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PETITIONER: ANDHRA PRADESH STATE ROAD TRANSPORT CORP.

       Vs.

RESPONDENT: P. VENKATESWARA RAO ETC.

DATE OF JUDGMENT19/08/1976

BENCH:

ACT:             Gratuity,  entitlement to--Whether a former employee  of         the Nizam’s State  Railway can claim gratuity as of right in         addition to Provident Fund--Government of Hyderabad  Railway         Establishment  Code,  1949, Rule 8.01, 8.02, 8.05,   8,  12,         8.13,  8.15, 8.16, 8.17 and 8.19 read with para  17  Chapter         VII..--Inter practice of             Code  of  Civil   Procedure,  Act  V  of   1908--Section         11--Principle  of res judicata--Applicability when  gratuity         was  awarded in a previous proceedings under the Payment  of         Wage  Act  in  the teeth of the  clear  provision  of   Rule         8.01--Scope of Rule 8.01.             Provident Fund--Illegal payment of gratuity in the  past         will not affect legal claims to Provident Fund.

HEADNOTE:             In  APSRTC  v.. Rammohan Rao (Civil  revision   petition         No.   1598/1968,  dated April 25, 1969), the High  Court  of         Andhra Pradesh held: (i) that wages under s. 2(iv)(d) of the         Payment  of Wages Act included gratuity and (ii)  that  Rule         8.01  of  the  Hyderabad  Government  Railway  Establishment         Code,  1949, did not stand alone and read with Rule 8.15  it         meant that an employee  who has received the Provident  Fund         was  not disentified to gratuity.  Following the said  deci-         sion, the labour court in a11 the appeals allowed the claims         of the respondents to gratuity in addition to Provident Fund         vide its order dated August 25, 1970.             Dismissing the appeals by special leave the Court,         HELD:  (i)  Rule 8.15 of the  Hyderabad  Government  Railway         Establishment Code, 1949, cannot be read in the same  manner         as the Andhra Pradesh High Court had done it in the  earlier         case.  Rule 8.15 only explains that the how Rule 8.05 was to         be  applied in certain cases.  Rule 8.05 lays down that  the         period  for which gratuity on retirement or contribution  to         the provident Fund has been received will count towards  the         qualifications  in Rule 8.05 and further clarifies that  the         period  will  not, however, affect the  calculation  of  the         amount of gratuity under Rule .8.19.. The obvious  intention         of Rule 8.15 was that the amount already received either  as         gratuity  or contribution to the Provident Fund will not  be         paid again to the employee.  The periods for which  payments         had  already  been made which may happen in  certain  cases,         would  nevertheless  count  towards  the  qualifying  period         prescribed by Rule 8.05. [242F-H]           (2) When gratuity was awarded in a previous proceeding  as         a part of wages in the teeth of the clear provision of Rules         8.01 imposing a condition precedent which was not  satisfied         to eligibility for it, the contention that  such a  patently         illegal  view could or should be held to be binding  on  the         parties  in  a  subsequent claim for gratuity  on  the  same

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       too.ting  is  unacceptable.  The most the court can  say  is         that the previous recognition of a claim to gratuity,  prac-         tically  in  excess  of jurisdiction to do  so,  debars  the         labour  court  from,  going into the  question  whether  the         respondent  was rightly paid that amount as gratuity in  the         past.   In the instant ease, the provisions of s. 11 of  the         C.P.C. have no application. [253 D-G]             (3) It is true that the whole idea of the Provident Fund         to   which   the  employer also contributes,  seems  to  be.         different from a gratuity to which "good. continuous,  effi-         cient and faithful" service may entitle an. employee yet  he         cannot  claim  the benefit of both the guaranteed  or  other         Provident Fund to which the         249         employer  contributes as well as to gratuity as of right  in         the  face  of the provisions of Rule 8.01 and  8.02  of  the         Gratuity  rules.  Illegal payments of gratuity in  the  past         will  not  affect legal claims to Provident Fund.   [253  H.         254, A]             Andhra  Pradesh  State Road Transport  Corporation  v.M.         Rammohan Rao (Civil) Revision Petition No. 1598/1968 decided         on April 25, 1969), (A.P.), over-ruled.

JUDGMENT:             CIVIL  APPELLATE JURISDICTION: Civil Appeals Nos. 36  to         54 of 1971.             Appeals  by special leave from the judgment  and   order         dated  25-8-1970  of the Labour Court,  Hyderabad  in  Civil         Misc. Petitions Nos. 133 to 147 and 165 to 168 of 1970.                                             AND         Civil Appeal No. 1153 of 1972.             Appeal by special leave from  the  judgment  and   order         dated  20-10-71  of  the Labour Court,  Hyderabad  in  Misc.         Petition No. 64/71.                            AND         Civil Appeal No. 312 of 1973.         Appeal  by special leave from the  judgment   and      order         dated  11-2-1972  of the Labour Court, Hyderabad  in   Misc.         Petition  No. 239/70.         AND         Civil Appeals Nos. 325 to 339 of 1973.             Appeals  by  special leave from the judgment  and  order         dated  7th, 9th, 11th and 15th February, 1972 of the  Labour         Court  Hyderabad  in Misc. Petitions  Nos.  231-238/70,  and         240-246/70.             L.N.  Sinha, Sol. General of India and B.  Parthasarthy,         for the appellants.             G.  Narayana  Rao and K.S.  Ramanujacharyulu,   for  the         respondents.         The Judgment of the court was delivered by             BEG, J.  A number of appeals filed by the Andhra Pradesh         State  Road Transport Corporation are before us by grant  of         special  leave  under  Article 136 of  the  Constitution  of         India,  against  orders   of  a Labour  Court  passed  under         section  33C(2) of the Industrial Disputes Act,  1947.   The         facts of the first of these appeals may be stated to  illus-         trate  the kind of circumstances in which a common  question         of law involved in these appeals arises.             The respondent P. Venkateswara Rao, who was employed  on         6th  October,  1933, retired on 10th February,  1958,  after         putting in more than 34 years of service. As he was a former         employee  of the Nizam’s State Railway, his  service  condi-         tions  were governed by the provisions of the Government  of

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       Hyderabad,  Railway  Department Establishment Code  of  1949         (hereinafter referred to as ’the  Code’).  He  claimed  that         he  was  entitled to receive a gratuity at  a  half  month’s         salary for                                                    18--1003 SCI\76         250         each  year of qualifying service subject to a maximum of  15         months’ salary as laid down in Rule 8.01 of the Code,  which         says:                        "8.01. Condition of eligibility.--Gratuity is                  granted  at  the discretion of  Government  in  the                  Railway Department as a reward for good, efficient,                  continuous,  and  faithful service to  a  permanent                  railway  servant if he is not a subscriber  to  the                  Provident Fund or to the Guaranteed Provident Fund,                  on  his quitting the service, or, in the  event  of                  his  death before receipt of gratuity to his  widow                  or   widows  and/or  dependent children.  For  pur-                  poses  of this rule a monthly paid railway  servant                  borne  on the temporary establishment whose pay  is                  charged  to open line capital and revenue works  on                  which he is employed shall be deemed to be a perma-                  nent  railway servant only after he had rendered  4                  years’  continuous service,’ railway  servants  be-                  longing to the category of workshop staff, employed                  otherwise  than  in a supervisory  capacity,  shall                  also  be considered as permanent  railway  servants                  only  after they have rendered 4 years’  continuous                  service".                      The other rules which seemed to have a  bearing                  on the question before us are as follows:                  "8.02. A gratuity cannot be claimed as of right.                    8.04.  No gratuity shall be granted to a  railway                  servant who has been removed from service by reason                  of  any misconduct on his part, save with  the  ex-                  press sanction of the authority competent to  sanc-                  tion the gratuity.                    8.05. Qualifying service.--Except where otherwise                  provided  for in these rules, service must be  con-                  tinuous and must also, in the opinion of the Gener-                  al  Manager, be "good", "efficient" and  "faithful"                  service  to qualify for the gratuity.   A  gratuity                  may  be granted on the fulfilment of the  following                  conditions :--                  (i) Completion of thirty years’ service; or                        (ii)  Attainment  of the  age  of  fifty-five                  years, provided not less than fifteen years’  serv-                  ice has been completed; or                        (iii) Retirement or resignation after fifteen                  years’ service, on grounds admitted by the authori-                  ty  competent to sanction the gratuity as good  and                  sufficient  from the point of view of the  Adminis-                  tration; or                        (iv)Retirement with less than fifteen  years’                  service, due to                  (a)  permanent physical or mental  ’incapacity,  or                  (b)  abolition  of appointment  if  other  suitable                  employment cannot be found for the railway servant.                  251                    8.12. The maximum  period  of  service qualifying                  for gratuity is thirty years.                    8.13. A railway servant who is retired in service                  after  he has attained the age of fifty-five  years                  may be permitted to count the whole of his service,                  subject to the limit of thirty years, as qualifying

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                for, gratuity.                    8.15.  Service  for which a railway  servant  has                  already  received  a retiring gratuity  or  special                  contribution  to  the  provident  fund  or  to  the                  guaranteed   provident  fund counts  as  qualifying                  service  for the purpose rule 8.05 but it shall  be                  excluded  in  calculating the  amount  of  gratuity                  admissible under rule 8.19.                    8.16.  When a railway servant is injured  in  the                  performance of his duty and is obliged to leave the                  service, he may be given the gratuity he had earned                  under  these rules in addition to any  compensation                  gratuity awarded to him on account of his injury.                  8.17. Breaks in service.--                  (i) Ordinarily, a break in the service of a railway                  servant  entails  forfeiture of his  past  service,                  but,  in deserving cases, this rule may be  relaxed                  under  orders  of  the Government  in  the  Railway                  Department,  or  in cases of breaks  not  exceeding                  fifteen  days in respect of railway servants  other                  than  Class I or Class II under the orders  of  the                  General  Manager,  the period of break  whether  in                  permanent or temporary service or both being treat-                  ed as dies non.                      (ii) A railway servant who has been  discharged                  from      the  service may, subject  to  the  other                  conditions of     these rules, on re-employment  on                  the Railway,  be permitted to add the period of his                  former qualifying service to his future service for                  the purpose of determining the gratuity  admissible                  to him.                   8.19. Amount of gratuity.--The amount of  gratuity                  admissible shall be as follows:                  (i) In cases of less than fifteen  years’  qualify-                  ing  service falling under rule 8.05(iv)  above,  a                  gratuity limited ordinarily to half a month’s  pay,                  and, in special cases, where circumstances warrant,                  to  one  month’s pay, for each year  of  qualifying                  service, subject to a maximum of six months pay  in                  all.                      (ii) In all other cases falling under the rules                  in this         chapter half a month’s pay for each                  year  of qualifying service, subject to  a  maximum                  of fifteen  months’ pay"                  252                      The respondent claimed Rs. 3962.50 as gratuity.                  The defence of the appellant was, inter-alia,  that                  a  sum of Rs. 3962/- had already been paid  to  the                  respondent  on 13th March, 1968, as a special  con-                  tribution to Provident Fund.  It was urged that  no                  employee is entitled to any grant at all if he is a                  subscriber  to  Provident Fund. It is  pointed  out                  that  Rule 8.01 set out abOve made a claim of  pay-                  ment  of gratuity admissible in those  cases  where                  the employee was not a subscriber to the  Provident                  Fund.-  On the face of it, this  contention,  which                  has been repeated before us, seems to be sound  and                  unanswerable.                      The  Labour Court had, however, over-ruled  the                  main defence of the appellant on the strength of  a                  previous  proceeding  under section  15(2)  of  the                  Payment of Wages Act, in which the respondent   had                  claimed  a  payment  out of his  gratuity,  to  the                  extent of 2,000/-, on the ground that the  gratuity                  claimable  fell  within the definition  of  "wages"

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                under  the Payment of Wages Act.  It had been  held                  that  he  was entitled to such payment although  he                  was  a  subscriber to a Provident  fund.   In  that                  case, the respondent had applied only for deducting                  Rs. 1256.79 due from him to the Co-operative Credit                  Society  of  the  appellant  Corporation  from  the                  gratuity which would have become payable to him  on                  retirement.   He  was  declared  entitled  to   Rs.                  1630/only.  The two issues framed in that case were                  as follows:                      1. Whether gratuity is wages within the meaning                  of payment of Wages Act ?                      2.  Whether the Corporation had the  discretion                  to refuse to pay the gratuity to the respondent and                  whether it cannot be questioned ?             The case had gone up to the High Court of Andhra Pradesh         in  revision  under Section 115 Civil Procedure  Code.   The         High Court, while rejecting the objection advanced on behalf         of  the  appellant Corporation in a case arising out of  the         proceeding under the Payment of Wages Act, had observed that         Rule 8.15 indicated that Rule 8.01 did not stand in the  way         of awarding gratuity to a person who is also entitled to the         Provident Fund.             We  are unable to read Rule 8.15 in the same way as  the         High  Court had done it in the earlier case.  We think  that         Rule8.15  only explains how Rule 8.05 was to be  applied  in         certain  cases.   It  lays down that the  period  for  which         gratuity of retirement or contribution to the Provident Fund         had been received will count towards the qualifications laid         down in Rule 8.05.  It then clarifies that this period  will         not,  however,  affect  the calculation  of  the  amount  of         gratuity  under  Rule 8.19.  The obvious intention  of  Rule         8.15 was that the amount already received either as gratuity         or   contribution  to  the Provident Fund will not  be  paid         again  to the employee.  The period for which  payments  had         already  been made, which may happen in certain cases,  such         as  those of broken service  or  of  anticipatory  payments,         like the one to satisfy debt of the respondent P.  Venkates-         wara  Rao, to the Cooperative Society, would,  nevertheless,         count towards the qualifying period prescribed by Rule 8.05.         253             On  the strength of the judgment of the High  Court,  in         the previous proceeding, which was the basis of the decision         of the Labour Court, Learned Counsel for the respondent  had         put  forward a preliminary objection that the matter  cannot         be  reagitated.  It is clear that the provisions of  Section         11 C.P.C. have no application to such a case.  The nature of         the  proceedings  and   of  authorities   before  which  the         claims  were  made were different.  It is,  however,   urged         that  the principles of res Judicata should bar raising  the         same question once again in a subsequent proceeding.  It  is         true  that the High Court had made observations which had  a         clear  bearing on  the question to be decided  subsequently,         but, it will be noticed that the question now before us  was         not  directly the subject ,matter of  the issues  framed  in         the  previous  proceeding  which have been  set  out  above.         Nevertheless, an objection was taken on behalf of the appel-         lant. that a basic condition for the eligibility of a  claim         for   gratuity  had not been satisfied inasmuch as  the  re-         spondent was a subscriber to a Provident Fund.  This  objec-         tion  had been over-ruled.  It  was held that  the  gratuity         could be claimed as of right.  We do not know what direction         was exactly given in that case.  The finding, however,  that         the petitioner was entitled to a payment of gratuity, as  of         right,  to  the extent of Rs. 1630/-, appears to  have  been

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       given  as a result of the decision that he was  entitled  to         the  payment   of  this  much gratuity and no more  for  the         purposes  of  the claim made in the  proceedings  under  the         Payment of Wages Act.             It  seems  to us that, when gratuity was  awarded  in  a         previous proceeding, as a part of Wages, in the teeth of the         clear provision of Rule 8.01 imposing a condition precedent,         which was not satisfied, to eligibility for it, it is diffi-         cult  to  hold that such a patently illegal  view  could  or         should be held to be binding on the parties in a  subsequent         claim for gratuity on the same footing, before  the   Labour         Court.   We find that, even if we were to hold, as we  think         we  must,  as  the matter was not taken  further,  that  the         declaration  of  entitlement to Rs. 1630/- in  the  previous         proceeding should be held to be binding between parties,  we         cannot apply the same reasoning to the subsequent claim made         before the Labour Court which is now before us.  The  Labour         Court  had  not  even deducted the  amount  already  awarded         earlier  from  the amount awarded  by   its   judgment   now         before us.  The most we can say is that the previous  recog-         nition  of  a claim to gratuity, practically  in  excess  of         jurisdiction  to do  so, debars the Labour Court from  going         into  the question whether the respondent was  rightly  paid         that  amount as gratuity in the past.  We have  already  set         out  the rule which disentitles him from being eligible  for         the  award  of gratuity when he contributes to  a  provident         fund  also.  We  have also interpreted the  rule  which  was         misunderstood earlier by the High Court.             We  need  not here set out the relevant  provident  fund         rules  contained in Chapter 7 of the Code.  It is true  that         the whole idea of the Provident Fund, to which the  employer         also  contributes, seems to be different from a gratuity  to         which "good, continuous, efficient and faithful servant" may         entitle an employee, yet, we are unable to hold         254         that  the employee is able to claim the benefit of  ,both  a         ,guaranteed  or other Provident Fund, to which the  employer         contributes,  as  well as to gratuity, as of right,  in  the         face of the provisions of Rule 8.01 and 8.02 of the gratuity         rules set out above.             Although  we have held that a claim to gratuity,  as  of         right, cannot be put forward, under the Code, by an employee         who  gets the benefit of a Provident Fund also, yet  illegal         payments  of  gratuity  in the past will  not  affect  legal         claims  .to  Provident Fund.  In  Civil Appeal No.  1153  of         1972,  the amount awarded to an employee was in  respect  of         payment due towards the guaranteed Provident  Fund which had         nothing  to do with a claim for gratuity.  This  claim  was,         therefore rightly allowed.             Civil  Appeals  No. 36 to 54 of 1971 and  Civil  Appeals         Nos.  325 to 339 of 1973 involve only claims to gratuity  by         persons who  are entitled to Provident Fund.  These  claims,         according to the  view taken by us, are not admissible under         the law.  Similar is the position in Civil Appeal No. 312 of         1973.             For the reasons given above, we allow Civil Appeals Nos.         36  to  54 of 1971, and Civil Appeal No. 312  of  1973,  and         Civil  Appeals  Nos.  325 to 339 of 1973,  and  dismiss  the         claims under Section 33C (2) of the Industrial Disputes Act,         1947,  of  the respondents in these appeals.   We,  however,         dismiss the Civil Appeal No. 1153 of 1972.         The parties will bear their own costs.         S.R.                         C.As. 36-54/71, 312/73                                      and 329-339/73 allowed.                                      C..4. No. 1153/72 dismissed.

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