The Municipal Corporation of Greater Mumbai vs Ganesh Narayan Vaze and Others

R.G. Ketkar, J—Heard Mr. Bharucha, learned Senior Counsel for petitioner, Mr. Vaidya, learned Counsel for respondent No. 1 and Ms Todankar, learned Counsel for respondents No. 2 and 3 in all the Petitions at length.

By these Petitions under Articles 226 and 227 of the Constitution of India, the petitioner-Municipal Corporation of Greater Mumbai (for short ''Corporation'') has challenged the judgment and order dated 12.12.2013 passed by the Controlling Authority under Payment of Gratuity Act and Judge, 11th Labour Court, Mumbai as also the judgment and order dated 18.10.2014 passed by the learned Member, Industrial Court, Mumbai in Appeals filed by the Corporation. By order dated 12.12.2013, the Labour Court allowed the applications filed by respondent No. 1 under Section 4 of the Payment of Gratuity Act, 1972 (for short ''Act'') and declared that respondent No. 1 is entitled to receive amount of gratuity along with interest @10% p.a. from the date of superannuation till the date of payment. The Corporation was directed to pay that amount to the respondent No. 1 within 30 days from the order failing which gratuity amount shall carry interest @10% p.a. Respondents No. 2 and 3 herein were directed to pay simple interest @10% p.a. on the amount of gratuity from 31.01.2008 till the date of the order. The Industrial Court partly allowed the appeals preferred by the Corporation and modified the order of the Labour Court and held that respondent No. 1 is entitled to receive amount of gratuity with interest @10% p.a. from the date next date of the superannuation till the date of realization of gratuity amount. Respondents No. 2 and 3 were directed to forward the Form-I submitted by the respondent No. 1 to the Corporation and the Corporation was directed to release the amount of gratuity with interest @10% p.a.

Rule. The learned Counsel for respective respondents waive service. At the request and by consent of the parties, rule is made returnable forthwith and the Petitions are taken up for final hearing. Since common questions of law and facts arise in these Petitions, the same can conveniently be disposed of by the common judgment. For the purpose of appreciating the controversy between the parties, facts from Writ Petition No. 702 of 2015 are considered.

Respondent No. 1 joined the employment of respondents No. 2 and 3 as an "Assistant Teacher" from 21.06.1974. He was superannuated from 31.01.2008, after completing 34 years'' continuous service. His last drawn salary was Rs. 15,883/-. He filed application under Section 4 of the Act. It is the case of the respondent No. 1 that he is entitled to gratuity amount of Rs. 3,04,980/- as calculated in Annexure-B attached to his application. On 09.07.2011, as per Rule 7(1) of the Payment of Gratuity (Central) Rules, 1972 (for short ''Rules''), he gave notice in Form-I to respondents No. 2 and 3. They failed to make payment. Respondent No. 1 further contended that after superannuation, respondents No. 2 and 3 did not call upon him for calculating and making payment of gratuity under the Act. He, therefore, issued legal notice on 19.12.2011. Even after receipt of the notice, gratuity amount was not paid. He, therefore, approached the Labour Court claiming amount of Rs. 4,14,773/- along with interest @15% p.a.

Respondents No. 2 and 3 filed written statement resisting the claim. It was contended that respondent No. is not entitled to claim amount of gratuity as also the interest. Respondent No. 2 Vidya Vikas Mandal, Marathi Primary School is a private school within the meaning of Bombay Primary Education Act, 1947. The school is recognised by the Corporation under Section 107 of that Act. Respondents No. 2 and 3 admitted that respondent No. 1 served as an Assistant Teacher for the period from 21.06.1974 to 31.01.2008. Since February, 2002, the school started receiving partly salary grant from the Corporation. In April 2005, the school started getting 100% grant-in-aid from the Corporation. It was further contended that the Corporation is making the payment of salaries to the teachers, and therefore, is a necessary party to the proceedings. It was submitted that at the most, respondents No. 2 and 3 are liable to make payment of gratuity for his service prior to March 2005 on the basis that wages/salaries were paid by them. As the Act was not made applicable to the teachers, respondents No. 2 and 3 had not made any provision for payment of gratuity to the respondent No. 1. Respondents No. 2 and 3 further contended that the Act was made applicable to the teachers after the Amendment Act of 2009, which was retrospectively made applicable with effect from 03.04.1997. It was further submitted that respondent No. 1 is entitled to payment of gratuity on the basis of basic pay and dearness allowance. The Corporation is liable to make payment of gratuity as a part and parcel of service conditions. Respondents No. 2 and 3 had repeatedly approached the Corporation. The Corporation however, did not release the gratuity amount. It was, therefore, submitted that respondent No. 1 is not entitled to payment of interest. Respondent No. 1 accordingly impleaded Corporation as a party to the proceedings.

The Corporation also resisted the application by filing written statement and submitted that respondent No. 2 got first recognition on unaided basis since June 1962 to May 1964 vide letter dated 14.05.1963. The school thereafter applied for grant-in-aid. In February, 2002, the Corporation sanctioned 20% grant and in the year 2005, the school started getting 100% grant-in-aid. Respondent No. 1 completed only 2 years and 9 months service from the receipt of grant-in-aid till his retirement (April 2005 to 31.01.2008). Thus, he did not complete the minimum 10 years qualifying service for entitlement of gratuity from Corporation. Reliance was placed on circular dated 31.10.1997 of Education Department of the Corporation. It was further submitted that the Corporation had sanctioned pension scheme to the teaching and non-teaching staff of private primary aided schools in Greater Mumbai. Reliance was placed upon Rules 48 and 57 of Municipal Corporation of Greater Mumbai Pension Rules, 1953.

After considering the material on record, the Labour Court allowed the application as indicated earlier. Aggrieved by that decision, the Corporation preferred appeal before the Industrial Court, which was partly allowed and the order passed by the Labour Court was modified. It is against these decisions, the Corporation has instituted these Petitions under Articles 226 and 227 of the Constitution of India.

In support of these Petitions, Mr. Bharucha submitted that admittedly, respondent No. 1 is an employee of respondents No. 2 and 3. There is no relationship of the employer and employee between the Corporation and respondent No. 1. There is no privity of contract between the Corporation and the respondent No. 1. The Labour Court did not have jurisdiction to direct the Corporation to pay the gratuity. He submitted that respondent No. 1 had withdrawn Provident Fund amount. He submitted that in terms of Pension Rules applicable to the Corporation, the employee has to exercise the option in writing in the proforma prescribed by the Municipal Commissioner. The option so exercised is registered only on receipt of management''s contribution for entire qualifying service and interest thereon as indicated in the Rules. He submitted that in the first place, respondent No. 1 did not exercise the option and secondly, respondents No. 2 and 3 did not pay management''s contribution. He further submitted that the respondent No. 2 started receiving 100% grant-in-aid from April 2005. Respondent No. 1 attained superannuation on 31.01.2008. Thus, respondent No. 1 had put in 2 years 9 months service. In other words, he did not put in minimum 10 years qualifying service from the receipt of the grant-in-aid. In any case, he submitted that the Courts below were not justified in directing payment of interest as it has come on record that respondent No. 1 had submitted application to respondents No. 2 and 3 in July 2011 and the same was not forwarded to the Corporation. He submitted that the Industrial Court, in fact, had recorded findings to that effect in paragraphs 12 and 17. For all these reasons, he submitted that the Petitions deserve to be allowed.

Ms Todankar submitted that the Act was amended by Payment of Gratuity (Amendment) Act, 2009 on 31.12.2009. It was made applicable to the teachers retrospectively with effect from 03.04.1997. Respondent No. 1 did not submit the application to respondents No. 2 and 3 after attaining superannuation. Though repeatedly respondents No. 2 and 3 approached the Corporation for releasing gratuity amount, the Corporation did not disburse the gratuity amount. In short, she submitted that no fault can be found with the actions of respondents No. 2 and 3. The Industrial Court rightly modified the order passed by the Labour Court by directing payment of interest by the Corporation. She submitted that respondent No. 1 cannot claim any interest on the gratuity amount from respondents No. 2 and 3. Respondents No. 2 and 3 had paid amount of Rs. 49,223/- (inclusive of interest). She invited my attention to Circular dated 31.10.1997 issued by the Corporation. She submitted that Corporation is liable to pay gratuity as also interest to the respondent No. 1.

Mr. Vaidya submitted that Section 7(1) of the Act lays down that a person who is eligible for payment of gratuity, has to send a written application to the employer. Sub-section (2) thereof lays down that as soon as gratuity becomes payable, the employer has to, whether an application referred to in Sub-section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the Controlling Authority specifying the amount of gratuity so determined. Sub-section (3) lays down that the employer shall arrange to pay the amount of gratuity within 30 days from the date it becomes payable to the person to whom the gratuity is payable. Sub-section (3-A) lays down that if the amount of gratuity under Sub-section (3) is not paid by the employer within the period specified therein, the employer has to, from the date on which the gratuity becomes payable to the date on which it is paid, pay 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, as that Government may, by notification specify. Proviso thereto lays down that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the Controlling Authority for the delayed payment on this ground.

Mr. Vaidya submitted that the contention advanced on behalf of respondents No. 2 and 3 that respondent No. 1 did not submit application to them after attaining superannuation is immaterial in view of Section 7(2) thereof. He further submitted that Section 14 of the Act lays down that the provisions thereof or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than the Act or in any instrument or contract having effect by virtue of any enactment other than the Act. In other words, he submitted that the reliance placed by the Corporation on the Pension Rules is wholly misconceived as the provisions of the Act has the overriding effect. He submitted that the contention raised by the Corporation that the respondent No. 1 did not exercise option or that the option so exercised will be registered only on receipt of management''s contribution for entire qualifying service and interest thereon is wholly misconceived. He further submitted that the contention raised on behalf of the Corporation that the qualifying service of the respondent No. 1 has to be computed from the date on which the school became 100% grant-in-aid is no longer available and the same is concluded in view of the decision of this Court in the case of Anuradha Jayant Gangakhedkar v. Brihanmumbai Municipal Corporation in Writ Petition No. 415 of 2012 decided by this Court (Coram: Dr. D.Y. Chandrachud and R.D. Dhanuka, JJ.) on 26.07.2012. He submitted that respondent No. 1 was an employee of respondents No. 2 and 3. Respondents No. 2 and 3 are getting 100% grant-in-aid from the Corporation. The Corporation is, therefore, liable to pay gratuity amount. He submitted that the Courts below were justified in directing the Corporation to pay the amount of gratuity together with interest @10% p.a. He, therefore, submitted that no case is made out for invocation of powers under Articles 226 and 227 of the Constitution of India.

I have considered the rival submissions made by the learned Counsel appearing for the parties. I have also perused the material on record. Mr. Bharucha submitted that respondent No. 1 is an employee of respondents No. 2 and 3. There is no relationship of employer and employee between the Corporation and the respondent No. 1. There is no privity of contract between the Corporation and the respondent No. 1. The Labour Court did not have jurisdiction to direct the Corporation to pay the gratuity. During the course of hearing to a query raised by the Court, Mr. Bharucha, upon taking instructions from the officer of the Corporation, fairly stated that in respect of private primary schools getting 100% grant-in-aid from Corporation, it is the Corporation who is paying the gratuity amount. Apart from this fact, it is admitted position that from April 2005, the Corporation has sanctioned 100% grant-in-aid in favour of the respondent No. 2 school. I, therefore, do not find any merit in the submission of Mr. Bharucha that since there is no employer and employee relationship between the Corporation and respondent No. 1 and that the is no privity of contract between the Corporation and respondent No. 1, Corporation is not liable to pay gratuity. I do not find that the Courts below committed any error in holding that the Corporation is liable to pay the gratuity amount. The Courts below concurrently held that the Corporation is liable to pay gratuity amount. No fault can be found with the findings recorded by the Courts below.

Mr. Bharucha submitted that from April 2005, respondent No. 2 started receiving 100% grant-in-aid. Respondent No. 1 attained superannuation on 31.01.2008. Thus, respondent No. 1 had put in 2 years 9 months service in an aided school. Respondent No. 1 has not completed 10 years of qualifying service in the aided school from the date of receiving the grant-in-aid from the Corporation. The said argument was considered by this Court in the case of Anuradha Jayant Gangakhedkar (supra). In paragraph 6, it was observed thus,

"6. ... The test which must be applied is as to whether an employee was a full time confirmed and approved member of the teaching or non-teaching staff of a private primary aided school on the date of her retirement. If that test is satisfied, the Pension Scheme is made applicable by virtue of the provisions of Clause 5(ii). There is no warrant in the Pension Scheme or the Pension Rules to exclude while computing qualifying service, the service which is rendered by an employee before a school same to be in receipt of grant-in-aid. So long as the school was in receipt of grant-in-aid on the date on which an employee retired from service upon attaining the age of superannuation. The application of the Pension the age of superannuation, the application of the Pension Scheme would be attracted. The petitioner was an employee of a private primary aided school on the date of retirement and was hence eligible."

In the present case, admittedly, respondent No. 1 was employed as an assistant teacher on 21.06.1974 and was superannuated on 31.01.2008. Respondent No. 1 had put in approximately 34 years service. It is not in dispute that he was a confirmed employee. Applying the test laid down by this Court in the case of Anuradha Jayant Gangakhedkar (supra), I do not find any merit in the submission of Mr. Bharucha that respondent had put in 2 years and 9 months service and did not put in 10 years qualifying service for payment of gratuity.

This brings me to the question as to payment of interest. As noted earlier, the Act was amended by Payment of Gratuity (Amendment) Act, 2009 on 31.12.2009. It was made applicable to the teachers retrospectively with effect from 03.04.1997. Respondent No. 1 had attained superannuation on 31.01.2008. Section 7 of the Act reads as under:

"7. Determination of the amount of Gratuity.--(1) 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.

(2) As soon as gratuity becomes payable, the employer shall, whether an application referred to in Sub-section (i) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity so determined.

(3) The employer shall arrange to pay the amount of gratuity within thirty days from the date it becomes payable to the person to whom the gratuity is payable.

(3-A) If the amount of gratuity payable under Sub-section (3) is not paid by the employer within the period specified in Sub-section (3) the employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the Central Government from time to time for repayment of long term deposits, as that Government may, by notification specify:

Provided that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the Controlling Authority for the delayed payment on this ground].

(4)(a) If there is any dispute as to the amount of gratuity payable to an employee under this Act or as to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the person entitled to receive the gratuity, the employer shall deposit with the Controlling Authority such amount as he admits to be payable by him as gratuity.

(b) Where there is a dispute with regard to any matter or matters specified in Clause (a), the employer or employee or any other person raising the dispute may make an application to the Controlling Authority for deciding the dispute.

(c) The Controlling Authority shall, after due inquiry and after giving the parties to the dispute a reasonable opportunity of being heard, determine the matter or matters in dispute and, if, as a result of such inquiry any amount is found to be payable to the employee, the Controlling Authority shall direct the employer to pay such amount or, as the case may be, such amount as reduced by the amount already deposited by the employer.

(d) The Controlling Authority shall pay the amount deposited, including the excess amount, if any, deposited by the employer, to the person entitled thereto.

(e) As soon as may be after a deposit is made under Clause (a), the Controlling Authority shall pay the amount of the deposit-

(i) to the applicant where he is the employee; or

(ii) where the applicant is the employee, to the nominee or, as the case may be, the guardian of such nominee or heir of the employee if the Controlling Authority is satisfied that there is no dispute as to the right of the applicant to receive the amount of gratuity.

(5) For the purpose of conducting an inquiry under Sub-section (4), the controlling authority shall have the same powers as are vested in a Court, while trying a suit, under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the following matters namely:--

(a) enforcing the attendance of any person or examining him on oath;

(b) requiring the discovery and production of documents;

(c) receiving evidence on affidavits;

(d) issuing commissions for the examination of witnesses.

(6) Any inquiry under this Section shall be a judicial proceeding within the meaning of Sections 193 and 228, and for the purpose of Section 196, of the Indian Penal Code, 1860 (45 of 1860).

(7) Any person aggrieved by an order under Sub-section (4), may, within sixty days from the date of the receipt of the order, prefer an appeal to the appropriate Government or such other authority as may be specified by the appropriate Government in this behalf:

Provided that the appropriate Government or the appellate authority, as the case may be, may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of sixty days, extend the said period by a further period of sixty days.

Provided further that no appeal by an employer shall be admitted unless at the time of preferring the appeal, the appellant either produces a certificate of the controlling authority to the effect that the appellant has deposited with him an amount equal to the amount of gratuity required to be deposited under Sub-section (4), or deposits with the appellate authority such amount.

(8) The appropriate Government or the appellate authority, as the case may be, may, after giving the parties to the appeal a reasonable opportunity of being heard, confirm, modify or reverse the decision of the controlling authority."

Perusal of Sub-section (2) of Section 7 shows that as soon as the gratuity becomes payable, the employer has to determine the amount of gratuity whether an application referred to in Sub-section (1) has been made or not. Sub-section (3) thereof lays down that the employer has to arrange to pay the amount of gratuity within 30 days from the date it becomes payable to the person to whom the gratuity is payable. Respondent No. 1 attained superannuation on 31.01.2008. Though he retired in the year 2008, that time the Act was not made applicable to the teachers. The Act was amended by Payment of Gratuity (Amendment) Act, 2009 on 31.12.2009. Respondent No. 1 is, therefore, entitled to interest from the period 01.01.2010 till realization of the amount. It has also come on record that though respondent No. 1 submitted application in July 2011, respondents No. 2 and 3 did not forward the said application to the Corporation. In view of Section 7(3) of the Act, respondents No. 2 and 3, being employer, have to make payment of gratuity within 30 days from the date when it became payable to the respondent No. 1. Thus, the respondent No. 1 became entitled to payment of gratuity under the Act from 31.12.2009. The Industrial Court directed the Corporation to pay simple interest @10% on Rs. 2,55,757.20/- as respondents No. 2 and 3 had paid Rs. 49,223/-(inclusive of interest).

In my opinion, Corporation cannot be saddled with the interest component as respondents No. 2 and 3 could not substantiate their submissions that in the past they repeatedly approached the Corporation for releasing the gratuity. In fact, perusal of paragraphs 12 and 17 shows that witness of respondents No. 2 and 3 admitted in cross-examination that Form I given by the respondent No. 1 was not forwarded to the Corporation. In paragraph 18, the Industrial Court observed that respondents No. 2 and 3 have not paid amount of gratuity to the respondent No. 1, respondent No. 1 is entitled to interest @10% p.a. under Section 7(3-A) of the Act from the date on which the gratuity became payable to him till the date which it is paid. The Industrial Court, therefore, held that Corporation has to pay interest on gratuity amount from 01.02.2008 till the realization of the amount. In my opinion, this part of the order directing the Corporation to pay the interest is required to be modified as I do not find that the Corporation was at fault in not paying the gratuity. Respondents No. 2 and 3 are liable to pay the interest though from 01.02.2010. As noted earlier, the Act was amended with effect from 31.12.2009. Section 7(3) provides that employer has to make the payment within 30 days from the date it became payable. Earlier, the Act was not applicable to the teachers. It was made applicable though retrospectively by amendment of 31.12.2009. In view thereof, the Petitions are disposed of by modifying the order of the Industrial Court in the following terms:

"a. Respondent No. 1 is entitled to receive amount as per clause 2 of the operative part of the order in each case together with interest @10% p.a. from 01.02.2010 till the date of realization of the gratuity amount;

b. Respondents No. 2 and 3 are directed to forward Form No. I submitted by the respondent No. 1 to the Corporation;

c. The Corporation is directed to release the gratuity amount specified in Clause 2 of the operative part of the order in each case together with interest @10% p.a. from 01.02.2010 till the date of realization of the amount to the respondent No. 1;

d. The Corporation shall be entitled to recover/adjust the interest component from respondents No. 2 and 3 from the salary grant payable to them;"

Rule is partly made absolute in the aforesaid terms. In the circumstances, however, there shall be no order as to costs.