbitrarily said
there was break in service and when the factum of illegal strike has not been established, the authorities have committed error of law in not
considering the same. In support of his contention, the learned Counsel for the Petitioner has relied upon a number of decisions. Placing reliance
upon 2002 [4] LLN 363, [Krishnaveni Textile Mills v. Asst. Commissioner [Central] and Ors.], the learned Counsel for the Petitioner submitted
that no materials are placed for proving that the strike had been treated as break in service.
Countering the arguments, the learned Counsel for the Respondent Management has submitted that the Management has rightly taken the salary
of June month as wages last drawn and the provisions of the Act cannot be technically interpreted, causing violence to the provisions. Placing
reliance upon Vol.103 FJR Page 71 [Executive Engineer and Ors. v. Lokesh Reddy and Ors.] the learned Counsel has submitted that merely
because the Act is a beneficial legislation, interpretation cannot be stretched to the extent of causing violence to the provisions. Drawing the
attention of the court to the Memorandum of Settlement, the learned Counsel for the Management has submitted that the employee having
participated in the strike and when the employee has not worked for 240 days, there was break in service of one year and the Gratuity has been
rightly calculated at the completed years of service i.e. 31 years. Further drawing the attention of the court to the details of the calculation of
Gratuity for the other retired employees, the learned Counsel for the Management has urged that for all the employees, Gratuity was paid only on
the basis of the wages last drawn and not the wages payable on the month of retirement. It was further submitted that if the Petitioner''s claim is to
be allowed, there would be spate of applications from the other employees and the settled claims would be reopened.
In-re Point 1: The Petitioner attained superannuation on 09.07.1998. Gratuity was paid to him on the basis of last drawn wages for the month of
June, 1998 i.e. Rs. 3,958.78. Onbehalf of the Petitioner, it was urged that the words ""fifteen days'' wages"", ""which are paid"", ""or payable to him"",
are clear and unambiguous and mean only the wages payable for the month in which the employee superannuated i.e. July, 1998. It was further
submitted that Gratuity is calculated on the daily wages and the Gratuity amount payable is calculated on 15 days'' wages for every completed year
of service. The learned Counsel for the Petitioner made forcible submissions contending that in Social Welfare Legislation, the Court should adopt
a beneficial rule of construction and if a section is capable of two constructions, that construction should be preferred for the benefit of the
workman, which would fulfill the policy of the Act. In support of his contention, the learned Counsel placed reliance upon 1980 [2] LLJ SC 252
[Sri Digvijay Woollen Mills Ltd. and Anr. v. The Maharashtra Mills Ltd.] and 1984 [2] LLJ 464 [Jeewanlal Ltd. Etc. v. Appellate Authority,
Payment of Gratuity Act and Ors.]. In Digvijay Woollen Mills case, the Supreme Court considered the mode of calculation of Gratuity and
observed that although a month is understood to consist of thirty days, the Gratuity payable under the Act during the monthly wages, as wages for
26 days worked, is not new or unknown and confirmed the Judgment of the Gujarat High Court. In Jeevan Lal''s case also, the Supreme Court
had dealt with the calculation of payment of Gratuity at the rate of fifteen days'' wages for one completed year of service. Referring to Digvijay''s
case, the Supreme Court has held:
The intention of the Legislature in enacting Sub-section[2] of Section 4 of the Act was not only to achieve uniformity and a reasonable degree of
certainty, but also to create and bring into force a self contained, all-embracing, complete and comprehensive code relating to gratuity as a
compulsory retiral benefit. The quantum of gratuity payable under Sub-section [2] of Section 4 of the Act has to be fifteen days'' wages based on
the rate of wages last drawn by the employee concerned for every completed year of service or more in excess of six months, subject to a
maximum of 20 months'' wages as provided by Sub-section[3] thereof. The whole object is to ensure that the employee concerned must be paid
gratuity at the rate of fifteen days'' wages for 365 days in a year of service. The total amount of gratuity payable to such employee at that rate has
to be multiplied by the number of years of his service subject to the ceiling imposed by Sub-section [3] of Section 4 of the Act viz., that such
amount shall not exceed 20 months'' wages.
Both the decisions deal with treating the monthly wages as wages for 26 working days and not laid down any principle regarding the payment of
Gratuity on the basis of the wages drawn on the month of superannuation.
Gratuity is payable to an employee at the rate of 15 days'' wages, which the employee has last drawn for every completed year of service. The
language employed in Section 4(2) is clear and unambiguous that the Gratuity is payable to an employee at the rate of 15 days'' wages based on
the rate of wages last drawn by the employee concerned.
The wages last drawn by the employee concerned � 15 days'' wages will be calculated by dividing the monthly wages by 26 and multiplying
the same by 15. Gratuity is payable only from the last drawn monthly wages of the employee, from which 15 days'' wages is to be computed. If the
intention of the legislature was to take the month of superannuation, the language employed in Section 4(2) would have been different.
The learned Counsel for the Petitioner has submitted that u/s 2[s] of the Act, the wages means all emoluments which are earned by an
employee paid or payable and hence the salary payable to the Petitioner for the month of July, 1998 ought to have been taken as the basis for
computing Gratuity. u/s 2(s), ""Wages when defined to mean all emoluments which are earned by an employee while on duty or on leave in
accordance with the terms and conditions of his employment and which are paid or payable to him, the sum total of all payments perquisites and
advantages or gains arising from such employment, except those that are specifically excluded in the definition of ""wages"" would fall within the
definition of ""Wages"".
Placing reliance upon 2005 W.L.R. 820, [N. Venkataramani v. Indian Bank rep. By its Chairperson and Managing Director and Ors.], the
learned Counsel for the Petitioner has submitted that in matters of Welfare legislation, provisions of law should be construed in favour of the weak.
The learned Counsel further urged that by the combined reading of Section 2(s) and 4(2) of the Act, the wages payable for the month of July 1998
ought to have been taken as the basis for calculating Gratuity. In 103 FJR 71, it was held that the interpretation of Welfare Legislation cannot be
stretched to the extent of causing violence to the provisions. The contention of the Petitioner that the definition of wages that all remuneration ''paid
or payable'' is to be construed to calculate the Gratuity on the basis of the emoluments payable for July, 1998, cannot be acceded to.
Emolument according to the Webster''s Dictionary means,
the profit arising from office or employment usually in the form of compensation or perquisite: [something necessary to the carrying out of a
function].
The payment for such emoluments is to be paid in cash. Emoluments have further to be earned in accordance with the terms and conditions of
employment.
Emoluments payable in cash arise out of office or employment. To put it differently, Gratuity is payable by an employer to the employee on the
basis of the last drawn wages for the services rendered according to the terms and conditions of the Contract of employment. It is not a notional
calculation of what would have been the wages if the Petitioner has rendered service in the forthcoming month.
As per the contract of service, the contract of employment of the Petitioner came to an end when he has attained the age of superannuation on
09.07.1998. The Gratuity cannot be calculated on the basis, what would have been the emoluments which the Petitioner might have drawn for
July, 1998. The provisions of Section 4(2) cannot be stretched to the extent of adding to the meaning of the provision.
The Petitioner attained superannuation on 09.07.1998. The last drawn wages applicable to the Petitioner was wages for June, 1998 in which
he had drawn the basic salary of Rs. 338.57 and Dearness Allowance of Rs. 3,720.21. On the basis of 31 years of service, taking the wages of
June, 1998, i.e. Rs. 3,958.78, Gratuity was calculated at Rs. 70,802/-. For the month of July, the Basic Wages was Rs. 131.04 and Dearness
Allowance Rs. 3,951/- [total Rs. 4,082.04] and the Petitioner cannot contend that Rs. 4,082.04 ought to have been taken as the basis for
calculating the Gratuity. The learned Counsel for the Management has drawn the attention of the court to the Statement of Gratuity paid to the
employees retired, superannuated, ceased from employment from the month of April, 1995 and submitted that only the last drawn wages was
taken as the basis for payment of Gratuity to those employees. The learned Counsel for the Management is right in submitting that if the claim of the
Writ Petitioner is accepted, there would be a spate of applications from other retired employees, who were paid Gratuity on the basis of the wages
last drawn.
In-re Point 2: According to the Petitioner, he had put in 32 years of service and the Management has arbitrarily calculated the completed year
of service as 31 years. According to the Management, there was strike during the period from 23.11.1983 to 22.02.1984 and from 04.06.1984
to 08.08.1994 and the said strike being in contravention of current settlement, became illegal and all the workmen, including the Petitioner,
participated in the strike and they have suffered break in service of one year. The learned Counsel for the Management has submitted that
excluding that one year, the total service of the Petitioner is 30 years, 7 months and 24 days, which was rounded off to 31 years and on that basis,
he was paid Gratuity.
The learned Counsel for the Petitioner has submitted that no material had been placed showing that the Petitioner had participated in the strike.
It was further urged that even if there had been a strike, the burden lies upon the management to establish that the Petitioner played active
participation and notice ought to have been issued to the Petitioner for the alleged participation on the strike. It was further submitted that the
management has not established any issuance of notice or break in service. In support of his contention, the learned Counsel placed reliance upon
2002 [4] LLN 363. In the said case, the employees of the Mill went on strike during the years 1978-1990. According to the Management, the
strikes were illegal, which amounted to interruption in service, within the meaning of Section 2A(i) of the Act. The employees claimed that they are
entitled to Gratuity during the period of strike also. Going into the factual aspects, the Controlling Authority and the Appellate Authority allowed
the claim of the employees and directed the management to pay Gratuity during that period also. In that factual background, the learned Judge has
observed that when the strike or cessation of work was not due to any fault of the employee, it would be included as continuous service under the
Act, for payment of Gratuity. In the said case, nothing has been placed on record by the Management to show that they treated the absence of the
employees as break in service, in accordance with the standing orders and rules and regulations.
In the other decision relied upon by the learned Counsel for the Petitioner, 2004 LLN 435 [Ramakanth Atmaram Manjerekar v.N.T.C.[M.N.]
Ltd.] also, no material was placed by the Management to show that the employees were not present as a result of strike, which was attributable to
the fault of the workmen, and in the absence of any such evidence, the authorities erred in holding that the employee would not be entitled to the
benefit in the computation of Gratuity and the Court has issued necessary direction.
The case on hand stands on different footing. To show that during the period the workman struck off work, the management had produced
Memorandum of Settlement u/s 12[3], dated 01.03.1982 and 08.08.1994. According to the Management, the strike during the period
23.11.1983 to 22.02.1984 and from 04.06.1984 to 08.08.1994 was in contravention of the then current settlement dated 01.03.1982. During the
strike period, the Management had issued Phonogram addressed to the Workers Union, stating that the strike is illegal and warning them that the
Management would be constrained to take further legal remedy apart from disciplinary action. When materials are produced showing that the
strike was illegal, the Petitioner is not right in contending that no materials had been produced showing that the strike had been illegal. The learned
Counsel for the Respondent Management has drawn the attention of the court to the decision made in 2002 [1] LLJ 261 [General Manager, Sri
Sarada Mills, Coimbatore v. Assistant Labour Commissioner] and submitted that whether the strike is legal or illegal, has to be proved by the
person who claims benefit stating that the strike is illegal and that the Respondent Management had produced material showing that the strike was
declared illegal.
On 10.06.1998, the Petitioner submitted his application for Gratuity in Form-I, claiming the amount of Gratuity of Rs. 70,802/-. The
Controlling Authority found that having received the amount in full and final settlement of his claim for the Gratuity, without any objection, the
Petitioner is not entitled to reagitate the same. The Controlling Authority has placed reliance upon the decisions of the Madras High Court.
The above finding of the Controlling Authority is very much assailed by the Petitioner placing reliance upon the decision reported in Rajamani,
wife and Nominee of S. Rajagopalan (Since deceased) and 8 others Vs. The Deputy Commissioner of Labour and the Appellate Authority under
Payment of Gratuity Act, Tiruchirapalli and 2 others, . In the said case before the Division Bench, the lesser amount of Gratuity was paid and in
that case, the Division Bench has observed that even if the employees have agreed to receive the lesser amount and issued receipt, there cannot be
an estoppel against the statutory claim and by any receipt or voucher given by the employee will not bar his claiming further amount due under the
Act. The factual aspects of the case on hand is entirely different. The Petitioner himself has submitted his application for Gratuity in Form I, at least
a month in advance, prior to his superannuation and has also issued the receipt. Both at the time of submitting his application and at the time of
receiving the Gratuity, the Petitioner did not raise any objection. Having received the Gratuity amount in full and final settlement of his claim, the
Petitioner cannot reagitate the same.
The orders of the Controlling Authority and the Appellate Authority do not suffer from any error of law to exercise the Jurisdiction under
Article 226 of the Constitution of India.
In the result, this Writ Petition is dismissed. No costs.