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NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 9024 OF 2012

Allahabad Bank …Appellant

versus

A.C. Aggarwal                  …Respondent

J U D G M E N T

G. S. Singhvi, J.

1. The question  which  arises  for  consideration  in  this  appeal  filed  

against the order of the Delhi High Court is whether the respondent, who  

had sought voluntary retirement from service and was paid gratuity by the  

appellant under the Payment of Gratuity Act, 1972 (for short, ‘the 1972  

Act’) along with Contributory Provident Fund is entitled to pension.  

2. The  appellant’s  predecessor,  i.e.,  Allahabad  Bank  Ltd.  was  

established in 1865. Its employees were given pensionary benefits w.e.f.  

14.3.1890.  After  22  years,  the  Board  of  Directors  of  the  appellant’s  

predecessor passed Resolution dated 2.3.1912 vide which the benefit of  

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Contributory  Provident  Fund  was  extended  to  the  employees.   The  

appellant’s  predecessor  was  nationalized  in  1969 along  with  13  other  

commercial  banks  through  the  Banking  Companies  (Acquisition  and  

Transfer of Undertakings) Ordinance, 1970, which was repealed by the  

Banking  Companies  (Acquisition  and  Transfer  of  Undertakings)  Act,  

1970 (for short, ‘the 1970 Act’).  Section 12(2) of that Act reads as under:

“Save  as  otherwise  provided in  sub-section (1),  every  officer  or  other  employee  of  an  existing  bank  shall  become,  on  the  commencement of this Act,  an officer or other employee, as the  case may be, of  the corresponding new bank and  shall hold his  office or service in that bank on the same terms and conditions and  with  the  same rights  to  pension,  gratuity  and  other  matters  as  would  have  been  admissible  to  him  if  the  undertaking  of  the  existing  bank  had  not  been  transferred  to  and  vested  in  the  corresponding new bank and continue to do so unless and until his  employment in the corresponding new bank is terminated or until  his  remuneration,  terms  or  conditions  are  duly  altered  by  the  corresponding new bank.”

3. In  1974,  the  appellant  framed a  scheme titled  ‘Allahabad  Bank  

Employees’  Pension  Scheme  (Old)’  (for  short,  ‘the  Old  Pension  

Scheme’).  Thereafter,  circular  dated  10.3.1975  was  issued  and  the  

employees/officers were given the choice to opt for payment of gratuity  

or pension under the Old Pension Scheme. After four years, the appellant  

framed the Allahabad Bank (Officers’)  Service Regulations,  1979 (for  

short, ‘the Regulations’).  In terms of clause 46 of the Regulations, the  

officers became entitled to gratuity equivalent to one month pay for every  

completed year of  service subject  to a  maximum of 15 months.   The  

proviso to Regulation 46 postulated payment of additional gratuity at the  

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rate of half month’s pay for each completed year of service to those who  

had completed more than 30 years service. After 20 years, the appellant  

notified Allahabad Bank Employees’ Pension Regulations, 1995.

4. The respondent joined service as Clerk in 1961.  He was promoted  

as  an  officer  with  effect  from  10.08.1970  and  was  granted  Middle  

Management Scale-III in September, 1993.  After serving the appellant  

for almost 40 years, the respondent applied for voluntary retirement under  

the Voluntary Retirement Scheme, 2000. His application was accepted by  

the  competent  authority  and  he  was  relieved  from  service  w.e.f.  

30.04.2001.  He  was  paid  gratuity  under  the  1972 Act  along with  the  

amount  of  Contributory  Provident  Fund.   The  respondent  made  

representations dated 30.7.2001, 6.10.2001 and 20.10.2001 for grant of  

pension but the concerned authority of  the appellant  did not  give any  

response.   However, in reply to the notice sent by the respondent,  the  

appellant  informed  him  vide  letter  dated  24.11.2001  that  he  can  get  

benefit under the Old Pension Scheme subject to the condition of refund  

of  the  amount  of  gratuity  already  paid  to  him  and  submission  of  an  

irrevocable  undertaking  that  he  will  be  getting  pension  in  lieu  of  the  

gratuity.  The relevant portions of that letter are extracted below:

“In response to your above notice of the 9th instant we have to  advise that your client is entitled to old pension in lieu of Gratuity  provided he fulfils the relevant criteria as required by the bank  which are as under :-

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(1)   Sri A.C. Aggarwal has to complete 30 years of active  service and should have been recruited/promoted as an officer on  or before 1.7.79.

(2)  He  has  to  refund  the  entire  gratuity  amount  already  released  through  the  disbursing  branch  and  remit  the  same  by a  CREDIT ADVICE (Ct 20A) alongwith the copy of  Gratuity receipt duly discharged.

(3)    He has to submit an irrevocable undertaking  stating  that  he  is  interested  to  receive  old  Pension in lieu of Gratuity.”

5. The respondent  challenged the aforesaid communication in Writ  

Petition No.2261 of 2002 and prayed that the appellant  be directed to  

release  the  pensionary  benefits  with effect  from 30.4.2001 along with  

interest  at  the  rate  of  24% per  annum or,  in  the  alternative,  pay him  

pension under the New Pension Scheme. He pleaded that the decision of  

the  appellant  to  insist  upon  the  refund  of  gratuity  as  a  condition  for  

payment of pensionary benefits is ultra vires the provisions of the 1972  

Act and Articles 14, 16 and 21 of the Constitution. In para 25 of the writ  

petition, the respondent averred that the State Bank of India was paying  

gratuity  to  its  employees  in  addition  to  other  retiral  benefits  and,  

therefore, there was no justification to discriminate the employees and  

officers of the appellant. In support of his claim, the appellant relied upon  

the  judgment  of  this  Court  in  Som Prakash  Rekhi  v.  Union  of  India  

(1981) 1 SCC 449. He further pleaded that in terms of Resolution dated  

2.3.1912 passed by the Board of Directors of the appellant’s predecessor,  

the employees were entitled to the benefit of  pension as well as gratuity  

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and, as such, there was no justification to ask him to refund the amount of  

gratuity as a condition for grant of pensionary benefits.

6. In the counter affidavit  filed on behalf of the appellant,  reliance  

was placed on Chapter II of the Regulations and Section 19 of the 1970  

Act and it was pleaded that the employees who are paid gratuity under  

the 1972 Act are not entitled to pension. The appellant also relied upon  

the  judgments  of  this  Court  in  Ramesh  Hiranand  Kundanmal  v.  

Municipal  Corporation, Greater Bombay (1992) 2 SCC 472 and Delhi  

Transport  Corporation  Retired  Employees’  Association  v.  Delhi  

Transport Corporation (2001) 6 SCC 61 and pleaded that the respondent  

is not entitled to the benefit of pension because he had already been paid  

gratuity under the 1972 Act.

7. The Division Bench of the High Court relied upon the judgment of  

this Court in Allahabad Bank and another v. All India Allahabad Bank  

Retired  Employees  Association  (2010)  2  SCC  44  and  held  that  the  

respondent is entitled to pension in addition to gratuity already paid to  

him under the 1972 Act.  

8. Shri R.F. Nariman, learned senior counsel for the appellant argued  

that the impugned order is liable to be set aside because it is based on  

misreading of the judgment in Allahabad Bank and another v. All India  

Allahabad Bank Retired Employees Association (supra). Learned senior  

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counsel submitted that the only point raised, argued and considered in the  

Allahabad  Bank  and  another  v.  All  India  Allahabad  Bank  Retired  

Employees  Association  (supra)  was  whether  the  employees,  who  had  

already availed benefit  under the Old Pension Scheme, were estopped  

from claiming benefits under the 1972 Act and the answer given by this  

Court was limited to the entitlement of the employees to receive gratuity.  

Shri Nariman emphasized that in that case, the Court was not called upon  

to decide the question whether retired employees/officers of the appellant  

are entitled to get double benefits, i.e., gratuity under the 1972 Act and  

pension  under  the  Old  Pension  Scheme  and,  therefore,  that  judgment  

could not have been made basis by the High Court for declaring that the  

respondent is entitled to pension in addition to gratuity already received  

by  him.  Shri  Nariman  relied  upon  some  of  the  judgments  on  the  

interpretation of  statutes and understanding of  the ratio of  the Courts’  

judgment and argued that the declaration granted by this Court that the  

retired employees are entitled to benefits under the 1972 Act cannot lead  

to  an inference that  the employees  who have already received benefit  

under the 1972 Act can claim pension without refunding the amount of  

gratuity.  

9. Shri  Jitendra  Sharma,  learned  senior  counsel  supported  the  

impugned order and argued that the High Court did not commit any error  

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by ordaining payment of pension to the respondent because his case is  

squarely covered by the ratio of  the judgment in Allahabad Bank and  

another  v.  All  India  Allahabad  Bank  Retired  Employees  Association  

(supra) and order dated 29.1.2010 passed in IA No. 6 of 2009. Learned  

senior counsel argued that the appellant is under a statutory obligation to  

pay gratuity under the 1972 Act and an employee who has been paid  

gratuity  cannot  be  denied  pension  under  the  Old  Pension  Scheme by  

requiring him to refund the amount of gratuity. He submitted that there  

cannot be any estoppel against the statute and the respondent cannot be  

deprived of the benefit of pension under the Old Pension Scheme merely  

because he has been paid gratuity under the 1972 Act.  

10. We have considered the respective arguments.  In Allahabad Bank  

and another v. All India Allahabad Bank Retired Employees Association  

(supra), this Court considered the question whether the retired employees  

who have received pension are entitled to gratuity under the 1972 Act.  

The Association of  retired employees had represented to the appellant  

that its members be paid gratuity in accordance with the provisions of the  

1972 Act.  The appellant rejected the claim of the Association and this  

was conveyed vide letter dated 10.1.1989 sent by the Chief Manager (PA)  

to the General Secretary of the Association, the relevant portion of which  

is extracted below:

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“Ref. No. Admn./5/0280 Dated: 10-1-1989

The General Secretary, All India Allahabad Bank Retired Employees Association, Central Office, Ram Bhawan, C-1254B, Sector-A, Mahanagar, Lucknow.

Dear Sir, Payment of Gratuity

This  has  reference  to  your  letter  Bank/14/8  dated  14-11- 1988 and enclosures.

In this connection, we have to advise that Allahabad Bank  has accepted Contributory Provident Fund Scheme, which is  not  available  to  government  employees.  Besides  this,  the  Bank has a pension scheme in which an employee/officer  may exercise option for pension or gratuity; but the dual be- nefits are not available under the scheme. Since the respect- ive  pensioners  have  exercised  their  option  voluntarily  for  availing of  pension in  lieu of  gratuity  on their  retirement  from the Bank's service, they are not eligible for gratuity at  all. They are receiving pension since their retirement and as  such we are not in a position to accede to your request for  payment  of  gratuity in addition to pension to  the persons  named in your letter under reference.

Yours faithfully, sd./-     

(R.K. Nath) Chief Manager (P.A.)”

11. The Association challenged the decision of the appellant bank by  

filing  writ  petition  under  Article  226 of  the  Constitution.   It  was  the  

pleaded case of the Association that the consent or option given by the  

employees for Pension Scheme cannot be made basis for depriving them  

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of  their  statutory  right  to  gratuity  under  the  1972  Act.  The  appellant  

contested the writ petition by relying upon the awards known as ‘Shastry  

Award’  and  ‘Desai  Award’  and  the  Settlements  under  which  the  

employees were entitled either to the benefit of pension or of gratuity at  

one’s  own  option  but  not  the  both.  It  was  the  specific  case  of  the  

appellant that the members of the Association had voluntarily opted for  

the  pension  scheme  and,  as  such,  they  are  not  entitled  to  gratuity.  

According to the appellant, all the employees were paid the amount of  

contributory provident fund and pension in terms of the option exercised  

by them and, therefore, they were estopped from claiming gratuity under  

the 1972 Act.

12. The High Court allowed the writ petition and directed the appellant  

to pay gratuity to the employees who had opted for pension. On appeal by  

the bank, the two Judge Bench of this Court noted the background in  

which the 1972 Act  was enacted by Parliament,  referred to Section 5  

thereof  which  empowers  the  appropriate  Government  to  exempt  any  

establishment, factory, mine, oil field, plantation, etc. and observed:

“A plain reading of the provisions referred to hereinabove  makes it abundantly clear that there is no escape from pay- ment of gratuity under the provisions of the Act unless the  establishment is granted exemption from the operation of the  provisions of the Act by the appropriate Government.”

The Bench then referred to the judgments in Som Prakash Rekhi v. Union  

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of India (1981) 1 SCC 449, Sudhir Chandra Sarkar v. TISCO Ltd. (1984)  

3 SCC 369 and observed:

“Gratuity payable to an employee on the termination of his  employment after  rendering continuous service for not less  than 5 years and on superannuation or retirement or resigna- tion, etc. being a statutory right cannot be taken away except  in accordance with the provisions of the Act whereunder an  exemption from such payment may be granted only by the  appropriate Government under Section 5 of the Act which it- self is a conditional power. No exemption could be granted  by any Government unless it is established that the employ- ees are in receipt of gratuity or pension benefits which are  more favourable than the benefits conferred under the Act.

In our considered opinion, pensionary benefits or the retire- ment  benefits  as  the case  may be whether  governed by a  scheme or rules may be a package consisting of payment of  pension and as well as gratuity. Pensionary benefits may in- clude payment of pension as well as gratuity. One does not  exclude the other. Only in cases where the gratuity compon- ent in such pension schemes is in better terms in comparison  to that of what an employee may get under the Payment of  Gratuity Act the Government may grant an exemption and  relieve the employer from the statutory obligation of pay- ment of gratuity.”

The appellant’s plea that under the Old Pension Scheme, an employee is  

entitled to only two terminal benefits, viz., Contributory Provident Fund  

and either gratuity or pension was negatived by the Court in the following  

words:  

“It is not the case of the Bank that at the time of superannu- ation of the employees there was a scheme for payment of  gratuity  under  which the employees  were  entitled  to  pay- ment of gratuity and the said scheme in comparison to that  of the provisions of the Act was more beneficial to the work-

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men. On the other hand, the scheme that was prevalent at the  relevant time in clear and categorical terms provided that:

“the gratuity will not be payable in case where a pen- sion is granted by the Bank. But if a pensioned officer  should die before receiving any pension payments an  aggregate sum at least equal to the gratuity which he  would otherwise have received then the Bank will pay  the difference between such aggregate sum and gratu- ity  to  the  officer's  widow;  if  any,  otherwise  to  his  legal representative.”

Be it  noted that  in the counter-affidavit  filed in the High  Court  the  Bank  placed  reliance  on  Shastry  and  Desai  Awards  which  have  taken  the  view that  Allahabad  Bank  which had pension scheme of its own was more advantage- ous than the provisions of the gratuity to its employees. It is  asserted that under the said Awards and the subsequent set- tlements an employee is entitled to receive either the benefit  of pension or gratuity at his own option but not both. The  contention was that such of those employees who had volun- tarily opted for pension scheme were not entitled to receive  gratuity as well.  The respective comparative figures under  pension and/or gratuity, in terms of Shastry/Desai  Awards  and/or  Bipartite  Settlement  on  one  hand  and  the  gratuity  payable under the Act on the other were made available for  the perusal of the Court to buttress the Bank's submission  that what has been paid to the employees was better in terms  and more favourable than the benefits conferred under the  Act.

The submission is totally devoid of any merit for more than  one reason, namely, that it is for the appropriate Government  to form the requisite opinion that the employees were in re- ceipt of gratuity or pensionary benefits which were more fa- vourable than the benefits conferred under the Act and there- fore, the establishment must be exempted from the operation  of the provisions of the Act. The Bank having failed to ob- tain exemption from the operation of the provisions of the  Act cannot be permitted to raise this plea.

No  establishment  can  decide  for  itself  that  employees  in  such establishments were in receipt of gratuity or pensionary  benefits not less favourable than the benefits conferred un-

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der the Act. Sub-section (5) of Section 4 protects the rights  of an employee to receive better terms of gratuity from its  employer under any award or agreement or contract as the  case may be. Admittedly, the Scheme under which the em- ployees of the Bank received the pension was in lieu of gra- tuity. There is no question of comparing the said Scheme  and arrive at any conclusion that what they have received  was much better in terms than the benefits conferred under  the Act. Reliance upon sub-section (5) of Section 4 is there- fore unsustainable.

In the present case the real question that arises for our con- sideration is whether the employees having exercised their  option to avail the benefits under the pension scheme are es- topped from claiming the benefit under the provisions of the  Act?

The appellant being an establishment is under the statutory  obligation to pay gratuity as provided for under Section 4 of  the Act which is required to be read along with Section 14 of  the Act which says that the provisions of the Act shall have  effect  notwithstanding  anything  inconsistent  therein  con- tained  in  any  enactment  or  in  any  instrument  or  contract  having effect by virtue of any enactment other than this Act.  The provisions of the Act prevail over all other enactments  or instruments or contracts so far as the payment of gratuity  is concerned. The right to receive gratuity under the provi- sions of  the Act cannot be defeated by any instrument or  contract.”

The Court  also referred to  an interlocutory order passed on 22.3.2006  

whereby  the  parties  were  directed  to  appear  before  the  Controlling  

Authority  and  the  latter  was  directed  to  decide  whether  the  benefits  

admissible to the employees under the Old Pension Scheme were more  

beneficial than the gratuity payable under the 1972 Act, referred to the  

decision of the Controlling Authority and held:  

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“Section  7  deals  with  procedure  for  determination  of  the  amount of gratuity. Every person who is eligible for pay- ment of gratuity under the Act is required to send a written  application to the employer in the prescribed form for pay- ment of such gratuity. Sub-section (2) of Section 7 provides  that once the gratuity becomes payable, the employer shall,  whether an application has been made or not, determine the  amount of gratuity and give notice in writing to the person to  whom the gratuity is payable and also to the Controlling Au- thority specifying the amount of gratuity so determined and  arrange to pay the amount of gratuity to the person to whom  the gratuity is payable.

The scheme envisaged under Section 7 of the Act is that in  case of any dispute as to the amount of gratuity payable to  an employee under the Act or as to the admissibility of any  claim of, or in relation to, an employee payable to gratuity,  etc. the employer is required to deposit with the Controlling  Authority the admitted amount payable as gratuity. In case  of any dispute the parties may make an application to the  Controlling Authority for deciding the dispute who after due  inquiry and after giving the parties to the dispute, a reason- able  opportunity  of  being  heard,  determine  the  matter  or  matters  in  dispute  and if,  as  a  result  of  such inquiry any  amount is found to be payable to the employee, the Con- trolling  Authority  shall  direct  the  employer  to  pay  such  amount to the employee.

Sub-section (7) of Section 7 provides for an appeal against  the  order  of  the  Controlling  Authority.  The  Act  nowhere  confers any jurisdiction upon the Controlling Authority to  deal with any issue under sub-section (5) of Section 4 as to  whether the terms of gratuity payable under any award or  agreement or contract is more beneficial to employees than  the one provided for payment of gratuity under the Act. This  Court's order could not have conferred any such jurisdiction  upon the Controlling Authority to decide any matter under  sub-section (5) of Section 4, since Parliament in its wisdom  had chosen to confer such jurisdiction only upon the appro- priate Government and that too for the purposes of consider- ing to grant exemption from the operation of the provisions  of the Act.

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Even on merits  the conclusions  drawn by the Controlling  Authority  that  the  Pension  Scheme  (Old)  offered  by  the  Bank is more beneficial since the amount of money the pen- sioners  got  under  the  pension  scheme  is  more  than  the  amount that could have been received in the form of gratuity  under the provisions of the Act is unsustainable. The Con- trolling Authority failed to appreciate that sub-section (5) of  Section 4 of the Act protects the right of an employee to re- ceive better terms of gratuity under any award or agreement  or contract with the employer than the benefits conferred un- der the Act. The comparison, if any, could be only between  the terms of gratuity under any award or agreement or con- tract and payment of gratuity payable to an employee under  Section 4 of the Act. There can be no comparison between a  pension scheme which does not provide for payment of any  gratuity and right of an employee to receive payment of gra- tuity under the provisions of the Act.”

13. IA No.6  of  2009  filed  by  the  Association  for  clarification  was  

disposed of by this Court vide order dated 29.1.2010, the relevant portion  

of which is extracted below:

“We have heard learned counsel for the petitioner as well as  learned counsel appearing for the Bank.

Paragraph 28 of the Judgment shall now read as under:  

“Judgment is, however, applicable to all the members  of  the  Petitioner's  Association/Pensioners  in  the  respondent-Bank  governed  by  the  Pension  Regulations (old) 1890 of the Bank as well as those  pensioners who retired during the period 1.1.1986 to  31.10.1993.

It is made clear that such of those officers of the Bank  working  prior  to  1.7.1979  and  have  retired  after  coming into force of  the said Act  on 31st  October,  1993, shall alone be entitled for the benefits.”

I.A. is disposed of accordingly.”

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14. In  the  impugned  order,  the  Division  Bench  of  the  High  Court  

noticed the aforesaid judgment of this Court and observed:

“Though the Supreme Court limited the judgment aforesaid  to the employees of the Bank working prior to 1st July, 1979  and who had retired after coming into force of the said Act  on  31st  October,  1993  and  in  which  the  petitioner  as  aforesaid is covered but even if we were to consider the case  of the petitioner as not covered by the said dates, the counsel  for  the respondent Bank is unable to show as to how the  ratio  aforesaid  of  the  judgment  would  not  apply  to  the  petitioner.  The  petitioner  is  admitted  to  be  entitled  to  pension under the Old Pension Scheme of the year 1890 of  the  respondent  Bank.  The  said  pension  is  sought  to  be  denied to the petitioner only for the reason of the gratuity  under the Gratuity Act having been paid to the petitioner but  which gratuity the Supreme Court has held to be a statutory  right not affected by the pension. We have also put it to the  counsel for the respondent Bank as to whether the petitioner  would  not  have  been  in  the  same  position  as  the  retired  employees before the Supreme Court had he not been paid  gratuity and had started availing of the pension and would  have  thereafter  claimed the gratuity.  No reply to  the said  proposition has been forthcoming.”

15. In our view, the High Court’s interpretation/understanding of the  

judgment of this Court is correct and there is no merit in the argument of  

Shri Nariman that the respondent, who had received gratuity under the  

1972 Act, is not entitled to pension or that he must refund the amount of  

gratuity as a condition for payment of pension.  

16. At  this  stage,  we  may  mention  that  vide  communication  dated  

14.7.1986  sent  to  the  Central  Government,  the  appellant  had  sought  

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exemption from the operation of  the 1972 Act  but  its  prayer was  not  

entertained. It is also worth noticing that in pursuance of industry level  

settlement signed on 24.4.2010, the appellant offered another option to  

those employees who could not  exercise  option for  pension under the  

1995 Scheme and the respondent exercised such option vide letter dated  

22.9.2010.  

17. Reference may also be made to Section 14 of the 1972 Act, which  

reads as under:

“Section 14. Act to override other enactments, etc. – The  provisions  of  this  Act  or  any  rule  made  thereunder  shall  have effect notwithstanding anything inconsistent therewith  contained in  any enactment  other  than this  Act or  in  any  instrument  or  contract  having  effect  by  virtue  of  any  enactment other than this Act.”

18. In view of the plain language of the above reproduced provision,  

which  contains  a  non-obstante  clause,  every  eligible  employee  is,  

notwithstanding anything inconsistent contained in any other enactment  

or instrument or  contract is  entitled to gratuity. Therefore, even if  the  

respondent  had opted for  pension,  he could have  legitimately claimed  

gratuity without being required to refund the amount of pension already  

received by him.

19. In the result, the appeal is dismissed. The appellant is directed to  

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implement the order of the High Court within a period of eight weeks  

from today.

………………………….J.         [G.S. SINGHVI]

………………………….J. [GYAN SUDHA MISRA]

New Delhi, March 13, 2013.     

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