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PETITIONER: JALGAON DISTRICT CENTRAL CO-OPERATIVE BANKLTD.

       Vs.

RESPONDENT: PUNDALIKRAO LAXMANRAO SURYAWANSHI & ORS.

DATE OF JUDGMENT: 03/09/1969

BENCH: DUA, I.D. BENCH: DUA, I.D. SHELAT, J.M. VAIDYIALINGAM, C.A.

CITATION:  1970 AIR 1966            1970 SCR  (2) 192  1970 SCC  (1) 171

ACT: 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.

HEADNOTE: 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there remained no basis for the claim of gratuity by  respondent  no. 1; (ii) that the old rules  had  neither been  repealed nor altered and the effect  of  retrospective operation  of  the  new rules was  that  the  Registrar  had withdrawn his approval to the old rules and enforced the new ones.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

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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 Gratuity  Fund. [195] 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.  [196 B---D]

JUDGMENT: 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 appellant. Ganpat Rai and R. Mahalingier, for respondent No. 1. 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

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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 specified herein.                     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  of               service.                   (c) After 15 years service three fourth of               a  month’s salary for each completed  year  of               service,  subject  to the minimum  of  fifteen               salaries.                 8.                     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  these Rules.                     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

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             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 to costs. G.C.                                       Appeal dismissed. 197

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