Delhi High Court
Vijay Krishan vs The State Trading Corporation & ... on 4 October, 2018
$~
*IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 5th September, 2018
Pronounced on: 4th October, 2018
+ W.P.(C) 6301/2010
VIJAY KRISHAN ..... Petitioner
Through: Mr. V.P. Singh, Adv.
versus
THE STATE TRADING CORPORATION & ORS
.. Respondents
Through: Mr. Tarkeshwar Nath, Adv.
CORAM:
HON'BLE MR. JUSTICE C.HARI SHANKAR
% JUDGMENT
1. The petitioner, who had put in 36 years of service in the
Government and public sector, was appointed, in the State Trading
Corporation of India Ltd (Respondent No. 1 herein and referred to,
hereinafter, as "STC"), as Director (Finance), vide Department of
Commerce Office Memorandum, dated 23rd July, 2002, for a period of
5 years from the date of taking charge of the post or till
superannuation, or further orders, which was earlier. The petitioner
assumed charge of the post of Director (Finance) on 1 st August, 2002,
and retired, on 31st July, 2006, on attaining the age of superannuation,
vide Office Order dated 12th May, 2006.
2. On 28th July, 2006, a charge-sheet was issued, to the petitioner,
proposing holding of an enquiry, against him, under Rule 27 of the
Employees‟ (Conduct, Discipline & Appeal) Rules, 1975 (hereinafter
referred to as "the Rules"). Though learned counsel for the petitioner
has not made any submissions regarding the merits of the charges
against his client, the Articles of Charge may, for the sake of
completion of the recital, be reproduced thus:
" Article-I
That the said Shri Vijay Krishan while working as
Director (Finance) of State Trading Corporation of India
Limited, New Delhi failed to ensure proper examination of
the business proposal from finance angle of the STC Metal
Scrap Division for grant of financial assistance of Rs.150
crore to M/s Metro Machinery Traders for purchase of old
plant & Machinery from M/s Neyveli Lignite Corporation
submitted on 28.04.2005 for consideration of the STC
Committee of management.
Article-II
That the said Shri Vijay Krishan failed to critically
evaluate the financial viability of the NLC Project before
submitting Viability Report dated 29.04.2005 by Fax from
Mumbai.
Article-III
That the said Shri Vijay Krishan failed to exercise due
diligence by neither questioning the wide variations in the
estimated values of individual items of plant & machinery of
two valuation reports arranged by applicant party while
approving the proposal dated 28.04.2005 initiated by Metal
Scrap Division for seeking reliable estimation of worth of the
plant & machinery in question through independent third
party evaluation before considering the proposal.
Article-IV
That the said Shri Vijay Krishan failed to ensure
compliance with the provisions of STC‟s Circular
No.CMD/STC/03/990 dated 19th August, 1999 issued by
CMD and Circular No. 173 dated 27th July, 2000 issued by
Company Secretary while approving the proposal dated
28.05.2005 of Metal Scrap Division for financial assistance to
the tune of Rs.15.38 crore to M/s A.G. Agro Pvt. Ltd. for
purchase of old process steam plant of M/s Neyveli Lignite
Corporation Ltd.
The above acts of omission and commission as detailed
in Articles I to IV above on the part of Shri Vijay Krishan
constitute misconduct as per rules 4(1) (i) & (ii) and Rule 5
(5) & (9) of the STC Employees (Conduct, Discipline,
Appeal) Rules, 1975."
3. A disciplinary inquiry was held, culminating in Inquiry Report
dated 14th November, 2008. The disciplinary authority, finally, passed
the impugned order, dated 20th May, 2009, imposing, on the petitioner,
the penalty of deduction of 100% of the gratuity payable to him.
Rival Submissions
4. Mr. V. K. Singh, learned counsel for the petitioner, chose not to
address any submissions regarding the merits of the charges against
his client, or the findings of the IO and the DA thereon. He restricts
his submissions to the following:
(i) Deduction of 100% gratuity was contrary to Section 4(6)
of the Payment of Gratuity Act, 1972 (hereinafter referred to as
"the Act") under which termination of employment was the sine
qua non for passing an order for forfeiture of gratuity. Sub-
section (6) of Section 4 of the Act may, for ready reference, be
reproduced thus:
"(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 of
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."
(Emphasis supplied)
Termination of service is, therefore, Mr. Singh would contend,
the sine qua non for forfeiture of gratuity, whether in whole or
in part, as per Section 4(6) of the Act. No such termination, of
the petitioner‟s service, had taken place, as he had been
relieved, on completion of his tenure as Director (Finance) of
the STC, on 31st July, 2006. For this proposition Mr. Singh
relies on para 14 of Jaswant Singh Gill v. Bharat Coking Coal
Ltd, (2007) 1 SCC 663 and para 17 of Jorsingh Govind Vanjari
v. Divisional Controller, Maharashtra State Road Transport
Corporation, Jalgaon Division, Jalgaon, AIR 2017 SC 57.
(ii) Punishment had been awarded, to the petitioner under
Rule 30-A(ii) of the Rules, which could not supersede the Act,
as they were not statutory. Reliance was placed, for this
purpose, on paras 18 to 21 of Chairman-cum-managing
Director, Mahanadi Coal Field Ltd v. Rabindranath Choubey,
(2013) 16 SCC 411. Rule 30-A of the Rules read thus:
"30-A Continuation of disciplinary proceedings
after retirement
(i) 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.
(ii) During the pendency of the disciplinary
proceedings, the disciplinary authority may withhold
payment of gratuity, for ordering the recovery of
gratuity of the whole or part of any pecuniary loss
caused to the Company if the employee is found in a
disciplinary proceeding or judicial proceeding to 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 Section 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 case the employee is
fully exonerated."
(iii) Reliance was also placed, by Mr. Singh, on para 10 of
Jaswant Singh Gill (supra), which holds that Rule 27 of the
Rules, which applied in that case, provided only for recovery
from gratuity to the extent of loss caused to the Company, and
ordained that, in any event, penalties had to be imposed so long
as the employee remained in service. It was held, in the said
paragraph, that, even if disciplinary proceedings were initiated
prior to attaining of the age of superannuation, once the
employee was allowed to retire from service, the question of
imposing the penalty of removal or dismissal from service
would not arise. Even though the applicable Rules allowed for
continuation of a disciplinary proceeding despite retirement of
the employee, the said allowance, it was held, would not mean
that, though the employee was permitted to retire, and his
services had not been extended for the said purpose, major
penalty could be imposed on him.
(iv) Mr. Singh pointed out that Jaswant Singh Gill (supra)
has been referred, by Rabindranath Choubey (supra), to a
Larger Bench, but submitted that the said reference would not
affect his case, as his was not the case of dismissal of removal,
and the point referred to the Larger Bench was, expressly,
whether the punishment of removal, or dismissal, could be
awarded to an employee after he had retired from service.
(v) It was further submitted that Rule 30-A permitted for
withholding/forfeiture of gratuity, only to the extent of loss
caused. There was no allegation, in the present case, in any
Article of Charge, of the acts of the petitioner having caused
loss to the respondent. In fact, no loss had occurred, to the
respondent, till date. Neither had any such loss been quantified.
5. Arguing in opposition, Mr. Tarkeshwar Nath initially contested
the maintainability of the present writ petition, on the ground that
Section 7(6) of the Act provided an efficacious alternative remedy, by
way of appeal, to the appellate authority specified thereunder. He
relied, for the said purpose, on the judgements of this Court in Neeru
Abrol v. Chairman and Managing Director, National Fertilisers Ltd,
2017 (152) FLR 565, P. S. Gupta v. U.O.I., 2011 (3) LLJ 839 and S.
P. S. Rana v. National Seeds Corporation, 2007 (99) DRJ 227. He
also highlighted the fact that the proceedings, which had culminated
before the Supreme Court in Jaswant Singh Gill (supra), too, reached
the Supreme Court via the Controlling Authority under the Act.
Alternatively, Mr. Nath submits, a remedy of appeal was also
available under Rule 35 of the Rules. As such, he would exhort this
Court to reject this writ petition on the ground of maintainability.
6. Addressing the reliance, by Mr. Singh, on Jaswant Singh Gill
(supra), Mr. Nath would submit that the said decision does not deal
with the situation where the charge-sheet had been issued prior to
retirement of the employee. He, instead, places reliance on para 23 of
the judgement in Rabindranath Choubey (supra), also submitting
that, as the said judgement referred Jaswant Singh Gill (supra) to a
Larger Bench, the reliance, on the latter decision, by Mr. Singh, was
inappropriate.
7. Mr. Nath further submitted that Section 4(6) of the Act had
been interpreted by a coordinate single bench of this Court in Marmar
Mukhopadhyay v. U.O.I., MANU/DE/2466/2013. He placed specific
reliance on paragraphs 23 and 24 of the report, which read thus:
"23. In view of the aforesaid discussion with respect to
bindingness of the ratios in the judgments of M.H. Mazumdar
(supra) and Brahm Datt Sharma (supra) we will have to read
the provisions of Section 4(6) of the Payment of Gratuity Act.
Once the ratio of the judgment of the Supreme Court is that
departmental proceedings can continue even after retirement
if the rules of the organization or statutory rules so permit,
then, I am of the opinion that the provision of Section 4(6) of
the Payment of Gratuity Act must be read by putting more
stress not on the aspect of the fact that dismissal order or
termination of services order against an employee cannot be
passed after retirement but the substance and heart of Section
4(6) is that the action of the employee is such that loss or
damage caused to the employer during the period of service of
the employee and which can result in an order of termination
of services i.e. what is important is not passing of an actual
order of termination of services before retirement but the loss
or damage caused to the employer-organization which can
entail order of termination of services of an employee if the
employer had continued to be in service. The fact that order of
termination of services cannot be passed because of
retirement of the employee in the meanwhile cannot mean that
the loss or damage has not been caused to the employer which
otherwise could have resulted in dismissal/termination of
services of an employee. That being so, the provisions of
Section 4(6) will have to be read in the same manner as was
done by the Supreme Court with reference to Bombay Civil
Services Rules 188 and 189 in the case of M.H. Mazumdar
(supra) i.e. entitling an employer to continue with the
departmental proceedings even after retirement of the
employee.
24. I do not find anything in the applicable provision of
Section 4(6) of the Payment of Gratuity Act, 1973 which
brings to an end automatically the continuation of an enquiry
against a charged employee merely on account of
superannuation/retirement. If the provisions of Rules 188 and
189 have been held in the case of M.H. Mazumdar (supra) to
enable continuation of the departmental proceedings after
retirement of an employee, I find that the provision of Section
4(6) also does provide entitlement of forfeiture on account of
loss or damages caused by an employee and which
entitlement does not bear any co-relation to the incidence of
retirement of an employee because nothing in Section 4(6) of
the Payment of Gratuity Act at all provides that on retirement
there is disentitlement to continue the enquiry/departmental
proceedings against a superannuated employee. All that the
provision of Section 4(6) provides is that once the services
have been terminated i.e. in effect can be terminated if
employee was in service or the employee being found guilty
of act or willful omission or negligence causing any damage
or loss or destruction of property belonging to the employer,
then, forfeiture can be made of the gratuity, and if that be so,
this provision does not in any manner prohibit continuing of
the departmental enquiry after superannuation of the charged
official/retiring employee."
(Emphasis supplied)
In this connection, Mr. Nath also sought to invoke para 18 of
the judgement in S. P. S. Rana (supra).
8. Mr. Nath lastly submits that, if the arguments of Mr. Singh were
accepted, an employee of the respondent could easily commit
embezzlement prior to his retirement, and, after he retires, claim that
he should be let off scot-free. Such, Mr. Nath would submit, could
never be the intention of the law.
9. For these reasons, Mr. Nath would exhort this Court to reject
the present writ petition.
10. Countering the reliance, by Mr. Nath, on Marmar
Mukhopadhyay (supra), Mr. Singh submits that, in view of the later
decision of the Supreme Court in Jorsingh Govind Vanjari (supra),
Marmar Mukhopadhyay (supra) could not come to the aid of the
respondent.
11. Mr. Nath would, in surrejoinder thereto, contend that the
controversy, in Jorsingh Govind Vanjari (supra), was totally
different, and that the said decision does not refer, anywhere, to
Section 4(6) of the Act.
Analysis
12. Inasmuch as the controversy in issue is primarily legal,
involving interpretation of different pronouncements of the Supreme
Court and of this Court, and the issue was addressed, at length, by
both learned counsel, over various dates of hearing, I deem it
appropriate to decide it on merits, instead of relegating the petitioner
to the remedy of appeal available at the administrative level. Besides,
in Rabindranath Choubey (supra), a similar objection, as upheld by
the learned Single Judge, was rejected, in appeal, by the Division
Bench of the High Court, which ruled on merits, and the matter was
also decided, on merits, by the Supreme Court.
13. It is obvious, even from a reading of Rule 30-A of the sub-rules,
that the respondent cannot wish away Section 4(6) of the Act. Sub-
Rule (ii) of Rule 30-A specifically permits withholding of payment of
gratuity by reference to Section 4(6) of the Act. In my view, therefore,
it is not possible to countenance an argument that Rule 30-A of the
Rules can operate on its own steam, as a self-contained code,
oblivious of the dictates of Section 4(6) of the Act.
14. Adverting, now, to Section 4(6) of the Act, a plain reading of
the said provision reveals that it contemplates termination as a
necessary pre-requisite to withholding of gratuity, whether in whole
or in part. Termination of the employee is specifically contemplated in
clause (a) as well as in both of the sub-clauses (i) and (ii) of clause (b),
of Section 4(6). Withholding of gratuity, in the absence of an order of
termination of the employee would, therefore, clearly amount to doing
violence to Section 4(6) of the Act which, being in the nature of
plenary parliamentary legislation, has to be accorded due respect and
reverence. It is not permissible, therefore, for the respondent to rely
on Rule 30-A of the Rules, to act in a manner contrary to Section 4(6)
of the Act.
15. I may note, in this regard, that it is nobody‟s case that the Act
does not apply to the respondent, or to the present proceedings. That
being so, even assuming there were a conflict between Rule 30-A of
the Rules and Section 4(6) of the Act - which, frankly, does not seem
to exist - it is obvious that Section 4(6) of the Act would prevail. The
submission of Mr. Singh, to this effect, is well taken and merits
acceptance.
16. I now proceed to the inevitable task of maneuvering betwixt the
authorities which, chiefly, were cited before me, i.e. Jaswant Singh
Gill (supra), Rabindranath Choubey (supra), Jorsingh Govind
Vanjari (supra) and Marmar Mukhopadhyay (supra).
17. Jaswant Singh Gill
17.1 The appellant Jaswant Singh Gill (hereinafter referred to as
"Gill"), was an employee of Respondent No.1- Bharat Coking Coal
Ltd. (hereinafter referred to as "BCCL"). He was visited with a
charge-sheet, alleging shortage of stock of coal in one of the areas
under his supervision. During the pendency of the ensuing
departmental proceedings, he was allowed to retire.
17.2 Consequent to retirement, Gill applied, in 1998, for payment of
gratuity, under the Act. The application was denied. Gill approached
the Additional Labour Commissioner (hereinafter referred to as
"ALC"). In response to the notice issued by the ALC, BCCL filed a
response, contending that the gratuity payable to Gill had been
withheld for the purposes of making of adjustment, in the event
recovery was directed to be made in the disciplinary proceedings.
17.3 Upon conclusion of the departmental inquiry, the disciplinary
authority, vide order dated 5th July, 2000, found Gill guilty of the
charge against him and, "considering the seriousness of the offence,
would have imposed the punishment of dismissal from service of Shri
J.S. Gill....... but for his superannuation". Forfeiture of the gratuity of
Gill was, therefore, ordered.
17.4 The ALC, however, in his order dated 11th April, 2001, held
that, as Gill had retired on superannuation, he was entitled to payment
of gratuity under the Act. It was observed, by the ALC, that forfeiture
of gratuity, under Section 4(6) of the Act, was permissible only where
the service of the employee was terminated, for one or other of the
reasons contemplated by the different clauses of the said sub-section.
The services of Gill not having been so terminated, the ALC held that
forfeiture of his gratuity was impermissible. He specifically observed,
in this regard, that "the basic requirement of termination of service for
any of the misconduct as enumerated under Sections 4(6)(a) and
4(6)(b) of the Payment of Gratuity Act, 1972 has not been fulfilled
before the issue of order of forfeiture of gratuity."
17.5 BCCL appealed. The appellate authority concurred with the
finding, of the controlling authority under the ALC that termination,
for one of the reasons contemplated in the different clauses of Section
4(6) of the Act was a sine qua non for forfeiture or withholding of
gratuity. He, therefore, dismissed the appeal of BCCL.
17.6 BCCL proceeded to the High Court of Jharkhand by way of a
writ petition, which, too, was dismissed by a learned Single Judge,
vide judgment dated 13th December, 2001.
17.7 The matter was carried further, by BCCL, via an intra-court
appeal. The Division Bench of the High Court of Jharkhand set aside
the judgment of the learned Single Judge, on the ground that the
controlling authority under the Act was not competent to entertain the
appeal against the order passed by the disciplinary authority,
imposing, on Gill, the punishment of forfeiture of gratuity.
17.8 It was thus that Gill reached the Supreme Court.
17.9 The Supreme Court crystallized the issue arising for
consideration before it as " whether the provisions of the said Act shall
prevail over the rules framed by the Coal India Limited, the holding
company of Respondent No.1, known as the Coal India Executives‟
Conduct, Discipline and Appeal Rules, 1978 (for short "the Rules")".
17.10 It was recognized, at the very outset, by the Supreme Court, that
the Rule by which Gill was governed, provided for imposition of the
penalty of "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". Further, Rule 34.2 and 34.3 of the said Rules read
thus:
"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."
17.11 The Supreme Court held, categorically, in paras 9 and 10 of the
report, thus:
"9. The Rules framed by the Coal India Limited are not
statutory rules. They have been made by the holding company
of Respondent 1.
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.
(Emphasis supplied)
17.12 A reading of the above paras from the judgment of the Supreme
Court discloses that, while the Supreme Court acknowledged the
entitlement, of BCCL, to continue the disciplinary proceedings,
initiated against Gill, while he was in service, even after his
retirement, it was of the clear view that the said continuance would
not, as a sequitur, empower BCCL to, having allowed Gill to retire
and not having extended his service, impose, on him, a major penalty
in terms of Rule 27.
17.13 Again, in paras 11 and 12 of the judgment, the Supreme Court
held thus:
"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.
12. A statutory right accrued, thus, cannot be impaired by
reason of a rule which does not have the force of a statute. It
will bear repetition to state that the Rules framed by
Respondent 1 or its holding company are not statutory in
nature. The Rules in any event do not provide for withholding
of retiral benefits or gratuity"
(Emphasis supplied)
17.14 The Supreme Court went on to observe further, in para 13 of the
judgment that the provision of sub-section (6) of Section 4 of the Act
"must.....be scrupulously observed". This, it was held, would not only
require termination of services of the employee, to have been directed
before any forfeiture of his gratuity took place, but also limited such
forfeiture to the actual loss of or damages, quantified by the
disciplinary authority.
17.15 The only circumstance in which the whole of gratuity payable
to the employee could be forfeited, was where the termination of the
employee was for riotous or disciplinary conduct, or an act of
violence, or where an employee was convicted for an offence
involving moral turpitude.
17.16 Para 14 of the report reiterates the legal position, in no
uncertain terms, thus:
"14. Termination of services for any of the causes enumerated
in sub-section (6) of Section 4 of the Act, therefore, is
imperative."
(Emphasis supplied)
17.17 Relying on the above reasoning, the Supreme Court set
aside the judgment of the Division Bench of the High Court of
Jharkhand, and allowed the appeal of Gill, with costs.
17.18 Jaswant Singh Gill (supra) therefore, is categorical in
postulating that
(i) the Rules framed, by the company, would have to
cede place to the provisions of the Act, especially
Section 4(6) of the Act,
(ii) even if the Rules permitted continuation of the
disciplinary proceedings, initiated by the employee, while
in service, beyond his superannuation, that would not
permit imposition of a major penalty of dismissal or
removal, after the employee had superannuated, unless he
was not allowed to retire and his services were continued
for the said purpose,
(iii) termination of service, for one of the reasons
contemplated in Section 4(6) of the Act, was a sine qua
non for withholding of gratuity, whether in whole or in
part, and
(iv) the gratuity could be withheld, if at all, only to the
extent of the loss suffered by the organisation, which was
required to be quantified by the disciplinary authority.
18. Rabindranath Choubey
18.1 The respondent in this case (Rabindranath Choubey, hereinafter
referred to as "Choubey") was issued a charge-sheet on 1st October,
2007, proposing to hold a disciplinary inquiry. During the pendency of
the said proceedings, he was allowed to retire, on 31st July, 2010, on
attaining the age of superannuation. Choubey applied, on 21 st
September, 2010, for release of his gratuity. He also moved an
application before the Controlling Authority under the Act for the
same purpose.
18.2 On being informed, by the appellant-company Mahanadi
Coalfield Limited (hereinafter referred to as "MCL"), that the gratuity
of Choubey had been withheld owing to the pendency of the
disciplinary case against him, the Controlling Authority, under the
Act, held the claim of Choubey to be premature.
18.3 Choubey moved to the High Court of Orissa by way of a writ
petition, which was dismissed by the learned Single Judge, on the
ground that an alternate remedy of appeal was available to him.
18.4 Choubey filed an intra-court appeal. The Division Bench held
that the writ petition was maintainable and further ruled, on merits,
following Jaswant Singh Gill (supra) that, as the disciplinary
proceedings against Choubey had been initiated prior to his attaining
the age of superannuation, and he had been permitted to retire on
superannuation, there could be no question of imposing, on him, the
major penalty of dismissal from service thereafter. Withholding of his
gratuity, it was further held, had necessarily to abide by the provisions
of the Act. It was also held that the right, of Choubey, to gratuity,
under the Act, could not be impaired by resorting to the rules framed
by MCL, which did not have the force of statute. A direction, was
therefore, issued to MCL, to release the gratuity payable to Choubey.
18.5 The Supreme Court, which was further moved by MCL,
crystallized the issue arising for its consideration as "whether it is
permissible in law for the appellant to withhold the payment of
gratuity to the respondent, even after his superannuation from service,
because of the pendency of disciplinary proceedings against him."
18.6 Before the Supreme Court, learned counsel for MCL relied on
the judgment in SBI v. Ram Lal Bhaskar, (2011) 10 SCC 249, and
urged that the Act did not mandate release of gratuity when
departmental proceedings were pending against an employee.
18.7 The Supreme Court, at the outset, acknowledged the fact that
Rule 34 of the Rules applicable in that case permitted the management
to withhold gratuity during the pendency of disciplinary proceedings.
It, thereafter, distilled the issue before it thus (in paras 14 and 15 of the
report):
"14. The bone of contention is as to whether this rule is
contrary to the provisions of the Payment of Gratuity Act and,
therefore, this rule being no-statutory is to be ignored and the
provisions of the Gratuity Act are to be preferred. In this
behalf we will have to examine the scheme of the Gratuity
Act to find whether as per the Gratuity Act, such a person like
the respondent, would become entitled to receive the gratuity
under this Act.
15. It is because of the reason that a statutory right
accrued, thus, cannot be impaired by reason of a rule which
does not have the force of statute. It will bear repetition to
state that the Rules framed by Respondent or its holding
company are not statutory in nature."
18.8 Jaswant Singh Gill (supra), it was noted, examined the
interplay of the very same rules, vis-a-vis the Act. The principles
flowing from Jaswant Singh Gill (supra) were set out thus, by the
Supreme Court (in paras 17.1 and 17.2 of the report):
"17.1 No doubt, Rule 34.2 of the CDA Rules provides for
continuation of disciplinary proceedings despite retirement of
an employee if the same was initiated before his retirement.
However, after his retirement, major penalty in terms of Rule
27 cannot be imposed. We may state here that Rule 27 of the
CDA Rules provides for the nature of penalties including
„recovery from pay or gratuity of the whole party of any back
loss caused to the company by negligence or breach of orders
for trust‟. Major penalties which are prescribed under Rule 27
are reduction to a lower grade, compulsory retirement,
removal from service and dismissal. The Court thus held that
these major penalties cannot be imposed upon a retired
employee.
17.2 The Gratuity Act gives right to an employee to receive
gratuity on rendition of 5 years‟ continuous service. Gratuity
becomes payable as soon as the employee retires. This
statutory right which accrues to an employee cannot be
impaired by reason of a rule which does not have the force of
a statute. Therefore, Rule 34.3 of the CDA Rules, which is
non-statutory in nature, is contrary to the provisions of the
Gratuity Act. As such, gratuity cannot be withheld on the
retirement of an employee even if departmental proceedings
were initiated against him before his retirement and pending
at the time of retirement."
18.9 It was noticed that, while Jaswant Singh Gill (supra) was
rendered by a Bench of two learned Judges, Ram Lal Bhaskar (supra)
was a judgment of three learned Judges of the Supreme Court, and
later in point of time. Regarding Ram Lal Bhaskar (supra), the
Supreme Court held thus (in paras 18 to 21 of the report):
"18. Jaswant Sigh Gill v. Bharat Coking Coal Ltd. (2007)
1 SCC 663: (2007) 1 SCC (L& S) 584 was a judgment
delivered by a two-Judge Bench. Mr. Mahavir Singh, learned
Senior Counsel has placed strong reliance on a three-Bench
judgment of this Court which is later in point of time. This
case is known as SBI v. Ram Lal Bhaskar, (2011) 10 SCC
249: (2012) 1 SCC (L&S) 402. In that case, rule 19(3) of
the State Bank of India Officers Service Rules, 1992 came up
for interpretation which is in pari material with Rule 13.42 of
the CDA Rules. Said Rule 19(3) of the SBI Officers, Service
Rules also permits disciplinary proceedings to continue even
after the retirement of an employee if those were instituted
when the delinquent employee was in service. Then for the
purpose of such proceedings the otherwise retired employee is
deemed to be in service and those proceedings shall be
continued and concluded as if the employee had continued in
service. Thus, such an employee is deemed to be in service for
limited and specified purpose only viz. for the purposes of
continuance and conclusion of the proceedings. In that case,
charge-sheet was served upon the respondent before his
retirement. The proceedings continued after his retirement and
were conducted in accordance with relevant rules wherein
charges were proved. On the departmental remedies, the
respondent filed the writ petition in the High Court which was
allowed and order of dismissal was quashed.
19. This Court in SBI v. Ram Lal Bhaskar, (2011) 10
SCC 249: (2012) 1 SCC (L&S) 402 reversed the said decision
of the High Court. However, we find that there is no direct
discussion, in the said judgment, on the issue as to whether it
is permissible for the disciplinary authority to impose the
penalty of dismissal of service after the retirement of the
employee. In fact the Court had dealt with two aspects. One
question which was deliberated was as to whether inquiry
could continue after the retirement of the respondent from
service. This question was answered in the affirmative having
regard to Rule 19 (3) of the SBI Officers Service Rules. The
court distinguished another judgment in UCO Bank v.
Rajinder Lal Capoor [(2007) 6 SCC 694: (2007) 2 SCC (L&
S) 550] on the ground that in the said case the delinquent
officer had already been superannuated and the charge-sheet
was served after his retirement. In these circumstances the
Court had taken the view in Rajinder Lal Capoor case
[(2007) 6 SCC 694: (2007) 2 SCC (L& S) 550] that when an
employee is allowed to superannuate, no inquiry can be
initiated against him thereafter. However, if charge-sheet is
served before the retirement, enquiry can continue even after
the retirement as per Rule 19(3). This proposition thus stands
settled viz. if the Rule permit, enquiry can continue even after
the retirement of the employee.
20. The other aspect which was dealt with in SBI v. Ram
Lal Bhaskar, (2011) 10 SCC 249: (2012) 1 SCC (L&S) 402
was as to whether the High Court could interdict the findings
of disciplinary authority and arrive at its conclusion that the
findings recorded by the inquiry officer were not substantiated
by any officer on record on the basis of evidence produced.
This Court held that so long the findings of the disciplinary
authority are supported by some evidence, the High Court is
not empowered to reappreciate the evidence as an appellate
authority and came to a different and independent findings on
the basis of that evidence. This is not the issue before us in the
instant case.
21. It is thus clear that the question as to whether penalty
of dismissal could be imposed after retirement was not
categorically raised or dealt with in Ram Lal case. No doubt,
penalty of dismissal was inflicted upon the employee in that
case. But it was not specifically or in clear terms contended
that such a penalty could not be imposed on an employee who
is already permitted to retire. At the same time, innuendo, the
judgment gives a semblance of indication that such a penalty
is permissible because of the reason that as per the rules, for
the purposes of enquiry, the employee shall be deemed to be
in service. As a sequitur, one can deduce the principle that
when the Rules, by creating fiction, treat the officer still in
service, albeit for the limited purpose of the continuance and
conclusion of such proceedings, then any of the prescribed
penalties, including dismissal, can be imposed. However, as
we have pointed out above, the issue of permissibility of
penalty of dismissal on such a retired official was neither
raise nor any direct discussion followed thereupon. At the
same time, the fact remains that penalty of dismissal even
after the retirement, was upheld. This goes contrary to the
dicta laid down in Jaswant Singh Gill which took the view
that no major penalty is permissible after retirement and was
not even referred to."
(Emphasis supplied)
18.10 Having thus examined the decisions in Jaswant Singh Gill
(supra) and Ram Lal Bhaskar (supra), the Supreme Court held, in
para 22 of the report, that the issue of whether, in view of the
provisions of the Act, gratuity had necessarily to be released to the
employee concerned, on his retirement, even if departmental
proceedings were pending against him, stood directly answered by
Jaswant Singh Gill (supra). However, it was also noticed that
Jaswant Singh Gill (supra) proceeded on the premise that, after the
retirement of an employee, he could not be visited with the penalty of
dismissal. Resultantly, if the penalty of dismissal could be visited on
the retired employee, the right to forfeit gratuity would still enure, in
favour of the employer, in the eventualities provided in sub-section (1)
to (6) of Section 4 of the Act.
18.11 The Supreme Court also held, categorically, that "for invoking
clause (a) or (b) of sub-section (6) of Section 4, the necessary
precondition is the termination of service on the basis of departmental
enquiry or conviction in a criminal case" and that "this provision
would not get triggered if there is no termination of service."
18.12 On the premise that Jaswant Singh Gill (supra) proceeded on
the assumption that it was permissible to impose, on the employee, the
punishment of dismissal from service, even after his superannuation,
and noticing that Ram Lal Bhaskar (supra) took a contrary view, the
Supreme Court felt that the matter needed resolution by a Larger
Bench. Accordingly, the decision in Ram Lal Bhaskar (supra)
directed that the matter be placed before the Chief Justice for
constituting a Larger Bench to hear the appeal.
18.13 The said Larger Bench remains to be constituted.
19. Jorsingh Govind Vanjari
19.1 This case, clearly, did not actually deal with the issue of
whether, in the absence of an order terminating the services of an
employee, his gratuity could be withheld. The appellant before the
Supreme Court had been dismissed from service, and had raised an
industrial dispute, resulting in the termination being set aside, vide
order dated 26th August, 2002. However, as, in the interregnum, the
appellant had crossed the age of superannuation on 31 st May, 2005,
the Labour Court ordered that, from the date of termination to the date
of superannuation, the appellant would be entitled to all service
benefits except back wages which were limited to 50%.
19.2 The management challenged the award before the Bombay
High Court, which, vide judgment dated 8th July, 2015, modified the
award by granting one time compensation equivalent to 50% back
wages.
19.3 The appellant moved the Supreme Court thereagainst.
19.4 The Labour Court noted that the termination of the appellant,
from service, was consequent to a domestic inquiry, and that the
Labour Court had found the inquiry to have proceeded in violation of
the principles of natural justice. Once such a finding had been returned
by it, the Labour Court observed that it was for the management to
prove the factum of misconduct, by leading evidence before it. This,
the Labour Court noted, was not done, resulting in the allegation of
misconduct having been committed by the appellant (before the
Supreme Court) remained unestablished. In this scenario, the Labour
Court held that it could "safely be inferred that the charges leveled
against the parties are false and that charge-sheet was issued with an
intention to victimize him".
19.5 As noted hereinabove, ultimately, the High Court limited the
relief granted to the appellant-workman, a lump sum compensation of
50% back wages, from the date of termination till the date of
superannuation.
19.6 The appellant was also held, by the High Court, not to be
entitled to gratuity.
19.7 In so modifying the order of the Labour Court, the High Court
proceeded on the premise that the procedure followed by the Labour
Court was faulty, as it had decided the preliminary issue regarding
fairness of inquiry as well as the issue of misconduct at one stroke.
The Supreme Court found that this presumption, by the High Court,
was erroneous on facts, as it was the respondent-management which,
despite having been granted an opportunity, had failed to lead
evidence, to prove the misconduct, before the Labour Court.
19.8 Thereafter, the Supreme Court proceeded, in para 17 of the
report, to hold thus:
"17. In order to deny gratuity to an employee, it is not
enough that the alleged misconduct of the employee
constitutes an offence involving moral turpitude as per the
report of the domestic inquiry. There must be termination on
account of the alleged misconduct, which constitutes an
offence involving moral turpitude."
(Emphasis supplied)
19.9 Mr. Singh presses into service the above extracted para 17 of
the Supreme Court in Jorsingh Govind Vanjari (supra).
19.10 Be it regarded as ratio decidendi or obiter dictum, it is clear that
in para 17, the Supreme Court has held termination of service to be the
sine qua non for withholding gratuity. A reading of the judgment of
the High Court of Bombay, from which the matter proceeded to the
Supreme Court, as reported in MANU/MH/3974/2015, reveals that the
High Court directed withholding of gratuity on the ground that the
charge against the appellant involved moral turpitude. The Supreme
Court, in para 17 of its judgment, clearly disapproved of this view,
holding that termination of the employee had necessarily to precede
withholding of gratuity.
19.11 It is true that the judgment of the Supreme Court does not refer
to Section 4(6) of the Act. Even so, it is obvious that the Supreme
Court was seized of a provision which contemplated withholding of
gratuity only in the case of termination of the employee, and the
Supreme Court had treated the said clause as mandatory.
20. Marmar Mukhopadhyay
20.1 This judgment, by a learned Single Judge of this Court,
admittedly addresses, squarely, the issue of whether Section 4(6) of
the Act permitted withholding of gratuity in the absence of an order
terminating the services of the concerned employee.
20.2 In the said case, the petitioner-Marmar Mukhopadhyay
(hereinafter referred to as "Mukhopadhyay"), challenged a charge-
sheet, dated 28th November, 2006, issued to him, as well as the
consequential letter dated 30th November, 2006, whereby his employer
withheld his gratuity. The applicability of Section 4(6) of the Act was
admitted by all parties. Arguments were addressed, at length, on the
issue of whether inquiry proceedings could, or could not, continue
beyond the retirement/superannuation of Mukhopadhyay, in view of
Section 4(6) of the Act.
20.3 Mukhopadhyay, relied on Section 4(6) of the Act to contend
that departmental inquiry, against him, had necessarily to cease with
his retirement. He placed reliance, inter alia, on the judgment in
Jaswant Singh Gill (supra).
20.4 Para 7 of the judgment of this Court, which deals with Jaswant
Singh Gill (supra), reads thus:
"7. When we refer to para-10 of the judgment in the case
of Jaswant Singh Gill (supra) the same quite clearly holds
that penalties can only be imposed so long as the employee
remains in service and if an employee attains the age of
superannuation prior to closing of the disciplinary
proceedings question of major penalty by removal or
dismissal from services would not arise. It has further been
observed that entitlement to continue the departmental
proceedings is only if the services of the employee are
extended for the purpose of the enquiry proceedings. Supreme
Court thereafter observed in para 7 in the case of Bhagirathi
Jena (supra) that departmental proceedings cannot continue
unless there was a provision for continuing the departmental
enquiry after superannuation in the relevant rules of the
employer-organization.
In my opinion, para-13 of the judgment in Jaswant
Singh Gill (supra) would also be relevant because the
Supreme Court in the case of Jaswant Singh Gill (supra)
arrived at a finding that there is no entitlement to withhold the
gratuity because the conditions which were required for
applicability of Section 4(6) had not arisen inasmuch as in the
facts of that case the Disciplinary Authority had not passed an
order quantifying the loss or damage because the Disciplinary
Authority observed that punishment cannot be imposed after
retirement. In the case of Jaswant Singh Gill (supra) the
Disciplinary Authority had passed an order dated 5.7.2000
(which is reproduced in para-3 of the judgment) that since the
charged official in that case had superannuated from service,
no punishment of dismissal could be imposed. However, the
Disciplinary Authority, still directed forfeiture of the gratuity
of the charged official, and therefore the issue was that if
there exists no order of punishment as imposed by the
Disciplinary Authority whereby the existence of the
conditions of Section 4(6) of the Payment of Gratuity Act are
made out, then, how can there be an entitlement of the
employer to withhold gratuity. The ratios as given in paras 10
and 13 of the judgment in the case of Jaswant Singh
Gill (supra) are independent of each other i.e. Supreme Court
has independently observed of disentitlement to continue the
enquiry proceedings after superannuation and has also
separately found that in the facts of that case since there was
no order of the Disciplinary Authority quantifying the loss or
damage or existence of other conditions of Section 4(6) of the
Payment of Gratuity Act, 1972, hence there could not be
forfeiture of the gratuity as ordered by the Disciplinary
Authority."
(Emphasis supplied)
20.5 In para 21 of the judgment, the learned Single Judge held that
"the ratio of the Supreme Court in the case of Jaswant Singh Gill
(supra) that although the roles of employer-workman, permitted
continuation of the departmental proceedings, yet departmental
proceedings cannot continue after retirement." was in direct conflict
with an earlier decision of two-Judge Bench of the Supreme Court as
well as the decision of a Bench of three learned judge of the Supreme
Court in State of Maharashtra v. H.M. Mazumdar 1988 (2) SCC 52.
Thereafter, in paras 23 and 24 of the judgment, the learned Single
Judge proceeded to hold thus:
"23. In view of the aforesaid discussion with respect to
bindingness of the ratios in the judgments of M.H.
Mazumdar (supra) and Brahm Datt Sharma (supra) we will
have to read the provisions of Section 4(6) of the Payment of
Gratuity Act. Once the ratio of the judgment of the Supreme
Court is that departmental proceedings can continue even
after retirement if the rules of the organization or statutory
rules so permit, then, I am of the opinion that the provision of
Section 4(6) of the Payment of Gratuity Act must be read by
putting more stress not on the aspect of the fact that dismissal
order or termination of services order against an employee
cannot be passed after retirement but the substance and heart
of Section 4(6) is that the action of the employee is such that
loss or damage caused to the employer during the period of
service of the employee and which can result in an order of
termination of services i.e. what is important is not passing of
an actual order of termination of services before retirement
but the loss or damage caused to the employer-organization
which can entail order of termination of services of an
employee if the employer had continued to be in service. The
fact that order of termination of services cannot be passed
because of retirement of the employee in the meanwhile
cannot mean that the loss or damage has not been caused to
the employer which otherwise could have resulted in
dismissal/termination of services of an employee. That being
so, the provisions of Section 4(6) will have to be read in the
same manner as was done by the Supreme Court with
reference to Bombay Civil Services Rules 188 and 189 in the
case of M.H. Mazumdar (supra) i.e. entitling an employer to
continue with the departmental proceedings even after
retirement of the employee.
24. I do not find anything in the applicable provision of
Section 4(6) of the Payment of Gratuity Act, 1973 which
brings to an end automatically the continuation of an enquiry
against a charged employee merely on account of
superannuation/retirement. If the provisions of Rules 188 and
189 have been held in the case of M.H. Mazumdar (supra) to
enable continuation of the departmental proceedings after
retirement of an employee, I find that the provision of Section
4(6) also does provide entitlement of forfeiture on account of
loss or damages caused by an employee and which
entitlement does not bear any co-relation to the incidence of
retirement of an employee because nothing in Section 4(6) of
the Payment of Gratuity Act at all provides that on retirement
there is disentitlement to continue the enquiry/departmental
proceedings against a superannuated employee. All that the
provision of Section 4(6) provides is that once the services
have been terminated i.e. in effect can be terminated if
employee was in service or the employee being found guilty of
act or willful omission or negligence causing any damage or
loss or destruction of property belonging to the employer,
then, forfeiture can be made of the gratuity, and if that be so,
this provision does not in any manner prohibit continuing of
the departmental enquiry after superannuation of the charged
official/retiring employee."
(Emphasis supplied)
20.6 Paras 23 and 24 of the judgment of the learned Single Judge in
Marmar Mukhopadhyay (supra), as reproduced hereinabove,
elucidate two principles, i.e. (i) that Section 4(6) of the Act did not
bring to an end, automatically, the continuation of an inquiry against a
charged employee, merely on account of superannuation/retirement
and (ii) the reference to "termination" under Section 4(6) of the Act
did not necessarily refer to actual termination, but to a situation in
which the services of the employee could have been terminated, had
he continued in service. By this reasoning, the learned Single Judge,
has held that the superannuation/retirement, of the employee, in the
interregnum, would not debar the establishment-department from
withholding his gratuity, provided that the services of employee could
have been terminated had he continued in service and not retired.
21. The above dicta, juxtaposed
21.1 Section 4(6) of the Act, plainly read, uses the word "if the
services of such employee had been terminated". There is no
reference, in the said provision, to any "deemed termination" or
"possible termination". On a plain reading, the said sub-section
requires actual termination of the employee and nothing else, for it to
apply.
21.2 The learned Single Judge, in Marmar Mukhopadhyay has read
into Section 4(6), a situation in which actual termination of the
employee cannot take place but, had the employee not superannuated
in the interregnum, from service, it might have been possible to
terminate him.
21.3 The necessity of entering further into this controversy is,
however, obviated by the judgment in Rabindranath Choubey
(supra), which was delivered three months after Marmar
Mukhopadhyay (supra), on 29th October, 2013. In the said case, the
Supreme Court has categorically held that Jaswant Singh Gill (supra)
clearly ruled that gratuity of an employee could not be withheld after
he had superannuated. No doubt, the Supreme Court noticed that the
rationale of the decision in Jaswant Singh Gill (supra) was the
premise that, after superannuation, disciplinary proceedings, resulting
in the dismissal or removal of the employee from service, could not
take place, which view the Supreme Court felt appropriate to refer to a
Larger Bench. On the issue of impermissibility of recovery or
withholding of recovery of gratuity from an employee who had
superannuated from service, the law in Jaswant Singh Gill (supra)
continues to hold till date, in view of the pronouncement in
Rabindranath Choubey (supra).
21.4 Para 22 of the report in Rabindranath Choubey (supra)
categorically observes thus "Thus for invoking.......termination of
services."
21.5 The views expressed in para 17 of Jaswant Singh Gill (supra)
and para 20.3 of Rabindranath Choubey (supra), therefore, support
the proposition that an order of termination of the employee is a
necessary precursor to withhold his gratuity. At the cost of repetition,
it may be mentioned that this view is completely in accordance with
the actual wording of Section 4(6) of the Act and, therefore, in my
opinion, commends immediate acceptance.
22. Mr. Tarkeshwar Nath, appearing for the respondents, had also
sought to question the wisdom of such a view, by suggesting that, if
such a view were to be accepted, an employee and officer who was
guilty of serious financial defalcation could, merely by superannuating
or retiring, escape the consequences of his act. The argument is too
facile to be countenanced seriously.
23. In the first place, the issue in controversy relates only to the
power to withhold gratuity and not to any other action which could be
taken against the officer. Secondly, all that would be required to be
done, in order to ensure that the officer receives his just desserts for
his actions, would be not to permit him to retire during the
continuancy of the disciplinary proceedings.
24. Once the officer has been permitted to superannuate, however,
Section 4(6) of the Act would, in my view, unquestionably, kick in,
with all is appurtenances and embellishments, as noticed hereinabove.
Conclusion
25. For the above reasons, I am of the view that there is merit, in
the contention of the petitioner, that the petitioner having been
allowed to superannuate in normal course, and no order, terminating
his service, ever having been passed, the decision to withhold/forfeit
his gratuity was clearly in the teeth of Section 4(6) of the Act, and
cannot, therefore, sustain. Consequently, the impugned order, dated
20th May, 2009, is quashed and set aside.
26. The petitioner shall be entitled to reliefs consequent thereupon,
which shall be computed and disbursed to him within four weeks of
receipt, by the respondent, of a certified copy of this judgment.
27. I refrain from issuing any directions regarding continuation of
the disciplinary inquiry, or imposition of any alternative penalty by the
respondent, as the very permissibility of continuation of the
disciplinary inquiry, and imposition of a major penalty on the
petitioner, after he had superannuated from service, is still at large,
following the reference to the larger Bench, made by the Supreme
Court in Rabindranath Choubey (supra).
28. There shall be no order as to costs.
C.HARI SHANKAR, J
OCTOBER 04, 2018
dsn
