Summary
The employee’s claim to gratuity above the statutory ceiling failed because the company scheme expressly required gratuity for employees covered by the Act to be calculated under its provisions. This incorporated both the calculation method and the ceiling, which was Rs.10 lakh at the employee’s resignation in 2012. The scheme’s separate terms applied to employees outside the Act. Section 4(5) protects better contractual terms, but this scheme offered no such alternative to covered employees.
Issues
- Whether the scheme offered gratuity without the statutory ceiling to an employee covered by the Act.
- Whether Section 4(5) preserved a more beneficial entitlement on these facts.
- Whether excess payments to other employees created a right to similar treatment.
Provisions considered
- Sections 2(e), 4(2), 4(3) and 4(5), Payment of Gratuity Act, 1972Applied the definition without a wage ceiling and the Rs.10 lakh gratuity ceiling prevailing on resignation; required an actual better award, agreement or contract to invoke Section 4(5). (¶¶ 15, 15.4, 15.5, 15.6, 16, 17, 18, 20, 21, 22, 23, 24)
- Rule 6(b) and Appendix, Company Gratuity SchemeRequired covered employees’ gratuity to be calculated under the Act, including its ceiling, while providing separate terms for employees not covered. (¶¶ 3.2, 3.3, 20, 21, 22, 23, 24)
Held
- Section 4(5) preserves better terms under an award, agreement or contract. Its application requires an available alternative offering better terms than the Act; it does not itself create an uncapped entitlement. (¶¶ 17, 18, 21)
- Rule 6(b) and the Appendix divided employees into those covered by the Act and those outside it. For the former, calculation under the Act incorporated both Section 4(2) and the ceiling in Section 4(3). The scheme’s historical purpose was to extend benefits to excluded employees, not to offer covered employees a superior package. (¶¶ 20, 21, 22, 23)
- The employee was covered by the Act without any wage-bracket exclusion when he resigned on 1 June 2012, when the statutory ceiling was Rs.10 lakh. The employer correctly applied that ceiling. Mistaken excess payments to other employees could not confer a right contrary to the trust deed and scheme. (¶¶ 15.4, 15.5, 15.6, 16, 24)
- Where genuinely alternative statutory and contractual packages exist, an employee must take one complete package rather than combine favourable components from both. Here the High Court’s premise that the scheme adopted the statutory rate without its ceiling overlooked Rule 6(b). (¶ 23)
Result
Employer’s appeal allowed; impugned judgment and order set aside and employee’s claim petition dismissed, without costs.