Extending Benefits Of Better Terms Of Gratuity To Be Decided By Employer, Employee Cannot Claim It As Right: Kerala High Court

The Court was considering whether retired employees of Kerala Minerals and Metals Ltd were entitled to get the benefit of the amendment dated 24.5.2010 to Section 4(3) of the Payment of Gratuity Act, increasing the ceiling limit from Rs.3.5 lakhs to Rs.10 lakhs.

Justice M A Abdul Hakhim stated granting enhanced gratuity benefits was within the employer's discretion. It stated that the employer can decide whether to extend the better terms of gratuity to employees or not.

“Section 4(5) of the Payment of Gratuity Act provides that 'nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer'. I am of the view that extending better terms of gratuity is matter to be decided by the employer taking into account several relevant factors. The employees cannot claim better benefits as of right. Of course, the employees can negotiate with the employer to persuade the employer to extend better benefits of gratuity to them”, stated

The Petitioner had approached the High Court aggrieved that the amendment dated 24.5.2010 was not extended to them whereas several state-owned companies, PSUs and Central Government employees were given the benefit of amended provision retrospectively. They alleged discrimination since they were not granted the benefit of increasing the ceiling limit of gratuity to Rs.10 lakhs.

On the other hand, the respondents submitted that members of the petitioner association retired before the date of implementation of the amendment. It was submitted that the members of the petitioner association were paid gratuity as per prevailing law which was existing as on the dates of their respective dates of retirement based on the unamended provision.

The Court found that the KMML has rightly rejected the request finding that various PSUs have different allowance rates based financial condition and company profitability. Additionally, the Court observed that the benefit was rejected since the amendment to Section 4(3) of the Payment of Gratuity Act, 1972 has only prospective effect from 24.5.2010.

The Court stated that the members of the petitioner association of KMML were paid gratuity based as per the law prevailing as on the dates of their respective retirements. It said, “The petitioner's demand for retrospective implementation of the Amendment Act is not supported by any legal ground.”

The Court stated that the employees cannot compel the employer to give better benefits of gratuity merely because employees of other State-owned companies, PSUs and Central Government employees were given the benefit. “In view of Section 4(5), nothing prevents the Respondent No.3 from giving better benefits of gratuity to its employees if it is doing it willingly. I am of the view that the Respondent No.3 cannot be compelled to give better benefits of gratuity to its employees merely because other like employers have extended better benefits of gratuity to their employees.” added the Court.

Accordingly, the Court dismissed the writ petition.

Counsel for Petitioner: Advocate R Rajasekharan Pillai

Counsel for Respondents: Standing Counsel Latha Anand, Government Pleader K B Sony

Citation: 2024 LiveLaw Ker 278

Case Title: The KMML Retired Officers Association v The State of Kerala

Case Number: WP(C) NO.10071 OF 2016

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