Madras High Court
The Management vs The Appellate Authority on 29 May, 2025
W.P.No.1951 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
(Special Original Jurisdiction)
RESERVED ON : 17.04.2025
PRONOUNCED ON : 29.05.2025
PRESENT:
THE HON’BLE DR. JUSTICE A.D. MARIA CLETE
W.P.No.1951 of 2021
and
W.M.P. No.2207 of 2021
The Management,
Dharmapuri District Co-operative Bank Ltd,
Dharmapuri – 636 701. ….Petitioner
Vs.
1. The Appellate Authority
Under the Payment of Gratuity Act, 1972
(Additional Commissioner of Labour)
Dr.Balasundaram Road,
Coimbatore – 18.
2. Controlling Authority
Under Payment of Gratuity Act, 1972
Salem – 636 008.
3. G.Pushpam,
D/o. Gnanaiah,
5/997, Perumal Maistry Street,
Senthil Nagar,
Collectorate (PO),
Dharmapuri – 636 705 ….Respondents
Prayer in W.P.
To issue a writ under Article 226 of Constitution of India in the nature of
certiorari or other appropriate writ or order or direction, call for the records in
1/32
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W.P.No.1951 of 2021
AGA 45/2019 on the file of the Appellate Authority Under Payment of Gratuity
Act, 1972 (Additional Commissioner of Labour), Dr.Balasundaram Road,
Coimbatore – 18, the 1st respondent herein, quash the final order dated
30.06.2020 passed therein and pass such other or further orders as this Hon’ble
Court deem fit and proper in the circumstances of the case.
Prayer in W.M.P.
To grant an interim stay of the order dated 30.06.2020 in AGA 45/2019 passed
by the Appellate Authority Under Payment of Gratuity Act, 1972, (Additional
Commissioner of Labour), Dr.Balasundaram Road, Coimbatore – 18 the 1st
respondent herein pending disposal of the writ petition.
Appearance of Parties:
For Petitioner : M/s. P.Anbarasan, A.Karthikesan, A.Praveen Kumar
and M.Meeenatchi, Advocates
For Respondents 1 & 2 : Mr.K.Suresh, GA
For Respondent 3 : Mr.R.Thamaraiselvan, Advocate
JUDGMENT
Heard.
2.The present writ petition has been filed by the District Central Co-
operative Bank, Dharmapuri, challenging the order passed by the first
respondent—Appellate Authority under the Payment of Gratuity Act, 1972—in
A.G.A. No. 45 of 2019. By the said order, the Appellate Authority allowed the
appeal filed by the third respondent, set aside the order of the second
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respondent dated 22.01.2019 in P.G. Case No. 73 of 2018, and directed the
petitioner bank to pay a sum of Rs. 5,41,025/- to the third respondent within 30
days. The order further stipulated that, in the event of default, interest at the rate
of 10% per annum shall be payable on the delayed amount.
3.When the writ petition was taken up for admission on 02.02.2021,
notice was accepted on behalf of respondents 1 and 2, and the Court directed
issuance of notice to the third respondent. The third respondent has since
entered appearance through counsel. Pending the writ petition, an interim stay
was granted for a period of four weeks. When the matter was listed on
23.04.2024, this Court directed that the case be referred to the National Lok
Adalat scheduled for 08.06.2024, for an attempt at amicable resolution.
However, as no settlement could be arrived at, the matter was returned to this
Court for final adjudication.
4.Subsequently, when the matter was listed on 05.11.2024, this Court
directed that it be referred to the Tamil Nadu Mediation and Conciliation Centre
for resolution. However, the mediation efforts were unsuccessful, and no
settlement could be reached between the parties. Accordingly, the matter was
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returned to this Court with a covering letter dated 09.01.2025.
5.The primary contention advanced by the petitioner bank is that the third
respondent joined its service on 09.01.1992 and retired on 31.01.2016. Shortly
before her retirement, she submitted a letter dated 28.01.2016 stating that she
had availed a loan of Rs. 5,00,000/- from the Co-operative Thrift and Loan
Society, and that monthly instalments towards the loan were being deducted
from her salary. As on 28.01.2016, an outstanding sum of Rs. 4,97,795/-
remained payable by her to the society. In the same letter, the third respondent
further agreed that if any surcharge was imposed on her in the pending
proceedings under Section 81 of the Tamil Nadu Co-operative Societies Act,
the same could be recovered from the terminal benefits payable to her, and the
remaining balance disbursed thereafter.
6.In its reply dated 29.01.2016, the petitioner bank informed the third
respondent that upon conclusion of the surcharge proceedings under Section 81
of the Tamil Nadu Co-operative Societies Act, and after determining the amount
due from her, the dues would be adjusted against her terminal benefits, and the
remaining balance would be paid to her. The third respondent, by her
communication dated 30.01.2016, agreed to abide by this condition. However,
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she subsequently submitted another letter dated 14.02.2016, stating that she had
received a sum of Rs. 1,45,000/- from the bank, but had not paid interest on the
same. She accordingly requested the bank to adjust the said amount from her
terminal benefits and release the balance due to her.
7.In response to the third respondent’s letter dated 10.08.2016, the bank
informed her that payment of the terminal benefits would be made upon
completion of the enquiry under Section 81 of the Tamil Nadu Co-operative
Societies Act. Pursuant to this, the Deputy Registrar, who conducted the
enquiry, by letter dated 05.10.2016, informed the bank that the third respondent
was liable to pay a sum of Rs. 7,25,000/- to the society under three separate
heads. Based on this communication, the third respondent was informed that,
after adjusting a sum of Rs. 3,141/- towards an outstanding housing loan, the
net amount payable to her was Rs. 5,37,870/- towards gratuity and Rs.
3,13,043/- towards earned leave wages for 235 days, aggregating to Rs.
8,05,913/-. However, considering the liability of Rs. 7,25,000/- to the society,
and interest accrued up to 31.10.2016 amounting to Rs. 5,56,326/-, the bank
gave credit for the said liability while adjusting the terminal benefits. The third
respondent was therefore advised to approach the bank to obtain a receipt for
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the said adjustment.
8.The third respondent subsequently filed an application before the
second respondent seeking payment of gratuity in the sum of Rs. 6,24,259/-,
calculated based on her revised wages, along with interest. As there was a delay
of 645 days in filing the application, she also submitted a petition for
condonation of delay in P.G.I.A. No. 10 of 2018. The authority allowed the
condonation petition and condoned the delay by order dated 24.08.2018. The
main gratuity application was thereafter taken on file as P.G. Case No. 73 of
2018, and notice was issued to the petitioner bank. In response, the petitioner
bank filed its counter statement dated 26.02.2018.
9.Before the second respondent, the third respondent examined herself as
PW1, though she did not file any documentary evidence in support of her claim.
On behalf of the petitioner bank, K. Govindaraju, Manager (Establishment),
was examined as RW1, and thirteen documents were filed, which were marked
as Exhibits R1 to R13. The authority, taking note of the letter submitted by the
third respondent wherein she had agreed to the adjustment of her gratuity
against the amounts due to the Co-operative Thrift and Loan Society, computed
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the gratuity amount at Rs. 5,41,025/-. However, relying on her willingness for
such adjustment, the authority ultimately held that she was not entitled to
receive gratuity, and by order dated 22.01.2019, rejected the claim. In the
operative portion of the order, the following finding was recorded:—
“kDjhuUf;F jFjpahd nkw;fz;l gzpf;bfhilj; bjhif KGtJk;
kDjhuu; vjpu;kDjhuu; epUthfj;jpd; gzpahsu; Tl;Lwt[ rpf;fd kw;Wk;
fld; r';fk; ypkpbll;oy; bgw;w fld; bjhiff;fhf kDjhuupd; xg;g[jYld;
neu; bra;Jbfhz;lgoahy; kDjhuu; nkYk; vjpu;kDjhuu; epUthfj;jpypUe;J
gzpfb; fhil bgw Kfhe;jpuk; VJk; ,y;iy vd Kot[ bra;J kDjhuu;
kDit js;Sgo bra;J cj;jutpLfpnwd;/”
10.Aggrieved by the order of the second respondent Controlling
Authority dated 22.01.2019, the third respondent preferred an appeal dated
04.04.2019 under Section 7(7) of the Payment of Gratuity Act, 1972. The
appeal was taken on file as A.G.A. No. 45 of 2019, and notice was issued to the
petitioner bank. In response, the petitioner bank filed a counter statement dated
29.08.2019 and submitted fifteen documents, which had earlier been marked
before the Controlling Authority as Exhibits R1 to R15. The third respondent
filed a rejoinder dated 24.09.2019. Both parties also submitted written
arguments in support of their respective positions.
11.In addition to the earlier contentions, the third respondent brought to
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the notice of the Appellate Authority—both in her appeal grounds and written
submissions—the fact that she had filed a writ petition in W.P. No. 9426 of
2018 and had obtained an interim stay in W.M.P. No. 11243 of 2018 dated
18.04.2018. It was submitted that, in light of the interim order granted by the
High Court, the surcharge proceedings initiated against her had become
unenforceable.
12.The Appellate Authority, after hearing both parties, allowed the appeal
by order dated 30.06.2020 and awarded gratuity in favour of the third
respondent to the tune of Rs. 5,41,025/-, along with interest, as already noted.
While doing so, the Appellate Authority did not accept the objections raised by
the petitioner bank and proceeded to grant relief by relying on Section 4(6) of
the Payment of Gratuity Act, 1972, as well as the decisions in Jaswant Singh
Gill v. M/s. Bharat Coking Coal Ltd. & Others, (2007) 1 SCC 663, and
Union Bank of India v. C.G. Ajay Babu, (2018) 9 SCC 529. The authority
rejected the effect of the undertaking given by the third respondent—wherein
she had agreed to an adjustment of the dues from her terminal benefits—and
held that such an undertaking could not defeat her statutory entitlement to
gratuity.
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13.In light of the above findings, the Appellate Authority set aside the
order of the Controlling Authority dated 22.01.2019 in P.G. Case No. 73 of
2018 and directed that gratuity be paid to the third respondent as specified. The
petitioner bank had raised a twofold objection before the Appellate Authority
regarding the interim stay granted in the writ petition challenging the surcharge
proceedings. These contentions have been extracted and recorded by the
Appellate Authority in the impugned order at pages 8 and 9, and are as
follows:-
“...tpUg;g foj';fspd; ngupy;jhd; mtuJ Xa;tf
[ hy epjp gad;fs;
gpoj;jk; bra;J fld; fzf;fpw;F tut[ itf;fg;gl;lnj jtpu. gpupt[
87?d; jz;lf;fl;lz Mizia mog;gilahf bfhz;L gpoj;jk;
bra;J tH';fg;gltpyi
; y vd;Wk;. fld; fzf;fpid xj;jpirt[ bra;J
bfhs;s ntz;oa bghWg;g[k; flika[k; nky;KiwaPll; hsUf;nf
cupajhFk;////”
“///gpupt[ 87?d; fPH; tH';fg;gl;l jz;lj;jPui
; t Mizia
cau;ePjpkd;wk; gpwg;gpjJ
; s;s jil cj;jutpid nky;KiwaPll; hsu;
jhf;fy; bra;atpy;iy///”
14.It appears that the petitioner bank was not a party to W.P. No. 9426 of
2018, in which only the Central Co-operative Thrift and Credit Society was
arrayed as a respondent. This may explain why the petitioner bank made the
aforementioned statement and also why there is no reference in the affidavit
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filed in support of the present writ petition to the said writ proceedings or to the
interim stay obtained by the third respondent from this Court. In view of this
omission, this Court undertook an exercise to ascertain the status and outcome
of the said writ petition.
15.It is found that the third respondent filed W.P. No. 9426 of 2018
challenging the surcharge proceedings only after she had instituted P.G. Case
No. 73 of 2018 on 03.02.2018. In the said writ petition, while issuing notice on
18.04.2018, this Court passed the following interim order:—
“Learned counsel for the petitioner submitted that by the
proceedings dated 29.1.2016, the petitioner was permitted to
retire from service on reaching the age of superannuation on
31.1.2016. After permitting the petitioner to retire from
service, the relationship of master and servant ceased to exist.
Hence, the respondent society cannot initiate proceedings
under Section 87 of the Tamil Nadu Cooperative Societies
Act, as per the settled legal position holding that after the
retirement of any staff of the cooperative society, no such
proceedings under Section 87 shall be allowed to take place.
2. Ms.T.Girija, learned Government Advocate, taking notice
on behalf of the respondents, submitted that in pursuance of
the enquiry report filed under Section 81 on 25.7.2016, the
proceedings under Section 87 were initiated against the
petitioner.
3. But, even if the contention made by the learned
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Government Advocate for the respondents that the report
under Section 81 of the Act was made available against the
petitioner on 25.7.2016, she should not have been permitted
to retire from service by the proceedings dated 29.1.2016.
When the petitioner has been permitted to retire from service
on reaching the age of superannuation on 31.1.2016, this
Court, prima facie, finds that the proceedings under Section
87 cannot be continued. Therefore, there shall be an order of
interim stay of the impugned order. Call after four weeks for
filing of counter affidavit.”
16.However, when the matter was listed again on 14.11.2024, it is indeed
surprising that the counsel appearing for the Co-operative Thrift and Credit
Society—which had obtained the surcharge order against the third respondent
—submitted before this Court that the writ petition was not maintainable, and
that the appropriate remedy would lie by way of a Civil Revision Petition under
Article 227 of the Constitution, in view of the Division Bench decision in E.S.
Sundara Mahalingam v. Special Tribunal, reported in 2020 (1) CWC 417.
Notably, the present counsel for the third respondent, who had also appeared as
counsel for the writ petitioner in that matter, did not raise any objection to the
said submission. Accordingly, with the consent of both parties, the learned
Judge passed the following order on 14.11.2024:—
“The learned counsel for the respondents placed reliance on the
order in W.P.No.22274 of 2019 dated 28.01.2022 wherein, in a
similar matter, a learned Single Judge of this Court had opined as
follows:
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“The learned counsel for the petitioner/management would
submit that in view of the latest decision reported in 2020
(1) C.W.C Pg.417 (E.S.Sundara Mahalingam Vs. Special
Tribunal), the writ petition is not maintainable and it is only
a C.R.P that is maintainable. According to him several writ
petitions have been converted as C.R.P after the above
judgment of the Division Bench. Therefore, he would
request this Court to convert this writ petition into C.R.P
and post before the roster judge.
2.Accordingly, the Registry is directed to covert this writ
petition into C.R.P and post the same before the judge
concerned after obtaining necessary orders from My Lord
Hon'ble Acting Chief Justice.”
2. It is uniformly stated by both the learned counsels that similar
order could be passed in the present writ petition also. The writ
petition is therefore converted as Civil Revision Petition.
3. Accordingly, the Registry is directed to convert this writ
petition into Civil Revision Petition and list the same before the
roster Judge after obtaining necessary orders from the Hon'ble
Chief Justice.”
17.It must be emphasised that counsel appearing before this Court bear a
duty of responsibility and candour, particularly when making submissions that
are accepted and acted upon by the Court. The Division Bench decision relied
upon in the order dated 14.11.2024—E.S. Sundara Mahalingam v. Special
Tribunal, reported in 2020 (1) CWC 417—arose from a writ petition
challenging an order passed by a Co-operative Tribunal under Section 152 of
the Tamil Nadu Co-operative Societies Act, 1983. It is also a matter of judicial
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notice that, in lieu of constituting a Special Tribunal, the State Government had
designated all Principal District Courts as Co-operative Tribunals under the
said Act. In Sundara Mahalingam's case (cited supra), the maintainability of
the writ petition was questioned through a writ appeal, which came to be
decided by the Division Bench.
18.In Sundara Mahalingam's case (cited supra), the Division Bench,
while considering the writ appeal, examined whether the writ petition in
question had been filed under Article 226 or Article 227 of the Constitution.
The Bench held that since the writ petition was directed against an order of the
Co-operative Tribunal—presided over by a Principal District Judge—the nature
of the relief sought and the forum involved indicated that the matter was, in
substance, a Civil Revision Petition (CRP) under Article 227. Consequently, it
was held that if a matter is effectively a CRP, then an intra-court appeal under
Clause 15 of the Letters Patent would not be maintainable. On that basis, the
writ appeal was dismissed. Thus, the decision in Sundara Mahalingam's case
(cited supra) serves as authority solely for the proposition that where a writ
petition is filed against the order of a Co-operative Tribunal, it must be treated
as a CRP under Article 227 and not as a writ petition under Article 226.
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19.It is unclear how the decision in Sundara Mahalingam's case (cited
supra) can be applied to the case of the third respondent, who sought to
challenge a surcharge order passed under Section 87 of the Tamil Nadu Co-
operative Societies Act, 1983 by the Deputy Registrar of Co-operative
Societies. The proper course available to the third respondent was to file an
appeal under Section 152 before the Co-operative Tribunal, and if still
aggrieved, to approach this Court by way of a Civil Revision Petition under
Article 227 of the Constitution, as laid down by the Division Bench in Sundara
Mahalingam's case (cited supra). The reliance on that decision to sustain the
interim order in the present context was clearly misplaced, and the submission
made by learned counsel to that effect appears to be a misstatement, aimed at
continuing the benefit of the interim stay through an incorrect procedural route.
20.Although the order in question is dated 14.11.2024, in order to
ascertain whether W.P. No. 9426 of 2018 was ever converted into a Civil
Revision Petition (CRP) and to verify the current status of such a proceeding,
this Court directed the Registry to submit a report. The Registry has informed
that, to date, the petitioner in W.P. No. 9426 of 2018 (who is the third
respondent in the present writ petition) has not taken any steps to move the
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Registry by filing proper grounds of revision, and the CRP remains
unnumbered. It is a matter of concern that even after the lapse of more than six
months since the order of the learned Judge dated 14.11.2024, no further action
has been taken to regularise the matter. What compounds the issue is that the
said order was obtained on a clearly erroneous statement of law. The intention
behind such inaction appears evident: to perpetuate the benefit of an
unsustainable interim stay order that has remained in force for over seven years.
21.However, learned counsel for the petitioner bank submitted that,
notwithstanding the provisions of Section 4(6) of the Payment of Gratuity Act,
1972, the recovery mechanism provided under the Tamil Nadu Co-operative
Societies Act, 1983 would prevail by virtue of the non-obstante clause
contained in Section 48(7) of the said Act. In support of this contention,
reliance was placed on the judgment of a Division Bench of this Court in The
Secretary, Government Regional Workshop Employees Co-operative
Thrift and Credit Society Ltd., Salem v. G. Pandurangan, Deputy
Registrar of Co-operative Societies, Salem Circle, in W.A. No. 2126 of 2022,
dated 01.08.2024. Particular emphasis was placed on the observations
contained in paragraphs 12 to 16 of the said judgment, which were cited in
support of the argument.
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“12. Thus, the said Act will prevail over all other general laws.
13. The endorsement made by the Pay Disbursing Officer in the
loan application would be binding on the Department. Therefore,
the competent authorities of the Government Department are duty
bound to recover the loan dues from the principal borrower or
guarantor and settle the same to the Cooperative Society concerned.
The said undertaking has been agreed by the principal borrower and
guarantor. That being the nature of loan transaction, now the first
respondent-guarantor cannot turn around and say that
employer/Government Department cannot recover the gratuity and
settle the loan dues. Section 48 [as stated supra] would squarely
apply in respect of the loan transactions in Cooperative Societies
and more specifically, where the Government employees or the
employees of other sectors borrowing loan from the Cooperative
Societies.
14. Question of issuance of show cause notice in such matters
would not arise at all in view of the fact that the principal borrower
and the guarantor are very much aware of the nature of transactions
and the agreements signed by them, which is a contract. The
agreement, loan applications are governed under the provisions of
the Tamil Nadu Cooperative Societies Act and therefore, ignorance
in respect of the conditions is not a ground to seek exoneration.
Under Section 48, gratuity is recoverable for the purpose of settling
the loan dues to the Cooperative Societies. Thus, the ground that no
show cause notice was issued to the first respondent is untenable
and such notice is not required in view of the contractual
obligations as established, under the Statute, which was agreed in
the loan application both by the principal borrower and the
guarantor.
15. Regarding the other ground that under the Gratuity Act, the
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gratuity is not recoverable, Section 48(7) of the Tamil Nadu
Cooperative Societies Act states that the provisions of this Section
shall apply notwithstanding any law to the contrary for the time
being in force. Therefore, the Cooperative Societies Act would
prevail over all other general laws. Thus, the order passed by the
competent authority of the Government Automobile Workshop in
proceedings dated 22.01.2013 is well within the powers conferred
under Section 48 of the Tamil Nadu Cooperative Societies Act and
there is no infirmity. The Writ Court proceeded by considering the
provisions of the Gratuity Act and the relevant provisions of the
Tamil Nadu Cooperative Societies Act, which is a special enactment
was not brought to the notice of the Writ Court, which resulted in
allowing of the writ petition. Thus, we are inclined to interfere.
16. Accordingly, this Writ Appeal stands allowed and consequently,
the writ order impugned dated 04.03.2022 passed in WP.No.16488
of 2013 is set aside.”
In light of the above submissions, learned counsel contended that the impugned
order passed by the authority is liable to be set aside.
22.In response, learned counsel for the third respondent placed reliance
on an earlier Division Bench judgment of this Court in N. Ponmudi & Others
v. Villupuram District Central Co-operative Bank Ltd. & Others, rendered
in W.A. No. 57 of 2022 dated 16.12.2022. Particular reference was made to the
observations contained in paragraphs 5 to 13 of the said judgment, which were
relied upon to support the respondent’s case. The relevant excerpts are as
follows:—
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“5. The learned Single Judge, on hearing both sides, proceeded to
hold that the Tamil Nadu Co-operative Societies Act alone will
govern the matter, as the Tamil Nadu Co-operative Societies Act is
a special enactment and the Payment of Gratuity Act is a general
law. Once the Management has decided to have a separate Scheme,
approved by the Registrar of Cooperative Societies, the grievance
will have to be addressed only under the provisions of the Tamil
Nadu Co-operative Societies Act and the Payment of Gratuity Act
would not be applicable to the employees of a Co-operative
Society.
6. The learned Single Judge has further held that in terms of
Sections 153 and 154 of the Tamil Nadu Co-operative Societies
Act, the aggrieved persons will have to work out their remedy only
before appropriate forum and not under the Payment of Gratuity
Act.
7. Heard both sides and perused the materials available on record.
8.It is not in dispute that if an employee has attained the age of
superannuation on completion of sufficient years of service, he
was an employee under the Tamil Nadu Co-operative Societies
Act.
9. For the sake of convenience, Section 4(5) of the Payment of
Gratuity Act needs to be referred to, which is extracted as follows:
"Section 4: Payment of gratuity:
.. ..
(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. ....."
10. Section 4(5) clearly stipulates that in case the Management
gives the better benefit than what has been provided under the
Tamil Nadu Co-operative Societies Act, the employees are entitled
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to get the benefits. It does not mean that the employees who are
working in Co-operative Society, cannot get the benefits of the
provisions of the Payment of Gratuity Act. In case the Scheme
gives lesser benefit than what has been provided under the Act, the
employees cannot be prevented from approaching the authority
under the provisions of the Payment of Gratuity Act. When there
are two forums available to an employee, he is entitled to choose
the forum which is beneficial to him. The Apex Court in the
decision reported in 1991 (1) LLJ 111 (SC) = 1990 (2) LLN 3 =
MANU/SC/0652/1990 (Nirchiliya Vs. The Management of Safire
Theatre) has held that the employee can choose the forum. Though
it has been rendered in the context of denial of employment, the
same principle will apply here also.
11. In this case, the provisions of the Tamil Nadu Co-operative
Societies Act, so also the Payment of Gratuity Act, 1972, are
applicable to a Co-operative Society. There is no evidence before
the authority concerned to show that the Management is giving for
better benefits than what has been provided for under the Payment
of Gratuity Act to drive the employees to get the relief invoking
Section 153 or Section 154 of the Tami Nadu Cooperative
Societies Act.
12. It may be true that the Payment of Gratuity Act is a general Act
and the Tamil Nadu Co-operative Societies Act is a special
enactment. It does not mean that the employees are precluded from
approaching the authority claiming gratuity when the Payment of
Gratuity Act gives a better benefit than the one provided under the
Scheme.
13. Hence, we are of the view that the impugned order passed by
the learned Single Judge needs to be interfered with. The order of
the Controlling Authority, as confirmed by the appellate authority,
is restored and the amount if any lying in deposit with the
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Controlling Authority, shall be credited to the account of the writ
petitioners by the authority within four weeks from the date of
receipt of a copy of this order. In case the amount has been
withdrawn by the Co-operative Bank, it shall be remitted to the
employees within a period of eight weeks together with interest @
10% per annum on the gratuity amount in terms of Section 7(3-A)
of the Payment of Gratuity Act, 1972.”
23.Once again, learned counsel failed to ascertain that the above Division
Bench judgment is presently under challenge before the Hon’ble Supreme
Court at the instance of the Central Co-operative Bank and is presently stayed.
The matter is pending in Special Leave Petition (Civil) Diary No. 23579 of
2023, and the interim order dated 24.07.2023 reads as follows:—
“Delay condoned.
Issue notice, returnable in six weeks. Until further orders,
operation of the impugned order dated 16.12.2022 passed by the
Madras High Court shall remain stayed.”
24.Learned counsel for the third respondent also relied on a decision of a
learned Single Judge of this Court in The Special Officer (now the Managing
Director), Madurai Kamaraj University Co-operative Printing Press
Limited, Madurai v. The Appellate Authority under the Payment of
Gratuity Act & Another, in W.P. (MD) No. 6425 of 2018, dated 10.02.2023.
In support of his submission, he referred to and relied upon the following
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observations made in paragraph 6 of the said judgment:—
“The petitioner Press claims that they have withheld the gratuity
amount of the third respondent's husband on the ground that he has
not cleared the loan availed from the Co-operative Society and as
per Section 48 of the Tamil Nadu Co-operative Societies Act, they
can retain the gratuity amount of the employee……… except
Section 4(6)(1) of the Payment of Gratuity Act, the employer have
no right to withhold the gratuity amount of the employee. Further,
in this regard, the Co-operative Society has not made any claim
before the Petitioner Press to recover the loan amount from the
third respondent's husband and the petitioner Press, on its own
decision, has withheld the gratuity amount. Hence, this Court is not
inclined to interfere with the impugned orders passed by the first
and second respondent. The petitioner is directed to settle the
gratuity amount to the third respondent within a period of six weeks
from the date of receipt of a copy of this order.”
25.Learned counsel further referred to the judgment of the Full Bench of
this Court in E. Gopal v. Arulmigu Dhandayuthapaniswamy Temple, Palani,
reported in 2013 (3) CTC 689, wherein the following observations were made
in paragraph no.28:—
“28.The Payment of Gratuity Act, 1972 is a self contained and
complete code by itself and its provisions impliedly exclude
recourse to any other statute. Section 14 of the Payment of Gratuity
Act has overriding effect over the provisions of any other
enactment. It is not in dispute that the Central Act is more
advantageous than that of the State Rules. In other words, the
benefit availed by the employees of the Devasthanam under the
State Rules is meager compared to the Gratuity payable under the
Payment of Gratuity Act. Section 4(5) of the Act protects the right
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of the employee to receive better terms of gratuity under any award
or agreement contract with the employer. The proviso to Rule 26 of
the Rules provides that said Rule will not apply to any institution
where the Contributory Provident Fund Scheme is in force. By
imposing a restriction, the Rules prohibit the employees enjoy the
fruits of the beneficial Central Act and to that extent the Rules are
inconsistent with the Central Act. Therefore, we have no hesitation
in holding that the Rules are repugnant to the Central Act to the
extent indicated above.”
26.Reference was also made to a judgment of the Division Bench of the
Kerala High Court in State of Kerala v. Omana S.N., rendered in Writ
Appeal No. 1569 of 2017 dated 16.08.2017. Learned counsel relied upon the
following passage from paragraph 10 of the said judgment in support of his
submissions:—
“10. A Division Bench of this Court has considered the effect of
the above provision in the context of Part III KSR in relation to
an employee of the Kerala State Electricity Board (KSEB for
short). As per the said judgment (Exhibit P4 in the Writ Petition)
dated 08.01.2008, disposing of W.A.No.1062 of 2003 and
W.A.No.1938 of 2004 speaking for the Bench, Dattu CJ (as he
then was) has held as follows:
15. Section 14of the Payment of Gratuity Act provides
that the provisions of the Act shall have effect
notwithstanding anything inconsistent therewith contained
in any enactment other than the Act or in any instrument
or contract having effect by virtue of any enactment under
the Act. The sweep of this Section clearly provides that
the right to claim gratuity by an employee under the
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provisions of this Act is not based on any contract, but a
right which arises out of the provisions of the Statute
itself. The Apex Court in the case of (Municipal
Corporation of Delhi Vs. Dharam Prakash SharmaAIR
1999 SC 293) has held that the Payment of Gratuity Act,
1972being a special provision, shall have an overriding
effect over any scheme that might have been adopted by
the concerned employer, and even if the benefit is availed
of under the concerned scheme, the employee would be
entitled for payment of gratuity under the Act.”
27.Lastly, learned counsel referred to a recent decision of a two-Judge
Bench of the Hon’ble Supreme Court in Western Coal Fields Ltd Vs.
Manohar Govinda Fulzele reported in 2025 INSC 233. In this decision, the
Supreme Court referred to the earlier judgments in Jaswant Singh Gill's case
and C.G. Ajay Babu's case (cited supra) —both of which were relied upon by
the Appellate Authority in the impugned order. Specific reference was made to
paragraphs 8 and 9 of the judgment, which read as follows:—
“8. Further Jaswant Singh Gill4 was overruled by a three Judge
Bench in Mahanadi Coalfields Ltd. vs. Rabindranath
Choubey wherein it was held that even when an employee retires
during the pendency of disciplinary proceedings, the services are
deemed to be continued, for the purpose of continuation of the
proceedings, as per rules. The delinquent employee since deemed
to be in service, even a major penalty of termination could be
imposed on the delinquent employee, who has superannuated
during the pendency of the proceedings. We cannot but reiterate
that, Jaswant Singh Gill4 had not considered the issue as to
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whether there could be a forfeiture of gratuity if the delinquent
employee is found to have committed an offence involving moral
6 (2020) 18 SCC 71 CA No.2608 OF 2025 (@SLP (C) NO.10088
of 2020) turpitude; even when there is no conviction entered by a
Criminal Court on the very same offence.
9. With all the respect at our command, the interpretation in C.G.
Ajay Babu3 does not come out of the statutory provision; Section
4(6)(b)(ii) of the Act. Normally we would have referred the
matter for consideration by a Larger Bench, but, as we noticed,
the statutory provision does not make it a requirement that the
misconduct alleged & proved in a departmental enquiry should
not only constitute an offence involving moral turpitude, but also
should be duly established in a Court of Law. The words "duly
established in a Court of Law" cannot be supplied to the
provision. Moreover, as we observed; the interpretation of sub
clause (b)(ii) of subsection (6) of Section 4 was uncalled for in
C.G. Ajay Babu3 since the provisions of the Section 4, including
subsection (6) was found to be inapplicable to the employer Bank
and its employee, by virtue of subsection (5) of Section 4. The
interpretation, hence, with due respect was an obiter making a
reference unnecessary.”
28.It is unclear how the aforementioned judgment advances the case of
the third respondent. On the contrary, the decision makes reference to the three-
Judge Bench ruling in Mahanadi Coalfields Ltd. v. Rabindranath Choubey,
reported in (2020) 18 SCC 71, wherein the Mahanadi case was explained in
the following terms:—
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“ It is true that while considering the very provisions of the CDA
Rules, namely, Rule 34.2 and Rule 34.3 of the CDA Rules, this
Court in the case of Jaswant Singh Gill (supra) has observed and
held that once the employee is permitted to retire on attaining the
age of superannuation, thereafter no order of dismissal can be
passed. However, for the reasons stated hereinabove, we are not in
agreement with the view taken by this Court in the case of Jaswant
Singh Gill (supra). As observed hereinabove, if no major penalty is
permissible after retirement, even in a case where the disciplinary
proceedings were instituted while the employee was in service, in
that case, Rule 34.2 would become otiose and shall be
meaningless. On the contrary, there is a decision of three Judge
Bench of this Court in the case of Ram Lal Bhaskar (supra) taking
just a contrary view. In the case of Ram Lal Bhaskar (supra), Rule
19(3) of the State Bank of India Officers Service Rules, 1992 came
up for consideration which was pari materia with Rule 34.2 of the
CDA Rules. The said Rule 19(3) of the State Bank of India Officers
Service Rules, 1992 also permits the disciplinary proceedings to
continue even after the retirement of an employee if those were
instituted when the delinquent employee was in service. In that case,
chargesheet was served upon the respondent before his retirement.
The proceedings continued after his retirement and were
conducted in accordance with the relevant rules where charges were
proved. Punishment of dismissal was imposed. The High Court
allowed the petition and quashed the order of dismissal. This Court
reversed the said decision of the High Court. In the said decision, it
was specifically observed by this Court while considering the pari
materia provisions that in case disciplinary proceedings under the
relevant rules of service have been initiated against an officer before
he ceased to be in the bank’s service by the operation of, or by
virtue of, any of the rules or the provisions of the Rules, the
disciplinary proceedings may, at the discretion of the Managing
Director, be continued and concluded by the authority by whom the
proceedings were initiated in the manner provided for in the Rules
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as if the officer continues to be in service, so however, that he shall
be deemed to be in service only for the purpose of the continuance
and conclusion of such proceedings. In the said decision, this Court
also took note of another decision of this Court in the case
of Rajinder Lal Capoor (supra) and it is observed even in the said
decision that the UCO Bank Officer Employees’ Service
Regulations, 1979 which were also pari materia to the SBI Rules as
well as the CDA Rules, could be invoked only when the disciplinary
proceedings had been initiated prior to the delinquent officer
ceased to be in service. It is to be noted that Jaswant Singh
Gill (supra) was a judgment delivered by a two Judge Bench and the
judgment in the case of Ram Lal Bhaskar (supra) is a judgment
delivered by a three Judge Bench. Under the circumstances and
even otherwise for the reasons stated above and in view of Rule
34.2 of the CDA Rules, even a retired employee who was permitted
to retire on attaining the age of superannuation can be subjected to
major penalty, provided the disciplinary proceedings were initiated
while the employee was in service.”
29.Similarly, in C.G. Ajay Babu's case (cited supra), the Hon’ble
Supreme Court, in paragraphs 21 and 22, confined its findings to the following
observations:—
“21. That the Act must prevail over the Rules on Payment of
Gratuity framed by the employer is also a settled position as
per Jaswant Singh Gill (supra). Therefore, the appellant cannot take
recourse to its own Rules, ignoring the Act, for denying gratuity.
22. To sum-up, forfeiture of gratuity is not automatic on dismissal
from service; it is subject to sub-Sections (5) and (6) of Section 4 of
The Payment of Gratuity Act, 1972.”
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30.The upshot of the above discussion is that the Payment of Gratuity
Act, 1972 is a special legislation, and with regard to forfeiture of gratuity, it is
Section 4(6) of the Act that exclusively governs the field. The authoritative
pronouncement on this issue is found in the judgment of a three-Judge Bench of
the Hon’ble Supreme Court in Mahanadi Coalfields Ltd. v. Rabindranath
Choubey, reported in (2020) 18 SCC 71. The legal position has been
conclusively summarised in paragraphs 10.31 and 11 of the said judgment,
which read as follows:—
“10.31 Several service benefits would depend upon the outcome of
the inquiry, such as concerning the period during which inquiry
remained pending. It would be against the public policy to permit
an employee to go scotfree after collecting various service benefits
to which he would not be entitled, and the event of superannuation
cannot come to his rescue and would amount to condonation of
guilt. Because of the legal fiction provided under the rules, it can
be completed in the same manner as if the employee had remained
in service after superannuation, and appropriate punishment can be
imposed. Various provisions of the Gratuity Act discussed above
do not come in the way of departmental inquiry and as provided
in Section 4(6) and Rule 34.3 in case of dismissal gratuity can be
forfeited wholly or partially, and the loss can also be recovered. An
inquiry can be continued as provided under the relevant service
rules as it is not provided in the Payment of Gratuity Act, 1972 that
inquiry shall come to an end as soon as the employee attains the
age of superannuation. We reiterate that the Act does not deal with
the matter of disciplinary inquiry, it contemplates recovery from or
forfeiture of gratuity wholly or partially as per misconduct
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committed and does not deal with punishments to be imposed and
does not supersede the Rules 34.2 and 34.3 of the CDA Rules. The
mandate of Section 4(6) of recovery of loss provided
under Section 4(6)(a) and forfeiture of gratuity wholly or partially
under Section 4(6)(b) is furthered by the Rules 34.2 and 34.3. If
there cannot be any dismissal after superannuation, intendment of
the provisions of Section 4(6) would be defeated. The provisions
of section 4(1) and 4(6) of Payment of Gratuity Act, 1972 have to
be given purposive interpretation, and no way interdict holding of
the departmental inquiry and punishment to be imposed is not the
subject matter dealt with under the Act.
10.32 Thus considering the provisions of Rules 34.2 and 34.3 of
the CDA Rules, the inquiry can be continued given the deeming
fiction in the same manner as if the employee had continued in
service and appropriate punishment, including that of dismissal
can be imposed apart from the forfeiture of the gratuity wholly or
partially including the recovery of the pecuniary loss as the case
may be.
11. In view of the above and for the reasons stated above and in
view of the decision of three Judge Bench of this Court in Ram Lal
Bhaskar (supra) and our conclusions as above, it is observed and
held that (1) the appellant – employer has a right to withhold the
gratuity during the pendency of the disciplinary proceedings, and
(2) the disciplinary authority has powers to impose the penalty of
dismissal/major penalty upon the respondent even after his
attaining the age of superannuation, as the disciplinary
proceedings were initiated while the employee was in service.”
31.In light of the legal precedents discussed above, the case of the third
respondent may be summarised thus: Prior to her retirement, the third
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respondent submitted a letter expressly consenting to the adjustment of her
gratuity against the loan she had availed from the Co-operative Thrift Society,
with the request that the balance, if any, be disbursed to her. She was also
subjected to a surcharge order, which she sought to challenge by filing a writ
petition that was subsequently directed to be converted into a Civil Revision
Petition (CRP), based on a misrepresentation. In any event, the interim stay
granted in the writ petition merely rendered the surcharge order unenforceable
against her; it did not extinguish the underlying liability. As clarified by the
Hon’ble Supreme Court in Rabindranath Choubey's case (cited supra), an
employer is empowered to deduct from the gratuity any loss caused by the
employee. The third respondent retired only after voluntarily furnishing a
written undertaking permitting such adjustment. Having done so, she cannot
now resile from the terms of her own representation.
32. In view of the foregoing discussion, this Court is of the considered
opinion that the order passed by the first respondent Appellate Authority in
A.G.A. No. 45 of 2019 dated 30.06.2020 is liable to be set aside, and is
accordingly quashed. The writ petition is allowed. As a consequence, the order
of the second respondent in P.G. Case No. 73 of 2018 dated 22.01.2019 shall
stand restored. The connected miscellaneous petition is dismissed. Although the
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third respondent may be liable to bear costs, considering that she has already
been deprived of her gratuity amount, this Court refrains from imposing costs.
Hence, there shall be no order as to costs.
29.05.2025
ay
NCC : Yes / No
Index : Yes / No
Speaking Order / Non-speaking Order
To
1. The Appellate Authority
Under the Payment of Gratuity Act, 1972
(Additional Commissioner of Labour)
Dr.Balasundaram Road,
Coimbatore – 18.
2. Controlling Authority
Under Payment of Gratuity Act, 1972
Salem – 636 008.
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DR. A.D. MARIA CLETE, J
ay
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Pre-Delivery Judgment made in
and
29.05.2025
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