President/Chairman, Central Madhya Pradesh Gramin Bank vs Smt. Abha Goyal

This Writ Petition under Article 227 of the Constitution of India at

the instance of Employer takes exception to order dated 19.10.2015

passed by the Appellate Authority under the Payment of Gratuity Act,

1972.

The appeal under Section 7 (7) of 1972 Act was filed by respondent

employee against the order dated 25.7.2013 passed by the Controlling

Authority; whereby, claim for grant of gratuity was negatived on the

ground of it being not maintainable as the claimant employee has

challenged her termination in the High Court.

Relevant facts giving rise to the controversy, briefly are that the

respondent while posted as Manager, Nowrojabad Branch of the petitioner

was charge-sheeted on 4.6.2011. On denial of charges, departmental enquiry was held which culminated into an order of removal passed on

26.6.2013 which will not be a disqualification for future employment.

Departmental Appeal preferred against the order of removal was

dismissed on 3.10.2013; whereagainst, respondent has filed a Writ

Petition No. 20084/2013 which is pending consideration.

That, after her removal and during pendency of the Writ Petition,

respondent filed an application under Section 7 (4) of 1972 Act for grant

of gratuity before the Controlling Authority on the contention that the

same has been wrongly withheld.

The Controlling Authority vide order dated 29.5.2016 dismissed the

application on the finding that the matter is sub judice before High Court

and the employee can file an application after finalization of writ petition.

That order on being challenged in Appeal under Section 7 (7) of 1972 Act

has been set aside vide impugned order.

The Appellate Authority while formulating the issues as to (i)

Whether the ex-employee is having right to receive gratuity pending

proceedings before the High Court regarding challenge of order of

termination passed by the Bank; (ii) Whether the Claim made by the ex-

employee is maintainable or not before the Controlling Authority under

the Act of 1972, and (iii) in case the claim for gratuity is maintainable,

whether the action of the management in withholding or forfeiting the

gratuity amount is legal, justified or not.

Answering the issues in favour of employee the Appellate Authority

found that the Bank having not taken decision to forfeit the gratuity and

that respondents, viz., Central Madhya Pradesh Gramin Bank (Officers

and Employees) Service Regulation, 2010 and Satpura Narmada

Kshetriya Gramin Bank (Officers and Employees) Service Regulations

2013 will not over-ride the provisions of 1972 Act.

In the above factual background the issue which crops up for

consideration is whether the petitioner Bank is justified in withholding the

gratuity when the same is not withheld by a specific order after the

termination of service of the respondent.

The petitioner has relied upon regulation 72 of the Regulations

which provides for:

"72. Gratuity.- (1) An officer or employee shall be eligible for payment of gratuity either as per the provisions of Payment of Gratuity Act, 1972 (39 of 1972) or as per sub-regulation (2), whichever is higher. (2) Every officer or employee shall be eligible for gratuity on,- (a) retirement (b) death, (c) disablement rendering him unfit for further service as certified by a medical officer approved by the Bank, or (d) resignation after completing 10 years of continuous service, or (e) termination of service in any other way except by way of punishment after completion of 10 years of service; Provided that in respect of an employee there shall be no forfeiture of gratuity for dismissal on account of misconduct except in cases where such misconduct causes financial loss to the bank and in that case to that extent only. (3) The amount of gratuity payable to an officer or employee shall be one month''s pay for every completed year of service or part thereof in excess of six months subject to a minimum of 15 months'' pay: Provided further that in respect of an officer the gratuity is payable based on the last pay drawn: Provided also that in respect of an employee pay for the purposes of calculation of the gratuity shall be the average of the basic pay (100%), dearness allowance and special allowance and officiating allowance payable during the 12 months preceding death, disability, retirement, resignation or termination of service, as the case may be."

Petitioner has also relied on Regulation 45; however, said

Regulation is neither reproduced in the petition/rejoinder nor has been

commended at, at the time of hearing. As such only Regulation 72 is

considered.

Clause (e) of sub-Regulation (2) of Regulation 72 envisages that

every officer or employee shall be eligible for gratuity on the termination

of service in any other way except by way of punishment after completion

of 10 years of service. Proviso to sub-Regulation (2) stipulates that in

respect of an employee there shall be no forfeiture of gratuity for

dismissal on account of misconduct except in cases where such

misconduct causes financial loss to the Bank and in that case to that extent

only.

Thus, on one hand Regulation 72 (2) (e) prohibits grant of gratuity

to every officer or employee whose services are terminated by way of

punishment. Plain reading of this provision thus suggests total blockade

of gratuity to a terminated officer or employee. The proviso, however, is

in respect of forfeiture of gratuity for dismissal on account of misconduct

to the extent the misconduct causes financial loss to the Bank by an

employee. It excludes an officer.

Thus, if clause (e) of sub-Regulation (2) is read with proviso, the

proviso will govern it to the extent that even if an employee is terminated

by way of punishment then also the forfeiture of gratuity can be only to

the extent of the loss caused to the bank. In other words if there is no

financial loss caused by an employee who is terminated for a misconduct

the gratuity cannot be forfeited. The proviso excludes an officer. Thus if

an officer is terminated from service for misconduct even if such

misconduct has not caused any financial loss to the Bank he or she as per

Regulation 72 (2)(e) shall not be entitled for the gratuity.

The question therefore is whether a gratuity of an officer who has

suffered a termination can justifiably be withheld.

Evidently, sub-Regulation (1) of Regulation 72 makes the provision

of the Act of 1972 applicable to the officers and employees of the Bank.

In view whereof it is to be first seen as to whether the provisions

contained under the Regulation will over-ride the provisions contained in

1972 Act. Though learned counsel for the petitioner has relied upon the

judgment in United Bank of India vs. Pranab Kumar Bhuiyan & ors . :

WP.No.15864 (W) of 2014 decided on 16.07.2014 whereby the learned

Single Judge has held that "the provisions of the Gratuity Act would

prevail over the Regulation does not appear to be correct" The view,

however, does not lay down the correct proposition. In Y.K. Singla v.

Punjab National Bank and others (2013) 3 SCC 472 it is held by the

Supreme Court :

..........A perusal of Section 14 leaves no room for any doubt, that a superior status has been vested in the provisions of the

Gratuity Act, vis-?-vis, any other enactment (including any other instrument or contract) inconsistent therewith. Therefore, insofar as the entitlement of an employee to gratuity is concerned, it is apparent that in cases where gratuity of an employee is not regulated under the provisions of the Gratuity Act, the legislature having vested superiority to the provisions of the Gratuity Act over all other provisions/enactments (including any instrument or contract having the force of law), the provisions of the Gratuity Act cannot be ignored. The term "instrument" and the phrase "instrument or contract having the force of law" shall most definitely be deemed to include the 1995 Regulations, which regulate the payment of gratuity to the appellant. 24. Furthermore, from the mandate of Section 14 the Gratuity Act, it is imperative to further conclude, that the provisions of the Gratuity Act would have overriding effect, with reference to any inconsistency therewith in any other provision or instrument. ..."

In view of the law laid down by the Supreme Court this Court

respectfully disagree with the view expressed by learned Single Judge of

Calcutta High Court in Pranab Kumar Bhuiyan (supra).

Section 4 of 1972 Act provides for:

"4. Payment of gratuity - (1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,-- (a) on his superannuation, or (b) on his retirement or resignation, or (c) on his death or disablement due to accident or disease: Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement: Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority. Explanation - For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement. (2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days'' wages based on the rate of wages last drawn by the employee concerned:

Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account: Provided further that in the case of an employee who is employed in a seasonal establishment and who is not so employed throughout the year, the employer shall pay the gratuity at the rate of seven days'' wages for each season. Explanation.-- In the case of a monthly rated employee, the fifteen days'' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen. (3) The amount of gratuity payable to an employee shall not exceed one lakh rupees. (4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced. (5) Nothing in this section shall affect the right of an employee receive better terms of gratuity under any award or agreement or contract with the employer. (6) Notwithstanding anything contained in sub- section (1), - (a) the gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused; (b) the gratuity payable to an employee may be wholly or partially forfeited - (i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act violence on his part, or (ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment."

Sub-section (1) of Section 4 of Act of 1972 stipulates that Gratuity

shall be payable to an employee on the termination of his employment

after he has rendered continuous service for not less than five years, (a) on

his superannuation, or (b) on his retirement or resignation, or (c) on his

death or disablement due to accident or disease.

Sub-section (6) of Section 4 carves out an exception to sub- section

(1) stipulating that -

"(6) Notwithstanding anything contained in sub- section (1),-

(a) the gratuity of an employee, whose services have been

terminated for any act, wilful omission or negligence causing

any damage or loss to, or destruction of, property belonging to

the employer, shall be forfeited to the extent of the damage or

loss so caused;

(b) the gratuity payable to an employee may be wholly or

partially forfeited-

(i) if the services of such employee have been

terminated for his riotous or disorderly conduct or any

other act or violence on his part, or

(ii) (ii) if the services of such employee have been

terminated for any act which constitutes an offence

involving moral turpitude, provided that such offence is

committed by him in the course of his employment".

Section 14 stipulates that the provisions of Act of 1972 or any rule

made thereunder shall have effect notwithstanding anything inconsistent

therewith contained in any enactment other than this Act or in any

instrument or contract having effect by virtue of any enactment other than

this Act.

Thus, except the stipulations contained under sub-Section (6) of

Section 4 of 1972 Act, there is no other provisions as would empower the

employer to withhold the gratuity. Thus, the Regulation viz. Regulation

72(2) (e) being inconsistent with the provisions of 1972 Act as per Section

14, will not have a binding effect as would empower the employer to

withhold the gratuity. The power which vests with the employer is what is

conferred vide sub-section (6) of Section 4 . Thus, withholding of the

gratuity of an officer who has been removed from service on the charges

of misconduct is beyond the jurisdiction of the employer. However, a

distinction has to be drawn between a forfeiture and the withholding.

While expression forfeiture as defined by Blackstone would mean

to be a punishment annexed by law to some illegal act or negligence in

the owner of lands, tenements or hereditaments; whereby he loses all his

interest therein, and they go to the party injured, as a recompense for the

wrong, which either be alone or the public together with him hath

sustained. It is divestiture of specific property without compensation in

consequence of some defaults or act forbidden by law. Please see

(Advance Law Lexicon).

The expression withholding takes with it the dictionary meaning to

hold back; to keep back; to restrain or decline to grant. The holding back

or keeping back is not an isolated act but is a continuous process by which

the property is not returned or restored to the company and the company

is deprived of its possession. (Please see Lalita Jalan v. Bombay Gas

Co. Ltd . [(2003) 6 SCC 107]

In the case at hand, as specific stand has been taken by the

petitioner-employer that the respondent''s gratuity has not been forfeited

but is withheld which as discussed above cannot be approved of.

In view whereof, the impugned Appellate Order when adjudged on

the anvil of above analysis cannot be faulted with as would warrant any

interference.

Consequently, petition fails and is dismissed. However, there shall

be no costs.