Bangalore Metropolitan Transport Corporation Vs Deputy Labour Commissioner and Appellate Authority & Others (Karnataka High Court)
Summary: Karnataka High Court held that Bangalore Metropolitan Transport Corporation was justified in deducting Rs.1,31,345 from the gratuity payable to its employee where the deductions were made during his lifetime pursuant to his written undertaking authorising recovery of amounts payable to creditors. The employee, V. Maligachari, had joined BMTC as a conductor on 18 March 1970 and voluntarily retired on 20 June 2007 under the Surakshatha-net Scheme. Two connected writ petitions arose from the gratuity proceedings—one filed by BMTC challenging the authorities’ treatment of deductions and another by the employee’s legal representatives challenging denial of benefits under KSRTC Circular No.9/2007.
On the first issue, the High Court held that the employee was entitled to the benefit of Circular No.9/2007 dated 11 July 2007. The revised pay scale under the Circular took effect from 1 April 2006 and incorporated 71% DA into basic pay as on 1 July 2005. Although the employee was alleged to have remained absent for a period before retirement, no action had been initiated against him for such absence. Since his retirement date was 20 June 2007 and his total service was 37 years, 3 months and 2 days, the Court held that the date of retirement was significant for service benefits and denial of the Circular’s benefit was unjustified.
On gratuity deductions, the Court examined the employee’s undertaking covering amounts payable towards various liabilities, including Rs.28,000 relating to a two-wheeler loan. Referring to earlier Karnataka High Court decisions, it held that recovery from gratuity pursuant to an employee’s written undertaking, including amounts due to a registered co-operative society, does not necessarily amount to prohibited attachment or contracting out of gratuity. The Court distinguished an earlier BMTC case where, after an employee’s death, the Corporation sought to divert gratuity payable to his legal representatives towards creditors without establishing an equivalent basis for deduction.
Accordingly, the Court held that deduction of Rs.1,31,345 from the employee’s gratuity during his lifetime and at his request was valid, while the deduction of Rs.2,205 previously held illegal by the authorities remained invalid. BMTC was directed to compute the differential gratuity after granting the benefit of Circular No.9/2007 and making the permitted deduction, and to disburse the resulting amount expeditiously to the deceased employee’s legal representatives.
Cases Discussed
1. Karnataka State Road Transport Corporation Vs The Deputy Labour Commissioner and the Appellate Authority, W.P. No. 50800/2013, decided on 18.06.2014 (Karnataka High Court) — Relied upon by BMTC and applied on the gratuity-deduction issue. The Court recorded that in this precedent, where a workman had availed a loan from the KSRTC Consumers Co-operative Society and had undertaken that the outstanding amount could be deducted from his terminal benefits, the Controlling Authority ought to have deducted the amount due to the Co-operative Society as on the date of superannuation.
2. Divisional Controller Vs Deputy Labour Commissioner & Appellate Authority and Others, W.P. No. 17743/2007, decided on 05.12.2008 (Karnataka High Court) — Relied upon. The Court noted that deduction from gratuity towards dues of a registered Co-operative Society, when supported by the employee’s written consent and the recovery mechanism under the Karnataka Co-operative Societies Act, 1959, was held justifiable and was not treated as prohibited attachment or contracting out of gratuity.
3. Bangalore Metropolitan Transport Corporation Vs The Deputy Labour Commissioner and Others, W.P. No. 12494/2008, decided on 01.10.2008; W.A. No. 1770/2008; S.L.P. (C) No. 2155/2010 — Relied upon by the employee’s legal representatives but distinguished. In that matter, the Corporation had failed to establish the claimed deduction before the authority and, after the employee’s death, sought to adjust gratuity payable to his legal representatives against creditors. The Court held that this precedent was of little assistance in the present case, where deductions were made during the employee’s lifetime pursuant to his undertaking.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
These petitions involving similar and akin issues, have been heard together and are disposed of by this common order.
2. Sri.V.Maligachari was appointed with the Bangalore Metropolitan Transport Corporation [Corporation] as a conductor in the year on 18.03.1970. It is contended that till 2007, he was working with the Corporation, on 20.06.2007 due to his health problems he had taken VRS in Surakshatha-net Scheme and retired on that day. He had approached the first respondent claiming the difference of gratuity amount. The first respondent rejecting the claim of the benefits of the Circular No.9/2007 issued by the KSRTC, enhanced some gratuity amount. Being aggrieved, Sri.V.Maligachari as well as the Corporation filed appeals before the Appellate Authority unsuccessfully. Subsequent to the disposal of the appeals, Sri.V.Maligachari died due to his ill-health i.e., during the pendency of W.P.No.12255/2016 filed by the Corporation challenging the order of the Appellate Authority. As such, legal representatives of deceased Sri.V.Maligachari are on record and the said legal representatives of Sri.V.Maligachari have preferred W.P.No.7893/2019 assailing the very same order of the Appellate Authority dated 02.05.2015.
3. The sole contention of the Corporation in challenging the orders of the Controlling Authority and the Appellate Authority is inasmuch as the payment of gratuity to be made deducting the various loan amount of Rs.1,35,755/- as per the undertaking given by the workman – Sri.V.Maligachari to the Corporation requesting to deduct the said loan amount from his gratuity amount. It is the contention of the Corporation that a sum of Rs.46,696/- was paid to the workman vide cheque dated 13.11.2007 towards the gratuity amount deducting Rs.1,35,755/- as agreed by the workman. The Controlling Authority failing to notice the loan amount of Rs.28,000/- liable to be deducted towards the loan account of two wheeler, computed the gratuity amount of Rs.1,05,500/- as the amount deducted from the gratuity amount. Out of the said Rs.1,05,500/-, deduction of Rs.2,205/- is held to be illegal. The sole contention of the learned counsel for the Corporation is that the deduction of Rs.28,000/- towards the loan account of the two wheeler has been lost sight of, by the Authorities.
4. Learned counsel for the Corporation submitted that though the workman was retired from service on 20.06.2007 as per the records, he remained absent from 01.03.2006 to 01.06.2007 which would disentitle him in availing the benefits of the Circular No.9/2007. Learned counsel has relied upon the judgments of the Cognate Bench of this Court in the case of Karnataka State Road Transport Corporation V/s. The Deputy Labour Commissioner and the Appellate Authority, [W.P.No.50800/2013 (D.D. 18.06.2014)] as well as Divisional Controller V/s Deputy Labour Commissioner & Appellate Authority and Others [W.P.No.17743/2007 (D.D. 05.12.2008)].
5. Learned counsel for the LRs of the employee would submit that no deduction could be made from the gratuity amount in terms of Section 13 of the Payment of Gratuity Act, 1872 [‘Act’ for short]. Undertaking of the workman relied upon by the Corporation could not be the basis for the deductions to be made from the gratuity amount. Indeed such undertaking was taken forcefully by the Corporation to deny the gratuity to which the workman was legally entitled to. It was argued that the Circular No.9/2007 has been misinterpreted by the Authorities ignoring the material aspects that the workman had taken voluntary retirement and retired from the services on 20.06.2007. The workman is the beneficiary of the said Circular which contemplates the addition of 71% D.A., to the basic salary as on 01.07.2005 while re-fixing the salary with effect from 01.04.2006. Learned counsel placed reliance on the judgment of the Cognate Bench of this Court in the case of Bangalore Metropolitan Transport Corporation V/s. The Deputy Labour Commissioner and Others, [W.P.No.12494/2008 (D.D. 01.10.2008)], W.A.No.1770/2008 and S.L.P.[C]No.2155/2010.
6. Having heard the learned counsel for the parties and perusing the material on record, the points that arise for consideration of this Court are:-
1. Whether the petitioner is entitled to the benefits of the Circular No.9/2007 dated 11.07.2007 issued by the KSRTC?
2. Whether the deductions of Rs.1,35,755/- deserves to be made from the gratuity amount in view of the undertaking dated 27.10.2007 given by the workman marked at Ex.R7?
REGARDING POINT No.1:
7. Circular No.9/2007 contemplates that in terms of the Government Order No.FD 8 SRP 2007 dated 09.04.2007, Government of Karnataka has revised the pay scale with effect from 01.04.2006 and in revising such new pay scale, 71% of the D.A., has been added to the basic pay as on 01.07.2005. In terms of the said Circular, the revised pay scale comes into effect from 01.04.2006. The Primary reason assigned by the Authorities for denying the benefit of the said Circular to the workman is that he remained absent from 01.04.2006 albeit retiring from the service voluntarily on 20.06.2007. Indisputably, no action has been initiated by the Corporation for the alleged absence of the workman from 01.04.2006 and his total length of service is 37 years 3 months 2 days. What is relevant for the purpose of the Circular No.9/2007 is the date of the retirement which indisputedly is 20.06.2007. For all purposes of service benefits, the date of retirement is significant. Considering the same, the respondent-Authorities ought to have extended the benefit of the Circular No.9/2007 to the workman, denial of such claim is unjustifiable.
REGARDING POINT No.2:
8. Before the Controlling Authority as well as the Appellate Authority, the case of the workman was that Rs.1,07,755/- has been deducted illegally from his gratuity amount. The undertaking given by the workman indicates the total amount of Rs.1,33,550/- including Rs.28,000/- towards the arrears of loan account of two wheeler. The Controlling Authority giving a finding that the deduction of Rs.2,205/- towards the strike period of Rs.805/-, MIWF Fund of Rs.1,200/-, free bus pass of Rs.200/- is illegal held that the workman is entitled to the refund of the said amount of Rs.2,205/- said to have been illegally deducted. However, the Appellate Authority arrived at a decision that the amount of Rs.28,000/- deducted towards the two wheeler vehicle loan is also held to be vitiated without there being any such finding by the Controlling Authority. The dispute of the Corporation revolves around this deduction of Rs.28,000/- held to be improper by the Appellate Authority.
9. As could be seen from the records that the Controlling Authority has not addressed the issue of Rs.28,000/- claimed to be contrary to the provisions of the Act. The claim being made only to Rs.1,07,755/- excluding Rs.28,000/-, the decision of the Appellate Authority cannot be upheld.
10. At this juncture, it is beneficial to refer to the judgments relied upon by the learned counsel for the parties. In the case of Divisional Controller supra, the Cognate Bench of this Court has observed that even though there is a provision in the Act against attachment and with regard to contracting out the gratuity, the deduction from gratuity due to the registered Co-operative Society cannot be considered as either of the two situations as indicated in the Act. The employee having given undertaking to the management that the amount due to the society can be recovered and since such a provision is available under the Karnataka Co-operative Societies Act, 1959, only a manner of recovery of the amount to the persons to whom the amount is due and that too with written consent of the workman, deduction by the employer is held to be justifiable.
11. In the case of Karnataka State Road Transport Corporation supra, the Cognate Bench of this Court while considering the availment of loan from KSRTC Consumers Co-operative Society by a workman in the context of the workman giving undertaking for deduction of the said amount payable to the Society from the terminal benefits held that the Controlling Authority ought to have deducted the said sum which was due to the aforesaid Cooperative Society by the third respondent as on the date of his superannuation.
12. In the ruling of this Court in the case of Bangalore Metropolitan Transport Corporation supra, where the Controlling Authority declines to accept the plea of the Corporation on the deductions, a finding is given that the Corporation did not lay before the authority the material to establish the said deduction. Accordingly, rejected the writ petition, confirmed by the Division Bench and the SLP also came to be rejected. It is significant to note that in the said proceedings after the death of an employee, the Corporation attempted to adjust and disburse the amount payable to his LRs under the head “Gratuity” to the creditors of the deceased. Moreover, the workman had requested the Corporation to credit the gratuity and other retirement benefits payable to him to his SB Account of National Co-operative Bank. In such circumstances, it has been observed that the Corporation cannot disburse the said gratuity amount towards the loan amount of the deceased employee after his death out of the Gratuity payable to his LRs.
13. Hence, the said judgments would be of little assistance to the workman.
14. For the reasons spelt out in the judgments relating to the undertaking given by the workman referred to supra, the deduction of the amount of Rs.1,33,550/- – Rs.2,205/- = Rs.1,31,345/- paid to the creditors from the gratuity amount of the workman during his lifetime and at his request cannot be held to be untenable. However, the deduction of Rs.2,205/- held to be illegal by the authorities is confirmed. The arguments that the workman was forced to sign the affidavit of undertaking cannot be accepted at this length of time.
Hence, both the writ petitions stand disposed of in terms of the following:
ORDER
1. The workman Sri.V.Maligachari was entitled to the benefit of Circular No.9/2007 dated 11.07.2007 issued by the KSRTC.
2. The Corporation was justified in deducting Rs.1,31,345/- from the gratuity amount of the workman – Sri.V.Maligachari.
3. The Corporation shall compute the difference of gratuity amount of the workman [deceased] in terms of Circular No.9/2007 dated 11.07.2007 with deduction as aforesaid, and shall disburse the same to the legal representatives of the workman – petitioners in W.P.No.7893/2019 in an expedite manner. 10.2
