Madras High Court
The Management vs N.Somasundaram on 23 August, 2021
W.A. No.1558 of 2011
and M.P. No.1 of 2011
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 23.08.2021
CORAM
THE HONOURABLE MRS.JUSTICE PUSHPA SATHYANARAYANA
and
THE HONOURABLE MR.JUSTICE KRISHNAN RAMASAMY
W.A. No.1558 of 2011 and
M.P. No.1 of 2011
The Management
The Coimbatore District Central
Co-operative Bank Ltd
Coimbatore - 641 018
Rep. by its General manager
Mr.A.Muthusamy ... Appellant
vs
1.N.Somasundaram
2.The Authority under the Payment of Gratuity Act
Assistant Commissioner of Labour
Dr.Balasundaram Road
Coimbatore - 611 018
3.The Appellate Authority
under Payment of Gratuity Act
Assistant Commissioner of Labour
Dr.Balasundaram Road
Coimbatore - 611018 ... Respondents
****
Prayer: Writ Appeal filed under clause 15 of the Letters Patent
against the order dated 24.06.2011 made in W.P. No.15154 of 2010.
****
For Appellant : Mr.S.Saravanan
_______
http://www.judis.nic.in
Page 1/11
W.A. No.1558 of 2011
and M.P. No.1 of 2011
For Respondents : Mr.A.Deivasigamani for R1
Mr.C.Jayaprakash,
Govt. Advocate for R2 & R3
JUDGMENT
(delivered by PUSHPA SATHYANARAYANA, J.)
The unsuccessful management of a Co-operative Bank before
the Assistant Commissioner of Labour as well as Appellate Authority
under the Payment of Gratuity Act, had preferred W.P. No.15154 of
2010, challenging the said proceedings. The writ petition was
dismissed by the learned single Judge, against which, the above
appeal is preferred.
2. The short facts leading to the above case is that the first
respondent was a Manager with the appellant-bank. He was issued
with Charge Memo dated 18.04.2007 alleging fraud against him
causing loss to the bank to an extent of Rs.7,81,911/-. However,
when he attained the age of superannuation on 30.04.2007, he was
relieved from the service on the same day in terms of Special By-Law
No.5(ii), without prejudice to the charges pending against him and
any final orders that may be passed in the said charges.
_______
http://www.judis.nic.in
Page 2/11
W.A. No.1558 of 2011
and M.P. No.1 of 2011
3. As the first respondent was relieved from the services of the
appellant-bank, he applied for gratuity under Section 4(1) of the
Payment of Gratuity Act, 1972. The first respondent had a sum of
Rs.4,71,600/- to his credit, as gratuity. The appellant-bank refused
to disburse the gratuity amount, contending that the first respondent
was not eligible for the same, as there were charges pending against
him and he had not cooperated with the enquiry proceedings.
4. It is also pertinent to note that the surcharge proceedings
under Section 87 of the Tamil Nadu Co-operative Societies Act, 1983
was initiated and the liability of the first respondent was fixed at a
sum of Rs.7,81,911/- on 06.01.2009. Nevertheless, the Controlling
Authority held that, since the petitioner was allowed to retire from
service on attaining the age of superannuation, the gratuity cannot
be withheld or forfeited. When an employee is not terminated on the
grounds of causing loss to the employer and permitted to retire, the
gratuity amount cannot be withheld by the authorities. That apart, in
the surcharge proceedings, the liability of the first respondent was
quantified and it is open to the appellant to proceed against him
under Section 87(2) of the Tamil Nadu Co-operative Societies Act,
1963, treating the same as arrears to the Government. Therefore, the
_______
http://www.judis.nic.in
Page 3/11
W.A. No.1558 of 2011
and M.P. No.1 of 2011
payment of gratuity was allowed with 10% interest per annum on the
belated payment. The appellant before preferring the appeal on the
file of the third respondent, had deposited the entire amount of
Rs.3.5 Lakhs. The only reason given by the appellant for not
disbursing the amount is that the surcharge proceedings are pending
and the first respondent caused loss to the bank. Admittedly, if there
was any loss caused to the bank due to the misconduct of the first
respondent, the bank would have taken appropriate action under
Law.
5. It will be relevant to quote Section 4 of the Payment of
Gratuity Act, as below:
4. Payment of Gratuity.- (1) Gratuity shall be
payable to an employee on the termination of his
employment after he has rendered continuous service
for not less than five years,-
(a) on his superannuation, or
(b) on his retirement or resignation,
(c) on his death or disablement due to accident or
disease:
Provided that the completion of continuous service of
five years shall not be necessary where the termination
of the employment of any employee is due to death or
disablement:
Provided further that in case of death of the employee,
_______
http://www.judis.nic.in
Page 4/11
W.A. No.1558 of 2011
and M.P. No.1 of 2011
gratuity payable to him shall be paid to his nominee or,
if no nomination has been made, to his heirs, and where
any such nominees or heirs is minor, the share of such
minor, shall be deposited with the Controlling Authority
who shall invest the same for the benefit of such minor
in such bank or other financial institution, as may be
prescribed, until such minor attains majority.
Explanation.- For the purposes of this section,
disablement means such disablement as incapacitates
an employee for the work which he was capable of
performing before the accident or disease resulting in
such disablement.
(2) For every completed year of service or part
thereof in excess of six months, the employer shall pay
gratuity to an employee at the rate of fifteen days'
wages based on the rate of wages last drawn by the
employee concerned:
Provided that in the case of a piece-rated employee,
daily wages shall be computed on the average of the
total wages received by him for a period of three months
immediately preceding the termination of his
employment, and, for this purpose, the wages paid for
any overtime work shall not be taken into account:
Provided further that in the case of an employee who is
employed in a seasonal establishment, and who is not
so employed throughout the year, the employer shall
pay the gratuity at the rate of seven days' wages for
each season.
Explanation.-In the case of a monthly rated employee,
the fifteen days' wages shall be calculated by dividing
_______
http://www.judis.nic.in
Page 5/11
W.A. No.1558 of 2011
and M.P. No.1 of 2011
the monthly rate of wages last drawn by him by twenty-
six and multiplying the quotient by fifteen.
(3) The amount of gratuity payable to an
employee shall not exceed ten lakh rupees.
(4) For the purpose of computing the gratuity
payable to an employee who is employed, after his
disablement, on reduced wages, his wages for the period
preceding his disablement shall be taken to be the
wages received by him during that period, and his wages
for the period subsequent to his disablement shall be
taken to be the wages as so reduced.
(5) Nothing in this section shall affect the right of
an employee to receive better terms of gratuity under
any award or agreement or contract with the employer.
(6) Notwithstanding anything contained in sub-
section (i),-
(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
_______
http://www.judis.nic.in
Page 6/11
W.A. No.1558 of 2011
and M.P. No.1 of 2011
committed by him in the course of his employment.
6. A reading of the above section makes it clear that sub-
section (5) is a non-obstante clause of the entire section. Sub section
(5) has overriding effect on all other sections of the Act. Even under
sub section (6)(i)(a), the gratuity can be forfeited only to the extent
of damages or loss caused to the bank. In case the employee is
terminated for any act or willful omission or negligence causing
damage to the employer, then the loss can be recovered from the
gratuity by way of forfeiture, as contemplated under Section
4(6)(i)(b). Under sub-section 6(i)(b), the forfeiture of the gratuity
either wholly or partially is permissible only when the employee is
terminated on account of disorderly conduct or any other act of
violence on his part and if the termination is for any act, which
constitutes an offence involving moral turpitude and the said offence
is committed during the course of employment. Therefore, from the
above, it is clear that forfeiture of the gratuity is permissible only in
the circumstances indicated above.
7. Admittedly, in the instant case, the employee was allowed to
retire on the date of attaining superannuation, though the enquiry
_______
http://www.judis.nic.in
Page 7/11
W.A. No.1558 of 2011
and M.P. No.1 of 2011
proceedings are pending on the said date. Therefore, forfeiture or
withholding of the gratuity is permissible under Section 4(6)(i)(b)(ii)
of the Act only in the event of termination on account of any
disorderly conduct involving the moral turpitude and the employee is
convicted. In the present case there is no conviction of the first
respondent for the misconduct, which according to the appellant, is
an offence involving moral turpitude. Therefore, there is no
justification in withholding the gratuity amount of the petitioner.
8. As mentioned earlier, the Co-operative Societies Act, 1963
provides for recovery of loss caused to the bank by invoking the
Revenue Recovery Act from the employee. Since the surcharge
proceedings has come to an end, it is open to the authorities to
recover the loss caused to the bank by the first respondent, in the
manner known to law, but the gratuity cannot be withheld.
9. Against the order of recovery passed by the Deputy
Registrar, Co-operative Societies, Coimbatore, the respondent herein
has preferred a civil miscellaneous appeal in Co-Op. C.M.A. No.57 of
2009 on the file of the Principal District Judge, Coimbatore. The same
was allowed by a judgment and decree by setting aside the order of
_______
http://www.judis.nic.in
Page 8/11
W.A. No.1558 of 2011
and M.P. No.1 of 2011
the Deputy Registrar, Co-operative Societies, Coimbatore made in
Thaa.Thee No.1 of 2008 dated 06.01.2009 under Section 87 of the
Co-operative Societies Act. Aggrieved by the judgment and decree
passed in the said Co-operatie civil miscellaneous appeal, the
appellant-bank has preferred a civil revision petition in C.R.P. (NPD)
No.3296 of 2012 and this court, by an order dated 24.08.2017,
dismissed the civil revision petition by confirming the Judgment and
decree of the Principal District Judge, Coimbatore dated 01.03.2012.
Not stopping with that, the appellant-bank, has questioned the order
of the learned single Judge dated 24.08.2017 made in C.R.P. (NPD)
No.3296 of 2012 before the Hon'ble Supreme Court in S.L.P. (Civil)
Diary No.44624 of 2018 and the same was dismissed by the Hon'ble
Supreme Court by order dated 08.04.2019.
10. Section 13 of the Payment of Gratuity Act stipulates that no
gratuity payable under this Act and no gratuity payable to an
employee employed in any establishment, factory, mine, oilfield,
plantation, port, railway company or shop exempted under Section 5
shall be liable for attachment in execution of any decree or order of
any civil, revenue or criminal court.
_______
http://www.judis.nic.in
Page 9/11
W.A. No.1558 of 2011
and M.P. No.1 of 2011
11. In the light of Section 13 of the Payment of Gratuity Act
also, gratuity cannot be attached on any account for recovery to be
made against the first respondent, as gratuity is not liable to be
attached, to satisfy any decree.
12. In such circumstances, there is no merit in the appeal and
it is open to the first respondent to withdraw the amount. We do not
find any error or defect in the order of the learned single Judge.
13. Accordingly, the writ appeal is dismissed. No costs.
Consequently, the connected civil miscellaneous petition is closed.
[P.S.N., J.] [K.R., J.]
23.08.2021
Asr
Index : Yes/No
To
2.The Authority under the Payment of Gratuity Act
Assistant Commissioner of Labour
Dr.Balasundaram Road
Coimbatore - 611 018
3.The Appellate Authority
under Payment of Gratuity Act
Assistant Commissioner of Labour
Dr.Balasundaram Road
Coimbatore - 611018
_______
http://www.judis.nic.in
Page 10/11
W.A. No.1558 of 2011
and M.P. No.1 of 2011
PUSHPA SATHYANARAYANA, J.
and
KRISHNAN RAMASAMY, J.
Asr
W.A. No.1558 of 2011 and
M.P. No.1 of 2011
23.08.2021
_______
http://www.judis.nic.in
Page 11/11
