METTUR BEARDSELL LTD , Madras vs. REGIONAL LABOUR COMMISIONOR (CENTRAL)-ELIGIBILITY FOR GRATUITY

In this case , the Madras High Court decided about the eligibility of employees who completed 4 year ,10 months and 18 days service  for gratuity eligibility under section 2 (a), 2 (b), 2(c),2(e), and 2 A under the Payment of Gratuity Act ,1972.

Section 4 of the Payment of Gratuity Act, 1972 provides that an employee will entitled to gratuity on completion of continuous service of 5 years and while clarifying the 5 years complete service, Andhra Pradesh Hight Court in P. Raghuvulu and Sons v. Additional Labour Court , [1985] , had held that the minimum period for becoming eligible for payment of gratuity should not be less than 5 years since it should be complete 5 year service.

 It was further clarified that the words or part in excess of six months' are only meant for the purposes of computation of gratuity for the subsequent year or years to first complete 5 years. It was also held that if an employee has worked for 4 years 11 months and 10 days, he will not be eligible for gratuity for want of completion of 5 years. 

Further in a subsequent case, MADRAS HIGH COURT while relying upon the clarification by the SUPREME COURT pertaining to 240 working days in one year will be deemed to be continuous service of one year meaning thereby that there should not be complete 12 calendar months' service. MADRAS HIGH COURT has further held that an employee, who has put in service of 4 Years 10 Months and 18 Days in the 5 years, will be entitled to gratuity.

The gratuity act says continued services . In this case , there is continuity in service.

Further , as per SC , a year means 240 working days.

Since the employee who has completed 4 years 10 months and 18 days is eligible for gratuity as he has put in service of 5 years continuously as per SC explanation.

To ,  gratuity act is a social welfare act and one should have liberal interpretation offering benefits to employees who had put more than 4 years and but less than in 5 years but falls within 240 days in the 5th year.

SC applied liberal interpretation of the Act and had given benefits to the employee.

Hence , an employee who has completed 4 years 10 months and 18 days continuously without any break is eligible for Gratuity under the Act.

GRATUITY FOR CASUAL OR TEMPORARY WORKERS - INDIAN RARE EARTHS LTD , MADURAI HIGH COURT

Please go through the following Madurai Bench of Madras High Court , where it has held recently that for the purpose of gratuity , even the period of casual or temporary work period will be calculated for the eligibility of gratuity and for the payment of gratuity to eligible workers. Workers who were employed as casual and then after wards retrenched then taken back and became permanent employment , then gratuity should be calculated even for such casual or temporary phases of employment. This is another example where Courts had liberal interpretation in social welfare laws.

The facts of the case is given below:

Once workmen became eligible for gratuity, then, the entire length of their service must be counted, including different spells under which they were employed by the same employer. Otherwise, it would defeat the very purpose of the Payment of Gratuity Act, 1972, the Madurai Bench of Madras High Court has held.

In its order, the Court, while dismissing the writ petitions filed by Indian Rare Earths Ltd, Manavalakurichi, Kanyakumari District, a Government of India undertaking, challenging, inter alia, the common order dated September 23, 2005 of the Regional Labour Commissioner/Authority under the Payment of Gratuity Act, Chennai-600 006 in granting gratuity to workmen for the period when they (respondents) were employed on casual or temporary basis before their spell of employment as permanent workers, ruled that the entire length of service must be counted. Otherwise, it would defeat the very purpose of the enactment.

The issue

According to the petitioner, in early 1960s, when the unit was constructing the plant, the workers were employed for construction. They were later retrenched for want of work. Then, when mining operations got expanded, some workers, who were retrenched earlier, were taken back on casual or temporary rolls and subsequently made permanent. .At the time of superannuation (which were on different dates), the workers were paid terminal benefits, including gratuity. Long after their settlement of gratuity by management, the workers staked their claim for further gratuity for their first spell of employment. They moved the Controlling Authority (Assistant Labour Commissioner, Central). When the Authority held in workers' favour, the Company had come forward with the writ petitions.

Master-servant ties

The petitioner contended that the service rendered by the workers during the first spell of employment ended due to retrenchment. Their subsequent re-employment, on direct recruitment, could not be tagged on because during the interregnum period, there was no master-servant relationship that existed.

Mr Justice K. Chandru, who heard the petitions, said that if the contention of the petitioners was accepted, then it was easy for the employer to employ them in different spells and deny gratuity to them in spite of the fact that they might have put in sufficient length of service. The term ‘continuous service' under Section 25B of the Industrial Disputes Act was more or less similar to the definition under Section 2-A of the Gratuity Act. Hence, the objection of the petitioner on the findings of the Appellate Authority and Controlling Authority had to be rejected. Also, the question of delay would not arise in moving the authority.

The Judge also ruled that 3 other writ petitions of workers, M. Vairamuthu, V. Ponnaiah and N. Harikrishnan, could not be rejected as similarly placed persons were getting benefits.

Criminal Prosecution can be Initiated for wrong disclosure in Balance Sheet

SANJAY SURI V. STATE [2010] 157 COMP CAS 10 (DEL) V.K.Jain, J [Decided on 29-1-2010]
Sections 209(6) and 217(1) of the Companies Act, 1956 read with sections 468, 469(1)(b) and 482 of the Cr.P.C – 

Failure by company to give proper disclosure in balance-sheet regarding collateral security and activities relating to export.


Prosecution initiated by ROC –
 1. There was a contravention of section 212 (1) as the company had acquired in excess of 90% of shareholding .


2.No proper disclosure was made in the balance sheet regarding the collateral security thereby its bank account was attached due to a court order and no contingent liability was disclosed towards this.


3.Its director report failed to disclose activities relating to exports , action initiated to enhance the exports , expansion of new export markets .

The defendants argued that the complaint was barred by limitation.  The ROC cannot be regarded as " person of aggrieved " under section 469 (1) (b) of the Criminal Procedure , 1973.


Trial Court took cognizance of the offence-summons issued against the directors – Whether criminal proceedings can be quashed-  It was held by the Court as No as the petitioners were the persons obliged to make sure compliance of the appropriate provisions of the Act and the officers in default at the appropriate time.

VRS CAN BE REFUSED IF THE EMPLOYEE IS EFFICIENT AND CABABLE !!!

The management of a bank can deny the request for voluntary retirement if it considers the officer very efficient and wants to keep him. In this case decided by the SC last week, Indian Overseas Bank vs Tribhuvan Nath, the officer joined as a clerk but due to exceptional merit and dedication to the bank, he was promoted fast and posted abroad in managerial posts. However, he applied for voluntary retirement. The bank rejected his application. He challenged the action in the Allahabad high court. It held the bank’s decision arbitrary and even mala fide . 

The bank appealed to the SC. It upheld the discretion of the bank in accepting or rejecting the application according to the scheme. The bank can shed staff with inferior abilities, while it can retain officers of superior merit. No organisation would like to lose its best people, the SC said while quashing the high court decision. This officer retired before the judgment.

Thus , drafters should keep in mind in the VRS agreement to include a clause 

The VRS cannot be opt by all the eligible employees. If bank thinks a particular employee as an efficient and capable , bank may disregard his request for VRS.