Devan Ramachandran, J.

1. Though impelled before us is solely if the employees of the Perurkada Service Co-operative Bank Ltd (‘Bank’) – which is a Co-operative Society registered under the provisions of the Kerala Co-operative Societies Act (‘the KCS Act’ for short) – is entitled to gratuity as per the Payment of Gratuity Act, 1972 (hereinafter referred to as ‘the Act’ for short), without ceiling; several legal issues come to the fore for evaluation, many of which have obtained consideration of this Court earlier and are covered by precedents.

2. The genesis of the polemic is in that the petitioner in WP(C)No.4374 2010 – Sri.Sadasivan Nair; and the first respondent in WP(C)No. 26484 of 2010 – Smt.Prasannakumary, both of whom were employees of the ‘Bank’ – the former having served as its Secretary, and the latter as its Inspector of Branches – claimed gratuity upon retirement, on attaining the age of superannuation, calculated as per the ‘Act’, but without conceding to the maximum limits mentioned therein. For doing so, they rely on Section 4(5) of the ‘Act’, which provides that, when there is a contract between the employer and employee that a higher gratuity will be paid, such becomes eligible to them; and cite the judgment of this Court in Chandrasekharan Nair G. and Others v. Kerala State Co-operative Agricultural and Rural Development Bank Ltd and Others [2017(5) KHC 15] in substantiation.

3. The "Bank", however, maintains that its bylaws contain no provision for payment of gratuity and that the "Act" would hence apply; consequently, that all payments are subject to the maximum statutory limits mentioned therein.

4. Smt.Prasannakumary, on her claim not being honoured, moved the learned Lok Ayukta and obtained Ext.P12, against which, the Bank has filed WP(C)No. 26484 of 2010; while Sri.Sadasivan Nair, has, in his writ petition, namely WP(C)No.4374 2010, challenged Exts.P3 and P4 produced therein, which are the letters of the 'Bank' refusing his claim.

5. Sri.K.G.Balasubramanian – appearing for Sri.Sivadasan Nair, argued that, when the 'Bank' had, admittedly obtained a Master Policy from the Life Insurance Co-operation of India (LIC), under which, the latter had agreed to honour claims of gratuity without any limit; and that when the former had remitted premium for such, the declarations in Chandrasekharan Nair (supra) mandate that his client and others similarly situated are granted sums without being constrained by the maximum stipulated under the ‘Act’. He contended that, when it is admitted that, the accrued gratuity to his client as per the 'Act', is far in excess of Rs.3,50,000/-, and when the Group Policy Scheme of the LIC covers such amounts, his client is justified in having claimed the same; consequently, that the bank could not have rejected it as has been done now. He prayed that his writ petition be allowed and the Bank be directed to pay his client the full amount of gratuity, which is to a sum over Rs.6½ lakhs.

6. Sri.K.G.Radhakrishnan – learned counsel for Smt.Prasannakumary, also vehemently contested the stand of the ‘Bank’, asserting it to be wholly untenable, arguing that when the 'LIC' honoured a larger sum in favour of his client – to be received by them, they could have retained no portion of it and ought to have paid the whole to her. He explained that such action amounts to maladministration, which the learned Lok Ayukta is competent to evaluate and decide upon; and contended that hence, its order is irreproachable. He added that his client is now finding it difficult to sustain and needs this money; and prayed that this Writ Petition be dismissed.

7. Smt.Prabha R Menon - learned Standing Counsel for the LIC, affirmed that, as per the Master Policy, her client took upon themselves the obligation to pay only Rs.3,50,000/-, as gratuity, to each employee, and not more. She explained that, however, in the case of Smt.Prasannakumary, even after the said sum had been honoured, the then Secretary of the Bank - Sri.Sadasivan Nair, requested for a further sum of Rs.1,07,938/-, which was also paid, but not acceding to any liability under the policy, but solely to honour the request of the Bank. She added that the Bank has remitted the said sum back into the corpus of the LIC; and prayed that no further orders be issued against them.

8. Before proceeding further, it is necessary to record why these matters, though filed as writ petitions, have been placed before this Bench. As noticed above, the challenge in WP(C)No.26484 of 2010 is against the order of the learned Lok Ayukta, which, by roster, is to be placed before a Division Bench. The Honourable the Chief Justice, thereafter, on the application of the parties, has ordered that WP(C)No.4374 of 2010 be tagged along with the former; and it is thus, that these matters are before us.

9. The first question that begs consideration is whether Ext.P12 order in WP(C)No. 26484 of 2010 is one that could have been issued by the learned Lok Ayukta. The Bank argues, through their learned Standing Counsel – Sri.N.Unnikrishnan, as a question of jurisdiction, that the learned Lok Ayukta could not have entered into the controversy at all, since it obtains no competence to do so, under the provisions of the Kerala Lok Ayukta Act, 1999 ('Lok Ayukta Act').

10. The Kerala Lok Ayukta Act, 1999 (hereinafter referred to as ‘the Lok Ayukta Act’) delineates the powers of the Lok Ayukta and Upa Lok Ayuktas through two specific Sections, namely, Sections 7 and 8 thereof. While Section 7 enumerates the matters which may be investigated by the Lok Ayukta and Upa Lok Ayuktas, Section 8 provides those matters not subject to their investigation.

11. What is relevant for us, in answering the argument of Sri. N. Unnikrishnan, regarding the jurisdiction of the learned Lok Ayukta in the matter at hand, is Section 8(1), which reads as under:

                  “8. Matters not subject to investigation.--(1) Except as hereinafter provided, the Lok Ayukta or an Upa-Lok Ayukta shall not conduct any investigation under this Act, in the case of a complaint involving a grievance in respect of any action, if such action relates to any matter specified in the Second Schedule.”

12. The Second Schedule to the Lok Ayukta Act then contains those actions, as mentioned in Section 8; and, what is important to us is sub-clause (d) therein, which is extracted infra:

                  “(d) Action taken in respect of appointment, removal, pay, discipline, superannuation or other matters relating to conditions of service of public servants but, not including actions relating to claims for pension, gratuity, provident fund or to any claims which arises on retirement, removal or termination of service.”

13. Therefore, a combined reading of Section 8 and sub-clause (d) of the Second Schedule to the Lok Ayukta Act, admits to no doubt that, while action taken in respect of appointment, removal, pay, discipline, superannuation or other matters relating to the conditions of service of a public servant stands beyond the purview of the Lok Ayukta or Upa-Lok Ayukta; claims relating to pension, gratuity, provident fund, or any claim arising on retirement, stand within their competence for consideration.

14. It is ineluctable, as fully conceded, that the dispute is between a former employee – Smt.Prasannakumary and the ‘Bank’; specifically on the question of the quantum of gratuity eligible to the former.

15. Hence, the argument of Sri.Unnikrishnan, that the learned Lok Ayukta did not have jurisdiction to entertain the matter cannot, in our view, be countenanced.

16. Even if we were to take a different view, we are certain that the contentions of Smt.Prasannakumary cannot be disregarded, since they run in tandem with those of Sadasivan Nair, which we are, in any event, enjoined to consider and answer.

17. The germane question is whether persons like the petitioner in WP(C)No.4374 of 2010, or the first respondent in WP(C)No.26484 of 2010, are entitled to gratuity from the 'Bank' de hors the limit as per the 'Act', when the latter has obtained a policy from the LIC.

18. It is well settled, through a catena of judgments that, normally, payment of gratuity to employees of Co-operative Societies are governed by their bylaws. However, it is admitted unreservedly that, as far as the bylaws of the ‘Bank’ is concerned, it contains no such provision; and consequently that the only manner of payment becomes under the ‘Act’.

19. It is also unequivocally conceded by both sides that, at the time when the parties obtained the right to receive gratuity – namely, when they retired on attaining the age of superannuation – the upper limit under the ‘Act’ was Rs.3,50,000/-.

20. In the meanwhile, it is without dispute that the 'Bank' had entered into a “Cash Accumulation Group Gratuity Scheme” with the LIC – which was, earlier, a pure Endowment Group Gratuity Scheme until 01.02.2006 – so as to honour the payment of gratuity to its employees.

21. The disputation between the parties is, if the LIC had taken upon themselves, as per the policy, the burden to pay gratuity to all the employees of the ‘Bank’ without being constrained by the upper pecuniary limits in the 'Act', or otherwise.

22. None of the policy documents placed on record, including that by the 'LIC', specifically says that the latter’s obligation is to a particular sum. However, when one reads Ext.R1(C) - produced along with W.P.(C) No.4374 of 2010 - which is a letter issued to the 'LIC' by the ‘Bank’, on the 20th of March, 2009, it is specifically stated therein that, under the aforementioned scheme, the maximum amount offered to any employee should be not more than Rs.3,50,000/-. Based on this, the LIC then notified the Bank, through Ext.R1(D), the premium to be paid under the policy.

23. This was followed by Ext.R1(E) – also produced along with WP(C)No.4374/2010 – again issued by the 'LIC', in which, they reiteratingly showed the sealing of gratuity to be Rs.3,50,000/-.

24. It is pertinent that, subsequent to the afore exchange of communications between the ‘Bank’ and the 'LIC', the petitioner in WP(C)No.4374/2010 – Sri.Sadasivan Nair, took over as the Secretary of the former.

25. It is curiously relevant that, the first to retire from the services of the ‘Bank’ was Smt.B.Prasannakumary – the 1st respondent in WP(C)No.26484/2010. Though Ext.P5 therein was settled showing only Rs.3,50,000/- to be eligible to her as gratuity – with the LIC admittedly honouring it – the pleadings on record indicate that, thereafter, a further sum of Rs.1,07,938/- was claimed by Sri.Sadasivan Nair, in his capacity as the Secretary of the ‘Bank’, assertedly being the balance gratuity entitled to Smt.Prasannakumary, as calculated without the ceiling under the ‘Act’. However, even though the ‘Bank’ received this sum from the ‘LIC’, they refused to pay it to Smt.Prasannakumary; and she then moved the Lok Ayukta, which was allowed through Ext.P12 order. The learned Lok Ayukta found that, since the 'LIC' had, in fact, paid Rs.4,57,938/-; being the total amount sought for by the ‘Bank’ as gratuity, Smt.Prasannakumary was entitled to the same.

26. Subsequently, Sri.Sadasivan Nair retired, on attaining the age of superannuation; and he himself settled Ext.P1 in WP(C)No.4374/2010, dated 30.10.2009, showing the gratuity eligible to him to be Rs.3,50,000/-. However, immediately thereafter, on 04.12.2009, he addressed Ext.P2 letter to the President of the Bank, asserting that the employees are eligible to much more than the said sum; and seeking action against the then Secretary-in-Charge for having informed the 'LIC' that they need to disburse only such amounts under the Policy. The Bank rejected the contentions of Sri.Sadasivan Nair through Ext.P4; and it is thus that he has approached this Court.

27. It is irrefutable that, unless a contract between the ‘Bank’ and the 'LIC', for payment of gratuity in excess of the statutory ceiling limit under the ‘Act’ is established, the benefit of Section 4(5) thereof cannot apply. This has been well settled in several judgments, including Chandrasekharan Nair (supra).

28. As far as these cases are concerned, it leaves little doubt that, since the bylaws of the Bank do not provide for the payment of gratuity, such stands modulated by the ‘Act’; and that, at the relevant time, the upper limit under it was Rs.3,50,000/-.

29. Travelling by the pleadings in WP(C)No.4374/2010, Sri.Sadasivan Nair alleges that the communications sent by the ‘Bank’ to the 'LIC', that the amount of gratuity be limited to the afore amount, is illegal; and even seeks action against its the then Secretary-in-Charge. One fails to fathom how Sri.Sadasivan Nair can make such demands, when the 'LIC' had also made it clear, in their communications to the Bank and in the relevant documents, that the maximum amount they will honour under the policy is Rs.3,50,000/- to an individual employee – thus the contract between them and the Bank being confined to such.

30. In such scenario, the declarations in Chandrasekharan Nair (supra) cannot come to his benefit in any manner, as Sri.Sadasivan Nair claims. This is how the Bank also understood the position, to thus respond to him, through Ext.P4 in WP(C)No.4374/2010.

31. Sri.N.Unnikrishnan, at this time, intervened to say that the actions of Sri.Sadasivan Nair are suspicious because, it is solely in order to pave way for a higher gratuity payout in his favour, that he initially tried to obtain such benefit to Smt.Prasannakumary, by claiming from the 'LIC', larger amounts to her, which was in blatant violation of the directions of the ‘Bank’. He contended that, though the 'LIC' honoured such illegal claim – forwarded to them by Sri.Sadasivan Nair in his capacity as the Secretary of the ‘Bank’ – since only Rs.3,50,000/- could be legally disbursed to Smt.Prasannakumary, the balance had been remitted back into the corpus of the Policy.

32. We are persuaded to some favour in the above suspicion of Sri.N.Unnikrishnan because, Sri.Sadasivan Nair was, admittedly, the Secretary of the Bank when Smt.Prasannakumary retired from service on attaining the age of superannuation. Even when only an amount of Rs.3,50,000/- was initially claimed in favour of Smt.Prasannakumary as gratuity, Sri.Sadasivan Nair - in his capacity as Secretary, claimed a further sum from the LIC. The fact that the LIC honoured this would be of no consequence, if the employee was not entitled to receive it.

33. When we find that the employees of the ‘Bank’ are not entitled to amounts of gratuity beyond the limits of ceiling as fixed under the ‘Act’, it is unnecessary for us to say that we cannot find favour with the findings of the Lok Ayukta; and are in approval of the stand taken by the Bank, as reflected in Ext.P4 in WP(C)No.4374/2010.

In the afore circumstances,

                  a) WP(C)No.26484/2010 is allowed and Ext.P12 order of the Lok Ayukta is set aside.

                  b) WP(C)No.4374/2010 is dismissed.