Full Judgment Text
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PETITIONER:
JALGAON DISTRICT CENTRAL CO-OPERATIVE BANKLTD.
Vs.
RESPONDENT:
PUNDALIKRAO LAXMANRAO SURYAWANSHI & ORS.
DATE OF JUDGMENT:
03/09/1969
BENCH:
DUA, I.D.
BENCH:
DUA, I.D.
SHELAT, J.M.
VAIDYIALINGAM, C.A.
CITATION:
1970 AIR 1966 1970 SCR (2) 192
1970 SCC (1) 171
ACT:
Maharashtra Cooperative Societies Act. 1960 (24 of 1961)-
Cooperative Bank-Bank framing Gratuity Fund Rules, 1957
under its bye-laws-Rule 6 providing for payment of gratuity
and rule 10 providing for contribution by Bank to Gratuity
Fund-Rules 6 and 10 not approved by Registrar-Whether
gratuity payable by virtue of Rules 7 and 9-New Rules framed
replacing 1957 Rules-Rule 16 of old rules whether protects
vested interests of employees under old rules.
HEADNOTE:
Respondent No. 1 retired from the service of the appellant
bank on July 19, 19’62 after 32 years of service. Under
the Bank’s bye-laws Gratuity Fund Rules were sanctioned by
the Board of Directors on August 17, 1957. These rules were
forwarded to the Registrar of Cooperative Societies for
approval and they were ’approved with some modification
except Rules 6, 10 and 15. On his retirement Respondent No.
1 was paid a sum of Rs. 5,070/- as gratuity. He instituted
arbitration proceedings in the Court of the Registrar’s
Nominee for a further sum of Rs. 7,605/as balance of
gratuity payable to him with interest at 6 per cent. The
claim was disallowed and an appeal before the Maharashtra
State Cooperative Tribunal ’also failed. The High Court
however in a petition under Art. 227 of the Constitution
allowed the respondent’s claim. The Bank appealed to this
Court. It was urged on behalf of the appellant (i) that
Rule 6, the last sentence of which provides for the grant of
gratuity and RuIe 10 which provides for contributions by the
Bank to the Gratuity Fund not having been approved by the
Registrar, there remained no basis for the claim of gratuity
by respondent no. 1; (ii) that the old rules had neither
been repealed nor altered and the effect of retrospective
operation of the new rules was that the Registrar had
withdrawn his approval to the old rules and enforced the new
ones.
HELD: (i) The argument that r. 6 not having been
approved there was no rule under Which the obligation to pay
gratuity arose ignored the express language of r. 7 which,
in unequivocal terms requires gratuity to be granted in case
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of retirement. resignation or termination of services
according to the rate specified therein. Clause (a) of this
rule contains a provision similar in effect to what the last
sentence of r. 6 directs. Rule 9 also imposes an imperative
obligation for the payment of gratuity under these rules
within one month from the retirement. resignation, death or
termination of service of the employee concerned. [195 D--F]
(ii) The non-approval of r. 10 by the Registrar also
could not make the other rules ineffective and could not
absolve the Bank of the obligation imposed on it by rr. 7, 8
and 9. Once the Gratuity Fund Rules imposing an obligation
on the Bank to pay gratuity to its employees are approved by
the Registrar, then this obligation cannot be rendered
nugatory merely because there is no separate Gratuity Fund.
[195]
193
It was conceded that the new rules could not detract
from or prejudicially affect the vested rights created under
the old’ rules. Old Rule 16 expressly prohibits the
retrospective operation of the new rules with the object of
protecting the interests of the employees. The effect of
old r. 16 cannot be negatived by describing the process as
mere withdrawal of the approval of the old rules and
enforcement of the new ones. [196 B---D]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 944 of 1966.
Appeal by special leave from the judgment and order,
dated March 30, 1’965 of the Bombay High Court in Special
Civil Application No. 5 of 1964.
M.C. Chagla and 1. N. Shrog, for the appellant.
Ganpat Rai and R. Mahalingier, for respondent No. 1.
The judgment of the Court was delivered by
Dua, J. Pundalikrao Laxmanrao Suryawanshi plaintiff
(respondent No. 1 in this Court) instituted arbitration
proceedings in the Court of the Registrar’s Nominee against
the Jalgaon District Central Co-operative Bank Ltd.,
Jalgaon (appellant in this Court) for the recovery of a
sum of Rs. 7,605/- as the balance of gratuity with interest
at 6 per cent due from 18-8-1962. The claim having been
resisted, the same was disallowed on May 16, 1963. An
appeal presented to the Maharashtra State Co-operative
Tribunal under section 97 of the Maharashtra Co-operative
Societies Act against the award of the Registrar’s Nominee
was dismissed and the said award was confirmed.
The Bombay High Court was thereupon approached by
respondent No. 1 under Article 227 of the Constitution and
the High Court allowing the application on July 17, 1965 set
aside the orders made by the Co-operative Tribunal and by
the Registrars Nominee and directed the appellant-Bank to
pay to respondent No, 1 Rs. 7,605/- together with interest
at 4 per cent per annum from June 19, 1963 up-to-date,
The present appeal by special leave is directed
against the order of the Bombay High Court.
Shri M.C. Chagla, the learned counsel for the
appellant, concentrated his challenge to the impugned order
on the ground that on July 19, 1962, when respondent No. 1
retired from service of the appellant-Bank, there were no
valid rules in force entitling him to the amount of gratuity
claimed by him. It was not disputed before us that
respondent No. 1 had retired on July’ 19, 1962 after 32
years of service. On retirement, he was paid a sum of Rs.
5,070/- by way of gratuity, but his claim in the present
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proceedings is for a further sum of Rs. 7,605/-.
194
Gratuity Fund Rules were sanctioned by the Board of
Directors of the appellant-Bank on August 17, 1957. They
were framed under the Bank’s bye-laws. These rules
(thereafter called old rules) were forwarded to the
Registrar of Co-operative Societies for approval and they
were approved with some modifications except Rules 6, 10 and
15 which were kept under consideration. The principal
argument pressed before us by Shri Chagla was that Rules 6
and to having not been approved by the Registrar, all the
old rules must be deemed to have remained inoperative
because these two rules form the real substratum of the
scheme embodied in those rules Without these two rules, the
remaining rules, according to the argument, cannot
effectively operate. We are unable to accept this
submission.
It would be useful at this stage to reproduce old Rules
6,7, 9,10,15 and 16 which alone are suggested on behalf of
the appellant to be relevant.
"6. These Rules shall be deemed to have
come into force (i.e. in respect of an
employee retiring, resigning and/or having
terminated his services) from the 1st July,
1953. Every employee who has completed at
least five years service shall be granted
gratuity at the rate specified herein.
7. In case of retirement, resignation or
termination of services gratuity shall be
granted:
(a) After five years but before
completion of 10 years services :--half
month’s salary for each completed year of
service.
(b) After 10 years but before completion
of 16 years service :--’three fourth of a
month’s salary for each completed year of
service.
(c) After 15 years service three fourth of
a month’s salary for each completed year of
service, subject to the minimum of fifteen
salaries.
8.
9. Payment of the claims on account of
the Gratuity payable under these Rules, shall
be made within one month from the retirement,
resignation, death or the termination of
service.
10. The Bank shall contribute on 30th
June, very year, or as soon as possible
thereafter, but not later
195
than 30th September of the year, an amount
not less than the amount contributed by the
Bank as contribution to the Provident Fund.
11 to 14.
15. The provisions under sec. 41 of the
Bombay Co-operative Societies Act (Bombay Act
V11 of 1925) as amended upto date shall be
applicable to the administration of the
’Gratuity Fund’ created under these Rules.
16. The Board of Directors shall have.
powers, subject to the approval of the
Registrar Co-operative Societies Bombay
State, Poona, to alter, add to, or repeal
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these rules from time to time, provided
however that no such alteration, addition or
repeal shall have any retrospective effect
against the interest of the employee, in the
employment of the Bank on that date."
According to the appellant’s learned counsel, the Registrar
having withheld approval of Rule 6, the last sentence of
which provides that every employee who has completed at
least 5 years’ service, shall be granted gratuity at the
rate specified in the rules, there is no rule which imposes
an obligation on the appellant Bank to pay gratuity. This
argument, in our opinion, ignores the express language of
Rule 7 which, in unequivocal terms, requires gratuity to be
granted in case of retirement, resignation or termination of
service according to the rate specified therein. Clause (a)
of this rule contains a provision similar in effect to what
the last sentence of Rule 6 directs. Rule 9 also imposes an
imperative obligation for the payment of gratuity under
these rules within one month from the retirement,
resignation, death or termination of service of the employee
concerned. Rule 10, which provides for contribution of
the Bank towards the Gratuity Fund, was no doubt also kept
under consideration and not approved by the Joint Registrar,
but this too, in our view, does not render the remaining
rules ineffective; nor does this fact by itself absolve the
Bank of the obligation imposed on it by Rules 7, 8 and 9.
The contention that without there being a Gratuity Fund, the
Bank cannot lawfully pay gratuity assumes that the Bank hag
no other resources out of which its liabilities under the
Rules in question can be discharged--an assumption which is
not easy to upheld. Once the Gratuity Fund Rules imposing
an obligation on the Bank to pay gratuity to its employees
are approved by the Registrar, then this obligation, in our
opinion, cannot be rendered nugatory merely because there is
no separate Gratuity Fund. Rule 15 which provides for the
applicability of section 41 of the Bombay Co-operative
Societies Act VII of 1925 to the "administration of
196
the Gratuity Fund" created under the rules in question, does
not touch the question of the enforcement of these rules,
and indeed even on behalf of the appellant, no attempt has
been made to rely on Rule 15 for this purpose.
The appellant’s counsel next relied on the new rules
which were approved by the Joint Registrar of Co-operative
Societies and were made retrospective in their operation so.
as to be enforceable with effect from July 1, 1953. It was,
however, conceded by Shri Chagla and, in our opinion,
rightly, that the new rules could not detract from or
prejudicially affect the vested rights created under the
old rules. Indeed old Rule 16, it may be recalled,
prohibits the retrospective operation of the new rules with
the object of protecting the interests of the employees.
The submission that the old rules have neither been
repealed, nor altered, as contemplated by Rule 16, and that
the Registrar has merely withdrawn his approval to the old
rules and enforced the new ones, does not advance the
appellant’s case. The effect of old rule 16, in our
opinion, cannot be negatived by describing the process as
mere withdrawal of the approval of the old rules and
enforcement of the new ones, for in real substance the
process seems to us to be covered by Rule 16.
The appeal accordingly fails with no order as to costs.
G.C. Appeal dismissed.
197
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