2015 (8) TMI 91 - HC - Companies Law

Payment of gratuity to director Having agreed to make payment of gratuity as per content terms, claim that gratuity not admissible was not maintainable Held that - Section 4(5) of Payment of Gratuity Act, 1971, makes it clear that nothing shall effect the right of employee to receive better terms of gratuity under any award or agreement or contract with employer Even if employee does not fall within meaning of definition prepared for Section 4-A, nothing prevents employer company from entering into any agreement with employee for payment of gratuity. Respondent was employed with Appellant and received regular emoluments No reason not to be treated as employee Nothing prevents Appellant-company from entering into separate contract for payment of gratuity with whole-time employee who was holding more than 5 per cent voting rights in company Letter dated 3 January 2014 addressed by LIC show that Respondent was actually included in gratuity scheme and policy taken from LIC in connection with scheme. Where there was unequivocal admission of liability to pay gratuity to Respondent coupled with promise to pay same as per content terms It was agreed and confirmed by appellant that gratuity shall be paid to Respondent on account of his resignation No infirmity in order of CLB Appeal dismissed Decided in favour of Respondent.

Issues Involved:
1. Entitlement of the Respondent to gratuity under the Payment of Gratuity Act, 1971.
2. Jurisdiction of the Company Law Board (CLB) to adjudicate disputes regarding gratuity.
3. Validity and enforcement of consent terms regarding gratuity payment.
4. Calculation and quantum of gratuity payable.
5. Applicability of judgments from higher courts on the jurisdiction and entitlement issues.

Detailed Analysis:

1. Entitlement of the Respondent to Gratuity:
The Appellants argued that the Respondent was not entitled to gratuity as he was an 'employer' rather than an 'employee' under the Payment of Gratuity Act, 1971. They contended that the payments made to the Respondent were director's remuneration and not wages. However, the court noted that the Act defines an employee as any person employed on wages in connection with the work of an establishment. The Respondent, being employed with Appellant No.1 and receiving regular emoluments, was deemed an employee under the Act. The court also highlighted that the definition of 'employee' under the trust deed for compulsory insurance purposes does not generally govern the meaning of 'employee' for gratuity purposes under the Act.

2. Jurisdiction of the CLB:
The Appellants contended that disputes regarding gratuity should be decided by authorities under the Payment of Gratuity Act, not the CLB. The court clarified that this case was not about determining gratuity under the Act but enforcing consent terms agreed upon by the parties. The consent terms included an unequivocal admission of liability to pay gratuity to the Respondent. The CLB had jurisdiction to enforce its own order passed by consent of the parties, and there was no need to refer the dispute to authorities under the Act.

3. Validity and Enforcement of Consent Terms:
The consent terms filed before the CLB included a clause for payment of gratuity to the Respondent within two months from the date of handing over management. The court emphasized that the consent terms were a mutual settlement between the parties, and the CLB's role was to enforce this agreement. The Respondent's entitlement to gratuity was acknowledged in the consent terms, making the CLB's order for payment valid and enforceable.

4. Calculation and Quantum of Gratuity Payable:
The CLB accepted the calculation of gratuity provided by the Respondent, as the Appellants did not contest the details or provide an alternative calculation. The court noted that the approved balance sheet of the company disclosed the Respondent's last drawn salary, which was used to calculate the gratuity. The CLB was entitled to undertake this ministerial exercise based on the provided records, and there was no error of law in accepting the Respondent's calculation.

5. Applicability of Judgments from Higher Courts:
The Appellants relied on judgments from the Supreme Court and Calcutta High Court to argue that gratuity disputes should be adjudicated by authorities under the Payment of Gratuity Act. However, the court distinguished these cases, noting that they involved applications under the Act, whereas the present case involved enforcement of consent terms agreed upon by the parties. The court held that the CLB had jurisdiction to enforce its own order and that the judgments cited did not apply to the specific circumstances of this case.

Conclusion:
The court found no infirmity in the CLB's order directing the Appellants to pay gratuity to the Respondent as per the consent terms. The appeal was dismissed, and the CLB's order was upheld. The court also ordered that the impugned order of the CLB shall not be executed for four weeks, providing temporary relief to the Appellants. Consequently, related company applications were also dismissed.

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