Jalgaon District Central Co-Operative Bank Ltd. v. Pundalikrao Laxmanrao Suryawanshi & Ors.

Dua, J. Pundalikrao Laxmanrao Suryawanshi plaintiff (res-pondent No. I in this Court) instituted arbitration proceedings in the Court of the Registrar's Nomine.e against the Jalgaon District Central Co-operative Bank Ltd., Jalgaon (appellant in this Court) for the recovery of a sum of Rs. 7,605/- as the balance of gratuity with interest at 6 per cent due from 18-8-1962. The claim having been resisted, the same was disallowed on May 16, 1963. An appeal presented to the Maharashtra State Co-operative Tribunal under s~ction 97 of the Maharashtra Co-operative Societies Act against the award of the Registrar's Nominee was dismissed and the said award was confirmed.

The Bombay High Court was thereupon approached by respondent No. 1 under Article 227 of the Constitution and the High Court allowing the application on July 17, 1965 set aside the orders made by the Co-operative Tribunal and by the Regis-trar's Nominee :c.nd directed the appellant-Bank to pay to respon-dent No. 1 Rs. 7,605/- together with interest at 4 per cent per annum from June 19, 1963 up-to-date.

The present appeal by special leave is directed against the order of the Bombay Hi,~h Court.

Shri M. C. Chagla, the learned counsel for the appellant, concentrated his challenge to the impugned order on the ground that on July 19, 1962, when respondent No. 1 retired from service of the appellant-Bank, there were no vali't rules in force entitling him to th.~ amount of gratuity claimed by him. It was not dispu-ted before m that respondent No. l had retired on July 19, 1962 after 32 vears of service. On retirement. he wa~ paid a sum of Rs. 5,070/- by way of gratuity, but his claim in the present pro-ceedings is for a further sum of Rs. 1,605/-.

Gratuity Fund Rules were sanctioned by the Board of Directors of the appellant-Bank on August 17, 1957. They were framed under the Bank's bye-laws. These rules (thereafter called old rules) were forwarded to the Registrar of Co-operative Societies for approval and they were approved with some modifications except Rules 6, 10 and 15 which were kept under consideration. The principal argument pressed before us by Shri Chagla was that Rul.es 6 and 10 having not been approved by the Registrar, ·all the old rules must be deemed to have remained inoperative because these two rules form the real substratum of the scheme embodied in those rules. Without these two rules, the remaining rules, according to the argument, cannot effectively operate. We are unable to accept this submission.

It would be useful at this stage to reproduce old Rules 6,7, 9,10,15 and 16 which alone are suggested on behalf of the appel· Jani to be relevant.

"6. These Rules shall be deemed to have come into force (i.e. in respect of an employee retiring, resigning and/or having terminated his services) from the !st July, 1953. Every employee who has completed at least five years service shall be granted gratuity at the rate specified herein.

¶7In case of retirement, resignation or termination of services gratuity shall be granted :

(a) After five years but before completion of 10

years services :-half month's salary for each completed year of service.

(b) After 10 years but before completion of 16

years service :-'three fourth of a month's salary for each completed year of service.

( c) After 15 years service three fourth of a month's

salary for each completed year of service, sub-ji:ct to the minimum of fifteen salaries.

8., 9. Payment of the claims on account of the Gra-tuity payable under these Rules, shall be made within one month from the retirement, resignation, death or the termination of service.

¶10The Bank shall contribute on 30th June, every year, or as soon as possible thereafter, but not later

than 30th September of the year, an amount not less than the amount contributed by the Bank as contribu-tion to the Provident Fund.

lltol4.

¶15The provisions under sec. 41 of the Bombay R Co-operative Societies Act (Bombay Act VII of 1925)

as am.ended upto date shail be applicable to the admi-nistration of the 'Gratuity Fund' created under these Rules.

¶16The Board oi Directors shall have powers, sub-ject to the approval of the Registrar Co-operative Societies Bombay State, Poona, to alter, add to, or re-peal these rules from time to time, provided however that no such alteration, addition or repeal shall have any retrosp.~ctive effect against the interest of the em-ployee, in the employment of the Bank on that date."

According to the appellant's learned counsel, the Registrar hav-ing withheld approval of Rule 6, the last sentence of which pro-vides that every employee who has completed at least 5 years' service, shall be granted gratuity at the rate specified in the rules, there is no rule which imposes an obligation on the appellant-Bank to pay gratuity. This argument, in our opinion, ignores the expre'5 language of Rule 7 which, in unequivocal terms, requires gratuity to be granted in case of retirement, resignation or termi-nation of service according to the rat.~ specified therein. Clause (a) of this rule contains a provision similar in effect to what the last sentence of Rule 6 directs. Rule 9 also imposes an impera-tive obligation for the payment of gratuity under these rules within one month from the retirement, resignation, death or termi-nation of service of the employee concerned. Rule 10, which provides for contribution of the Bank towards the Gratuity Fund, was no doubt also kept under consideration and not approved by the Joint Registrar, but this too, in our view, <lees not render the remaining rules ineffective; nor does this fact by itself absolve the Bank of the obligation impo'.~d on it by Rules 7, 8 and 9. The Cr· contention that without there being a Gratuity Fund, the Bank

cannot lawfully pay gratuity assumes that the Bank has no other resources out of which its liabilities under the Rules in question can be discharged-an assumption which is not easy to upheld. Once the Gratuity Fund Rules imposing an obligation or. the Banic to pay gratuity to its employees ar.~ approved by the Regist-II rar, then this obligation, in our opinion, cannot be rendered nuga-

tory merely because there is no separate Gratuity Fund. Rule 15 which provides f?r .the applicability of section 41 of the Bombay Co-operative Soc1eUes Act VII of 1925 to the "administration of the Gratuity Fund" created under the rules in question, does not touch the question of the enforcement of these rules, and indeed even on behalf of the appellant, no attempt has been made to rely on Rule 15 for this purpose.

The appellant's counsel next relied on the new rules which were approved by the Joint Registrar of Co-operative Societies and were made retrospective in their operation so as to be enforce-able with effect from July I, 1953. It was, however, conceded by 5hri Chagla and, in our opinion, rightly, that the new rules could not detract from or prejudicially affect the vested rights created under the old rules. Indeed old Rule 16, it may be re· called, prohibits the retrospective op.~ration of the new rules with the object of protecting the interests of the employees. The sub· mission that the old rules have neither been repealed, nor altered, as contemplated by Rule 16, and that the Registrar has merely withdrawn his approval to th.~ old rules and enforced the new ones, does not advance the appellant's case. The effect of old rule 16, in our opinion, cannot be negatived by describing the process as mere withdrawal of the approval of the old rules and enforcement.of the new ones, for in real substance the process seems to us to be covered by Rule 16.

The appeal accordingly fails with no order as to costs.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 944 of 1966.

Appeal by sp~cial leave from the judgment and order, dated March 30, 1965 of the Bombay High Court in Special Civil Appli-cation No. 5 of 1964.

M. C. Chagla and I. N. Shroff, for the appellant.

Ganpat Rai and R. Mahalingier, for respondent No. I.