Telangana High Court
The Chairman And Managing Director ... vs The Appellate Authority Under Payment ... on 27 June, 2025
Author: Nagesh Bheemapaka
Bench: Nagesh Bheemapaka
HON'BLE SRI JUSTICE NAGESH BHEEMAPAKA
WRIT PETITION No. 14571 OF 2019
O R D E R:
This Writ Petition is filed aggrieved by the order
dated 27.05.2019 in Case No.PGA-3/2019 passed by the 1st
Respondent (Appellate Authority under Payment of Gratuity Act)
dismissing the Appeal and confirming the order dated
28.12.2018 in P.G. Application No.12 of 2015 passed by the 2nd
respondent (Controlling Authority under Payment of Gratuity
Act) and directing petitioner - Syndicate Bank to pay gratuity of
Rs. 10,34,315/- along with interest at Rs.10,34,315/- i.e. total
amount of Rs.20,68,630/- to the 3rd respondent.
2. The brief case of petitioner bank is that the 3rd
respondent, who worked in the Officer Cadre in their bank filed
an Application dated 13.04.2015 claiming gratuity on the
ground that though he was terminated on 07.08.2008 from the
service he is eligible for gratuity under the Payment of Gratuity
Act, 1972 (for short, 'the Act'), but it was not paid. Petitioner
filed a reply raising a preliminary objection on 23.05.2015 that
petitioner filed a Writ Petition assailing the penalty imposed
under Syndicate Bank Officer Employees' (Discipline & Appeal)
Regulations, 1976 and it is pending before this Court, hence, as
per the law laid down in District Central Cooperative Bank
Ltd. v. Ramanbhai M. Patel 1, entitlement of employee to
receive payment cannot be determined or adjudicated by the
Controlling Authority under the Act. The Controlling Authority
directed the Bank to file counter observing that the issue raised
as a primary objection would also be dealt while disposing the
Application. Accordingly, petitioner filed detailed objections
along with documents relating to disciplinary action on
03.01.2017. It was specifically pleaded therein that the 3rd
respondent was served with the charge sheet dated 03.10.2006
for the alleged misconduct of failing to discharge his duties with
utmost integrity, honesty, devotion and diligence and acted in a
manner unbecoming of an Officer Employee and charges were
proved in the departmental enquiry resulting in imposing
punishment of dismissal vide proceedings dated 24.07.2008
and the Appeal preferred by him was dismissed by the Appellate
Authority. Since the acts proved against the 3rd respondent are
criminal in nature and it can be termed as criminal breach of
trust and they are involving moral turpitude, the competent
authority vide Proceedings dated 21.11.2008 forfeited gratuity.
Notices were served on him but he did not respond except
stating that bank cannot issue notice at this stage.
(2011) 3LLJ 579
It is stated, the 3rd respondent being an officer in
Syndicate Bank, is governed by the Syndicate Bank Officer
Employees' (Service) Regulations, Syndicate Bank Officer
Employees' (Discipline & Appeal) Regulations, 1976 and
Syndicate Bank Officer Employees' (Conduct) Regulations, 1976.
An officer is entitled for gratuity as per Regulation 46 of the
1976 Regulations. As per Section 4(6)(b)(ii) of the Act, gratuity
payable to the employee, whose service is 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, can wholly or partially be forfeited. Since the
misconduct is in the nature of moral turpitude and Bank
sustained financial loss, the case of the 3rd respondent squarely
falls under Section 4(6)(b)(ii), and consequently, he is not
entitled for gratuity as concluded by the Authority within the
bank who deals about the payment of gratuity to its employees.
It is not within the realm of the Disciplinary Authority or the
Appellate Authority while passing orders in the proceedings
under Syndicate Bank Officer Employees' (Discipline & Appeal)
Regulations, 1976 to deal with regarding forfeiting gratuity
amount.
It is brought to the notice of this Court that in
Disciplinary Authority-cum-Regional Manager v. Nikunja
Bihari Patnaik 2, the Hon'ble Supreme Court held that a
person acting beyond his authority is a misconduct and
allowing overdrafts involving substantial amounts beyond his
authority could not be treated merely as an error of judgment
and hence, it is a misconduct as defined by the Regulations.
It is stated, the 2nd respondent - Controlling
Authority under the Act, inter-alia, in the order dated
28.12.2018 held that delay in filing the Application for gratuity
beyond the period stipulated under sub-section (4) of Section 7
is condoned. It further held that forfeiture of gratuity amount is
not justified, and in support of that finding, it observed in para
6 of the order that in Banking Institutions risk taking forms an
integral part of business and every loss caused to the
organization in pecuniary terms need not necessarily be the
subject matter of Vigilance Enquiry and merely an employee is
dismissed from service, he could not be deprived of gratuity as
the claim is made under the provisions of the Payment of
Gratuity Act. He further held that the gratuity of an employee
whose service was terminated can be forfeited to the extent of
damage or loss so caused and the bank failed to quantify the
(1996) 9 SCC 69
amount of loss suffered. Hence, the Bank shall pay interest on
the gratuity amount. The Controlling Authority calculated the
amount of gratuity under the provisions of Payment of Gratuity
Act and also as per Service Regulations and directed the bank to
pay Rs.10,34,315/- which was arrived by calculating under
Service Regulations of the Bank and also directed the bank to
pay Rs.10,34,315/- towards interest from 07.08.2008 to
07.12.2018 i.e. total amount of Rs.20,68,630/-. Against the
said order, the bank preferred Appeal before the 1st respondent -
Appellate Authority. According to petitioner, the 1st respondent
did not apply the correct principles of law and the statutory
provisions applicable to the facts of the case. The Appellate
Authority's order dated 27.05.2019 impugned in this Writ
Petition is devoid of any merits.
3. This Court, while issuing rule nisi, by order dated
16.07.2019, directed that the 1st respondent shall not disburse
the gratuity amount deposited by petitioner bank to the 3rd
respondent until further orders; further the 2nd respondent
shall deposit the said amount in a fixed deposit in any
nationalised bank. However the 3rd respondent shall receive the
interest accrued on the said fixed deposit on month-to-month
basis.
4. Learned Standing Counsel for petitioner Sri A.
Krishnam Raju submits that the amount determined by the
Controlling Authority which was approved by the Appellate
Authority is in excess of the amount payable under sub-section
(3) of Section 4. The maximum gratuity amount payable under
the PG Act was Rs.3,50,000/- as on 24.07.2008 i.e. date of
dismissal order, therefore, under no circumstance, the gratuity
is liable to be paid by the bank more than Rs.3,50,000/-. He
submits that gratuity amount was increased from Rs.3.50 to
Rs.10.00 lakhs by Payment of Gratuity (Amendment) Act, 2010
which came into effect from 24.05.2010, however, the 3rd
respondent having been dismissed from service on 24.07.2008
is governed by the rules and regulations applicable as on that
day. Even as per the calculation made at page 12 of the order of
the 2nd respondent, in terms of the Act, amount comes to
Rs.6,70,910/-, but the Authority applied the calculation method
under officer's Service Regulations and arrived the amount as
Rs.10,34,315/- which is contrary to the law laid down by the
Hon'ble Supreme Court in Beed District Central Cooperative
Bank Ltd. V. State of Maharashtra 3.
According to learned counsel, delay of more than six
years in approaching the 2nd respondent is unexplained and no
(2006) 8 SCC 514
Application is filed to condone delay along with gratuity
Application, however, both the Authorities decided the main
Application.
It is submitted that the Authorities solely on the
judgment of the Hon'ble Supreme Court in Union Bank of
India v. C.G. Ajay Babu (Civil Appeal No. 8251 of 2018)
rejected the contention of the bank that the act committed by
the applicant constitutes moral turpitude. He relies on the
judgment in Western Coal Fields Ltd. V. Manohar Govinda
Fulzele (Civil Appeal No. 2608 of 2025), dated 17.02.2025,
wherein the Hon'ble Supreme Court categorically observed that
interpretation in C.G. Ajay Babu's case does not come out of
the statutory provision i.e. Section 4(6)(b)(ii) of the Act and the
said interpretation was not warranted. At para 10, it is
categorically held that provision of forfeiture of gratuity under
the Act does not speak of a conviction in criminal proceedings
for an offence involving moral turpitude.
5. Heard Sri P.B. Vijay Kumar, learned counsel on
behalf of the 3rd respondent. He submits that the order
impugned does not warrant any interference.
6. A perusal of the impugned order shows that the 1st
respondent - Appellate Authority observed that Form-M
rejecting the claim totally for offences involving moral turpitude
can be given only when there is conviction by a criminal Court
as per latest decision of the Hon'ble Supreme Court in C.G. Ajay
Babu's case wherein it has been held that there must be a
conviction by criminal Court for offences involving moral
turpitude for forfeiting gratuity and that the provisions of the
Act will prevail over the Rules framed by the employer. 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 Act. In General Manager, UCO Bank, Kolkata v. Jitendra
Kumar, Shrivastava, Bilaspur (WPL No. 42 of 2015), the High
Court of Chattisgarh held that in order to forfeit gratuity of
terminated employee under Section 4(6)(b)(ii), his conviction for
an offence involving moral turpitude is mandatory. The 1st
respondent further observed that there is no registration of FIR
against the 3rd respondent or police case of any conviction by
any criminal Court. Hence, Section 4(6)(b)(ii) cannot be invoked
by the bank. As such, till all the offences alleged against him are
proved before the criminal Court, the 3rd respondent is treated
to be innocent, hence, gratuity has to be paid to him upon
completion of 30 days from the date of dismissal. In support of
the said conclusion, the 1st respondent relied on the judgments
which were made a mention in their order. Since bank's
regulations cannot override the provisions of the Act, the
argument of the bank that ex-employee is not entitled for
gratuity as per Regulation 46(1) of the Banks's Service
Regulations, 1979 and petitioner cannot take shelter of
Regulation 46 for withholding gratuity. Finally, relying on the
judgment in UCO Bank v. Regional Labour Commissioner,
wherein the Allahabad High Court held that 'payment of gratuity
Act', being a beneficial legislation, has to be interpreted so as to
provide benefit to the employees and not to deprive them of the
same, dismissed the Appeal of petitioner.
7. Now, learned Standing Counsel for petitioner has
placed strong reliance on the judgment of the Hon'ble Apex
Court in Western Coal Fields Ltd's case (supra). In paragraph
9 of the said judgment, it has been observed as under:
" With all the respect at our command, the
interpretation in C.G. Ajay Babu 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 sub-section (6) of Section 4 was
uncalled for in C.G. Ajay Babu since the provisions of Section 4,
including sub-section (6) was found to be inapplicable to the employer
Bank and its employee, by virtue of sub-section (5) of Section 4. The
interpretation, hence, with due respect was an obiter making a reference
unnecessary.
In view of the same, the finding of the 1st respondent
Authority that in order to forfeit gratuity of terminated
employee under Section 4(6)(b)(ii), his conviction for an offence
involving moral turpitude is mandatory, cannot hold water.
Therefore, the order impugned is liable to be set side.
8. Further, learned Senior Counsel relied on Beed
District Central Cooperative Bank Ltd. case (supra) wherein
it has been held as under:
" 13. We, however, are of the opinion that the said
doctrine cannot be said to have any application whatsoever in the
instant case. Undoubtedly, the Payment of Gratuity Act is a beneficial
statute. When two views are possible, having regard to the purpose the
Act seeks to achieve being a social welfare legislation, it may be
construed in favour of the workman. However, it is also trite that only
because a statute is beneficent in nature, the same would not mean that
it should be construed in favour of the workmen only although they are
not entitled to benefits thereof. (See Regional Director, ESI Corpn. v.
Ramanuja Match Industries
14. Applying the "golden rule of interpretation of statute, to
us it appears that the question should be considered from the point of
view of the nature of the scheme as also the fact that the parties agreed
to the terms thereof. When better terms are offered, a workman takes it
as a part of the package. He may volunteer therefor, he may not. Sub-
section (5) of Section 4 of the 1972 Act provides for a right in favour of
the workman. Such a right may be exercised by the workman
concerned. He need not necessarily do it. It is the right of individual
workman and not all the workmen. When the expression "terms" has
been used, ordinarily it must mean "all the terms of the contract". While
interpreting even a beneficent statute, like, the Payment of Gratuity Act,
we are of the opinion that either contract has to be given effect to or the
statute. The provisions of the Act envisage for one scheme. It could not
be segregated. Sub-section (5) of Section 4 of the 1972 Act does not
contemplate that the workman would be at liberty to opt for better terms
of the contract, while keeping the option open in respect of a part of the
statute. While reserving his right to opt for the beneficent provisions of
the statute or the agreement, he has to opt for either of them and not
the best of the terms of the statute as well as those of the contract. He
cannot have both. If such an interpretation is given, the spirit of the Act
shall be lost. Even in Shin Satellite, this Court stated: (SCC pp. 637-38,
para 27)
"27. The proper test for deciding validity or otherwise of an
agreement or order is 'substantial severability and not textual
divisibility. It is the duty of the court to sever and separate trivial or
technical parts by retaining the main or substantial part and by giving
effect to the latter if it is legal, lawful and otherwise enforceable. In such
cases, the court must consider the question whether the parties could
have agreed on the valid terms of the agreement had they known that
the other terms were invalid or unlawful. If the answer to the said
question is in the affirmative, the string of severability would apply and
the valid terms of the agreement could be enforced, ignoring invalid to
hold otherwise would be "to expose the covenanter to the almost
inevitable risk of litigation which in nine cases out of ten he is very ill-
able to afford, should he venture to act upon his own opinion as to how
far the restraint upon him would be held by the court to be reasonable,
while it may give the covenantee the full benefit of unreasonable
provisions if the covenanter is unable to face litigation'."
9. In view of the same, the conclusion arrived at by the
1st respondent of applying calculation method under Officer's
Service Regulations cannot be countenanced.
10. The impugned order of the Appellate Authority
would show that the Authority had held that petitioner-Bank
cannot take recourse to Regulation 46 of the Syndicate Bank
Service Regulations (now Canara Bank) whereunder Bank had
the right to withhold gratuity. The Authority further held that
the Payment of Gratuity Act, 1972, which is a beneficial
legislation, prevails over the rules/regulations of petitioner-
Bank. Further, in order for the Bank to withhold or forfeit the
gratuity, it was mandatory that allegations are proved in a Court
of Law.
11. At this juncture, it may be noted that the earlier
ruling in Ajay Babu's case (supra) wherein proving the
allegations of misconduct/moral turpitude in a Court of Law,
has been overridden by the latest judgment of the Hon'ble
Supreme Court in Western Coal Fields (supra); thereby the
discretion of the employer in imposing the punishment of
forfeiture of gratuity, based on the disciplinary proceedings, has
been upheld. Nevertheless, considering that the parties are
before this Court under the provisions of the Payment of
Gratuity Act, 1972, which is, undoubtedly, a beneficial
legislation, and further considering that respondent-workman
had served the petitioner-Bank for a considerable period of time,
and considering the rationale in the judgment of the Hon'ble
Supreme Court in Western Coal Fields (supra), this Court
deems it appropriate to restrict the gratuity amount payable to
the respondent-workman, as admissible under the 1972 Act.
Further, the interest component whatsoever, accruable on such
restricted gratuity, shall not exceed the gratuity amount. The
petitioner-Bank shall deduct 25% of the gratuity being paid to
respondent-workman.
12. The Writ Petition is therefore, allowed in part
restricting the gratuity amount payable to respondent-workman,
as admissible under the 1972 Act with interest accruable on
such restricted gratuity, which shall not exceed the gratuity
amount. On such computation of gratuity, petitioner-Bank shall
forfeit 25% of the gratuity being paid to respondent-workman.
No costs.
13. Consequently, Miscellaneous Applications, if any
shall stand closed.
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NAGESH BHEEMAPAKA, J
27th June 2025
ksld
