THE AREA MANAGER SAHARA CREDIT COOPERATIVE SOCIETY LTD. vs SHRI HEMANT BALRAMBHAI RAI

C/SCA/1772/2025 JUDGMENT DATED: 15/10/2026
(GJHC240083512025)
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 1772 of 2025
With
R/SPECIAL CIVIL APPLICATION NO. 1811 of 2025

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE DIVYESH A. JOSHI

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Approved for Reporting Yes No
√
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THE AREA MANAGER SAHARA CREDIT COOPERATIVE SOCIETY LTD. &
ANR.
Versus
SHRI HEMANT BALRAMBHAI RAI
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Appearance:
MR YOGEN N PANDYA(5766) for the Petitioner(s) No. 1,2
MR PV PATADIYA(5924) for the Respondent(s) No. 1
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CORAM: HONOURABLE MR. JUSTICE DIVYESH A. JOSHI

Date : 15/10/2026
ORAL JUDGMENT
1) Rule.
2) As the issue involved in both the petitions is identical and
based upon the same set of facts and materials, they are being
disposed of by this common judgment. However, facts of Special
Civil Application No. 1772/2025 are taken into consideration.
3) By way of filing present petition under Articles 226 and 227
of the Constitution of India, read with the provisions of the
Payment of Gratuity Act, 1972, petitioners have challenged the
legality, validity and propriety of the order passed by the
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Controlling Authority and subsequently confirmed by the
Appellate Authority, whereby the appeal preferred by the
petitioner Bank came to be dismissed on the ground of delay.
4) Learned advocate Mr. Yogen N. Pandya, appearing for the
petitioners, submits that the respondent was employed by the
petitioner society and, after attaining the age of superannuation,
claimed entitlement to gratuity. As a dispute arose regarding the
amount payable, the respondent preferred an application before
the Controlling Authority under the provisions of the Payment of
Gratuity Act, 1972. Pursuant to the issuance of notice, the
petitioners appeared before the Controlling Authority and
produced the necessary documents in opposition to the said
application. After considering the documents and evidence
available on record, the Controlling Authority, vide order dated
03.07.2023, partly allowed the application and directed the
petitioner Bank to pay an amount of Rs. 3,22,020/- towards
gratuity, together with simple interest at the rate of 10% per
annum from 01.09.2022, being the date of entitlement to
gratuity, until actual payment. The petitioners were further
directed to make the payment within 30 days from the date of
receipt of a copy of the said order.
4.1) Being aggrieved by the aforesaid order, the petitioners
preferred an appeal before the Appellate Authority. However,
there was a delay in filing the appeal. Learned advocate submits
that the statutory provisions prescribe an outer limit of 120 days
for preferring an appeal, beyond which the petitioners could not
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avail of the appellate remedy. Consequently, the appeal came to
be dismissed on the ground of delay, without examining the
merits of the case. Being aggrieved by the orders passed by both
the authorities, the petitioners have preferred the present
petition.
4.2) Learned advocate Mr. Pandya further submits that the
Controlling Authority committed an error in determining the
amount of gratuity payable to the respondent. The error is
apparent from the reasoning recorded in the impugned order,
particularly while calculating the last-drawn wages of the
respondent. He submits that the Controlling Authority
erroneously included the special allowance paid to respondent
along with his basic salary for the purpose of calculating the
amount of gratuity.
4.3) It is further submitted that the settled position of law
requires the relevant components of wages to be considered in
accordance with the provisions of the Payment of Gratuity Act,
1972, and that the inclusion of special allowance in the
calculation of gratuity is contrary to the statutory provisions of
law relied upon by the petitioners. In support of his submissions,
learned advocate has placed reliance upon numerous judicial
decisions, including decisions of the Hon'ble Apex Court which
are squarely applicable to the facts of the present case.
4.4) In view of the aforesaid submissions and the judicial
precedents relied upon, learned advocate submits that the
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present petition deserves to be entertained, the impugned
orders deserve to be quashed and set aside and the matter is
required to be remitted to the authority concerned for fresh
consideration in accordance with the settled position of law.
5) None appears on behalf of the respondent.
6) Having heard the learned advocate appearing for the
petitioners and having gone through the documents available on
record, it appears that the controversy involved in the present
matter lies within a narrow compass. The principal question that
arises for consideration is whether, while determining the
amount of gratuity payable under the Payment of Gratuity Act,
1972, the Controlling Authority was justified in including the
special allowance as a component of wages for the purpose of
calculating the amount of gratuity.
Before delving into the issue involved in the present
matter, it would be appropriate to refer to the principles of law
laid down by the Hon'ble Apex Court in the relevant judicial
decisions.
6.1) In the case of The Manipal Academy of Higher Education
vs. The Provident Fund Commissioner reported in ( 2008) 5 SCC
428 , the Hon'ble Apex Court considered the issue as to whether
leave encashment was required to be included in the basic wages
as defined under Section 2(b) of the Employees' Provident Funds
and Miscellaneous Provisions Act, 1952. The relevant
observations made by the Hon'ble Apex Court in paragraphs 10
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to 12 of the said judgment are reproduced hereinbelow for ready
reference:
“10. The basic principles as laid down in Bridge Roof's case (supra) on
a combined reading of Sections 2(b) and 6 are as follows:
(a) Where the wage is universally, necessarily and ordinarily paid to
all across the board such emoluments are basic wages.
(b) Where the payment is available to be specially paid to those who
avail of the opportunity is not basic wages. By way of example it was
held that overtime allowance, though it is generally in force in all
concerns is not earned by all employees of a concern. It is also earned
in accordance with the terms of the contract of employment but
because it may not be earned by all employees of a concern, it is
excluded from basic wages.
(c) Conversely, any payment by way of a special incentive or work is
not basic wages. (emphasis supplied)
11. In TI Cycles of India, Ambattur v. M.K. Gurumani and Ors. (2001
(7) SCC 204), it was held that incentive wages paid in respect of extra
work done is to be excluded from the basic wage as they have a
direct nexus and linkage with the amount of extra output. It is to be
noted that any amount of contribution cannot be based on different
contingencies and uncertainties. The test is one of universality. In the
case of encashment of leave the option may be available to all the
employees but some may not avail and some may avail. That does
not satisfy the test of universality. As observed in Daily Partap v.
Regional Provident Fund Commissioner (1998 (8) SCC 90) the test is
uniform treatment or nexus under-dependent on individual work.
12. The term 'basic wage' which includes all emoluments which are
earned by an employee while on duty or on leave or on holidays with
wages in accordance with the terms of the contract of employment
can only mean weekly holidays, national holidays and festival
holidays etc. In many cases the employees do not take leave and
encash it at the time of retirement or same is encashed after his
death which can be said to be uncertainties and contingencies.
Though provisions have been made for the employer for such
contingencies unless the contingency of encashing the leave is there,
the question of actual payment to the workman does not take place.
In view of the decision of this Court in Bridge Roof's case (supra) and
TI Cycles's case (supra) the inevitable conclusion is that basic wage
was never intended to include amounts received for leave
encashment."
6.2) Additionally, it would be appropriate to reproduce the
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definition of the term “wages” as provided under Section 2(s) of
the Payment of Gratuity Act, 1972, which reads as under:
“2(s) - “wages" means all emoluments which are earned by an
employee while on duty or on leave in accordance with the terms and
conditions of his employment and which are paid or are payable to
him in cash and includes dearness allowance but does not include any
bonus, commission, house rent allowance, overtime wages and any
other allowance.”
6.3) On a conjoint reading of the aforesaid statutory provisions,
it emerges that the amount of gratuity is required to be
determined in accordance with the provisions of Section 4 of the
Payment of Gratuity Act, 1972, by taking into consideration the
last drawn wages by the employee, as defined under the Act. The
said definition specifies the components to be included in and
excluded from the computation of wages. Therefore, the amount
of gratuity is required to be calculated in accordance with the
statutory definition of wages and the components permissible
thereunder.
6.4) At this juncture, it would be appropriate to refer to the
observations made by the Hon'ble Apex Court in the case of The
Straw Board Manufacturing Co. Ltd. vs. Its Workmen reported
in AIR 1977 SC 941 , wherein it was observed that gratuity is
ordinarily related to basic wages. The aforesaid decision was
subsequently considered in the case of TI Cycles of India,
Amattur vs. M. K. Gurumani and Others, reported in (2001) 7
SCC 204 wherein the Hon'ble Apex Court further explained the
legal position. The relevant observations made in paragraphs 10,
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25 and 27 of the said judgment are reproduced hereinbelow:
10. A comparison between these two provisions will make it clear
that there is no basic difference between the two expressions used in
these two enactments insofar as the exclusion of bonus from the
emoluments is concerned. The High Court has been carried away by
the expression basic wages used in the PF Act while the term wages
is used in the Act but that distinction will not be of any impact, if we
closely examine the manner in which the two terms are defined in
the respective Acts. The nomenclature of the two expressions will
not alter the contents of the two terms. Therefore, the High Court
ought to have considered this aspect of the matter. Further this
Court in Straw Board Mfg. Co. Ltd. vs. Its Workmen, 1977 I LLJ 463,
was concerned with the gratuity scheme formulated prior to the Act
and this is how this Court interpreted this aspect of the matter: (SCC
p. 338. Paras 25 & 27)
25. Decisions have been brought to our notice some of which refer to
basic wages and others to consolidated wages as the foundation for
computation of gratuity. These are matters of discretion and the fee
of the circumstances prevalent in the industry by the Tribunal and,
unless it has gone haywire in the exercise of its discretion the award
should stand. We see that in the Payment of Gratuity Act also, not
basic wages but gross wages inclusive of dearness allowance; have
been taken so as the basis. This, incidentally, reflects the industrial
sense in the country which has been crystallised into legislation.
27. We clarify that wages will mean and include basic wage and
dearness allowance and nothing else. (emphasis supplied)”
6.5) The aforesaid judicial pronouncements, read in the context
of the statutory definition of wages, are relied upon by the
petitioner to contend that the expression “any other allowance”
is of wide amplitude and would include special allowance, unless
the same falls within a component specifically included under the
statutory definition. It is, therefore, submitted that the special
allowance paid to an employee pursuant to the terms of his
employment cannot be included in the computation of gratuity
merely because the same forms part of the salary paid to him.
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6.6) It is further submitted that the use of the expression “any
other allowance” by the legislature indicates that allowances
other than those specifically included in the definition are
excluded from the computation of wages. The special allowance
paid to the respondent would fall within the ambit of the
expression “any other allowance” and, therefore, could not have
been taken into consideration while determining the amount of
gratuity payable to him.
7) Having considered the aforesaid submissions and the
statutory provisions, it would now be appropriate to revert to the
facts of the present case.
It is an admitted position that while calculating the amount
of gratuity payable to the respondent, the Controlling Authority
has taken into consideration the component of special allowance
along with the basic salary. A perusal of the impugned order
indicates that the Controlling Authority has relied upon the
definition of wages provided under the Payment of Gratuity Act,
1972, which refers to all emoluments earned by an employee
while on duty or on leave in accordance with the terms and
conditions of his employment and includes dearness allowance,
but excludes bonus, commission, house rent allowance, overtime
wages and other wages, as specified therein.
7.1) After an elaborate discussion of the definition of wages,
the Controlling Authority has taken the view that the exclusion
of “any other allowance” cannot be interpreted to mean that all
allowances, other than dearness allowance, are required to be
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excluded from the computation of wages. On the basis of such
interpretation, the Controlling Authority has concluded that the
respondent was entitled to gratuity calculated by taking into
consideration his basic salary along with the special allowance.
Accordingly, the amount of gratuity was determined at Rs.
3,20,020/-.
7.2) Being aggrieved by the aforesaid decision, the petitioner
had preferred an appeal before the Appellate Authority.
However, since the appeal was preferred beyond the prescribed
period, the same came to be dismissed on the ground of delay,
without examining the merits of the case. It is also required to be
noted that the statutory scheme prescribes a specific period
within which an appeal is required to be preferred, subject to the
permissible extension provided therein. The question of
condonation of delay beyond the prescribed statutory limit has
also been considered by this Court in various judicial
pronouncements.
7.3) In this regard, the relevant decision of the Full Court of this
Court, wherein the issue concerning the power of the competent
authority to condone delay beyond the statutory period was
considered, requires reference. The relevant observations
contained in paragraph 12 of the said decision are reproduced
hereinbelow for ready reference:
“12. The learned advocates for the petitioners lastly contended
that there being no express bar created in the Act, the provisions of
section 29[2] would apply. We have already pointed out that the
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appellate authority being not a Court, it cannot have any application.
In this connection, we may profitably refer to a three-judge-Bench
decision of the Supreme Court in the case of Commissioner of
Customs & Central Excise v. Hongo India Private Limited reported in
(2009) 5 SCC 791, where the question was whether delay in filing of
a Reference before the High Court could be condoned by High Court
beyond the period specified in section 35H of the Central Excise Act.
In the above context, in paragraphs 34 to 36, the Supreme Court
made the following observations:
"34. Though, an argument was raised based on Section 29 of the
Limitation Act, even assuming that Section 29[2] would be
attracted, what we have to determine is whether the provisions
of this section are expressly excluded in the case of reference to
the High Court.
35. It was contended before us that the words "expressly
excluded" would mean that there must be an express
reference made in the special or local law to the specific
provisions of the Limitation Act of which the operation is to
be excluded. In this regard, we have to see the scheme of the
special law which here in this case is the Central Excise Act. The
nature of the remedy provided therein is such that the legislature
intended it to be a complete code by itself which alone should
govern the several matters provided by it. If, on an examination of
the relevant provisions, it is clear that the provisions of the
Limitation Act are necessarily excluded, then the benefits
conferred therein cannot be called in aid to supplement the
provisions of the Act. In our considered view, that even in a case
where the special law does not exclude the provisions of Sections
4 to 24 of the Limitation Act by an express reference, it would
nonetheless be open to the court to examine whether and to
what extent, the nature of those provisions or the nature of the
subject-matter and scheme of the special law exclude their
operation. In other words, the applicability of the provisions of
the Limitation Act, therefore, is to be judged not from the terms
of the Limitation Act but by the provisions of the Central Excise
Act relating to filing of reference application to the High Court.
36. The scheme of the Central Excise Act, 1944 supports the
conclusion that the time-limit prescribed under section35-H
[1] to make a reference to the High Court is absolute and
unextendable by a court under section 5 of the Limitation Act.
It is well-settled law that it is the duty of the court to respect
the legislative intent and by giving liberal interpretation, the
legislature cannot be extended by invoking the provisions of
Section 5 of the Limitation Act."
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In view of the aforesaid legal position, the scope of the
statutory power to condone delay is required to be considered in
accordance with the applicable provisions and the binding judicial
pronouncements.
8) As per the law laid down by the Hon’ble Supreme Court in
T.I. Cycles of India, Ambattur (supra), wages mean and include
basic wages and dearness allowance and nothing else. This
clearly goes on to show that for the purpose of calculating
gratuity, only basic salary and dearness allowance are required to
be taken into consideration. However, in the present case, the
authority concerned has interpreted the definition of wages and
concluded that the basic salary as well as the special allowance
should be taken into consideration for calculating gratuity. The
view adopted by the authority prima facie appears to be contrary
to the law laid down by the Hon’ble Apex Court. Therefore, the
impugned order is illegal and erroneous and contrary to the
settled principles of law and is required to be quashed and set
aside, with the matter being remanded to the authority
concerned for fresh consideration after excluding the special
allowance from the calculation of gratuity. It further appears
from the record that being aggrieved by and dissatisfied with the
decision of the Controlling Authority, the petitioner preferred an
appeal before the Appellate Authority. However, the appeal was
dismissed on the ground of delay in filing the same beyond the
prescribed period of limitation.
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9) In the present case, the Controlling Authority, while
interpreting the definition of wages, has included the special
allowance as a component for calculating the amount of gratuity
payable to the respondent. However, in view of the statutory
provisions and the judicial pronouncements relied upon by the
petitioner, the inclusion of such special allowance requires
reconsideration in accordance with the applicable legal position.
A perusal of the salary slip available on record further indicates
that, at that relevant time, the respondent was not drawing any
amount towards dearness allowance. Thus, for the purpose of
determining the amount of gratuity, the amount of dearness
allowance was nil. The Controlling Authority, instead of
calculating the amount on the basis of the components legally
permissible under the Act, has taken into consideration the
special allowance paid to the respondent.
9.1) In view of the aforesaid circumstances, it appears that the
Controlling Authority has proceeded on an incorrect
interpretation of the statutory provisions while determining the
wages for the purpose of calculating gratuity. The methodology
adopted by the Controlling Authority, therefore, requires
reconsideration in light of the applicable statutory provisions and
the principles of law laid down by the Hon'ble Apex Court and
this Court.
10) In view of the foregoing discussion, I am of the opinion that
the present petition deserves to be allowed and the impugned
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order passed by the Controlling Authority and the subsequent
order passed by the Appellate Authority are hereby quashed and
set aside. The matter is remitted to the Controlling Authority for
fresh consideration of the original application filed by the
respondent, after examining the material available on record,
applying the relevant statutory provisions and the principles of
law laid down in the aforesaid judicial pronouncements and after
affording a reasonable opportunity of hearing to all the parties
concerned.
11) It is, however, required to be noted that the original
application seeking gratuity was preferred by the respondent in
the year 2023 and that the respondent has already attained the
age of superannuation. Considering these circumstances, the
Controlling Authority is directed to decide the original
application afresh, as expeditiously as possible, preferably within
a period of 3 months from the date of receipt of a copy of this
order.
With the aforesaid directions, the present petition stands
allowed. Rule is made absolute to the aforesaid extent.

(DIVYESH A. JOSHI,J)
GARVITA

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