RETNAVALLI Vs. AMBALAPADU SERVICE CO OP BANK LTD

JUDGEMENT

(1.) A very important question affecting the employees of the Co-operative Societies across the State of Kerala arises in this case. The question is whether the gratuity payable to retired employees or legal heirs of deceased employees of Co-operative Societies should be restricted to the maximum prescribed under Section 4(3) of the Payment of Gratuity Act, 1972, (for short 'the Act'), Rule 59 of the Kerala Co-operative Societies Rules, 1969 (hereinafter referred to as 'the Rules') and the bye-laws framed under the said Rule 59, even in cases where the Societies have entered into arrangement with the L.I.C. to have their liability for payment of gratuity to its employees insured as per the "Employees Group Gratuity Life Assurance Scheme" of the L.I.C., as per which more amounts than the statutory maximum payable as per Section 4(3) of the Payment of Gratuity Act, Rule 59 and bye-laws of the society are payable to the employees.

(2.) The facts of the case fall in a narrow compass. According to the petitioners, the 1st respondent-Society had constituted a Gratuity Fund Trust under the Payment of Gratuity Act in order to ensure payment of gratuity to its employees as per the Act. The Society entered into an agreement with the L.I.C. of India under which the L.I.C. of India assured payment of gratuity to the employees of the Society as per the master policy, two pages of which are produced as Ext.P1. The petitioners submit that by Ext.P1, the L.I.C. has taken over the liability of the Society to pay gratuity to its employees by paying the sum assured by Ext.P1, to retiring employees or legal heirs of deceased employees. In Ext.P1, the sum assured as per the policy is described thus:

(3.) One P.K. Krishnan retired as the Secretary of the 1st respondent-- Society on 18.2,1995 and he expired on 29.3.1996. His last drawn salary was Rs. 7380/- per month. He had continuous service of 29 years at the time of retirement. Calculated in accordance with the terms of Ext.P1 policy, the total amount of gratuity due to him was Rs. 1,23,473/- (7380 x 15/26 x 29) which is less than the maximum prescribed as per Ext.P1. Out of this, Rs. 75,000/- was paid to the said Krishnan on his retirement. After his death, his legal heirs, who are the petitioners in this Original Petition, were paid another sum of Rs. 25,000/- making a total of Rs. 1,00,000/- paid as gratuity. The petitioners now claim the balance amount due to them as per Ext.P1 policy. According to the petitioners, although at the relevant time, the maximum amount of gratuity payable as per Section 4(3) of the Act, at it stood then, was Rs. 1 lakh, Ext.P1 represented a contract for payment of better terms of gratuity which is saved by Section 4(5) of the Act. On receipt of representations from the petitioners, the 1st respondent sought clarification from respondents 2 and 3 who advised them that no amount in excess of the maximum described under the Act can be paid to a retired employee as gratuity, apparently based on Ext.R3(d) communication from the Registrar of Co-operative Societies.