BCH ELECTRIC LIMITED versus PRADEEP MEHRA

Citation: [2020] 10 S.C.R. 1 · Decided: 29-04-2020 · Supreme Court of India · Bench: UDAY UMESH LALIT · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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BCH ELECTRIC LIMITED
v.
PRADEEP MEHRA
(Civil Appeal No. 2379 of 2020)
APRIL 29, 2020
[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
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
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)
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
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
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
[2020] 10 S.C.R. 1
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SUPREME COURT REPORTS
[2020] 10 S.C.R.
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
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
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”
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.
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
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
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 i

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