of Ksrtc V. R. Krishna Reddy  Insc 732 (1 November 2006)
Sinha & Markandey Katju
out of S.L.P. (Civil) No. 24946 of 2005] S.B. SINHA, J :
is a statutory corporation constituted under the Road Transport Corporation
Act, 1950. It has its own scheme in terms whereof gratuity is being paid at the
rate of 30 days' basic pay for each completed year of service. Government
Servants are, however, entitled to gratuity calculated on the basis of 15 days'
basic pay for each completed year of service. Such is the position also under
the Payment of Gratuity Act, 1972 (for short "the Act").
and differences having arisen by and between the workmen of the Corporation and
the management, a settlement was arrived at on 17.07.1999. The said settlement
was valid for the period 1.01.1988 and 31.12.1991. It expired on 31.12.1991,
Clause (5) whereof postulated:
Allowance The rates of Dearness allowance shall be on par with the rates
sanctioned by the State Government to its employees from time to time and from
the same date. The enhanced Dearness Allowance shall be paid in cash.
during the currency of this settlement, the Government of Karnataka were to
merge any portion of Dearness Allowance presently being paid to its employees,
that portion of the Dearness Allowance so merged will also be reckoned at
appropriate levels by the corporation for determining the Dearness Allowance,
House Rent Allowance, City Compensatory Allowance and Gratuity payable to the
employees of the corporation, but shall not be reckoned for other
purposes." The State of Karnataka
merged a part of the Dearness Allowance with the basic pay wherefor a
Government Order being Government Order No. FD 27 SRS 95 was issued on
28.11.1995 which is to the following effect:
question of revision of pensionery benefits in respect of Government Servants
has been examined by Government in the light of the recommendations made by the
Karnataka State Fourth Pay Commission and the decision taken by the Government
of India on the Interim Recommendations of the Fifth Central Pay Commission.
Accordingly, the following orders are issued.
Government are now pleased to order that Dearness Allowance sanctioned upto the
Average All India Consumer Price Index (A.I.C.P.I.) 1201.66 in Government order
No. FD 29 SRP 93, dated 30th
October, 1993 as
indicated below, shall be reckoned as emoluments for the purpose of retirement
gratuity/ death gratuity under the Karnataka Civil Services Rules in respect of
State Government Employees who retire or die on or after 28th November, 1995:
Range Rate of Dearness Allowance to be added to pay for calculating gratuity
Basic pay upto 3500 per month 90% of basic pay
Basic pay between Rs. 3401 and upto Rs. 600 per month 67% basic pay subject to
minimum of Rs. 3150 per month
Basic pay above Rs. 6000 per month 58% of basic pay subject to minimum of Rs.
4020 per month" The appellant, however, contends that actual merger of pay
had taken place on 7.01.1999 with retrospective effect from 1.04.1998 wherefor
a Government Order was issued. The Board of Directors of the appellant in its
meeting held on 14.01.1999 adopted a resolution in the following terms:
Principal Secretary, Finance Department stated that the provisions of the
Gratuity Act, 1972 has to be followed as far as the ceiling on payment of
gratuity is concerned. The legal position in this regard may be examined in the
context of the settlements reached and appropriate necessary action taken.
considering the matter in detail the Board of Directors resolved as hereunder:
No. 7808 Approval is accepted for the payment of gratuity to the employees of
the Corporation from 28.11.1995 in terms of the Gratuity Act 1972 if it is more
advantageous." The Board of Directors of the appellant also adopted the
following resolution on 26.06.1999:
is accorded to merge the Dearness Allowance as contemplated in Government Order
No. FD 48 SRP 98 dated 7.1.1999 into the Basic Pay of the employee of the
Corporation w.e.f. 1.04.1998 by treating the same as Basic D.A. for calculation
of Gratuity." The dispute between the parties centers round the issue as
to whether for the purpose of computation of the amount of gratuity, the order
dated 28.11.1995 would be attracted or not.
herein was appointed on 4.06.1959 as a conductor. He retired as traffic
inspector on 30.03.1996. He claimed gratuity in terms of the said Government
Order dated 28.11.1995. The same having been denied to him, he filed an
application before the Assistant Labour Commissioner and Controlling Authority
under the Act. By an award dated 6.02.1998, he was held to be entitled thereto.
An appeal thereagainst was preferred by the appellant. The Appellate Authority
in terms of its order dated 15.09.1998 allowed the said appeal. The respondent
filed a writ petition before the High Court. A learned Single Judge by reason
of a judgment and order dated 13.10.2003 allowed the said writ petition inter alia
so far as the other contention that the Government Order only speaks adding
Dearness Allowance to the basic pay wherein Clause to the basic pay wherein
Clause (5) refers to merger of Dearness Allowance with basic pay is concerned,
I do not find any substance. The word 'adding of basic pay', 'adding of
Dearness Allowance' or the word 'merger of Dearness Allowance' with the basic
pay are synonymous. There is no difference in meaning with those two phrases.
The ultimate result is the same if such hyper technical interpretation of these
phrases is accepted it would result in great injustice to one of the parties to
the contract. Moreover, they are not words used in any status. They are words
used by the Government at one place and the respondents in their order. Moreover,
in the subsequent order passed by the KSRTC they have understood the said word
as merger and has given benefit to its employees. Under the circumstance, I do
not find any merit in the said contention also." An intra-court appeal
filed thereagainst by the appellant was dismissed.
G.E. Vahanvati, learned Solicitor General appearing on behalf of the appellant,
principally raised two contentions in support of this appeal:
The actual merger having taken place on 7.01.1999 upon revision of the scale of
pay, the purported settlement dated 28.11.1995 could not have been construed
In any event, the purported merger of Dearness Allowance in respect of the
employees of the State was not binding on the Corporation.
Nageshwara Rao, learned senior counsel appearing on behalf of the respondent,
on the other hand, submitted that the amount of gratuity is required to be
calculated in terms of Section 5 of the Act and in that view of the matter the
rate prescribed therefor must be computed at par with the settlement. The High
Court, the learned counsel would contend, cannot be said to have committed any
illegality in arriving at the said finding.
Act was enacted to provide for a scheme for payment of gratuity to employees
engaged in factories, mines, oilfields, plantations, ports, railway companies,
etc. and for matters connected therewith or incidental thereto. Gratuity is
payable in terms of Section 4 of the Act to an employee inter alia on his
superannuation after he has rendered continuous service for not less than five
(2) of Section 4 of the Act envisages that for every completed year of service,
the employer shall pay gratuity to an employee at the rate of 15 days' wages
based on the rate of wages last drawn by the employee concerned. Sub-section
(3) of Section 4, however, puts a ceiling on the amount of gratuity being Rs.
three lakhs and fifty thousand. Sub- section (5) of Section 4 inter alia
provides that the provisions contained therein shall not affect the right of an
employee to receive better terms of gratuity under any award or agreement or
contract with the employer.
is, therefore, payable by way of gratuity in terms of the scheme was 30 days
wages for each completed year of service.
has been defined in Section 2(s) of the Act in the following terms:
means all emoluments which are earned by an employee while on duty or on leave
in accordance with the terms and conditions of his employment and which are
paid or are payable to him in cash and includes dearness allowance but does not
include any bonus, commission, house rent allowance, overtime wages and any
other allowance." We have noticed hereinbefore that the Government of
Karnataka in terms of Government Order dated 28.11.1995 inter alia directed
that 90% of Basic Pay to be added to pay for calculating gratuity. If the basic
pay of an employee was upto Rs. 3500/- per month and was drawing a Dearness
Allowance of Rs. 2000/-, what was to be added was the 90% of the Dearness
Allowance which was being paid. If 90% of the Basic Pay as Dearness Allowance
is to be added to the basic pay, the employee became entitled to higher wages
on the basis thereof. It is in that sense the question of application of the
merger of Dearness Allowance with the scale of pay arose for all intent and
purport. As was rightly held by the learned Single Judge, different
terminologies used did not make any material difference. Section 4 of the Act
itself contemplates implementation of a settlement. Settlement, therefore,
entered into by and between the parties was required to be interpreted having
regard to the intention of the parties. What was contemplated by the parties
was that the rates of Dearness Allowance would be at par with the rate
sanctioned by the State Government to its employees from time to time and from
the same date. It was never contemplated that a different amount of gratuity
shall be payable to an employee who retires prior to the revision of scale of
pay although the terms of the settlement are applicable to his case.
was necessary to be taken into account was the merger of any portion of the
Dearness Allowance with pay which was being paid to its employees. In such an
event that portion of the Dearness Allowance was also to be reckoned at
appropriate level by the appellant for determining the quantum of Gratuity
payable to its employees. The said settlement was arrived at for calculating
amount of gratuity payable to the employees of the appellant and not for any
therefore, not a case where the appellant could legitimately raise a contention
that any enhancement in the emoluments to its employees by the State would not
automatically enhance the emoluments of the employees of the appellant. It has
been contended before us that the effect of the merger and addition of Dearness
Allowance would be different. It may be so. But, having regard to the fact of
the present matter and the definition of 'wages' under the Act, we need not go
into the said question.
have noticed hereinbefore that the contention may ordinarily be applicable to a
case of merger of the basic pay vis-`-vis adding of Dearness Allowance to basic
pay, but, herein the same would not make any substantive difference for the
purpose of payment of gratuity keeping in view the definition of
"wages" contained in Section 2(s) of the Act. It is not a case where
the scheme of the Corporation and the provisions of the Act are inconsistent
with each other.
District Central Co-operative Bank Ltd. v. State of Maharashtra & Ors.
[2006 (10) SCALE 40], it was laid down:
the Payment of Gratuity Act is a beneficial statute. When two views are
possible, having regard to the purpose, the Act seeks to achieve being a social
welfare legislation, it may be construed in favour of the workman. However, it
is also trite that only because a statute is beneficent in nature, the same
would not mean that it should be construed in favour of the workmen only
although they are not entitled to benefits thereof." For the reasons
aforementioned, we are unable to agree with the submissions made by the learned
Solicitor General that the consequences of merger in a case of this nature
shall be different in case of addition to the Dearness Allowance in the scale
in view the facts and circumstances of this case, we are of the opinion that it
is not a case where this Court should take a view different from that of the
High Court. The Appeal is dismissed with costs. Counsel's fee assessed at Rs.
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