BCH ELECTRIC LIMITEDversusPRADEEP MEHRA

                          [2020] 10 S.C.R. 1                                1


                     BCH ELECTRIC LIMITED                                   A
                                   v.
                         PRADEEP MEHRA
                   (Civil Appeal No. 2379 of 2020)
                           APRIL 29, 2020                                   B
     [UDAY UMESH LALIT AND SANJIV KHANNA, JJ.]
       Payment of Gratuity Act, 1972: ss.4(3), 4(5) – Respondent
appointed as Chief Operating Officer resigned after putting 12 years
of service – His last drawn monthly wage was Rs.24.50 lacs – Claim
                                                                            C
made by him for gratuity of Rs.1.83 crores – Appellant-employer
held that respondent was entitled to maximum of Rs.10 lacs as gratuity
– The Authorities under the Act and the High Court accepted the
claim preferred by the respondent – Challenge against – Held: s.4(3)
stipulates that the amount of gratuity payable to an employee shall
not exceed certain limit and thus puts a cap on the amount payable          D
towards gratuity – However, s.4(5) states that nothing in this Section
shall affect the right of an employee to receive better terms of gratuity
under “any award or agreement or contract with the employer” –
Thus, as against what is made applicable by the Act, if better terms
are available under any arrangement with the employer, s.4(5)
                                                                            E
stipulates that nothing in s.4 shall affect the right of any employee
to receive such better terms – This means when two choices are
available, one under provisions of the Act and one under such
arrangement with the employer and if the latter offers better terms,
the employee cannot be denied right to receive those higher benefits
– In the instant case, Rule 6(b) of the Rules framed under the Scheme       F
of the appellant-Company stipulates that notwithstanding the
Scheme of the Company, if any member is covered by the Act, the
amount of gratuity shall be calculated in accordance with the
provisions of the Act – Similarly, the Appendix to the Scheme
prescribes the rates at which the gratuity is to be paid – Thus, the
                                                                            G
intent of the Trust Deed and the Scheme is clear that the governing
principles as regards the amount to be calculated and the rates to
be applied have to be in accordance with the provisions of the Act,
if an employee is covered by the provisions of the Act – If the amount
is to be so calculated according to the provisions of the Act, in case
of employees covered by the provisions of the Act, there is no other        H
                                   1
2            SUPREME COURT REPORTS                     [2020] 10 S.C.R.


A   alternative which is offered by the Company or which is part of any
    award or agreement or contract entered into between the employer
    and employees – Thus, no reliance could be placed on s.4(5) of the
    Act to submit that the employees are entitled to some greater
    advantage than what is available under the Act – Appellant was
    right in going by the provisions of the Act and by the ceiling
B
    prescribed u/s.4(3) of the Act – The Authorities under the Act and
    the High Court erred in accepting the claim preferred by the
    respondent – Any mistakes on its part in making some extra payments
    to some of the other employees would not create a right in favour of
    respondent in the face of the stipulations in the Trust Deed and the
C   Scheme.
          Allowing the appeal, the Court
          HELD: 1.1 As on the day, when the respondent resigned
    from his service, that is on 01.06.2012, the relevant ceiling in
    Sub-Section (3) of Section 4 was at the level of “ten lakh rupees”
D   and for an employee to be covered by the definition obtaining in
    Section 2(e) of the Act, there was no wage-bracket or ceiling. In
    terms of Section 4(1) of the Act, gratuity shall be payable to an
    employee in the eventualities referred to therein if he had
    rendered continuous service for not less than five years.
E   Explanation to Section 4(2) inter alia states that the gratuity shall
    be payable at the rate of 15 days’ wages for every completed year
    of service or part thereof in excess of six months. Explanation to
    Section 4(2) lays down how the gratuity is to be calculated, while
    Section 4(3) stipulates that the amount of gratuity payable to an
    employee shall not exceed certain limit and thus puts a cap on
F   the amount payable towards gratuity. Section 4(5) then states
    that nothing in said Section shall affect the right of an employee
    to receive better terms of gratuity under “any award or agreement
    or contract with the employer”. [Paras 16, 17][23-A-D]
          1.2 For Section 4(5) of the Act, to get attracted, there must
G   be better terms of gratuity available and extendable to an
    employee “under any award or agreement or contract with the
    employer” as against what has been provided for under and in
    terms of the Act. In other words, as against what is made
    applicable by the Act, if better terms are available under any such
H
        BCH ELECTRIC LIMITED v. PRADEEP MEHRA                           3


arrangement with the employer, Section 4(5) stipulates that             A
nothing in Section 4 shall affect the right of any employee to
receive such better terms. Thus, when two choices are available,
one under provisions of the Act and one under such arrangement
with the employer and if the latter offers better terms, the
employee cannot be denied right to receive those higher benefits.
                                                                        B
[Para 18][23-D-F]
       2.1 The Trust Deed was executed “for the purpose of
providing gratuities to the employees of the company under the
Payment of Gratuity Act”. Clause 15 of the Trust Deed casts an
obligation on the trustees to provide payment of gratuity upon
termination of service or upon death or retirement of service of        C
the Member “as provided in the Rules of Scheme” Rule 6(b) of
the Rules clearly stipulates that notwithstanding the Scheme of
the Company, if any member is covered by the Act, the amount of
gratuity shall be calculated in accordance with the provisions of
the Act. Similar thought is expressed in the Appendix to the            D
Scheme which prescribes the rates at which the gratuity is to be
paid. The Scheme thus divides the employees in two categories.
First, the employees to whom the Act applies and with respect to
whom the amount of gratuity shall be “calculated in accordance
with the provisions of the Act and as per the rates prescribed by
the Act”; the Second category of employees are those to whom            E
the Act does not apply. According to said Rule 6(b) and Appendix,
the calculation of amount of gratuity at the rates prescribed in
the manner laid down in the Appendix, is to be done only in the
case of employees in the Second category. [Para 20][23-H;
24-A-D]                                                                 F
      2.2 The intent of the Trust Deed and the Scheme is thus
clear that the governing principles as regards the amount to be
calculated and the rates to be applied have to be in accordance
with the provisions of the Act, if an employee is covered by the
provisions of the Act. If the amount is to be so calculated according   G
to the provisions of the Act, in case of employees covered by the
provisions of the Act, there is no other alternative which is offered
by the Company or which is part of any award or agreement or
contract entered into between the employer and employees. Thus,

                                                                        H
4           SUPREME COURT REPORTS                    [2020] 10 S.C.R.


A   no reliance could be placed on Section 4(5) of the Act to submit
    that the employees are entitled to some greater advantage than
    what is available under the Act. For Section 4(5) to apply there
    must be two alternatives, one in terms of the Act and one as per
    the award or agreement or contract with the employer. The
    Scheme on which heavy reliance was placed to submit that it
B
    afforded and made available better terms of gratuity itself
    emphasizes that in case of the employees who are covered under
    the Act, the amount payable as gratuity shall be in terms of the
    provisions of the Act. The Scheme does not therefore offer to
    the employees covered by the Act any other alternative apart
C   from what is payable under the Act. [Para 21][24-E-H]
          2.3 Rather than making available an alternative to the model
    and modalities of calculation of amount of gratuity, as placed on
    statute book by the provisions of the Act, the Trust Deed and the
    Scheme contemplates two kinds of employees. One, who are
D   covered under the provisions of the Act and the other, who are
    not so covered. The historical background and the changes that
    the provisions of Section 2(e) and Section 4 have undergone show
    that not all employees were initially sought to be covered under
    the Act. Those, who were in wage-brackets greater than what
    was stipulated in Section 2(e) till it was finally amended to do
E   away with the wage-bracket, were not covered by the Act. The
    Trust Deed and the Scheme sought to devise an apparatus and
    make provision for those who were otherwise not covered by
    the Act and for this reason contemplated two kinds of employees.
    The Trust Deed and the Scheme were executed and formulated
F   in the year 1979 when the wage-bracket was a definite parameter
    for an employee to be covered under the Act. The intent of the
    Trust Deed and the Scheme has to be understood in that
    perspective. The idea was not to afford to the employees who
    are covered by the provisions of the Act, a package better than
    what was made available by the Act, but it was to extend similar
G   benefit to those who would not be covered by the Act. [Para 22]
    [25-A-D]




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       BCH ELECTRIC LIMITED v. PRADEEP MEHRA                           5


      3. The High Court failed to consider the effect and impact       A
of Rule 6(b) of the scheme. The Single Judge did refer to said
Rule 6(b) but found that the Rule was so broadly drafted that it
could not be construed to contemplate the ceiling limit under
Section 4(3) of the Act. The true import of Rule 6(b) which gets
further emphasized by stipulation in the Appendix to the Scheme
                                                                       B
was lost sight of by the authorities under the Act and by the High
Court. If an employee is covered by the provisions of the Act,
according to said Rule 6(b), the amount of gratuity has to be
calculated in accordance with the provisions of the Act. The
Appendix to the Scheme reiterates the same principle. Thus, in
case of such an employee the gratuity has to be calculated in          C
accordance with the provisions of the Act and while so calculating,
not only the basic principle available in Section 4(2) as to how the
gratuity is to be calculated must be applied but also the ceiling
which is part of Section 4(3) must also apply. The rates and the
modalities of calculations of gratuity as available under the Scheme
                                                                       D
of the Rules are to apply only to those employees who are not
covered by the provisions of the Act. [Para 23][25-G-H; 26-A-C]
      4. The Authorities under the Act and the High Court erred
in accepting the claim preferred by the respondent. The appellant
was right in going by the provisions of the Act in the present
matter and by the ceiling prescribed under Section 4(3) of the         E
Act. Any mistakes on its part in making some extra payments to
some of the other employees would not create a right in favour of
others in the face of the stipulations in the Trust Deed and the
Scheme.[Para 24][26-D-E]
      Beed District Central Cooperative Bank Ltd. v. State of          F
      Maharashtra and Others (2006) 8 SCC 514 : [2006] 6
      Suppl. SCR 895; Union Bank of India and Others v.
      C.G. Ajay Babu and Another (2018) 9 SCC 529 : [2018]
      9 SCR 995 – referred to.
                      Case Law Reference                               G
[2006] 6 Suppl. SCR 895          referred to          Para 10.2
[2018] 9 SCR 995                 referred to          Para 13

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6                SUPREME COURT REPORTS                         [2020] 10 S.C.R.


A         CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2379
    of 2020.
          From the Judgment and Order dated 12.02.2019 of the High Court
    of Delhi at New Delhi in Letters Patent Appeal No. 97/2019.
          C. U. Singh, Sr. Adv., Gulshan Chawla, Ashish Kumar, Advs. for
B   the Appellant.
          J.P. Cama, Sr. Adv., Shekhar Kumar, Saurav Prakash, Mayan
    Pd., Ms. Suruchi Kr., Utsav Jain, Advs. for the Respondent.
             The Judgment of the Court was delivered by
C            UDAY UMESH LALIT, J.
             1. Leave granted.
          2. This appeal challenges the judgment and order dated 12.2.2019
    passed by the High Court1 dismissing Letters Patent Appeal No.97 of
    2019 and thereby affirming the decision of the Single Judge of the High
D
    Court in Writ Petition No.10318 of 2017.
           3. By Trust Deed executed on 19.03.1979 between the appellant,
    a company registered under the Indian Companies Act, 1956 on one
    hand and three trustees on the other, an “Approved Gratuity Fund” was
    constituted “for the purpose of providing Gratuities to the employees of
E   the Company under the Payment of Gratuity Act, 1972 (hereinafter
    referred to as ‘the Act’) and the Gratuity Scheme of the Company”.
             Clauses 4, 11 and 15(a) of the Trust Deed are as under:-
             “4. RULES:
F            The Fund shall be governed by the Rules and any reference to
             the Rules in these presents shall mean the Rules for the time
             being in force which shall be binding on the Members, their
             Beneficiaries and on the Company. A copy of the current Rules is
             annexed to and the same shall be deemed to form part of these
G            presents.
             11. MEMBERS TO HAVE NO LEGAL RIGHT Except as
             provided in these presents and in the Rules, no Member or his
             Beneficiary shall have any legal claim, right or interest in the Fund.

    1
        The High Court of Delhi at New Delhi
H
      BCH ELECTRIC LIMITED v. PRADEEP MEHRA                               7
              [UDAY UMESH LALIT, J.]

     Provided always that the Trustees shall administer the Fund for      A
     the benefit of the Members and their Beneficiaries in accordance
     with the provisions of these presents and the Rules.
     15. PAYMENT OF GRATUITY:
     (a) On behalf of the Company, the Trustees shall provide for the
     payment of gratuity on termination of service, on death or           B
     retirement of the Member or otherwise as provided in the Rules
     of Scheme.”
    3.1 In the Rules appended to the Scheme the expressions
“Company”, “Employee” and “Gratuity” are defined as under:-
                                                                          C
     “2. (a) “Company” shall mean Bhartia Cutler Hammer Limited
     and its successors or assigns or any Company or body corporate
     which may by purchase or amalgamation acquire or take over in
     whole or in part, the undertaking of the company and with the
     previous approval of the Commissioner undertakes to perform
     the obligations of the Company under the Trust Deed or the Rules.    D
     ………
     (b) “Employee” shall mean a person in the permanent, whole-
     time and bona fide employment of the Company, including a whole-
     time Director, but shall not include (i) any member of the staff
                                                                          E
     who is or may be on probation or who is temporary or part-time
     (ii) any apprentice or (iii) a personal or domestic servant.
     ...……
     (m) “Gratuity” shall mean Gratuity payable under these Rules.”
                                                                          F
     3.2 Rules 4(b) and 6 of the Rules are as under:-
     “4. (a) … … …
           (b) The Company shall pay to the Trustees in respect of
     each member an ordinary annual contribution in each year based
     on an actuarial valuation by a Qualified Actuary subject to Rule     G
     103 of the Income Tax Rules 1962 or any statutory enactment or
     any modification thereof from time to time.
     6. A member on ceasing to be a member of the Fund shall be
     entitled to be paid by the Trustees, the amount due as computed in
     the manner laid down hereunder in this Scheme: -                     H
8            SUPREME COURT REPORTS                        [2020] 10 S.C.R.


A               (a) The amount of Gratuity payable to the beneficiary shall
          be calculated in the manner provided in the Company’s Gratuity
          Scheme.
                 (b) Notwithstanding the provision herein contained, if any
          ember is covered by the provisions of the Payment of Gratuity
B         Act 1972, the amount of gratuity shall be calculated in accordance
          with the provisions of that Act.”
           3.3 The Appendix to the Scheme prescribes the rates at which
    gratuity will be payable as under:-
          “Gratuity will be payable to the Employees to whom the Payment
C         of Gratuity Act, 1972 applies as per the rates prescribed by the
          said Act.
          Gratuity will be payable to the other employee of the company at
          the following rates:-

D            (a) On the death or permanent total physical disablement, while
             in the service of the Company, or retirement at the age of 55
             years or if retained by the Company after 55 years, then at the
             time of separation from the Company:
             15 days basic salary for each completed year of service subject
             to maximum of 20 months basis pay, payable to the employees
E
             or payable to his heirs, executors or nominee in case of death
             of the employee.
             (b) On termination of Service:
                i. Beyond five years upto 8 years of continuous service at
F               the rate of 5 (five) days basic pay for every completed
                year of service.
                ii. Beyond 8 years upto 10 years of continuous service at
                the rate of 10 days (ten) basic salary for every completed
                year of service.
G               iii. Beyond 10 years upto 15 years of continuous service at
                the rate of 12 (twelve) days basic salary for every completed
                year of service.
                iv. Beyond 15 years of continuous service at the rate of 15
                (fifteen) days basic salary for every completed year of
H               service subject to maximum of 20 months basic salary.
           BCH ELECTRIC LIMITED v. PRADEEP MEHRA                                 9
                   [UDAY UMESH LALIT, J.]

                (c) On resignation or voluntary retirement:                      A
                After completion of 5 years of continuous service or more
                at the rate of 15 days basic salary per year of completed
                service, subject to maximum of 20 months basic pay provided
                that the management is satisfied that such resignation or
                voluntary retirement is in the interest of the administration.   B
                The rate of basic salary for payment of Gratuity shall be
                the last pay drawn by the employee.”
       4. On 12.06.2000, the respondent was appointed as Chief
Operating Officer of the appellant-company with basic salary of
Rs.1,05,000/- per month on terms and conditions indicated therein. One           C
of the terms was:-
            “11. Gratuity
            You will be entitled to gratuity on your becoming eligible as per
            laws.”                                                               D
         At the same time, one of the conditions was:-
            “9. Your services will be governed by the Central services
            Rules of the Company.”
       5. The emoluments payable to the respondent were raised from
time to time. After having put in about 12 years’ of service, the respondent     E
resigned with effect from 01.06.2012 when his last drawn wages were
Rs.24,50,000/-per month. A sum of Rs.36,70,015/- was thereafter paid
to the respondent towards retiral dues. The respondent raised a claim
that he was entitled to gratuity amount of Rs.1,83,75000/-. By
communication dated 09.08.2012, a bank draft in the sum of                       F
Rs.10,19,452/- was forwarded by the appellant to the respondent being
the sum of Rs.10 Lakhs towards gratuity along with interest accrued
thereon from the date of cessation of service of the respondent.
       6. The respondent issued a legal notice on 19.10.2012, which was
followed by filing of a Claim Petition2 under Section 7 of the Act. It was       G
submitted that the emolument sheets issued to the respondent from time
to time indicated that a sum of 4.81% of his basic salary had been
adjusted towards gratuity; in the year 2007 the respondent was promoted
to the post of Chief Executive Officer and his emoluments had almost
2
    Claim Petition No. ALC-HOTB/36(66)/2012/ALC-1/36(203)/16-NK                  H
10             SUPREME COURT REPORTS                           [2020] 10 S.C.R.


A    doubled; that his emolument sheet dated 03.06.2011 acknowledged that
     the amount set apart for contribution towards gratuity for that year alone
     was Rs.11,54,400/-, and that various other employees had actually
     received gratuities without any limit. It was thus prayed that the
     respondent was entitled to the balance sum of Rs.1,73,75,000/-
     (Rs.1,83,75,000/- less Rs.10,00,000/- which was received) towards
B
     gratuity along with interest at the rate of 18% per annum.
            7. In its reply to the claim petition, the appellant relied upon Clause
     15 of the Trust Deed and Rule 6(b) of the Rules. It was submitted:-
            “(iv) From bare reading of the above Clause 15 read with Rule
C           6(b), it is apparent that the employees of the respondent No.1
            Company, if covered by the provisions of the Gratuity Act were
            entitled for gratuity in accordance with the provisions of the
            Gratuity Act.
            (v) As per the aforementioned prescribed scheme, the gratuity
D           was always determined as per the method prescribed under the
            Gratuity Act and when the gratuity for any employee exceeded
            the maximum limit (as prescribed from time to time), under the
            Gratuity Act, it was capped at the prevailing upper limit at the
            relevant time i.e. the gratuity amount was reduced so as to stay
            within the upper caps prescribed by the Gratuity Act.”
E
            While responding to the submission that some of the employees
     had received gratuities in excess of Rs.10 lakhs, it was submitted that
     the respondent as Chief Executive officer was responsible for making
     such excessive payments to said employees and that the respondent
     reserved its rights to take appropriate remedy in that behalf. It was
F    further stated:-
            “In any event, the emoluments sheet never mentioned that the
            provisions on the letter of appointment, Trust Deed and provisions
            of the Gratuity Act are not to be followed. The petitioner was
            entitled to payment of gratuity as per the Gratuity Act in accordance
G           with the terms and conditions of its letter of appointment and the
            Trust Deed as referred above.”
           8. By Order dated 31.07.2017, the Claim Petition was allowed by
     the Controlling Authority under the Act. After referring to some of the
     decisions of the High Court, it was observed:-
H
       BCH ELECTRIC LIMITED v. PRADEEP MEHRA                                    11
               [UDAY UMESH LALIT, J.]

     “The proposition of law that emerges from the aforesaid judgment           A
     is that the employees are entitled to receive higher gratuity amount
     under contract, settlement, award, rules, regulations and schemes
     of the employer in view of section 4(5) of the Act and an employee
     can approach the controlling authority to claim determination of
     his gratuity under the more beneficial settlement, award, rules or
                                                                                B
     scheme of the employer.”
     8.1. While dealing with the Scheme, it was observed:-
     “The fact that the scheme of the respondents only talk about the
     method of calculation of gratuity and does not specially put any
     cap on the amount of gratuity payable under the scheme, the fact           C
     that the said scheme was never amended by the respondents to
     incorporate any ceiling on gratuity, the fact that it does not prescribe
     for any minimum qualifying service and the fact that the several
     employees have also been paid gratuity higher than the prescribed
     limit and that the management has continued to earmark 4.81%
     of the basic of the applicant and other co-employees, towards the          D
     gratuity and showing the same as cost to company in emoluments
     sheet despite the fact the that the said allocation had already
     crossed the gratuity limits provided under the Act, leaves no room
     for doubt that the respondents had intended to make more liberal
     and beneficial gratuity scheme by abandoning the cap on gratuity           E
     and minimum qualifying service which otherwise has been provided
     under the Act.”
     8.2 In the premises, it was held:-
     “The applicant is therefore entitled to gratuity under the scheme
     without any cap. The gratuity is to be calculated as per the formula       F
     of the Act as the applicant is admittedly covered by the Act, as
     provided in the scheme of the management, but the gratuity has
     to be paid without any ceiling.”
       8.3 The computation as regards the amount payable towards
gratuity was as under:-                                                         G
     “The last drawn salary of the applicant is therefore taken as
     Rs.24,50,000/-. The gratuity payable under the scheme is therefore
     determined as under:-
                   24,50,000 X 15 X 13/26 = 1,83,75,000/-
                                                                                H
12               SUPREME COURT REPORTS                          [2020] 10 S.C.R.


A             Since there is no cap on the gratuity under the scheme of the
              employer, same is more beneficial to the applicant and he is entitled
              to receive full gratuity amount of Rs.1,83,75,000/- under the said
              scheme.”
            9. The appellant being aggrieved, filed appeal before the Appellate
B    Authority under the Act challenging the aforesaid order dated 31.07.2017
     passed by the Controlling Authority and applied for waiver of the
     requirement of pre-deposit of the amount directed to be paid to the
     respondent. Submitting that said application for waiver was not being
     considered by the Appellate Authority, Writ Petition (Civil) No.10319 of
     2017 was preferred in the High Court by the appellant. The Writ Petition
C    was disposed of by the High Court on 22.11.2017 directing the appellant
     to submit appropriate bank guarantee in the sum representing the amount
     of gratuity along with interest till the date of filing of the appeal. After
     compliance, the appeal was taken up for hearing. By order dated
     23.03.2018 the appeal3 was dismissed by the Appellate Authority under
D    the Act with following observations:-
              “The Gratuity Fund so created by the appellant to regulate the
              gratuity of the employees is necessarily a term of the service
              contract between the employer and the employees as per
              requirement under Section 4(5) of the Act.
E             The CA has rightly held that the amount of gratuity under the
              scheme that does not provide any ceiling is very well covered
              under the Section 4(5) of the Act”
            10. The appellant filed Writ Petition No.3385 of 2018 in the High
     Court challenging the Orders passed by the Authorities under the Act.
F    By its order dated 13.04.2018 the High Court stayed the operation of the
     orders challenged upon the appellant furnishing appropriate bank
     guarantee. After exchange of pleadings, the Writ petition was taken up
     for final disposal. The submission advanced on behalf of the appellant
     was noted as under:-
G             “As per clause 15 of this Trust Deed, the petitioner’s employees
              are entitled to be paid gratuity out of the aforesaid Fund on the
              termination of their service, on death or retirement or otherwise
              as provided in the “Rules of the scheme”. The Rules of the scheme
              and the Appendix thereto provide for two modes of computing an
     3
H        No.36(26)/2017 P.A. DYC
       BCH ELECTRIC LIMITED v. PRADEEP MEHRA                                   13
               [UDAY UMESH LALIT, J.]

      employee’s gratuity. For employees covered under the PG Act,             A
      gratuity is to be calculated in accordance with the provisions of
      the Act itself, whereas for the other employees it is to be calculated
      as per the relevant clauses in the Appendix. He, however, submits
      that the rules for computing the gratuity of other employees are
      now redundant in the light of the Payment of Gratuity (Amendment)
                                                                               B
      Act, 1994, which extended the applicability of the PG Act to all
      the employees engaged in a company. Resultantly, all the
      petitioner’s employees, including the respondent are now covered
      under the PG Act and, as per the express provisions of the
      petitioner’s gratuity scheme, their gratuity has to be calculated as
      per the statutorily prescribed rate and ceiling limit under Sections     C
      4(2) and 4(3) respectively.”
     On the other hand the submission of the respondent on the point
was noted as under:-
      “the respondent’s claim for gratuity in excess of the ceiling limit
      prescribed under Section 4(3), is not in conflict with the provisions    D
      of the PG Act. In fact, contrary to what has been contended by
      the petitioner, Section 4(5) categorically protects the respondent’s
      right to receive gratuity under better terms than those prescribed
      under the said Act.”
      10.1. While considering these submissions, it was observed:-             E

      “24. In my considered opinion, there is nothing in the Trust Deed
      dated 19.03.1979 or the Rules thereunder that curbs the
      respondent’s entitlement to gratuity to the ceiling limit prescribed
      under Section 4(3). The relevant Rule 6(b) of petitioner’s gratuity
      scheme only stipulates that the amount of gratuity payable to an         F
      employee shall be calculated in accordance with the provisions of
      the PG Act. The “provisions of the PG Act” is a broad phrase
      that not only contemplates the rate statutorily prescribed under
      Section 4(2) and the ceiling limit under Section 4(3), but also the
      exception carved out under Section 4(5) for employees who have           G
      better terms of gratuity under an award, or agreement/contract
      with the petitioner. Therefore, in the absence of a specific clause
      that caps the maximum amount of gratuity payable to the
      respondent, a broad stipulation in Rule 6(b) that gratuity will be
      calculated as per the provisions of the PG Act, cannot be construed
                                                                               H
14      SUPREME COURT REPORTS                           [2020] 10 S.C.R.


A    to mean that the ceiling limit under Section 4(3) is applicable to
     the respondent. To my mind, such an interpretation would amount
     to selectively applying only Section 4(3) of the Act, by ignoring
     the mandate of Section 4(5), when Rule 6(b) in itself contemplates
     the provisions of the PG Act as a whole.
B    25. In other words, Rule 6(b) merely reiterates what is apparent
     on a plain reading of Section 4 of the PG Act, i.e., the respondent
     is entitled to a maximum of Rs.10,00,000/- as gratuity, unless there
     is an award, or contract/agreement whereunder he can claim
     gratuity in excess of the aforesaid ceiling limit. The said Rule is so
     broadly drafted that read by itself, it cannot be construed to
C    contemplate only the ceiling limit under Section 4(3) of the PG
     Act, but also indicates the provisions of Section 4(5). Similarly,
     the Appendix to the aforesaid Rules only stipulates that the
     respondent’s gratuity shall be calculated as per the rates prescribed
     under the PG Act, i.e., under Section 4(2). However, it does not in
D    any way stipulate that he is subject to the statutory limit prescribed
     under Section 4(3).
     26. Now coming to clause 11 of the respondent’s terms of
     appointment which, as per the contentions of the learned counsel
     for the petitioner, clearly lays down that the respondent is only
E    entitled to a maximum gratuity of Rs.10,00,000/- as prescribed
     under the PG Act. I am of the view that there can be two possible
     interpretations of Clause 11. In the first sense, the phrase “as per
     laws” can be read to qualify the word “eligible” so that Clause 11
     suggests that the respondent shall be entitled to receive gratuity
     on his meeting the eligibility criteria laid down by the laws in force.
F    For obvious reasons, this particular interpretation of the clause
     cannot in any way be read to impose a limit on the amount of
     gratuity payable to the respondent. In the second sense, which is
     the interpretation that has been relied upon by the learned counsel
     for the petitioner, Clause 11 can be read to suggest that the
G    respondent shall be entitled to gratuity “as per laws” on his
     becoming eligible. In this sense also, the phrase “as per laws” is
     at best a broad stipulation that takes within its sweep not only the
     provisions of Sections 4(2) and 4(3), but also of Section 4(5). Like
     Rule 6(b) under the Trust Deed dated 19.03.1979, the interpretation
     of clause 11 relied upon by Mr. Sethi has such a broad implication
H
           BCH ELECTRIC LIMITED v. PRADEEP MEHRA                                  15
                   [UDAY UMESH LALIT, J.]

         that it cannot be read so selectively to apply the ceiling limit under   A
         Section 4(3) to the amount of gratuity that can be claimed by the
         respondent. Thus, looked at from every possible angle, there is
         nothing in the documents relied upon by the learned counsel for
         the petitioner that curbs the gratuity payable to the respondent to
         the statutory ceiling limit under Section 4(3).”
                                                                                  B
      10.2. As regards, the decision of this Court in Beed District Central
Cooperative Bank Ltd. v. State of Maharashtra and others4, it was
observed:-
         “31.Similarly, the decision in Beed District Central Coop. Bank
         Ltd. v. State of Maharashtra and Ors.4, is also not applicable to        C
         the present case. In that case, the appellant/employer’s internal
         gratuity scheme provided a better rate for computing the gratu9ity
         of the respondent/workman, but the ceiling limit thereunder was
         lower than that prescribed by the PG Act. When the respondent/
         workman sought to avail the benefit of the appellant/employer’s
         internal gratuity scheme as also the ceiling limit under the PG Act,     D
         the Supreme Court held that the respondent/workman must either
         avail the benefit of his contract with the appellant/employee in its
         entirety or the statute. He cannot avail the better terms of his
         contract with appellant/employer and at the same time keep his
         options open in respect of a part of the statute that suits him.”        E
      The Single Judge of the High Court, thus by order dated 06.02.2019
dismissed the aforesaid Writ Petition as well as connected petitions.
      11. The matter was carried further by the appellant by filing Letters
Patent Appeal No. 97 of 2019 before the Division Bench of the High
Court which by its judgment and order dated 12.02.2019 affirmed the               F
view taken by the Single Judge and dismissed the appeal. The Division
Bench considered the decision of this Court in Beed District Central
Cooperative Bank Ltd.4 and found as under:-
         “18. … …There, the employees had opted for the Scheme of the
         Management which was less advantageous than the PGA. Their               G
         plea that they should be given gratuity as per the then upper limit
         as per the PGA was negative. It was held by the Supreme Court
         that an employee while reserving his right to opt for the beneficient

4
    (2006) 8 SCC 514                                                              H
16             SUPREME COURT REPORTS                        [2020] 10 S.C.R.


A          provisions of the statute or the agreement had to opt “for either of
           them and not the best of the terms of the statute as well as those
           of the contract.” In the present case, the Appellant’s Gratuity
           Scheme, which was relied upon by the Respondent, itself provided
           for the rates as per Section 4(2) of the PGA but without the upper
           limit under Section 4(3) PGA. By opting for the Appellant’s
B
           Scheme, the Respondent did not lose the benefit of Section 4(2)
           PGA.
           …         …        …
           20. The Court finds that not all elements of the PGA have been
C          adopted in the Gratuity Scheme of the Appellant. While the ‘rate’
           stipulated under Section 4(2) PGA has been adopted, the ceiling
           limit under Section 4(3) of the PGA has not. As noted both by the
           CA and the learned Single Judge, the Appellant itself calculated
           the gratuity not just in the case of the Respondent but in the cases
           of ten other employees. The Chairman and Managing Director
D          (CMD) of the Appellant would decide the emoluments of the
           Respondent and issue EES which invariably contained an entry
           towards gratuity, which amount was computed at the rate of 4.81%
           of the Respondent’s annual basic salary. The EEs were issued
           under the signature of the CMD before being handed over to the
E          Respondent in original, thereby becoming a part of the contract
           between the Appellant and the Respondent. In 2007-08 the gratuity
           amount was Rs.6,34,920/- which was nearly twice the then ceiling
           limit of Rs.3.5 lakhs under the PGA. In 2011-12 it was
           Rs.11,54,400/- which was higher than the ceiling limit of Rs.10
           lakhs.”
F
          12. In this appeal challenging the view taken by the High Court,
     we heard Mr. C.U. Singh, learned Senior Advocate for the appellant
     and Mr. J.P. Cama, learned Senior Advocate for the respondent.
            13. In the submission of Mr. C.U. Singh, learned Senior Advocate,
G    the respondent was clearly covered by the Payment of Gratuity Act,
     1972 and subject to the ceiling or limit of Rs.10 lacs as provided under
     Section 4(3).
            He submitted that while an employee would be entitled to receive
     better terms of gratuity under Section 4(5) of the Act, such better terms
     could be claimed only under specific circumstances as set out in Section
H
           BCH ELECTRIC LIMITED v. PRADEEP MEHRA                                17
                   [UDAY UMESH LALIT, J.]

4(5); that at no stage any claim was raised regarding existence of any          A
award, agreement or contract nor was there any pleading about the
existence of any award, agreement or contract. It was further submitted
that in terms of law laid down by this Court in Beed District Central
Cooperative Bank Ltd.4 and Union Bank of India and others vs.
C.G. Ajay Babu and Another5 either the statutory provisions or the
                                                                                B
contractual scheme can be followed and not a combination of both the
elements.
        14. In response, it was submitted by Mr. J.P. Cama, learned Senior
Advocate for the respondent that since Section 4(5) of the Act has been
given overriding effect over other provisions of Section 4, as held by this
Court in Union Bank of India6, it would override the provisions of              C
Section 3 of the Act and as such, all that the respondent needed to show
was that the appellant had a scheme for its employees (contract) and
that it did not prescribe any ceiling and that such a scheme would be
protected by Section 4(5) of the Act. As regards the applicability of Rule
6(b) of the Scheme, it was submitted:-                                          D
         “It is true that Rule 6(b) contains a non-obstante clause. However,
         Section 4(5) also contains a non-obstante clause. Section 4(5)
         being a statutory provision, will prevail. In any case Rule 6(b)
         must also be reconciled with Rule 6(a) which makes “the
         Company’s Gratuity Scheme” applicable to every member,                 E
         otherwise Rule 6(a) would become otiose. Thus, if “the Company’s
         Gratuity Scheme” is more beneficial than the Act, Rule 6(a) will
         get its play. There is nothing in Rule 6(b) that excludes a more
         beneficial scheme under Section 4(5) and / or Rule 6(a).”
      15. Before we deal with the rival submissions, the effect of various      F
amendments making changes in Section 2(e), Section 4(2) and Section
4(3) of the Act are required to be considered. The Act was enacted in
the year 1972 “to provide for a scheme for the payment of gratuity to
employees engaged in factories, mines, oilfields, plantations, ports, railway
companies, shop or other establishments and for matters connected there
with and incidental thereto”. The expression “employee” as originally           G
defined in Section 2(e) was as under:-


5
    (2018) 9 SCC 529
6
    (2018) 9 SCC 529                                                            H
18            SUPREME COURT REPORTS                         [2020] 10 S.C.R.


A          “(e) “employee” means any person (other than an apprentice)
           employed on wages, not exceeding one thousand rupees per
           mensem, in any establishment, factory, mine, oilfield, plantation,
           port, railway company or shop, to do any skilled, semi-skilled, or
           unskilled, manual, supervisory, technical or clerical work, whether
           the terms of such employment are express or implied, but does
B
           not include any such person who is employed in a managerial or
           administrative capacity, or who holds a civil post under the Central
           Government or a State Government, or who is subject to the Air
           Force Act, 1950, the Army Act, 1950, or the Navy Act, 1957.

C
           Explanation. - In the case of an employee, who, having been
           employed for a period of not less than five years on wages not
           exceeding one thousand rupees per mensem, is employed at any
           time thereafter on wages exceeding one thousand rupees per
           mensem, gratuity, in respect of the period during which such
D          employee was employed on wages not exceeding one thousand
           rupees per mensem, shall be determined on the basis of the wages
           received by him during that period;”
          The original text of Sub-Sections (2) and (3) of Section 4 of the
     Act was as under:-
E
           “Payment of gratuity:
           4. (1) ………
             (2) For every completed year of service or part thereof in excess
                 of six months the employer shall pay gratuity to an employee
F                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
G                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 an employee employed
                 in a seasonal establishment, the employer shall pay the
H                gratuity at the rate of seven days’ wages for each season.
        BCH ELECTRIC LIMITED v. PRADEEP MEHRA                               19
                [UDAY UMESH LALIT, J.]

      (3)    The amount of gratuity payable to an employee shall not        A
             exceed twenty months’ wages.
      (4)    to (6) … … …”
      15.1 By Act 25 of 1984 the expression “one thousand six
hundred rupees” was substituted in place of expression “one thousand
rupees” in Section 2(e). Further, in explanation to Section 2(e), similar   B
expression “one thousand six hundred rupees” was substituted at
two places for “one thousand rupees”. Similarly, expression “and
whether or not such person is employed in a managerial or
administrative capacity” was inserted in Section 2(e) before the clause
beginning with “but does not include any person who holds the post          C
under the Central Government …”.
       15.2 By Act 22 of 1987 further amendments were effected and
expression “two thousand five hundred rupees per mensem or such
higher amount the Central Government may, having regard to the
general level of wages, by notification specify” was substituted in         D
place of “one thousand six hundred rupees per mensem” in the main
part of Section 2(e) defining “employee”. Similarly, for the expression
“one thousand six hundred rupees per mensem”, the expression “that
amount” was substituted at two places in the Explanation to Section
2(e). Said amendment Act also inserted following explanation after
Second Proviso to Sub-Section (2) of Section 4.                             E

      “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.”
                                                                            F
       Sub-Section (3) of Section 4 was also amended and instead of
“twenty months’ wages” the expression “fifty thousand rupees” was
substituted.
      15.3 In exercise of power conferred upon it, the Central
Government by Notification No. S.O. 863 (E), dated 26.11.1992 raised
                                                                            G
the “higher amount” of wages referred to in Section 2(e) of the Act to
“three thousand and five hundred rupees”.
      15.4 Act 35 of 1994 made further amendments and expression
“not exceeding two thousand five hundred per mensem, or such
higher amount as the Central Government may, having regard to
                                                                            H
20            SUPREME COURT REPORTS                          [2020] 10 S.C.R.


A    the general level of wages, by notification specify” occurring in
     Section 2(e) was omitted. The explanation to Section 2(e) was also
     omitted. Consequently, the definition of “employee” now ceased to have
     any limit on wages and all employees, who otherwise answer the
     description in the definition, regardless of wages that they would receive,
     now stand covered.
B
           This Amendment Act also substituted expression “one lakh” in
     place of the earlier expression “fifty thousand” occurring in Section
     4(3) of the Act.
           15.5 By Act 47 of 2009, for Clause (e) of Section 2 following
C    Clause was substituted:-
           “(e) “employee” means any person (other than an apprentice)
           who is employed for wages, whether the terms of such employment
           are express or implied, in any kind of work, manual or otherwise,
           in or in connection with the work of a factory, mine, oilfield,
D          plantation, port, railway company, shop or other establishment to
           which this Act applies, but does not include any such person who
           holds a post under the Central Government or a State Government
           and is governed by any other Act or by any rules providing for
           payment of gratuity;”

E           15.6 The ceiling limit of “one lakh rupees” as stipulated in Section
     4(3) of the Act was successively raised by Act 11 of 1998 and by Act 15
     of 2010 to “rupees three lakhs and fifty thousand rupees” and “ten
     lakh rupees” respectively.
           15.7 By Act 12 of 2018 the expression “ten lakh rupees” now
F    stands substituted by the expression “such amount as may be notified
     by the Central Government from time to time”.
            15.8 The provisions of Section 2(e) and Section 4 of the Act, as
     they stand this date, are as under:-
           Section 2(e)
G          “employee” means any person (other than an apprentice who is
           employed for wages, whether the terms of such employment are
           express or implied, in any kind of work, manual or otherwise, in or
           in connection with the work of a factory, mine, oilfield, plantation,
           port, railway company, shop or other establishment to which this
H          Act applies, but does not include any such person who holds a
 BCH ELECTRIC LIMITED v. PRADEEP MEHRA                                 21
         [UDAY UMESH LALIT, J.]

post under the Central Government or a State Government and is         A
governed by any other Act or by any rules providing for payment
of gratuity;”
Section 4
Payment of gratuity.- (1) Gratuity shall be payable to an employee
on the termination of his employment after he has rendered             B
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:            C
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:
Provided further that in the case of death of the employee, gratuity
                                                                       D
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.                         E
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      F
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        G
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 [an employee who is employed
in a seasonal establishment and who is riot so employed throughout     H
22      SUPREME COURT REPORTS                         [2020] 10 S.C.R.


A    the year], the employer shall pay the gratuity at the rate of seven
     days wages for each season.
     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
B    by fifteen.
     (3) The amount of gratuity payable to an employee shall not exceed
     three lakhs and fifty thousand] rupees.
     (4) For the purpose of computing the gratuity payable to an
     employee who is employed, after his disablement, on reduced
C    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 to
D    receive better terms of gratuity under any award or agreement or
     contract with the employer.
     (6) Notwithstanding anything contained in sub-section
     (1), -
E       (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.
F       (b) the gratuity payable to an employee 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 of violence on his part, or
G              (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”
H
        BCH ELECTRIC LIMITED v. PRADEEP MEHRA                                 23
                [UDAY UMESH LALIT, J.]

      16. Thus, as on the day, when the respondent resigned from his          A
service, that is on 01.06.2012, the relevant ceiling in Sub-Section (3) of
Section 4 was at the level of “ten lakh rupees” and for an employee to
be covered by the definition obtaining in Section 2(e) of the Act, there
was no wage-bracket or ceiling.
       17. In terms of Section 4(1) of the Act gratuity shall be payable to   B
an employee in the eventualities referred to therein if he had rendered
continuous service for not less than five years. Explanation to Section
4(2) inter alia states that the gratuity shall be payable at the rate of 15
days’ wages for every completed year of service or part thereof in excess
of six months. Explanation to Section 4(2) lays down how the gratuity is
to be calculated, while Section 4(3) stipulates that the amount of gratuity   C
payable to an employee shall not exceed certain limit and thus puts a cap
on the amount payable towards gratuity. Section 4(5) then states that
nothing in said Section shall affect the right of an employee to receive
better terms of gratuity under “any award or agreement or contract with
the employer”.                                                                D
       18. For Section 4(5) of the Act, to get attracted, there must be
better terms of gratuity available and extendable to an employee “under
any award or agreement or contract with the employer” as against what
has been provided for under and in terms of the Act. In other words, as
against what is made applicable by the Act, if better terms are available     E
under any such arrangement with the employer, Section 4(5) stipulates
that nothing in Section 4 shall affect the right of any employee to receive
such better terms. Thus, when two choices are available, one under
provisions of the Act and one under such arrangement with the employer
and if the latter offers better terms, the employee cannot be denied right
to receive those higher benefits.                                             F

      19. But the question still remains whether in the present case
there was such a choice available or not. According to Mr. C.U. Singh,
learned Senior Advocate, the case of the respondent would be clearly
covered by the provisions of the Act and not under the Scheme at all.
Similar submissions were advanced on behalf of the appellant before           G
the High Court, as noted by the Single Judge. However, the submissions
were rejected after placing reliance on Section 4(5) of the Act.
       20. We must, therefore, see what exactly has been provided for
in the Trust Deed, Scheme and the Rules framed thereunder. The Trust
                                                                              H
24            SUPREME COURT REPORTS                         [2020] 10 S.C.R.


A    Deed was executed “for the purpose of providing gratuities to the
     employees of the company under the Payment of Gratuity Act”. Clause
     15 of the Trust Deed casts an obligation on the trustees to provide
     payment of gratuity upon termination of service or upon death or
     retirement of service of the Member “as provided in the Rules of Scheme”
     Rule 6(b) of the Rules clearly stipulates that notwithstanding the Scheme
B
     of the Company, if any member is covered by the Act, the amount of
     gratuity shall be calculated in accordance with the provisions of the Act.
     Similar thought is expressed in the Appendix to the Scheme which
     prescribes the rates at which the gratuity is to be paid.
            The Scheme thus divides the employees in two categories. First,
C    the employees to whom the Act applies and with respect to whom the
     amount of gratuity shall be “calculated in accordance with the provisions
     of the Act and as per the rates prescribed by the Act”; the Second
     category of employees are those to whom the Act does not apply.
     According to said Rule 6(b) and Appendix, the calculation of amount of
D    gratuity at the rates prescribed in the manner laid down in the Appendix,
     is to be done only in the case of employees in the Second category.
             21. The intent of the Trust Deed and the Scheme is thus clear that
     the governing principles as regards the amount to be calculated and the
     rates to be applied have to be in accordance with the provisions of the
E    Act, if an employee is covered by the provisions of the Act. If the amount
     is to be so calculated according to the provisions of the Act, in case of
     employees covered by the provisions of the Act, there is no other
     alternative which is offered by the Company or which is part of any
     award or agreement or contract entered into between the employer and
     employees. Thus, no reliance could be placed on Section 4(5) of the Act
F    to submit that the employees are entitled to some greater advantage
     than what is available under the Act. As stated earlier, for Section 4(5)
     to apply there must be two alternatives, one in terms of the Act and one
     as per the award or agreement or contract with the employer. The
     Scheme on which heavy reliance was placed to submit that it afforded
G    and made available better terms of gratuity itself emphasizes that in
     case of the employees who are covered under the Act, the amount
     payable as gratuity shall be in terms of the provisions of the Act. The
     Scheme does not therefore offer to the employees covered by the Act
     any other alternative apart from what is payable under the Act.

H
        BCH ELECTRIC LIMITED v. PRADEEP MEHRA                                 25
                [UDAY UMESH LALIT, J.]

       22. Rather than making available an alternative to the model and       A
modalities of calculation of amount of gratuity, as placed on statute book
by the provisions of the Act, the Trust Deed and the Scheme contemplates
two kinds of employees. One, who are covered under the provisions of
the Act and the other, who are not so covered. The historical background
and the changes that the provisions of Section 2(e) and Section 4 have
                                                                              B
undergone show that not all employees were initially sought to be covered
under the Act. Those, who were in wage-brackets greater than what
was stipulated in Section 2(e) till it was finally amended to do away with
the wage-bracket, were not covered by the Act. The Trust Deed and
the Scheme sought to devise an apparatus and make provision for those
who were otherwise not covered by the Act and for this reason                 C
contemplated two kinds of employees. The Trust Deed and the Scheme
were executed and formulated in the year 1979 when the wage-bracket
was a definite parameter for an employee to be covered under the Act.
The intent of the Trust Deed and the Scheme has to be understood in
that perspective. The idea was not to afford to the employees who are
                                                                              D
covered by the provisions of the Act, a package better than what was
made available by the Act, but it was to extend similar benefit to those
who would not be covered by the Act.
       23. In Beed District Central Cooperative Bank Ltd.4, the gratuity
scheme provided by the employer had better rate for computing gratuity
but the ceiling limit was lower; whereas the entitlement under the            E
provisions of the Act was at a lesser rate but the ceiling prescribed by
the Act was higher than what was provided by the employer. This Court
laid down that an employee must take complete package as offered by
the employer or that which is available under the Act and he could not
have synthesis or combination of some of the terms under the scheme           F
provided by the employer while retaining the other terms offered by the
Act. That was a situation where two alternatives were available to the
employee. The High Court in the present case, however, distinguished
said decision on the ground that the Scheme of the appellant “itself
provided for the rates as per Section 4(2) of the Act but without upper
limit under Section 4(3) of the Act”. In our view, the High Court failed to   G
consider the effect and impact of Rule 6(b) of the scheme. The Single
Judge did refer to said Rule 6(b) but found that the Rule was so broadly
drafted that it could not be construed to contemplate the ceiling limit
under Section 4(3) of the Act. In our view, the true import of Rule 6(b)
which gets further emphasized by stipulation in the Appendix to the           H
26              SUPREME COURT REPORTS                         [2020] 10 S.C.R.


A    Scheme was lost sight of by the authorities under the Act and by the
     High Court. If an employee is covered by the provisions of the Act,
     according to said Rule 6(b), the amount of gratuity has to be calculated
     in accordance with the provisions of the Act. The Appendix to the Scheme
     reiterates the same principle. Thus, in case of such an employee the
     gratuity has to be calculated in accordance with the provisions of the
B
     Act and while so calculating, not only the basic principle available in
     Section 4(2) as to how the gratuity is to be calculated must be applied
     but also the ceiling which is part of Section 4(3) must also apply. The
     rates and the modalities of calculations of gratuity as available under the
     Scheme of the Rules are to apply only to those employees who are not
C    covered by the provisions of the Act.


            24. We have, therefore, no hesitation in holding that the Authorities
     under the Act and the High Court erred in accepting the claim preferred
     by the respondent. We hold that the appellant was right in going by the
D    provisions of the Act in the present matter and by the ceiling prescribed
     under Section 4(3) of the Act. Any mistakes on its part in making some
     extra payments to some of the other employees would not create a right
     in favour of others in the face of the stipulations in the Trust Deed and
     the Scheme.
E          25. We, therefore, allow this appeal, set aside the impugned
     judgment and order and dismiss the Claim Petition preferred by the
     respondent. No costs.


     Devika Gujral                                                 Appeal allowed.
F




G




H