Calcutta High Court (Appellete Side)
Company Limited vs Baleswar Shaw & Ors on 24 December, 2024
Author: Ravi Krishan Kapur
Bench: Ravi Krishan Kapur
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
APPELLATE SIDE
BEFORE:
The Hon'ble Mr. Justice Ravi Krishan Kapur
W.P.A. No.11387 of 2024
Calcutta Jute Manufacturing
Company Limited
Vs.
Baleswar Shaw & Ors.
With
W.P.A. No.11392 of 2024
Calcutta Jute Manufacturing
Company Limited
Vs.
Munib Shaw & Ors.
With
W.P.A. No.11423 of 2024
Calcutta Jute Manufacturing
Company Limited
Vs.
Yogendra Sahini & Ors.
For the petitioners : Mr. Soumya Majumder, Advocate
Mr. S.K. Singh, Advocate
Mr. Ravi Kumar Dubey, Advocate
For the respondent No.1 : Mr. Rananeesh Guha Thakurta, Advocate
Ms. Senjuti Sengupta, Advocate
Ms. Dipa Roy, Advocate
For the State : Mr. Susovan Sengupta, Advocate
Mr. Manas Kumar Sadhu, Advocate
Ms. Sabnam De Bardhan, Advocate
Mr. Amit Kumar Ghosh, Advocate
Judgment on : 24.12.2024
2
Ravi Krishan Kapur, J.:
1. All these petitions raise common questions of law and fact and were heard
analogously.
2. The petitioners assail orders passed by the Certificate Officer, Alipore in
Case No. 22/Misc/22 dated 1 February 2024 and 21 March 2024, Case No.
50/Misc/23 dated 4 March 2024 and 21 March 2024 and Case No.
22/Misc/22 dated 1 February 2024 and 21 March 2024 respectively in
proceedings initiated under section 8 of The Payment Gratuity Act, 1972.
3. The crux of the disputes between the parties is whether compound interest
under section 8 of the Act should be calculated on the gratuity amount alone
or on the gratuity amount and simple interest combined together.
4. Briefly, the petitioner is a company involved in the business of
manufacturing and sale of jute products. Each of the private respondents
were appointed as badli workers by the petitioner and continued in
employment till retirement. Upon retirement, the respondents filed their
respective claims in Form N as prescribed under the Act, before the
Controlling Authority which was disposed of by orders dated 13 May 2021,
28 December 2022, and 27 April 2021 respectively directing the petitioner to
make payment towards the principal amount of gratuity alongwith interest
aggregating to Rs.4,16,544/- (Rs. 2,08,272 + Rs.2,08,272), Rs.
3,41,990.86/- (Rs.1,76,102.40 + 1,65,888.46) and Rs.3,49,409/-
(Rs.1,73,232 + Rs.1,76,177) respectively. Subsequently, the respondent no 1
initiated certificate proceedings for recovery of the awarded amount. After a
lapse of few years, the said amount was deposited by the petitioner company
on 18 January 2024, 12 February 2024 and 18 January 2024 respectively.
3
In such circumstances, each of the employees claimed compound interest
before the Certificate Officer due to the delay by the employer in making
payment within the stipulated time. By the impugned orders dated 1
February 2024, 4 March 2024 and 1 February 2024 respectively, the
Certificate Officer passed directions upon the petitioner to make further
payments of Rs.1,83,914/-, Rs.53,723/- and Rs.1,57,501/- respectively
towards compound interest @ 15% per annum for the period commencing
from 13 June 2021 till 18 January 2024, 27 January 2023 till 12 February
2024 and 27 May 2021 till 18 January 2024 respectively. Subsequently, the
respondent no. 4 by an order dated 21 March 2024 also directed attachment
of the bank account of the petitioner and further prohibited all outward
transactions till further orders and sought for information of the petitioner’s
remaining bank accounts.
5. It is contended that the respondent no. 4 erroneously calculated compound
interest under section 8 of the Act on an aggregate amount of Rs.416544/-,
Rs.3,41,990.86/- and Rs.3,49,409/- respectively which included the
principal amount on account of gratuity alongwith interest whereas the
calculation should have been only on the gratuity amount of Rs.2,08,272/-
Rs 1,76,102.40/- and Rs.1,73,232 only. It is submitted that section 8 of the
Act clearly provides for a ceiling limit on the amount of gratuity alone and
not on the cumulative amount inclusive of the interest component. In view of
the above, the impugned orders dated 1 February 2024, 4 March 2024 and 1
February 2024 and 21 March 2024 respectively have been passed in excess
of jurisdiction and in violation of the provisions of the Act.
4
6. It is also submitted that the Act differentiates between liability for gratuity
and interest. Section 4(3) of the Act provides for a ceiling limit on gratuity.
The expression “for that amount” in section 8 of the Act can relate to
gratuity alone. It is also contended that when a Certificate is issued for a
specified amount for recovery, a prescribed time frame is contemplated
within which the debt must be discharged by the employer. This is also in
conformity with sections 6 and 7 of the Bengal Public Demands Recovery Act
1913. The second proviso to section 8 categorically restricts the amount of
compound interest to a maximum amount of gratuity alone. On a combined
reading of the provisions of the Act, read with the provisions of the Bengal
Public Demand Recovery Act, 1913, the amount of compound interest
payable in view of the plain language of the second proviso of section 8 of the
Act can never exceed the amount of gratuity payable under the Act.
7. On behalf of the respondent no.1, it is contended that the gratuity referred
to under the second proviso of section 8 of the Act is deemed to be inclusive
of simple interest. Accordingly, in awarding compound interest the
Certificate Officer has correctly taken the ceiling limit to be inclusive of the
gratuity and the interest component. As such, there is no infirmity with any
of the impugned order.
8. For convenience, the relevant sections of the Act of 1972 are set out below:
Section 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
years,–
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease:
5
Provided that the completion of continuous service of five years shall not be
necessary where the termination of the employment of any employee is due to
death or disablement:
1[Provided further that in the case of death of the employee, gratuity payable to
him shall be paid to his nominee or, if no nomination has been made, to his
heirs, and where any such nominees or heirs is a minor, the share of such
minor, shall be deposited with the controlling authority who shall invest the
same for the benefit of such minor in such bank or other financial institution, as
may be prescribed, until such minor attains majority.]
Explanation.– For the purposes of this section, disablement means such
disablement as incapacitates an employee for the work which he was capable
of performing before the accident or disease resulting in such disablement.
(2) For every completed year of service or part thereof in excess of six months,
the employer shall pay gratuity to an employee at the rate of fifteen days’ wages
based on the rate of wages last drawn by the employee concerned:
Provided that in the case of a piece-rated employee, daily wages shall be
computed on the average of the total wages received by him for a period of three
months immediately preceding the termination of his employment, and, for this
purpose, the wages paid for any overtime work shall not be taken into account:
Provided further that in the case of 2[an employee who is employed in a
seasonal establishment and who is not so employed throughout the year], the
employer shall pay the gratuity at the rate of seven days’ wages for each
season.
3[Explanation.– In the case of a monthly rated employee, the fifteen days’
wages shall be calculated by dividing the monthly rate of wages last drawn by
him by twenty-six and multiplying the quotient by fifteen.
(3) The amount of gratuity payable to an employee shall not exceed 4[5[such
amount as may be notified by the Central Government from time to time] .]
(4) For the purpose of computing the gratuity payable to an employee who is
employed, after his disablement, on reduced wages, his wages for the period
preceding his disablement shall be taken to be the wages received by him
during that period, and his wages for the period subsequent to his disablement
shall be taken to be the wages 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 (1),–
6
(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 6[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.
Section 7: Determination of the amount of gratuity.
(1) A person who is eligible for payment of gratuity under this Act or any person
authorised, in writing, to act on his behalf shall send a written application to the
employer, within such time and in such form, as may be prescribed, for payment
of such gratuity.
(2) As soon as gratuity becomes payable, the employer shall, whether an
application referred to in sub-section (1) has been made or not, determine the
amount of gratuity and give notice in writing to the person to whom the gratuity
is payable and also to the controlling authority specifying the amount of gratuity
so determined.
1[(3) The employer shall arrange to pay the amount of gratuity within thirty
days from the date it becomes payable to the person to whom the gratuity is
payable.
(3A) If the amount of gratuity payable under sub-section (3) is not paid by the
employer within the period specified in sub-section (3), the employer shall pay,
from the date on which the gratuity becomes payable to the date on which it is
paid, simple interest at such rate, not exceeding the rate notified by the Central
Government from time to time for repayment of long-term deposits, as that
Government may, by notification specify:
Provided that no such interest shall be payable if the delay in the payment is
due to the fault of the employee and the employer has obtained permission in
writing from the controlling authority for the delayed payment on this ground.]
(4)(a) If there is any dispute as to the amount of gratuity payable to an employee
under this Act or as to the admissibility of any claim of, or in relation to, an
employee for payment of gratuity, or as to the person entitled to receive the
7gratuity, the employer shall deposit with the controlling authority such amount
as he admits to be payable by him as gratuity.
2* * * * *
3[(b) Where there is a dispute with regard to any matter or matters specified in
clause (a), the employer or employee or any other person raising the dispute
may make an application to the controlling authority for deciding the dispute.]
4[(c) The controlling authority shall, after due inquiry and after giving the parties
to the dispute a reasonable opportunity of being heard, determine the matter or
matters in dispute and if, as a result of such inquiry any amount is found to be
payable to the employee, the controlling authority shall direct the employer to
pay such amount or, as the case may be, such amount as reduced by the
amount already deposited by the employer.]
3[(d)] The controlling authority shall pay the amount deposited, including the
excess amount, if any, deposited by the employer, to the person entitled thereto.
4[(e)] As soon as may be after a deposit is made under clause (a), the controlling
authority shall pay the amount of the deposit–
(i) to the applicant where he is the employee; or
(ii) where the applicant is not the employee, to the 5[nominee or, as the case may
be, the guardian of such nominee or] heir of the employee if the controlling
authority is satisfied that there is no dispute as to the right of the applicant to
receive the amount of gratuity.
(5) For the purpose of conducting an inquiry under sub-section (4), the controlling
authority shall have the same powers as are vested in a court, while trying a
suit, under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the
following matters, namely:–
(a) enforcing the attendance of any person or examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses.
(6) Any inquiry under this section shall be a judicial proceeding within the
meaning of sections 193 and 228, and for the purpose of section 196, of the
Indian Penal Code (45 of 1860).
(7) Any person aggrieved by an order under sub-section (4) may, within sixty
days from the date of the receipt of the order, prefer an appeal to the
appropriate Government or such other authority as may be specified by the
appropriate Government in this behalf:
8
Provided that the appropriate Government or the appellate authority, as the case
may be, may, if it is satisfied that the appellant was prevented by sufficient
cause from preferring the appeal within the said period of sixty days, extend the
said period by a further period of sixty days:
6[Provided further that no appeal by an employer shall be admitted unless at
the time of preferring the appeal, the appellant either produces a certificate of
the controlling authority to the effect that the appellant has deposited with him
an amount equal to the amount of gratuity required to be deposited under sub-
section (4), or deposits with the appellate authority such amount].
(8) The appropriate Government or the appellate authority, as the case may be,
may, after giving the parties to the appeal a reasonable opportunity of being
heard, confirm, modify or reverse the decision of the controlling authority.
Section 8: Recovery of gratuity.
If the amount of gratuity payable under this Act is not paid by the employer,
within the prescribed time, to the person entitled thereto, the controlling
authority shall, on an application made to it in this behalf by the aggrieved
person, issue a certificate for that amount to the Collector, who shall recover the
same, together with compound interest thereon [at such rate as the Central
Government may, by notification, specify], from the date of expiry of the
prescribed time, as arrears of land revenue and pay the same to the person
entitled thereto:
[Provided that the controlling authority shall, before issuing a certificate under
this section, give the employer a reasonable opportunity of showing cause
against the issue of such certificate:
Provided further that the amount of interest payable under this section
shall, in no case exceed the amount of gratuity payable under this Act.]
(emphasis added)
9. The Payment of Gratuity Act, 1972, is a social welfare legislation. All labour
and welfare legislations are to be broadly and liberally construed. The
fundamental principle underlying gratuity is that it is a retirement benefit
for long service and as a provision for old age. Demands of social security
and social justice make it necessary to provide for payment of gratuity. On
the introduction of the Act, a statutory liability is now cast on the employer
9
to pay gratuity within the stipulated time period. The Act makes a clear
distinction between gratuity and interest. In H. Gangahanume Gowda vs.
Karnataka Agro Industries Corporation, Ltd. [2003] 1 L.L.N 805, it has been
held as follows:
” 7. …Payment of gratuity with or without interest, as the case may be, does
not lie in the domain of discretion but it is a statutory compulsion. Specific
benefits expressly given in a social beneficial legislation cannot be ordinarily
denied. Employees on retirement have valuable rights to get gratuity and any
culpable delay in payment of gratuity must be visited with the penalty of
payment of interest was the view taken in State of Kerala v. M. Padmanabhan
Nair [(1985) 1 SCC 429 : 1985 SCC (L&S) 278 : (1985) 50 FLR 145] . Earlier
there was no provision for payment of interest on the delayed payment of
gratuity. Sub-section (3-A) was added to Section 7 by an amendment, which
came into force with effect from 1-10-1987.
9. …there is a clear mandate in the provisions of Section 7 to the employer for
payment of gratuity within time and to pay interest on the delayed payment of
gratuity. There is also provision to recover the amount of gratuity with
compound interest in case the amount of gratuity payable was not paid by the
employer in terms of Section 8 of the Act.”
10. In Sharda Nand Lal Das vs. Assistant Labour Commissioner in [2019] 4
Mh.L.J, it has been held as follows:
“12. The scheme that emerges from the above quoted two sections provides for
payment of gratuity to the employee within 30 days from the date it becomes
payable. In fact, it is mandated that the employer shall pay the amount of
gratuity as soon as it becomes payable, sub-section (3-A) of section 7 of the
said Act provides that if the gratuity payable to the employee is not paid within
the period specified in sub-section (3), which is 30 days, the employer shall
pay simple interest at the rate notified by the Central Government from the
date on which the gratuity becomes payable to the date on which it is paid.
The only rider to the said requirement of payment of interest by employer is
that if the delay is attributable to a fault of the employee and if the employer
has obtained permission in writing from the Controlling Authority for delayed
payment on such ground, no interest would be payable. The proviso to section
107(7) of the said Act mandates that if the employer files an appeal before the
Appellate Authority challenging determination of gratuity by the Controlling
Authority, it shall deposit the amount of gratuity with the Controlling
Authority and that no appeal shall be admitted, unless such deposit is made.
Section 8 of the said Act provides that if the amount of gratuity payable under
the said Act is not paid by the employer within the prescribed time, the
Controlling Authority shall issue a certificate to the Collector for recovery of
the amount along with compound interest as notified by the Central
Government. It is undisputed that the rate of simple interest payable under
section 7(3-A) of the said Act as notified by the Central Government and
relevant for the case of the employee is 10% per annum and the compound
interest under section 8 of the said Act as per notification issued by the
Central Government is 15% per annum compound interest.”
11. Section 7(3) confers liability on the employer to take steps for payment of
gratuity. Section 7(3A) confers liability to pay simple interest at the rate
specified by the Central Government except in cases where the delay is
attributable to the employee. The provision to determine the amount of
gratuity in section 7(4)(c) authorizes the Controlling Authority to “determine
a dispute” and direct the employer to pay such an amount. Section 7(7) of
the Act mandates only the gratuity amount to be deposited when preferring
an appeal. The term “such amount” has been repeatedly used in the Act and
can only mean gratuity. The liability to pay simple interest as stipulated
under section 7(3A) of the Act for an employer is to make payment within 30
days from the date it becomes payable.
12. Section 8 of the Act defines the mode for recovery of gratuity. This section
provides for sanction for such payment and the methodology for its recovery
with interest for the delay in payment caused by default of the employer. The
liability to pay compound interest does not stem from the certificate of the
Controlling Authority but from the default in the performance of the duty of
11
the employer. Section 8 contemplates issuance of certificate by the
Controlling Authority only for the amount of gratuity and not for “such
amount” over and above the gratuity amount. The expression “for that
amount” in section 8 is qualified by the “amount of gratuity”. In particular,
the second proviso to section 8 specifically restricts the amount of
compound interest which cannot exceed the amount of gratuity. Hence, no
interest amount can be read into the gratuity amount in calculating
compound interest under section 8 of the Act.
13. In Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd.,
(2010) 8 SCC 24, it has been held as follows:
“20. The principles of statutory interpretation are well settled. Where the words
of the statute are clear and unambiguous, the provision should be given its plain
and normal meaning, without adding or rejecting any words. Departure from the
literal rule, by making structural changes or substituting words in a clear
statutory provision, under the guise of interpretation will pose a great risk as the
changes may not be what the legislature intended or desired. Legislative
wisdom cannot be replaced by the Judge’s views. As observed by this Court in a
somewhat different context:
‘6. … When a procedure is prescribed by the legislature, it is not for the court to
substitute a different one according to its notion of justice. When the legislature
has spoken, the judges cannot afford to be wiser.’
(See Shri Mandir Sita Ramji v. State (UT of Delhi) [Shri Mandir Sita Ramji v. State
(UT of Delhi), (1975) 4 SCC 298], SCC p. 301, para 6.)
21. There is however an exception to this general rule. Where the words used in
the statutory provision are vague and ambiguous or where the plain and normal
meaning of its words or grammatical construction thereof would lead to
confusion, absurdity, repugnancy with other provisions, the courts may, instead
of adopting the plain and grammatical construction, use the interpretative tools
to set right the situation, by adding or omitting or substituting the words in the
statute. When faced with an apparently defective provision in a statute, courts
prefer to assume that the draftsman had committed a mistake rather than
12concluding that the legislature has deliberately introduced an absurd or
irrational statutory provision. Departure from the literal rule of plain and straight
reading can however be only in exceptional cases, where the anomalies make
the literal compliance with a provision impossible, or absurd or so impractical as
to defeat the very object of the provision. We may also mention purposive
interpretation to avoid absurdity and irrationality is more readily and easily
employed in relation to procedural provisions than with reference to substantive
provisions.”
14. Similarly, in Bhasker vs Ayodhya Jewellwers (2023)9 SCC 281, it has been
held as follows:
20. As a normal rule, while interpreting the statute, the court will not add words or omit
words or substitute words. However, there is a well-recognised exception to this rule
which is found in a decision of the House of Lords in Inco Europe Ltd. v. First Choice
Distribution [Inco Europe Ltd. v. First Choice Distribution, (2000) 1 WLR 586 (HL)] ,
wherein the Court held thus : (WLR p. 592)” … The court must be able to correct obvious drafting errors. In suitable cases, in
discharging its interpretative function the court will add words, or omit words or
substitute words. Some notable instances are given in Professor Sir Rupert Cross’s
admirable opuscule, Statutory Interpretation, 3rd Edn. (1995), pp. 93-105. He comments
at p. 103:
‘In omitting or inserting words the judge is not really engaged in a hypothetical
reconstruction of the intentions of the drafter or the legislature, but is simply making as
much sense as he can of the text of the statutory provision read in its appropriate
context and within the limits of the judicial role.’This power is confined to plain cases of drafting mistakes. The courts are ever mindful
that their constitutional role in this field is interpretative. They must abstain from any
course which might have the appearance of judicial legislation. A statute is expressed in
language approved and enacted by the legislature. So the courts exercise considerable
caution before adding or omitting or substituting words. Before interpreting a statute in
this way the court must be abundantly sure of three matters: (1) the intended purpose of
the statute or provision in question; (2) that by inadvertence the draftsman and
Parliament failed to give effect to that purpose in the provision in question; and (3) the
substance of the provision Parliament would have made, although not necessarily the
precise words Parliament would have used, had the error in the Bill been noticed. The
third of these conditions is of crucial importance. Otherwise any attempt to determine
13the meaning of the enactment would cross the boundary between construction and
legislation.”
21. The principle laid down in the said decision was reiterated by this Court in Surjit
Singh Kalra v. Union of India [Surjit Singh Kalra v. Union of India, (1991) 2 SCC 87]. In
para 19, this Court held thus: (SCC p. 98)“19. True it is not permissible to read words in a statute which are not there, but ‘where
the alternative lies between either supplying by implication words which appear to have
been accidentally omitted, or adopting a construction which deprives certain existing
words of all meaning, it is permissible to supply the words’ (Craies Statute Law, 7th
Edn., p. 109). Similar are the observations in Hameedia Hardware Stores v. B. Mohan
Lal Sowcar [Hameedia Hardware Stores v. B. Mohan Lal Sowcar, (1988) 2 SCC 513] ,
SCC pp. 542-25 where it was observed that the court construing a provision should not
easily read into it words which have not been expressly enacted but having regard to
the context in which a provision appears and the object of the statute in which the said
provision is enacted the court should construe it in a harmonious way to make it
meaningful. An attempt must always be made so to reconcile the relevant provisions as
to advance the remedy intended by the statute. (See : Sirajul Haq Khan v. Sunni Central
Board of Waqf [Sirajul Haq Khan v. Sunni Central Board of Waqf, 1958 SCC OnLine SC
27 : 1959 SCR 1287 : AIR 1959 SC 198] , AIR p. 204, para 16 : SCR p. 1299.)”
15. There is no dispute as to the power of the Courts to award interest on
interest or compound interest subject to the power conferred under statute
or under the terms of a contract. On a plain and ordinary reading of the
second proviso to section 8 of the Act, the interest component can never
exceed the gratuity amount under the Act. The gratuity amount as specified
in the second proviso to section 8 of the Act cannot be interpreted to mean
inclusive of interest. This would amount to re-writing the section and adding
words into the same which is prohibited. On a combined reading of section 8
of the Act, read with sections 6, 7, and 13 of the Bengal Public Demands
Recovery Act, 1913, it is clear that the Collector does not have any power nor
jurisdiction to charge compound interest which exceeds the gratuity amount
payable under the Act. [Sharda vs. Assistant Labour Commissioner 2019 (4)
14
Mh.L.J, D. Khosla and Company vs. Union of India SCC OnLine SC 1898 and
H. Gangahanume Gowda vs. Karnataka Agro Industries Corporation Ltd.
(supra)].
16. It is true that the gratuity amount should be paid upon superannuation of
an employee and the prolonged delay undoubtedly has a detrimental effect
on the employee. Nevertheless, the interpretation of the section as contended
by the respondent would tantamount to adding words to the plain language
of the Act which is impermissible. It is well settled that where the language
of the section is plain and unambiguous, the legislative intent must be given
effect to and there is no scope to add, subtract, omit or substitute words.
Accordingly, the impugned orders are unsustainable to the extent that they
take into account the interest component in calculating the ceiling limit
under the second proviso to section 8 of the Act. All the decisions cited by
the respondent no. 1 are distinguishable and inapposite.
17. In view of the above, WPA 11387 of 2024, WPA 11392 of 2024 and WPA
11423 of 2024 respectively stand allowed. The impugned orders are set
aside. The matter is remanded to the Certificate Officer for recalculation of
the amount payable to the employees as compound interest and for recovery
of the entire gratuity amount inclusive of both simple and compound
interest payable. The above exercise is to be completed within a period of 4
weeks from the date of communication of this order to the Certificate Officer
and without granting any unnecessary adjournments to either of the parties.
(Ravi Krishan Kapur, J.)