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TMI Blog2024 (8) TMI 1244X X X X Extracts X X X X X X X X Extracts X X X X ..... ement is an employee , jurisdiction of Controlling Authority under the Payment of Wages Act would be unavailable and a plain claim of a person (not being an employee) to enforce specific performance of agreement for payment of amount described as gratuity may not lie before the Controlling Authority. The first inquiry should have been about the issue as to whether Petitioners were employees of the first Respondent-Company. However, since substantially high amount of Rs. 1,21,96,154/- is claimed by both Petitioners as gratuity as compared to cap of Rs. 10,00,000/- each under Section 4 (3), a slightly different approach is being adopted where I first embark upon the path to enquire about existence of agreement under Section 4 (5) of the Act between the parties. What is contemplated under sub-section (5) of Section 4 of the Payment of Gratuity Act is any award or agreement or contract with the employer . Admittedly the claim is not premised on existence of any Award and therefore what needs to be proved is existence of an agreement or contract. No express written agreement or contract is however produced on record, under which the first Respondent-company agreed to pay any gratuity to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated for the first time by Petitioners, who were in complete control of the company on that date, that too 5 days before sale of their stake in the company, cannot amount to agreement under provisions of section 4 (5) of the Payment of Gratuity Act. Petitioners claim for gratuity is thus totally untenable and has rightly been rejected by the Controlling and Appellate Authorities. X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the term 'employee'. 3) Petitioners filed Appeal (PGA) No. 1/2019 and Appeal (PGA) No. 2/2019 before the Appellate Authority-cum-Industrial Court, Pune (Appellate Authority) challenging the decision of the Controlling Authority. By orders dated 10 July 2023, the Appellate Authority has dismissed the Appeals filed by Petitioners. Aggrieved by the decisions of the Controlling Authority and Appellate Authority, Petitioners have filed the present petitions. 4) Mr. Bapat, the learned senior advocate appearing for Petitioners would submit that the Controlling and Appellate Authorities have failed in not appreciating that Petitioners drew wages from the First Respondent-Company and therefore clearly fit into the definition of the term 'employee' under Section 2 (e) of the Payment of Gratuity Act. That every person who is employed for wages becomes an employee and that therefore once the salary slips are produced, both the Authorities ought to have treated Petitioners as employees of the First Respondent-Company. That mere functioning as Directors of the Company did not mean that they become employers or that they cease to be employees. That the employer in the present case would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015., in support of his contention that this Court has dealt with an almost identical case where a Director of the Company was sought to be denied gratuity by erroneously treating him as employer. That this Court held that mere absence of name of the Respondent therein in the LIC Group Gratuity Scheme procured under the provisions of Section 4A of the Payment of Gratuity Act was not a fit ground for rejection of claim for payment of gratuity. Mr. Bapat would therefore urge for setting aside the orders passed by the Controlling Authority and Appellate Authority and to allow the applications filed by the Petitioner for payment of gratuity. 7) Petitions are opposed by Mr. Kshirsagar, the learned counsel appearing for the Respondents. He would submit that Petitioners are founder Directors of the First Respondent Company who were in absolute control of its affairs. That therefore both the Courts below have correctly held them to be the employers of various other employees employed in the Company. That Petitioners selectively produced salary slips of only one month for May 2012 with a view to raise false claim for gratuity. That there is no explanation as to who appointed Petitioners, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which arc paid or arc payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance. 11) Relying on the aforesaid definition, Mr. Bapat has contended that since Petitioners were 'employed for wages' they are required to be treated as employees for the purpose of application of provisions of the Payment of Gratuity Act. He has also contended that Petitioners are treated as employees for the purpose of application of provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and that therefore there is no reason why they should not be treated as employees for the purpose of application of provisions of the Payment of Gratuity Act. 12) Reliance is placed by the Petitioners on documents described as 'Pay Slips' for the month of May 2012 which are placed on record. The Pay Slips refer to Employee Numbers assigned to Petitioners as 00139 and 00141. Petitioner-Anil Ganu is shown to have been earning basic earnings of Rs. 8,60,000/- from w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tep further to contend that the relevant entries made in the Balance Sheet constitutes an 'agreement' within the meaning of Section 4 (5) of the Payment of Gratuity Act. 16) Section 4 of the Payment of Gratuity Act provides for payment of gratuity to an employee on termination of his employment after he has rendered continuous service of atleast five years. Gratuity is payable either on superannuation or retirement or resignation or death or disablement. Sub-section (2) of Section 4 provides for quantum of Gratuity payable under which for every completed year of service, gratuity at the rate of 15 days wages is required to be paid. Under sub-section (3) of Section 4, the amount of gratuity payable to an employee is caped at Rs. 10,00,000/-. However, under sub-section (5) of Section 4, right of an employee to receive better terms of gratuity under any Award or Agreement or Contract with the employer is preserved. Section 4 of the Payment of Gratuity Act, as it applied in the year 2012, is reproduced below: 4. Payment of gratuity.-- (1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as so reduced. (5) Nothing in this section shall affect the right of an employee receive better terms of gratuity under any award or agreement or contract with the employer. (6) Notwithstanding anything contained in sub-section (i),-- (a) the gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused; (b) the gratuity payable to an employee may be wholly or partially forfeited-- (i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act violence on his part, or (ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment. By Amendment Act, 2018 the figure 'Ten lakh rupees' has been amended as 'such amount as may be notified by the Central Government from time to time'. Thus after 2018 amendment, sub-section (3) of Section 4 reads thus: (3) The amount of gratuity payable to an em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where I first embark upon the path to enquire about existence of agreement under Section 4 (5) of the Act between the parties. 19) What is contemplated under sub-section (5) of Section 4 of the Payment of Gratuity Act is 'any award or agreement or contract with the employer'. Admittedly the claim is not premised on existence of any Award and therefore what needs to be proved is existence of an agreement or contract. No express written agreement or contract is however produced on record, under which the first Respondent-company agreed to pay any gratuity to Petitioners. In absence of such express written contract, Petitioners contend that the entries made in the Balance Sheet for the year ending 31 March 2012 are required to be construed as an 'agreement' for payment of gratuity. The issue is whether Balance Sheet prepared for taxation purposes would constitute an 'agreement' for payment of gratuity under section 4 (5) ? 20) In the present case, there is an entry in the balance sheet as on 31 March 2012 under the heading 'Non-current liability' as 'Gratuity payable to Directors' and the amount is indicated as Rs. 1,21,96152/-. There is no dispute to the position that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assets Stabilisation Fund (SASF) & Anr. in which majority of four members had held that Balance Sheet would not amount to acknowledgment of debt for the purpose of extending limitation under Section 118 of the Limitation Act. After preliminary hearing, a Three Member Bench of NCLAT doubted the correctness of majority judgment of Full Bench and referred the case to Chairman of NCLAT to constitute Bench of coordinate strength to reconsider the judgment in V. Padmakumar case. A five member Bench of NCLAT refused to adjudicate the question referred, stating that the Reference to the Bench was itself incompetent. In the above factual background, the issue fell for Apex Court's determination. The Apex Court referred to the provisions of Section 18 of the Limitation Act relating to effect of acknowledgment in writing and formulated the question for determination as to whether entries in balance sheet made in accordance with law would amount to acknowledgment of debt for the purpose of extending the limitation under Section 18 of the Limitation Act ? The Apex Court answered the question by considering the provisions of Sections 292, 128, 129, 134, 137 of the Companies Act as well as vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . An exhaustive judgment of the Calcutta High Court in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff ["Bengal Silk Mills"] held that an acknowledgment of liability that is made in a balance sheet can amount to an acknowledgment of debt as follows: xxxx 21. Importantly, this judgment in Bengal Silk Mills holds that though the filing of a balance sheet is by compulsion of law, the acknowledgment of a debt is not necessarily so. In fact, it is not uncommon to have an entry in a balance sheet with notes annexed to or forming part of such balance sheet, or in the auditor's report, which must be read along with the balance sheet, indicating that such entry would not amount to an acknowledgment of debt for reasons given in the said note. 35. A perusal of the aforesaid sections would show that there is no doubt that the filing of a balance sheet in accordance with the provisions of the Companies Act is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134 (7). Equally, the auditor's report may also enter caveat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not lay down correct position of law. In short, the Apex Court held that an entry in the balance sheet amounts to acknowledgment of debt under Section 18 of the Limitation Act and would accordingly extend the period of limitation for filing application under Section 7 of the Insolvency and Bankruptcy Code. 23) The issue before the Apex Court in Asset Reconstruction Company (India) Ltd. was about applicability of provisions of Section 18 of the Limitation Act for extension of period of limitation for filing application under Section 7 of the IBC. The effect of Section 18 of the Limitation Act is beginning of fresh period of limitation from the date on which acknowledgment of debt is made. Thus, if the amount is due to a party, which fails to file suit/proceedings for recovery thereof within the period of limitation, but the opposite party later reflects the said amount in the liability column of the Balance Sheet, reflection of such entry in the balance sheet would amount to acknowledgment of debt under Section 18 of the Limitation Act as held by the Apex Court in Asset Reconstruction Company (India) Ltd. and would result in running of fresh period of limitation from the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d liability arising out of such right must be independently established. In absence of proof of existence of 'liability in respect of a right', mere acknowledgement through a balance sheet entry would not amount to creation of such liability. This is dealt with to some extent by the Apex Court in Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria AIR 1961 SC 1236, which is relied upon in para 15 of the judgment in Asset Reconstruction Company (India) Ltd. It is held in Para 6 of the judgment in Khan Bahadur Shapoor Fredoom Mazda as under: 6. It is thus clear that acknowledgment as prescribed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgment of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledgment is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. (emphasis added) 26) Thus, it cannot be stated that mere reflection of an entry in the liability column of balance sheet would amount t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence as under: 4) I say that the Applicant and his wife transferred their ownership by selling of their shares to Innovative Industries Ltd. and Mr. Prabhakar Salunkhe and others which can be seen in the Share Purchase. Agreement. There was no understanding or any agreement either oral or written between the Applicant and the new owners with respect to the amount of gratuity payable to the Applicant. The entries which were made in the Annual Report of financial year of the year 2011-2012 were made before the transfer of ownership of Innovative Technomics Pvt. Ltd. to its new owners. That as mentioned in the above said para the Applicant and his wife themselves being the Directors/Employers made the said entries for payment of gratuity in the books of account for their own personal gain, on their own accord and hence it has no legal validity in the eyes of law. Hence the Applicant with mala fide intention has suppressed various facts like reason for resignation, transfer of shares date on which entry regarding the payment of gratuity in the books of account was made etc. to mislead the Hon'ble Court. (emphasis and underlining supplied) 29) Mr. Bapat has strenuously rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce sheet does not create any liability in absence of an underlying contract, nothing more can be read in the above statement of the witness. On the contrary, the same witness has expressly denied existence of any agreement or contract between Petitioners and Company to pay gratuity. 31) In my view, therefore there is no agreement in the present case between Petitioners and the First Respondent Company within the meaning of sub-section (5) of Section 4 of the Payment of Gratuity Act and therefore they cannot claim gratuity by merely relying on entry in the balance sheet of the Company. It must also be observed here that the balance sheet is prepared on instructions of the Petitioners, who were in full control of the Company as on the date of finalisation of the Balance Sheet. They signed the same 5 days before execution of the SPA. 32) Having held that there is no agreement within the meaning of Section 4 (5) of the Payment of Gratuity Act, the issue of Petitioners fitting into the definition of the term 'employee' becomes academic. It however must be observed here that in every case a director or managing director of a company drawing salary for work performed for the company can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company and all the controls were with the Managing Director of the company. On the aforesaid basis, it was found that the respondent was entitled to gratuity on the basis of his continuous service from 1 April, 1976 to 30 June, 1996 as there was no break in his service during that period. It is also required to be considered that the respondent herein had no ultimate control over the affairs of management and he was, all throughout, performing his duties and was getting salary for his work. It is not in dispute that he had never acted as a Managing Director and all the administrative decisions were in the hands of the management and therefore, simply because he signed some papers as Director, that will not disentitle him from availing of the benefits of gratuity under the Payment of Gratuity Act. The petitioner cannot be said to be an employer/co-employer, as, even looking to the definition of "employer," if any person is having ultimate control of the affairs of the company, he can be considered as employer. The petitioner was not having any such control in his hands and after considering the evidence on record, the authorities have come to the conclusion that the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clauses of SPA. Under Clause 1.1.17 'employee' is distinctly defined from the term 'Promoters' within the meaning under Clause 1.1.32. Both the terms are defined in the SPA as under : 1.1.17 "Employee" means either confirmed or permanent employee of the Company working as well as Persons who are under probation in accordance with the terms of appointment letters issued by the Company. 1.1.32 "Promoters" means and includes for the purpose of this Agreement Mr. Anil G. Ganu, and Ms. Ashwini A. Ganu. 36) Thus, under the SPA, both Petitioners are included in the definition of the term 'promoters' of the First Respondent-Company. As against this, the term 'employee' is defined to mean only confirmed and permanent employees of the Company. So far as the alleged liability created towards payment of gratuity to directors under entries in the Balance Sheet are concerned, the same would not bind the First Respondent Company or its purchasers/Directors in view of 'Entire Agreement' clause. Clause-16.1 of the SPA which reads thus: 16.1 This Agreement constitutes the entire Agreement between the parties with respect to the subject matter hereof to the exclusion of and shall supersede the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and deliver the said agreement and they are not required to obtain any consent or approval for execution of said document. It means that they having ultimate control respondent No. 1 before selling the same. 39) Even otherwise, the resignation is from the office of director of the Company. It may happen that in a given case, a regular employee of the company can be designated as a director and when he resigns from the position of the director, his employment with the company does not automatically come to an end. Therefore, resignations allegedly tendered by Petitioners from position of directors cannot be a factor for presumption of their employment with the company. What is curious to know is that Petitioners had sold their entire equity stake in the Company on 20 September 2012 and closing date in the SPA was indicated as the date of signing of the agreement. Thus, Petitioners otherwise did not have any connection with the company from 20 September 2012 and therefore it is quite incomprehensible as to why they were required to resign from the position of directors of the Company on 1 October 2012. This appears to be the reason why there is no endorsement or acknowledgment on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned as to how a company, who had suffered losses, can ever agree for creation of fresh liability on itself towards gratuity to directors of Rs. 1.21 crores, when no such provision was made in previous years when company was earning profits ? After being queried as to whether Petitioners could produce the balance sheet for previous year for Court's perusal, Mr. Bapat has expressed inability. Therefore, selective production of pay-slip of only one month and more importantly non-production of balance sheet of previous year makes the entire claim of Petitioners highly doubtful. 42) Also, it is an admitted position that under the Group Gratuity Scheme purchased by the first Respondent-Company as required under Section 4A of the Payment of Gratuity Act, list of employees is submitted and that the said list does not contain Petitioners' names. Mr. Kshirsagar has placed on record the renewed Group Gratuity Insurance Policy No. 638644 with annual renewal date of 1 February 2013 in which names of 57 employees of the first Respondent-Company, figures of their salaries, total accumulated gratuity, life cover etc. is indicated. Admittedly, Petitioners' names are not reflected in the said lis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n hire has entered into a contract of service; and includes any person employed for wages on any work connected with the administration of the factory or establishment or any part, department or branch thereof or with the purchase of raw materials for, or the distribution or sale of the products of, the factory or establishment or any person engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), [and includes such person engaged as apprentice whose training period is extended to any length of time] [Note : The expressions in parenthesis were substituted by Act 18 of 2010 w.e.f. 1-6-2010 in place of the expressions "or under the standing orders of the establishment".] but does not include-- (a) any member of the Indian naval, military or air forces; or (b) any person so employed whose wages (excluding remuneration for overtime work) exceed such wages as may be prescribed by the Central Government: Provided that an employee whose wages (excluding remuneration for overtime work) exceed such wages as may be prescribed by the Central Government at any time after (and not before) the beginning of the contribution period, shall c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86 : 1998 SCC (L&S) 178 : (1997) 77 FLR 878] , SCC p. 100, para 19) "19. As a result of the aforesaid discussion it must be held that the Division Bench of the High Court in the impugned judgment [ESI Corpn. v. Apex Engg. (P) Ltd., 1987 SCC OnLine Bom 136 : 1990 Mah LJ 501 : (1990) 2 Mah LR 850] had erred in taking the view, on the facts of the present case, that Shri Dhanwate as Managing Director of the company was not an employee within the meaning of Section 2 sub-section (9) of the Act. On the other hand, it must be held that he was an employee of the company and as such could be added to the list of the remaining 19 employees so as to make a total of 20 for covering the establishment under Section 2 sub-section (12) of the Act which defines "factory" to mean, 'any premises including the precincts thereof-- (a) … or (b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on,'." 13. We are clearly of the view that what has been observed and held by this Court in Apex Engg., in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interfere with the order dated 6-4-2005 as issued by the appellant Corporation. 44) Relying on the judgment in Venus Alloy Private Limited (supra), Mr. Bapat has contended that since definition of the term 'employee' and 'wages' under both the enactments being same, the ratio of the judgment holding directors of a company as employees must apply to the present case. I am unable to agree. Firstly, it is not even Petitioners' case that they were covered by definition of the term 'employee' within the meaning of ESI Act and that any contribution was made to ESIC in respect of the remuneration paid to them. The column 'ESI No.' in the payslip is blank. Thus Petitioners were not treated as employees within the meaning of ESI Act. The reliance on judgment in Venus Alloy Private Limited, far from assisting Petitioners' case, actually militates against them. 45) Also, the scheme under the ESI Act is entirely different where the establishments covered under the ESI Act are required to make contribution to the Employees State Insurance Fund held and administered by ESIC for payment of benefits and provision of medical treatment to the insured persons. The wages pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablished an approved gratuity fund in respect of his employees and who desires to continue such arrangement, and every employer employing five hundred or more persons who establishes an approved gratuity fund in the manner prescribed from the provisions of sub-section (1). (3) For the purpose of effectively implementing the provisions of this section, every employer shall within such time as may be prescribed get his establishment registered with the controlling authority in the prescribed manner and no employer shall be registered under the provisions of this section unless he has taken an insurance referred to in sub-section (1) or has established an approved gratuity fund referred to in sub-section (2). (4) The appropriate Government may, by notification, make rules to give effect to the provisions of this section and such rules may provide for the composition of the Board of Trustees of the approved gratuity fund and for the recovery by the controlling authority of the amount of the gratuity payable to an employee from the Life Insurance Corporation of India or any other insurer with whom an insurance has been taken under sub-section (1), or as the case may be, the Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total voting power. 50) Thus qua gratuity fund established as per the provisions of Income Tax Act and Rules and which is recognised for exemption under Section 4A of Payment of Gratuity Act, a director who owns shares carrying more than 5% of total voting power is specifically excluded from being admitted to the gratuity fund. Thus, conjoint reading of Section 4A of the Payment of Gratuity Act, Section 2(5) of the Income Tax Act and Rule 102 of the Income Tax Rules would indicate that in respect of those employers who have already established 'approved gratuity fund', such employer is not under statutory obligation to obtain insurance from Life Insurance Corporation of India for his liability for payment of gratuity. In respect of such employers who have obtained 'approved gratuity fund', its directors owning shares in a company carrying more than 5% of the total voting power cannot be admitted to such 'approved gratuity fund'. When in respect of a company which has set up 'approved gratuity fund', its director having more than 5% voting power cannot be admitted to such approved gratuity fund and therefore cannot be paid gratuity, I do not see any reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided for exit of Respondent therein from the First Appellant Company and Appellant No. 2 remaining in exclusive charge and control of its management and affairs. As a part of the settlement, the Consent Terms specifically provided for payment of gratuity and provident fund to Respondent No. 2. While Provident Fund was duly paid to him, gratuity was not paid and, in this background, the Respondent applied for directions before the Company Law Board for payment of gratuity 'in pursuance of the Consent Terms'. The application was opposed by the Appellants inter-alia on the ground that Respondent was an employer rather than employee within the meaning of Payment of Gratuity Act and the payments made to him were in the nature of Director's remuneration and not wages within the meaning of the Act. In the above factual background, this Court held as under : 5. …. The Act provides for payment of gratuity for every completed year of service or part thereof in excess of six months at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned. The Act also provides for compulsory insurance for the employer's liability of payment of gratu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to import the definition of 'employee' under the trust deed for this purpose. That definition, providing for not more than 5% voting rights for a director employee, may be relevant for the purposes of compulsory insurance under Section 4-A of the Act, but does not generally govern the meaning of the word 'employee' for the purposes of gratuity payable under the Act. Nothing therefore prevents Appellant No. 1 company from entering into a separate contract for payment of gratuity with a whole-time employee who has been holding more than 5 per cent voting rights in the company. Secondly, it has been brought out on record by the Respondent before the CLB that whereas there were suitable provisions made towards the company's liability to pay gratuity to the employees including whole time directors prior to the scheme, i.e. till the year 2001, with effect from the year 2001 an appropriate provision was made by depositing suitable amounts towards gratuity payable to the employees including the Respondent with the LIC. There is an admitted document on record in this behalf, namely, the letter dated 3 January 2014 addressed by the LIC that the total accumulation value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, and as far as the question of quantum is concerned, even that hardly admits of any dispute since the approved balance sheet of the company for the year ending 31 March 2012 is on record (annexed to the consent terms) and this balance sheet discloses that the Respondent's last drawn salary was Rs.24 lakhs per annum. On the basis of this last drawn salary and an admitted liability to pay gratuity, working out of the quantum of gratuity payable was a ministerial exercise, which in the facts of the case, the CLB was entitled to undertake. 53) Thus, in Ramchander's Coaching Institution Pvt. Ltd. this Court allowed claim for gratuity towards enforcement of Consent Terms filed before the Company Law Board. This Court noticed that in addition to Consent Terms filed before the Company Law Board, specific provision was made by depositing suitable amounts towards gratuity payable to employees (including the Respondent) with LIC. Thus under the Group Gratuity Scheme purchased under the provisions of Section 4A of the Act, the amounts were deposited for payment of gratuity to Respondent therein. There was a letter addressed by LIC indicating the accumulated amount of gratuity payable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of SPA) is made basis for claiming gratuity of Rs. 1.21 crores. The claim puts an additional burden on purchasers over and above the purchase price of Rs. 23 crores. There is no underlying agreement for payment of gratuity to directors to support the stray entry in the balance sheet. There is nothing of record to indicate that the previous directors (Mr. and Mrs. Deo) who owned 50% stake in the company during financial year 2010-11, were paid any gratuity. Petitioners' names do not figure in the list of employees for whom gratuity is insured by purchasing insurance policy from LIC under Section 4A of the Act. Even then, if a specific agreement was to be produced for payment of better terms of gratuity under Section 4 (5) of the Act, the claim of Petitioners could have been awarded. Mere entry in the balance sheet created for the first time by Petitioners, who were in complete control of the company on that date, that too 5 days before sale of their stake in the company, cannot amount to agreement under provisions of section 4 (5) of the Payment of Gratuity Act. Petitioners' claim for gratuity is thus totally untenable and has rightly been rejected by the Controlling and Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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