NEDUPUZHA SERVICE CO OPERATIVE BANK LTD Vs. RUGMINI

JUDGEMENT

(1.) In these Writ Appeals the appellant Co-operative Banks are challenging judgments of the learned Single Judges directing the appellants to pay gratuity to the respondent employees over and above the gratuity amount receivable by them under the LIC's Group Gratuity-cum-Life Assurance Policy taken by the appellant Banks covering all the employees. We have heard learned counsel appearing for the appellant Banks and learned counsel appearing for the respondents including the learned Standing Counsel appearing for the Life Insurance Corporation of India.

(2.) At our request, concerned executives from the LIC appeared in Court and personally explained the nature of the Group Gratuity-cum-Life Assurance Policy, which the appellant Banks have with them for payment of gratuity to their employees. Before proceeding with the matter, we have to refer to the statutory provisions under which the appellants as employers are liable to pay gratuity to their employees on their retirement.

(3.) Admittedly, employees of all Co-operative Banks are entitled to receive gratuity on their death, resignation or retirement in accordance with the provisions of the Payment of Gratuity Act, 1972 (hereinafter referred to as the Act for short). Section 4(5) of the Act provides that employers and employees can have better arrangement for payment of gratuity over the benefits available to the employees under the statute. If there is any such arrangement, the employees are entitled to receive better benefit over the statutory benefits. It is to be noted that all the appellant Banks are constituted under the provisions of the Kerala Co-operative Societies Act, 1969, which in Section 62 provides that employees of Co-operative Societies are entitled to payment of gratuity at such rates and on such conditions as are prescribed. Rule 59 of the Kerala Co-operative Societies Rules provides for eligibility for gratuity such as minimum period of service required, category of employees entitled to gratuity, etc. In exercise of powers conferred under Section 66A of the Kerala Co-operative Societies Act, the Registrar of Co-operative Societies issued circular 46/79 authorising Co-operative Societies to take policies to cover employees under the LIC's Group Gratuity-cum-Life Assurance Scheme. Following the circular issued by the Registrar of Co-operative Societies, the appellant Banks took policies with the LIC for operating the Group Gratuity Scheme for their employees. The unique advantage of the Scheme is that life of the employees are also insured under the Gratuity Policy, which will benefit employees dying in service. The Group Gratuity Policies taken by the Co-operative Banks are renewed on an year to year basis. The Scheme provides for individual accounts for each and every employee and depending on pay and years of service available to employee before retirement, gratuity payable to each employee and premium payable are also determined on an year to year basis. There is nothing in the policy limiting the gratuity entitlement for the employees up to the statutory limit which during the relevant years was Rs. 3.5 lakhs. However, the premium fixed for each employee every year will depend on the gratuity amount payable to such employee, which is also provided in the Schedule to the Policy which is an annexure to it. If the employer wants to provide gratuity over and above the statutory limit of Rs. 3.5 lakhs, Policy has to provide for it and the LIC will charge higher premium amount for such endowment policy. In most of the cases, the Banks have taken Policies keeping in mind the maximum gratuity payable under the Act. None of the respondent employees have raised a dispute that the LIC's Group Gratuity Policies taken by the appellant Banks are less favourable to them and therefore they are entitled to payment of gratuity in terms of the statutory provisions which is more than the amount received by the appellant Banks from the LIC under the Policies and payable to the employee concerned. In our view, the Registrar of Co-operative Societies rightly advised the appellant Banks to join the LIC's Group Gratuity Scheme because even in the event of liquidation of Societies on account of loss, the employees are protected as they are entitled to gratuity by virtue of the policy coverage. It is seen that under the Policies taken, the appellant Banks have limited employees' entitlement for gratuity up to the maximum amount payable under the Act. The issue raised in some of the appeals is whether the excess amount over the statutory limit received by the Banks under the Policy for the retired employees should be given to them or whether the same could be retained by the Bank. The appellant Banks claim that the Policies are taken by them and their liability is limited to the statutory limit and excess gratuity amount received under the individual account of the employees over the statutory limit should go to the appellants. The employees, on the other hand, contend that they are entitled to the entire amount payable by the LIC for the policies taken by the appellant Banks. The learned Single Judges directed the appellants to pass on the entire benefits received from the LIC in the individual accounts of the employees to them. Besides this, none of the respondent employees have a case that the gratuity received by them under the Policies taken by the appellant Banks with the LIC is less than their entitlement for gratuity under the Act. In other words, in all cases the amount payable under the LIC's Group Gratuity Policies taken by the employers is either the statutory limit or in excess thereof. The above referred circular issued by the Registrar of Co-operative Societies was modified by circular No. 25/99 wherein the Registrar ordered that the excess amount receivable from the LIC in the individual account of the employees over the gratuity payable to them under the Act will enure to the Societies. Similarly, it is also ordered that if the amount received from the Society is less than the amount of gratuity payable under the Act, the Society is bound to pay the difference to the employees. This Court in the decision in Retnavalli v. Ambalapadu Service Co-operative Bank Ltd., 2005 3 KerLT 320, held that the circular is bad and the employees are entitled to maturity amount under the LIC policy, which may be in excess of the maximum gratuity provided under the statute under Section 4(3) of the Act.