Holding

The High Court was correct that, for university employees, gratuity must be calculated on basic pay together with dearness allowance and ad‑hoc dearness allowance, and the university’s adoption of state service rules does not supplant its own gratuity rules.

Summary

The respondent, a retired employee of Rajasthan Agricultural University, claimed that his gratuity should be calculated on his last drawn pay including dearness allowance (DA) and ad‑hoc DA, whereas the university argued that only basic pay should be considered, relying on resolutions adopting Rajasthan State Service Rules. The High Court held that the university’s own gratuity rules, which expressly include DA and ad‑hoc DA in the definition of emoluments for employees retiring after 31‑03‑1986, govern the calculation and dismissed the university’s appeal. The Supreme Court affirmed this view, stating that the university, being a separate corporate body, is not bound by state service rules unless expressly adopted, and the Board of Management’s later resolution could not be entertained as it was not raised during oral arguments. Consequently, the gratuity must be computed on basic pay plus DA and ad‑hoc DA, and the appeal was dismissed with costs.

Issues considered

Whether the Rajasthan Civil Services (Revised Pay‑Scales) Rules, 1987 apply to the university employees for the purpose of calculating gratuity.
Whether dearness allowance and ad‑hoc dearness allowance must be included in the emoluments for gratuity under the University of Udaipur (Sukhadia University) Payment of Gratuity to Employees Rules, 1979.
Whether the Board of Management’s resolution limiting the inclusion of DA and ad‑hoc DA can be considered despite not being raised at the time of oral arguments.

Subjects

gratuity calculationdearness allowancead‑hoc dearness allowanceuniversity service rulesstate service rules adoptionvested rightsservice lawappeal dismissed

Judgment

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RAJAS THAN AG RI CULTURAL UNIVERSITY
v.
A

RAM KRISHNA VY AS

MAY 4, 1999

[S.S. MOHAMMED QUADRI AND S.N. PHUKAN, JJ.] B

Service Law

University of Udaipur (Sukhadia University) Payment of Gratuity to
Empioyees Rules, 1979-Calculation of Gratuity-Rules of University c
including dearness allowance and adhoc dearness allowance with basic pay
for calculation ofgratuity-University denying benefit of Dearness Allowance
to Respondent while calculating gratuity-Revision of pay scales and
increasing limit of gratuity in accordance with State Government Rules-·
Whether, amounts to adoption of State Civil Service Rules-Held, No-High
Court holding rules of Government employees would not be applicable in D

• case of University employee-Upheld-Rajasthan Civil Services (Revised pay
Scales) Rules, 1987.

Practice and Procedure
E
Appellant filing documents alongwith written submissions not filed
with SLP nor argued orally-Held, point cannot be considered

The Respondent who was an employee of the Appellant University
retired from service in 1992. Since his provisional pension was subsequently
reduced, the respondent filed a Writ Petition before the High Court for a F
direction to the appellant to finalies the retrial benefits such as pension,
gratuity and other retrial dues on the basis of actual last pay drawn, dearness
and adhoc dearness allowances. The Respondent contended that the gratuity
was calculated only on the basic pay instead of calculating on the pay last
drawn including the dearness allowance and adhoc dearness allowance. The
G
appellant contended that provisional pension was granted on the basis of
".' undertaking given by the respondent that excess benefits if any would be

-· refunded. The appellant submitted that rules stood amended as per rules of
the State Government and as the Government rules define the emoluments
as basic pay for the purpose of payment of gratuity no payment of gratuity
on dearness allowance can be allowed. The Writ Petition was allowed by H
989
990 SUPREME COURT REPORTS (1999] 2 S.C.R.

A Single Judge holding that rules regarding calculation of basic pay in respect
of Government employee would not be applicable in case of employee working
under the University and therefore, while calculating the gratuity, basic pay
- ,_
j

alongwith amount of dearness allowance should be taken in!o consideration.
The Writ Appeal by appellant was dismissed by the Division Bench.

B On appeal before this Court, the appellant contended that as the Board
of Management of the appellant by resolution No. 31dated12.5,1988 which
was formally notified on 16.6.1988 had adopted increase in the payment of
gratuity as per Rajasthan Government Notification to the employees and the
respondent is not entitled to get the benefit of dearness allowance and ad-
.___._
C hoc dearness allowance while calculating total emoluments for the purpose
of granting gratuity, and that as the pay-scales of the appellant were revised
in terms of Rajasthan services (Revised Pay-Scales) Rules, 1987, by an
order dated 5.3.1987, the Rajasthan Civil Services Rules shall apply to all
employees of the appellant University. In the written submissions the appellant
filed a resolution dated 4.12.1987 in which it was resolved that the gratuity
D rules of Rajasthan State Government Services (second amendment) Rules,
1987 with effect from 1.1.1986 and modified from time to time will be
followed by the University till separate service rules are framed.

Dismissing the appeal, the Court
HELD: 1. The High Court rightly held that under rules of the University
E
while calculating total emoluments of the respondent for the purpose of
gratuity not only the basic pay but also the dearness allowance and ad/we .--
dearness aUowance have to be taken into consideration. (997-A-B]
2. Though alongwith the order of the appellant dated 16.61988 a copy
F ofthe Rajasthan Services (second amendment) Rules, 1987 was also extracted,
by no stretch of imagination it can be said that by the above order, the
University ofUdaipur (Sukhadia University) payment of gratuity to employees
Rules, 1979, as adopted by the appellant-university, were also amended in
respect of other provisions. By that order only maximum limit of gratuity
was increased. [995-F-G]
G
3. The Board of Management by their Resolution and order dated
5.3.1987 only revised the pay-scales of the University employees and did not
. ~«;!opt the Rajasthan Civil Services (Revised Pay Scales) Rules, 1987 in toto.
- ~~

H 4. The point urged by the appellant in the written arguments was
RAJASTHAN AGRICULTURAL U~IVERSITY v. R.K. VYAS [S.N. PHUKAN, J.] 991
neither urged at the time of oral arguments nor taken as a ground in the A
Special Leave Petition. Therefore, the effect of resolution dated 4.12.1987
is not considered, as it was proposed to take away the vested right ofrespondent
which was affirmed by the High Court. (996-G-H]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2612 of
1996. I B
From the Judgment and Order dated 12.9.95 of the Rajasthan High Court
in S.A. No. 572 of 1995.

Altaf Ahmed, Additional Solicitor General, A.P. Dhamija, Sushi! Kr. Jain,
A. Misra, Pradeep Aggarwal and Umesh Bohre for the Appellant. C

Pallav Shishodia for A.P. Medh for the Respondents.

The Judgment of the Court was delivered by
D
S.N. PHUKAN, J. This appeal is directed against the judgment and
order of the Division Bench of the Rajasthan High Court at Jodhpur dated
12.09.95 passed in Special Appeal No. 572of1995. By the impugned judgment
the Division Bench dismissed the special appeal filed by the present appellant
namely Rajasthan Agricultural University constituted by Rajasthan Agricultural
University, Bikaner Act, 1987. Initially by an Act Udaipur University was
constituted which was renamed as Mohanlal Sukhadia University. Later
Mohanlal Sukhadia University was bifurcated and present appellant university
was founded by an Act of Legislature.

The respondent herein was an employee of the appellant university and
retired from service on superannuation on 9th December, 1992. He was granted F
provisional pension which was subsequently reduced. Another grievance of
the respondent was that the gratuity was calculated only on the basic pay
instead of calculating on the pay last drawn including the dearness allowance
and adhoc dearness all~wance in accordance with the provisions of relevant 1
rules. The respondent, therefore, prayed that an appropriate writ/direction be · G
issued directing the appellant - university to finalise the retiral benefits such
as pension, gratuity and other retiral dues on the basis of actual last pay
drawn, dearness and ad hoc dearness allowances.

In the counter filed before the High Court by the present appellant -
university the actual date of retirement was disputed and according to the H
992 SUPREME COURT REPORTS [1999] 2 S.C.R.

A appellant, the respondent herein actually retired on 30th November, 1992.
Regarding provisional pension it was urged before the High Court that
provisional pension \Vas granted on the basis of undertaking given by the
respondent that excess benefits, if any, would be refunded. It was also urged
that provisional pension was found to be more than what was due. Regarding
B rules of the university the plea taken before the High Court was that rules
stood amended as per rules of the State Government and as the Government
rules define the emoluments as basic pay for the purpose of payment of
gratuity, no payment of gratuity on dearness allowance can be allowed.
Various other pleas had been taken and it is not necessary to state at this
stage and we shall deal with those submissions at the appropriate stage, if
C necessary.
The learned Single Judge in Writ Petition No. 3242 of 1993 by order
dated 09.03.1995 inter alia was of the view that the rules regarding the
calculation of basic pay in respect of Government employee would not be
applicable in case of employee working under the university and therefore,
D for the purpose of calculation of gratuity of the respondent who was an
employee of university, rules of the university shall have to be taken into
consideration. It was directed that in terms of the rules of the university while.
work_ing out gratuity of the respondent apart from the basic pay, amount of
dearness allowance and ad-hoc dearness allowance should be counted.
E Being aggrieved appeal was filed before the Division Bench which was
dismissed as stated above.

We have heard Mr. Altaf Ahmed, learned Addi. Solicitor General for the
appellant and Mr. Pallav Shishodia, learned counsel for the respondent. We
F may state here that after the argument was over written s.ubmissions were
filed on behalf of both the parties.

To appreciate the contentions raised before us, we may quote below
relevant portions of rules etc. The notes 1 and 2 of rule 11 of the University
of Udaipur (Sukhadia University) Payment Of Gratuity to Employees Rules,
G 1979 run as follows:-

"I. In the case of an University employee retiring on or after 31.3 .1986.
the term emolument wherever it occurs under these rules shall mean
the emoluments which he was drawing immediately before retirement
or on death from the service and include the following for purpose of
H calculation:-
RAJASTHAN AGRICULTURAL UNIV:ERSITYv. R.K. VYAS [S.N. PHUKAN, J.] 993

a/ Pay as defined in Rule 7(24) of RSR bl the amount of dearness A
allowance, and c/ the amount of ad hoc dearness allowance as amended
from time to time.

2. For the persons retirmg prior to 31.03.1986, the word 'emoluments'
wherever it occurs means emoluments which an employee was receiving
immediately before the date of his release from University service on B
superannuation or retirement after extension in service or termination
or death and includes:-

a/ Basic pay in the time scale; b/ Personal Pay which is granted in
lieu of loss of substantive pay; cl Special pay attached to a post; and
di Dearness pay, if any." C
We extract Annexure-C to the writ petition:-

"Minuts of the fourth meeting of the Boards of Management of the
Rajasthan Agricultural University, Bikaner held on May 20, 1980 at
11.30 A.M. at the Krishi Vigan Kendra Peschwal Farm, Bikaner. xxx xxx D
xxx xxx
RAJAU/BOM-4/88-2/47

Considered adoption of Statutes of Sukhadia University, Udaipur
for RAJAU till new Statutes of the Sukhadia University, Udaipur be E
adopted till the Statutes for RAJAU are framed and ...... "

We extract Annexure-B to the writ petition:

"Sukhadia University: Udaipur No.F/Rules/PPS-87/87-Il/430 dated
5.3.87.
F
ORDER
(\

In pursuance of Board of Management Resolution No.15 dated
21.2.87 the Vice Chancellor is pleased to revise the existing Pay Scales
of University employees in accordance with Rajasthan Civil
Services(Revised Pay Scale) Rules,1987 published in Rajasthan Raj- G
Patra, Spl. Bulletin, Part-IV Sub-div. I dated 2.2.87. These revised pay
scales would be applicable to the employees from 1.9.86. The revised
pay scales would not applicable to the employees getting U.G.C. pay
scales ...... "

We extract Annexure-A to the writ petition: H
994 SUPREME COURT REPORTS (1999) 2 S.C.R.

A "Finance 9Gr.2) Department Notification: No.Fl(68) FD(Gr.2)/86 Jaipur
dt.2.2.87 Sub: Rajasthan Service Rules:

............................ These rules may be callled the Rajasthan Service
(Amendment) Rules, .1987.

B They shall be deemed to have come into force with effect from 1.9.86.

In the said rules-

7(24). Pay - means the amount drawn monthly by a Government
servant as - (i) the pay other than special pay or pay granted in view
of his personal qualifications, which has been sanctioned for a post
c held by him substantively or in an officiating capacity, or to which he
is entitled by reason of his position in a cadre, and (ii) special pay and
personal pay, and (iii) any other emoluments which may be specially
classed as pay by the Governor."

We extract Annexure-G to the writ petition:
D
"Rajasthan Agriculture University: Bikaner. No.FII(3)/RAJAU/C/88/
31139- 78 dt.16.06.88

Office Order
E Sub: Payment of Gratuity to employees rules, 1970.

In pursuance of the Finance Committee resolution No. 4 dated
20.5.88 and duly approved by the Board of Management on 20.5.88,
the Vice Chancellor is pleased to order that the Government ofRajasthan
Finance (Gr.2) Department Notification No.F. l (29) FD (Gr.2) 87-1 dated
F
20.10.87 regarding raising the maximum limit of death-cum-retirement
it Gratuity from Rs. 50,000 to Rs.75,000 may be made applicable to
University employees from 1.9.1986 as per Govt. order referred above."

There is no dispute at the bar regarding position of the rules and the
G resolution etc. extracted above.

The short question to be decided in the present appeal is whether while
calculating the total emoluments of the respondent for the purpose of gratuity
in addition to pay as defined in Rule 7(24) of the Rajasthan Service Rules,
dearness allowance and ad hoc dearness allowance which the respondent
H was drawing at the time of the retirement, have to be added or not?
RAJASTHAN AGRICULTURAL UNIVERSITYv. R.K. VYAS [S.N. PHUKAN, J.] 995
The University being a body corporate having perpetual succession A
has got a separate legal entity and as such rules framed by the government
shall not be applicable unless specifically adopted by the University in
accordance with the provisions of the Act by which the University was
constituted.

From the resolution of the meeting of the Board of Management of the B
appellant-university dated 20th May, 1980 we find that the appellant-university
adopted the statutes of the Sukhadia University therefore, the University of
Udaipur(Sukhadia University) Payment of Gratuity to Employees Rules, 1979
are applicable to employees of the appellant-university. As respondent retired
from service after 31.3 .1986, note (1) to the rule 11 is applicable. Therefore, C
while calculating the emoluments .for the purpose of payment of gratuity the
three clauses namely: (a), (b) and (c) of the said note (I) have to be applied.
Thu,s, the total emoluments for the purpose of gratuity of the respondent
would include (1) pay as defined in rule 7(24) of the Rajasthan Services Rules,
(2) amount of dearness allowance and (3) amount of ad hoc dearness allowance
as amended from time to time. D
. According to Mr. Ahmed, learned Addi. Solicitor General for the
appellant-university, as the Board of Management of the appellant-university
by Re~olution No. 31 dated 12.5.1988 had adopted increase in the payment
of gratuity to the employees and the respondent is not entitled to get the E
benefit of dearness allowance and adhoc dearness allowance while calculating
total emoluments for the purpose of granting gratuity. This resolution was
formally notified by the order dated 16.6.88 which was extracted above.

On basis of the above order dated 16.6.88 we have no hesitation to hold
that only maximum limit of the amount of gratuity was raised from Rs. 50,000 F
to Rs. 75,000w.e.f 01.09.1986.

Though along with the order of the appellant- university dated 16.6.88
a copy of the Rajasthan Services (second amendment) Rules, 1987 was also
extracted, b)' no stress of imagination it can be said that by the above order,
the University of Udaipur(Sukhadia University) Payment of Gratuity to G
Employees Rules, 1979, as adopted by the appellant-university, were also
amended in respect of other provisions. By that order only limit of gratuity
was increased.

Mr. Ahmed has further contended that as the pay-scales of the appellant-
university were revised in terms of Rajasthan Services (revised pay-scales) H
996 SUPREME COURT REPORTS [1999] 2 S.C.R.

A Rules, 1987 by an order dated 05.03.1987 as extracted above, Rajasthan Civil
Services Rules shall apply to all employees of the appellant-university.

Reading of the above order dated 05.03.87 makes it clear that the Board
of Management by Resolution dated 21.02.1987 only revised the pay-scales
of the university employees and did not adopt the Rajasthan Civil
B Services(revised pay-scales) Rules, 1987 in toto. .

As stated above after the conclusions of oral arguments, written
submissions on behalf of both the parties were filed. Along with written
submissions explanatory note and resolution of the Board of Management
dated 4.12.87 have been annexed. By this resolution of the Board of
C Management it was resolved by the Board that the gratuity rules of Rajasthan
State Government Services (second amendment) Rules, 1987 with effect from
I. l .86 and modified from time to time will be followed by the university till
separate service rules are framed.

We quote below a paragraph from the explanatory note submitted to the
D Board:

"The Rajasthan Agricultural University has also adopted the Revised
Pay Scales, 1987 effective from 1.9.86 for its employees and also
adopted the revised gratuity Rules in which the amendment has been
raised from Rs. 50,000/- to 75,000/- vide order dated 16.6.88, and the
E payment of gratuity is also being made accordingly to the amended
rules. But one retired employees Sh. R.K. Vyas, Lab Assistant has
challenged these rules in High Court. The Hon'ble High Court in its
judgment dated 9.3.95 held that RAU has not adopted GOR Gratuity
Rules in its entity in replacement ofM.L.S. University, Udaipur gratuity
F rules-70. In view of this, calculation for the purpose of gratuity shall
be governed by notes contained in Rule 11 of M.L.S. University
Gratuity Rules. Thus gratuity shall be calculated on the basis of
Pay+D.A.+Adhoc D.A."

In the written argument, it has been stated that in view of the above
G resolution of the Board, the respondent is not entitled to get the relief claimed.
This point was neither urged before us at the time of arguments and nor taken
as a ground in the special leave petition. Therefore, we are not inclined to
consider the effect of resolution as it was proposed to take away the vested
right of respondent which was affirmed by the High Court.

H For the reasons stated above, we hold that the High Court rightly held
RAJASTHAN AGRICULTURAL UNIVERSITY v. R.K. VYAS [S.N. PHUKAN, J.] 997

that under rules of the University while calculating total emoluments of the A
respondent for the purpose of gratuity not only the basic pay but also the
dearness allowance and ad hoc dearness allowance have to be taken into
consideration.

The present appeal has no merit and accordingly it is dismissed.
Consdering the facts and circumstances. of the case parties are directed to B
bear their own costs.

V.M. Appeals dismissed.