Holding

The special contribution under Regulation 37 is not the same as gratuity under the Payment of Gratuity Act, 1972, and therefore the Board must pay it.

Summary

The petitioner, Katheeja Bai, widow of a retired Tamil Nadu Electricity Board employee, claimed that the Board had failed to credit the special contribution mandated by Regulation 37 of the Board’s Contributory Provident Fund Regulations to her late husband’s provident fund account. The Board contended that this special contribution was merely another form of gratuity and therefore could not be paid in addition to the gratuity payable under the Payment of Gratuity Act, 1972. The Supreme Court examined the nature of the special contribution, the provisions of Regulation 37, and the distinctions between it and the gratuity scheme under the 1972 Act. It held that the special contribution is a distinct benefit, part of the provident fund scheme, and not covered by the gratuity provisions. Consequently, the Board was ordered to pay the outstanding special contribution, the balance of gratuity, interest, and compensatory costs. The petition was allowed.

Issues considered

Whether the special contribution under Regulation 37 of the Tamil Nadu Electricity Board Contributory Provident Fund Regulations is the same as the gratuity payable under the Payment of Gratuity Act, 1972.
Whether the Board can lawfully refuse to pay the special contribution on the ground that it duplicates the gratuity liability.

Legislation cited

Electricity (Supply) Act, 1948s. 79(c)
Employees' Provident Funds and Miscellaneous Provisions Act, 1952s. 12
Payment of Gratuity Act, 1972s. 14, s. 4

Subjects

Provident FundGratuitySpecial ContributionTamil Nadu Electricity BoardWrit PetitionArticle 32Payment of Gratuity ActEmployee benefitsRegulation 37Legal interpretation

Judgment

798

KATHEEJA BAI

v.

THE SUPERIN"iENDJNG ENGINEER & ORS.

MayJO, 1984
B
[0. CHINNAPPA l!-EDDY, A.P. SEN AND ••
• E.S. VENKATARAMIAH, JJ.]

• Tamil Nadu.-Electrictjr Board Co~tribulorj ProvidelJI Fund RegulatiOn1
·frcimed by Tarilil Nadu Electricity Board .under Electricity Supply Act, 1948- ·
Regulation 37-Whether_SP,t;Cial Contribiltion to be made by ElectriCity BQard. to
the Contributory Provident Fund of the einpJOyees is _·Same as Gr.atuity tinder Pay-
ment' of G;atufty Act, 1.912-W.heth~i PaylTll!nt· of Gratuity under Payment of
_Gratuity· A.ct debars paym.e"nt of SpeCial ConttibJ,(lion. to be made under Regula·
~ion 31.
D
Public Interest L'it1'gation-Letfer-to 1udge- treate·d wrii petition~
•
Regaiation 37 of the. Tamil Nadu Electricity Board Contributory Provident
Fund Regulations framed by the Tamil Natlu Electricity Board under· the Electri-
city-Supply Act, 1948 provides that the Electricity Board shall credit.to a mem-
ber's.-provident fund acCount a special contribution calC\1lated in the specified
B ··rnanrier, in addition to. the contribution credited under ·Regut3.ti0n. ll, if the
Board is satisfied that the service of the member has been good effici~nt and-_ faith ..
ful and th¢_ member ha~ not b~eCn diSJ:n-issed from ~erviCe or the member hjs Jl(lt
been removed ftom service. in which Case the sanction of the Board hiid to be
obtained. · ·

The Payment of Gratuity Act, 1!i12 which was also applicable ..to' the
p Tamil· Nadti Electricity Board provided for the Payment of greatiuty to· em..
ployees _who would fetife after rendering service for a specified number of
. years .

. . The petitioner's hu~band retired in 1976 after serving the Tamil Nadu
Electricity B0ard for ·about 34 _years and died three.mo.n1hs thereafter. The
petitioner was paid_ her husband's · stibscription to the Contributory Provident
G Fund and interest and the.Electd~ity Bo1lrd's contribution and intereSt and also ·
thc-gratUity under the payment of Gratuity Act, 1972 .. The Electricity Board
did not pay the·SJ)ecial Contribrition to be ma.de by it to the contributory Pro-
vident Fund under. 'Regulation 37. ·on tqC gro~nd that-the specia~· ·contributioll
being nothing other than tbe payment of gratuity, they could n.ot be asked to.
pay gratuity t\Vice Over, once under Payment of Gratuity Act and a~in under
_Regii1ation 37. The petitiorier having got no relief from ailywhere wrote a
H.
letter tQ a!Judge of the Supreme Court which wa.• treated as a writ petitioll:

Allowins!the petition,
KATilEEJA BAI v. SUPDT ENGINEER (Cb;nnappa Reddy, 'J.) 799.
HELD :. The E·lectrjcity BOard cannot avoid payn1e·nt of the special
- Contribution to Provident Fuiid under their own Provident Fund RegulatiOlIS on
the pretext that ii is a.kin to or_ the same as Gratuity payable_ under the Pay-
ment of Gratuity Act. In the first place, the Board, in thC:ir Regulations, h3ye
themselves Iab~llC:d the Speci31 Contribution under Regulation 37 .as a Special
-·contribution to Provident Fund .and- nOt as Gratuity. ·It is not as if they were·
utiaware of the word '_Gratuity' -and· what it meant Since it -is found that there
is a reference in· Regulation 5 to a·Gratuitt,.Scheme of.. th~.-Tilmil ~a~ Govern-
ment ·which had been adopted by the.Bd!rd .. The Special Contr1but1on under
B
Regulation 37 is part of a Well thought out _Provident F·und Scheine designed tO
benefit ··good-, efficient and faithfur employees (borrowing th:e words- from the
Regulation'itself) by _making annual contributions· in_ addition- to the monthly
contributions .und~r Re!iulation JI.· This is what apnears from Regulation 37
itself. There is no justification ror first dubbing it as a gratuity on the ground
that it Ii.as some ·or the known ch_aractcristics of gratuity and then proceeding to
·deny the employees the benefit o.f it ·Qn the-gt"ound that the Beard are paying
gratuity under the. Pa:yment of Gratuity Act. If the Special Contribution has
•
so.me _cOII)mon features with gratuity, it has also distinctive features which ·ctis·
ti~guish it .from gratuity payable under the I~r.yment of Gratuity A~t. [803B-F]
. .

in view of the finding that ..Special. Contrib~tion un<;te~ Regulation 37 is
not the same as grat_uity·under Payment of Gratuity Act; the argument that the D
provision for Special Contribution under Regulation 37 was inconsistent With •
the provisions of the Payment of Gratuity Act .and therefore the Jatier should
prevail to the eXclusion of the former must fail. [804H ; 805A] ·

ORIGINA~ JURisDier10N : Writ Petition .No. 13009 of 1983. E

(Under article 32 of the Constitution of India)

.G;pal Subra aniam (A.C) for the Petitioner.

Dr. Y.S. Chitale, AY. Rangam and Mrs: Sar/a Chandra for the F
Respondeni.
•
The Judgm;niof the Court was delivered by

. · CHINNAP.PA REDDY, J. Smt. .Kathoeja Bai, is the widow of
Abdul Salam who retired .as a Line· Inspector, Grade l, in the G
employment of the Tamil Nadu State Electricity Board on 31.7.76
and who unfortunately. died on 15.10.76. Smt. Katheeja Bai failed
to get from her late husband's employers .certain amounts" which
she clam~d werl!o due to her husband. She. knocked contii)Uously,
but m varn, at the doors of the Regional Provident Commissioner R
Madras, Central Provident Commissioner, New Delhi a~d th;
Minister for Labour Government of India for several years for
Mo SUPREME CotJRT REPORTS [1984] 3 s.c.ll..

A. redress. In sheer :desperation she nltimately turned to this CQurt as
a
a last resort. Unable to engage lawyer, she addressed a letter to
· . a learned judge of the Court setting forth her grievance. After be-
ing processed in the. Registry; the letter was t)'eated as·a Writ
Petition under Art 32 of th~ Constitution. A Rule Nisi was issued
and the Tamil Nadu..State. Electricity 'Board have app.eared before •
us through connsel. At our request Sri' Gopala Subramanyam ••
argued the case for the widoJ' i!S amicus ·curiae. He presel)ted the
case with understanding and .thoroughness and yie are grateful to
bim, as also fo Dr. Chitaley who' presented the employer's case
with his usual fairness.·
G .•
In exercise of the powers conferred by s. 79(c) of the Electricity
Supply Act, .1948, ·the Tamil Nadn Electricity Bo.ard made the Tamil
Nadu Electricity Board Contributory Provident ,fund.Regulations.
Regulation 3 Provides for the estabfahment. of a fund kno.wn as the
Tamil Nadu Electricity Board Employees' Contributory Provident
Fund;with effect from 1.7.57. Regulation 3·A to 3-K provide for
the· managem~nt ·and administration of the fund by the Board of .
•
Truste&. ·Regulation 4 prescribes that the. Fund .shall be governed •
by regula!iou as may be in force for the .time being but provides
that no addition, alteration or repeal, of any .regulation which may
adversely effect a subscriller shall be. retrospective. Regulation 5
provides th.at all en;ployees who are eligible for the Contributory
Prov.ident Fund (Tamil Nad1,1) Scheme and Gratuity Scheme oft.he
Governfi1ent of Tamil Nadu except certain categories of employees
''
with whom we are not. co.ncerned ·shall become· subscribers to the
fund o~ completion of three months continuous service. Regulation.
6 prescribes that. an account shall be ·opened in the name of eac.h
member in which shall be credited, the member's subscriptions and
interest thereon, the contributions maie by the Electricity Bo'ard to
his account and interest thereon and the J)re·existin·g account before.
the Electricity Department was taken.over by thil Electricity Board.
Regulation 9 provides ·ror subscription to the fund by member~ at
G. the rate of 7-1/2 % of pay' iJlus dearness allowance. RJ)gnlation 11
provides for contribution byjhe Electricity Board to the account of.
each member at the. rate of7t% of pay plus dearness allowance.
The member's subscription along with the Electricity B.oard's Contri-
. bution is required to be credited to the individual. a~count ofthe mem
.H . ber before the 15th of every month. Regulation 37 prescribes that the
Electricity Board shall credit to a memb<;r's Provide!lt Fund account
a special contribution calculated· in the specified maimer. in addi-
•
~ATHESJA. BAI l'. SJPDT ENG!NEER (G:/iinnappa Raddy, J.j · 80i

tion to the contri·buti'oncrediled under Regulation 11, ifthe Board .A
is .satisfied that tlie service of the member has been .good, .efficient
and faithful and the member has not bo~n dismissed from service or
the membor h:ls not been removed from service in which case the
sanction of the Board bas to be obtained. In the case of a Class I
or Class Hcmpbyee who quits service on attainment of'the age of
supernnuation, ne is to be ·credited, if his service exec.eds 18 years B
with six months pay plus. half a month's pay for each completed
year of service afte;- the J8t~1 but not so 1s to e<cced, in all, twelve .
months' pay or rnpees tw:n!y:five thonsand, ~h1chever is less. If
the employee's service does not exceed 1.8 years, he is to be credited
with half· a month's pay for each completed year of si:rvice".so as
. • . . G
not to exceed six months' pay. In the case of a Class Ill or Class IV
employees who bas attained tltc'age of superannuation after 15 years' .
• service, th~ Electricity B.oard is requiccd to 9redit .his account with
half a month's· pey for each completed year of service., ·but no.t so
as to exceed to 15 montl1s' pay. Jf the service is short of 15 years, he
is to be credited .with half a month's pay !or e'ach completed ye~r .D
of service so-as n0t 15 exc·;!ed six mopths' pay. rt is provided in
Regulation 37 that pay for the purpose. of reckoning special contri·
bution shall be the pay last drawn during the last- three years .of
service, whichever is more. The Board is also empowered to withhold
or. reduce
.
the
: .
Special Contribution in any particular case.
~
·
E

At this stage, we may refer to s.12 of the Em~loyees' Provident
Funds, And Miscellaneous Provisions Act, 1952 which prohibits an
employer from rcducinr; directly or indirectly the total quantum of
benefits in the nature of uld age pension-, ·gratuity or Provident Fund
or Life Insurance to whic:1 the employee is entitled· under the terms
of his employment, express or implied, by reason only of his liability
for the payment of any contribution to th.e Fund (wh°ich. is defined
by i.2 (h) as meaning a. Provident Fund . established under the
· Employed ·Provident Fund Scheme framed under s.5).
. '

G
· In 1972, Parliament enacted the Payment of Gratuity Act,
1972 to provide for' a schem<": for the payment of gratuity to emplo:.
yees in cert1iin establishments. There 'is no. dispute that the Act
applies to the Tamil Nadu 'State Electricity }3oard. Section 4 of the
.Act.,.equircs payment of gratuity to,an employee who .~as rendered .
continnous s;~rvico for not less than-five years, on the termination H
of his employment' on superannuation or on retirement
. . '
or on. his
,c
802 . SUPREME COURT RliPORrs . [l 984] 3 S.C.R.
'
death or disable.ment due·.to accideut or disease. · The employer is ·
. ' required to pay the gratuity to.the employee at tbe rate of fifteen
days' wages· for each ·completed year of service or part thereof ·in
excess of six months. The amount of gratuity. is not to exceed 20
'months' wages. The employer is not requfred to pay· any gratuity
to an employee if .the service ·of the employe.e has. been terminated
B· for any act, wilful omission or negligence causing any damage or '.
loss tci; or destruction of, property belonging to the employer, or if '<
the services of the employee have been terminated for riotous or
· disorderly conduct or any other act of violence ~on his part or if his
.· c servicea have \)een terminated for any act involving moral turpitude
provided ihat suc}). offence' is committed by him i.n the course.of his
· employment. Section 14 provides tl\at the contribution of the Act
shall have effect notwithhstanding anything inconsistent therewith
contained in any enactment other than tbis Act or in any instrumenJ;
or contract }).aving effect by virtue of any enactmsnt· other than the
D Payment of Gratuity Act.• ·
•
Abdul Salam, w!io held a non-pensionable post, retired· on
31.7.76, after a service. of 34 years.and five months. He died on
15.10.76 within three months after his retirement. He was entitled
or, in this case his widow was entitled to the paymorit of the entire
amount standing to. his credit in his Provident Fund account and
the gratuity pa.yable u.nder the Payment of Gratuity Act. The
. Electricity Boai:d, however-, took the stand that she was entitled to
he paid the member's subscription and interest, the employer's
B contribution. and 'inte.rest and. gratuity but not the special contri-
bution under Reg'!lation 37 of the Tamil Nudu State Electricity
Board Contri.butory Provident Fund Regulitions .. The reason Jor
the Board's .attitude was that· the sp,ecial · contribution required to
be paid ·under Regulation 37 was nothing other than payment of
gratuity and that !hey could not be asked to pay gratuity twice over,
G once under the Payment of Gratuity Ac( and again under Regulatio~
37, Since they were ready to pay the gratuity payable under the
.. Payment of Gratuity Act,. which. was more .favourable to the
employee, they. were not obliged to make pay~ent of tbe contri-
bution under Regulation 37. We may mention here that tl)e Board
B has paid to the widow, the member's subscription with interest and
· the· employer'& contribu.tion with interest. but not the special ~ont.ri-.
bution under Regulation 37. The Board has paid a sum ofRs.4275/-
towards gratuity under the payment of Gratuity Act but a ~um of
·•
•

'\ - KATHEEJA BAI v. SUP!)T, ENG!l:!EE'R (Chinnappa Raddy, J.) 803

Rs, 3167/- is admittedly yet due from the Board to_wards gratuity.
In the coun_ter affidavit filed on b~half of the Electricity Board we A
are not able to find any reason.for non-payment of the balance_ of
gratuity .
•
We are unable to appreciate how the Electricity. Board can
. avoid payment of the Special Contribution to Provident Funct'
B.
_under their own· Provident Fund Regulatio11s on the pretext
that it is akin to or the same as Gratuity payable under the Pay-
• ment of Gratuity Aci. In the first place, the Bqard, in their Regu-
lations, have themselves labelled the Special Contribution under
Reglilation 37 as a Special Contribution to Provident' Fund not as
Gratuity. ·'It is not.as if .they were uriaware of the· word 'Gratuity'
and what it meant since w.e find that there is a reference in Regu-
•
lation 5 to a Gratui_ty Scheme -of the Tamil Nadil Govern-
ment which had beeri adopted by the Board. The Special Contri-
'bution under Regulation 37 is part of a well thought out Provident
Fund Scheme designed·. to benefit 'good; efficient and faithful D
. "employees (we borrow the words from the . Regulation itself) by
making annual contributiOns in- a\ldition the monthly contributions.
under Regulation 11. This is wbat appears from Regulation or
itself, we see no justification for first dubbing It as a gratuity on the
ground that it has some of the known cbaracteristics of gratuity and
then proceeding to·. deny' the employees the· benefit ·of it on the E
) ground that the Board are paying gratuity under the Payment
of Gratuity Act. If the Special Contribution has some common:
features with gratuity, it has also. distinctive features which .distin-
guish It.from gratuity payable under the payment of Gratuity Act;
For example, one important feature ·which discrimin_ates the Special F
Contribution under Regulation 37 from gratuity under the.Payment
of Gratuity Act is that while tlie Payment of the latter is-obligatory
and. can only be denied if the employee's services have been termi~
nated for his riotous or disorderly conduct or any other act of
'violence on-his part or.any act which 'Constitutes an offence involving - G
· moral turptitude and can also be denied to· the_ extent. of- the damage ·
orloss·caused by the employee, where the employee's services have
been terminated for any act, wilful omission or negligence causing
any damage or to loss, or destruction of, property belonging to the
. emp1oyer, the payment of the former is_ discretionar_y and may not -
be made if the service of the employee has not been good, efficient .H
ani.l faith(ul. The employer has also the discretion to with,ho)d or
reduce the Special 8ontribution in any. particular case. Of course,

." . ,..
SUPREME CoURT REPORTS [l9g4j j S.C.R •.

A the einpfoyer canhot arbitrarily clai'm that th~ employee's service.
. was not good., efficient and· faithful, . or with-hold or reduce the
Special Contribution in an arbitrary fashion. Even ·so,. the distinc-
tion between the mandate of the Payment of Gratuity Act and the .
discretion involved in makin,!J the Special Contribution under Regu-
•
la1ion 37 is iriielligibly clear, Another feature which di1tinguishes
B. the.two is that the benefit of the Payment of Gratuity Act is confin-
.ed to persons · drawing wages· not · exceeding Rs. 1000 and
does :not extend to persons employed · in a managerial or admini-
strative capacity .wliereas the SpeCial Contr,ibution under Regulaiion
37 is ·not so confined and extends to every employee of the Board°
except casual employees,State or Cenfral Government employees
0.
employed with the Board on foreign service terms etc. etc. For the· ·
purpose of cont~ibution of, Provident Fund under Regulation 11 or
Regulation 37 it makes no difference that a person is employed in
a managerial or administtarive ·capacity on that he draws wages
more than Rs. 1000 pet month. A thin;\, feature which marks the
D · two apart is that the ·contribution to the. Provident Fund whether
under Regulation 11 or Regulation 37 becomes .part of the Fund ·
established py Regulation 3 and·is to be managed and administered
by trustees u.nder Regulation 3-A to 3-K, whereas the payment of
Gratuity Act does .not provide for the Constitution of a fund to be
managed and administered by trustees.. In addition -to th.ese broad
E feature;, we· have the outstanding circumstance that the Board
themselves have describ.ed the contribution under Reguiation 37 as
a contribution to ·Provident Fund and have chosen to include it in
their Provident Fund Scheme. That should conclude the matter.
· Dr. Chitaley invi.ted our attention to s.14 of the Payment of•
Gratuity Act; i972 which provides, ·

"The provisions of this Act or any rule ma~e there·
.under shall have effect notwithstanding anything inconsistent
therewith contained in an enactment other than th.is Act or
in any instrument or contract having effect by virtue of any
G
..
enactmel/.t other thau this Act," ·

He argued that the provision for Special Contribution under
Regulation 37 was inconsistent with.the provisions of the Payment
of Gratuity Act and therefore the latter should prevail to the
H · exculusion of the former .. This ,'argument is. dependent on the
assumption that the SpeCial Contribution nuder Regulation 37 is
· the samething as the gratuity contemplated by the Payment of .

r
KATl!imJA BAI v. SUPDT. ENGINEER (Chinnappa Raddy,J.) 805
' '
Gratuity ·Act. We have held that it. is not and the argument,
A
"therefore, fails.

a
There was then the usual lament that large number of em-
ployees were involved and, therefore, the cost will be.heavy. We do
not understand this argument at all .. Does it inean that beneficent.
legislations . and beneficent schemes must be confined to small B
establishments emploY,ing a Jew workers only ? On the other hand,
it is misreading to say that the cost is heavy. The cost is made to
appear heavy divorced from the size of the · establishment. If the.
establishment is huge and if a large number of workmen are employ-
. ed the total wagejbill may appear to bepeayy, but is it really so?
ls it disproportionate to the size of the estblishmeut,' its resourees, . c
· -·its revenues and its other expenditure ? Is the individual wage-bill.
also very high ? To talk of heavy cost without refere.nce to .other
circumstances
. .
is to present an entireiy unfaithful· pictl!re. We need
<-rnake no further .comment. ·

·In the resuJt we direct the respondent Board to pay to the D
. petitioner the whole of the. Special Contribution under Regulation
37" which was payable. to her husband and the balan.ce of the gra-
tuity payable under the Payment of Gratuity Act, part of which we
are told has beenpaid leaving the sum of Rs. 3167 unpaid. Tbese
amounts should be paid to the. petitiouer with interest at 15% per
) · annum froin the date on w.hich the amO.unts fell due. The respon-
.E
dent Board -shol!ld also pay a sum of Rs. 2500 to the "petitioner ·
towards compensatory costs. We must add that the case haa left us
with the.feeling of: uneasiness and distress at the plight.of helpless
persons like the petitioner whose repeated representations to those
in authority were left uncared for. so the tediously long despite F
frequent protestations pf social j)lstice .

. ,.J
H.S.K. Petirion allowed.

.,