RAGBAVULU AND SON Vs. ADDITIONAL LABOUR COURT

JUDGEMENT

(1.) The petitioner herein challenges the correctness of the order of respondent No. 1 directing the petitioner to pay gratuity to respondent No, 2 under Sec. 40 of the Andhra Pradesh Shops and Establishment Act, 1966 ('the Act', for short). There was some dispute as to when respondent No. 2 was appointed. The order of the respondent No. 1 proceeded, however, on the basis that respondent No. 2 was appointed on 21-6-1971. It appears respondent No. 2 voluntarily abandoned the services with effect from 1-6-1976 with the result that he was in the service of the petitioner for a period of 4 years 11 months and 10 days. Respondent No. 2 1aid a claim for payment of gratuity under Sec. 40 of the Act before respondent No. 1. The claim was resisted by the petitioner on the ground that respondent No. 2 had not been in the employment continuously for a period not less than 5 years and consequently he was not eligible to receive gratuity on termination of his services. The first respondent declined to accept the above contention on the ground that under Sec. 2 (c) of the Payment of Gratuity-Act, an employee working for 240 days in a year shall be deemed to be in continuous service for one year and therefore the second respondent was eligible for receiving gratuity. According to the first respondent, clause (d) to the Explanation to Sec. 40 (1) of the Act is analogous to the provisions contained in Sec. 2 (c) of the Payment of Gratuity Act. In as much as respondent No. 2 was in the employment for a period of 4 years 11 months, it was held that pursuant to clause (d) to the Explanation to Sec. 40(1) of the Act, the respondent No. 2 would be entitled to receive gratuity. In that view, the petitioner had been required to pay gratuity for 5 years. In addition, the petitioner was also required to pay two months' wages by way of penalty for non-payment of gratuity. The above view of respondent No. 1 is challenged in this writ petition.

(2.) As the question turns upon the correct interpretation of Sec. 40 of the Act, it is relevant to extract the same.

(3.) There are two ingredients insofar as Sec. 40 of the Act is concerned. The first ingredient is the eligibility itself. Sec. 40 provides that every employee who has been in employment continuously for period of not less than five years shall be eligible to receive gratuity. Once the eligibility is established, the second ingredient is to quantify the amount of gratuity. See. 40(1) of the Act provides that where an employee does become eligible for payment of gratuity, the gratuity payable to him shall be 15 days' average wages for each year of continuous employment. Clause (d) to the Explanation to Sec. 40(1) of the Act, which is quoted above provides that where the total continuous employment is for a fraction of a year or extends over a fraction of a year in addition to one or more completed years of continuous employment, such fraction if it is not less than a half year, shall be counted as a year of continuous employment in calculating the total number of years for which the gratuity is to be given. (emphasis supplied), It is clear from the above explanation that if the service of an employee extends over a fraction of a year and if such fraction is in excess of a half year, it shall be counted as a year of continuous employment for the limited purpose of calculating the total number of years for which the gratuity is to be given. This may be illustrated. For instance, if an employee were to be in service for a total period of 5 years 11 months and 10 days, he shall be considered to have been in continuous employment for a period of 6 years and the gratuity payable to him shall be quantified at the rate of 15 days' average wages for each year of "continuous employment". Explanation (d) in the terms above stated, has no effect on the initial question regarding eligibility. It is not provided in