Kerala High Court

Sri. Raju M.C vs Kaduthuruthy Urban Co-Op Bank Ltd on 13 August, 2021

W.P(C).19839/2020
                                        1

              IN THE HIGH COURT OF KERALA AT ERNAKULAM
                                   PRESENT
               THE HONOURABLE MR. JUSTICE SUNIL THOMAS
     FRIDAY, THE 13TH DAY OF AUGUST 2021 / 22ND SRAVANA, 1943
                          WP(C) NO. 19839 OF 2020
PETITIONER/S:

             SRI. RAJU M.C., AGED 58 YEARS, S/O. CHACKO,
             MUTTATHIL KAROTTU HOUSE, AYAMKUDY P.O, KOTTAYAM
             DISTRICT, PIN-686 613

             BY ADVS. P.N.MOHANAN
             C.P.SABARI
             AMRUTHA SURESH


RESPONDENT/S:

     1       KADUTHURUTHY URBAN CO-OP BANK LTD., K-3999, REP. BY
             ITS GENERAL MANAGER, KADUTHURUTHY P.O, KOTTAYAM-686
             604

     2       MANAGING COMMITTEE OF KADUTHURUTHY URBAN CO-OP BANK
             LTD., REP. BY ITS CHAIRMAN, KADUTHURUTHY P.O,
             KOTTAYAM-686 604

     3       JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (G)
             OFFICE OF THE JOINT REGISTRAR (GENERAL),
             COLLECTORATE P.O, KOTTAYAM-686 002

             BY ADVS. SRI.T.R.HARIKUMAR
             GOVERNMENT PLEADER SRI.K P HARISH


OTHER PRESENT:

             SR.GP K.P HARISH


      THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION
ON   13.08.2021,    THE    COURT   ON       THE   SAME   DAY   DELIVERED   THE
FOLLOWING:
 W.P(C).19839/2020
                                   2


                             JUDGMENT

The writ petitioner retired from the service of the first

respondent bank on 31.05.2020 as General Manager. While he was

holding the office, the Joint Registrar of the Co-operative Societies

had called for few documents maintained by the bank, in its course of

regular business. While so, by Ext.P3 proceedings dated 25.05.2020,

the Joint Registrar directed the bank not to disburse the retiral

benefits to the petitioner, anticipating his retirement on 31.05.2020

and informed that, retiral benefits shall be released only after

completion of audit and release of NLC. It is now stated that the audit

for the period 2018-2019 and 2019-2020 are completed, evidenced by

Exts.P4 and P5 audit reports.

2. It is stated that, for the payment of gratuity, bank had

availed a Group Gratuity Assurance Scheme operated by the LIC of

India. The maximum gratuity payable under S.4 of the Payment of

Gratuity Act was Rs.20,00,000/-. It is stated that, bank had released

some amount and retained a sum of two lakhs marking lien over the

property. According to the petitioner, this was illegal since Exts.P4

and P5 did not evidence any liability against the petitioner and that,

even otherwise, the gratuity and other terminal benefits due to the

petitioner could not be recovered or could not be deducted from the W.P(C).19839/2020

terminal benefits. It was contended that, no amount could be

deducted under S.4(6) of Payment of Gratuity Act and under S.4(7),

except in case of termination for riotous behaviour, appropriate

amounts totalling to the quantified damages cannot be recovered from

the petitioner. Except those, no amount could be recovered from the

petitioner.

3. Learned counsel for the petitioner, to buttress the

argument, relied on the decisions reported in B.Lalitha v. State of

Kerala and Ors. [2014(2) KLJ 707] to contend that, if an employee

is permitted to retire on superannuation, no portion of the gratuity

can be withheld, unless it falls within the campus Sec.4(6) or 4(7).

4. Relying on the Division Bench decision reported in Philip

v. Registrar of Co-operative Societies [2018(3) KLT 347],

petitioner contended that, bank cannot suo motu appropriate the

amounts from the retiral benefits to recompense the loss suffered as it

has to be quantified in an adjudicatory process as envisaged under

Section 69 of the Act.

5. The petitioner has approached this Court contending that

the withholding of the gratuity amount and other benefits awaiting the

audit was incorrect. It was also contended that, unless there was a

determination of any amount if due, there could not be retention of

the money anticipating it. It was also contended that, the petitioner, W.P(C).19839/2020

after being permitted to retire on superannuation, the bank has to

resort to specific reliefs under S.69 of the Kerala Co-operative

Societies Act to recover the money, if any, due.

6. There is no dispute that, a sum of Rs. Twenty lakhs was

allotted by the State Bank of India to the first respondent bank

including Rs. twenty lakhs towards the gratuity amount. It is also an

admitted fact that, audit of the year 2018-2019 and 2019-2020 have

been completed and there was no adverse report against the

petitioner. However, he had worked till May 2021, the audit report for

the period 20-21 has to be awaited, as per the order of Joint Registrar

produced as Ext.P3, and correctly so.

7. Sec.4(6) of the Payment of Gratuity Act provides that,

notwithstanding anything contained in Sub-section (1), the gratuity

payable to the employee may be wholly or partially forfeited, if the

services of such employee have been terminated for his riotous or

disorderly conduct or any other act of violence on his part. Sec.4(6)

(a) of the Act provides that, the gratuity of an employee, whose

services have been terminated for any act, willful omission or

negligence causing any damage or loss to, or destruction of, property

belonging to the employer, shall be forfeited to the extent of the

damage or loss so caused. Evidently, Secs.4(6)(a) and 4(6)(b)

contemplates partial or full forfeiture of the money due to the W.P(C).19839/2020

employer, out of the gratuity amount, if the petitioner has been

terminated for negligence for the situations mentioned in Secs.4(6)(a)

and 4(6)(b). Admittedly, the petitioner has not been terminated but

has been permitted to retire on attainment of superannuation.

Evidently, the situation contemplated under S.4(6)(a) and 4(6)(b) are

not attracted in the case at hand. Necessarily, the judgment of this

Court in Lalitha v. State of Kerala (supra) is applicable to the facts

of the case.

8. Even assuming that the petitioner has committed loss and

even if any adverse remarks are incorporated in the audit report

covering the period 2020-2021, that by itself is not sufficient to forfeit

the gratuity amount. The Division Bench has clearly stated that, bank

cannot suo moto appropriate the amounts from the retiral benefits,

unless it has been quantified by an adjudicatory process as envisaged

under S.69 of the Act. The Court noted that, learned Single Judge has

observed that the principles of unjust enrichment and restitution

enables the bank to suo moto appropriate the amounts from the retiral

benefits to recompose the loss suffered. However, the Division Bench

could not agree with that proposition, since the loss allegedly suffered

by the bank has to be quantified by an adjudicatory process, as

envisaged under S.69 of the Act. Dispute of that nature can be raised

by the bank even against a past member going by the terminology of W.P(C).19839/2020

S.69 and the retirement of the appellant is immaterial.

9. To counter this argument, learned counsel for the

respondent relied on the counter affidavit filed by the respondents

and the additional statements filed by the Joint Registrar of Co-

operative Societies.

10. It is clear that, no enquiry has been conducted. It is also

clear that, the liability has not been fixed on the respondent. Having

considered this, the retiral benefit due to him, including the gratuity,

cannot be withheld.

11. The learned Senior Government Pleader to counter this

argument relied on the decision reported in Secretary, ONGC Ltd.

And Another v. V.U.Warrier [(2005)5 SCC 245] wherein the

Honourable Supreme Court held that, where there is an unauthorized

retention of official accommodation by the employee, after his

retirement entailing penal interest, employer was entitled to deduct it

from the gratuity payable to the employee, penal rent in terms of such

statutory Rules/Regulations. It was held that, if a person after

retirement holds the official accommodation for more period than

permitted, the amount due can be recovered from the gratuity. It

seems from the above decision that there was a specific provision in

the regulation which enabled the employer to deduct the amount from

the gratuity amount. In the above Supreme Court decision, the W.P(C).19839/2020

determination and deduction fo the amount due to the employer

towards the accommodation had a statutory backing, which is not

applicable to the case at hand. The above decision has no application

to the facts of this case. The above view, was thereafter reiterated by

this Court in Steel Authority of India Ltd. v. Raghbendra Singh

and Ors [SLP 11025 of 2020 reported in

MANU/SCOR/46090/2020].

12. Having considered this, I am inclined to hold that the

retention of the gratuity due to the petitioner is illegal and shall be

forthwith be released, if there is no other legal embargo except the

pendency of the audit proceedings. It is also held that, the employer

unless situations contemplated under Secs.4(6)(a) and 4(6)(b) are

attracted are not entitled to deduct from the gratuity amount. The

remaining amount, shall be forthwith released, after the audit is over,

and no liability is cast on the employee.

Writ Petition is allowed as above.

Sd/-

SUNIL THOMAS JUDGE Sbna/ W.P(C).19839/2020

PETITIONER EXHIBITS

EXHIBIT P1 A TRUE COPY OF THE LETTER DATED 18.05.2020 OF THE 3RD RESPONDENT.

EXHIBIT P2            A   TRUE  COPY   OF  THE   JUDGMENT   DATED
                      25/05/2020 IN WPC NO. 10215/2020.

EXHIBIT P3            A TRUE COPY OF THE LETTER DATED 25/05/2020
                      OF THE JOINT REGISTRAR.

EXHIBIT P4            A TRUE COPY OF THE AUDIT CERTIFICATE OF
                      THE YEAR 2018-2019.

EXHIBIT P5            A TRUE COPY OF THE AUDIT CERTIFICATE OF
                      THE YEAR 2019-2020.

EXHIBIT P6            A TRUE COPY OF THE REPORT OF THE CHARTERED
                      ACCOUNTANT DATED 15.07.20.

EXHIBIT P7            A TRUE COPY OF THE PRINT OUT OF THE AMOUNT
                      PAID BY THE LIC DATED 7.05.2020 WITH
                      STATEMENT OF ACCOUNTS.

EXHIBIT P8            A TRUE COPY OF THE JUDGMENT REPORTED IN
                      2014 (2) KLJ 707.

EXHIBIT P9            A TRUE COPY OF THE JUDGMENT AS REPORTED IN
                      2018 (3) KLT 347.