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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CIVIL APPELLATE JURISDICTION

WRIT PETITION NO.11812 OF 2026

Mr. Murali Venkataramana ....Petitioner

V/S

1. Philips Klin Services (India) Pvt. Ltd.

2. Life Insurance Corporation of India ....Respondents

_________

Mr. Avinash Jalisatgi with Mr. T.R. Yadav, Mr. Nagendra Dube,

Ms. Divya Wadekar, Mr. Mulanshu Vora and Mr. Shivam S. Dube for the

Petitioner.

Mr. Haresh Shivdasani for Respondent No.1.

__________

CORAM : SANDEEP V. MARNE, J.

RESERVED ON : 12 OCTOBER 2026.

PRONOUNCED ON : 26 OCTOBER 2026.

J U D G M E N T :

1.By this Petition, Petitioner has challenged judgment and order

dated 17 August 2026 passed by the Appellate Authority constituted

under the Payment of Gratuity Act, 1972 (PG Act). By the impugned

judgment and order, the Appellate Authority has partly allowed the

Appeal (PGA) No. 25 of 2024 preferred by Respondent No.1 and has set

aside the judgment and order dated 22 January 2024 passed by the

Controlling Authority in Application (PGA) No.156 of 2013. The

Controlling Authority had directed payment of gratuity of Rs.27,64,384/-

to the Petitioner. The Appellate Authority, while setting aside the order

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of the Controlling Authority dated 22 January 2024 has reduced the

amount of gratuity payable to the Petitioner to Rs.10,00,000/-, which is

directed to be paid along with interest at the rate of 10% per annum

from 17 October 2012. Petitioner is aggrieved by reduction of amount of

gratuity payable to him from Rs.27,64,384/- to Rs.10,00,000/- and has

accordingly filed the present Petition.

2.Petitioner joined the services of Respondent No.1 on 23 March

1995. He served with Respondent No.1 for 17 years and 6 months and

rose to the position of Vice President. He was drawing basic wages of

Rs.1,33,100/- per month and his annual package was Rs.48,00,000/-.

Petitioner tendered the resignation from service of Respondent No.1 on

5 September 2012. According to Petitioner, 17 October 2012 was his last

day of work.

3.Respondent No.1 has created a trust for administration of gratuity

payable to its employees and has also obtained insurance policy from

Life Insurance Corporation of India (Respondent No.2). Petitioner relies

on email dated 14 February 2011 under which Respondent No.1 agreed

to pay slab-wise gratuity for employees putting in over 10 years of

service. Gratuity at the rate of 30 days’ for each completed year of

service, was agreed to be paid under the email dated 14 February 2011.

4.Respondent No.1 issued legal notice to the Petitioner on 26

November 2012 leveling certain allegations, which was replied to by the

Petitioner on 2 January 2013. According to the Petitioner, he was not

paid gratuity despite orally demanding the same.

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5.Since Petitioner was denied gratuity, he approached the

Controlling Authority under the PG Act and filed Application (PGA)

No.156 of 2013 and claimed gratuity of Rs.23,95,800/-. The Application

was resisted by Respondent No.1 by filing Written Statement. After

learning that Respondent No.1 had purchased policy from LIC,

Petitioner applied for impleadment of LIC to the PG Application.

Accordingly, LIC was impleaded as Respondent No.2 to the PG

Application. The Application preferred by LIC for its deletion from PG

Application was rejected by the Controlling Authority by order dated 1

September 2023. Respondent No.2-LIC also filed written statement.

Petitioner examined himself. Respondent No.1 examined Mr. Vijay A.

Vengurlekar, Accounts Executive, to prove its defence.

6.The Controlling Authority thereafter passed judgment and order

dated 22 January 2024 directing Respondent No.1 to pay gratuity of

Rs.27,64,384/- to the Petitioner with simple interest at the rate of 10%

per annum from 17 October 2012 onwards.

7.Respondent No.1 filed Appeal before the Appellate Authority

under Section 7(7) of the PG Act challenging the order of the Controlling

Authority. It appears that Petitioner had filed SC Suit No.1687 of 2015

for payment of various legal dues in which Respondent No.1 had filed

counterclaim. Parties settled the dispute and entered into Consent

Terms dated 15 December 2025. Under the Consent Terms, Respondent

No.1 paid amount of Rs.4,42,002/- to the Petitioner against various

claims. It was also agreed that the accumulated balance in

superannuation fund with LIC was Rs.24,19,690/-, to which Petitioner

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would be entitled to, without deductions. It was further agreed that the

settlement was restricted to claims arising out of the suit and that

gratuity claim pending before Appellate Authority would remain

unaffected.

8.The Appellate Authority heard the Appeal preferred by

Respondent No.1 and by judgment and order dated 17 August 2026, the

Appeal has been partly allowed by setting aside the order of the

Controlling Authority dated 22 January 2024. The Appellate Authority

has held Respondent No.1 is liable to pay amount of Rs.10,00,000/-

towards gratuity to the Petitioner with interest at the rate of 10% per

annum from 17 October 2012 onwards. Petitioner is aggrieved by

reduction of gratuity amount from Rs.27,64,384/- to Rs.10,00,000/- and

has accordingly filed the present Petition.

9.Mr. Jalisatgi, the learned counsel appearing for Petitioner submits

that the Appellate Authority has grossly erred in interfering in the order

of the Controlling Authority. He submits that the Controlling Authority

had rightly ascertained the gratuity payable to the Petitioner as

Rs.27,64,384/-. That the email dated 14 February 2011 expressly provided

for payment of gratuity as per revised terms. That under Section 4A of

the PG Act, Petitioner is entitled to draw higher amount of gratuity than

the one payable under the PG Act. He relies on Board Resolution dated

16 August 2012 in support of his plea that Respondent No.1 had

specifically agreed to lift the maximum limit applicable under PG Act

well before coming into effect of Petitioner's resignation. That

subsequent execution of Deed of Variation on 19 November 2012 is mere

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ministerial act for giving effect to the Board Resolution. He submits that

once a decision is taken to pay higher amount of gratuity, the same

cannot be made subject to technical formalities of execution of Deed of

Variation. He submits that similarly placed employees have been paid

higher amount of gratuity by implementing orders passed by the

Controlling Authority. He prays for setting aside the order passed by the

Appellate Authority.

10.The Petition is opposed by Mr. Shivdasani, the learned counsel

appearing for Respondent No.1. He submits that the Appellate Authority

has rightly appreciated the position that the varied scheme of payment

of gratuity without applying limit under PG Act was brought into effect

from 20 November 2012. That at the time of cessation of Petitioner's

service on 17 October 2012, the scheme introduced with effect from 1

April 2011 was in vogue which provided for application of maximum

limit of PG Act to the slab-wise gratuity. That the maximum limit was

lifted by revised scheme introduced from 20 November 2012. He invites

attention of this Court to clause 9 of the Trust Deed in support of his

contention that any variation in the scheme requires three-stage

procedure of passing of board resolution, execution of variation deed,

and securing approval of the Income Tax Department to the varied

scheme. He submits that mere passing of board resolution is not

sufficient for effecting variations in the scheme. That the varied scheme

was ultimately incorporated in the Trust Deed on 19 November 2012 and

came into effect from 20 November 2012. That therefore payment of

gratuity without applicability of any limit would only apply to those

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ceasing in service after 20 November 2012. Mr. Shivdasani relies on

judgment of this Court in Pune District Central Co-operative Bank

Limited vs. Shivajirao Dinkarrao Jadhavrao and Ors.

1

in support of his

contention that mere passing of board resolution is not sufficient and

that the revised scheme comes into effect only after approval is given to

the scheme by the Income Tax authorities. He relies on judgment of this

Court in Mercedes-Benz India Pvt. Ltd. and Ord. vs. Noshir Nani Desai

2

in support of its contention that mere email correspondence does not

create any agreement between the parties. He prays for dismissal of the

Petition.

11.Rival contentions urged on behalf of the parties now fall for my

consideration.

12.Petitioner is aggrieved by reduction in the amount of gratuity by

the Appellate Authority. The Controlling Authority had granted gratuity

amount of Rs.27,64,384/- to the Petitioner, which is brought down to

Rs.10,00,000/- by the Appellate Authority by the impugned judgment

and order dated 17 August 2026.

13.It appears that Respondent No.1 has created a Trust for

administration of gratuity payable to the employees and has also

obtained policies from Life Insurance Corporation of India. Copy of the

Trust Deed dated 20 June 2007 is placed on record. Under clause 11(a) of

the Trust Deed, the trustees agreed to provide for payment of gratuity on

termination of service, on death or retirement of the member or as

1(2004) 4 Mh.L.J. 859

22024 SCC OnLine 199

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provided in the rules of the Scheme. Under annexure to the Trust Deed,

Group Gratuity Assurance Scheme was introduced with effect from 1

April 2007. Under the Scheme, gratuity was payable at the rate of 15 days

salary for each year of service.

14.Respondent No.1-Company however decided to offer higher

amount of gratuity to the employees and officers as a token of

appreciation for their continued service in the Company. The Company

voluntarily increased the gratuity entitlement as:

20 days basic salary for 5-7 years of service,

25 days of basic salary for 7-10 years of service and

30 days of basic salary for more than 10 years of service.

15. The decision of the management was communicated to the

employees vide email dated 14 February 2011. The relevant part of

email dated 14 February 2011 reads thus:

GRATUITY

As per the Government of India rules, the Company is obliged to pay 15 days

salary, if an employee completes 5 years of permanent service in the Company.

As a token of our appreciation for your continued service in the Company,

Company is voluntarily increasing the gratuity payment as follows:-

5-7 years 20 days of basic salary

7-10 years 25 days of basic salary

More than 10 years30 days of basic salary

We have applied to Government of India for approval of above proposal and on

receipt of the same, we will implement the above proposal

16.Thus, Respondent No.1-Company agreed to provide higher

amount of gratuity depending on length of service for employees who

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had put in more than 10 years of service. Respondent No.1 agreed to pay

gratuity at the rate of 30 days’ of basic salary per completed year of

service. To give effect to the decision communicated to the employees by

email dated 14 February 2011, a Deed of Variation was made on 21 April

2011 to the Trust Deed by which amendments were effected in various

clauses of the Scheme. The amendment reflected in Annexure-A to the

Deed of Variation dated 21 April 2011 reads thus:

ANNEXURE ‘A’

Years of unbroken

service on date of

cessation of service

Gratuity payable (Basic + DA)

5 years and more but

less than 7 years

20 days salary for each completed year of sservice

subject to maximum limit specified in the Payment

of Gratuity Act, 1972, as amended from time to time.

Over 7 years but less

than 10 years

25 days for each completed year of service subject to

maximum limit specified in the Payment of Gratuity

Act, 1972, as amended from time to time.

Over 10 years 30 days for each completed year of service subject to

maximum limit specified in the Payment of Gratuity

Act, 1972, as amended from time to time.

The above mentioned amendment shall take effect from 1.04.2011.

17.Thus, the Revised Scheme of payment of slab-wise gratuity came

into effect from 1 April 2011. However, though the email was silent on

applicability of maximum limit, while executing the Deed of Variation,

the trustees incorporated maximum limit specified under PG Act in each

of the slabs. It was never the intention of Respondent No.1 to apply any

maximum limit on payment of slab-wise gratuity. Respondent No.1

realized the mistake committed while executing the Deed of Variation,

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and accordingly the Board of Respondent No.1 adopted following

resolution in meeting held on 16 August 2012:

TRUE EXTRACT FROM THE MINUTES OF THE MEETING OF THE BOARD

OF DIRECTORS OF PHILLIPS KILN SERVICES (INDIA) PVT. LTD. HELD ON

16TH AUGUST, 2012.

The Board of Directors vide their meeting held on 15th March, 2007 have

approved the Gratuity Cum Life Insurance Scheme with the Life Insurance

Corporation of India (LIC) and the Trust Deed and Rules thereto. The Board

informed that vide Board resolution dated 11the February 2011 amended the

ELIGIBILITY Clause in the Gratuity Trust Deed and its Rules by giving effect to

the admission of working Directors and also participate in the said Gratuity

Scheme of all eligible members who are not more than 70 years and also

extended graded benefits of Gratuity stated in Section III of the Rules of the

Trust Deed.

The Board informed that while making the deed of variation, even though the

gratuity benefits based on the years' of service with the Company was

extended, the maximum Gratuity payable under Rule 8,9and 10 has wrongly

been specified as per the Payment of Gratuity Act, 1972 as amended from time

to time. However, the intention of the Board was not to restrict the maximum

gratuity payable as per the Gratuity Act. Hence, this clause needs an

amendment in the Trust Deed and Its Rules and also the Group Gratuity

Scheme with LIC of India.

After discussions, it is RESOLVED THAT the Gratuity payable Clause in the

Gratuity Trust Deed and its Rules be amended to give effect to the actual

amount of gratuity payable as per the graded scale of benefits based on the

years' of service with the Company and deleting the word "Subject to

maximum limit specified in the Payment of Gratuity Act, 1972, as amended

from time to time".

FURTHER RESOLVED THAT the Trustees of the Gratuity Trust Scheme be

authorized do all acts in carrying out the above said amendments in the Trust

Deed and Rules. The Trustees also carry out necessary modifications in the

Scheme with LIC in co-ordination with LIC.

IT IS FURTHER RESOLVED THAT on carrying out the necessary amendments

in the Trust Deed and Rules, the Common Seal of the Company be affixed to

the said amended Trust Deed/ Deed of Variation.

18.Thus, it is emphatically stated in the board resolution dated 16

August 2012 that the maximum limit under PG Act was wrongly

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specified, though the intention of the Board was not to restrict

maximum gratuity payable. The Board accordingly resolved to amend

the Trust Deed to give effect to actual amount of gratuity payable as per

the graded scale of benefits by removing the words "subject to maximum

limit specified in the Payment of Gratuity Act, 1972, as amended from

time to time".

19.Accordingly, a Deed of Variation dated 19 November 2012 was

executed, in which following amendments were introduced in the Trust

Deed:

AMENDMENTS

IN THE RULES:

(1) Rule No.7 “Scheme of Insurance” :

Delete the words “as specified in The Payment of Gratuity Act 1972, as

amended from time to time” wherever appearing in “Annexure A” under the

rule #7 as amended by leader of origin dated 21st April 2011.

Further add following words in the 14

th

line before the word “provided….”

“However life cover will be restricted as per the Rules of the Corporation

amended from time to time.”

(2) Rule No.8,9,10 Benefits:

Delete the words “as specified in the Payment of Gratuity Act, 1972 as

amended form time to time” wherever appearing in “Annexure A” under the

Rule No. 8, 9 & 10 as amended by deed of variation dated 21

st

April 2011.

Hence the gratuity payable under Rule No.7, 8, 9 & 10 shall be with no ceiling.

The above mentioned amendments shall take effect from 20/11/2012.

20.The Petitioner resigned from service during this gap period of the

two Deeds of Variation dated 21 April 2011 and 19 November 2012. He

resigned on 5 September 2012 and his resignation took effect from 17

October 2012. According to Respondent No.1-Company, the amended

scheme removing the maximum limit came into effect from 20

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November 2012, and therefore the same does not apply to the Petitioner.

Therefore, the short issue that arises for consideration is whether

Petitioner can be extended the benefit of gratuity payable as per the

decision taken by Board of Directors of Respondent No.1 without

imposition of any maximum limit.

21.If proceedings filed before the Controlling Authority are perused,

it appears that Respondent No.1 initially took a plea that no gratuity was

payable to the Petitioner on account of non-submission of I-Form,

commission of prejudicial acts, and cause of huge financial loss to

Respondent No.1 leading to forfeiture of gratuity and in the Written

Statement, Respondent No.1 levied serious allegations of cause of

financial loss by the Petitioner and raised the plea of forfeiture of

gratuity. Respondent No.1-Company also raised the plea that it was

entitled to recover amount of Rs.6,40,000/- from Petitioner towards

notice pay and further amount of Rs.4,01,507/- being paid excess to him.

In paragraph 1(d) of the written statement, Respondent No.1 raised a

vague plea that as per the provisions of PG Act, the Trust Deed and

Insurance Policy obtained from LIC, no employee is entitled to gratuity

above Rs.10,00,000/- and as on 17 October 2012, maximum amount of

gratuity was capped at Rs.10,00,000/-.

22.The Controlling Authority adjudicated Petitioner's Application by

judgment and order dated 22 January 2024 and held that since Board

Resolution was passed prior to submission of resignation by the

Petitioner, he was entitled to draw slab-wise gratuity without

application of any upper limit. Accordingly, Respondent No.1-Company

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was directed by the Controlling Authority to pay gratuity of

Rs.27,64,384/- alongwith interest.

23.When Respondent No.1-Company filed Appeal (PGA) No.25 of

2024, there was apparently a shift in its stand and it gave up the plea of

non-entitlement of Petitioner to receive any amount towards gratuity.

Respondent No.1 prosecuted the Appeal by raising the plea of

applicability of maximum cap of Rs.10,00,000/- at the time of

resignation of the Petitioner. The Appellate Authority has accepted the

plea raised by Respondent No.1-Company by holding that the revised

scheme introduced vide Deed of Variation dated 19 November 2012 came

into effect on 20 November 2012 when Petitioner was not in service. It

therefore held that the maximum cap of Rs.10,00,000/- was applicable as

on the date of resignation of the Petitioner. This is how the Appellate

Authority has capped the maximum amount of gratuity payable to the

Petitioner at Rs.10,00,000/-.

24.In my view, the Appellate Authority has mechanically considered

the case of the Petitioner without appreciating the intention of

Respondent No.1 to extend the benefit of higher amount of gratuity to

its employees. As observed above, there was an error on the part of the

trustees while executing the Deed of Variation dated 21 April 2011. The

email dated 14 February 2011 did not reflect imposition of any upper

limit on amount of gratuity payable to the employees. The higher

amount of gratuity as per applicable slab was extended as token of

appreciation towards employees, who continued in service of the

Company for more than five years. There was no intention on the part

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the management to apply any upper limit while introducing the scheme

of grade-wise gratuity. However, while executing the Deed of Variation

dated 21 April 2011, erroneously maximum limit specified in the PG Act

came to be inserted while making applicable the grade-wise gratuity

scheme.

25.The Board of Respondent No.1 realized the mistake in execution

of the Deed of Variation dated 21 April 2011. The mistake was corrected

by passing Board Resolution dated 16 August 2012. However, while

giving effect to the Board Resolution dated 16 August 2012, the trustees

once again committed the mistake of not making applicable the decision

to delete maximum gratuity limit with effect from date of application of

slab-wise gratuity i.e. 1 April 2011. The amendment was effected from 20

November 2012.

26.Thus, if a hyper-technical approach is adopted, Petitioner can be

denied the benefit of slab-wise gratuity scheme by applying maximum

limit of Rs.10,00,000/-. However, such hyper-technical approach needs to

be shunned in the present case considering the intention of Respondent

No.1. The Board Resolution dated 16 August 2012 expressly stated that

“However, the intention of the Board was not to restrict the maximum

gratuity payable as per the Gratuity Act”.

27.Also, application of limit of Rs.10,00,000/- to slab-wise gratuity

scheme renders the objective of paying higher gratuity to the employees

otiose in case of most of the employees. If a case of an employee drawing

salary of Rs.50,000/- at the time of retirement and who has put in 25

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years of service is taken into consideration, the gratuity payable under

slab-wise scheme would be in excess of Rs.10,00,000/- and in such

situation, applying the maximum limit of Rs.10,00,000/- would render

the very objective of offering higher amount of gratuity ineffective.

28.Therefore, in the facts of the present case, intention of

Respondent No.1-Company needs to be borne in mind and due

importance needs to be given to the specific statement in the Board

Resolution that the Company never intended to apply maximum limit

while paying gratuity under slab-wise scheme. The intention was to pay

gratuity under the slab-wise scheme without putting any upper limit.

This objective must be given effect to rather than adopting a hyper-

technical approach that the Deed of Variation removed the provision for

maximum limit from 20 November 2012 i.e. after resignation of the

Petitioner. In the facts of the case where a mistake was committed in

applying maximum limit under the Deed of Variation dated 21 April

2011. Once the mistake was sought to be cured by execution of fresh

Deed of Variation dated 19 November 2012, the benefit of removal of

mistake must be extended to the Petitioner.

29.Respondent No.1 appears to carry some grudge against the

Petitioner, which is the reason why no gratuity was paid to him and he

was driven to the Controlling Authority for securing his gratuity. Before

the Controlling Authority, a bitter battle was fought levelling several

allegations of misconduct against the Petitioner. Otherwise, Respondent

No.1 appears to have paid higher amount of gratuity to all other officers

and employees. The witness of Respondent No.1 Mr. Vijay Audumbar

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Vengurlekar, gave an admission that Mr. Manisubramaniam, one of the

Directors of the Company, received massive amount of gratuity of

Rs.2,53,84,671/-. The other Director, Ms. Bhanumati Subramaniam,

received gratuity of Rs.53,66,871/-.

30.The case also involves an element of unjust enrichment by

Respondent No.1. As observed above, Respondent No.1 has obtained a

policy from LIC for payment of gratuity to its employees. It appears that

gratuity of Rs.27,64,385/- had accumulated in the account of Petitioner

maintained with LIC. This is clear from email dated 5 June 2015. Mr.

Shivdasani has sought to distance Respondent No.1 from email dated 5

June 2015 contending that the same is fabricated. However, cross-

examination of the witness Vijay Vengurlekar would indicate that he

gave express admission that the email was received by him from LIC.

Since recipient of the email has himself admitted existence of the

document, Respondent No.1 cannot contend that same is fabricated.

Though the witness has denied contents of the email, he has admitted

existence thereof. There is one more document on record being bank

account extract which indicates an amount of Rs.29,80,808/- was

transferred in the bank account of Respondent No.1 by LIC. It is the case

of Respondent No.1 that gratuity amount accumulated with LIC is

apportioned by Respondent No.1. This is disputed by Mr. Shivdasani

contending that the remittance received under the relevant bank entry

does not pertain to Petitioner alone. However there is no material placed

by him on record that the said transmitted amount did not include the

gratuity payable to Petitioner. Also the remittance is not restricted to Rs.

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10,00,000/- Therefore there appears to be prima facie truth in the

contention of the Petitioner about Respondent No. 1 receiving amount

in excess of Rs. 10,00,000 from LIC. Thus, the gratuity payable by the

Respondent No.1 to Petitioner is appropriated by Respondent No.1 and

to this extent there appears to be unjust enrichment by Respondent

No.1. However, it is not necessary to delve deeper into this aspect. What

needs to be taken into consideration is that gratuity amount of

Rs.27,64,385/- was available with LIC to be paid to the Petitioner and the

said amount more or less matches the amount directed to be paid by the

Controlling Authority.

31.Respondent No.1 has placed on record copy of letter dated 25

April 2011 addressed to Income Tax Authorities in support of its

contention that variation in the Scheme required approval of

Commissioner of Income Tax. However, no document is placed on record

to demonstrate that similar approval was sought in respect of Deed of

Variation dated 19 November 2012.

32.I am also not impressed by submission of Mr. Shivdasani that

three-stage procedure was mandatory for giving effect to any variation

in the Scheme. The three-stage procedure may be relevant for the

purpose of effecting variation in the gratuity scheme. In the present

case, variation was brought upon by Deed of Variation dated 21 April

2011. What is done subsequently is merely correction in the said Deed of

Variation. For such correction, it was not necessary to procure fresh

approval from Income Tax Authorities. Correction of error in the earlier

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Deed of Variation ordinarily ought to have been given effect from 1 April

2011. The same is erroneously given effect from 20 November 2012.

33.Reliance by Mr. Shivdasani on judgment of this Court in Pune

District Central Cooperative Bank Limited (supra) is inapposite. In that

case, the gratuity payable under the PG Act at the time of retirement of

Respondent therein was Rs.1,00,000/- and the said amount was paid to

him. Shortly before his retirement, a Board Resolution was passed on 3

February 1997 for introduction of group gratuity scheme alongwith Life

Insurance Corporation, under which gratuity was to be raised to

Rs.2,50,000/-. The scheme was introduced w.e.f. 1 April 1997.

Respondent therein was denied the benefit of group gratuity scheme

since he retired on 28 February 1997 i.e., prior to 1 April 1997. In the

peculiar facts of that case, this Court held in paragraphs 6 and 7 of the

judgment as under:

6. A proper reading of the gratuity application filed before the Controlling

Authority would establish that what was sought was payment of gratuity

under the Act. There was no reference made at all to any resolution nor was

any reference made to other persons having been paid gratuity in excess of Rs.

1,00,000/- nor was there any submission that the petitioner-bank had shown

favouritism to some employees or had discriminated against the respondent-

workman by not paying him gratuity in excess of Rs. 1,00,000/-. The written

statement, therefore, naturally did not contain any pleading about the

resolution of the bank dated 3-2-1997. According to the bank, as contended in

the written statement, the gratuity of Rs. 1,00,000/- had been paid to the

workman on 18-3-1997 in accordance with the Act and no further amounts

were payable to him. It appears that it was during the course of evidence and

arguments before the Controlling Authority that material was brought on

record to indicate that some persons had been paid gratuity in excess of Rs.

1,00,000/- although they had retired after the respondent-workman but before

the amendment to the Act in September, 1997 raising the ceiling to Rs.

2,50,000/-. The Controlling Authority, therefore, was in error to grant gratuity

to the respondent-workman in excess of Rs. 1,00,000/- when the claim of

gratuity was made under the Act and there was no evidence on record to

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indicate that the bank was paying gratuity at a more beneficial rate than that

available under the Act. The only reason for granting the application is that

the other employees, who had retired prior to the amendment being brought

into force, were paid gratuity in excess of Rs. 1,00,000/-. The Controlling

Authority has observed that the Board resolution of 3-2-1997 had not been

brought on record. The Labour Court had given no reasons to indicate as to

why the amount in excess of the gratuity claimed should have been paid to the

respondent. There was no scheme available before the Controlling Authority

which stipulated that gratuity in excess of Rs. 1,00,000/- was payable to the

employees. That being so, the Controlling Authority was wholly in error to

grant this amount.

7. The Appellate Authority has committed a further error by confirming the

judgment and order of the Controlling Authority. The resolution of the bank

dated 3-2-1997 was brought on record before the Appellate Authority. The

Appellate Authority has interpreted the resolution to mean that the bank

intended to pay the enhanced gratuity to the employees who were on their

muster rolls on 3-2-1997. The submission made by the petitioner that the

group gratuity scheme was applicable only from 1-4-1997 was not accepted by

the Appellate Authority because by the resolution it was decided to ascertain

the burden of the estimated gratuity payable on 3-2-1997. A perusal of the

resolution dated 3-2-1997 indicates that the Board of Directors of the bank

had taken a decision to introduce the group gratuity scheme in view of the

provisions of law then existing as well as the future amendments to the

Payment of Gratuity Act which would stipulate Rs. 2,50,000/- as the maximum

limit of gratuity payable to an employee. After deciding to introduce the

gratuity scheme in principle, the resolution stated that Rs. 17,78,47,261/- was

the liability as on that date. It was then resolved to make a deposit of this

amount in instalments with the Life Insurance Corporation towards the group

gratuity scheme. A further decision was taken to introduce the scheme in

respect of workmen who were on the rolls on 21-3-1997. It was also decided to

introduce the scheme from 1-4-1997. The Commissioner of Income-Tax, Pune

had accorded approval to the scheme of gratuity known as the Pune District

Central Co-operative Bank Limited Employees' Group Gratuity cum Life

Insurance Scheme. This approval was effective from 1-4-1997. Therefore,

obviously, the scheme could come into operation only w.e.f. 1-4-1997. There is

no doubt that some workmen who, the respondent-workman claimed, had

retired after him were paid gratuity in excess of Rs. 1,00,000/-. These persons

had retired some time in July 1997. Obviously, therefore, they were paid

gratuity under the Group Gratuity Scheme introduced on 1-4-1997 under

which there was no ceiling for the payment of gratuity, although a ceiling

existed under the Act. The petitioner bank therefore, cannot be faulted for

having paid those persons who had retired after the introduction of the

scheme on 1-4-1997 gratuity in excess of Rs. 1,00,000/-.

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34.Thus, in Pune District Central Co-operative Bank (supra), the

scheme for payment of higher gratuity was never placed before the

Controlling Authority, which had directed payment of amount of

Rs.2,50,000/- to Respondent therein only on account of other employees

being paid the said amount. The Resolution dated 3 February 1997 was

brought on record for the first time before the Appellate Court. This

Court held that the revised scheme came into operation from 1 April

1997 when approval of Commissioner of Income Tax was accorded. The

facts of the case in Pune District Central Co-operative Bank (supra) are

clearly distinguishable, in that the said case did not involve commission

of mistake in execution of Deed of Variation. In the present case,

Respondent No.1 has admitted the mistake while executing the Deed of

Variation and resolved to correct the said mistake. Therefore, the

judgment in Pune District Central Cooperative Bank (supra) cannot be

made applicable to the unique facts and circumstances of the present

case.

35.Mr. Shivdasani relies on judgment of this Court in Mercedes Benz

India Pvt. Ltd. (supra) in support of his contention that email does not

constitute agreement between the parties. This Court held in paragraphs

10, 11 and 12 of the judgment as under:

10. On the other hand, in Writ Petition No. 12201 of 2021 filed by the Mr.

Desai, he is aggrieved by capping of Rs. 10,00,000/- by the Appellate Authority

while determining the entitlement of employee towards gratuity. According to

Mr. Rao, there is email correspondence between the parties which clearly

provided for payment of higher amount of gratuity and according to him, the

same would constitute an exception within the meaning of Section 4(5) of the

Gratuity Act. Sub-Section 5 of Section 4 reads thus:

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(5) Nothing in this section shall affect the right of an employee receive better

terms of gratuity under any award or agreement or contract with the employer.

11. It is therefore necessary to examine whether there is any agreement

between the parties for payment of higher amount of gratuity than the one

provided under the Gratuity Act. I have gone through the email

communications dated 24 October 2012 and 31 October 2012 which reads

thus:

“Payment of Gratuity-Even the gratuity was considered as part of retirals which

were added in the post salary…. However, we have taken the reasonable approach

and decided to pay gratuity on basis of your current salary as of 2012 which is

over and above the amount legally paybale to you”

12. Perusal of the above email communication does not indicate, in any

manner, that there is any agreement or settlement for payment of higher

amount of gratuity than the one payable under the provisions of the Gratuity

Act. Mr. Rao would rely upon the judgment of this Court in Transport Manager,

Kolhapur Municipal Transport Undertaking, Kolhapur1. In that case, there was a

settlement providing for payment of gratuity at the rate of 21 days wages per

year which is better as compared to 15 days' wages per year as per Gratuity Act.

It is in the light of such settlement that this Court held that the Respondent

therein was entitled to better terms of gratuity under Section 4(5) of the

Gratuity Act. The judgment would have no application to the present case,

where there is no settlement or agreement for payment of higher/better

gratuity than the one provided for in the Act. I therefore do not find any

serious flaw in the view taken by the Appellate Authority in holding that the

email-communication cannot be termed as contract admitting better terms

under Section 4(5) of the Gratuity Act.

(emphasis in original)

36.In my view, the judgment in Mercedes Benz (supra) has no

application to the facts of the present case. Here there is no issue

involved as to whether email created agreement or not. The issue is

about giving retrospective effect to correction of mistake committed in

execution of Deed of Variation. There is an express admission by

Respondent No.1 while passing Board Resolution that it never intended

to apply maximum limit to payment of gratuity. Therefore, the judgment

in Mercedes Benz (supra) has no application to the facts of the case.

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37.Payment of Gratuity Act is a beneficial piece of legislation. It is

enacted for the benefit of employees. Therefore, if there is any

ambiguity, the interpretation must be in favour of person for whose

benefit the PG Act is enacted. The present case involves unique

circumstances where mistake got committed in execution of Deed of

Variation and commission of mistake is admitted by Respondent No.1.

An ambiguity is created on account of execution of subsequent Deed of

Variation dated 19 November 2012 giving effect to deletion of maximum

limit with effect from 20 November 2012. Thus, there is variance

between the actual intention of Respondent No.1 and the amendment

effected in the scheme. In these peculiar circumstances, the ambiguity

needs to be removed by interpreting the stipulations of Deed of

Variation in favour of the Petitioner and against Respondent No.1 who

has clearly enriched itself unjustly. Respondent No.1 has acted

arbitrarily by denying gratuity to the Petitioner. It initially raised a false

plea of forfeiture of gratuity even though no charges were leveled against

the Petitioner nor any finding of guilt was recorded against him. It

appropriated the amount of gratuity generated in LIC gratuity fund.

Before the Appellate Authority, Respondent No.1 changed its stance and

agreed to pay gratuity of Rs.10,00,000/-. Thus, the conduct of

Respondent No.1 in the entire episode is not above board.

38.Considering the above circumstances, I am of the view that the

order passed by the Appellate Authority deserves to be set aside by

confirming the order passed by the Controlling Authority. The Petition

accordingly succeeds and I proceed to pass the following order:

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i)Judgment and order dated 17 August 2026 passed by the

Appellate Authority in Appeal (PGA) No.25 of 2024 is set aside.

ii)Judgment and order dated 22 January 2024 passed by the

Controlling Authority in Application (PGA) No.156 of 2013 is

confirmed.

39.Writ Petition is allowed in above terms with no order as to costs.

(SANDEEP V. MARNE, J.)

40.After the judgment is pronounced, Mr. Shivdasani, the learned

counsel appearing for Respondent No.1 prays for stay on the withdrawal

of the deposited amount of gratuity. Request is opposed by the learned

counsel appearing for the Petitioner. Considering the fact that the

Petitioner has ceased to be in service of Respondent No.1 since

September 2012, and is denied gratuity for the last 14 long years, the

request for stay is rejected.

(SANDEEP V. MARNE, J.)

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