Provision Enabling Employee To Get Higher Gratuity Prevails Over One That Limits The Gratuity Amount: Kerala High Court

The Kerala High Court on Thursday reiterated that the provision in the Payment of Gratuity Act which enables an employee to opt for better terms of gratuity would prevail over the provision in Kerala State Co-operative Societies Act that limits the amount payable as gratuity.

A Division Bench of Justice A.K Jayasankaran Nambiar and Justice Mohammed Nias C.P added that when two choices are available, the employee cannot be denied the right to receive those higher benefits.

"Thus, when two choices are available, one under the provisions of the Payment of Gratuity Act and the other under such arrangement with the employer and if the latter offers better terms, the employee cannot be denied the right to receive those higher benefits." 

A few retired employees of the Kerala State Co-operative Bank Ltd with over 20 years of service approached a Single Judge contending that they were governed by the Gratuity Rules of the Kerala State Cooperative Bank Staff Regulations and the Payment of Gratuity Act.

Rule 5(e) of the Regulations stipulates that gratuity payable shall be the amount equal to one month's pay for every year of service, as long as it does not exceed 15 months' pay. As per Section 4(3) of the Payment of Gratuity Act, the maximum amount payable to an employee shall not exceed Rs.10 lakh. However, Section 4(5) of the Act, clearly provides that nothing in that section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.

Likewise, a Full Bench of this Court in Chandrasekharan Nair G & Ors v. Kerala State Co-operative Agricultural and Rural Development Bank Ltd. & Ors [2017(4) KLT 276] held that Section 4(5) of the Payment of Gratuity Act which enables an employee to opt for better terms of gratuity would prevail over the second proviso to Rule 59 (iii) of the Kerala State Co-operative Societies Act.

Similarly-situated employees of the appellant bank had thereafter moved the Court claiming the benefit of this Full Bench decision and the same was allowed.

Relying on these, the petitioners sent a representation demanding the balance amount of gratuity they are entitled to, however, the appellant herein turned down the request ignoring the Full Bench decision and the subsequent binding judgment, stating that it was liable to pay gratuity only as per the limit mentioned in the Central Act or the Kerala Co-operative Societies Act.

The petitioners challenged this decision before a Single Judge and sought for higher gratuity as provided in Rule 5(e) of the Rules over and above the gratuity paid at the time of retirement on the basis of the Full Bench judgment and the subsequent decision. The appellant argued that after the enactment of Kerala Co-operative Societies Act, which consolidated and unified the laws relating to the Co-operative Societies in Kerala, the provisions of the Act become the enabling provisions for the payment of gratuity.

The Single Judge allowed the plea finding that the issue raised by the petitioners is squarely covered by the Full Bench decision and the subsequent judgment. It was also noticed that the retired employees of the Bank would be entitled to a higher amount of gratuity in terms of the  Rules as per Section 4(5) of the Payment of Gratuity Act notwithstanding the fact that only a lesser amount is due under Section 4(2) thereof.

Aggrieved by the order of the Single Judge, the appellant bank moved the Division Bench with an appeal. 

Advocate Gilbert George Correya appearing for the appellant argued that the Full Bench judgment is clearly distinguishable. He also argued that if at all the petitioners are aggrieved about the quantum of gratuity they should have taken recourse to the alternate remedy under the Payment of Gratuity Act. It is also argued that the Regulations came into force prior to the enactment of the Central or the State Regulations and that after implementation of the Kerala Co-operative Societies Act, the petitioners would be bound by that.

He also argued that there was no choice for the writ petitioners since they are subject to the Payment of Gratuity Act and that there was no agreement, award or contract that has been entered into for the "better terms" and in the absence of the same the bank cannot be directed to make excess payments. 

Advocate Mohan Idiculla Abraham appeared for the respondents in the matter.

The Division Bench was in complete agreement with the finding that the matter in issue is squarely covered by the judgment in Chandrasekharan Nair (supra) as well as the subsequent decision.

"These judgments against the very same bank cover the issue on all fours and we are in complete agreement with the proposition laid down in them. We also note that the judgment in WP(C)No. 27507 of 2013 and WP(C)No.1023 of 2019 have become final in the absence of a challenge to the same by the bank and after accepting the same, it was not open to the appellant to contend against the findings in those cases over again."

The Court also dismissed the argument of petitioners' failure to avail alternate remedy citing that there was no factual dispute that needs resolution. 

"It is pertinent to note that the bank is enjoined to act as a model employer whose actions on all fronts, including in the matter of payment of gratuity to its employees, must be informed by fairness in action."

Therefore, it was held that the bank cannot adopt double standards while dealing with similarly situated employees.

Regarding the contention that the Regulations cannot be held to be an award or agreement or contract, the Bench observed that the Regulations should definitely be an instrument having the force of law which regulate the payment of gratuity to the writ petitioners.

"The non-obstante clause contained in Section 4(5) of the Payment of Gratuity Act has an overriding effect over all the other sub-sections under Section 4 and the Regulations must be taken as a contract within the meaning of Section 4(5) of the Payment of Gratuity Act."

Therefore, finding no merit in the appeals, they were dismissed.

Case Title: Kerala State Co-operative Bank Ltd v. S. Viswanathamallan & Anr

Citation: 2022 LiveLaw (Ker) 350

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