Jalgaon District Central Co-Operative
Bankltd Vs. Pundalikrao Laxmanrao Suryawanshi & Ors  INSC 219 (3
03/09/1969 DUA, I.D.
CITATION: 1970 AIR 1966 1970 SCR (2) 192 1970
SCC (1) 171
Maharashtra Cooperative Societies Act. 1960
(24 of 1961)- Cooperative Bank-Bank framing Gratuity Fund Rules, 1957 under its
bye-laws-Rule 6 providing for payment of gratuity and rule 10 providing for
contribution by Bank to Gratuity Fund-Rules 6 and 10 not approved by
Registrar-Whether gratuity payable by virtue of Rules 7 and 9-New Rules framed
replacing 1957 Rules-Rule 16 of old rules whether protects vested interests of
employees under old rules.
Respondent No. 1 retired from the service of
the appellant bank on July 19, 19'62 after 32 years of service. Under the
Bank's bye-laws Gratuity Fund Rules were sanctioned by the Board of Directors
on August 17, 1957. These rules were forwarded to the Registrar of Cooperative
Societies for approval and they were 'approved with some modification except
Rules 6, 10 and 15. On his retirement Respondent No. 1 was paid a sum of Rs.
5,070/- as gratuity. He instituted arbitration proceedings in the Court of the
Registrar's Nominee for a further sum of Rs. 7,605/as balance of gratuity
payable to him with interest at 6 per cent. The claim was disallowed and an
appeal before the Maharashtra State Cooperative Tribunal 'also failed. The High
Court however in a petition under Art. 227 of the Constitution allowed the
respondent's claim. The Bank appealed to this Court. It was urged on behalf of
the appellant (i) that Rule 6, the last sentence of which provides for the
grant of gratuity and RuIe 10 which provides for contributions by the Bank to
the Gratuity Fund not having been approved by the Registrar, there remained no
basis for the claim of gratuity by respondent no. 1; (ii) that the old rules
had neither been repealed nor altered and the effect of retrospective operation
of the new rules was that the Registrar had withdrawn his approval to the old
rules and enforced the new ones.
HELD: (i) The argument that r. 6 not having
been approved there was no rule under Which the obligation to pay gratuity
arose ignored the express language of r. 7 which, in unequivocal terms requires
gratuity to be granted in case of retirement. resignation or termination of
services according to the rate specified therein. Clause (a) of this rule
contains a provision similar in effect to what the last sentence of r. 6
directs. Rule 9 also imposes an imperative obligation for the payment of
gratuity under these rules within one month from the retirement. resignation,
death or termination of service of the employee concerned. [195 D--F] (ii) The
non-approval of r. 10 by the Registrar also could not make the other rules
ineffective and could not absolve the Bank of the obligation imposed on it by
rr. 7, 8 and 9. Once the Gratuity Fund Rules imposing an obligation on the Bank
to pay gratuity to its employees are approved by the Registrar, then this
obligation cannot be rendered nugatory merely because there is no separate
 193 It was conceded that the new rules
could not detract from or prejudicially affect the vested rights created under
the old' rules. Old Rule 16 expressly prohibits the retrospective operation of
the new rules with the object of protecting the interests of the employees. The
effect of old r. 16 cannot be negatived by describing the process as mere
withdrawal of the approval of the old rules and enforcement of the new ones.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 944 of 1966.
Appeal by special leave from the judgment and
order, dated March 30, 1'965 of the Bombay High Court in Special Civil
Application No. 5 of 1964.
M.C. Chagla and 1. N. Shrog, for the
Ganpat Rai and R. Mahalingier, for respondent
The judgment of the Court was delivered by
Dua, J. Pundalikrao Laxmanrao Suryawanshi plaintiff (respondent No. 1 in this
Court) instituted arbitration proceedings in the Court of the Registrar's
Nominee against the Jalgaon District Central Co-operative Bank Ltd., Jalgaon
(appellant in this Court) for the recovery of a sum of Rs. 7,605/- as the
balance of gratuity with interest at 6 per cent due from 18-8-1962. The claim having
been resisted, the same was disallowed on May 16, 1963. An appeal presented to
the Maharashtra State Co-operative Tribunal under section 97 of the Maharashtra
Co-operative Societies Act against the award of the Registrar's Nominee was
dismissed and the said award was confirmed.
The Bombay High Court was thereupon
approached by respondent No. 1 under Article 227 of the Constitution and the
High Court allowing the application on July 17, 1965 set aside the orders made
by the Co-operative Tribunal and by the Registrars Nominee and directed the
appellant-Bank to pay to respondent No, 1 Rs. 7,605/- together with interest at
4 per cent per annum from June 19, 1963 up-to-date, The present appeal by
special leave is directed against the order of the Bombay High Court.
Shri M.C. Chagla, the learned counsel for the
appellant, concentrated his challenge to the impugned order on the ground that
on July 19, 1962, when respondent No. 1 retired from service of the
appellant-Bank, there were no valid rules in force entitling him to the amount
of gratuity claimed by him. It was not disputed before us that respondent No. 1
had retired on July' 19, 1962 after 32 years of service. On retirement, he was
paid a sum of Rs.
5,070/- by way of gratuity, but his claim in
the present proceedings is for a further sum of Rs. 7,605/-.
194 Gratuity Fund Rules were sanctioned by
the Board of Directors of the appellant-Bank on August 17, 1957. They were
framed under the Bank's bye-laws. These rules (thereafter called old rules)
were forwarded to the Registrar of Co-operative Societies for approval and they
were approved with some modifications except Rules 6, 10 and 15 which were kept
under consideration. The principal argument pressed before us by Shri Chagla
was that Rules 6 and to having not been approved by the Registrar, all the old
rules must be deemed to have remained inoperative because these two rules form
the real substratum of the scheme embodied in those rules Without these two
rules, the remaining rules, according to the argument, cannot effectively
operate. We are unable to accept this submission.
It would be useful at this stage to reproduce
old Rules 6,7, 9,10,15 and 16 which alone are suggested on behalf of the
appellant to be relevant.
"6. These Rules shall be deemed to have
come into force (i.e. in respect of an employee retiring, resigning and/or
having terminated his services) from the 1st July, 1953. Every employee who has
completed at least five years service shall be granted gratuity at the rate
7. In case of retirement, resignation or
termination of services gratuity shall be granted:
(a) After five years but before completion of
10 years services :--half month's salary for each completed year of service.
(b) After 10 years but before completion of
16 years service :--'three fourth of a month's salary for each completed year
(c) After 15 years service three fourth of a
month's salary for each completed year of service, subject to the minimum of
9. Payment of the claims on account of the
Gratuity payable under these Rules shall be made within one month from the
retirement, resignation, death or the termination of service.
10. The Bank shall contribute on 30th June,
very year, or as soon as possible thereafter, but not later 195 than 30th
September of the year, an amount not less than the amount contributed by the
Bank as contribution to the Provident Fund.
11 to 14.
15. The provisions under sec. 41 of the
Bombay Co-operative Societies Act (Bombay Act V11 of 1925) as amended upto date
shall be applicable to the administration of the 'Gratuity Fund' created under
16. The Board of Directors shall have.
powers, subject to the approval of the
Registrar Co-operative Societies Bombay State, Poona, to alter, add to, or
repeal these rules from time to time, provided however that no such alteration,
addition or repeal shall have any retrospective effect against the interest of
the employee, in the employment of the Bank on that date." According to the
appellant's learned counsel, the Registrar having withheld approval of Rule 6,
the last sentence of which provides that every employee who has completed at
least 5 years' service, shall be granted gratuity at the rate specified in the
rules, there is no rule which imposes an obligation on the appellant Bank to
pay gratuity. This argument, in our opinion, ignores the express language of
Rule 7 which, in unequivocal terms, requires gratuity to be granted in case of
retirement, resignation or termination of service according to the rate
specified therein. Clause (a) of this rule contains a provision similar in
effect to what the last sentence of Rule 6 directs. Rule 9 also imposes an
imperative obligation for the payment of gratuity under these rules within one month
from the retirement, resignation, death or termination of service of the
employee concerned. Rule 10, which provides for contribution of the Bank
towards the Gratuity Fund, was no doubt also kept under consideration and not
approved by the Joint Registrar, but this too, in our view, does not render the
remaining rules ineffective; nor does this fact by itself absolve the Bank of
the obligation imposed on it by Rules 7, 8 and 9.
The contention that without there being a
Gratuity Fund, the Bank cannot lawfully pay gratuity assumes that the Bank hag
no other resources out of which its liabilities under the Rules in question can
be discharged--an assumption which is not easy to upheld. Once the Gratuity
Fund Rules imposing an obligation on the Bank to pay gratuity to its employees
are approved by the Registrar, then this obligation, in our opinion, cannot be
rendered nugatory merely because there is no separate Gratuity Fund. Rule 15
which provides for the applicability of section 41 of the Bombay Co-operative
Societies Act VII of 1925 to the "administration of 196 the Gratuity
Fund" created under the rules in question, does not touch the question of
the enforcement of these rules, and indeed even on behalf of the appellant, no
attempt has been made to rely on Rule 15 for this purpose.
The appellant's counsel next relied on the
new rules which were approved by the Joint Registrar of Co-operative Societies
and were made retrospective in their operation so.
as to be enforceable with effect from July 1, 1953. It was, however, conceded by Shri Chagla and, in our opinion, rightly, that
the new rules could not detract from or prejudicially affect the vested rights
created under the old rules. Indeed old Rule 16, it may be recalled, prohibits
the retrospective operation of the new rules with the object of protecting the
interests of the employees.
The submission that the old rules have
neither been repealed, nor altered, as contemplated by Rule 16, and that the
Registrar has merely withdrawn his approval to the old rules and enforced the
new ones, does not advance the appellant's case. The effect of old rule 16, in
our opinion, cannot be negatived by describing the process as mere withdrawal
of the approval of the old rules and enforcement of the new ones, for in real
substance the process seems to us to be covered by Rule 16.
The appeal accordingly fails with no order as
G.C. Appeal dismissed.