C. NARASAIAH vs THE DIVISIONAL CONTROLLER

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HC-KAR
NC: 2026:KHC:57911
WP No. 36326 of 2016


CNR: KAHC010081532016




IN THE HIGH COURT OF KARNATAKA AT BENGALURU

TH
DATED THIS THE 14 DAY OF OCTOBER, 2026


BEFORE

THE HON'BLE MR. JUSTICE H.T. NARENDRA PRASAD

WRIT PETITION NO. 36326 OF 2016 (L-PG)


BETWEEN:

C. NARASAIAH
S/O CHIKKA DASAIAH HOSAKERI
BANNUR, T. NARASIPURA TALUK
MYSORE DISTRICT.
…PETITIONER
(BY SRI. LAKSHMAN RAO., ADVOCATE)







AND:

1. THE DIVISIONAL CONTROLLER
MYSORE URBAN DIVISION
MYSORE.

2. THE ASSISTANT LABOUR COMMISSIONER
& CONTROLLING AUTHORITY
UNDER THE P.G. ACT OF 1972
MYSORE DIVISION, MYSORE.

3. THE DEPUTY LABOUR COMMISSIONER
& APPELLATE AUTHORITY
REGION-2, KARMIKA BHAVAN
BANNERUGHATTA ROAD
BANGALORE-560 029.
…RESPONDENTS
(BY SMT. H R RENUKA., ADVOCATE FOR R1:
SRI. M RAJAKUMAR, AGA FOR R2 & R3)






Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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WP No. 36326 of 2016


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THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO
QUASH THE IMPUGNED ORDER PASSED BY THE R-2 DATED
14.01.2015 ERRONEOUSLY CALCULATED THE GRATUITY WITH-
OUT ADDING DEARNESS ALLOWANCE TO BASIC PAY AS PER
TRUCE AGREEMENT; THE TRUE COPY OF THE IMPUGNED
ORDER PASSED BY R-2 IS PRODUCED AT ANNEXURE-A AND
FURTHER QUASH THE IMPUGNED ORDER PASSED BY R-3
ERRONEOUSLY CONFIRMING THE IMPUGNED ORDER OF R-2
VIDE ITS ORDER DATED 31.03.2016 VIDE ANNEXURE-B AND
ETC.
THIS PETITION, COMING ON FOR PRELIMINARY HEARING
IN ‘B’ GROUP, THIS DAY, ORDER WAS MADE THEREIN AS
UNDER:
CORAM: HON'BLE MR. JUSTICE H.T. NARENDRA PRASAD

ORAL ORDER

1. The petitioner has filed this writ petition challenging
the order dated 14.01.2015 passed by
respondent No. 2–Controlling Authority in
No. ALC/MYS/PGA/CR.No.107/2013 (Annexure-A) and the
order dated 31.03.2016 passed by respondent No. 3–
Appellate Authority in No.DLC-B2/PGA/CR.No.07/2015-16
(Annexure-B), whereby the Appellate Authority dismissed
the appeal and confirmed the order passed by the
Controlling Authority.
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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HC-KAR
NC: 2026:KHC:57911
WP No. 36326 of 2016


CNR: KAHC010081532016



2. The brief facts of the case are that the petitioner was
appointed as a Conductor in the respondent-Corporation
on 04.07.1977. Subsequently, he was promoted as a
Traffic Controller and retired from service on 28.02.2001.
He claims to have rendered 25 years of service without
any break. As on the date of his retirement, he was
drawing a basic salary of Rs.7,115/- and Dearness
Allowance of Rs.5,041/-. Upon his retirement, the
Corporation paid gratuity to him. Being dissatisfied with
the amount paid, the petitioner filed an application under
Section 7 of the Payment of Gratuity Act, 1972 (for short,
‘the Act’) before respondent No. 2–Controlling Authority.
By order dated 14.01.2015 (Annexure-A), the Controlling
Authority directed the Corporation to pay the petitioner
the differential amount of Rs.2,965/- towards gratuity,
together with interest of Rs.470/- calculated at the rate of
10%, aggregating to Rs.3,435/-. Aggrieved by the said
order, the petitioner preferred an appeal before
respondent No. 3–Appellate Authority. By order dated
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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NC: 2026:KHC:57911
WP No. 36326 of 2016


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31.03.2016 (Annexure-B), the Appellate Authority
dismissed the appeal and confirmed the order passed by
the Controlling Authority. Being aggrieved by the orders
passed by the authorities, the petitioner has approached
this Court.


3. Learned counsel appearing for the petitioner
contended that, under Section 4(5) of the Act, an
employee is entitled to receive better terms of gratuity
under any award, agreement or contract with the
employer. It was submitted that the respondent-
Corporation has framed a scheme for payment of gratuity
and that the petitioner’s gratuity ought to have been
determined in accordance with the said scheme. According
to the petitioner, his salary comprises basic pay and
Dearness Allowance, and the gratuity payable to him
ought to have been calculated by taking both components
into consideration, along with the number of years of
service rendered. However, the authorities failed to
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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include Dearness Allowance while determining the amount
of gratuity, thereby passing the impugned orders contrary
to the provisions of the Act and the scheme framed by the
Corporation. It was further contended that the Appellate
Authority failed to consider this aspect of the matter and
mechanically confirmed the order passed by the
Controlling Authority without proper application of mind.
Accordingly, learned counsel sought for allowing the writ
petition.


4. Per contra, learned counsel appearing for the
respondent-Corporation submitted that, in exercise of the
provision contained in Section 4(5) of the Act, the
Corporation has framed regulations governing the
payment of gratuity. It was further submitted that a
Memorandum of Settlement dated 27.09.1981 had been
entered into between the parties, which provides for
payment of gratuity. Under the said settlement, gratuity is
calculated on the basis of one month’s basic pay for each
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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year of service, and there is no provision for including
Dearness Allowance in the computation of gratuity for this
purpose. Learned counsel further submitted that gratuity
is payable either under the Act or under the scheme
framed by the Corporation, whichever is more beneficial to
the employee. In the present case, the Controlling
Authority rightly calculated the gratuity payable to the
petitioner under the Memorandum of Settlement, as the
amount so determined was more beneficial to him than
the amount payable under the Act. Accordingly, learned
counsel sought for dismissal of the writ petition.


5. Heard learned counsel for the parties and perused
the writ papers.


6. It is not in dispute that petitioner was appointed as a
Conductor in respondent-Corporation on 04.07.1977.
Thereafter, he was promoted to different posts and he
retired as a Traffic Controller on 28.02.2001. In total, he
has served for 23 years 7 months and 24 days. When he
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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retired from the service, he was drawing basic pay of
Rs.7,115/- and Dearness Allowance of Rs.5,041/-.


7. Section 4(5) of the Act is extracted below.
“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. “



8. A plain reading of the aforesaid provision makes it
clear that the Act does not affect an employee’s right to
receive better terms of gratuity under any award,
agreement or contract with the employer. Therefore,
where the terms governing the payment of gratuity under
an applicable award, agreement or contract are more
beneficial to the employee than those provided under the
Act, the employee is entitled to the more beneficial terms.


9. In the present case, a Memorandum of Settlement
dated 27.09.1981 was entered into between the parties.
Clause 7 of the said settlement prescribes the terms
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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WP No. 36326 of 2016


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governing the payment and computation of gratuity. It
provides that gratuity shall be paid in accordance with the
Gratuity Regulations or the provisions of the Act,
whichever is more beneficial to the employee. The
settlement further stipulates that gratuity shall be
calculated at the rate of one month’s pay for each
completed year of service, with proportionate gratuity for
completed months in the incomplete final year of service,
excluding part of a month, if any. The settlement also
defines the components of pay to be taken into

consideration for determining gratuity.


10. The relevant clause of the settlement reads as
follows:
7. Gratuity:

(a) Gratuity shall be paid in accordance with the
Gratuity Regulations or in accordance with the
provisions of the Gratuity Act 1972 whichever is
beneficial to employee.

(b) The quantum of gratuity shall be equal to one
month's pay for each completed year of service. For
incomplete period of final year of service, if any
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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WP No. 36326 of 2016


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prorata contribution of gratuity shall be reckoned for
completed months excluding part of the month if
any. In the event of payment of gratuity to
employees dismissed from service for misconduct,
the Management may deduct from the gratuity
payable, financial loss if any, caused to it on account
of any such misconduct.

(c) Gratuity shall be paid on the basis of pay drawn
on the date of any events stipulated in Clause (5) of
Gratuity Regulations and the pay would include basic
pay, personal pay and charge allowance consequent
upon holding incharge of a higher post and not
additional charge.


11. A reading of the aforesaid clause indicates that, for
the purpose of computing gratuity under the Memorandum
of Settlement, pay comprises basic pay, personal pay and
charge allowance consequent upon holding charge of a
higher post. Dearness Allowance is not included in the
definition of pay under the said settlement. Therefore,
gratuity payable to the petitioner under the settlement is
required to be calculated on the basis of his basic pay of
Rs.7,115/- and the period of service reckoned by the
authorities. Accordingly, as per the scheme (Memorandum
of Settlement), the gratuity payable to the petitioner
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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WP No. 36326 of 2016


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comes to Rs.1,67,795/- (i.e., Rs.7,115 X 23 years 7
months).


12. On the other hand, under Section 4(2) of the Act,
basic pay (Rs.7,115) + 15 days of dearness allowance
(Rs.2,917) and number of years of service has to be
considered for computation of gratuity, which comes to
Rs.1,38,905/- (Rs.10,032 X 24 years X 15/26).


13. A comparison of the two amounts determined by the
authorities shows that the gratuity payable under the
Memorandum of Settlement is Rs.1,67,795/-, whereas the
amount calculated under the Act is Rs.1,38,905/-. The
amount payable under the settlement is, therefore, more
beneficial to the petitioner. Accordingly, the respondent
No.2-Controlling Authority is justified in adopting the
method of calculation under the settlement and
determining the petitioner’s entitlement to gratuity at
Rs.1,67,795/-.

Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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WP No. 36326 of 2016


CNR: KAHC010081532016



14. The respondent-Corporation has already paid a sum
of Rs.1,64,830/- towards gratuity to the petitioner.
Consequently, the balance amount payable works out to
Rs.2,965/-. The Controlling Authority, by its order dated
14.01.2015, therefore, directed the Corporation to pay the
said differential amount together with interest of Rs.470/-
calculated at the rate of 10%, aggregating to Rs.3,435/-.
In view of the foregoing discussion, the direction issued by
the Controlling Authority is justified. The Appellate
.
Authority was also justified in confirming the said order


15. In the facts and circumstances of the case, this Court
finds no error or illegality in the impugned orders passed
by respondent Nos. 2 and 3 warranting interference in
exercise of the writ jurisdiction of this Court.


16. Accordingly, the writ petition is dismissed.


17. At this stage, learned counsel appearing for the
petitioner submitted that a sum of Rs.470/-, representing
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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WP No. 36326 of 2016


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the interest calculated by the Controlling Authority, has
not been deposited by the respondent-Corporation.


18. The said submission was disputed by the learned
counsel appearing for the respondent-Corporation, who
contended that the entire amount of Rs.3,435/- had
already been deposited.


19. If the respondent-Corporation has not deposited the
amount, it is directed to deposit the balance amount, if
any, within two weeks from the date of receipt of a copy of
this order.


Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

(H.T. NARENDRA PRASAD)
JUDGE


DM
LIST NO.: 1 SL NO.: 15