REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE  JURISDICTION

CIVIL APPEAL NO.  1478 OF 2004

Allahabad Bank & Anr. …Appellants  

VERSUS

All India Allahabad Bank Retired  Emps. Assn. …Respondent

WITH  

WRIT PETITION (CIVIL) NO. 150 OF 2007

All India Allahabad Bank Retired  Emps. Assn. …Petitioner

Versus

Allahabad Bank & Anr. …Respondents  

With  

WRIT PETITION (CIVIL) NO. 237 OF 2007

Allahabad Bank Retirees Assn. …Petitioner

Versus

Controlling Authority & Anr. …Respondents  

JUDGMENT

B. SUDERSHAN REDDY, J.

1. All  India  Allahabad  Bank  Retired  Employees  

Association  (for  short  ‘Association’)  filed  a  writ  petition  

invoking  the  original  jurisdiction  of  the  Allahabad  High  

Court under Article 226 of the Constitution of India with a  

prayer to issue a writ of mandamus directing the appellant  

bank  herein  to  pay  gratuity  to  the  members  of  its  

Association under the Payment of Gratuity Act, 1972 ( for  

short ‘the said Act’).  The High Court on due consideration  

of the matter declared that the retired employees of the  

appellant  bank  were  entitled  to  the  benefit  of  gratuity  

under the said Act and accordingly directed the payment  

of gratuity within the time specified in the judgment.  The  

said judgment of the Allahabad High Court is impugned in  

this appeal.  

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2. A short question that arises for our consideration in  

this  appeal  is  as  to  whether  the  retired  employees  of  

appellant bank are entitled to payment of gratuity under  

the provisions of the said Act?

3. The retired employees of the appellant bank having  

formed  an  association  which  includes  officers  and  

subordinate staff sent a legal notice to the appellant bank  

on  27.11.1988  requiring  it  to  release  the  amount  of  

gratuity to its members in accordance with the provisions  

of the said Act.  The case set up by the Association was  

that  its  members  were  being  illegally  deprived  of  their  

statutory right to receive gratuity under the provisions of  

the Act on the pretext that they had opted for pensionary  

benefits  in lieu of gratuity.  It appears that on behalf of  

the Association applications were sent to the competent  

authority  in  the  prescribed  proforma  for  payment  of  

gratuity  in response to which the appellant bank made its  

stand  explicitly  clear  that  it  was  not  possible  to  make  

payment  of  gratuity  in  addition  to  pension.   Since  the  

whole  cause of  action  is  based on the  response of  the  

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appellant bank dated 10.01.1989, it would be appropriate  

to notice the same in its entirety.  

“Ref. No. Admn./5/0280  

Date: January 10,1989

The General Secretary All India Allahabad Bank Retired  Employees Association,  Central Office, Ram Bhawan,  C-1254B, Sector-A,  Mahanagar, Lucknow.  

Dear Sir,  Payment of Gratuity

This  has  reference  to  your  letter  Bank/14/8  dated  14.11.1988  and  enclosures.  

In  this  connection,  we  have  to  advise that Allahabad Bank has accepted  contributory  Provident  Fund  Scheme,  which  is  not  available  to  Government  employees. Besides this, the Bank has a  Pension  Scheme  in  which  an  employee/officer  may  exercise  option  letter  for  Pension  or  Gratuity;  but  the  dual benefits are not available under the  scheme Since the respective  pensioners  have exercised their option voluntarily for  availing of pension in lieu of Gratuity on  their retirement from the bank’s service,  they are  not  eligible  for  gratuity  at  all.  They  are  receiving  pension  since  their  retirement and as such we are not in a  position  to  accede  to  your  request  for  payment  of  gratuity  in  addition  to  pension  to  the  persons  named  in  your  letter under reference.  

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Yours faithfully,  Sd/- (R.K. Nath) Chief Manager (P.A.)”

4. The  Association  thereafter  filed  a  writ  petition  

asserting  its  right  that  its  members  were  entitled  to  

receive gratuity in accordance with the provisions of the  

Act.  The contention was that the consent or option given  

by  the  members  of  the  Association  opting  for  pension  

scheme would not deprive them of their statutory right to  

receive  gratuity  under  the  provisions  of  the  Act.   The  

appellant  bank  resisted  the  writ  petition  filed  by  the  

Association  mainly  relying  upon  the  Awards  known  as  

Shastry  Award  and  Deasai  Award  and  subsequent  

settlements under which employees were entitled either  

to the benefit  of pension or benefit of gratuity at one’s  

own option but not both.   The Bank  took a specific stand  

that the members of the Association had voluntarily opted  

for  pension scheme, as a result  thereof,  they were not  

entitled to receive gratuity as well since they have already  

exercised their  option claiming benefit  of  pension.   The  

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submission was that at the time of their retirement all the  

employees  were  paid  contributory  provident  fund  and  

pension in terms of option exercised by them, under the  

relevant Pension Scheme of the bank and therefore, they  

were not entitled to payment of any gratuity.  The bank  

further  asserted  that  the  employees  opted  for  the  

pensionary  benefits  which,  admittedly,   are  better  in  

terms   as  found  by  various  Awards  that  pensionary  

scheme was really more advantageous  to the employees  

than that of the gratuity.  

5. We may at this stage notice that appellant bank did  

not succeed in its attempt to get the bank exempted from  

the operations of provisions of the Act.  

6. Before adverting to the question as to whether the  

retired employees of the bank are entitled to payment of  

any gratuity, it may be just and necessary to notice the  

objects and reasons and the scheme of the Act.  It was  

realised  that  there  was  no  Central  Act  to  regulate  the  

payment  of  gratuity  to  industrial  workers,  except  the  

Working  Journalists  (Conditions  of  Service)  and  

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Miscellaneous Provisions Act, 1955.  The Government of  

Kerala  enacted  legislation  for  payment  of  gratuity  to  

workers  employed  in  factories,  plantations,  shops  and  

establishments.  The West  Bengal  enacted an Ordinance  

on  3.6.1971  prescribing  a  similar  scheme  of  gratuity.  

Gratuity was also being paid by some employers to their  

workers  under  Awards  and  agreements.  Since  the  

enactment of the Kerala and the West Bengal Acts, some  

other State Governments have also voiced their intention  

of enacting similar measures in their respective States.  It  

is  under  those  circumstances  the  Union  Government  

realised that it has become necessary, to have a Central  

law on the subject so as to ensure a uniform pattern of  

payment  of  gratuity  to  the  employees  through  out  the  

country.   The  Act  was  intended  to  avoid  different  

treatment  to  the  employees  of  establishments  having  

branches in more than one State. The proposal for Central  

legislation  on  gratuity  was  discussed  in  various  Labour  

Ministers’  Conference,  where  Central  legislation  on  

payment of gratuity was felt a necessity.  

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7. Section 4 (1) of the Act provides:  

“(1)  Gratuity  shall be  payable  to  an  employee  on  the  termination  of  his  employment  after  he  has  rendered  continuous  service  for  not  less  than  five  years,--

(a) on his superannuation, or

(b) on his retirement or resignation, or

(c)  on  his  death  or  disablement  due  to  accident or disease:”

8. The expression “employee” is defined in Section 2 (e)  

of  the  Act   as  any  person  (other  than  apprentice)  

employed on wages, in any establishment, factory, mine,  

oilfield, plantation, port, railway company or shop to do  

any  skilled,  semi-skilled,  or  unskilled,  manual,  

supervisory, technical or clerical work, whether the terms  

of such employment are express or implied……… . There is  

no  dispute  before  us  that  the  appellant  bank  is  an  

establishment and an employer within the meaning of the  

provisions of the Act. Section 5 confers power upon the  

appropriate  Government  to  exempt  any  establishment,  

factory, mine, oilfield, plantation etc.  from the operation  

of  the  provisions  of  the  Act,  if,  in  its  opinion,  the  

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employees  in  such  establishment,  factory  etc.  are  in  

receipt  of  gratuity  or  pensionary  benefits  not  less  

favourable  than  the  benefits  conferred  under  the  Act.  

The  power  to  exempt  conferred  upon  the  appropriate  

Government  is  not  an  unconditional  power.   The  

appropriate  Government  is  required  to  hear  all  the  

persons concerned who are likely to be affected by the  

decision to be taken and the exemption itself is subject to  

the  conditions  mentioned  in  the  provisions  of  the  Act  

namely  that  employee  or  class  of  employees  in  the  

opinion of  the government  are in  receipt  of  gratuity  or  

pensionary benefits not less favourable than the benefits  

conferred under the Act.   

9. A plain reading of the provisions referred to herein  

above makes it abundantly clear that there is no escape  

from payment of gratuity under the provisions of the Act  

unless the establishment is granted exemption from the  

operation of the provisions of the Act by the appropriate  

Government.  

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10. Notwithstanding  the subsequent  improvements  and  

embellishments the stand taken by the bank was and is  

before  us  that  the  members  of  the  Association  had  

accepted  the  Contributory  Provident  Fund  Scheme  and  

they opted for pension in lieu of gratuity which was being  

paid and therefore are not entitled to payment of gratuity  

under the provisions of the Act.  

11. We shall proceed to examine the point urged by the  

learned counsel  for  the appellant.  Remedial  statutes,  in  

contra distinction to penal statutes, are known as welfare,  

beneficient  or  social  justice  oriented  legislations.  Such  

welfare  statutes  always  receive  a  liberal  construction.  

They are required to be so construed so as to secure the  

relief contemplated by the statute.  It is well settled and  

needs  no  restatement  at  our  hands  that  labour  and  

welfare  legislation  have  to  be  broadly  and  liberally  

construed having due regard to the Directive Principles of  

State Policy. The Act with which we are concerned for the  

present  is  undoubtedly  one  such  welfare  oriented  

legislation  meant  to  confer  certain  benefits  upon  the  

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employees  working  in  various  establishments  in  the  

country.  

12. Krishna Iyer, J in Som Prakash Rekhi Vs. Union of  

India1 stated  the  principle  in  his  inimitable  style  that  

benignant provision must receive a benignant construction  

and,  even  if  two  interpretations  are  permissible,  that  

which furthers the beneficial object should be preferred. It  

has been further observed: “We live in a welfare State, in  

a “socialist” republic, under a Constitution with profound  

concern  for  the  weaker  classes  including  workers  (Part  

IV).  Welfare  benefits  such  as  pensions,  payment  of  

provident  fund  and  gratuity  are  in  fulfilment  of  the  

Directive Principles. The payment of gratuity or provident  

fund should not occasion any deduction from the pension  

as a “set-off”. Otherwise, the solemn statutory provisions  

ensuring  provident  fund  and  gratuity  become  illusory.  

Pensions  are  paid  out  of  regard  for  past  meritorious  

services.  The  root  of  gratuity  and  the  foundation  of  

provident  fund  are  different.  Each  one  is  a  salutary  

benefaction  statutorily  guaranteed  independently  of  the  1 (1981) 1 SCC449

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other. Even assuming that by private treaty parties had  

otherwise  agreed  to  deductions  before  the  coming  into  

force of these beneficial enactments they cannot now be  

deprivatory. It is precisely to guard against such mischief  

that  the  non  obstante  and  overriding  provisions  are  

engrafted on these statutes.”

13. Interpreting the provisions of the said Act this Court  

in Sudhir Chandra Sarkar Vs. Tata Iron and Steel Co.  

Ltd.2  observed that  pension and gratuity  coupled with  

contributory  provident  fund  are  well  recognised  retiral  

benefits governed by various statutes.  These statutes are  

legislative responses to the developing notions of the fair  

and humane conditions of work, being the promise of Part  

IV of the Constitution. It was observed: “the fundamental  

principle  underlying  gratuity  is  that  it  is  a  retirement  

benefit  for  long  service  as  a  provision  for  old  age.  

Demands  of  social  security  and  social  justice  made  it  

necessary  to  provide  for  payment  of  gratuity.  On  the  

enactment of Payment of Gratuity Act, 1972 a statutory  

liability was cast on the employer to pay gratuity.” 2 (1984) 3 SCC 369

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14. Gratuity payable to an employee on the termination  

of his employment after rendering continuous service for  

not less than 5 years and on superannuation or retirement  

or resignation etc. being a statutory right cannot be taken  

away except in accordance with the provisions of the Act  

whereunder  an  exemption  from such  payment  may  be  

granted  only  by  the  appropriate  Government  under  

Section 5 of the Act which itself is a conditional power. No  

exemption could be granted by any Government unless it  

is established that the employees are in receipt of gratuity  

or pension benefits which are more favourable than the  

benefits conferred under the Act.  

15. In  Union  of  India Vs All  India  Services  

Pensioners’ Association And Another3, this  Court  

explained that there is always a distinction  between the  

pension payable on retirement and the gratuity payable  

on retirement.  “While  pension is  payable periodically  as  

long as the pensioner is alive, gratuity is ordinarily paid  

only once on retirement.”  No decision of this Court which  

3 (1988)2 SCC 580

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has  taken  a  view contrary  to  the  decisions  referred  to  

herein above has been brought to our notice.  

16. In our considered opinion pensionary benefits or the  

retirement benefits as the case may be whether governed  

by a Scheme or Rules may be a package consisting of  

payment of pension and as well  as gratuity. Pensionary  

benefits  may  include  payment  of  pension  as  well  as  

gratuity. One does not exclude the other. Only in cases  

where the gratuity component in such pension schemes is  

in better terms in comparison to that of what an employee  

may  get  under  the  Payment  of  Gratuity  Act  the  

government  may  grant  an  exemption  and  relieve  the  

employer  from  the  statutory  obligation  of  payment  of  

gratuity.  

17. In the result, we find merit in the submissions made  

by the learned senior counsel, Shri P.P. Rao appearing for  

the  Association  that  pension  and  gratuity  are  separate  

retiral benefits and right to gratuity is a statutory right.  

However, Shri Dhruv Mehta, learned counsel for the bank  

placed strong reliance on the decision rendered by this  

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Court in  DTC Retired Employees’ Association & Ors.  

Vs Delhi Transport Corporation & Ors.,4  in support of  

his  contention  that  the employees  of  the  bank are  not  

entitled to the twin benefits of payment of pension and as  

well as gratuity.  In that case, Delhi Transport Corporation  

introduced  the  Pension  Scheme  for  the  first  time  on  

27.11.1992,  for  its  retired  employees,  as  per  which  all  

employees of DTC retiring on or after 3.8.1981, were to  

be covered for the purpose of pensionary benefits.  The  

existing employees at the relevant  time and those who  

retired  on  or  after  3.8.1981,  were  required  to  exercise  

their  option  for  the  Pension  Scheme.  The  retired  

employees opting for the pension scheme were required  

to refund the employer’s share of provident fund received  

by them with interest  thereon.   Those  employees,  who  

joined the service on 27.11.1992, and thereafter, had no  

option but to be compulsorily covered under the Pension  

Scheme.   This  Court  found  that  the  employees  therein  

received gratuity at the time of their exit from the service  

and subsequently opted for pension which had never been  

4 (2001) 6 SCC 61  

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a  part  of  their  service  conditions.  It  is  under  those  

circumstances,  this  Court  took  the  view  that  it  was  a  

condition precedent that in order to get the benefit of the  

Pension  Scheme,  they  were  required  to  refund  the  

gratuity  received by them at  the time of  retirement.  It  

was clear that at the time of receipt of gratuity they were  

not entitled to get pension. The employees have opted for  

payment  of  pension  only  after  the  introduction  of  the  

Scheme for the first time. DTC (supra), in our considered  

opinion,  is  not  an  authority  for  the  proposition  that  an  

employee who receives the pension is not entitled to the  

payment of any gratuity.  This decision is of  no assistance  

to the appellant.  

18. Learned  counsel  for  the  appellant  has  strenuously  

contended  that  under  the  Old  Pension  Scheme  of  the  

Bank,  only  two  terminal  benefits  namely,  Contributory  

Provident  Fund  and  either  gratuity  or  pension  were  

required to be paid to the employees of the bank and not  

both.  The  bank  in  view  of  the  Awards,  circulars  and  

statutory regulations is not under any legal obligation to  

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pay gratuity as a third retiral benefit. The submission was  

that ever since   the Payment of Gratuity Act came into  

force in 1972, no employee was paid both pension and  

gratuity till 1995, when the Pension Regulations came into  

force. It is the case of the bank that the optional scheme  

of  pension prevalent  at  the  relevant  time was a  better  

mode  of  payment  and  therefore  was  a  better  form  of  

retiral benefit  within the meaning of Section 4 (5) of the  

Act. In this regard, he relied on the decision of this Court  

in Beed District Central Coop. Bank Ltd. Vs. State of  

Maharashtra & Ors.5  In that case a policy decision was  

taken by the bank to extend the benefit of better rate of  

gratuity to a large number of its employees and a scheme  

was  accordingly  formulated  to  the  effect  that  such  of  

those  employees  who  were  on  its  roll  on  and  from  

1.12.1975, the rate of gratuity was to be calculated on  

one month’s salary for every completed year of service  

with ceiling limit of 20 months salary.  It was operative  

from  1975  to  19.7.1996.  The  employees  of  the  bank  

accepted  the  scheme  and  availed  the  benefit  thereof.  

5 (2006) 8 SCC 514

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Thereafter  the  scheme  was  amended  providing  for  

payment  of  gratuity  at  the  rate  of  26  days’  salary  for  

every completed year of service with a ceiling limit of Rs.  

1.7  lakhs  which  was  operative  from  May,  1994  to  

September, 1997. Yet again, a scheme was floated raising  

the ceiling limit of Rs. 1.7 lakhs to Rs. 2.50 lakhs.  The  

employees  retired  during  the  currency  of  the  scheme  

formulated  by  the  bank  were  offered  gratuity  in  terms  

whereof the ceiling limit was fixed at Rs. 1.7 lakhs and Rs.  

2.50 lakhs between the period 20.7.1996 and 30.11.1999  

and the period 1.12.1999 to 17.1.2005, respectively and  

the amount of gratuity so offered to them in terms of the  

scheme was accepted. However, they raised a claim that  

they were entitled to the benefit of both the schemes as  

also  the  ceiling  limit  fixed  under  the  Amendment  Act,  

1998, raising the ceiling limit to Rs. 3.50 lakhs.  On the  

facts, this Court framed a question for its consideration as  

to  whether  keeping in  view the provisions  contained in  

sub-section (5) of Section 4 of 1972 Act, the employees  

although would be entitled to the benefit of ceiling limit of  

Rs. 3.5 lakhs, the rate of gratuity should be calculated at  

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the rate of 26 days’ instead and in place of 15 days’ salary  

for every completed year of service in terms of the 1972  

Act. We fail to appreciate as to how the said judgment is  

of any relevance to resolve the question that arises for  

our consideration in the present case.  It is not the case of  

the  bank  that  at  the  time  of  superannuation  of  the  

employees there was a scheme for payment of gratuity  

under which the employees were entitled to payment of  

gratuity and the said scheme in comparison to that of the  

provisions of the Act was more beneficial to the workmen.  

On the other hand, the scheme that was prevalent at the  

relevant time in clear and categorical terms provided that  

“the gratuity will not be payable in case where a pension  

is granted by the Bank. But if a pensioned officer should  

die before receiving any pension payments an aggregate  

sum  at  least  equal  to  the  gratuity  which  he  would  

otherwise  have  received  then  the  Bank  will  pay  the  

difference between such aggregate sum and gratuity to  

the  officer’s  widow;  if  any,  otherwise  to  his  legal  

representative.”  Be it noted that  in the counter affidavit  

filed  in  the  High  Court   the  Bank  placed  reliance  on  

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Shastry and Desai Awards which have taken the view that  

Allahabad Bank which had pension scheme of its own was  

more advantageous than the provisions of the gratuity to  

its employees. It is asserted that under the said Awards  

and the subsequent settlements an employee entitled to  

receive either the benefit of pension or gratuity at his own  

option  but  not  both.   The  contention  was  that  such of  

those Employees who had voluntarily  opted for  pension  

scheme were not entitled to receive the gratuity as well.  

The respective comparative figures under pension and/or  

gratuity,  in  terms  of  Shastry/Desai  Awards  and/or  

Bipartite Settlement on one hand and the gratuity payable  

under the Act on the other were made available for the  

perusal  of  the  Court  to  buttress  the Bank’s  submission  

that what has been paid to the employees was better in  

terms and more favourable  than  the benefits  conferred  

under  the  Act.  The  submission  is  totally  devoid  of  any  

merit for more than one reason namely, that it is for the  

appropriate Government to form the requisite opinion that  

the employees were in receipt of gratuity or pensionary  

benefits  which  were  more  favourable  than  the  benefits  

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conferred under the Act and therefore, the establishment  

must be exempted from the operation of the provisions of  

the Act.  The Bank having failed to obtain exemption from  

the  operation  of  the  provisions  of  the  Act  cannot  be  

permitted to raise this plea.  No establishment can decide  

for itself that employees in such establishments were in  

receipt  of  gratuity  or  pensionary  benefits  not  less  

favourable  than  the  benefits  conferred  under  the  Act.  

Sub-section  (5)  of  Section  4  protects  the  rights  of  an  

employee  to  receive  better  terms  of  gratuity  from  its  

employer under any Award or agreement or contract as  

the case may be. Admittedly the Scheme under which the  

employees of the Bank received the pension was in lieu of  

gratuity.   There  is  no  question  of  comparing  the  said  

Scheme and arrive at any conclusion that what they have  

received  was  much  better  in  terms  than  the  benefits  

conferred under the Act.  Reliance upon sub-section (5) of  

Section 4 is therefore unsustainable.  

19.   This  Court  in  Municipal  Corporation  Delhi vs.  

Dharam  Prakash  Sharma  &  Ors.,6 observed:  “the  

6 (1998)7SCC 221

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mere  fact  that  the  gratuity  is  provided  for  under  the  

Pension Rules will not disentitle him to get the payment of  

gratuity under the Payment of Gratuity Act. In view of the  

overriding  provisions  contained  in  Section  14  of  the  

Payment of Gratuity Act, the provision for gratuity under  

the  Pension  Rules  will  have  no  effect.  Possibly  for  this  

reason,  Section  5  of  the  Payment  of  Gratuity  Act  has  

conferred  authority  on  the  appropriate  Government  to  

exempt  any  establishment  from  the  operation  of  the  

provisions of the Act, if  in its opinion the employees of  

such establishment are in receipt of gratuity or pensionary  

benefits  not  less favourable  than the benefits  conferred  

under this Act. Admittedly MCD has not taken any steps to  

invoke  the  power  of  the  Central  Government  under  

Section 5 of the Payment of Gratuity Act. In the aforesaid  

premises,  we  are  of  the  considered  opinion  that  the  

employees of the MCD would be entitled to the payment  

of  gratuity  under  the  Payment  of  Gratuity  Act  

notwithstanding the fact that the provisions of the Pension  

Rules have been made applicable to them for the purpose  

of determining the pension. Needless to mention that the  

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employees  cannot  claim  gratuity  available  under  the  

Pension Rules” (emphasis supplied).   

In the present case it is not the case of the Bank that  

its employees had claimed and received gratuity under the  

pension scheme.  

20. The  decision  in  the  case  of  Workman  of  Metro  

Theatre, Bombay Vs. Metro theatre Ltd., Bombay7  in  

which this Court took the view that on true construction  

the  expression  ‘Award’  occurring  in  sub-section  (5)  of  

Section  4  does  not  mean  and  cannot  be  confined  to  

‘existing  Award’  but  includes  any  Award  that  would  be  

made by an adjudicator wherein better terms of gratuity  

could  be  granted  to  the  employees  if  the  facts  and  

circumstances warrant such grant.  This decision cited by  

the learned counsel for the appellant is of no relevance  

and in no manner supports the appellant’s case.  

21. Learned counsel  for  the appellant  relying upon the  

decision of this Court in Bank of India & Ors. Vs.  P.O.  

Swarnakar & Ors.8  contended that once the employees  7

8 (2003) 2 SCC 721

23

have  exercised  their  option  to  avail  pension  made  

available  to  them under  the  Old  Pension  Scheme,  and  

having drawn the benefits thereunder cannot be permitted  

to  resile  from  their  stand.   In  that  case  a  group  of  

employees  of  the  State  Bank  of  India  accepted  the  

amount  of  ex-gratia  under  the  scheme  known  as  ‘the  

Employees Voluntary Retirement Scheme’ and thereafter  

made an attempt to resile from the very Scheme itself. It  

is  under  those  circumstances  this  Court  observed  that  

“those who accepted the ex-gratia payment or any other  

benefit  under  the  Scheme,  in  our  considered  opinion,  

could not have resiled therefrom.”  In the present case  

the  real  question  that  arises  for  our  consideration  is  

whether the employees having exercised their option to  

avail the benefits under the pension scheme are estopped  

from claiming the benefit under the provisions of the Act?  

The  appellant  being  an  establishment  is  under  the  

statutory obligation to pay gratuity as provided for under  

Section 4 of the Act which is required to be read along  

with Section 14 of the Act which says that the provisions  

of  the  Act  shall  have  effect  notwithstanding  anything  

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inconsistent therein contained in any enactment or in any  

instrument  or  contract  having  effect  by  virtue  of  any  

enactment other than this Act.  The provisions of the Act  

prevail over all other enactment or instrument or contract  

so far as the payment of gratuity is concerned.  The right  

to receive gratuity under the provisions of the Act cannot  

be defeated by any instrument or contract.  

22. This Court in Hindustan Lever and Anr. Vs. State  

of Maharashtra & Anr.9 relying upon the decision of this  

Court in Purshottam H. Judye Vs. V.B. Poddar10  held  

that the word ‘instrument’ would include award made by  

the  Industrial  Tribunal.   It  is  thus  clear  that  

notwithstanding  the Desai  and  Shastry  Awards  and the  

subsequent  settlements  the  members  of  the  employees  

association are entitled to avail the benefit conferred upon  

them for payment of gratuity under the provisions of the  

Act.  The employees cannot be deprived of their valuable  

statutory right conferred upon them to receive payment of  

gratuity.   

9 (2004) 9 SCC 438 10 (1966) 2 SCR 353

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23. There  is  no  material  placed  before  us  that  the  

employees  while  opting  for  the  pension  scheme  at  the  

time of their  superannuation/retirement either expressly  

or impliedly waived their statutory right to claim payment  

of  gratuity  under  the  provisions  of  the  Act.   In  the  

circumstances we find no merit in the submission made by  

the learned counsel for the appellant in this regard.  For  

the aforesaid reasons we find no merit in the appeal.  

24. During the pendency of the appeal this Court by its  

order  dated  22.3.2006  directed  the  parties  to  appear  

before  the  Controlling  Authority  and  the  Controlling  

Authority  was  required  to  decide  as  to  whether  the  

benefits  under  the  Allahabad  Bank  Employees  Pension  

Scheme (Old)  are more beneficial in comparison to that  

of  the payment of  Gratuity  under the provisions of  the  

Act. Following is the order passed by this Court:  

“Though  the  order  of  the  High  Court  speaks  about  the  benefit  of  gratuity  under  the  Payment  of  Gratuity  Act,  1972 and a better Scheme, it does not  indicate  as  to  who is  the  Authority  to  decide  which  one  of  the  schemes  is  better.  According  to  the  Bank,  the  

26

employees concerned had accepted the  particular Scheme which had the option  of either the pension or the gratuity. It  is  pointed  out  that  the  there  was  no  challenge  to  the  legality  of  the  arrangement made or the Scheme itself.  On the other hand, Mr. Trivedi, learned  counsel  for  respondent  no.  1  submits  that  whether  the  Scheme  is  better  is  relatable to the benefits available under  the Act and nothing beyond it. The High  Court has come to an abrupt conclusion  that a Statute overrides an agreement.  There was no plea in this regard in the  writ  petition.  Be  that  as  it  may,  we  permit the parties to appear before the  controlling  authority  who  shall  take  a  decision  within  three  months.  The  parties are given liberty to produce copy  of  the  order  before  the  controlling  authority  so  that  it  can  fix  a  date  for  hearing.  

The parties  are permitted to take  all stands which are being raised in the  present  appeal.  The  matter  shall  be  listed after four months.”

25. The  Controlling  Authority  held  that  the  amount  

received  by  the  employees  under  the  said  Scheme  is  

much more than what they could have received under the  

Act.  The benefits according to the Controlling Authority  

available under the Scheme are more beneficial than the  

gratuity payable under the Act.   

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26. Being  aggrieved  by  the  order  of  the  Controlling  

Authority  two writ petitions were filed, one  by All India  

Allahabad  Bank  Retired  Employees  Association  and  the  

other  by  the  Allahabad  Bank  Retirees’  Association  

challenging  the  validity  of  the  order  of  the  Controlling  

Authority  dated 25.9.2006.

27. Section 2 (d) of the Act defines Controlling Authority  

as an authority appointed by the appropriate Government  

under  Section  3  of  the  Act.  Under  Section  3  the  

Controlling  Authority  is  made  responsible  for  the  

administration  of  the  Act  and  it  further  provides  for  

appointment  of  different  authorities  for  different  areas.  

Section 7 deals with for determination of the amount of  

gratuity.  Every  person  who  is  eligible  for  payment  of  

gratuity  under  the  Act  is  required  to  send  a  written  

application  to  the  employer  in  the  prescribed  form  for  

payment of such gratuity.  Sub-section (2) of Section 7  

provides  once  the  gratuity  becomes  payable,  the  

employer shall, whether an application has been made or  

not, determine the amount of gratuity and give notice in  

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writing to the person to whom the gratuity is payable and  

also to the Controlling Authority specifying the amount of  

gratuity so determined and arrange to pay the amount of  

gratuity to the person to whom the gratuity is payable.  

The Scheme envisaged under  Section 7  of the Act, is  

that  in  case  of  any  dispute  to  the  amount  of  gratuity  

payable  to  an  employee  under  the  Act  or  as  to  the  

admissibility  of  any  claim  of,  or  in  relation  to,  an  

employee  payable  to  gratuity  etc.  the  employer  is  

required  to  deposit  with  the  Controlling  Authority  the  

admitted  amount  payable  as  gratuity.  In  case  of  any  

dispute parties may make an application to the Controlling  

Authority for deciding the dispute who 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 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 to the employee.  Sub-section (7) of Section 7,  

provides for an appeal against the order of the Controlling  

Authority.  The Act, nowhere confers any jurisdiction upon  

29

the Controlling Authority to deal with any issue under sub-

section  (5)  of  Section  4  as  to  whether  the  terms  of  

gratuity  payable  under  any  Award  or  agreement  or  

contract  is  more  beneficial  to  employees  than  the  one  

provided  for  payment  of  gratuity  under  the  Act.  This  

Court’s  order  could  not  have  conferred  any  such  

jurisdiction upon the Controlling Authority to decide any  

matter  under  sub-section  (5)  of  Section  4,  since  the  

Parliament  in  its  wisdom  had  chosen  to  confer  such  

jurisdiction  only upon the appropriate Government and  

that  too  for  the  purposes  of  considering  to  grant  

exemption from the operation of the provisions of the Act.  

Even on merits the conclusions drawn by the Controlling  

Authority that the Pension Scheme (old)  offered by the  

Bank is more beneficial since the amount of money the  

pensioners got under the Pension Scheme is more than  

the amount that could have been received in the form of  

gratuity under the provisions of the Act is unsustainable.  

The  Controlling  Authority  failed  to  appreciate  that  sub-

section (5) of Section 4 of the Act, protects the right of an  

employee to receive better terms of gratuity under any  

30

award or agreement or contract with the employer than  

the benefits conferred under the Act.  The comparison, if  

any, could be only between the terms of gratuity under  

any  award  or  agreement  or  contract  and  payment  of  

gratuity payable to an employee under Section 4 of the  

Act.   There  can  be  no  comparison  between  a  Pension  

Scheme  which  does  not  provide  for  payment  of  any  

gratuity and right of an employee to receive payment of  

gratuity under the provisions of the Act.  Viewed from any  

angle  the  order  of  the  Controlling  Authority  is  

unsustainable. The order is liable to be set aside and the  

same is accordingly set aside.   

28. However, the judgment of ours is applicable to only  

such of those employees/workmen who retired from the  

service between 1.1.1986 and 31.10.1992.  

29. In  the  result,  the  appeal  preferred by the bank is  

dismissed with costs quantified at Rs. 25,000/- and the  

writ petitions are allowed without any order as to costs.  

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       ……………………………..J. (B. SUDERSHAN REDDY)

………………………………..J. (R.M. LODHA)

NEW DELHI, December 15, 2009.   

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