AI Structured Summary
Not yet generated for this judgment
Judgment
P. Shanmugam, J.—Petitioner''s in the writ petition are the appellants herein. In the writ petition, they have prayed for issue of writ of
certiorarified mandamus for quashing the order of the first respondent and for a direction to the second respondent to pay the amount of gratuity
payable to each of the petitioners as computed by him and deposited with him by the third respondent as per Section 7(7) of the Payment of
Gratuity Act. The writ petition was dismissed and the appeal is as against that order.
Brief facts which are necessary for the disposal of the appeal are as follows:-
The employees of the third respondent management, the appellants herein some of whom are legal representatives of the deceased employees,
were illiterate and poorly educated persons and they were serving in the textile, spinning and weaving mill of the third respondent management.
After having put in substantial period of service, on their retirement, the management, instead of calculating the gratuity as per their continuous
period of service under the provisions of Section 4 of the Gratuity Act, obtained full quit receipts for a lesser amount as against which they have
preferred claim petitions under the Payment of Gratuity Act before the Assistant Commissioner of Labour, Trichy. After considering the claims of
the petitioners, the Assistant Commissioner found that the petitioners were in continuous period of service for more than 240 days in the absence
of any record to show that their services have been interrupted u/s 2A of the Act. The authority further found that only under the printed forms of
receipts usually payments were made to the workers and because the petitioners have signed the receipts for the amount they received from the
management, that will not debar them from claiming the balance of gratuity amount for which the petitioners have statutory claim as guaranteed
under the Payment of Gratuity Act. He also found that the stamped receipts cannot be equated to a quit notice. He has also found that Section 14
of the Act has the over riding effect and therefore, the receipts or vouchers will not bar or stand in the way of claiming further amounts under the
Act, On this factual finding that the petitioners have worked continuously and that the stamped receipts will not debar the petitioners from claiming
the gratuity and following the judgment of our Court in M/s Jeevanlal Ltd. v. Controlling Authority Under The Payment of Gratuity Act, 1986 (I)
LLJ 86, the petitioners are entitled to the balance gratuity amount as claimed by them and calculated the amount payable to each of the petitioners.
However, on the management''s appeal before the Deputy Commissioner of Labour, the appellate authority reversed the order on the ground that
non production of records relating to the period of service will not result in adverse inference and that the full quit receipts are contracts out of
statute and the petitioners waived their right to claim and that the petitioners are estopped in law from claiming benefits under the statute. The
authority has also distinguished the judgment in M/s Jeevanlal Ltd. v. Controlling Authority Under The Payment of Gratuity Act, 1986 (1) LLJ 86
holding that the applicants themselves have admitted the eligibility years for gratuity and gave a full receipt for final and full settlement of his claim
for gratuity and therefore, the ruling will not apply.
As against this appellate order, the petitioners have filed the writ petition for the relief referred to earlier. Learned Single Judge has found that the
full quit receipts cannot be said to be inconsistent with the provisions of the Act and that the workmen having accepted the amount without any
protest till they filed the claim petition, their claims could not be sustained. The learned Judge has also found that the employer did not bargain or
persuade the employees to receive the lesser amounts knowing that they are entitled to higher amount and only in such a case, it will be hit by
Section 14 of the Act. The learned Judge has'' also reasoned that the receipts passed on by the petitioners will not amount to contracting out of
statute, but a voluntary acceptance of the amounts during the course of working out the provisions of Section 7 of the Payment of Gratuity Act, by
way of settlement and therefore, the question of contracting out does not arise at all. The learned Judge has also distinguished the number of
decisions referred to on behalf of the petitioners and ultimately dismissed their claim.
As we are unable to appreciate the approach of the appellate authority as well as the learned Single Judge in this regard, we have to go into the
basic features of the Payment of Gratuity Act, 1972. The Payment of Gratuity Act, 1972 hereinafter referred to as the Act is intended to provide
for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other
establishments and for matters connected therewith or incidental thereto. Section 4 of the Act says that gratuity shall be payable to an employee on
the termination of his employment after he has rendered continuous service for not less than five years. Sub-Section (2) of Section 4 says that for
every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days''
wages based on the rate of wages last drawn by the employee concerned. Section 7 deals with determination of the amount of gratuity. As per
Section 7, on the written application to the employer or as soon as the gratuity becomes payable, the employer shall arrange to pay the amount of
gratuity within 30 days from the date it become payable. If the amount is not paid within the period prescribed, a simple interest at such rate not
exceeding the rate notified by the Central Government from time to time for repayment of long term deposits has to be paid and if there is a dispute
with regard to any matter or matters specified, the employer or employee may make an application to the controlling authority for deciding that
dispute.
Section 14 of the Act is most crucial for the purpose of the present case is concerned. It reads thus,
The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment
other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act.
This provision makes it abundantly clear that the Gratuity Act shall have the effect notwithstanding anything found inconsistent with this enactment
either by way of instrument or by way of contract having effect by virtue of any enactment other than this Act. In other words, there is no scope for
contracting out of the overriding Act of Gratuity Act. No instrument, contract, standing order, rule can have force over and above the provisions of
the Gratuity Act. The Parliament has intended that every employee shall be provided with gratuity on his minimum required service and it has to be
paid compulsorily by the employer and there cannot be any instrument or contract inconsistent with the provisions of Gratuity Act.
In the light of the above provisions of the Act, it is crystal clear that the employer has no other option except to pay the gratuity as accrued or
payable under the Act. There is no scope for any contract or instrument to take away that statutory right. The crucial question that arises for
consideration in the above circumstances is whether the alleged letter or receipt given by the appellants to the management agreeing to receive a
particular amount can be treated as full and final settlement of the claim of gratuity.
Argument of the learned Senior Counsel Mr. Prasad is that assuming for the sake of argument that the workers have agreed to receive a lesser
amount, that will not disentitle them to claim the remaining amount and that a receipt passed on for a lesser amount will be subject to the overriding
of see, 14,
There is no need for enquiry as to whether receipt is given voluntarily or compulsorily or whether the employer knows that the amount that is
paid is less. Such kind of enquiry is outside the scope of the Act. What is contemplated is liability u/s 4 and determination u/s 7. Once the
determination is made taking into account the continuous service u/s 2(a), then there is no scope for paying lesser amount or receiving a lesser
amount than the amount provided under the Act. Assuming for the sake of argument that the petitioners have agreed to receive a lesser amount,
there cannot be an estoppel against the statutory claim. If there is any such payment binding the workers, that will be not only contrary to the
provisions of the Act, but that is illegal, arbitrary and unfair and would be affecting the fundamental rights of the workers to receive their gratuity
amount under the Act.
The learned Judge has considered the receipt not as a contract because a contract is an agreement, between two parties to do or not to do
something in future, but the settlement is putting an end to such an agreement and further the receipts cannot be said to be inconsistent with the
provisions of the Act. Contract has been defined under the Indian Contract Act as an agreement enforceable by law. Agreement has been defined
as every promise and every set of promises forming the consideration for each other. Therefore, the receipt which was passed on by the petitioners
agreeing to receive certain amount in full settlement of their claim is really a contract since it is an agreement which settles their claim by way of full
quit. But, Section 14 of the Act says that no instrument, contract, standing order, rule can have force over and above the provisions of the Gratuity
Act. We are unable to appreciate the view of the learned Judge that the receipts issued voluntarily accepting the amount cannot be construed to be
a contract as we find the receipt as a result of a contract within the definition of the Indian Contract Act. Therefore, such a contract will not have
overriding effect on the Gratuity Act. Further, the view of the learned Judge that the petitioners have voluntarily and whole-heartedly received the
amount and that the management did not know that they are eligible for higher amount and therefore, it cannot be said to be an agreement cannot
be accepted. The knowledge of the management is not relevant and the receipt of lesser amount will not bar for the statutorily protected gratuity.
All the decisions cited by and on behalf of the petitioners, in our view, have been wrongly distinguished. The citations referred to in the
judgment are Bennett Coleman and Co. (P) Ltd. Vs. Punya Priya Das Gupta, , Management of Pudukottah Textile Limited Vs. A. Ganapathi,
Etc., Etc., , Som Prakash Reikhi v. Union of India , Jeevanlal Ltd. v. Controlling Authority, Payment of Gratuity Act & others, 1986 (I) LLJ 86,
Pallavan Transport Corporation (Metro), Madras-2, v. Presiding Officer, I Additional Labour Court, Madras, T.K.Krishnamurthy & others, 1984
(II) LLJ 132. All the authorities have been categorical in their decision that there cannot be any estoppel against a statute and any representation
acting contrary to the Act will not bind the workers to claim the gratuity. In Som Prakash Reikhi''s Case even a regulation which provided for a cut
in certain eventualities from the pension was found to be contrary to the provisions of the Act. Similarly, in Pallavan Transport Corporation,
(Metro) Madras-2 Vs. Presiding Officer, I Additional Labour Court, Madras, T.K. Krishnamurthy and Others, the employees were found to be
eligible for the retirement benefits even after the period of their service of 55 years in the light of standing order entitling them for service upto 55
years and consequently all the retirement benefits. Therefore, from these decisions, it is very clear that if the employees are given a lesser gratuity,
than they are entitled either by virtue of any representation or rule or standing order, that will not stand in the way of claiming full benefit u/s 4 of the
Act.
The only decision which could be said to be in favour of the management is the judgment in Andhra Laundry v. Addl. Lab. Court, 33 FJR 431.
That decision arose prior to Payment of Gratuity Act, 1972 and there is no scope for settling the dues under the Gratuity Act as found under the
Industrial Disputes Act. Therefore, the judgment rendered in respect of the Industrial Disputes Act for payment of compulsory compensation is in
no way be applied to the claim of gratuity.
On merits, the learned Judge agreed with the finding of the appellate authority to say that the petitioners have admitted in their cross
examination that they have signed in Ex.R1 after reading its contents and they were aware of it that it was not obtained by coercion and therefore,
on merits, the learned Judge, found that the determination u/s 7(2) has been properly done and that the petitioners have expressed or waived since
there was no dispute at the time of accepting the amounts.
The question is whether it is open to any authority either for the management or the appellate authority to give any amount lesser than the
amount to which the workmen is legally entitled to on the ground of waiving their entitlement. There is no possibility or scope for obtaining a receipt
for a lesser amount even assuming that it is voluntarily given. The court has to take judicial notice of the fact, that the petitioners are said to be
illiterate and they could not have been in a position to raise their voice at the time of retirement and they had to receive some amount or other as
retirement benefit. Probably if they had raised their voice that the amount was not correct, they would not have been given even that amount
immediately. In any event, the receipt issued for lesser amount cannot be construed that they have given up their claim for remaining amount. The
management is duty bound to pay the remaining gratuity amount u/s 7 of the Act and if there is any deficiency in their calculation it is always open
to the employee to claim for payment of the balance amount.
For the foregoing reasons, we have no hesitation in setting aside the order of the learned Judge and the order of the appellate authority and
restore the order of the controlling authority quashing the order of the appellate authority and directing the management to pay the gratuity as
calculated by the controlling authority within a period of three months from the date of receipt of this order with interest as per the Act. No costs.