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BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 13/10/2011
CORAM
THE HONOURABLE MR.JUSTICE K.CHANDRU
W.P.(MD)No.2683 of 2011
and
M.P.(MD)No.1 of 2011
The Special Officer,
The Management of
R.1779 Srirangam Co-operative
Urban Bank Ltd.,
No.43, South Chithirai Street,
Srirangam-620 006. ... Petitioner
vs.
1.The Joint Commissioner of Labour
(Appellate Authority under the
Payment of Gratuity Act),
Trichy.
2.The Assistant Commissioner of Labour,
(The Controlling Authority under the
Payment of Gratuity Act),
Trichy.
3.V/Soundarrajan ... Respondents
PRAYER
Writ Petition is filed under Article 226 of the Constitution of
India praying for the issuance of a Writ of Certiorari, calling for the records
relating to the impugned order dated 06.01.2011 made in P.G.A.No.316/2010 passed
by the 1st respondent The Joint Commissioner of Labour (Appellate Authority
under the Payment of Gratuity Act), Trichy confirming the order dated 27.07.2010
made in P.G.No.1/2009 passed by the 2nd respondent The Assistant Commissioner of
Labour (The Controlling Authority under the Payment of Gratuity Act), Trichy and
quash the same.
!For Petitioner ... Mr.S.Meena Karapagarajam
^For R - 1 and R - 2 ... Mr.M.Govindan,
Special Government Pleader.
For R - 3 ... Mr.S.C.Herold Singh
:ORDER
The matter arises under the Payment of Gratuity Act, 1972. The
petitioner is the Management of Srirangam Co-operative Urban Bank Ltd.,
represented by its Special Officer. In this Writ Petition, they have sought to
challenge an order passed by the first respondent (Appellate Authority under the
payment of Gratuity Act), Joint Commissioner of Labour, Trichy in P.G.A.NO.316
of 2010, dated 06.01.2011. The appellate authority dismissed the appeal filed
by the petitioner-Society, challenging an order passed by the second respondent
(Controlling Authority under the Payment of Gratuity Act), Assistant
Commissioner of Labour, Trichy, made in P.G.No.1/2009. Aggrieved by the order
passed by the appellate Authority, the Writ Petition came to be filed.
2. When the matter came up on 08.03.2011, this Court ordered notice
regarding admission. Pending the notice, an interim stay was granted, which was
subsequently extended. Aggrieved by the grant of stay, the third respondent has
filed M.P.(MD)No.2 of 2011 seeking to vacate the interim order, which was
supported by a counter-affidavit dated 13.04.2011.
3. It is seen from the records that the third respondent was
employed as an Office Assistant from 16.05.1974 and he had reached the age of
superannuation on 30.11.2008, after rendering the service of thirty four years
and seven months in the petitioner's Society. However, on the day of his
reaching the age of superannuation viz., on 30.11.2008, he was relieved from the
service of the petitioner-society, but, without prejudice to the criminal
proceedings pending against him. When his gratuity was not paid, the third
respondent filed an application before the second respondent claiming gratuity
for the period of service rendered by him. The said application was taken on
file as P.G.Application No.1/09 and notice was ordered to the petitioner's
society. The petitioner's Society has filed a counter statement dated-Nil (June
2009). The defence taken by the petitioner-Society was that the criminal
proceeding initiated against the third respondent was still pending and he was
only relieved from the service of the Bank on the direction issued by the
District Level Committee. The gratuity should be made applicable only if a
person retired on superannuation. The pendency of the criminal case will dis-
entitle him from getting gratuity. The gratuity has been withheld for valid
reason though it was not a case of forfeiture.
4. The Controlling Authority viz., the second respondent, by a
detailed order, rejected the stand of the Management and computed the gratuity
for the 35 years' of service rendered by the third respondent and it worked out
to Rs.2,98,502/-. He also ordered 10% interest from 01.12.2008 till the date of
payment of gratuity as per the Act. Aggrieved by the order passed by the
second respondent, the petitioner preferred an appeal under Section 7(7) of the
Payment of Gratuity Act, 1972 before the first respondent-Appellate Authority.
As a condition precedent for preferring an appeal, it is also stated that the
amount had also been deposited with the second respondent. The appeal filed by
the petitioner's Society was taken on file as P.G.A.316/2010. Even before the
Appellate Authority, the petitioner's Society raised the same ground, as raised
before the second respondent. The Appellate Authority held that merely because
there is a pendency of a criminal case, the Society cannot allow a person from
leaving the service after reaching the age of superannuation. After considering
the various judgments on this issue, the petitioner Management was bound to pay
the gratuity. In that view of the matter, the appellate authority dismissed the
appeal.
5. In the affidavit filed in support of the Writ Petition, the
contentions raised by the Management of the Society was that the third
respondent was only relieved from the service of the Bank and not retired under
the special By-laws governing the service conditions of the employes of the Bank
to the effect that "an employe shall be responsible for and liable to make any
financial loss, which the bank may sustain on account of his negligence" and the
employees have got right to forfeit the gratuity and a reliance was also placed
upon a judgment of the Delhi High Court in Mashroom Ahamed Vs. Union of India
(2007 LLR (SN) P.318).
6. Per contra, the learned counsel for the third respondent
submitted that even assuming, certain amounts are due by the third respondent,
in law, there was no power on the petitioner's Society to deny the payment of
gratuity. Pendency of the criminal proceedings has no bearing on the payment of
the gratuity and he had not caused any financial loss to the petitioner's
Society.
7. In the light of the rival contentions, four issues will arise for
consideration:-
(i) Whether the petitioner on reaching the age of superannuation and
relieved from service, was entitled to get gratuity in terms of the Act?
(ii) Whether the Society can withhold gratuity on account of any
financial loss caused to the Society or on account of the pendency of any
criminal case?
(iii) Whether the Society has any other method of recovering the
amounts due to the Society? and
(iv) Whether the Society withholding the gratuity, notwithstanding
Section 14 of the Payment of Gratuity Act is valid?
8. On the first question, it must be noted that under Section 4(1)
of the Payment of Gratuity Act, gratuity shall be payable to an employee on the
termination of his employment, if he had rendered five years continuous service.
An employee, who is superannuated or retired or resigned or due to death or
disablement due to accident or disease, is entitled for gratuity. The
terminology used by the management for sending out a person from service is not
relevant. It is stated that the third respondent had put in thirty four years
and seven months service and was relieved on reaching the age of superannuation.
Merely because in the relieving order, it was stated that it was without
prejudice to the criminal proceedings, that will have no bearing in determining
the liability for payment of gratuity under Section 4 (1) of the Gratuity Act.
Therefore, that objection must necessarily fail.
9. The second contention was that if an employee had caused loss to
an employer, Section 4(6) of the Payment of Gratuity Act enables the employer
to forfeit the gratuity towards the damage or loss or destruction of the
property of the employer to the extent of the damage or loss so caused. In the
present case, the petitioner-Society did not spelt out the quantum of loss and
they have not pointed out any surcharge proceedings initiated in terms of
Section 87 of the Tamil Nadu Co-operative Society Act fixing liability on the
third respondent, towards the loss therefore, the amount of gratuity can be
forfeited. On the contrary, consistently, the Courts have held that the right
of the employer to forfeit certain amounts from the gratuity must reflect in the
order of termination itself and it should be a contemporaneous order and not a
best defence taken by an employer. Even in cases of forfeiture, an opportunity
will have to be given to the affected employee. For the purpose of exercising
the power under Section 4(6) in forfeiting the gratuity, there should be a valid
order of dismissal or imposition of punishment.
10. The Supreme Court while dealing with the right of the workman to
receive gratuity under Section 4(1) as well as obligation of the employer to
pass an order under Section 4(6) forfeiting the gratuity, dealt with the scope
of the provisions vide its judgment in Jaswant Singh Gill v. Bharat Coking Coal
Ltd., reported in (2007) 1 SCC 663 and in paragraphs 7,10,11,13 and 14, it had
observed as follows:
7.The short question which arises for consideration in this appeal is as to
whether the provisions of the said Act shall prevail over the rules framed by
the Coal India Limited, holding company of Respondent 1, known as the Coal India
Executives' Conduct, Discipline and Appeal Rules, 1978 (for short "the Rules").
Indisputably, the appellant was governed by the Rules. Rule 27 provides for the
nature of penalties including "recovery from pay or gratuity of the whole or
part of any pecuniary loss caused to the Company by negligence or breach of
orders or trust". Major penalties prescribed in Rule 27, however, include
reduction to a lower grade, compulsory retirement, removal from service and
dismissal. Rule 34 provides for special procedure in certain cases stating:
"34.2. Disciplinary proceedings, if instituted while the employee was in service
whether before his retirement or during his re-employment shall, after the final
retirement of the employee, be deemed to be proceeding and shall be continued
and concluded by the authority by which it was commenced in the same manner as
if the employee had continued in service.
34.3. During the pendency of the disciplinary proceedings, the disciplinary
authority may withhold payment of gratuity, for ordering the recovery from
gratuity of the whole or part of any pecuniary loss caused to the company, if
have been guilty of offences/misconduct as mentioned in sub-section (6) of
Section 4 of the Payment of Gratuity Act, 1972 or to have caused pecuniary loss
to the company by misconduct or negligence, during his service including service
rendered on deputation or on re-employment after retirement. However, the
provisions of Sections 7(3) and 7(3-A) of the Payment of Gratuity Act, 1972
should be kept in view in the event of delayed payment, in the case the employee
is fully exonerated."
10.The provisions of the Act, therefore, must prevail over the Rules. Rule 27 of
the Rules provides for recovery from gratuity only to the extent of loss caused
to the Company by negligence or breach of orders or trust. Penalties, however,
must be imposed so long an employee remains in service. Even if a disciplinary
proceeding was initiated prior to the attaining of the age of superannuation, in
the event the employee retires from service, the question of imposing a major
penalty by removal or dismissal from service would not arise. Rule 34.2 no doubt
provides for continuation of a disciplinary proceeding despite retirement of
employee if the same was initiated before his retirement but the same would not
mean that although he was permitted to retire and his services had not been
extended for the said purpose, a major penalty in terms of Rule 27 can be
imposed.
11.Power to withhold penalty (sic gratuity) contained in Rule 34.3 of the Rules
must be subject to the provisions of the Act. Gratuity becomes payable as soon
as the employee retires. The only condition therefor is rendition of five years'
continuous service.
13.The Act provides for a close-knit scheme providing for payment of gratuity.
It is a complete code containing detailed provisions covering the essential
provisions of a scheme for a gratuity. It not only creates a right to payment of
gratuity but also lays down the principles for quantification thereof as also
the conditions on which he may be denied therefrom. As noticed hereinbefore,
sub-section (6) of Section 4 of the Act contains a non obstante clause vis-.-vis
sub-section (1) thereof. As by reason thereof, an accrued or vested right is
sought to be taken away, the conditions laid down thereunder must be fulfilled.
The provisions contained therein must, therefore, be scrupulously observed.
Clause (a) of sub-section (6) of Section 4 of the Act speaks of termination of
service of an employee for any act, wilful omission or negligence causing any
damage. However, the amount liable to be forfeited would be only to the extent
of damage or loss caused. The disciplinary authority has not quantified the loss
or damage. It was not found that the damages or loss caused to Respondent 1 was
more than the amount of gratuity payable to the appellant. Clause (b) of sub-
section (6) of Section 4 of the Act also provides for forfeiture of the whole
amount of gratuity or part in the event his services had been terminated for his
riotous or disorderly conduct or any other act of violence on his part or if he
has been convicted for an offence involving moral turpitude. Conditions laid
down therein are also not satisfied.
14.Termination of services for any of the causes enumerated in sub-section (6)
of Section 4 of the Act, therefore, is imperative."
11. But, once an employee reached the age of superannuation or
retired, no punishment can imposed including dismissal. In such cases, Section
4(6) cannot be invoked, as held by Madhya Pradesh High court in R.Khichrolia Vs.
Madhya Pradesh State Co-operative Marketing Federation, Ltd., reported in 2002
(4) L.L.N 705. Further, this Court in Krishnaveni Textile Mills, Singanallur,
Coimbatore Vs. Assistant Labour Commissioner reported in 2002 (4) L.L.N 363 has
held that even for forfeiture of gratuity, an employee must be given notice and
an opportunity has to be given. In the present case, instead exercising the
power of forfeiture, the third respondent was allowed to be retired with a
condition that it was without prejudice to the pendency of criminal case. Even
the fate of the criminal case is not let known to this Court in the pleadings.
Therefore, the second submission made before the authorities as well as before
this Court must fail.
12. The third question is for an unspecified amount of loss whether
they can withhold the gratuity, Section 14 and Section 13 of the Payment of
Gratuity Act will give the complete answer to such a plea. Section 13 prohibits
the gratuity from being attached in execution of any decree or order of any
civil or revenue or criminal Court. In the present case, no such order has been
produced. Even for such order to be passed, Section 13 will be a complete bar.
13. With regard to the last question, it is not as if the Co-
operative Societies in Tamil Nadu are helpless and that they must pay gratuity
even in cases where there are dues to a Society. Section 48 of the Tamil Nadu
Co-operative Societies Act enables a Society to withheld any dues payable to the
workmen including gratuity, in case there is an ascertainable loss caused to the
Society. The petitioner-Society did not proceed against the workman with a vast
power conferred under the Act. After the workman had approached the authority,
the petitioner-Society cannot raise such issues and contend that the workman was
not eligible for any gratuity. Even after the petitioner-Society pays gratuity
to the third respondent, they have ample powers to proceed against him either
under Section 87 or by way of an arbitration under Section 90. Therefore, that
contention raised by the petitioner must necessarily fail.
14. In view of the above, the writ petition stands dismissed. In
view of the dismissal of the writ petition, the third respondent is entitled to
withdraw the amount lying in deposit with the second respondent. Consequently,
connected miscellaneous petition is closed. No costs.
vsm
To
1.The Joint Commissioner of Labour
(Appellate Authority under the
Payment of Gratuity Act),
Trichy.
2.The Assistant Commissioner of Labour,
(The Controlling Authority under the
Payment of Gratuity Act),
Trichy.
