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CASE NO.: Appeal (civil)  3166 of 2006

PETITIONER: Union of India & Anr.

RESPONDENT: Manik Lal Banerjee

DATE OF JUDGMENT: 26/07/2006

BENCH: S.B. Sinha & Dalveer Bhandari

JUDGMENT: J U D G M E N T [Arising out of S.L.P. (C) No. 21446 of 2005]

S.B. SINHA, J :

       Leave granted.

       The Respondent was a Station Master working in Sodepur Railway  Station, Eastern Railway.  He retired on 31.1.1995.  He was paid 16 =  months emoluments comprising basic salary and 20% dearness allowance  towards Death-Cum-Retirement Gratuity.   

       One Pritam Singh who is said to be similarly situated, however,  claimed and obtained such benefits of gratuity in terms of the provisions  contained in the Payment of Gratuity Act, 1972 (for short "the 1972 Act") in  terms whereof the element of dearness allowance was calculated at the rate  of 125% of basic salary.  A special leave petition filed thereagainst was  dismissed by this Court by an order dated 13.2.2002 holding:

"This is not a fit case for our interference under  Article 136 of the Constitution.  Hence the appeal  is dismissed."

       Principally, relying on the said decision, the Respondent filed an  original application before the Central Administrative Tribunal claiming  payment of gratuity on the same terms and for recovery of purported arrears  of the difference of gratuity.  The Tribunal by an order dated 25.2.2004  directed the Appellant to consider the Respondent’s case whereupon a  speaking order was passed by the Appellant on 4.6.2004 inter alia holding  that the case of the Respondent was not governed by the provisions of the  1972 Act but by the provisions of the Railway Services (Pension) Rules,  1993 (for short "the 1993 Rules").

       Another original application was filed by the Respondent questioning  the validity of the said order before the Tribunal which was registered as OA  No. 576 of 2004.  The said application was allowed by an order dated  1.12.2004 holding inter alia:

"Mr. De, the learned counsel for the respondents to  a query replied that Pritam Singh case was  complied with by the Railway Authorities.  It is  most unfortunate to state here that the DRM  treated the matter in a different manner in order to  avoid payment and has passed such illegal order by  stating that dismissal of SLP by the Hon’ble  Supreme Court does not amount to a decision on  merits.  He has lost sight of the fact that the CAT

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does not hold the jurisdiction to sit in appeal  against the order passed by the Controlling  Authority under the Gratuity Act.  In Pritam  Singh’s case an independent direction was passed  by the CAT by invoking the provisions of Gratuity  Act.  Similar benefit ought to have been given to  the present applicant.  From the totality of the facts  and circumstances of the case, I direct the  respondent No. 2 to pay the Gratuity as claimed by  the applicant in terms of Section 4 of the Indian  Gratuity Act, 1972 together with the interest  @12% per annum from the date when it became  due till the date of payment and file compliance  report within four months, failing which  appropriate action, as deemed fit, will be taken."

       A writ petition filed by the Appellant questioning the legality of the  said Order was dismissed by a Division Bench of the High Court holding  that the 1993 Rules do not make an employee of the Railways disentitled to  the benefit of gratuity under the 1972 Act.  It was furthermore held that there  was no reason as to why the decision of the Tribunal in Pritam Singh would  not be given effect to.

       Mr. K.P. Pathak, learned Additional Solicitor General appearing on  behalf of the Appellant urged that Section 2(e) of the 1972 Act will have no  application in view of the fact that the Respondent being a railway servant  was an employee of the Central Government and was being governed by the  1993 Rules.   

       Mr. Manik Lal Banerjee, Respondent appearing in person, on the  other hand, contended that Section 2(e) of the 1972 Act should be  interpreted conjointly with Section 2(f) defining ’employment’ and Section  2(a)(i) defining ’establishment’ and so construed, it must be held that the  same is applicable to the cases of railway employees also.  Strong reliance in  this behalf has been placed on The Executive Engineer (Construction)  Southern Railway, Quilon and others v. M.P. Sankara Pillai [ILR 1981 (1)  Ker 164]   

       It was urged that in view of Rule 15(4)(ii) of the 1993 Rules, as  pension and commuted value thereof are only governed by the Pensions Act,  1871, the matter relating to payment of gratuity could not have been brought  within the purview of the 1993 Rules.  As pension and gratuity are not  bounties, the same should be given a liberal construction.  Mr. Banerjee  furthermore contended that the decision of the Joint Consultative Machinery  (JCM) to pay 20% dearness allowance in emoluments for the purpose of  gratuity being not a decision under a legislative Act, the same is subservient  to the provisions of the 1972 Act.  In any event, the Fifth Pay Revision  Commission having made an interim report that 90% of dearness allowance  should be paid to the employees who have retired from 1.4.1995 to  31.12.1995, there is no reason as to why the Respondent should be deprived  from the benefit thereof.

       The 1972 Act was enacted to provide for a scheme inter alia for  payment of gratuity to employees in relation to railway companies.

       Section 2(e) of the 1972 Act defines ’employee’ to mean "any person  (other than an 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, and whether  or not such person is employed in a managerial or administrative capacity,  but does not include any such person who holds a post under the Central  Government or a State Government and is governed by any other Act or by  any rules providing for payment of gratuity."  The definition, thus, excludes

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an employee holding civil post under the Central Government and  government by another Act or Rules providing for gratuity.

       Section 2(f) of the 1972 Act defines ’employer’ inter alia to mean, in  relation to any railway company belonging to or under the control of the  Central Government or the State Government, a person or authority  appointed by the appropriate government for the supervision and control of  the employees.  Section 4 provides for payment of gratuity to an employee  on the termination of his employment after he has rendered continuous  service for not less than five years inter alia on his superannuation.  Sub- section (2) of Section 4 provides that for every completed year of service or  part thereof in excess of six months, the employer shall pay gratuity to an  employee at the rate of fifteen days’ wages based on the rate of wages last  drawn by the employee concerned, which amount in view of sub-section (3)  of Section 4 shall not exceed three lakhs and fifty thousand rupees.

       The 1972 Act is applicable inter alia to the ’establishment’ belonging  to a railway company.  The amount of gratuity, however, is payable to an  employee.  The interpretation clause contained in Section 2(e) takes out  from the purview of the said Act a person who holds inter alia post under the  Central Government and whose terms and conditions of service are  governed by an Act or the Rules providing for payment of gratuity.  The  1993 Rules provides for payment of gratuity in Rule 70 in the following  terms:

"70. Retirement gratuity or death gratuity. \026 (1)(a)  In the case of a railway servant, who has  completed five years’ qualifying service and has  become eligible for service gratuity or pension  under rule 69, shall, on his retirement, be granted  retirement gratuity equal to one-fourth of his  emoluments for each completed six monthly  period of qualifying service subject to a maximum  of sixteen and one-half times the emoluments and  there shall be no ceiling on reckonable  emoluments for calculating the gratuity\005"

       Rule 49 of the 1993 Rules provides for the manner in which  emoluments of such an employee should be calculated.  ’Pay’ in those rules  means the pay in the revised scales under the Fourth Pay Commission  Report.   

       Following representations made on behalf of the employees; the  Central Government in a JCM conceded grant of a part of dearness  allowance to be reckoned as dearness pay (DP) for the purpose of computing  the amount of gratuity and the same was treated an additional advantage  over and above those allowed in the recommendations of the Fourth Pay  Commission.  The quantum of such dearness pay was taken on the  Consumer Index as on 1.7.1988 and 20% of dearness allowance was  declared to be payable as dearness pay.  Such benefit was extended also to  the railway employees whose retirement had taken place on or after  16.9.1993.

       The Tribunal indisputably granted relief to the Respondent solely  relying on or on the basis of the decision in Pritam Singh.  In Pritam Singh’s  case indisputably the question as regards non-applicability of the 1972 Act  and consequent applicability of the 1993 Rules had not arisen for  consideration.  The controlling authority in Pritam Singh’s case proceeded  on the basis that the provisions of the 1972 Act were applicable.  The  Tribunal in Pritam Singh opined:

"\005The Controlling Authority has considered the  definition of term ’wages’ and came to the  conclusion that the applicant is eligible for getting  the gratuity.  We do not see any infirmity or

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illegality on the order as averred by the Petitioner  in this Original Application.  According to us,  there is no merit in the application which is only to  be dismissed.  Accordingly, we dismiss Original  Application with no order as to costs."

       Our attention has also been drawn to the fact that the Central  Administration Tribunal, Principal Bench in OA No. 700 of 2004 in the  matter of Federation of Central Government Pensioners’ Association  Organisations, Calcutta v. Union of India by a judgment and order dated 1st  October, 2004 held that the decision of the Tribunal in Pritam Singh was  rendered per incuriam and, thus, did not create any binding precedent.  The  Railway Administration in terms of its speaking order dated 4.6.2004 also  held so.  The Tribunal, unfortunately, did not apply its mind to that aspect of  the matter and proceeded to grant relief to the Respondent herein solely  relying on or on the basis of the said decision.  Pritam Singh, in our opinion,  did not create any binding precedent.  Only because this Court dismissed the  special leave petition, the same would not mean that any law within the  meaning of Article 14 of the Constitution was laid down thereby.    Pritam  Singh was evidently rendered per incuriam as the statutory provisions  relevant for determining the issue had not been taken into consideration.

       It is well-settled that a decision is an authority for what it decides and  not what can logically be deduced therefrom.  The decision in Pritam Singh  having indisputably not taken into consideration, the exclusionary clause  contained in Section 2(e) of the 1972 Act cannot be held to be an authority  for the proposition that despite the provisions of the 1993 Rules, the 1972  Act would apply in the case of the railway servants.

       It is now well-settled that if a decision has been rendered without  taking into account the statutory provision, the same cannot be considered to  be a binding precedent.  This Court, in Pritam Singh, while exercising its  discretionary jurisdiction, might have refused to interfere with the decision.   The same, therefore, did not constitute any binding precedent.  The Tribunal  and consequently the High Court, therefore, committed a manifest error in  holding otherwise.

       Submission of Mr. Banerjee that if the 1972 Act applies to an  establishment belonging to a railway company and the persons specified in  Section 2(f) are the employers, despite exclusion of railway servants  governed by the provisions of the 1993 Rules from the purview of the  definition of ’employee’ in terms of Section 2(e) of the Act, the case shall be  governed by the 1972 Act, cannot be accepted.   

       The High Court noticed the definition of ’employee’ contained in  Section 2(e) of the 1972 Act but while deciding the issue it fell into an error  in coming to the conclusion that there was nothing in the 1972 Act so as to  exclude the benefit thereof to a railway employee.  It failed to properly  construe the said provision.  

       The Kerala High Court in M.P. Sankara Pillai (supra), whereupon  strong reliance has been placed by Mr. Banerjee, was considering a case of  casual labour.  Indian Railway Administration although was held to be an  establishment within the meaning of the 1972 Act, it was clearly stated that  where the person was employed in Railway Administration as casual  labourer on wages not exceeding Rs. 1000/- per mensem and was holding  Civil Post in the Central Government, but subsequently absorbed in  temporary regular service as temporary laskar in the same establishment; it  would be impossible to escape the conclusion that the person was not an  employee as defined in Section 2(e) and he would be entitled to claim  gratuity allowance in respect of the period of his service as casual labourer  in Railway Administration under Section 4, even in the Central Government  at the time of retirement.

       The decision of the Kerala High Court, thus, does not advance the

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case of the Respondent herein.  Therein the question raised herein was not  raised.

       Reliance of Mr. Banerjee upon Rule 15(4)(ii) of the 1993 Rules is  misplaced.  Rule 15 provides for recovery and adjustment of Government or  railway dues from pensionary benefits.  Sub-rule (1) of Rule 15 enjoins a  duty on the Head of Office to ascertain and assess Government or railway  dues payable by a railway servant due for retirement, whereas sub-rule (2)  thereof provides for recovery of the dues against the retiring railway servant  in terms of sub-rule (4).  Clause (ii) of sub-rule (4) of Rule 15 stipulates  recovery of losses specified in sub-clause (a) of clause (i) of sub-rule (4) and  which has nothing to do with the computation of the amount of payment of  gratuity.   

       We have noticed hereinbefore that in terms of the 1993 Rules the  emoluments were to be paid in terms of the recommendations made by the  Fourth Pay Commission.  The Fifth Pay Commission no doubt  recommended that dearness pay be linked to All India Consumer Price Index  of 12.1.1966 as on 1.7.1993 but, the entitlements of the employees in terms  thereof was directed to be prospectively affected with effect from 1.4.1995.   The Central Government accepted the said recommendations only with  prospective effect from 1.4.1995 in terms whereof 97% of the dearness  allowance was to be paid to those who were drawing salary up to Rs. 3500/-  as basic pay.  The Respondent retired on 31.1.1995.  The recommendations  of the Fifth Pay Commission, thus, were not applicable in his case.

       It is now a well-settled principle of law that financial implication is a  relevant factor for accepting revision of pay.  [See Hec Voluntary Retd.  Emps. Welfare Soc. & Anr. v. Heavy Engineering Corporation Ltd. & Ors.,  2006 (2) SCALE 660 and State of Andhra Pradesh and Anr. v. A.P.  Pensioners Association & Ors., JT 2005 (10) SC 115].

       The matter might have been different if the revised scale of pay in  terms of the recommendations of the Fifth Pay Commission would have  been made applicable to the cases of the employees who had also retired  prior to 1.4.1995 as was noticed by this Court in U.P. Raghavendra Acharya  and Ors. v. State of Karnataka & Ors, [2006 (6) SCALE 23].

       For the reasons aforementioned, the impugned judgment cannot be  sustained which is set aside accordingly.  The appeal is allowed.  No costs.