Judgment :- 1. These petitions are heard and disposed of together, in view of the issue raised being the same. 2. The brief facts are as follows: The petitioners were erstwhile employees of the respondent – Bank and had retired from the service of the bank under a Special Voluntary Retirement Scheme during the year 2003. Thereafter, salary revision was effected for officer employees of the Bank with retrospective effect from 1st November 2002. While paying the revised salary and pensionary benefits to the petitioner, the payment of differential ex-gratia was denied. The present petitions, therefore, are in respect of the same. 3. The learned Senior Advocate Shri P.S. Rajagopal appearing for the counsel for the petitioners in two of the petitions, would contend that the petitioners were officer employees of the Bank. Their service conditions were governed by the Corporation Bank (Officers) Service Regulations, 1982 (hereinafter referred to as ‘the Service Regulations’ for brevity) and the Corporation Bank (Employees’) Pension Regulations, 1995 (hereinafter referred to as ‘the Pension Regulations’ for brevity). He would point out that the word ‘salary’ is defined under Regulation 3(m) of the Service Regulations, to mean the aggregate of pay and Dearness Allowance. The word ‘pay’ is defined under Regulation 3(1) to mean basic pay, stagnation increment, professional qualification pay, increment component of fixed personal pay and the officiating allowance. Regulation 4 lays down the grades and scales of pay. Though the service conditions are prescribed in these statutory regulations, amendments thereto have always been a product of bilateral negotiations. At the industry level, salary revision is negotiated between the Indian Banks’ Association as authorized by managements of the Banks, including the Trade Unions of Officer employees working in the Banking industry. Salary revisions are therefore arrived at by settlement between the parties and negotiated settlements are thereafter incorporated into the Regulations by way of amendment. Since the officer employees are not governed by the provisions of the Industrial Disputes Act, 1947, the settlements reached between the management and the unions are labeled as “Joint Notes” instead of settlements. 4. The Board of Directors of the respondent – Bank had as on 17.8.2002 approved a Special Voluntary Retirement Scheme called the Corporation Bank Officer Employees’ Special Voluntary Retirement Scheme 2002 (hereinafter referred to as ‘the Scheme’ for brevity) and notified the same by Circular dated 3.12.2002. 4. The Board of Directors of the respondent – Bank had as on 17.8.2002 approved a Special Voluntary Retirement Scheme called the Corporation Bank Officer Employees’ Special Voluntary Retirement Scheme 2002 (hereinafter referred to as ‘the Scheme’ for brevity) and notified the same by Circular dated 3.12.2002. The petitioners had all completed 25 years of service and were 50 years of age as on the relevant date stipulated under the Scheme namely, 1st April 2002. They were all eligible under the scheme as they met the required conditions. They had sought for and were granted voluntary retirement and they were duly relieved from service of the Bank during the year 2003. 5. It transpires that the Indian Banks Association and the negotiating Trade Unions of officer employees had signed a Joint Note dated 14.11.1999 whereby salary revision was agreed upon from 1.11.1997 to be operational for a period of five years and the settlement expired on 31.10.2002. The next salary revision was thus due from 1.11.2002. Therefore, negotiations were on from October 2002 and were in progress when the petitioners retired from the services of the Bank on voluntary retirement. Ultimately, the negotiations had resulted in the signing of Joint Note between the managements of the banks and the recognized officers Trade Union on 2nd June 2005. Under the settlement, pay, allowances, salary and emoluments payable to the officers, including the petitioners came to be revised with retrospective effect from 1.11.2002. The arrears of salary and allowances were disbursed to all, pending formal amendment to the Service Regulations and the same was, however, implemented by a Circular dated 30.6.2005. 6. Though the Bank, as already stated, had paid the arrears in terms of the revision including the differential gratuity and the differential amount towards encashment of privileged leave, the Bank did not choose to pay the differential amount of ex-gratia. Therefore, the petitioners had made representations. These were not formally rejected. But however, the same have been ignored and it is therefore apparent that the Bank is not inclined to pay the differential ex-gratia to the petitioners. Inspite of the best efforts of the petitioners to ascertain the basis on which the same is sought to be denied, the petitioners have been stone-walled and therefore the present petition is filed. 7. But however, the same have been ignored and it is therefore apparent that the Bank is not inclined to pay the differential ex-gratia to the petitioners. Inspite of the best efforts of the petitioners to ascertain the basis on which the same is sought to be denied, the petitioners have been stone-walled and therefore the present petition is filed. 7. The learned Senior Advocate would contend that the revision of pay, allowances and emoluments being made applicable from 1.11.2002, except for halting allowances and compensation on transfer, every other allowance and component of salary stood revised from a date anterior to the date of retirement of the petitioners and the petitioners having been paid all arrears owing to such revision, there is no basis or rationale to deny the differential amount of ex-gratia based on the revised salary. Under the scheme, it is laid down as follows:- “IV Ex-gratia payable under the Scheme: Officer employees who are eligible to apply and are permitted to retire voluntarily under the scheme shall be eligible for an ex-gratia amount specified at (a) OR (b) indicated below whichever is less: (a) 60 days salary (pay stagnation increments plus Special Pay plus Dearness relief) for each completed year of service OR (b) Salary for the number of months of service left. Note. 1. For the purpose of calculation of ex-gratia, “60 days salary” shall be taken as equivalent to 2 months’ salary with reference to the salary for the month in which the Officer employee is relieved from service on voluntary retirement.) 2. Fraction of service of six months and above will be taken as a full year and fraction of service of less than six months shall be ignored.” This is reiterated at Clause VIII.8. Fraction of service of six months and above will be taken as a full year and fraction of service of less than six months shall be ignored.” This is reiterated at Clause VIII.8. As the above clause mandates that calculation of ex-gratia is with reference to the salary for the month in which the officer employee is relieved from service on voluntary retirement, the denial of the same on the basis of the revised salary that has been paid to the petitioners for the month in which they retired is clearly contrary to the Scheme and amounts to violation of Article 39(d) as ex-gratia by definition is in lieu of future wages and is therefore contrary to the Joint Note and the Scheme as it is evident that the Joint Note does not exclude the payment of ex-gratia for the persons such as the petitioners under the Scheme. When as a fact the respondent would not deny that the revision is with reference to the salary and the ex-gratia being a multiple of the salary which is wholly unjust and unfair to deny the revision of ex-gratia. In this regard, the learned Senior Advocate would place reliance on the following authorities:- (a) ITI Limited Vs. Corporation Office, Bangalore vs. ITI Ex/VR Employees/Officers Welfare Association, Bangalore and another, 2002(1) Kar. L.J. 333, (b) Employees State Insurance Corporation vs. Gnanambigai Mills Limited, (2005) 6 SCC 67 Reference is drawn to Stroud’s Judicial Dictionary of Words and Phrases, Seventh Edition, wherein the word ‘Ex-Gratia’ as defined in a decided case is extracted as follows:- “EX GRATIA. The words “ex gratia” in a promise to pay do not carry a necessary or even probable implication that the agreement is to be without legal effect (Edwards v Skyways (1964) 1 W.L.R.349)” The report of the judgment referred to in the said Dictionary in Edwards vs. Skyways, (1964) 1 Weekly law Reports 349, is placed on record. 8. While the learned counsel for the respondent would vehemently deny that the petitioners are entitled to any such relief. He would point out that the respondent is a nationalized bank constituted under the Banking Companies (Transfer and Acquisition of undertakings) Act, 1980. The Scheme was introduced by the Bank in the year 2002 for officers as per Circular bearing No.399/2002 dated 3.12.2002. Clause 2.3 and Clause IV of Annexure-I provide for the payment of ex-gratia. He would point out that the respondent is a nationalized bank constituted under the Banking Companies (Transfer and Acquisition of undertakings) Act, 1980. The Scheme was introduced by the Bank in the year 2002 for officers as per Circular bearing No.399/2002 dated 3.12.2002. Clause 2.3 and Clause IV of Annexure-I provide for the payment of ex-gratia. The extract of Clause 203 and Annexure-IV is as under:- “Officer employees who are eligible to apply and are permitted to retire voluntarily under the Scheme shall be eligible for Ex-gratia amount specified at (a) OR (b) indicated below whichever less. (a) 60 days salary (pay plus stagnation increments plus Special Pay plus Dearness relief) to each completed year of service OR (b)Salary for the number of months of service left”. 9. The mode of payment of ex-gratia is provided for in Clause 2.5 of the Scheme and accordingly, the calculation of the ex-gratia was contemplated with reference to the salary for the month in which the officer employee is relieved from service on voluntary retirement. As regards other benefits, Clause 2.4 provides for payment of provident fund, gratuity, leave encashment, pension etc. The Scheme was introduced in line with the detailed man power planning exercises and the resultant consideration as to the manner of dealing with surplus man power identified. The petitioners having been found eligible their applications were accepted under the Scheme and all benefits including ex-gratia were settled and they were relieved from service between the period January to May 2003. 10. It is true that a Joint Note dated 2.6.2005 was signed between the Indian Banks Association and the Officers Associations providing for revision of salary and other allowances for all officers working in the Banking industry with effect from 1.11.2002. Pursuant to the revision of salary, the persons who had retired under the Scheme were extended the benefit of arrears of salary and allowances from 1.11.2002 till the date of voluntary retirement, including the difference of leave encashment, additional gratuity and additional benefits under the Provident Fund. The ex-gratia has not been paid for the reason that Clause 2.5 and VI of Annexure-I provides that ex-gratia will be paid in one lumpsum cash settlement. Clause –VIII (7) of Annexure-I provides that ex-gratia will be paid within 45 days from the date of relief. The ex-gratia has not been paid for the reason that Clause 2.5 and VI of Annexure-I provides that ex-gratia will be paid in one lumpsum cash settlement. Clause –VIII (7) of Annexure-I provides that ex-gratia will be paid within 45 days from the date of relief. In terms of Sub-clause (II) the payment released under the scheme is in full and final settlement of the officer employee including the provision of employment to dependants on compassionate grounds. The scheme does not envisage the payment of any additional amount in the event of any upward revision in the pay scale for officers and there is no statutory obligation to do so nor does the Joint Memo providing for wage increase with retrospective effect contemplate the provision of any such benefit on the petitioners. The ex-gratia payment paid to the retired officer is after an assessment of the financial implication on the bank as a package deal based on the salary drawn by the employee in the month he or she is relieved from service. Ex-gratia by its very nature is an amount which has no relation to the salary revision. As such, the Bank is not obliged either statutorily or contractually to make the payment to the petitioners pursuant to the salary revision. 11. It is further stated that the petitioners have voluntarily contracted out of the jural relationship of employer and employee and are bound by the 77 same and there is no enforceable right under which the petitioners could approach this court and hence seeks that the petition be dismissed. Reliance is placed on the following authorities in support of the defence set up by the respondents. (a) Smt. Manorama Rath vs. Orissa Mining Corporation Limited and others, 2002 LAB I.C.3377, (b) Ghaziabad Zila Sahkari Bank Limited vs. Additional Labour Commissioner and others, (2007)11 SCC 756 , (c) HEC Voluntary Retd. Employees Welfare Society and another vs. Heavy Engineering Corporation Limited, AIR 2006 SC 1420 , (d) Vayitri PlatationsLimited and Babu Mathew, (1994) 1 LLJ 1131, (e) A.K.Bindal and another vs. Union of India and others, AIR 2003 SC 2189 . 12. On the above facts and circumstances, there is no dispute with regard to the sequence of events, in that, vide Annexure-A dated 3.12.2002, the respondent – Bank introduced the Corporation Bank Officer Employees’ Special Voluntary Retirement Scheme 2002. 12. On the above facts and circumstances, there is no dispute with regard to the sequence of events, in that, vide Annexure-A dated 3.12.2002, the respondent – Bank introduced the Corporation Bank Officer Employees’ Special Voluntary Retirement Scheme 2002. This was in line with the detailed man-power planning exercise to deal with surplus man-power identified and the management having approved the Special Voluntary Scheme for officers of the Bank, the petitioners were found eligible and were allowed to retire under the Scheme. They were paid the ex-gratia amount contemplated under Clause 2.3 of the said document, which contemplated a choice of the ex-gratia amount, consisting of 60 days’ salary (pay + stagnation increments + special pay + Dearness relief) for each completed year of service, or salary for the number of months of service left, and it was also provided that it would be paid in one lump sum in cash in terms of Clause 2.5, thereunder. When the petitioners retired, negotiations were on in respect of salary revision of the employees. The Indian Banks Association and the Employees Unions ultimately signed a Joint Note which is at Annexure-C to the petition, agreeing upon revision of salaries with retrospective effect. This included various other benefits and allowances. The same was implemented through Annexure-D dated 30.6.2005. Insofar as the arrears of pay in respect of officers who ceased to be in service, which would include the petitioners, as on 27.6.2005, it was provided as follows: “VI. ARREARS OF PAY IN RESPECT OF OFFICERS WHO CEASED TO BE IN SERVICE AS OF 27.06.2005: The IBA vide their communication NO.CIR/PD/76/665/2005-06/555 dated 27.6.2005 have informed that as regards arrears in respect of officers who cease to be in service as of date, banks may await further advice. Accordingly, in respect of such officers branches/offices are advised to await further instructions from this Division.” 13. The management ultimately issued instructions on 8.7.2005 as regards salary revision for officer employees and release of arrears to retired officers. This significantly did not contemplate payment of any arrears of ex gratia amount. Several petitioners having raised the issue with the management, they were consistently informed that there is no revision in the ex gratia for persons such as the petitioners and the revision has been effected only with reference to salary, leave encashment, pension and gratuity, wherever applicable to the retired employees. 14. Several petitioners having raised the issue with the management, they were consistently informed that there is no revision in the ex gratia for persons such as the petitioners and the revision has been effected only with reference to salary, leave encashment, pension and gratuity, wherever applicable to the retired employees. 14. In the above background, the only question that arises for consideration in the present petition is, whether the claim of the petitioners for payment of arrears of ex gratia by virtue of revision of salary, retrospectively, is tenable. 15. Reliance sought to be placed by the learned counsel for the petitioners on the meaning attributed to ex gratia from Strouds Law Dictionary of Words and Phrases is with reference to the decision in Edwards vs. Skyways Limited. The facts of the case would be relevant to appreciate the meaning so attributed. The management of an airline company had empowered its Secretary to negotiate with the Airline Pilots Association as regards payment to redundant aircrew members, of an ex gratia amount approximating to the company’s contribution for each member of the Pension and Superannuation Fund. At a meeting consisting of the representatives of the management and the pilots, it was accepted in principle that pilots who were declared redundant and leaving the company would be given an ex gratia payment equivalent to the company’s contribution to the pension fund. They would in any case be entitled to the refund of their own contributions to the Fund. That decision was published in the Association’s News Letter. A pilot employed by the company was declared redundant and left the Company’s services. The company paid him his own contributions. Immediately thereafter, the Board of Directors resolved to rescind its own decision to make ex gratia payments to redundant aircrew. It was in that background that an action was brought by the plaintiff to recover the amount of ex gratia payment. The company had contended that the pilot had no legally enforceable right to the ex gratia payment. It was held that where an agreement was reached in the course of a business relationship and there was an intention to agree, the burden of proof would be on the party alleging that it was not intended to give rise to legal obligations. The reasoning of the Court is expressed thus:- “Was there a legal obligation on the part of the company? The reasoning of the Court is expressed thus:- “Was there a legal obligation on the part of the company? The company admits, as I understand it, that at the meeting a promise was made on its behalf with its authority, although the actual word “promise” was not used. In the defence it was pleaded that no consideration moved from the plaintiff. That plea was expressly abandoned at the hearing. It was conceded that there was consideration. The company admits that it was its intention to carry out its promise when it was made, and that the plaintiff’s representatives, and the plaintiff himself, believed, and acted in the belief, that the promise would be fulfilled. Every-one, at the end of the meeting, believed that there was an agreement which would be carried out. But the company says that the promise and the agreement have no legal effect, because there was no intention to enter into legal relations in respect of the promised payment. It is clear from such as Rose and Frank Co. v. J.R. Crompton and Bros. Ltd. and Balfour v. Balfour that there are cases in which English law recognizes that an agreement, in other respect duly made, does not give rise to legal rights, because the parties have not intended that their legal relations should be affected. Where the subject-matter of the agreement is some domestic or social relationship or transaction, as in Balfour V. Balfour, the law will often deny legal consequences to the agreement, because of the very nature of the subject-matter. Where the subject-matter of the agreement is not domestic or social, but is related to business affairs, the parties may, by using clear words, show that their intention is to make the transaction binding in honour only, and not in law; and the courts will give effect to the expressed intention. Scrutton L.J., expressed it thus, in Rose and Frank Co. V.J.R. Crompton & Bros. Ltd: “Now it is quite possible for parties to come to an agreement by accepting a proposal with the result that the agreement concluded does not give rise to legal relations. The reason of this is that the parties do not intend that their agreement shall give rise to legal relations. This intention may be implied from the subject-matter of the agreement, but it may also be expressed by the parties. The reason of this is that the parties do not intend that their agreement shall give rise to legal relations. This intention may be implied from the subject-matter of the agreement, but it may also be expressed by the parties. In social and family relations such an intention is readily implied, while in business matters the opposite results would ordinarily follow. But I can see no reason why, even in business matters, the parties should not intend to rely on each other’s good faith and honour, and to exclude all idea of settling disputes by any outside intervention, with the accompanying necessity of expressing themselves so precisely that outsiders may have no difficulty in understanding what they mean. If they clearly express such an intention I can see no reason in public policy why effect should not be given to their intention.” In the same case, Atkin L.J. said “To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly. Such an intention ordinarily will be inferred when parties enter into an agreement which in other respects conforms to the rules of law as to the formation of contracts. It may be negatived impliedly by the nature of the agreed promise or promises, as in the case of offer and acceptance of hospitality, or of some agreements made in the course of family life between members of a family as in Balfour v. Balfour. If the intention may be negatived impliedly it may be negatived expressly.” In the present case, the subject-matter of the agreement is business relations, not social or domestic matters. There was a meeting of minds - an intention to agree. There was, admittedly, consideration for the company’s promise. I accept the propositions of counsel for the plaintiff that in a case of this nature the onus in on the party who asserts that no legal effect was intended and the onus is a heavy one. xxxxxxxx However that may be, the company stays, first, as I understand it, that the mere use of the phrase “ex gratia” by itself, as a part of the promise to pay, shows that the parties contemplated that the promise, when accepted, should have no binding force in law. xxxxxxxx However that may be, the company stays, first, as I understand it, that the mere use of the phrase “ex gratia” by itself, as a part of the promise to pay, shows that the parties contemplated that the promise, when accepted, should have no binding force in law. It says, secondly, that even if the first proposition is not correct as a general proposition, nevertheless here there was certain background knowledge, present in the minds of every-one, which gave unambiguous significance to “ex gratia” as excluding legal relationship. As to the first proposition, the words “ex gratia”, in my judgment, do not carry a necessary, or even a probable, implication that the agreement is to be without legal effect. It is, I think, common experience amongst practitioners of the law that litigation or threatened litigation is frequently compromised on the terms that one party shall make to the other a payment described in express terms as “ex gratia” or “without admission of “liability”. The two phrases are I think synonymous. No one would imagine that a settlement so made, is unenforceable at law. The words “ex gratia” are without admission of liability or used simply to indicate – it may be as a matter of amour propre, or it may be to avoid a precedent in subsequent cases – that the party agreeing to pay does not admit any pre-existing liability on his part; but he is certainly not seeking to preclude the legal enforceability of the settlement itself by describing the contemplated payment as “ex gratia.” So here. There are obvious reasons why the phrase might have desired to avoid conceding that any such payment was due under the employers’ contract of service. It might have wished-perhaps ironically in the event – to show by using the phrase, its generosity in making a payment beyond what was required by the contract of service. I see nothing in the mere use of the words “ex gratia”, unless in the circumstances some very special meaning has to be given to them, to warrant the conclusion that this promise, duly make and accepted, for valid consideration, was not intended by the parties to be enforceable in law. The company’s second proposition seeks to show that in the circumstances here the words “ex gratia” had a special meaning. The company’s second proposition seeks to show that in the circumstances here the words “ex gratia” had a special meaning. What is said is this: when a payment such as this is made by an employer to a dismissed employee the question whether it is subject to income tax in the hands of the recipient is important. It was understood by the company and by the association, and by all their respective representatives at the meeting, that if the company’s payment were made as the result of legally binding obligation, it would be taxable in the hands of the recipient; whereas, if it were to be made without legal obligation on the part of the company, it would not be taxable. It was not argued before me whether this assertion is right or wrong in law. It was said by the company that that is quite immaterial; what is material is that the parties so believed. Thus, it is said, the phrase “ex gratia” was used, and was understood by all present to be used, deliberately and advisedly a formula to achieve that there would be no binding legal obligation on the company to pay, and hence to save the recipient from a tax liability. It is said that the offer was accepted by the association with full knowledge and understanding of these matters. Hence, it is said, the agreement by tacit consent, a consent evidenced by the use of the words “ex gratia” against this background of common understanding, was an agreement from which legal sanction and consequences were excluded. In my judgment, that submission also fails because the evidence falls far short of showing that his supposed background of avoidance of tax liability was present as an important element in the minds of all, or indeed any, of the persons who attended the meeting of February 8; or, if this be something different, in the minds of the company or of the association; or that they all, or any of them, directed their minds to the significance of the words “ex gratia” which is now suggested on behalf of the company. The question of the liability, and the possible influence thereon of the use of the words “ex gratia” may indeed have been present in some degree, and as one element, in the minds of some of the persons present at the meeting. The question of the liability, and the possible influence thereon of the use of the words “ex gratia” may indeed have been present in some degree, and as one element, in the minds of some of the persons present at the meeting. That, however, is far from sufficient to establish that the parties –both of them – affirmatively intended not to enter into legal relations in respect of the company’s promise to pay.” As could be seen from the above discussion, the said decision cannot be pressed into service in the present case on hand as there is no dispute that under the Voluntary Retirement Scheme, the Bank has paid the ex gratia amount as agreed and there is nothing on record to indicate that the negotiations for salary revision also contemplated payment of arrears of ex gratia, as well, on the basis of the revised salary. In the case of Employees State Insurance Corporation vs. Gnanambigai Mills Limited, (2005) 6 SCC 67 , which is then relied upon by the petitioners, the dispute was as to whether the compromise that was entered into between the employees and the management in that case, in respect of which, a Special Tribunal gave its imprimatur and the parties in their compromise having chosen to permit certain payments as ex-gratia payments, it was sought to be contended that the same were not within the definition of wages. The apex Court ultimately decided that the mere choice of the term of those payments as ex gratia payments, it did not mean that those payments ceased to be wages if they were otherwise wages. In the light of the issue therein, the said decision cannot also be pressed into service. In ITI Limited, Corporate Office, Bangalore vs. ITI. Ex/VR Employees/Officers Welfare Association, Bangalore and another, the opinion expressed that ex–gratia payment is to be calculated based on the revised pay scale given effect to retrospectively, after such ex-gratia payment was made is without reference to any principle of law and in the absence of any discussion on the factual matrix, in that case, or without there being any reference to decided cases in that regard – the decision can only be an authority for that case. In addressing the question arising for consideration, the definition of ex gratia as found in the several Dictionaries, can be usefully noted:- According to Jowitt’s Dictionary of English Law, Second Edition, ‘ex gratia’ is defined as follows:- ‘Ex gratia (as of favour). In contra-distinction to “as of right”. As to the liability to tax of an ex gratia payment.’ A Dictionary of Latin Words and Phrases, by James Morwood, defines ‘ex gratia’ as follows: ‘ex gratia – done or given as a favour and not under any compulsion’ Words and Phrases. Permanent Edition, contains the following definition: ‘Ex gratia payment Where there is concurrency of coverage between ceding company’s policy and policy of reinsurance, the follow the settlements doctrine imposes upon reinsurer a contractual obligation to indemnify the ceding company for payments it makes pursuant to loss settlement under its own policy, provided that loss settlement is not fraudulent, collusive, or otherwise made in bad faith, and is not “ex gratia payment”, which is one that is made by one who recognizes no legal obligation to pay but who makes payment to avoid later expenses as in case of settlement by insurance company to avoid costs of suit.” According to Advanced Law Lexicon, Third Edition, by P. Ramanatha Aiyar: Ex gratia. By favour. Out of grace; as a matter of grace, favour, or indulgence; gratuitous. A term applied to anything accorded as a favour; as distinguished from that which may be demanded ex debito as matter or right. The words “ex gratia” in a promise to pay do not carry a necessary or even probable implication that the agreement its to be without legal effect. As matter of grace or favour. Describing a payment made in thanks, such as a tip or golden handshake payment to a retiring employee. Most ex-gratia payments are tax free. Ex gratia payment. Payment made by one who recognizes no legal obligation to pay but who makes payment to avoid greater expense as in the case of a settlement by an insurance company to avoid cost of suit. A payment without legal consideration. In insurance, a payment made to settle an issue (such as an insurance claim) but without admitting liability. (Insurance) Ex gratia pension. A pension paid by an employer although there is no binding commitment to do so. A payment without legal consideration. In insurance, a payment made to settle an issue (such as an insurance claim) but without admitting liability. (Insurance) Ex gratia pension. A pension paid by an employer although there is no binding commitment to do so. (Investment) According to Webster’s Third New International Dictionary, “ex gratia – as a favour; not compelled by legal right (ex gratia pension payments)” Concise Oxford English Dictionary defines ‘ex gratia’ as follows:- “ex gratia – (with reference to payment) done from a sense of moral obligation rather than because of any legal requirement.” According to Black’s Law Dictionary, Sixth Edition, “ex gratia’ is, ‘Ex gratia. Out of grace; as a matter of grace, favour of indulgence; gratuitous. A term applied to anything accorded as a favour; as distinguished from that which may be demanded ex debito, as a matter of right. Ex gratia payment. Payment made by one who recognizes no legal obligation to pay but who makes payment to avoid greater expense as in the case of a settlement by an insurance company to avoid costs of suit. A payment without legal consideration. In the case of Vayitri Plantations Limited vs. Babu Mathew, 1994 1 LLJ 1131, a Division Bench of the High Court of Kerala, while considering the question whether ex-gratia payment would be remuneration, had addressed the definition “wages” and drew support from the decision of the Supreme Court in the case of Braithwaite and Company vs. EXI Corporation 1968-1-LLj 550 to hold as follows:- “14. A question analogous to an ‘ex-gratia’ payment with which we are concerned in the present case, arose in Braithwaite and Co. v. E.S.I. Corpn. (1968-I-LLJ-550). That was, no doubt, a case under the Employees’ State Insurance Act, 1948, and the main part or first part of the definition of ‘wages’ in S.2(22) of that Act reads as follows: “S.2(22): ‘wages’ means all remuneration paid or payable in cash to an employee, if the terms of contract of employment, express or implied, were fulfilled’. It is seen that the main part or first part of S.2(22) is substantially similar to the main part or first part of S.2(rr) of the I.D.Act, 1947 at any rate, so far as the words ‘all remuneration’, ‘if the terms of employment, express or implied, were fulfilled,’ are concerned. 15. It is seen that the main part or first part of S.2(22) is substantially similar to the main part or first part of S.2(rr) of the I.D.Act, 1947 at any rate, so far as the words ‘all remuneration’, ‘if the terms of employment, express or implied, were fulfilled,’ are concerned. 15. In Braithwaite’s case, the question was whether the payment of an ‘inam’ which was not one of the original terms of the contract of employment, but which was proposed by the employer, long thereafter on December 28, 1995, was ‘wages’, within the main part or first part in S.2(22) of the E.S.I. Act. It was held that it was not ‘wages’. The E.S.I. Corporation contended that the Inam was ‘wages’ within the main or first part of S.2(22) of that Act being ‘all remunerations paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled’. The E.S.I. Corporation did not rely upon any part of the inclusive part of the definition nor did the company rely on the exclusionary part of the definition. The High Court accepted the plea of the E.S.I. Corporation. The Supreme Court reversed the judgment of the High Court and held that the ‘Inam’ did not come within the main or first part of the definition in S.2(22) of that Act which substantially conforms to the main or first part of S.2(rr) in the I.D.Act, 1947. The High Court there held that the ‘inam’ had become an implied term of the contract of employment. 16. The Supreme Court analysed the features of the ‘Inam Scheme. Firstly, the Inam was not part of the original contract of employment. In the original contract, there was no offer to give any reward of prize. Secondly, when later, the incentive or inam scheme was introduced and certain special conditions were introduced, the scheme itself reserved the right to withdraw it altogether without assigning any reason or to revise its conditions as its sole discretion. Thirdly, the inam is not payable if the targets were not achieved due to lack of orders, lack of materials, breakdown of machinery, lack of labour, strikes, lock-outs, go-slow or any other reason whatsoever. Fourthly, if there was any deterioration in the workmanship on the part of the employees, the scheme could be abandoned forthwith. Thirdly, the inam is not payable if the targets were not achieved due to lack of orders, lack of materials, breakdown of machinery, lack of labour, strikes, lock-outs, go-slow or any other reason whatsoever. Fourthly, if there was any deterioration in the workmanship on the part of the employees, the scheme could be abandoned forthwith. Fifthly, it was made clear that this payment of reward was in no way connected with nor was part of wages. Therefore, the Supreme Court held that the ‘inam’ was neither an express nor an implied term of the contract. The Supreme court also observed, referring to Bala Sabsatmanya Rajaram v. B.C. Patil AIR 1958 Sc 518 , a case arising under the Payment of Wages Act, wherein the main part of the definition of ‘wages’ was similar. A Division Bench of Orissa High Court in the case of Manorama Rath vs. Orissa Mining Corporation Limited, 2002 LAB I.C.3377, in an identical situation, as in the present case on hand, while referring to the relevant clause under the Voluntary Retirement Scheme that was involved in that case, providing for payment of ex gratia held that such a clause cannot give an extended meaning to the expression that last drawn monthly salary to mean the revised pay and could only refer to the pay existing at the time of acceptance of voluntary retirement and other amounts contemplated and held as follows:- “………The object of voluntary retirement is to give an option to the employee to retire before his/her date of superannuation by receiving an ex gratia payment as well as an option to the Corporation either to accept or not to accept such option for voluntary retirement exercised by an employee. Obviously, the Corporation has to work out the financial implications of accepting the option exercised by a particular employee for voluntary retirement before it decides to accept or not to accet such option exercised by an employee for voluntary retirement. For working out such financial implications, the pay as existing at the time of acceptance of the option of the employee for voluntary retirement + D.A. + any other amount paid towards interim benefits can be taken into account and not the revised pay which may accrue to the employee on account of pay revision subsequent to acceptance of the option of the employee for voluntary retirement by the competent authority of the Corporation. Thus, neither the language not the object of paragraph – 5(i) supports the contention of Mr. Rath that the revised pay of the petitioner effective from 1-1-1996 will have to be taken into consideration for making out the ex gratia payment under paragraph – 5(i) under the scheme for voluntary retirement of the Corporation. Similarly, the language of paragraph – 5(vi) of the scheme for voluntary retirement of the Corporation would show that one months salary in lieu of one month notice can be paid to the employee by the Corporation and for working out the financial implications, it will have to take into consideration the basic pay of the employee at the time of accepting his option for voluntary retirement + D.A. + interim benefit and not the pay as may be revised subsequent to the acceptance of option of the employee for voluntary retirement. The contention of Mr. Rath that one months salary in lieu of one month notice in paragraph – 5(vi) of the scheme for voluntary retirement of the Corporation would mean revised pay effective from 1-1-1996, therefore does not find support from either, the language or the object of paragraph – 5 (vi) of the scheme for voluntary retirement of the Corporation. 9. The contention of Mr. Rath that the petitioner has been paid the gratuity, leave encashment and Contributory Provident Fund calculated on the basis of his revised pay effective from 1-1-1996 and the Corporation cannot now take a different stand for the purpose of calculating the ex gratia payment and the one months salary under paragraphs-5(i) and 5 (vi) of the scheme for voluntary retirement of the Corporation also has no merit. Gratuity, leave encashment and Contributory Provident Fund have to be calculated in accordance with the provisions of the Act or the Rules under which such gratuity, leave encashment and Contributory Provident Fund are to be paid whereas the exgratia payment of one month’s salary in lieu of one month are payable in accordance with the provisions in paragraphs – 5(i) and 5 (vi) of the scheme for voluntary retirement of the Corporation do not permit calculation of ex gratia payment and one month’s salary in lieu of one month on the basis of revised pay of the petitioner effective from 1-1-1996, the petitioner cannot be paid such ex gratia payment and one month’s salary in lieu of one month’s notice on the basis of such revised pay effective from 1-1-1996.” In A.K. Bindal vs. Union of India, supra, while denying that an employee could claim enhanced salary by virtue of retrospective revision of pay, after having opted for voluntary retirement has held as follows: “32. The Voluntary Retirement Scheme (VRS) which is some times called Voluntary Separation Scheme (VSS) is introduced by companies and industrial establishments in order to reduce the surplus staff and to bring in financial efficiency. The Office Memorandum dated 5.5.2000 issued by Government of India provided that for sick and unviable units, the VRS package of Department of heavy Industry will be adopted. Under this Scheme an employee is entitled to an ex-gratia payment equivalent to 45 days emoluments (pay + D.A.) for each completed year of service or the monthly emoluments at the time of retirement multiplied by the balance months of service left before the normal date of retirement, whichever is less. This is in addition to terminal benefits. The Government was conscious about the fact that the pay scales of some of the PSUs had not been revised with effect from 1.1.1992 and therefore it has provided adequate compensation in that regard in the second VRS which was announced for all Central Public Sector undertakings on 6-11-2001. Clause (a) of the scheme reads as under; (a) Ex gratia payment in respect of employees on pay scales at 1-1-87 and 1-1-92 levels, computed on their existing pay scales in accordance with the extant scheme, shall be increased by 100% and 50% respectively. 33. Clause (a) of the scheme reads as under; (a) Ex gratia payment in respect of employees on pay scales at 1-1-87 and 1-1-92 levels, computed on their existing pay scales in accordance with the extant scheme, shall be increased by 100% and 50% respectively. 33. This shows that a considerable amount is to be paid to an employee ex gratia besides the terminal benefits in case he opts for voluntary retirement under the Scheme and his option is accepted. The amount is paid not for doing any work or rendering any service. It is paid in lieu of the employee himself leaving the services of the company or the industrial establishment and forgoing all his claims or rights in the same. It is a package deal of give and take. That is why in business world it is known as ‘Golden Hand-shake’. The main purpose of paying this amount is to bring about a complete cessation of the jural relationship between the employer and employee. After the amount is paid and the employee ceases to be under the employment of the company or the undertaking, he leaves with all his rights and there is no question of his again agitating for any kind of his past rights, with his erstwhile employer including making any claim with regard to enhancement of pay scale for an earlier period. If the employee is still permitted to raise a grievance regarding enhancement of pay scale from a retrospective date, even after he has opted for Voluntary Retirement Scheme and has accepted the amount paid to him, the whole purpose of introducing the Scheme would be totally frustrated. 34. The contention that the employees opted for VRS under any kind of compulsion is not worthy of acceptance. The petitioners are officers of the two companies and are mature enough to weigh the pros and cons of the options which were available to them. They could have waited and pursued their claim for revision of pay scale without opting for voluntary retirement scheme. However they, in their wisdom thought that in the fact situation VRS was a better option available and chose the same. After having applied for VRS and taken the money it is not open to them to contend that they exercised the option under any kind of compulsion. However they, in their wisdom thought that in the fact situation VRS was a better option available and chose the same. After having applied for VRS and taken the money it is not open to them to contend that they exercised the option under any kind of compulsion. In view of the fact that nearly ninety nine per cent of employees have availed of the VRS Scheme and have left the companies (FCI and HFC), the writ petition no longer survives and has become in fructuous.” The above has been followed in a later judgment of the Supreme Court in the case of HEC Voluntary Retired Employees Welfare Association, supra. In Ghaziabda Zila Sahakari Bank Limited vs. Labour Commissioner, ( 2007 11 SCC 756 ), the nature of ex gratia payment was expressed to be as under:- “74. In the instant case, the Additional Labour Commissioner allowed the payment as an ex gratia payment to the employees of the Cooperative Bank form the public fund. The meaning of the word “bonus” according to the New English Dictionary is a boon or gift, over and above, what is normally due as remuneration to be received. This imports the concept of some ex gratia payment. It was ex gratia payment on account of which it is not possible to employ a term of service on the basis of employment contract. In our view, the payment made as ex gratia payment would not constitute any precedent for future years. The ex gratia payment made in the instant case was neither in the nature of production bonus nor incentive bonus nor customary nor any statutory bonus. It cannot be regarded as part of the contract “employment”. Therefore, the ex gratia payment made by the Bank cannot be regarded as remuneration paid or payable to the employees in fulfillment of the terms of the contract of employment within the meaning of definition under Section 2(rr) of the Industrial Disputes Act, 1947.” 16. In the light of this overwhelming material as to the nature of an ex gratia payment, it is evident that but for the Voluntary Retirement Scheme, there was no obligation on the part of the respondent – Bank to make any such payment. In the light of this overwhelming material as to the nature of an ex gratia payment, it is evident that but for the Voluntary Retirement Scheme, there was no obligation on the part of the respondent – Bank to make any such payment. In which event, it cannot be said that it could be claimed as a matter of right insofar as the revised salary is concerned, and on the basis of the same, only on the ground that such revision has been given a retrospective effect and therefore it should be applied in calculating the ex gratia payment made as on the date of voluntary retirement. As is evident from the decided cases, even the revision of salary with retrospective effect could not be claimed as a matter of right by the petitioners, if not for the Joint Note, under which this was agreed upon by the employer, as there was no jural relationship subsisting between the respondent and the petitioners, and it was only by virtue of the agreement that the respondent – Bank was compelled to pay the difference in arrears to the petitioners. Therefore, if the arrears in relation to the ex-gratia payment had also been addressed and agreed upon, as in the case of the arrears of revised salary, it may have been possible for the petitioners to assert that notwithstanding that ex gratia payment is made as a matter of favour and not out of any legal obligation, it could still be enforced as has been done in a decided case referred to hereinabove. In the absence of which, it cannot be said that either under the Statute or under Contract, there was an enforceable right to claim the difference in ex-gratia payment on the basis of the revised salary. In this view of the matter, the petitions lack merit and are dismissed.