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Issues:
Interpretation of Payment of Gratuity Act, 1972 regarding calculation of gratuity rate and ceiling limit based on different schemes. Analysis: The case involved an appellant (Bank) registered under the Maharashtra Co-operative Societies Act, 1960, and its employees (respondents) entitled to gratuity upon superannuation. The Bank introduced various gratuity schemes with different rates and ceiling limits over the years. The Payment of Gratuity Act, 1972, governs the payment of gratuity to employees. Section 4 of the Act specifies the payment of gratuity based on completed years of service and sets a ceiling limit on the amount payable. The key issue was whether the respondents were entitled to the benefit of a higher ceiling limit under the 1998 Act while calculating gratuity at a higher rate based on a contractual scheme of the Bank. The respondents argued that the statutory provision should prevail over the contractual term, which they deemed repugnant to the Act. They sought to replace the ceiling limit in their contract with the statutory limit provided in the 1972 Act. The doctrine of blue pencil, allowing courts to strike out offending portions of a contract, was discussed in relation to severing illegal or void provisions. The court, however, held that this doctrine was not applicable in the case at hand. It emphasized that the Payment of Gratuity Act is a beneficial statute, but workmen must choose between the terms of the statute and those of the contract. The court ruled that a workman cannot opt for both the statutory benefits and the contractual terms simultaneously as it would defeat the purpose of the Act. The judgment highlighted the importance of interpreting the Act in favor of workmen while balancing the contractual terms agreed upon by the parties. It emphasized that the spirit of the Act should not be compromised by allowing employees to cherry-pick the most favorable provisions from both the statute and the contract. Ultimately, the court set aside the lower court's decision, ruling in favor of the Bank and disallowing the respondents from claiming benefits under both the statutory ceiling limit and the contractual gratuity rate simultaneously.
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