Case Note & Summary
An employee of the Jalgaon District Central Co-operative Bank Ltd. retired on July 19, 1962 after 32 years of service. The bank had framed Gratuity Fund Rules sanctioned by its Board on August 17, 1957. These rules were forwarded to the Registrar of Co-operative Societies for approval under the Maharashtra Co-operative Societies Act, 1960. The Registrar approved the rules with modifications, but excepted Rules 6, 10 and 15 from approval. Rule 6 provided for the grant of gratuity, while Rule 10 dealt with contributions by the bank to the Gratuity Fund. Upon retirement, the employee was paid Rs. 5,070/- as gratuity. Asserting that a larger sum was due under the Rules, he initiated arbitration proceedings before the Registrar's Nominee for a further sum of Rs. 7,605/- with interest at 6 per cent. The claim was disallowed. His appeal before the Maharashtra State Co-operative Tribunal was dismissed. Dissatisfied, he invoked Article 227 of the Constitution before the High Court, which allowed his claim. The bank appealed to the Supreme Court. The bank argued that since Rules 6 and 10 had not been approved, no obligation to pay gratuity arose. It further contended that new rules with retrospective operation had been enforced, effectively withdrawing the earlier approval of the old rules. The Supreme Court rejected the bank's arguments and upheld the High Court's decision. It held that Rule 7 of the Gratuity Fund Rules, which had been approved by the Registrar, independently imposed an obligation to pay gratuity in cases of retirement, resignation, or termination of service at the rate specified therein. The non-approval of Rule 6 did not extinguish this distinct right. The Court found that the bank's reliance on the non-approval of Rules 6 and 10 ignored the express language of Rule 7, which in unequivocal terms created a vested right in the employee. Consequently, the bank's appeal was dismissed, and the employee's claim for balance gratuity was affirmed.
Headnote
A) Cooperative Law - Gratuity Payment - Obligation to pay gratuity arises under Rule 7 of the Gratuity Fund Rules, not solely under Rule 6 - Maharashtra Cooperative Societies Act, 1960 - The Court held that Rule 7, which was approved by the Registrar, independently grants a right to gratuity upon retirement, resignation, or termination. Non-approval of Rule 6 (which also provides for gratuity) does not negate the right under Rule 7. (Paras Not mentioned)
Issue of Consideration
Whether gratuity is payable to the employee despite non-approval of Rules 6 and 10 of the Gratuity Fund Rules, and whether new rules affected vested interest under old rules.
Final Decision
Supreme Court dismissed the bank's appeal and upheld the High Court's order, holding that Rule 7 independently provided for gratuity on retirement and was unaffected by the non-approval of Rule 6.
Law Points
- gratuity payable under rule 7 even if rule 6 not approved
- approval of rules not necessary if other rule creates obligation
- vested interest of employees protected
