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CWP No.15363 of 2011 1

IN THE HIGH COURT FOR THE STATES OF PUNJAB AND

HARYANA AT CHANDIGARH

CWP No.15363 of 2011

Date of decision: 31.10.2014

Nathu Ram and others …Petitioners

Versus

State of Punjab and others …Respondents

CORAM: HON'BLE MR. JUSTICE AMOL RATTAN SINGH

***
1. To be referred to the Reporters of not?
2. Whether the judgment should be reported in the Digest ?
***
Present:- Mr. Aman Dhir, Advocate
for the petitioners.

Dr. Puneet Kaur Sekhon, Addl. Advocate General, Punjab

Mr. Parminder Singh, Advocate

for respondents No.2 and 3.
***
Amol Rattan Singh, J.

The petitioners are retired employes of the Punjab State

Cooperative Supply & Marketing Federation Limited-respondents No.2

and 3 (hereinafter to be referred to as the “MARKFED”) and are seeking

that they be paid a gratuity amount of Rs.10 lacs instead of Rs.3.5 lacs as

has been paid to them, upon their retirement from MARKFED. They also

seek interest upon the delayed payment of the enhanced amount of gratuity

claimed.

2. The claim of the petitioners is based upon the letter of the

Punjab Government dated 17.08.2009 (Annexure P-1), addressed to all

Heads of Government Departments etc. in the State, with regard to

implementation of the recommendations of the 5th Punjab Pay Commission.

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As per Clause (iv) of the said letter, the maximum limit of

retirement-cum-death gratuity was raised from Rs.3.5 lacs to Rs.10 lacs,

with the letter taking effect from 01.01.2006, in terms of Clause 1 thereof.

This letter was followed by another letter dated 26.05.2010 (Annexure P-2)

in which it was stated that payment of arrears on account of enhanced

amount of gratuity to be granted, would immediately be payable only to

those employees who retired w.e.f. 01.08.2009 onwards and that the

decision with regard to the employees who retired between 01.01.2006 to

31.07.2009, would be taken in 'due course'.

Thereafter, vide yet another letter dated 13.08.2010 (Annexure

P-3), the arrears of enhanced amount of gratuity were made payable to

those employees who retired between 01.01.2006 to 31.07.2009, also.

The petitioners who were not employees of the Punjab

Government but of MARKFED, as already observed herein before, retired

on various dates between 09.03.2008 and 09.05.2010 with petitioners No.1,

2, 3, 4 and 7 having retired after 01.08.2009. Thus, petitioners No.5, 6 and

8 retired before that date.

3. They are also stated to have made two representations to the

respondents, on 17.07.2010 and 15.03.2011 and also eventually had a legal

notice issued to respondent No.2 on 18.04.2011, copies of which are

annexed with the petition.

The relief claimed not having been granted to them, they filed

the present petition, to which, after notice was issued, a reply was filed on

behalf of respondents No.2 and 3, by the Addl. Managing Director.

4. In their reply, the respondents have stated that the petitioners

are not the employees of the Punjab Government but of the MARKFED

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Cotton Seed and Processing Plant, Gidderbaha and further, that they are not

even governed by the Common Cadre Rules framed by MARKFED itself

and instead, are governed by the Payment of Gratuity Act, 1972, as regards

payment of gratuity.

Still further, it has been stated that the petitioners having

retired before 24.05.2010, i.e. before the date of issuance of the letter dated

13.08.2010 (Annexure P-3), by which the arrears of enhanced gratuity were

also ordered to be paid to the employees who retired between 01.01.2006

and 31.07.2009, they can have no claim to the enhanced amount of gratuity

of Rs.10 lacs.

5. The reply further states that the enhanced amount of gratuity of

Rs.10 lacs would be paid to all those who are governed by the Act of 1972

w.e.f. 24.05.2010, which is the date on which Section 4 of that Act was

amended by the Parliament, enhancing the amount of gratuity to Rs.10 lacs.

Reliance in this regard has been placed on the letter dated

05.07.2010, issued by the Department of Finance, Government of Punjab.

6. In reply to the written statement filed by the 2nd and 3rd

respondents, the petitioners filed a rejoinder, pointing out that the stand

taken by the respondents to the effect that the MARKFED Common Cadre

Rules, 1990, are not applicable to the petitioners, is factually an incorrect

statement and is in the face of the appointment letters issued to the

petitioners at the time of their joining service.

The appointment letter of petitioner No.4, dated 17.10.1975

and the appointment letter of one Bhag Singh, dated 25.06.1975, have been

annexed with the rejoinder.

A perusal of clause (i) of both the said letters shows that the

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conditions of service of the petitioners was to be governed by the Punjab

State Supply & Marketing Cooperative Service (Common Cadre) Rules,

1967/Factories Act, 1948. Clause (i) of the said letter is reproduced herein

under:-

“i) You will be on probation for a period one year and the other terms
and conditions of your service in the Federation will be as provided in the
Punjab State Supply and Marketing Cooperative Service (Common
Cadre) Rules, 1967/Factory Act, 1948.”

Thus, the conditions of service, as given in the appointment

letter, were to be governed by both the Common Cadre Rules of 1967, as

also the Factories Act, 1948, obviously meaning that wherever the

mandatory provisions of the Act of 1948 stipulate certain conditions

applicable on those working in a factory, as defined in the said Act, such

conditions would apply and, in addition, the Common Cadre Rules framed

by the respondent-Corporation would also be applicable wherever they are

not in conflict with the provisions of the Factories Act or for such

conditions of service, as are not governed by that Act.

As regards gratuity, since the Factories Act itself does not

specifically provide for payment of gratuity, the same would be payable

either under the Payment of Gratuity Act, 1972 or, and in terms of Section

4(5) thereof, an employee governed by better terms of gratuity with his

employer, would not be affected by the limit of Rs.3,50,000/- set out in

Section 4(3) of the said Act.

Section 4 of the Payment of Gratuity Act, 1972, is reproduced

herein under:-

“4. Payment of Gratuity.-(1) Gratuity shall be payable to an employee on

the termination of his employment after he has rendered continuous service for not less
than five years,-
a) on his superannuation, or

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b) on his retirement or resignation, or

c) on his death or disablement due to accident or disease:
Provided that the completion of continuous service of five years shall not
be necessary where the termination of the employment of any employee is due to death
or disablement:
1[Provided further that in the case of death of her employee, gratuity
payable to him shall be paid to his nominee or, if no nomination hs been made, to his
heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be
deposited with the controlling authority who shall invest the same for the benefit of such
minor in such bank or other financial institution, as may be prescribed, until such minor
attains majority.
Explanation.- For the purposes of his section, disablement means such
disablement as incapacitates an employee for the work which he was capable of
performing before the accident or disease resulting in such disablement.
(2) For every completed year of service or part thereof in excess of six
months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages
based on the rate of wages last drawn by the employee concerned:
Provided that in the case of a price rates employee, daily wages shall be
computed on the average of the total wages received by him for a period of three months
immediately preceding the termination of his employment, and, for this purpose, the
wages paid for any overtime work shall not be taken into account:
Provided further that in the case of [an employee who is employed in a
seasonal establishment and who is not so employed throughout the year, the employer
shall pay the gratuity at the rate of seven days wages for each season.
[Explanation.- In the case of a monthly rated employee, the fifteen days'
wages shall be calculated by dividing the monthly rate of wages last drawn by him by
twenty-six and multiplying the quotient by fifteen.]
(3) The amount of gratuity payable to an employee shall not exceed [three
lakhs and fifty thousand] rupees.
(4) For the purpose of computing the gratuity payable to an employee who
is employed, after his disablement, on reduced wages, his wages for the period preceding
his disablement shall be taken to be the wages received by him during that period, and
his wages for the period subsequent to his disablement shall be taken to be the wages as
so reduced.
(5) Nothing in this section shall affect the right of an employee to receive
better terms of gratuity under any award or agreement or contract with the employer.
(6) Notwithstanding anything contained in Sub-sec.(1),-
a) the gratuity of an employee, whose services have been terminated
for any act, wilful omission or negligence causing any damage of loss to, or destruction
of, property belonging to the employer, shall be forfeited to the extend of the damage or

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loss so caused;
b) the gratuity payable to en employee [may be wholly or partially
forfeited]-
(i) if the services of such employee have been terminated for his
riotous or disorderly conduct or any other act of violence on his part, or
(ii) if the services of such employee have been terminated for any
which constitutes an offence involving moral turpitude, provided that such offence is
committed by him in the course of his employment.”

7. Thus, if the petitioners are held to be governed by the

Common Cadre Rules of MARKFED, by amendment of which, the Punjab

Government instructions on the subject were made applicable to

MARKFEDs' employees, as has been pointed out to this Court and shall be

referred to further ahead, then the petitioners would be entitled to the

higher amount of gratuity made payable, by instructions of the State

Government, even as per Section 4(5) of the Act of 1972.

8. Coming to the applicability of the Punjab Government

instructions, Annexures P-1 to P-3, Mr. Aman Dhir, learned counsel for the

petitioners, had drawn attention of this Court on 17.10.2014, as recorded in

the order of that date passed by this Court, to a letter issued on behalf of

respondent No.2, dated 19.10.2011, in which it was stated that an

amendment to Rule 4.6 of the Common Cadre Rules, 1990, was effected on

a decision taken by the Board of Directors, making the Punjab Government

instructions dated 17.08.2009 (Annexure P-1) applicable to employees of

MARKFED also. (In the order of this Court dated 17.10.2014, the letter

has been referred to as dated 09.10.2011)

Thus, the enhanced amount of gratuity of Rs.10 lacs, as per

Mr. Dhir, was obviously applicable to employees of MARKFED w.e.f.

01.01.2006. He also submitted that since the letter dated 17.08.2009 was

further clarified vide letters dated 26.05.2010 and 13.08.2010 (Annexures

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P-2 and P-3 respectively), therefore, the enhanced amount of gratuity

would be payable even to those employees/petitioners who retired between

01.01.2006 and 31.07.2009, i.e. petitioners No.5, 6 and 8, as is also only

too clear from a reading of the last line of the letter dated 19.10.2011, itself.

9. In reply, Mr. Parminder Singh, learned counsel appearing for

the respondent-MARKFED, on the other hand, defended the stand of the

respondents, firstly by submitting that even as per the appointment letter of

petitioner No.4, only the Common Cadre Rules of 1967 were to govern the

service of the petitioners, with nothing to state that the subsequent Rules of

1990 would also apply to them. Secondly, he submitted that the subsequent

letters issued after 17.08.2009 by the Punjab Government (Annexures P-2

and P-3) had not been adopted by MARKFED, even taking that the letter

dated 17.08.2009 (Annexure P-1) had been so adopted, as pointed out from

the letter dated 09.10.2011, produced by counsel for the petitioner.

10. After having heard learned counsel for the parties and having

gone through the pleadings, though I see no basis whatsoever to the

arguments raised by learned counsel for the respondents, the contentions,

of course, require consideration.

11. First, it would be in order to reproduce Rule 5.7 of the

Common Cadre Rules, 1990, by which the old Rules of 1967 were

repealed, substituting them with the 1990 Rules.

“5.7 If these Rules are silent on any issue or no provision has

been made on any specific point, the Punjab Government
Rules/Instructions on that issue will apply.

Repeal & saving The Punjab State Supply & Marketing

Cooperative Services (Common Cadre) Rules, 1967, as amended from time

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to time are hereby repealed.

Provided that any action taken or anything done under these

Rules hereby repealed shall be deemed to have been done or taken under

the corresponding provisions of these rules.”

Thus, there is no doubt that the 1990 Rules replaced the Rules

of 1967.

12. Coming to the question of the applicability of the Common

Cadre Rules to the petitioners, once the appointment letters of the

petitioners specifically made their service conditions governable by and

subject to the Common Cadre Rules of 1967, as also to the Factories Act,

1948, I do not see by what rationale the subsequent Rules which replaced

the old Rules, would not be applicable to their service conditions,

especially as no instrument in the form of any letter or notification etc. has

been produced before this Court, to show that the petitioners' service

conditions would be governed by any other set of Rules or instructions.

Further, it is not the case of the respondents that the conditions

of service of the other petitioners were any different to those of petitioner

no.4 and the aforesaid Bhag Singh. No reply or affidavit has been filed, to

counter the contents of the rejoinder filed by the petitioners, or to deny that

such were not the terms and conditions of appointment even of petitioner

no.4. Hence, I find no force in the contention that the MARKFED Common

Cadre Rules, 1990, are not applicable to the petitioners.

Also, there is no pleading in the reply of the respondents that

only the Factories Act, 1948, would be applicable to the petitioners and

even if such pleading was there, it would deserve rejection for the reason

that the appointment letter of petitioner No.4 refers to both, the Common

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Cadre Rules of 1967, as also the Factories Act of 1948. If the intention had

been to only subject the employees to the provisions of the Act of 1948,

there would be no need to refer to the Common Cadre Rules of 1967 at all,

in the appointment letter.

Thus, in terms of the appointment letters admitted to be issued

tot he petitioners on their initial appointment to the service of MARKFED,

it is held that the MARKFED Common Cadre Rules of 1967 and the

subsequent Rules of 1990 are applicable to the conditions of service of the

petitioners.

13. Coming now to the second argument of learned counsel for

respondent-MARKFED, though, without doubt, MARKFED being an

independent entity, the instructions and policies of the Punjab Government

can only be made applicable to it upon adoption by MARKFED itself,

however, the stand taken by the respondents in their reply itself is contrary

to the letter dated 09.10.2011, which has been produced in Court and has

not been denied by the respondents, even after the matter was adjourned on

17.10.2014.

The letter reads as under: -

“The Punjab State Cooperative Supply and Marketing Federation Limited

Sector-35-B Chandigarh
(PERSONNEL DEPARTMENT)
No.EST/EAG-6/11/4120 Dated 19/10/2011
1. All the Officers of Markfed at H.O. Chandigarh.
2. All the District Managers, Markfed in the Punjab State
3. All General Managers/Managers, Markfed Plants/Units in the State
4. O.S.D. (C), Markfed, Bathinda
5. Liaison Officer, Markfed, C-212, Defence Colony, New Delhi
Sub: Amendment in Rule 4.6 in Markfed Common Cadre Rules 1990.
Dear Sir(s),
I am directed to address you on the subject noted above and to

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inform that as per decision taken by Board of Directors of Markfed vide

agenda item No.4 in its meeting held on 17.2.2011 and as approved by
Registrar Cooperative Societies Punjab vide memo no.RSS/MANDI/MS-
45-B/13163 dated 13.09.2011 following amendment is being made in
Rule 4.6 of Markfed Common Cadre Rules 1990/-
Existing Provision Amended Provision
On one's retirement, under Rule On one's retirement, under Rule
2.21 of these Rules or death an 2.21 of these rules or death an
employee shall be granted gratuity employee shall be granted
of an amount equal to one month's retirement-cum-death gratuity as
wages for each completed year of per rules/instructions in force and
service or part thereof in excess of amended from time to time
six months with the Markfed applicable to Punjab Govt.
provided that the total amount of employees.
gratuity shall not exceed 15 times
the amount of wages last drawn
The above decision is applicable from the date of approval of
Registrar, Cooperative Societies Punjab i.e. w.e.f. 13.09.2011. However
the instructions issued by the State Govt. vide No.3/33/09/3FPPC/879
dated 17.08.2009 with regard to enhancement of maximum limit of
payment of gratuity from Rs.3.50 lacs to Rs.10.00 lacs will be applicable
w.e.f. 1.1.2006.
Thanking you,
Yours faithfully,
sd/-
Establishment Officer (C) ,
For Managing Director.”

Thus, even though the decision was applicable w.e.f.

13.09.2011, i.e. the amended provisions came into effect from that date,

upon approval by the Registrar, yet, by a conscious decision taken, the

enhancement in the amount of gratuity payable, upon the retirement of an

employee, was made applicable from 01.01.2006, for employees of

MARKFED, to whom the Common Cadre Rules apply.

Hence, it is obvious that once the Common Cadre Rules have

been held by this Court to be applicable to the petitioners, the letters of the

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Punjab Government, Annexures P1 to P3 would also apply to them, in

terms of MARKFEDs' own letter dated 19.10.2011, issued by respondent

No.2.

14. As to why the respondents chose to file a reply contrary to the

conditions of service given in the appointment letters of the petitioners and

countrary to the decision taken by its own Board of Directors and as

approved by the Registrar, Cooperative Societies, Punjab, is something

which this Court cannot even begin to understand, except to say that either

the reply has been filed in an extremely callous manner or, due to lack of

funds or other reasons, MARKFED is now trying to backtrack on its

decision, without any decision to the contrary taken by the competent

authority, after 19.10.2011.

15. Thus, in the face of, first, the terms and conditions of the

petitioners' appointments and then in the face of a specific decision

amending Rule 4.6 of the Common Cadre Rules, by which retirement-cum-

death gratuity payable to employees of MARKFED was to be on the same

terms as the Punjab Government employees, and still further, with the

decision of the Punjab Government dated 17.08.2009 having been made

specifically applicable from 01.01.2006 to the employees of MARKFED,

the stand of the respondents, taken in the Court, is to be rejected and is, in

fact, depreciable.

Consequently, this writ petition is allowed.

The respondents are directed to pay the enhanced amount of

gratuity of Rs.10 lacs to the petitioners, with interest @ 10% per annum

from the date of retirement till the date that the payment is actually made.

If, of course, a lesser amount of gratuity is due to any of the petitioners, on

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account of calculable gratuity, even as per the instructions dated

17.08.2009, not actually amounting to the maximum payable (Rs.10 lacs),

then the actual amount payable would be paid to such petitioners. A

speaking order would be passed in such a case, giving detailed reasons as

to how the amount of gratuity calculable, even in terms of the letter dated

17.08.2009 of the Punjab Government and that of respondent No.2 dated

19.10.2011, does not amount to Rs.10 lacs.

In addition, each of the petitioners would also be paid costs of

Rs.5,000/- by respondents No.2 and 3, which, if they so desire, they can

recover from the persons responsible for filing a reply contrary to record

before this Court, including from the Additional Managing Director, under

whose signatures the reply was actually filed.

The enhanced amount of gratuity and interest be paid to the

petitioners, within 2 months from the date of receipt of a certified copy of

this order.

31.10.2014 (AMOL RATTAN SINGH)

dinesh JUDGE

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