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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

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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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