CHAIRMAN-CUM-MANAGING DIRECTOR FERTILIZER CORPORATION OF INDIA LTD. AND ANR. versus RAJESH CHANDRA SRIVASTAVA AND ORS. on 7 April 2022

84

SUPREME COURT REPORTS

[2022] 3 S.C.R.

ACHAIRMAN-CUM-MANAGING DIRECTOR FERTILIZERCORPORATION OF INDIA LTD. AND ANR.

v.

RAJESH CHANDRA SRIVASTAVA AND ORS.

(Civil Appeal No.2260 of 2022)

B

APRIL 7, 2022

[HEMANT GUPTA AND V. RAMASUBRAMANIAN, JJ.]

Payment of Gratuity Act, 1972 – s.2(s) – Whether ad hocpayment made by Management to the workers pursuant to interimCorders passed by Supreme Court in a previous round of litigationcould form part of “wages” within the meaning of the expression u/s.2(s) of the Payment of Gratuity Act, for the purpose of calculatinggratuity, especially in the light of the order passed by Supreme Courtin the case of Shri Kashi Prasad Tripathi – Held: The order passed inDthe case of Shri Kashi Prasad Tripathi does not deal with this question– s.2(s) of the Act defines wages – Irrespective of whether what wasearned has been paid or remained payable, the same is included inthe definition, provided it is in accordance with the terms andconditions of his employment – In the instant case, the employeesinitiated the first round of litigation (writ petitions) before variousEHigh Courts, for grant of the benefit of revision of pay scales, onground that the employees of other PSUs were granted revision onpar with the Government servants – Thus, what was claimed in thefirst round of litigation was not what was payable in accordancewith the terms and conditions of employment – Therefore, the SupremeFCourt (to which the writ petitions got transferred) was clear in itsinterim order as to how the ad hoc payment ordered thereundershould be treated – Even in the final order (vide which the writpetitions were eventually dismissed), the Supreme Court made it clearthat what was paid was only ad hoc – In a recent Supreme Courtdecision, it was clarified that wages mean and include basic wagesGand Dearness Allowance and nothing else – Ad hoc payment madepursuant to the interim orders by Supreme Court will not form partof the wages – Labour Laws.

Payment of Gratuity Act, 1972 – s.2(s) – Definition of “wages”– Held: The definition of the expression is in 3 parts, the first partH

indicating the meaning of the expression, the second part indicatingwhat is included therein and the third part indicating what is notincluded therein – Labour Laws.

Judgment /Order – Interim order – Party who secured it, failedin the final stage – Effect – Held: A party who is in enjoyment of aninterim order, is bound to lose the benefit of such interim orderwhen the ultimate outcome of the case goes against him.

Practice and Procedure – Appeals before Supreme Court, ofState or instrumentalities of State against individual litigants –Refusal of Supreme Court to go into question of law in such cases –Held: Cannot be treated as tantamounting to answering the questionof law in a particular manner – Whenever the State orinstrumentalities of State come up with appeals challenging smallbenefits granted to individual litigants, the Supreme Court appliesthe test of proportionality to see whether the quantum of benefitsgranted to the individual concerned, justifies the examination ofthe question of law, at the cost of that little man from a far off place– Doctrines/Principles – Test of proportionality.

Allowing the appeals, the Court

Conclusion

Allowing the appeals, the Court

HELD : 1. The order passed by this Court on 05.05.2015in C.A.No.4258 of 2015 in the case of Shri Kashi Prasad Tripathidoes not deal with this question. The said order has gone on thebasis that the computation of the quantum of gratuity is exclusivelywithin the domain of the authorities under the statute and thatthe High Court is not competent to interfere with the same.Therefore, the order passed in the case of Kashi Prasad Tripathicannot be taken to have laid down any law to the effect that thead hoc payment will form part of wages. The respondents,therefore, cannot really take advantage of the order passed inthe case of Kashi Prasad Tripathi, merely on the ground that thevery same question of law was raised by the Management in thecivil appeal and thereafter in the petition for review and curativepetition. At times, this Court refuses to go into the questions oflaw, when a single individual armed with an order in his favourfrom the High Court is pitted against the State. Whenever theState or instrumentalities of State come up with appeals challengingsmall benefits granted to individual litigants, this Court applies the ABCD

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Atest of proportionality to see whether the quantum of benefits grantedto the individual concerned, justifies the examination of the questionof law, at the cost of that little man from a far off place. The refusalof this Court to go into the question of law in such cases, cannot betreated as tantamounting to answering the question of law in aparticular manner. [Para 15][92-C-G]B

2. Section 2(s) of the Act defines wages. The definition ofthe expression is in 3 parts, the first part indicating the meaningof the expression, the second part indicating what is includedtherein and the third part indicating what is not included therein.In the first part of the definition, the emphasis is on what is earnedCby the employee “in accordance with the terms and conditions ofemployment”. Irrespective of whether what was earned has beenpaid or remained payable, the same is included in the definition,provided it is in accordance with the terms and conditions of hisemployment. [Paras 16, 17 and 18][92-H; 93-C-D]D

3. In the instant case, the employees initiated the firstround of litigation before various High Courts, for the grant ofthe benefit of revision of pay scales, way back in the year 1996,on the ground that the employees of other PSUs have beengranted revision on par with the Government servants. Thus,Ewhat was claimed in the first round of litigation was not what waspayable in accordance with the terms and conditions ofemployment. Therefore, this Court was clear in its interim orderdated 18.08.2000 as to how the ad hoc payment ordered thereunder should be treated. Even in the final order, this Court madeit clear that what was paid was only ad hoc. [Para 19][93-E-F]F

4. It is a fundamental principle of law that a party who is inenjoyment of an interim order, is bound to lose the benefit ofsuch interim order when the ultimate outcome of the case goesagainst him. Merely because of the fortuitous circumstance ofthe Voluntary Separation Scheme coming into effect before theGtransferred cases were finally dismissed by this Court by an orderdated 25.04.2003, creating an illusion as though the last drawnpay included this ad hoc payment, it is not possible to go againstthe fundamental rule that the benefits of an interim order would automatically go when the party who secured it, failed in the finalstage. [Para 20][93-G-H; 94-A]

5. In The Straw Board Manufacturing Co. Ltd. case, thisCourt clarified the meaning of the expression “wages” underSection 2(s) of the very same enactment, as follows: “We clarifythat wages will mean and included basic wages and DearnessAllowance and nothing else”. [Para 21][94-B]

6. In view of the above, the Controlling Authority and theAppellate Authority under the Act, holding that the ad hocpayment made pursuant to the interim orders by this Court willform part of the wages, are set aside. However, in view of theefflux of time and taking into account the fact that few employeesare now no more, the Management is directed not to effect anyrecovery, if payment has already been made to any of therespondents or their families. [Para 22][94-C]

The Straw Board Manufacturing Co. Ltd. v. Its Workmen(1977) 2 SCC 329 : [1977] 3 SCR 91 – relied on.

Case Law Reference

[1977] 3 SCR 91 relied onPara 21

CIVIL APPELLATE JURISDICTION : Civil Appeal No.2260of 2022.

From the Judgment and Order dated 11.07.2016 of the High Courtof Judicature at Allahabad in Writ-C No.29886 of 2016.

With

Civil Appeal Nos.2275, 2305, 2306, 2310, 2357, 2311, 2313, 2315,2318, 2319, 2320, 2321, 2322, 2323, 2324, 2325, 2326, 2327, 2328, 2329,2330, 2331, 2332, 2333, 2334, 2335, 2336, 2337, 2338, 2339, 2340, 2341,2342, 2343, 2344, 2345, 2346, 2347, 2348, 2349, 2350, 2351, 2352, 2353,2354, 2355, 2356, 2358-2359, 2317, 2262, 2269, 2268, 2264, 2263, 2267,2265, 2261, 2266, 2270, 2271, 2272, 2273, 2274, 2276, 2285, 2286, 2287,2288, 2289, 2290, 2291, 2284, 2292, 2280, 2278, 2293, 2294, 2277, 2283,2295, 2282, 2279, 2296, 2297, 2298, 2299, 2300, 2281, 2301, 2303, 2307,2302, 2308, 2309, 2312, 2304, 2314 and 2316 of 2022.

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ANeeraj Kishan Kaul, Sr. Adv., Ms. Pritha Suri, Chirag Joshi,Ghanshyam Joshi, Ms. Ira Mahajan, Advs. for the Appellants.

Bharat Sangal, Sr. Adv., Ms. Babita Kuswaha, Nagarkatti KartikUday, Advs. for the Respondents.

Ms. Vernika Tomar, Adv. for the Intervenor.

B

The Judgment of the Court was delivered by

V. RAMASUBRAMANIAN, J.

1. The common question that arises for consideration in this batchof appeals, is as to whether an ad hoc payment made to the workersCpursuant to the interim orders passed by this Court in a previous roundof litigation could form part of “wages” within the meaning of theexpression under Section 2(s) of the Payment of Gratuity Act, 1972(hereinafter referred to as the “Act”), for the purpose of calculatinggratuity.D2. We have heard learned counsel for the parties.

3. The scales of pay of the employees of public sector undertakingswere revised w.e.f. 01.01.1992. When the benefit of such revision wasnot made available to the employees of Fertiliser Corporation of IndiaLimited and Hindustan Fertiliser Corporation Limited, their employeesEmoved writ petitions in various High Courts, in the year 1996.

4. At the instance of the Union of India, the writ petitions pendingon the file of various High Courts were transferred to this Court. By aninterim order dated 18.08.2000, this Court directed an ad hoc monthlypayment of Rs.1500/-, Rs.1000/-, Rs.750/- and Rs.500/-, respectively toFfour different categories of employees, as an interim measure, subjectto the final outcome of the writ petitions which stood transferred to thisCourt. The said interim order dated 18.08.2000 reads as follows:- “Having heard learned Solicitor General for the applicant-Unionof India and Learned Senior Counsel, Mr. Sanyal, for the contestingGRespondents, purely as an adhoc measure and without prejudiceto the rights and contentions of the parties in the main matter, wedeem it fit in the interest of justice to modify our order dated19.01.2000 to the following effect:

(i) The authorities shall pay as an adhoc measure and onHaccount Rs. 1,500/- to Class-I employees; Rs. 1,000/- to

Class-II employees; Rs. 750/- to Class-IIIemployees;Rs. 500/- to Class-IV employees consisting of variouscategories in each of the Classes; per month with effectfrom___. This payment will be without prejudice to the rightsand contentions of the parties in the pending matters.

(ii) We make it clear that this order will not affect whateverpayment by way of HRA is being released or was releasedby the authorities to the employees concerned.

(iii) The direction about payments as earlier issued by us on19.04.2000 will stand modified by the present order.

(iv) According to this order all arrears with effect from01.04.2000 to 31.07.2000 will be cleared within ten weeksfrom today and the current payment he made with effectfrom 01.08.2000 along with the salary payable for the monthof August, 2000.

(v) Future payments shall accordingly be made from month tomonth regularly along with usual salaries payable to them.

This order is passed purely as an ad hoc measure and will notcome in the way of the ultimate decision of this Court. This order willalso not be treated as a precedent in any matter in view of the specialfacts of the present case. We express no opinion about the nature of theorder passed by learned Single Judge of the High Court. That questionwill abide by the decision in the main matter. In view of the presentorder, I.A.S. are disposed off…”

5. In the year 2002, the Government of India ordered the closureof the fertiliser units of these public sector undertakings and introduceda Voluntary Separation Scheme (for short “the Scheme”). According tothe Management of these companies, 5675 out of 5712 employees ofFertiliser Corporation opted to go out under the Scheme. Due to thisdevelopment, the writ petitions which got transferred to this Court wereeventually dismissed by a final order dated 25.04.2003. In the said finalorder, this Court recorded that economic viability or the financial capacityof the employer is an important factor which cannot be ignored whilefixing the wage structure and that the materials on record clearly revealedthat both these companies were suffering heavy losses for several years.It was also recorded in the final order passed by this Court that the A

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Ainterim relief was purely an ad hoc measure. The relevant portion ofthe final order of this Court dated 25.04.2003 reads as follows:- “…The order passed by this Court on 19.04.2000 clearly recordedthat a limited relief to all the employees of the two companieswas being granted purely as ad hoc measure and without prejudiceBto the rights and contentions of all concerned. This was reiteratedin the subsequent order dated 18.08.2000 when it was said thatthe order was being passed purely as ad hoc measure and will notcome in the way of the ultimate decision of the Court. The principalrelief claimed by the petitioners is against Union of India andSecretary, Department of Public Enterprises (respondent nos. 3Cand 4) as it is they who have issued the impugned memorandumdated 19.07.1995 which places embargo upon the revision of payscale of employees of sick PSUs registered with BIFR. Factuallythere being no compromise or settlement on behalf of respondentnos. 3 and 4 for payment of revised salary as they had neverDagreed to do so and the orders passed by this Court on 19.04.2000and 18.08.2000 having clearly indicated that they were beingpassed by way of ad hoc measure and were not to come in anyway in the ultimate decision of the case, it is not possible to holdthat there was any compromise or settlement at any earlier statewhich entitled the petitioners to get revised salary…”E

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6. Once the curtain was finally drawn on their very employment,the employees started filing applications before the Controlling Authorityunder the Act. In their applications before the Controlling Authority, theemployees included the ad hoc payment made pursuant to the interimorders of this Court, as part of the wages.F

7. The Controlling Authority started passing orders in theapplications filed by the employees individually, treating the ad hocpayment as part of the wages.

8. One of the orders so passed by the Controlling Authority wasGin respect of an employee by name Shri Kashi Prasad Tripathi.

9. Since the orders of the Controlling Authority were contrary tothe interim orders as well as the final orders passed by this Court, theManagement of these companies moved an application before this Courtfor clarification/modification of the order. But by an order dated01.05.2008, this Court disposed of the interim application by just observingH

that when the final order is passed, the interim order automatically comesto an end.

10. Understanding the said order differently, the Appellate authorityunder the Act dismissed the appeals filed by the Management. Therefore,the Management filed writ petitions on the file of the High Court.

11. In so far as the case of Shri Kashi Prasad Tripathi is concerned,the Management filed a writ petition in W.P.No.798 of 2009 which cameto be allowed by a learned Single Judge of the Allahabad High Court,based upon a judgment of a Division Bench of the Patna High Court.Shri Kashi Prasad Tripathi, unsuccessfully challenged the orders of thelearned Single Judge before a Division Bench. Therefore, Shri KashiPrasad Tripathi filed a special leave petition in SLP(C) No.972 of 2014.This SLP was allowed by this Court by an order dated 05.05.2015 inC.A.No.4258 of 2015. The order of this Court in the case of Shri KashiPrasad Tripathi in C.A.No.4258 of 2015 dated 05.05.2015 reads asfollows:- “Leave granted.

The appellant, aggrieved by the order of the High Courtwherein the controlling authority and the appellate authority havecalculated the payment of gratuity payable to the appellant herein,in exercise of its power under Article 227 of the Constitution,without considering the computation made which, in our consideredopinion, is not under the jurisdiction of the High Court. Havingregard to the facts and circumstances of the case, the materialavailable on record and the rival legal submissions, we are of theview that the High Court should not have interfered with thecalculation of payment of gratuity and ad hoc payment with interest.Hence, the appellant shall succeed 2 in this appeal. Accordingly,the appeal is allowed.

It is needless to mention that the question raised byrespondent no. 2 is kept open.”

12. The Management filed a petition for review. It was dismissedon 13.08.2015. The curative petition was also dismissed on 03.03.2016.

13. Following the order passed by this Court in C.A.No.4258 of2015 on 05.05.2015, in the case of Shri Kashi Prasad Tripathi, the HighCourt of Allahabad dismissed all the writ petitions filed in respect of the A

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Aother employees. Therefore, challenging such orders in the case of otheremployees, the Management of the Fertiliser Corporation has come upwith a batch of 98 appeals. The Hindustan Fertiliser Corporation hascome up with one appeal that arises out of similar judgment of the CalcuttaHigh Court.B14. Therefore, the short question that arises for consideration isas to whether the ad hoc monthly payment made by the Managementpursuant to the interim orders passed by this Court on 18.08.2000, isliable to be treated as part of the wages within the sweep of the saidexpression under Section 2(s) of the Act, especially in the light of theorder passed by this Court in the case of Shri Kashi Prasad Tripathi.C

15. We have already extracted the order passed by this Court on05.05.2015 in C.A.No.4258 of 2015 in the case of Shri Kashi PrasadTripathi. The said order does not deal with this question. The said orderhas gone on the basis that the computation of the quantum of gratuity isexclusively within the domain of the authorities under the statute andDthat the High Court is not competent to interfere with the same. Therefore,the order passed in the case of Kashi Prasad Tripathi cannot be taken tohave laid down any law to the effect that the ad hoc payment will formpart of wages. The respondents, therefore, cannot really take advantageof the order passed in the case of Kashi Prasad Tripathi, merely on theEground that the very same question of law was raised by the Managementin the civil appeal and thereafter in the petition for review and curativepetition. At times, this Court refuses to go into the questions of law,when a single individual armed with an order in his favour from the HighCourt is pitted against the State. Whenever the State or instrumentalitiesof State come up with appeals challenging small benefits granted toFindividual litigants, this Court applies the test of proportionality tosee whether the quantum of benefits granted to the individualconcerned, justifies the examination of the question of law, at thecost of that little man from a far off place. The refusal of this Courtto go into the question of law in such cases, cannot be treated asGtantamounting to answering the question of law in a particularmanner. Therefore, dehors order of this Court in Kashi Prasad Tripathi,we are obliged to deal with the question of law that arises in this batch.

16. Section 2(s) of the Act defines wages, as follows:-

“2. Definitions.—In this Act, unless the context otherwiserequires,—

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(s) ”wages” means all emoluments which are earned by anemployee while on duty or on leave in accordance with the termsand conditions of his employments and which are paid or arepayable to him in cash and includes dearness allowance but doesnot include any bonus, commission, house rent allowance, overtimewages and any other allowance.”

17. The definition of the expression is in 3 parts, the first partindicating the meaning of the expression, the second part indicating whatis included therein and the third part indicating what is not included therein.In the first part of the definition, the emphasis is on what is earned by theemployee “in accordance with the terms and conditions ofemployment” .

18. Irrespective of whether what was earned has been paid orremained payable, the same is included in the definition, provided it isin accordance with the terms and conditions of his employment.

19. Keeping in mind the above definition, if we go back to historicalfacts, it would be clear that the employees initiated the first round oflitigation before various High Courts, for the grant of the benefit ofrevision of pay scales, way back in the year 1996, on the ground that theemployees of other PSUs have been granted revision on par with theGovernment servants. It will thus be clear that what was claimed in thefirst round of litigation was not what was payable in accordance withthe terms and conditions of employment. Therefore, this Court was clearin its interim order dated 18.08.2000 as to how the ad hoc paymentordered there under should be treated. Even in the final order, this Courtmade it clear that what was paid was only ad hoc.

20. It is a fundamental principle of law that a party who is inenjoyment of an interim order, is bound to lose the benefit of such interimorder when the ultimate outcome of the case goes against him. Merelybecause of the fortuitous circumstance of the Voluntary SeparationScheme coming into effect before the transferred cases were finallydismissed by this Court by an order dated 25.04.2003, creating an illusionas though the last drawn pay included this ad hoc payment, it is not A

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Apossible to go against the fundamental rule that the benefits of an interimorder would automatically go when the party who secured it, failed inthe final stage.

21. In The Straw Board Manufacturing Co. Ltd. vs. ItsWorkmen[1 ]this Court clarified the meaning of the expression “wages”Bunder Section 2(s) of the very same enactment, as follows: “We clarifythat wages will mean and included basic wages and Dearness Allowance and nothing else”.

22. In view of the above, the appeals are allowed and the ordersof the High Court, the Controlling Authority and the Appellate AuthorityCunder the Act, holding that the ad hoc payment made pursuant to theinterim orders by this Court will form part of the wages, are set aside.However, in view of the efflux of time and taking into account the factthat few employees are now no more, we direct the Management not toeffect any recovery, if payment has already been made to any of therespondents or their families. There will be no order as to costs.D

Bibhuti Bhushan Bose

Appeals allowed.

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