Madras High Court
K.Chandrasekaran vs The Executive Director on 16 April, 2025
Author: R.Subramanian
Bench: R.Subramanian
WA No.37 of 2024
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 16.04.2025
CORAM:
THE HONOURABLE MR.JUSTICE R.SUBRAMANIAN
and
THE HONOURABLE MR.JUSTICE G.ARUL MURUGAN
WA No.37 of 2024
K.Chandrasekaran ... Appellant
versus
1.The Executive Director,
Bharat Heavy Electricals Limited (BHEL),
Tiruchirapalli-620 014.
2.Appellate Authority under the Payment
of Gratuity Act and Deputy Chief Labour
Commissioner (Central)
No.26, A Wing, 5th Floor,
Shastri Bhavan, Haddow's Road,
Nungambakkam, Chennai-600 006.
3.The Authority under the Payment of
Gratuity Act and Assistant Labour Commissioner (Central)
Chennai, No.04,
Haddow's Road,
Shastri Bhavan, Chennai -600 006 ...Respondents
PRAYER: Writ Appeal filed against the order of the learned Single
Judge in WP No.7299 of 2024 dated 22.11.2024.
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WA No.37 of 2024
For the Appellant : Mr.K.V.Kartik Subramanian
For the Respondents : Mr.A.V.Arun
for Ms.M.Abinu Monisha
for R1
Mr.Venkataswamy Babu
Senior Panel Counsel
for R2 and R3
JUDGMENT
(Delivered by R. SUBRAMANIAN, J.)
The appellant is aggrieved by the order made in W.P.No.7299 of
2024, challenge in which was to the order of the second respondent dated
14.02.2022 made in Gratuity Appeal No.30 of 2023 insofar as it relates to
the direction to pay 10% interest on the gratuity payable to the appellant.
2. The appellant who was working with the first respondent, retired
from service on 24.02.2011. He was convicted for offences under various
provisions of the India Penal Code on 08.09.2006. The said conviction
was confirmed by this Court on 17.09.2010. The appellant challenged the
said confirmation before the Hon'ble Supreme Court in Criminal Appeal
No.2417 of 2010. Since the Criminal Appeal was pending before the
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Hon'ble Supreme Court at the time of the retirement of the appellant, the
gratuity payable to the appellant was withheld by the first respondent
employer. Unfortunately for the employer and fortunately for the
appellant, the conviction was set aside by the Hon'ble Supreme Court vide
judgment dated 15.06.2023.
3. Upon being acquitted of the criminal charges, the appellant
moved the Controlling Authority under the Payment of Gratuity Act, 1972
seeking payment of gratuity with interest. The Controlling Authority
allowed the application and directed payment of gratuity with 10% simple
interest. This order was challenged by the employer in payment of
gratuity appeal in GA No.30 of 2023 before the Appellate Authority under
the Payment of Gratuity Act, 1972. The Appellant Authority dismissed
the appeal confirming the order of the Controlling Authority. Aggrieved,
the employer filed W.P.No.7299 of 2024 before this Court. The learned
Single Judge, by the order impugned, allowed the writ petition and held
that the employer is not bound to pay interest. Hence, this appeal by the
employee.
4. We have heard Mr.Kartik Subramanian, learned counsel
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appearing for the appellant. Mr.A.V.Arun, learned counsel appearing for
the first respondent employee and Mr.Venkataswamy Babu, learned
Senior Panel Counsel for the authorities viz., R2 and R3.
5. Mr.Kartik Subramanian, learned counsel appearing for the
appellant inviting our attention to the provisions of Section 4(6) and
Section 7(3) and 7(3A) of the Payment of Gratuity Act, would contend
that once the gratuity becomes payable, the employer is bound to pay
within 30 days of the retirement and in the event of the gratuity is
withheld, it has to be paid with interest at 10%. According to the learned
counsel, the provisions of the Payment of Gratuity Act, 1972 being
mandatory, the employer cannot escape the liability to pay interest.
6. Contending contra, Mr.A.V.Arun, learned counsel appearing for
the first respondent employer would invite our attention to the Employer’s
Gratuity Fund Rules titled as BHEL Gratuity Fund Rules as well as the
BHEL Conduct, Discipline and Appeal Rules to contend that the
employer has got a right to withhold the gratuity, if there is any judicial
proceedings pending against the employee, at the time of retirement.
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7. Mr.Arun would also invite us to the proviso to Section 7(3A) to
contend that if the withholding of the gratuity is as a result of the mistake
of the employee then the liability to pay interest will not arise.
8. We have considered the rival submissions advanced by the
learned counsel for the parties. For the purpose of convenience, we deem
it fit to extract the relevant provisions of the Payment of Gratuity Act,
BHEL Gratuity Fund Rules, and BHEL Conduct, Discipline and Appeal
Rules.
i) Section 4(6) of the Act of 1972 reads as follows:
“4(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.”
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ii) The relevant portion of Section 7 of the Act of 1972 viz., Section
7(1), (2), (3) and (3A) read as follows:
“(1) A person who is eligible for payment
of gratuity under this Act or any person
authorised, in writing, to act on his behalf shall
send a written application to the employer,
within such time and in such form, as may be
prescribed, for payment of such gratuity.
(2) As soon as gratuity becomes payable, the
employer shall, whether an application referred
to in sub-section (1) has been made or not,
determine the amount of gratuity and give
notice in writing to the person to whom the
gratuity is payable and also to the controlling
authority specifying the amount gratuity so
determined.
(3) The employer shall arrange to pay the
amount of gratuity within thirty days from the
date it becomes payable to the person to whom
the gratuity is payable.
(3A) 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.”
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The other provisions of sub-section of Section 7 are not very
relevant for our purpose.
iii) Rule 9.3(b) of the BHEL Gratuity Fund Rules, which relates to
deferment of payment of gratuity reads as follows:
“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.”
iv) Rule 30A of the BHEL Conduct, Discipline and Appeal Rules
reads as follows:
30A (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
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disciplinary proceeding or the judicial
proceeding, 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 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 29 7(3A) 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.
9. A reading of the above provisions, particularly, Section 4 of the
Act makes it clear that the gratuity is payable notwithstanding the fact that
an employee has either applied or not. sub-section 6 of Section 4 of the
Act enumerates the circumstances under which the gratuity can be
withheld by the employee. Section 7 of the Act deals with determination
and payment of gratuity and it also fixes the time limit.
10. Section 7(3A) of the Act imposes an obligation on the part of
the employer to pay interest. Of course, there is a proviso to the said
provision, which we have already extracted, it relieves the employer of the
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obligations to pay interest if the conditions stipulated therein are complied
with. The Service Rules are not in any manner materially different from
the provisions of the Act. In fact, the Service Rules themselves provide
that the payment of interest will be governed by the relevant Section of
the payment of Gratuity Act, 1972. As we have already pointed out the
employee retired on 24.02.2011. Gratuity is payable within 30 days as per
sub-section 3 of Section 7 of the Act of 1972. Admittedly, the gratuity
was not paid. It is also not shown that the required permission from the
authority was obtained as per the proviso to sub-section (3A) of Section 7.
11. Of course, the employee has suffered a conviction and he was a
convict on the day he retired. Therefore, there was a justification for the
employer to withhold the gratuity. Upon the conviction being set aside by
the Hon'ble Supreme Court, the employee was relieved of all the charges
and he was acquitted of the charges. The effect of the acquittal by the
Hon'ble Supreme Court is that the employee is deemed to have been
innocent throughout. The very basis on which the gratuity was withheld
stood effaced. If the basis goes, the consequence also disappears.
Therefore, the ineligibility of the employee also ceases. Once the
ineligibility ceases, the employee would be entitled to the gratuity as if
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there was no conviction at all. In fact, the employer had foreseen such an
event and a provision has been made in the Gratuity Rules itself, which
provides that if the employee is not guilty of the charges against him, the
gratuity is so withheld shall be released along with simple interest thereon
as is specified. Therefore, the employer was bound to pay interest on the
gratuity that is withheld. It is not in dispute that the gratuity amount is
deposited before the authority and the same was withdrawn by the
appellant. The dispute in this appeal is only with reference to the interest
portion.
12. In the light of the reasoning and in the light of the effect of the
provisions of Act, we are unable to concur with the conclusion of the
learned Single Judge to the effect that the interest is not payable and the
conclusion of the learned Single Judge that entitlement to gratuity would
commence from the date of acquittal by the Hon'ble Supreme Court. This
conclusion of the learned Single Judge, in our considered opinion,
completely overlooks the position in criminal law relating to the effect of
an acquittal made by a Court. It is settled position of criminal
jurisprudence that once an acquittal is made, the person accused is cleared
of all the charges and it is equivalent to him having undergone baptism.
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We therefore, allow the appeal, set aside the order of the learned Single
Judge and restore the orders of the authorities under the payment of
Gratuity Act.
13. The appellant is entitled to withdraw the interest amount viz.,
Rs.10 Lakhs deposited by the first respondent with the Controlling
Authority under the Payment of Gratuity Act. There shall be no order as to
costs.
(R.S.M., J.) (G.A.M., J.)
16.04.2025
Index : Yes/No
Neutral Citation : Yes/No
mrn
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To
1.The Executive Director,
Bharat Heavy Electricals Limited (BHEL),
Tiruchirapalli-620 014.
2.Appellate Authority under the Payment
of Gratuity Act and Deputy Chief Labour
Commissioner (Central)
No.26, A Wing, 5th Floor,
Shastri Bhavan, Haddow's Road,
Nungambakkam, Chennai-600 006.
3.The Authority under the Payment of
Gratuity Act and Assistant Labour Commissioner (Central)
Chennai, No.04,
Haddow's Road,
Shastri Bhavan, Chennai -600 006
R.SUBRAMANIAN, J
and
G.ARUL MURUGAN, J.
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(mrn)
16.04.2025
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