2004 (12) TMI 397 - HC - Companies Law

Summary

Issues Involved:
1. Whether Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) prevents the initiation of recovery proceedings for gratuity under the Payment of Gratuity Act, 1972.
2. Jurisprudential concept and constitutional mandates regarding the payment of gratuity.
3. Impact of the non obstante clauses in both the Payment of Gratuity Act, 1972 and SICA, 1985.
4. Application of the doctrine of proportionality in interpreting Section 22 of SICA, 1985.

Issue-wise Detailed Analysis:

1. Section 22 of SICA and Recovery Proceedings for Gratuity:
The primary issue is whether Section 22 of SICA, 1985, which includes a "non obstante clause," prevents the initiation of recovery proceedings for the realization of gratuity under the Public Demands Recovery Act. The court examined the legislative intent and the statutory provisions, concluding that Section 22 of SICA does not place an embargo on the recovery of gratuity payments. The court emphasized that gratuity is a deferred payment and a valuable right of the retired employee, which cannot be withheld under any circumstances, as per Section 14 of the Payment of Gratuity Act, 1972.

2. Jurisprudential Concept and Constitutional Mandates:
The court discussed the jurisprudential concept of gratuity, highlighting its evolution from being considered a gratuitous payment to being recognized as a statutory right and a form of deferred payment. The court referred to several Supreme Court judgments, including Som Prakash Rekhi v. Union of India and R. Kapur v. Director of Inspection (Painting & Publication) Income-tax, which established that gratuity is a property right protected under Article 300A of the Constitution of India. The court also noted that gratuity payments are part of social and economic justice mandated by the Constitution, ensuring financial security for retired employees.

3. Non Obstante Clauses in Payment of Gratuity Act and SICA:
The court analyzed the conflict between the non obstante clauses in Section 14 of the Payment of Gratuity Act, 1972, and Section 22 of SICA, 1985. It noted that while both sections contain overriding provisions, the Payment of Gratuity Act, being a piece of social welfare legislation, takes precedence. The court cited the case of Maharashtra Tubes Ltd. v. State Industrial and Investment Corpn. of Maharashtra Ltd., which held that in the event of a conflict between two central legislations, the later legislation would prevail. However, the court emphasized that the Payment of Gratuity Act serves a constitutional mandate and cannot be overridden by SICA.

4. Doctrine of Proportionality:
The court applied the doctrine of proportionality to assess whether Section 22 of SICA could restrict the payment of gratuity. It balanced the need for the rehabilitation of sick industries against the fundamental right of retired employees to receive their gratuity. The court concluded that denying gratuity payments under the guise of industrial rehabilitation would be disproportionate and violate the fundamental rights of retired employees under Article 21 of the Constitution. The court referenced the case of Union of India v. G. Ganayutham, which allowed for the application of the proportionality doctrine in assessing the validity of statutory provisions affecting fundamental rights.

Conclusion:
The court held that Section 22 of SICA, 1985, cannot be used to prevent the recovery of gratuity payments, as it would violate the fundamental rights of retired employees. The writ application was allowed, and the respondent was directed to initiate recovery proceedings for the gratuity amount along with interest. The Controlling Authority was also directed to take necessary steps to implement the judgment. The stay requested by the respondent was refused.