The Management, Sivagangai District Central Cooperative Bank Ltd. vs The Joint Commissioner of Labour, The Assistant Commissioner of Labour and S. Tajudeen

K. Chandru, J.—The Petitioner is the management. The matter arises under the Payment of Gratuity Act, 1972 (for short PG Act). Aggrieved by the order passed by the first Respondent the appellate authority under the Payment of Gratuity Act in P.G. Appeal No. 2 of 2010 confirming the order passed by the second Respondent Controlling authority, dated 26.5.2009, the writ petition came to be filed. The writ petition was admitted on 16.7.2010 and an interim stay was granted on the same day.

Heard the arguments of Mr. D. Shanmugaraja Sethupathi, learned Counsel appearing for the Petitioner, Mr. S.C. Herold Singh, learned Government Advocate taking notice for Respondents 1 and 2 and Mr. V.O.S. Kalaiselvan, learned Counsel appearing for the third Respondent employee.

The third Respondent was employed by the Petitioner District Central Cooperative Bank as an Assistant Manager. The third Respondent reached the age of superannuation on 31.10.2006. He was relieved from service on the same day. But, however in the order it was indicated that his relieve was without prejudice to the disciplinary action pending against him vide charge memo, dated 18.7.2005 as well as the surcharge proceedings, dated 14.10.2006.

It was also claimed by the Petitioner that the third Respondent had given an indemnity bond, dated 30.10.2006, stating that in case any irregularity in the work of the third Respondent is found and if there is any finding of loss caused to the Bank, he had agreed to have the amount recovered both from him as well as from his legal heirs together with interest. However, when the third Respondent was not paid his gratuity after his retirement, he filed a gratuity application before the second Respondent in P.G. Case No. 46 of 2008. In the meanwhile, the Petitioner Bank tried to invoke execution proceedings for recovering the amount computed by the Surcharge Officer. A counter statement, dated 12.08.2008 was also filed by the Petitioner herein and a reference was drawn to Section 4(6)(1)(a) of the Payment of Gratuity Act, wherein an employer can withhold the gratuity in case the employee was terminated for any act either by willful omission or negligence causing damages or loss to the property belonged to the employer.

Before the Controlling Authority, the third Respondent examined himself as P.W.1 and marked seven documents as Exs.P.1 to P.7. On the side of the Petitioner Bank, one Somanathan, the manager, was examined as R.W.1 and on their side, five documents were filed and marked as Exs.R.1 to R.5. The Controlling Authority held that the question of invoking the defence u/s 4(6)(1)(a) will arise only when termination was made against the employee for having caused loss to the employer''s property. But, in the present case, the Petitioner therein was allowed to retire without prejudice to the disciplinary action. Therefore, the defence in terms of Section 4(6) is not available. It was also held that on the basis of the by-laws and service conditions available to the Petitioner Bank, no enquiry can be held after reaching the age of superannuation. Therefore, it directed the Bank to pay the gratuity for a sum of Rs. 3,48,061/-. The Petitioner bank deposited the said amount with the second Respondent on 21.8.2009.

The Bank had filed an appeal before the first Respondent the appellate authority u/s 7(7) of the Payment of Gratuity Act. Reliance was placed upon the judgment of the Supreme Court in Jarnail Singh Vs. The Secretary, Ministry of Home Affairs and others, for contending that the employer can withhold the gratuity and adjust the dues payable to the State. Further reliance was also placed upon a judgment of the Supreme Court in U.P. State Sugar Corporation Ltd. v. Kamal Swaroop Tondon reported in 2008 (2) SCC 4. This case was relied on for the purpose of contending that an enquiry can be conducted even after reaching the age of superannuation as the third Respondent was entitled to get the terminal benefits. The said appeal was taken on file as P.G. Appeal No. 2 of 2010. Notice was given to the third Respondent. The third Respondent had filed a counter statement. He contended that the judgment in Jarnail Singh case (cited supra) will not apply as it arose out of the Central Civil Services (Pension) rules, 1972, wherein specific provision has been provided for withholding the DCRG in case of any dues to the State. Likewise, the judgment in U.P. State Sugar Corporation Ltd. (cited supra) also have no relevance since in that case the employee was not allowed to retire. Therefore, the Supreme Court held the proceedings can continue. But, in the present case, the Petitioner was allowed to retire from service and there is no service conditions to continue the disciplinary proceedings. The appellate authority had held that termination was not due to any misconduct, in which the allegation was that the employee had committed loss to the employer on account of his negligence. Therefore, the judgments relied on by the Petitioner Bank will no apply to the case of the Petitioner and dismissed the appeal by an order, dated 28.5.2010.

The two questions that arise for consideration in the present case are as follows:

(a) whether the Petitioner can deny the payment of gratuity by invoking the provisions in Section 4(6) of the Payment of Gratuity Act? and

(b) Whether the Cooperative society can conduct an enquiry even after an employee had reached the age of superannuation?

Before proceeding to deal with the case, it is necessary to refer to Section 4(6)(a) of the Payment of Gratuity Act which reads as follows:

(6) Notwithstanding anything contained in Sub-section (1),-

(a) the gratuity of an employee, whose services have been terminated for any act, willful 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;

As to whether an employer can rise a plea of adjustment of gratuity towards the loss sustained by it for the first time before the authority and also whether without passing an order of termination on such misconduct can claim to withhold the gratuity on that score came up for consideration by various courts.

In Gujarat State Road Transport Corporation Vs. Devendrabhai Mulvantrai Vaidya, , it was held that forfeiture can be made only when employee''s service was terminated for the reasons set out in Section 4(6). Similarly, in Radheshyam Khichrolia and Another Vs. Madhya Pradesh Co-operative Marketing Federation Ltd. and Others, , it was held that there should be a valid order of dismissal or imposition of punishment before forfeiture can be claimed.

In Gujarat State Fertilizers and Chemicals Ltd. v. Surendra T. Amin reported in 2005 (1) LLN 221, it was held that forfeiture issue cannot be raised for the first time before the authority. In Dunlop India Ltd. v. Union of India and Ors. reported in 2003 (II) LLJ 1125, it was held that termination of service is sine qua non for the applicability of Section 4(6). A similar view was also taken in Travancore Plywood Industries Ltd. Vs. Regional Joint Labour Commissioner and Others, and the Court held that the employer''s right to withhold the gratuity u/s 4(6) can be made only if there was prior termination.

Very recently, the Supreme Court vide its decision reported in P. Rajan Sandhi Vs. Union of India (UOI) and Another, , while dealing with the case of a working Journalist having right to get gratuity u/s 5 of the Working Journalist Act held that the Working Journalist Act is a special Act and it will prevail over the general Act like the Payment of Gratuity Act. In that context, in paragraphs 11 and 12, it was observed as follows:

It may be seen that there is a difference between the provisions for denial of gratuity in the Payment of Gratuity Act and in the Working Journalists Act. Under the Working Journalists Act gratuity can be denied if the service is terminated as a punishment inflicted by way of disciplinary act, as has been done in the instant case. We are of the opinion that Section 5 of the Working Journalists Act being a special law will prevail over Section 4(6) of the Payment of Gratuity Act which is a general law. Section 5 of the Working Journalists Act is only for working journalists, whereas the Payment of Gratuity Act is available to all employees who are covered by that Act and is not limited to working journalists. Hence, the Working Journalists Act is a special law, whereas the Payment of Gratuity Act is a general law. It is well settled that special law will prevail over the general law, vide G.P. Singh''s Principles of Statutory Interpretation, 9th Edn., 2004, pp.133 and 134.

The special law i.e. Section 5(1)(a)(i) of the Working Journalists Act, does not require any allegation or proof of any damage or loss to, or destruction of, property, etc. as is required under the general law i.e. the Payment of Gratuity Act. All that is required under the Working Journalists Act is that the termination should be as a punishment inflicted by way of disciplinary action, which is the position in the case at hand. Thus, if the service of an employee has been terminated by way of disciplinary action under the Working Journalists Act, he is not entitled to gratuity.

(Emphasis added)

Therefore, on the first question, the Petitioner management must fail because not only the third Respondent was allowed to retire, but the question of forfeiture was raised only in the counter pleadings before the Controlling Authority. No termination was made on account of ingredients found u/s 4(6) of the PG Act.

The second question, i.e. right to continue the proceedings even after reaching the age of superannuation, the appellate authority had erred in upholding the contention of the third Respondent. The issue is no longer res integra. A division bench of this Court in The Registrar of Co-operative Societies, Kilpauk, Chennai-10 and another v. G. Manoharan reported in 2010 (2) CTC 234, after reviewing the case laws in paragraph 33 held as follows:

From the records produced in this case, the following facts are obvious:

(a)The activities of the first Respondent had caused a great deal of consternation among the authorities and they were forced to transfer him from the place where, according to them, he was causing a lot of damage.

(b)The disciplinary proceedings had been actually initiated before his age of superannuation, since the first charge memo is dated 6.6.2003, whereas his age of superannuation is 31.6.2003.

(c)He had also given a reply to the charge memo dated 6.6.2003, but had not chosen to reveal the fact of the issuance of this earlier charge memo in his writ affidavit.

(d)No orders had been passed permitting him to retire; on the contrary, he was suspended on the eve of his attaining the age of superannuation.

(e)The Supreme Court has held that even if a person had retired, if it is proved that he had caused loss to the establishment, then proceedings can be initiated to recover the amount of loss from him.

(f)Even if a person has attained the age of superannuation, it is possible to dismiss him, in which event, he will not be entitled to his terminal dues vide Ramesh Chandra Sharma Vs. Punjab National Bank and Another, .

(g)In any event, Section 87 of the Act gives the power to proceed against even a past employee for recovery and restoration of the financial loss caused to the Society.

(Emphasis added)

Therefore, it is always open to the Petitioner Bank to proceed against the third Respondent for recovering the amounts ordered to be surcharged against him in person as well as against his property. But, however the payment of gratuity on that score cannot be withhold in view of the non obstinate clause found u/s 14 of the Payment of Gratuity Act and also the payment is freed from any attachment as provided u/s 13 of the Act.

In view of the above, the writ petition will stand dismissed. No costs. Consequently, connected miscellaneous petitions stand closed.