Recently, the Jammu and Kashmir High Court held that mere pendency of a civil suit for recovery against the borrower cannot, by any stretch of reasoning, justify the withholding of gratuity legally due to the petitioner. It violates the mandate of the Payment of Gratuity Act, 1972, and the fundamental rights of the petitioner under Articles of the petitioner under Article 14 and Article 300-A of the Constitution.
Brief facts
The factual matrix of the case is that the Petitioner, while serving as the bank manager in the Respondent/bank sanctioned the loan in favour of one Aman Kumar Gupta in the year 2014. In 2015, the petitioner was transferred from the said branch. The said loan account subsequently became a Non-Performing Asset (NPA), due to the borrower’s default in repayment. The petitioner attained the age of superannuation and retired from service in January 2016. However, the Respondent, without any lawful justification, withheld the petitioner’s gratuity amounting to Rs.8,12,063/-. Furthermore, despite withholding the gratuity amount of the Petitioner, the respondent-Bank, in the year 2020, instituted a civil suit for recovery of the said loan amount from the borrower. The Petitioner filed the present petition seeking issuance of an appropriate writ, order, or direction commanding the respondent-Bank to release the gratuity amount of Rs. 8,12,063/– along with the accrued interest, which, according to the petitioner, has been arbitrarily and unjustifiably withheld by the respondent.
Contentions of the Petitioner:
The counsel appearing on behalf of the Petitioner contended that the gratuity is a statutory right flowing from the Payment of Gratuity Act, 1972, and cannot be withheld except in accordance with law. It was furthermore contended that no disciplinary action has ever been initiated or concluded against the petitioner and, therefore, the withholding of gratuity without determination of guilt or misconduct is wholly arbitrary, illegal, and in violation of Articles 14 and 300-A of the Constitution of India.
Contentions of the Respondent:
The learned counsel appearing on behalf of the Respondent contended that the Petitioner had sanctioned a loan without observing due diligence.
Observations of the Court:
Justice Moksha Khajuria Kazmi, delivered a scathing critique of the bank’s action, calling it “illegal, arbitrary, and unsustainable in law.” The Court held that gratuity cannot be forfeited on mere allegations and that such forfeiture must be strictly in line with the conditions laid down in Section 4(6) of the Payment of Gratuity Act, 1972.
Quoting directly, the Court emphasized, “A bare perusal of the aforesaid provision makes it evident that forfeiture of gratuity is permissible only under the specific circumstances enumerated therein… In the present case, none of the aforesaid statutory conditions have been fulfilled. The petitioner retired upon superannuation and was not terminated on account of any misconduct. No disciplinary inquiry has been initiated or concluded to prove any negligence or intentional wrongdoing by the petitioner.”
In reaffirming the binding nature of the statutory right to gratuity, the Court relied on the Supreme Court’s decision in Hira Lal v. State of Bihar, stating, “Gratuity is not a bounty, but a statutory right of the employee. A person cannot be deprived of his pension without the authority of law, which is the constitutional mandate enshrined in Article 300-A of the Constitution.”
The Court further fortified its position by referencing Union Bank of India v. C.G. Ajay Babu, where the Supreme Court held that, “Misconduct must be established in an inquiry, and gratuity cannot be forfeited on allegations alone.”
Slamming the bank’s justification based on a pending civil suit, the Court observed, “Mere pendency of a civil suit for recovery against the borrower cannot, by any stretch of reasoning, justify the withholding of gratuity legally due to the petitioner. The said suit pertains solely to the liability of the borrower and does not involve any adjudication of misconduct on the part of the petitioner.”
Finally, invoking constitutional doctrine, the Court reminded the respondent-bank of its obligations, “The respondent-Bank, being a ‘State’ within the meaning of Article 12… is expected to act fairly, transparently, and in accordance with law. The arbitrary withholding of gratuity, without affording due process or any lawful authority, amounts to a violation of the petitioner’s rights under Article 300-A (right to property) and Article 14 (equality before law) of the Constitution of India.”
The decision of the Court:
With the above direction, the court allowed the writ petition.
Case Title: Kamaljeet Gupta vs. J&K Grameen Bank
Coram: Justice Moksha Khajuria Kazmi
Case No.: WP(C ) No. 898/2021
Advocate for the Petitioner: Adv. Ankur Sharma
Advocate for the Respondent: Adv. Sachin Dogra, Vandana Mehta
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