Madras High Court
The Executive Director vs / on 22 November, 2024
2024:MHC:3918
W.P. No.7299 of 2024
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on 19.09.2024
Pronounced on 22.11.2024
CORAM
THE HONOURABLE Ms.JUSTICE R.N.MANJULA
W.P. No. 7299 of 2024
and W.M.P.No.8159 of 2024
The Executive Director,
Bharat Heavy Electricals Limited (BHEL)
Tiruchirappalli – 620 014. ... Petitioner
/vs/
1. K.Chandrasekaran
No.4, Sakthi Colony,
VOC Street, Cantonment,
Trichy – 620 001.
2. Appellate Authority under the Payment
of Gratuity Act and Deputy
Chief Labour Commissioner (Central),
Commissioner (Central)
No.26, A Wing, 5th Floor,
Shastri Bhavan, Haddows Road,
Nungambakkam,
Chennai – 600 006.
3. The Authority under the Payment of
Page 1 of 25
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W.P. No.7299 of 2024
Gratuity Act and Assistant Labour Commissioner (Central)
Chennai,
No.4, Haddows Road,
Shastri Bhavan,
Chennai – 600 006. ... Respondents
Writ Petition is filed under Article 226 of the Constitution of India
to issue a writ of certiorari to call for the records connected with the order
dated 14.02.2024 passed by the Appellate Authority under the Payment of
Gratuity Act, 1972 i.e., the second respondent herein in Gratuity Appeal
No.30/2023 and quash the same in so far as the direction to petitioner to
pay 10% interest of the gratuity to the first respondent from the date of
his superannuation till the date of actual payment is concerned.
For Petitioner : Mr.A.V.Arun
For Respondents : Mr.K.V.Karthik Subramanian
for R1
Mr.M.Jayanthy
Additional Government Pleader
for R2 and R3
ORDER
The petitioner has filed this writ petition challenging the orders of
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the second respondent appellate authority dated 14.02.2022 under the
Payment of Gratuity Act, 1972 made in Gratuity Appeal No.30/2023.
2. The impugned order came to be passed on an appeal preferred
by the petitioner challenging the orders of the Controlling Authority /
Assistant Labour Commissioner, Puducherry dated 22.12.2022. In the
order dated 22.12.2022 the Controlling Authority has passed an order on
the application filed by the first respondent / employee for seeking
interest on the gratuity amount paid to him. As prayed by the first
respondent, the Controlling Authority allowed interest at the rate of 10%
from the date of eligibility to get the gratuity till the date of the actual
payment. The Appellate Authority also confirmed the above order and
dismissed the appeal filed by the petitioner.
3. The first respondent has joined the petitioner's company on
15.06.1974 as a Junior Executive Trainee and thereafter he worked in
various departments of Bharat Heavy Electricals Limited (in short
'BHEL'). In the year 2002 in pursuant to a criminal case registered
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against the first respondent, charge sheet has been filed by the CBI before
the Principal Special Judge for CBI cases for Madurai. The petitioner has
been charged for the offences under Section 109, 420, 468, 471 r/w. 468
IPC and 193 IPC. After the conclusion of trial the first respondent was
found guilty and was imposed with the punishment of imprisonment. The
first respondent and others have challenged the order of conviction by
filing Criminal Appeals Crl.A.(MD) No.437, 445 and 469 of 2006 before
the Madurai Bench of this Court. By virtue of an order dated 17.09.2010,
the Madurai Bench of this Court dismissed the appeal by confirming the
conviction and sentence imposed by the CBI Court.
4. Assailing the said order, the first respondent and others filed
Criminal Appeals before the Hon'ble Supreme Court in
Crl.A.Nos.2417/2010 and 16/2011. In the meanwhile, the first respondent
had attained the age of superannuation on 24.12.2011. The petitioner
company withheld the payment of gratuity to the first respondent in
accordance with Rule 30-A of BHEL Conduct, Discipline and Appeal
Rules, 1975 r/w. 9.3(b) of BHEL Gratuity Fund Rules which provides for
withholding the gratuity during the pendency of the criminal proceedings.
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5. By the judgment dated 15.06.2023 the Hon'ble Supreme Court
has set aside the order of this Court and acquitted the petitioner.
Thereafter, the first respondent has filed a gratuity application before the
Controlling Authority in PGA.No.3 of 2019 by seeking interest for the
delayed payment and his application has been allowed and the appellate
authority also confirmed the order of the Controlling Authority.
6. Mr.A.V.Arun, the learned counsel for the petitioner, submitted
that according to Rule 30-A of the BHEL Conduct, Discipline and Appeal
Rules r/w. 9.3(b) of BHEL Gratuity Fund Rules, the petitioner company
can withhold the payment of gratuity during the pendency of the
disciplinary and judicial proceedings; however, the Controlling Authority
has invoked Section 7 (3-A) of the Payment of Gratuity Act and stated
that the employee is liable to pay interest if the gratuity amount is not
paid by him within a period of thirty days from the date it becomes
payable; the first respondent claims that he is eligible to get interest on
the gratuity amount paid to him as he attained the age of superannuation
on 24.02.2011; as per Section 7(3) of Gratuity Act, the gratuity amount is
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payable to the first respondent within one month from the date of his
attaining superannuation, by claiming that the gratuity is payable to the
petitioner on or before 23.02.2011 and the petitioner claims interest
@10%; the appropriate authority also upheld the same by holding that the
petitioner's entitlement to get interest on the gratuity amount payable to
him in accordance with Section 7(3-A) of the Payment of Gratuity Act;
but according to the proviso to the said Section, interest is not payable if
the delay was due to the default on the part of the employee and the
employer has obtained permission in writing from the Controlling
Authority for the delayed payment.
6.1 It is claimed by the petitioner that Rule 30-A of BHEL
Conduct, Discipline and Appeal Rules r/w. 9.3(b) of BHEL Gratuity Fund
Rules, would provide that the petitioner's company can withhold the
payment of gratuity in case there is pendency of disciplinary or judicial
proceedings at the time of superannuation of the employee; no doubt on
24.02.20211 when the first respondent retired from service, the Criminal
Appeal filed by him was pending before the Supreme Court and hence
the company had withheld the payment of gratuity amount in accordance
with its own rules; in fact the petitioner was convicted for the charges
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framed against him by the Special Court for Principal Sessions Judge for
CBI, Madurai on the charge sheet filed by CBI; even the appeal preferred
by him before this Court also failed. Until the judgment passed by the
Hon'ble Supreme Court by setting aside the order, the conviction against
the petitioner continued to be pending.
7. Mr.K.V.Karthik Subramanian, the learned counsel for the first
respondent, submitted that Rule 30A of BHEL Conduct, Discipline and
Appeal Rules r/w. 9.3(b) of BHEL Gratuity Fund Rules are contradictory
to Section 4(1), 4(6) and 7(3) of the Payment of Gratuity Act and hence
the petitioner has no right to withhold the payment of gratuity; the
petitioner cannot consider the date of judgment of the Supreme Court as
the cut-off date for interest and the first respondent was entitled to get the
gratuity from 30 days from his superannuation.
8. No doubt as per Section 4(1) of the Payment of Gratuity Act, the
gratuity is payable to an employee on his termination of employment
after he has rendered continuous service for not less than five years.
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9. Section 4(6) of the Payment of Gratuity Act would contemplate
that irrespective of Section 4(1), if the services of an employee has been
terminated for any act, wilful omission or negligence causing any damage
or loss or destruction of property belonged to an employer, the gratuity
shall be forfeited to the extent of the damage or loss so caused.
10. Section 4(6)(b) of the Payment of Gratuity Act would suggest
that if the service of an employee is terminated due to the riotous or
disorderly conduct of the employee or if the services of the employee is
terminated for any act which constitutes an offence of Moral Turpitude,
the gratuity payable to the employee can be wholly or partially forfeited,
however, the offence committed by the employee ought to have been in
the course of his employment. The allegation against the petitioner is that
he has caused a loss to BHEL to an extent of Rs.2.32 Crores for awarding
limited tender without considering the pre-qualification of the prospective
of the tender in the matter of award of contract for construction of
building and facilities for reverse osmosis, desalination plants at various
places of Ramnad District of Tamil Nadu. So the alleged offences are said
to have been committed by the petitioner during the course of
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employment.
11. After the charge sheet has been filed against the petitioner, he
was tried before the Criminal Court and he was also convicted. As on the
date of superannuation also the petitioner continued to have been
convicted for the criminal charges proved against him. In this regard I
feel it is appropriate to extract Section 4(6)(b) of the Payment of Gratuity
Act which reads as under:
“Section 4(6)(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.”
12. So far as Section 9.3(b) of BHEL Gratuity Fund Rules is
concerned, it would state that during the pendency of any judicial
proceedings on the date of separation of the employee from the service,
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the gratuity shall be deferred beyond the statutory limit of thirty days and
in this regard application shall be submitted to the Controlling Authority
seeking permission for the delay in paying gratuity. In fact the said rule is
seen to have its origin from Section 4(6)(b) of the Payment of Gratuity
Act. For the sake of clarity, Section 9.3(b) of BHEL Gratuity Fund Rules
is extracted hereunder:
“ During the pendency of the disciplinary proceeding or
the judicial proceeding on the date of separation of an employee,
the disciplinary authority may defer payment of gratuity beyond
the statutory limit of thirty days from it becoming due for
payment, as the last pay particulars of the employee are
uncertain looking to the punishment that may be imposed on the
employee are uncertain looking to the punishment that may be
imposed on the employee on conclusion of the disciplinary
proceedings or as a result of prosecution proceedings.”
13. Rule 30-A of BHEL Conduct, Discipline and Appeal Rules
would state that during the pendency of the disciplinary proceedings or
judicial proceedings, the disciplinary authority may withhold the payment
of gratuity. However, it concludes that the provisions of Section 7(3) &
7(3-A) of the Payment of Gratuity Act should be kept in view, in the
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event of delayed payment and in case the employee is fully exonerated
from the charges. For the sake of clarity Rule 30-A of BHEL Conduct,
Discipline and Appeal Rules, is extracted hereunder:
“ 30 A (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 proceeeding or
the judicial proceeding, the disciplinary authority may withhold
payment of gratuity, for ordering the recovery from gratuity of thw
hole 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 provision of Section 7(3) and 7(3A)
of the Payment of Gratutity Act, 1972 should be kept in view in
the event of delayed payment, in case the employee is fully
exonerated.”
14. As the above provision is compatible to Section 4(6)(b) of the
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Payment of Gratuity Act, I do not find any inconsistency in order to
invoke the overriding provision provided under Section 4. So the import
of the above provisions as seen in the BHEL Conduct, Discipline and
Appeal Rules and BHEL Gratuity Fund Rules are seen to be slanting on
Section 4(6)(b) of the Payment of Gratuity Act. In nutshell, Section
4(6)(b) limits or forfeits the entitlement of gratuity for an employee if his
services are terminated due to his own misconduct or having got
convicted for an offence of moral turpitude in the course of employment.
15. Neither Rule 30-A of BHEL Conduct, Discipline and Appeal
Rules nor Section 9 of the BHEL Gratuity Fund Rule, makes any
reference about its entitlement of payment of interest. In fact Rule 30-A
would add more emphasis that Section 7(3) and 7(3-A) would be
applicable in case any delay is caused in settling the gratuity to an
employee who is fully exonerated from the charges. Since the provisions
in the alternate instruments are not aligned to the Payment of Gratuity
Act, I do not find any necessity to invoke the overriding provision. On the
contrary it is essential to read down both the provisions of the Gratuity
Act in order to ensure that the essence of these provisions is not lost.
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16. Much emphasis was made by the learned counsel for the
petitioner on Section 7(3-A) of the Payment of Gratuity Act which would
ensure the payment of interest on the delayed payment of gratuity, if the
gratuity becomes payable. Section 7(3-A) would read as under:
“ 7(3-A) If the amount of gratuity payable under sub-
section (3) is not paid by the employer within the period specified
in sub-section (3), the employer shall pay, from the date on which
the gratuity becomes payable to the date on which it is paid,
simple interest at such rate, not exceeding the rate notified by the
Central Government from time to time for repayment of long-term
deposits, as that Government may, by notification specify:
Provided that no such interest shall be payable if the delay
in the payment is due to the fault of the employee and the employer
has obtained permission in writing from the controlling authority
for the delayed payment on this ground.”
17. Before invoking the above provision one essential element has
to be made clear. It is about the entitlement of the gratuity to the
employee. The contention of the learned counsel for the first respondent
is that there is no delay on the part of the first respondent and it is the
petitioner who had caused the delay even though the first respondent was
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eligible to get the payment of gratuity.
18. Reliance was placed on the judgment of the Hon'ble Supreme
Court in Y.K.Singla Vs. Punjab National Bank and others reported in
(2013) 3 SCC 472, wherein the issue as to the benefit of interest of the
employees who are governed under the alternative provision / instrument
has been dealt with. The employees of the Punjab National Bank are
governed under the Punjab National Bank Employees Pension
Regulations, 1995 which does not have any provision for interest for the
delayed payment. In the said case the Hon’ble Supreme Court has held
that the provisions with regard to the payment of interest under the
Payment of Gratuity are extendable to the employees covered under the
alternative instrument like Punjab National Bank Employees Pension
Regulations, 1995. The Court further observed that the above regulations
are silent on the issue of payment of interest and the persons covered
under the said Regulations would still be entitled to the benefit of Section
7(3-A) of the Payment of Gratuity Act. The relevant part of the said
judgment is given as under:
“24. Furthermore, from the mandate of Section 14 of the
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Gratuity Act, it is imperative to further conclude, that the
provisions of the Gratuity Act would have overriding effect, with
reference to any inconsistency therewith in any other provision
or instrument. Thus viewed, even if the provisions of the 1995,
Regulations, had debarred payment of interest on account of
delayed payment of gratuity, the same would have been
inconsequential. The benefit of interest enuring to an employee,
as has been contemplated under section 7(3A) of the Gratuity
Act, cannot be denied to an employee, whose gratuity is
regulated by some provision/instrument other than the Gratuity
Act. This is so because, the terms of payment of gratuity under
the alternative instrument has to ensure better terms, than the
ones provided under the Gratuity Act. The effect would be the
same, when the concerned provision is silent on the issue. This is
so, because the instant situation is not worse than the one
discussed above, where there is a provision expressly debarring
payment of interest in the manner contemplated under Section
7(3A) of the Gratuity Act. Therefore, even though the 1995,
Regulations, are silent on the issue of payment of interest, the
appellant would still be entitled to the benefit of Section 7(3A) of
the Gratuity Act. If such benefit is not extended to the appellant,
the protection contemplated under section 4(5) of the Gratuity
Act would stand defeated. Likewise, even the mandate contained
in section 14 of the Gratuity Act, deliberated in detail herein
above, would stand negated.
25. We, therefore, have no hesitation in concluding, that
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even though the provisions of the 1995, Regulations, are silent
on the issue of payment of interest, the least that the appellant
would be entitled to, are terms equal to the benefits envisaged
under the Gratuity Act. Under the Gratuity Act, the appellant
would be entitled to interest, on account of delayed payment of
gratuity (as has already been concluded above). We therefore
hold, that the appellant herein is entitled to interest on account
of delayed payment, in consonance with sub-Section (3A) of
Section 7 of the Gratuity Act.”
19. While the Hon’ble Supreme Court has upheld the entitlement
of interest on the delayed payment of gratuity for the employees governed
under the alternative instrument, it has invoked the overriding effect
provided under Section 14 of the Payment of Gratuity Act for its
conclusion. In view of the overriding effect of the Payment of Gratuity
Act to any other Act or instrument, the employees governed under
alternative provision or instrument would also get the benefit of Payment
of Gratuity Act in the event of any inconsistency between the two
provisions. In this regard it is worthwhile to extract the discussions made
in paragraph 22 of the judgment for a better clarity:
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“... 22. In order to determine which of the two provisions
(the Gratuity Act, or the 1995, Regulations) would be applicable
for determining the claim of the appellant, it is also essential to
refer to Section 14 of the Gratuity Act, which is being extracted
hereunder:-
“14. Act to override other enactments, etc. – The provisions of
this Act or any rule made thereunder shall have effect
notwithstanding anything inconsistent therewith contained in any
enactment other than this Act or in any instrument or contract
having effect by virtue of any enactment other than this Act.”
A perusal of Section 14 leaves no room for any doubt,
that a superior status has been vested in the provisions of the
Gratuity Act, vis-à-vis, any other enactment (including any other
instrument or contract) inconsistent therewith. Therefore, insofar
as the entitlement of an employee to gratuity is concerned, it is
apparent that in cases where gratuity of an employee is not
regulated under the provisions of the Gratuity Act, the legislature
having vested superiority to the provisions of the Gratuity Act
over all other provisions/enactments (including any instrument
or contract having the force of law), the provisions of the
Gratuity Act cannot be ignored. The term “instrument” and the
phrase “instrument or contract having the force of law” shall
most definitely be deemed to include the 1995 Regulations, which
regulate the payment of gratuity to the appellant.”
20. Even in the instant case the petitioner has claimed that the
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overriding effect of Section 14 of Payment of Gratuity Act would
supersede Rule 30-A of the BHEL Conduct, Discipline and Appeal Rules
r/w. 9.3(b) of BHEL Gratuity Fund Rules in order to uphold the
supremacy of the Payment of Gratuity Act over the other provisions. As
stated already, Section 4 (6)(b) of the Payment of the Gratuity Act and the
alternate instruments of BHEL, in essence, would state that if an
employee is found guilty of the offences of misconduct and have caused
pecuniary loss to the company, the gratuity payable to him can be
withheld.
21. The first respondent has been charged for the offences under
Section 109, 420, 468, 471 r/w. 468 IPC and 193 IPC, even while he was
in service on the allegation that he has committed those offences during
the course of his employment. He attained the age of superannuation
while facing the trial. The first respondent has been convicted in the trial
Court on 08.09.2006. The appeal filed by the petitioner challenging the
judgment of the conviction of the trial Court was also dismissed by the
High Court on 17.09.2010. As the first respondent's age of
superannuation was due on 24.12.2011, the petitioner establishment has
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made an internal note to keep the gratuity payable to the first respondent
pending due to the criminal conviction. So the petitioner cannot claim
that on the date of superannuation, he was not tainted and he was allowed
to retire irrespective of his conviction. Until the petitioner got the
judgment from the Supreme Court on 15.06.2023 by which the judgment
of the High Court got reversed, the first respondent continued holding the
criminal conviction against him.
22. It is submitted by the learned counsel for the first respondent
that as per Section 4(6)(b) of the Payment of Gratuity Act the employee
ought to have been terminated from service and in the instant service the
employee was allowed to retire and hence he will not bear the brunt of
Section 4(6)(b) of the Payment of Gratuity Act. However, the first
respondent did not produce the order of superannuation to show whether
he has been allowed to retire without any condition. Even in the absence
of the same, the fact remains that the petitioner has been fighting the legal
battle even when the first respondent had attained the age of
superannuation and he was not free from the criminal charges proved
against him. So the first respondent cannot be considered as a person who
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has been allowed to retire irrespective of the proved criminal charges
against him.
23. The word “terminated” as adopted under Section 4(6)(b) of the
Payment of Gratuity Act would only signifies the ending point of service
from which the employee's gratuity might become payable depending
upon the misconduct / offences charged against him. It is the separating
point of the relationship of an employee with his employer by termination
of his services either through dismissal / resignation / retirement. In the
absence of any proof to show that the first respondent was allowed to
retire irrespective of the pending charges against him, it is wrong on the
part of the first appellate authority to allow the entitlement of interest
under Section 7(3-A) of the Payment of Gratuity Act, from the expiry of
one month from the date of his attaining the age of superannuation.
24. As the first respondent got acquitted only by virtue of the
judgment of the Hon'ble Supreme Court held on 15.06.2023, the
entitlement of the first respondent to get the gratuity itself would
commence from 15.06.2023. The situation would have been different if
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the judgment of the High Court made on 17.09.2010 went in favour of the
first respondent. Had it been the case, his termination of service as on
24.02.2011 would make him eligible to get the gratuity. By virtue of the
judgment of the Hon'ble Supreme Court, the first respondent was very
much a convict on the date he attained the age of superannuation i.e. on
24.02.2011 in view of the confirmation of the judgment of the conviction
by the High Court.
25. Only if the petitioner got an order of acquittal from the High
Court and thereafter his termination of services due to superannuation
arises, the pending proceedings before the Hon'ble Supreme Court can be
of no consequences on his entitlement of interest under Section 7(3-A) of
the Payment of Gratuity Act. Here is a contradictory situation where the
second respondent continued to be a convict in view of the judgment of
the High Court and only because of that he has taken it on appeal before
the Supreme Court. Had the Government taken it on appeal to the
Supreme Court, in the event of the first respondent's acquittal before the
High Court, then only, the situation contemplated in the order of the
second respondent appellate authority would arise.
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26. Section 4(6)(b) of the Payment of Gratuity Act would
contemplate not only the misconduct during the course of employment
but also the commission of offence during the course of the employment
for limiting or denying the benefit of the payment of gratuity. In the
instant case the first respondent has been convicted on criminal offences
alleged to have been committed during his employment and hence the
case of the first respondent cannot be treated as though the appeal has
been filed by the prosecution before the Hon'ble Supreme Court and the
first respondent has already been given with clean chit by the High Court.
27. Since the second respondent / appellate authority has passed the
order by completely misconstruing the situation that has arisen in this
case and has not appreciated the nuances of various provisions of the
Payment of Gratuity Act and the alternate instrument under which the
first respondent is governed and the object of this instrument, the
impugned order of the second respondent dated 14.02.2024 is liable to be
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quashed.
28. Accordingly, this Writ Petition is allowed and the impugned
order dated 14.02.2024 passed by the second respondent in Gratuity
Appeal No.30/2023 is hereby quashed. No costs. Connected
miscellaneous petition is closed.
22.11.2024
Note: Issue order copy by 25.11.2024
Index: Yes
Speaking order
Netural Citation Case : Yes
bkn
To:
1. Appellate Authority under the Payment
of Gratuity Act and Deputy
Chief Labour Commissioner (Central),
Commissioner (Central)
No.26, A Wing, 5th Floor,
Shastri Bhavan, Haddows Road,
Nungambakkam,
Chennai – 600 006.
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2. The Authority under the Payment of
Gratuity Act and Assistant Labour Commissioner (Central)
Chennai,
No.4, Haddows Road,
Shastri Bhavan,
Chennai – 600 006.
https://www.mhc.tn.gov.in/judis
R.N.MANJULA ,J.
bkn
Pre-delivery order in
22.11.2024
https://www.mhc.tn.gov.in/judis
