Holding

The Division Bench erred in setting aside the findings of the controlling and appellate authorities; the employee is entitled to gratuity and the orders of the authorities and the Single Judge are restored.

Summary

M.C. Chamaraju, a supervisor employed by Hind Nippon Rural Industrial (P) Ltd, worked for more than five years across several units before his salary stopped in March 1993. He applied for gratuity under the Payment of Gratuity Act, 1972. The Controlling Authority and the Appellate Authority held that the various units constituted a single continuous service, qualifying him for gratuity, and ordered payment with interest. The employer challenged these orders; a Single Judge of the Karnataka High Court upheld them, but the Division Bench set them aside, re‑appraising the facts and dismissing the employee’s claim. The Supreme Court held that the Division Bench improperly interfered with the factual findings of the specialized authorities, affirmed the liberal interpretation of the beneficial legislation, and restored the orders granting gratuity. Consequently, the appeal was allowed and the employee was ordered to be paid the gratuity amount.

Issues considered

Whether the employee completed the requisite five years of continuous service to be eligible for gratuity under the Payment of Gratuity Act, 1972.
Whether a High Court exercising judicial review can re‑appreciate the factual findings of the controlling and appellate authorities under the Act.
Whether a liberal interpretation of the Payment of Gratuity Act, as a beneficial legislation, mandates deference to the authorities' findings.

Legislation cited

Payment of Gratuity Act, 1972s. 7(4)

Subjects

gratuitycontinuous servicebeneficial legislationjudicial reviewhigh court interferenceliberal interpretationemployee rights

Judgment

M.C. CHAMARAJU A
v.
HIND NIPPON RURAL INDUSTRIAL (P) LTD.

AUGUST 24, 2007

{C.K. THAKKERANDTARUNCHATIERJEE,JJ.J B

Jabour Laws:

Payment of Gratuity Act, 1972; S. 7(4)/Payment of Gratuity (Central) C
Rules, 1972; R.10(1):

Payment of Gratuity to workman-Eligibility-Held: Payment of
Gratuity Act is a beneficial legislation-In interpreting the provisions of
such a legislation, a liberal view should be taken-Since a small amount is
involved, Division Bench of the High Court was not justified in interfering D
with the findings of facts arrived at by the authorities and affirmed by the
Single Judge of the High Court-The question raised before the authority
was whether the workman in question had completed five years continuous
service so as to be eligible to claim gratuity under the Act-Controlling
authority as also the appellate authority, on the basis of evidence, came to
the finding that he was qualified and thus entitled to claim gratuity under E
the Act-Single Judge of the High Court rightly dismissed the writ petition
filed by the employer on the basis ofthe findings recorded by the authorities-
Division Bench of the High Court ought not to have gone through the
question of fact, which exercise had been done by the controlling authority
as also by the appellate authority-High Court was exercising power of F
judicial review, which in its inherent nature, has certain limitations-Under
the facts and circumstances of the case, the Division Bench of the High Court
was wrong in setting aside the orders of the Single Judge and the authority-
Hence, order passed by the Division Bench set aside and that ofthe controlling
authority is restored-Constitution of India-Power of the High Court-
Judicial Review-Interpretation of Statutes--Interpretation of provisions of G
beneficial legislation.

Appellant was appointed as Supervisor in the respondent-company.
According to him, he worked as Supervisor for. more than five years at various
offices of the Company. From March, 1993 onwards he was allegedly neither H
361
362 SUPREME COURT REPORTS [2007] 9 S.C.R.

A paid salary nor any order of termination or dismissal was served .on him by
>-
the employer-company. The appellant-employee, therefore, requested the
Management to settle his dues and also to pay gratuity under the Act. But it
was not paid. He then approached the Controlling Authority by making an
application under sub-section (4) of Section 7 of the Payment of Gratuity Act
B read with sub-rule (1) of Rule 10 of the Payment of Gratuity (Central) Rules,
1972. The Controlling Authority held that the_ appellant was entitled to
gratuity and ordered to make payment of the gratuity to him with interest@
10% p.a. from June 12, 1993 till the date of payment. Aggrieved, the employer
filed an appeal before the Appellate Authority, which was dismissed by the J.
Appellate Authority. The employer challenged the order of the appellate
C authority by filing a writ petition in the High Court, which was dismissed by
the Single Judge of the High Court Appeal filed thereagainst by the employer
was allowed by the Division Bench of the High Court by setting aside all the
orders, dismissing the application filed by the workman. H~nce the present
appeal ·
D Appellant-workman contended that the Division Bench of the High Court
was wholly unjustified in setting aside the orders passed by the Authorities
under the Act and confirmed by the Single Judge of the High Court; that
while setting aside the orders, the Division Bench of the High Court has
virtually re-appreciated the evidence which could not have been done and on
E that ground also, the impugned judgment deserves to be set aside and that a
finding of fact arrived at by the Authorities under the Act could not have been
disturbed by the Division Bench of the High Court.

Allowing the appeal, the Court

F HELD: 1.1. The appeal deserves to be allowed. From the record, it is
clear that the question which was raised before the Authorities under the
Payment of Gratuity Act was whether the appellant had completed five years'
continuous service so as to be eligible to claim gratuity under the Payment of
Gratuity Act. The Authorities considered the said question and on the basis
G of the evidence adduced before them, held that various units where the appellant
had worked were "one and the same" and hence the entire service of the
workman ought to be considered and taken into account for the purpose of
computation of benefit of gratuity. On the basis of the above reasoning, the
Controlling Authority as well as the Appellate Authority held that the
appellant was qualified and entitled to gratuity under the Act.
H (Para 11] (365-G, H; 366-A)
M.C. CHAMARAJU 1•. ffiND NIPPON RURAL INDUSTRIAL(P) LTD. 363

1.2. Single Judge of the High Court was wholly right in dismissing the A
writ petition filed by the Management on the basis of the findings recorded by
the Authorities under the Act and in not interfering with the said orders.
[Para 13) [366-G]

1.3. The Division Bench of the High Court ought not to have undertaken
the exercise which had been done by the Controlling Authority as also by the B
Appellate Authority. The High Court was exercising power of'judicial review'
which, in its inherent nature, has limitations. This is particularly true since
the Single Judge also did not think it fit to interfere. Hence, the Division
Bench was wrong in setting aside all the orders and in allowing the appeal of
the Management and in dismissing the application filed by the workman. C
[Para 14) [367-B, C]

2. The Act has been enacted with a view to grant benefit to workers, a
'weaker section' in industrial adjudicatory process. In interpreting the
provisions of such beneficial legislation, therefore, liberal view should be
taken. A benefit has been extended by the Authorities under the Act to the D
workman by recording a finding that the appellant had completed requisite
service of five years to be eligible to get gratuity. Jn that case, even if another
view was possible, the Division Bench of the High Court should not have set
aside the findings recorded by the Authorities under the Act and confirmed
by a Single Judge by allowing the appeal of the Management. E
[Para 15] (367-D, E]

3. On the facts and in the circumstances of the case also, the Division
Bench was not justified in setting aside the orders passed by the Authorities
and confirmed by the Single Judge considering comparatively a small amount
involved in the appeal. The appellant was held entitled to Rs.16,785/- along F
with interest @ 10% p.a. Therefore, even on that ground, the Division Bench
of the High Court should have refrained from quashing the orders.
[Para 16) [367-F, GJ

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3889 of2007.
G
From the final Judgment and Order dated 26.09.2005 of the High Court
of Kamataka at Bangalore in Writ Appeal No. 2458 of 2005.

Ms. Minakshi Vij for the Appellant.

Ankur S.Kulksrni, Nimimesh Dube and Khwairakpam Nobin Singh, for H
364 SUPREME COURT REPORTS [2007] 9 S.C.R.

A the Respondent.
The Judgment of the Court was delivered by

C.K. THAKKER, J. 1. Leave granted.

B 2. This appeal is filed against the judgment and order dated Septe"mber
26, 2005, passed by the Division Bench of the High Court of Karnataka at
Bangalore in Writ Appeal No. 2458 of 2005 (L-PG). ~y the said order, the
Division Bench of the High Court set aside the order pas~ed by the Controlling
Authority and Assistant Labour Commissioner (Central), Bangalore under the
C Payment of Gratuity Act, 1972 (hereinafter referred to as 'the Act') and confirmed
by the Appellate Authority and also by a Single Judge of the High Court.

3. Short facts giving rise to the present appeal are that according to the
appellant, in September, 1984, he was appointed as Supervisor by Mr. V.K.
Poddar, Managing Director of Agarwal Investments, Poddar Granites and
D Hind Nippon Co. Ltd. According to him, he worked as Supervisor in Poddar
Mines at Sira upto 1990 and thereafter was transferred to other quarry. He
worked at various places like Bellary, Sira and Chamaraya Nagar. He worked
till February, 1993. From March, 1993, however, he was neither paid his salary
nor served with any order of termination or dismissal. On September 27, 1993,
E the appellant addressed a letter asking the Management to settle his dues and
also to pay gratuity under the Act. But it was not paid. He, therefore,
approached the Controlling Authority and Assistant Labour Commissioner,
Bangalore by making an application under sub-section (4) of Section 7 of the
Act read with sub-rule (I) of Rule I 0 of the Payment of Gratuity (Central)
Rules, 1972. The Controlling Authority, after hearing both the parties and
F perusing the materials placed before him, held that the appellant was entitled
to gratuity. Accordingly, an order was passed on May 26, 2003 that the
appellant was entitled to a sum of Rs.16,875/- towards gratuity. Since the
respondent-employer had not paid the amount of gratuity within 30 days of
the leaving of services by the workman, the payment was ordered to be made
G with interest @ I 0% p.a. from June 12, 1993 till the date of payment.

4. Being aggrieved by the order of the Controlling Authority, the
respondent-Company filed an appeal before the Appellate Authority under
the Act. The Appellate Authority vide his order dated December 20, 2004
dismissed the appeal and confirmed the order passed by the Controlling
H Authority.
M.C. CHAMARAJU v. HIND NIPPON RURAL INDUSTRIAL (P) LTD. [C.K. THAKKER, J.) 365

5. The Management challenged the said ord~r by filing a writ petition A
in the High Court but the learned Single Judge also dismissed the pet!tion
confinning the orders passed by the Authorities under the Act. The aggrieved
Management challenged the order of the learned Single Judge in intra court
appeal and as stated above, the appeal of the Management was allowed by
the Division Bench setting aside all the orders and holding that the application B
filed by the workman was liable to be dismissed.

6. The appellant has challenged the said order before this Court.

7. On July 10, 2006, notice was issued by this Court. Later on, the
parties appeared and the matter was ordered to be posted for final hearing.
c
8. We have heard learned counsel for the parties.

9. Learned counsel for the appellant contended that the Division Bench
was wholly unjustified in setting aside the orders passed by the Authorities
under the Act and confinned by the learned Single Judge. It was also submitted D
that while setting aside the orders, the Division Bench has virtually re- I
I( appreciated the evidence which could not have been done and on that
ground also, the impugned judgment deserves to be set aside. It was further
submitted that a finding of fact was recorded by the Authorities under the
Act that different units where the appellant had worked, were 'one' and there
was 'funcitonal unity' and the appellant was entitled to gratuity since he had E
worked for more than five years. Such finding could not have been disturbed
by the Division Bench. It was, therefore, submitted that the appeal deserves
to be allowed by setting aside the judgment of the Division Bench and
confinning the view taken by the Authorities under the Act and by the
learned Single Judge. F
10. Learned counsel for the respondent, on the other hand, supported
the order of the Division Bench and submitted that since the appellant was
not entitled to gratuity, the Division Bench was right in allowing the appeal
and dismissing the application filed by him.
G
I 1. Having heard learned counsel for the parties, in our opinion, the
appeal deserves to be allowed. From the record, it is clear that the question
which was raised before the Authorities under the Act was whether the
appellant had completed five years' continuous service so as to be eligible
to claim gratuity under the Act. The Authorities considered the said question
H
-~
366 SUPREME COURT REPORTS [2007] 9 S.C.R.

A and on the basis of the evidence adduced before them, held that .various units
where the appellant had worked were "one .and the same" and hence.the >-
entire service of the workman oughtto be considered and taken into account
for the purpose of computation of benefit of ·gratuity. On· the basis of the
above reasoning, the Controlling .Authority as well as the Appellate Authority
B held that the appellant was qualified and entitled to gratuity under the Act.

12. The Appellate Authority, after considering the arguments of the
parties and the findings recorded by the Controlling Authority, concluded;

"I have carefully perused the .records on which.the.CA has placed.
c reliance on. I am in full agreement with the.findings-of the CA. The.
CA ha5 given cogent reasons for arriving.at.his,conclusion that the
respondent herein is entitled for payment of gr<!-tuity right from
September 1984. The learned counseL for ·the.appellant has not
countered the statement ofthe.respondeot.that.Shri V.K. Poddar runs
the establishments of Aggarwal Investments,..Poddar. Granites and.
D Hind Nippon and that there.is just:interchangeabilityin the.services
of the respondent.- Two witnesses have been~lead:by the respondent
herein before the CA in support of his claim that he"had. worked
during the period from 1984, onwards .with. POddar_ Granites and.
Aggarwal Investments. Nothing has been.·produced .. before. me~to
E show that the said two companies are indeed run by a different perso11
other than Shri V.K. Poddar. Hence, I have to draw an adverse inference
that the three companies including the appellant company is run by
Shri V.K. Poddar and hence there is functionaUntegi:ally among these
three establishments and that the services of·respondent has been
merely transferred to the appellant ·company without ·his knowledge.
F
It appears that the appellant has been .chang~ng,the employ~r-ship of
the respondent solely to deprive .him of the statutory_ benefits. Hence,
I am of the considering opinion that the .decision. of the.CA under
challenge is in order".

G 13. To us, the learned Single Judge-was wholly right'in·dismissing the
writ petition on the basis of the findings recorded by the Authorities under
the Act and in not interfering with the said orders. The Division Bench,
surprisingly, went into the questions of fact and_came.to the conclusion that
it was not established by the appellant-workman-that he.had worked for more
H than five years continuously in the Company so as to be eligible to claim
gratuity. The Division Bench also perused certain documents and observed
>--- -·

M.C. CHAMARAJU v. HIND NIPPON RURAL INDUSTRJAL (P) LTD. [C.K. THAKKER, J.J367

that certain letters said to have been written were not on the letterhead of the A
Company and it could not be said that the appellant had worked for a period
of five years continuously which was an essential requirement to claim gratuity.
On that reasoning, the Division Bench held that the case was of 'no evidence'.
The Bench also held that the onus to establish eligibility was on the employee
and since it was not discharged by him, he should fail. Accordingly, the B
orders were set aside.

14. In our considered opinion, the Division Bench ought not to have
..J.... undertaken the above exercise which had been done by the Controlling
Authority as also by the Appellate Authority. The High Court was exercising
power of 1udicial review' which, in its inherent nature, has limitations. This C
is particularly true since the learned Single Judge also did not think it fit to
interfere. We are, therefore, of the view that the Division Bench was wrong
in setting aside all the orders and in allowing the appeal of the Management
and in dismissing the application filed by the workman.

15. There is another aspect also which is relevant. The Act has been D
enacted with a view to grant benefit to workers, a 'weaker section' in industrial
adjudicatory process. In interpreting the provisions of such beneficial
legislation, therefore, liberal view should be taken. A benefit has been extended
by the Authorities under the Act to the workman by recording a finding that
the applicant (appellant herein) had completed requisite service of five years E
to be eligible to get gratuity. In that case, even if another view was possible,
the Division Bench should not have set aside the findings recorded by the
Authorities under the Act and confirmed by a Single Judge by allowing the
appeal of the employer.

16. Finally, we are of the view that on the facts and in the circumstances F
of the case also, the Division Bench was not justified in setting aside the
orders passed by the Authorities and confirmed by the learned Single Judge
considering comparatively a small amount involved in the appeal. As already
noted in the earlier part of the judgment, the appellant was held entitled to
Rs.16,785/- along with interest@ 10% p.a. To us, therefore, even on that G
ground, the Division Bench should have refrained from quashing the orders.

17. For the foregoing reasons, the appeal deserves to be allowed and
is accordingly allowed. The order passed by the Division Bench of the High
Court is hereby set aside and the orders passed by the Controlling Authority
H

T
368 SUPREME COURT REPORTS [2007) 9 S.C.R.

A and Appellate Authority under the Payment of Gratuity Act, 1972 as confirmed _)._
by the learned Single Judge is hereby restored. In the facts and circumstances
of the case, however, there shall be no order as to costs.

18. The payment to which the appellant-workman is held entitled shall
be made within a period of twelve weeks from today.
B
S.K.S. Appeal allowed.