National Fertilizers Ltd. vs A.K. Maitra
2011 Latest Caselaw 6278 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

                                 Date of decision: 21st December, 2011.
+                        LPA 792/2011

%     NATIONAL FERTILIZERS LTD.                      ....Appellant
                  Through: Mr. A.S. Chandhiok, ASG with Mr.
                              P.K., Advocate.
                           Versus
      A.K. MAITRA                                ..... Respondent
                  Through:    Ms. Anju Bhattacharya, Adv.
                         AND
                  LPA 793/2011

    NATIONAL FERTILIZERS LTD.                        ....Appellant
                  Through: Mr. A.S. Chandhiok, ASG with Mr.
                              P.K., Advocate.
                           Versus
  ANIL KUMAR SHARMA                              ..... Respondent
                  Through:    Ms. Anju Bhattacharya, Adv.
CORAM :-
HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
RAJIV SAHAI ENDLAW, J.

1. The appeals impugn identical orders in W.P.(C) No. 8561/2010 &

W.P.(C) No. 469/2011 preferred by the respondents and whereby the learned

Single Judge has directed the appellant to release the amount due to each of

the respondents towards Leave Encashment along with interest @ 8% per

annum. The respondents superannuated from the employment with the

appellant on 28th February, 2009 and 31st March, 2010 respectively.

However their retiral dues on account of Gratuity and Leave Encashment

were not released to them. The respondents approached the Controlling

Authority under the Payment of Gratuity Act, 1972; the appellant in those

proceedings took a stand that the gratuity amounts had been withheld due to

pendency of judicial proceedings against the appellant and some of its

officials including the respondents, for payment of advance monies to

M/s Karsan Ltd., Ankara, Turkey for supply of urea without obtaining the

approval of Reserve Bank of India. However, the Controlling Authority

under the Gratuity Act held that since disciplinary proceedings also initiated

against the respondents for the same reason were dropped on 13 th October,

2004 and 18th February, 2005 respectively and the respondents exonerated

and further since as on the date of superannuation, no disciplinary

proceedings were pending against the respondents, the appellant was not

entitled to withhold the gratuity. Accordingly, the Controlling Authority

under the Gratuity Act directed the appellant to release the gratuity amounts

to the respondents. The appeals preferred by the appellant before the

Appellate Authority under the Gratuity Act were unsuccessful and the

gratuity amounts released by the appellant to the respondents.

2. However, the appellant having still not released the amount towards

Leave Encashment, the writ petitions from orders wherein these appeals

have preferred, were filed by the respondents for a direction to the appellant

to release the amount towards Leave Encashment.

3. The appellant contested the said writ petitions contending that the

amounts towards Leave Encashment were withheld in accordance with the

decision of the Board of Directors and which decision was in accordance

with the Rules and Regulations of the appellant. It was pleaded that

pursuant to authorization of Government of India to import urea, the

appellant entered into a contract with M/s Karsan Ltd. aforesaid for supply

of urea fertilizer in bagged form; the contract provided for 100% advance

payment and an amount US $ 38 million was so paid; however neither was

the urea received nor the advance refunded; that the respondents amongst

other employees of the appellant had vetted the contract; that the

Enforcement Directorate, Foreign Exchange Regulation Act, 1973 (FERA)

initiated proceedings against the appellant and some of its employees

including the respondents alleging that the clauses of the contract were in

violation of FERA and Exchange Control Manual; that the said proceedings

i.e. adjudication proceedings under Section 50 of FERA and criminal

complaint under Section 56, FERA r/w Section 200 Cr.P.C. were still

pending. It was thus contended that since there was a possibility of

imposition of penalty under Section 50 of FERA on the respondents, the

amount due to the respondents towards Leave Encashment was being

withheld till culmination of those proceedings.

4. The learned Single Judge has allowed the writ petitions filed by the

respondents holding that the said dues could be withheld only during the

pendency of disciplinary proceedings for imposition of major penalty and

the respondents having been exonerated in the said proceedings the appellant

is no longer entitled to withhold the same. It was further held that retiral

benefits including of Leave Encashment are not bounty but are earned by the

employees through the years of service and cannot be withheld. The learned

Single Judge has also held that the pendency of the criminal proceedings

against the respondents does not entitle the appellant to withhold the dues

since the appellant as well as some other employees of the appellant are also

accused therein.

5. The sole question for adjudication is thus whether the appellant is

entitled to withhold the said dues during the pendency of the aforesaid

prosecution and adjudication proceedings.

6. The learned ASG appearing for the appellant relies on Rule 50 of the

National Fertilizers Limited Employees' (Conduct, Discipline and Appeal)

Rules which is as under:-

"Wherever NFL Employees (CDA) rules are silent, the provision of Govt. CCS (CCA) Rules shall be followed."

7. It is further contended that since the Rules aforesaid are silent with

respect to withholding of Leave Encashment, Rule 39(3) of the Govt.

CCS(Leave) Rules, 1972 which is as under would apply:-

"39(3) The authority competent to grant leave may withhold whole or part of cash equivalent of earned leave in the case of a Government servant who retires from service on attaining the age of retirement while under suspension or while disciplinary or criminal proceedings are pending against him, if in the view of such authority there is a possibility of some money becoming recoverable from him on conclusion of the proceedings against him. On conclusion of the proceedings, he will become eligible to the amount so withheld after adjustment of Government dues if any."

8. Reliance is also placed on a communication dated 18th January, 2011

of the Ministry of Finance, Department of Revenue enclosing clarification

issued by DoPT on Rule 39(3) (supra) to the effect that withholding of

Leave Encashment should be resorted to in those cases where there is

likelihood of some money becoming due for instance where the proceedings

are on account of embezzlement of government funds or loss of public

money etc. It is contended that Section 50 of FERA provides for imposition

of penalty not exceeding five times the amount or value involved in any such

contravention. It is argued that if contravention is proved, the appellant

company may be subjected to payment of huge penalty as the value of the

contract was `133 crores.

9. The counsel for the respondents though has disputed the existence of

Rule 50 (supra) in the Rules, has also contended that the same even if in

existence would not make the provisions of Rule 39(3) (supra) applicable.

The learned Single Judge also in this regard has noticed the Resolution dated

16th August, 1996 of the Board of Directors of appellant as under:-

"RESOLVED THAT the proposal for withholding the payment on account of leave salary/leave encashment due to an employee against whom disciplinary proceedings for imposing major penalty are contemplated and/or pending on the charge of having caused loss/damage to the Company and from whom some amount will become recoverable if charges are proved, be and is hereby approved for incorporation in rules of the Company."

The counsel for respondents has contended that the Resolution

aforesaid restricts the withholding of Leave Encashment only to the cases

where disciplinary proceedings for imposing major penalty are contemplated

or pending and in which there is possibility of amounts being recoverable for

having caused loss/damage to appellant. It is contended that the

departmental proceedings against the respondents stood concluded long

before their superannuation and the respondents were exonerated and thus

there is no possibility of anything being recoverable by appellant from

respondents.

10. We have considered the matter. Rule 50 (supra) provides for

applicability of the CCS (CCA) Rules where the appellant's Rules are silent.

However owing to the Resolution dated 16 th August, 1996, it cannot be said

that the Rules of the appellant are silent regarding withholding of Leave

Encashment. Rule 50 (supra) uses the expression "wherever NFL

Employees (CDA) Rules are silent" which would mean a case of "no

provision" and not a case of "insufficient provision". However, in view of

the Resolution (supra), as far as the employees of the appellant are

concerned, it cannot be said that there is no provision for withholding of

Leave Encashment. The Resolution (supra) enables appellant to withhold

Leave Encashment due to an employee against whom disciplinary

proceedings for imposing major penalty are contemplated or pending, for the

charge of having caused loss or damage to the company and from whom

some amount will be recoverable if charges are proved. Such is not the case

here. At the time of retirement of the respondents, neither any disciplinary

proceedings were pending nor contemplated. Rather, disciplinary

proceedings earlier initiated had been dropped and the respondents

exonerated. The Leave Encashment of the respondents is now sought to be

withheld under Rule 39(3) of the Government CCS (Leave) Rules (supra)

which provides for such withholding not only in the case of disciplinary

proceedings, as provided in the Resolution (supra) also, but also in case of

criminal proceedings and if there is a possibility of any government dues

against the employees. The question which arises is, whether when the

Board of Directors of the appellant did not choose to extend withholding of

Leave Encashment to cases of prosecution and government dues as provided

for in Rule 39(3) (supra), can such withholding be permitted by relying on

residuary Rule 50 (supra). In our opinion, no. The Supreme Court in B.S.

Mathur Vs. UOI (2008) 10 SCC 271 similarly held that where a particular

aspect is provided for in the Rules, the Rules cannot be said to be silent with

respect thereto and the question of taking any aid from any outside Rule

does not arise.

11. Though the aforesaid is sufficient to dismiss these appeals but we

deem it appropriate to consider the position under Rule 39 (3) supra also.

12. A Division Bench of this Court of which one of us (Acting Chief

Justice) was a member, in judgment dated 11th September, 2002 in CWP

3545/2002 titled LAC R. Bhaskaran Vs. UOI held that once a provision is

made for payment of certain amount by way of leave encashment, it

becomes akin to a right of property in terms of Article 300A of the

Constitution of India and such a right can neither be taken away nor

curtailed as was sought to be done in that case by a mere circular. Relying

on the said judgment, another Division Bench of this Court in judgment

dated 1st December, 2010 in W.P.(C) No. 4011/2010 titled Kanwar Pal

Singh Vs. UOI, in the absence of any Rule denying leave encashment in the

case of dismissal from service, directed payment of leave encashment

benefit.

13. The CCS (CCA) Rules are concerned with relationship between the

government as the employer and its servant/employee. The same are not

intended to provide otherwise. Thus what has to be recoverable within the

meaning of Rule 39(3) of the CCS (Leave) Rules supra has to be the loss

occasioned by the employee to the employer. The said rule cannot be made

applicable for recovery of other dues. The amount if any due under Section

50 of FERA cannot be said to be recoverable on account of relationship of

employer or employee but is by way of penalty for contravention of

provisions of FERA. Rather, Sections 57 & 70 of FERA also provide for

mode of recovery of such penalty amounts. There is no provision for

attachment in anticipation of penalty being levied. If it were to be accepted

that Rule 39(3) supra can be invoked in the case of any government dues,

then the government as employer would be entitled to withhold Leave

Encashment in the event of pendency of any prosecution even if unrelatable

to the employment, which the employee at the time of superannuation may

be facing and which may also be punishable with fine or for that matter, any

other government dues viz. electricity / water charges etc. even. The same

cannot be the purport of the Rule 39(3) aforesaid.

14. We are also constrained to observe that had the appellant been of the

view that there was any likelihood of any monies becoming due from the

respondents to the appellant, considering the complaint of the Enforcement

Directorate, FERA, the appellant ought not to have dropped the

departmental proceedings initiated against the respondents and exonerated

the respondents. The appellant having done so is not entitled to contend

otherwise.

15. We therefore, though for reasons different from those which prevailed

with the learned Single Judge, do not find any merit in the appeals. The

same are dismissed.

RAJIV SAHAI ENDLAW, J

ACTING CHIEF JUSTICE DECEMBER 21, 2011 pp