Karnataka High Court

M/S. Canara Bank vs Smt. Shantha Kumari on 26 July, 2024

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                                            WA 1259/2022




    IN THE HIGH COURT OF KARNATAKA AT BENGALURU

         DATED THIS THE 26TH DAY OF JULY, 2024

                         PRESENT
       THE HON'BLE MR JUSTICE V KAMESWAR RAO
                           AND
            THE HON'BLE MR JUSTICE C M JOSHI
              WA NO. 1259 OF 2022 (L-RES)
BETWEEN:

M/S. CANARA BANK,
HEAD OFFICE AT NO.112, J.C.ROAD,
BENGALURU - 560 002,
REPRESENTED BY
MR.H.G.RAMESH,
ASSISTANT GENERAL MANAGER,
HRM, CIRCLE OFFICE.
                                               ...APPELLANT

(BY SRI. SANDESH CHOUTA, SENIOR COUNSEL FOR
    SRI. VIKRAM UNNI RAJAGOPAL, ADVOCATE)

AND:

SMT. SHANTHA KUMARI,
WIFE OF LATE SHRIMANTHA D PUJARI,
AGE: MAJOR,
NO.11/524, SHANTHI NIVAS,
BHARAMPUR,
BORABAI NAGAR,
KALBURGI - 585 103.
                                              ...RESPONDENT
(BY MS. GEETA.R.SHINDE, ADVOCATE)

     THIS APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER
DATED 13/09/2022 PASSED BY THE LEARNED SINGLE JUDGE IN
WP 11463/2020 AND ALLOW WP BEARING WP NO.11463/2020.

     THIS APPEAL HAVING BEEN HEARD AND RESERVED ON
12.06.2024, COMING ON FOR PRONOUNCEMENT OF JUDGMENT
THIS DAY, THE COURT DELIVERED THE FOLLOWING:
                                  -2-
                                                        WA 1259/2022




CORAM:      THE HON'BLE MR JUSTICE V KAMESWAR RAO
            AND
            THE HON'BLE MR JUSTICE C M JOSHI



                      CAV JUDGMENT

(PER: THE HON'BLE MR JUSTICE V KAMESWAR RAO)

This appeal has been filed by Canara Bank

challenging the order dated 13.09.2022 passed by the

learned Single Judge in W.P.No.11463/2020 (L-RES),

whereby the learned Single Judge has dismissed the writ

petition filed by Canara Bank and thereby directing the

Canara Bank to comply with the order of the Appellate

Authority within three weeks from the date of receipt of

copy of the order.

2. Some of the relevant facts to be noted from the

record are, Shrimantha D. Pujari, the husband of

respondent (who has since expired) joined the service of

the appellant-Bank on 13.03.1975. At relevant point of

time i.e., on 14.12.2005, while he was working as a Clerk,

disciplinary proceedings were initiated against him in

respect of misconduct relating to discounting of

cheques/TODs in the SB A/c No.16818 of the respondent.

3. The punishment of 'Compulsory Retirement' was

imposed on him.

4. Sri. Pujari had challenged the said punishment in

an Industrial Dispute. During the pendency of the

Industrial Dispute, Sri. Pujari expired. Resultantly, his legal

heirs withdrew the Industrial Dispute on 11.12.2018. In

the meanwhile, an application was filed by Sri. Pujari for

release of Gratuity amount before the Controlling Authority,

which was rejected.

5. The case of the appellant-Bank was that at the

time of compulsory retirement of Sri. Pujari, there were

direct and indirect liabilities outstanding in his name, which

were to be cleared by him. As on 15.09.2019, the liabilities

were Rs.9,85,420.24/- under staff clean OD apart from

Staff Welfare Fund liability of Rs.1,29,691/- payable along

with interest at 10% p.a.

6. Sri. Pujari challenged the order of Controlling

Authority before the Appellate Authority in Appeal

No.36(129)/2018/B1. Pursuant to his death on

04.05.2018, the said appeal was prosecuted by his wife,

who is the respondent in these proceedings.

7. The Appellate Authority by its order dated

31.10.2019 (read with Corrigendum dated 13.11.2019),

has allowed the appeal by directing the appellant-Bank to

pay gratuity amount of Rs.2,81,290/- along with interest at

the rate of 10% p.a. from the date it became due till the

actual date of payment.

8. The said order became the subject matter of the

writ petition being W.P.No.11463/2020, wherein the

impugned order has been passed by the learned Single

Judge.

9. Learned Single Judge has dismissed the petition by

interalia holding that while Staff Welfare Fund comes within

the domain of service conditions, but home loan occupies a

different position as home loan is governed by the

agreement of loan and it is for the appellant-Bank to act in

terms of the said agreement and exercise all rights under

the said agreement as against the debtor; therefore, the

appellant-Bank could not on the basis of an authorization,

recover the same from the Gratuity amount payable by it.

10. The submission of Sri. Sandesh Chouta, learned

Senior Counsel appearing for the appellant-Bank is

primarily the home loan which is an outstanding liability of

Rs.12,60,314.18 as on 30.09.2022 is not the subject

matter of these proceedings. The appellant-Bank intended

to adjust the Gratuity amount towards the Staff Clean OD

and Staff Welfare Fund liability and not home loan.

According to him, it is settled law that employers are

entitled to adjust Gratuity against dues payable to

employees and as such, the Bank is justified in adjusting

the aforesaid two amounts against the Gratuity and not

home loan as dealt with by the Learned Single Judge.

11. According to him, the learned Single Judge failed

to appreciate that immediately after the exit from the

services of the Bank, late Sri. Pujari was requested to come

forward and discharge his liabilities towards the appellant-

Bank. However, he did not come forward and failed to

discharge his liability. Therefore, the appellant-Bank had

no choice, but to proceed for adjustment of terminal

benefits towards his liabilities and the respondent being the

wife does not have any right to claim the Gratuity benefits

from the appellant-Bank.

12. In this regard, the learned Senior Counsel

submitted that, the law on the aspect of recovery is well

settled in as much as the Punjab and Haryana High Court in

the case of Punjab and Sindh Bank, Chandigarh -Vs.-

Regional Labour Commissioner, (Central) Kendriya

Sadan, Chandigarh and Others [2008 (117) FLR 710],

has held that the Bank is well within its right as an

employer to adjust the amount of Gratuity towards

outstanding dues of the employee. In fact, the Controlling

Authority has relied upon this judgment while dismissing

the petition filed by late Sri. Pujari. In support of his

submissions, he has also relied upon the following

judgments:

i) Secretary, ONGC Ltd. and Another -Vs.-

V.U. Warrier [(2005) 5 SCC 245];

ii) Steel Authority of India Ltd. -Vs.-

Raghbendra Singh and Others [2020 SCC Online SC 1063];

iii) Karnataka State Road Transport Corporation -Vs.- The Deputy Labour Commissioner and Others [W.P.No.50800/2013, decided on 18.06.2014];

iv) Bangalore Metropolitan Transport Corporation -Vs.- The Deputy Labour Commissioner and Others [W.P.No.45794/2015, decided on 16.10.2020];

v) Bangalore Metropolitan Transport Corporation -Vs.- The Deputy Labour Commissioner and Another [W.P.No.12255/2016, decided on 10.01.2020];

13. On the other hand, learned counsel for the

respondent would justify the order passed by the Appellate

Authority as upheld by the learned Single Judge. According

to her, the Appellate Authority has on an appreciation of

law, held that the requirement in law is, the appellant-Bank

being employer should, by quantifying the loss; by

conducting enquiry and further by issuing show-cause

notice, could forfeit the Gratuity, which process has not

been complied with by the appellant-Bank.

14. She has also relied upon the judgment of this

Court in the case of G. Narayana Rao -Vs.-

V.R. Nagendra [1998-III LLJ 1991] and of the Hon'ble

Supreme Court in the case of Jaswant Singh Gill

-Vs.- Bharat Coking Coal Ltd. [Civil Appeal

No.4770/2006, decided on 10.11.2006] [(2007) 1 SCC

663] wherein the Court has held the right to Gratuity is a

statutory right and admittedly, the appellant was not

charged with, nor was given an opportunity to show-cause

why Gratuity be not withheld. According to her, no

provision of law has been shown to justify Gratuity could be

withheld as a measure of punishment. Hence, there being

some basis for the Appellate Authority to grant the relief in

favour of the respondent, which has been upheld by the

learned Single Judge, this Court would not like to interfere

with the impugned order and dismiss the present appeal.

ANALYSIS:

15. Having heard the learned counsel for the parties

and perused the record, the short question which arises for

consideration is, whether the Appellate Authority is justified

in directing the appellant-Bank to pay the amount of

Rs.2,81,290/- as Gratuity with 10% interest from the date

it became due, which order has been upheld by the learned

Single Judge?

16. The case of the appellant-Bank before the

Controlling Authority was that, at the time of compulsory

retirement of late Sri. Pujari, there were direct and indirect

liabilities outstanding in his name. As on 15.09.2019, the

liabilities were for Rs.9,85,420-24 against the staff clean

OD and Rs.1,29,691/- against Staff Welfare Liability Fund,

with interest at 10% p.a.

17. The Appellate Authority, who had allowed the

appeal, had directed the payment of Gratuity only on the

ground that the same cannot be forfeited without following

the due process. Whereas the learned Single Judge, who

though dismissed the writ petition, has held that Staff

Welfare Fund would come within the domain of service

conditions. Meaningfully read, the said amount can be

recovered from the Gratuity. But, insofar as the other

amount is concerned, the same was considered as Home

Loan and it was held by the learned Single Judge that the

same occupies a completely different position in as much as

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home loan could be recovered in terms of the loan

agreement and the Bank could not have adjusted the same

from and out of Gratuity amount.

18. Suffice to state the learned Single Judge has

erred in construing the amount of Staff Clean OD as home

loan account, as according to Mr. Chouta, the home loan is

not subject matter of these proceedings. So, the issue

need to be seen whether the Staff Clean OD and Staff

Welfare Fund Liability can be recovered/adjusted against

Gratuity. The learned Single Judge has not held that the

Staff Welfare Fund Liability cannot be adjusted. So, the

issue for consideration, can be proceeded on the premise

that if the other liability is Staff Clean OD Account and not

home loan, whether the same can be adjusted/recovered

from Gratuity.

19. The Bank has justified the adjustment of the the

Staff clean OD Account against Gratuity by relying on the

authorization given by late Sri. Pujari and also by relying on

the judgment of Punjab and Sindh Bank, Chandigarh

(supra). Whereas, the Appellate Authority allowed the claim

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of the respondent by holding recovery from the Gratuity

payable to the employee based on an undertaking given by

the employee is against Section 14 of the Payment of

Gratuity Act, 1972.

20. Suffice to state, the law in respect of

adjustment/recovery of the dues from Gratuity and also on

representation/authorization given by the employee is no

more res integra in view of the judgments of this Court and

also of the Punjab and Haryana High Court. In Punjab

and Sindh Bank, Chandigarh (supra), the Court has, in

Paragraph No.10, stated as under:-

"10. Keeping in view the facts and circumstances of the case and the circumstances under which respondent No. 3 was compulsorily retired from service, we have no hesitation to hold that the respondent-Bank was well within its right to adjust the amount of gratuity towards the outstanding house loan amount of respondent No. 3. An employee cannot enforce his right for post-retiral dues in writ jurisdiction in such circumstances. The conduct of respondent No. 3 was most reprehensible and unbecoming of an officer. Further, by his own act and conduct, respondent No. 3 has put his employer to an immense loss which may be far more commensurate to his own dues. Surely, he is not entitled to the discretionary

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relief from this Court under Articles 226/227 of the Constitution of India. Similar view was taken by this Court in Municipal Corporation, Amritsar v. Jagdamba Dutt (through L.Rs), where the respondent- employee had raised some illegal construction and had overstayed in the allotted quarter even after his superannuation and the appellant-Corporation had withheld his provident fund, gratuity and encashment of earned leave on the plea of

adjustment of the amount that the respondent had to pay by way of house rent/penalty."

(emphasis supplied)

21. Similarly, the Single Bench of this Court in the

case of KSRTC [WP No.50800/2013, decided on

18.06.2014] (supra), has in Paragraphs No.2 & 3, held as

under:-

"xxx xxx xxx xxx xxx

2. The only contention of the learned Counsel for the petitioner-Corporation is that the third respondent had availed loan from KSRTC Consumer Co-operative Society in a sum of Rs.40,000/- and as on the date of his retirement, he is due in a sum of Rs.40,000/. This amount should have been deducted while computing gratuity payable to the third respondent by the controlling authority. It is argued that the third respondent had given an undertaking to the KSRTC

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that in the event of loan is not repaid by him, the same can be deducted from his terminal benefits. It is further contended that an additional sum of Rs.19,167/- towards gratuity has also been paid to the third respondent in view of the revision of pay scale after his retirement and the said amount also should have been deducted while computing gratuity payable to the third respondent.

3. Materials on record would clearly indicate that the third respondent has undertaken for deduction of the amount payable to the aforesaid Co-operative Society from his terminal benefits. Therefore, the controlling authority ought to have deducted a sum of Rs.40,000/-, which was due to the aforesaid Co- operative Society by the third respondent as on the date of his superannuation. Therefore, the second respondent is directed to refund a sum of Rs.40,000/-, and a sum of Rs.19,167/- paid by the Corporation towards gratuity in view of the revision of pay scale out of Rs.67,367/-, the deposit made by the petitioner- Corporation and balance of the amount in a sum of Rs.8,200/- shall be dispersed to the third respondent. Writ petition is allowed in the aforesaid terms. No costs."

(emphasis supplied)

22. In the Bengaluru Metropolitan Transport

Corporation (Supra) [WP No. 45794/2015 decided on

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16.10.2020], the learned Judge of this Court in Paragraphs

No.7, 9 & 10 has held as under:

"xxx xxx xxx xxx xxx

7. Learned counsel for the Corporation would submit that the Controlling Authority and the Appellate Authority have grossly erred in determining the payment of gratuity at Rs.1,41,388/-, as the workman was paid all the entitled gratuity when he had retired and at best the difference payable after reduction of loan and liabilities of the workman was Rs.19,980/- as he had availed various loans.

           xxx         xxx      xxx         xxx      xxx

           9.    The     Controlling        Authority      though       has

determined the difference in gratuity payable to the workman at Rs.1,41,388/-, the workman had availed various loans in the Corporation which are as follows:

(i) Loan from BMTC Co-operative Society Rs. 11,285/-

(ii) Loan from BMTC Consumer Society Rs. 20,000/-

(iii) Marriage Advance Rs. 19,005/-

(iv) Syndicate Bank TVS loan Rs. 45,000/-

     (v) Uco Bank BSK Branch                                Rs. 20,400/-

     (vi) URD Amount                                        Rs.   5,718/-

                              Total:                       Rs.1,21,408/-

10. Hence, the respondent-workman would be entitled to a remainder of the amount after deduction of the aforesaid advances that are availed by the

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employee, which on an undertaking given by the employee was deductible from gratuity. Therefore, the workman would be entitled to Rs.19,980/- which is the remainder of the amount out of Rs.1,41,388/- determined by the Controlling Authority along with interest at 10% per annum from the date of filing of the petition by the workman on 08.04.2010 till the deposit is made by the Corporation before the Appellate Authority i.e.. on 08.09.2012. Hence, the following:

ORDER

(i) Writ petition is allowed in part.

(ii) The order of the Controlling Authority bearing No.ALCB-1/PGA/CR/05/2010-11 dated 30.07.2012 and the order of the Appellate Authority bearing No.DLCB-

2/PGA/CR/25/2014 dated 24.02.2015 are set aside.

(iii) The workman is entitled to difference in gratuity of Rs.19,980/- along with interest at 10% per annum from the date of filing of the petition by the workman on 08.04.2010 till the date of deposit i.e., 08.09.2012.

(iv) The aforesaid order shall be compiled with by the Corporation within six months from the date of receipt of this order."

(emphasis supplied)

23. In the Bengaluru Metropolitan Transport

Corporation (Supra) [WP No.12255/2016 decided on

10.01.2020)], the learned Single Judge of this Court has in

Paragraphs No.12 & 14, held as under:-

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"xxx xxx xxx xxx xxx

12. In the ruling of this Court in the case of Bangalore Metropolitan Transport Corporation supra, where the Controlling Authority declines to accept the plea of the Corporation on the deductions, a finding is given that the Corporation did not lay before the authority the material to establish the said deduction.

Accordingly, rejected the writ petition, confirmed by the Division Bench and the SLP also came to be rejected. It is significant to note that in the said proceedings after the death of an employee, the Corporation attempted to adjust and disburse the amount payable to his LRs under the head "Gratuity" to the creditors of the deceased. Moreover, the workman had requested the Corporation to credit the gratuity and other retirement benefits payable to him to his SB Account of National Co-operative Bank. In such circumstances, it has been observed that the Corporation cannot disburse the said gratuity amount."

xxx xxx xxx xxx xxx

"14. For the reasons spelt out in the judgments relating to the undertaking given by the workman referred to supra, the deduction of the amount of Rs. 1,33,550/- Rs.2,205/- = Rs.1,31,345/- to the paid creditors from the gratuity amount of the workman during his lifetime and at his request cannot be held to be untenable. However, the deduction of Rs.2,205/- held to be illegal by the authorities is confirmed. The arguments that the workman was forced to sign the affidavit of undertaking cannot be accepted at this length of time."

(emphasis supplied)

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24. So it must be held that the learned Single Judge

has erred in dismissing the petition filed by the Canara

Bank.

25. The Appellate Authority, in its impugned order,

which was under challenge before the learned Single Judge,

has relied upon the judgment in the case of Jaswant

Singh Gill -Vs.- Bharath Coaking Coal Limited (supra),

wherein the Supreme Court has held, the right of Gratuity

is a statutory right. The appellant was not charged with

nor was given an opportunity that his Gratuity will be