Calcutta High Court (Appellete Side)
United Bank Of India vs Bidyut Baran Haldar & Ors on 18 January, 2018
Author: Arijit Banerjee
Bench: Jyotirmay Bhattacharya, Arijit Banerjee
In The High Court At Calcutta
Civil Appellate Jurisdiction
Appellate Side
MAT No.1522 of 2017
With
CAN No. 8857 of 2017
United Bank of India
-Vs.-
Bidyut Baran Haldar & Ors.
Coram: The Hon'ble The Acting Chief Justice Jyotirmay Bhattacharya
&
The Hon'ble Justice Arijit Banerjee
For the appellant : Mr. Subir Sanyal, Adv.
Ms. Sumouli Sarkar, Adv.
For the respondents : Mr. Suddhasatva Banerjee, Adv.
Ms. Deblina Chattaraj, Adv.
Heard On : 08.11.2017, 28.11.2017
Judgment On : 18th January, 2018
Arijit Banerjee, J.:
(1) The short question that arises for determination in this appeal is whether or not, the appellant-bank could attach/adjust the gratuity payable to the respondent-employee upon termination of his service, on the ground that moneys are due and payable by the employee to the Bank on account of loan that had been advanced by the Bank to the employee during the tenure of his service.
(2) The respondent no.1 employee (hereinafter referred to as Bidyut) had admittedly taken a housing loan from the Bank. When he was working as Computer Operator in the clerical cadre at the Kulpi Branch of the Bank, a disciplinary proceeding was initiated against him. Hearing was conducted. By an order dated 26th May, 2009, the Disciplinary Authority imposed the punishment of "dismissal without notice" in terms of clause 6(a) of the Memo of Settlement dated 10th April, 2002. Bidyut has challenged the disciplinary proceeding and the order passed therein by way of a separate writ petition, being WP No.10301 (W) of 2009, which is pending before this Court. (3) Although Bidyut was dismissed from service, the same was without any financial implication inasmuch as admittedly the Bank has not suffered any pecuniary loss by reason of the alleged misconduct of Bidyut. Admittedly, gratuity of Rs.3.5 lakhs is payable to Bidyut as would appear from an internal memo dated 30th May, 2013 issued by the Chief Manager, Establishment Division to the Chief Manager, Corporate Account Department of the Bank. (4) By reason of non-payment of gratuity to him, Bidyut filed an application under section 7 of the Payment of Gratuity Act (in short PGA) read with Rule 10(1) of the PGA Rules, 1972. Orders were passed on such application directing the bank to pay the gratuity amount to Bidyut. Upon the Bank failing to comply with such order, Bidyut made an application under section 8 of the PGA and a show cause notice was issued to the Bank calling for an explanation as to why certificate under section 18 of the PGA could not be issued against the Bank. During the pendency of such proceeding, the amount of Rs.3,50,000/- was deposited by the Bank in a savings account held in Bidyut's name with the Malda Branch of the Bank. However, the petitioner could not operate the same since the account had been frozen by the Bank prior to making such deposit. In the above background when the proceedings again came up before the Controlling Authority, a certificate was issued to the Certificate Officer for an amount of Rs.3.50 lakhs along with simple interest with a request to recover the said amount from the Bank along with compound interest thereon with effect from 27.05.2015 as arrears of land revenue and pay the same to the petitioner.
(5) In view of the failure/neglect of the Certificate Officer to recover the said amount and pay the same to Bidyut, the latter approached this Court by filing WP No. 15420(W) of 2017.
(6) The Learned Single Judge allowed the writ application. The operative portion of the learned Judge's order reads as follows:-
"In such circumstances, the respondent no.2 is directed to take immediate steps for the purpose of recovering the amount due to the petitioner from the bank as a public demand, and make over the same to the petitioner forthwith, on realization. It is expected that, the respondent no.2 will commence the recovery proceedings within a week from the date of communication of this order to him. He will endeavour to complete the proceedings within a fortnight thereafter. He will make over the amount due to the petitioner immediately on receipt of the same."
(7) The learned Judge held that the Bank did not take the defence of exercise of Bank's lien in the proceeding under the PGA. The Bank accepted the direction of the Controlling Authority and acted in purported compliance thereof. It was further held that the Banker's lien cannot be exercised over the terminal benefits of an employee. Sections 4(6), 13 and 14 of the PGA, were noticed by the learned Judge. It was observed that the employee is entitled to gratuity unless forfeited in the manner and for the ground provided under section 4(6) of the PGA. The gratuity receivable under the PGA is immune from execution of an order of Court. The Bank could not approach the Court for the purpose of attaching Bidyut's gratuity for adjustment towards outstanding loan amount. Since the Bank was not entitled to attach the gratuity amount payable to Bidyut through the process of court, the Bank is not entitled to adjust the gratuity amount against the outstanding loan on its own on the strength of documents executed by Bidyut. The learned Judge held that the Bank is seeking to obtain a relief indirectly which it could not obtain directly. (8) Being aggrieved by the said judgement and order of the learned Single Judge, the Bank is before us in the present appeal. (9) Appearing for the Bank, Mr. Sanyal, learned counsel submitted that it would appear from the defence statement filed by the Bank before the Controlling Authority in the proceedings under the PGA that the defence of adjustment was taken by the Bank. Hence, the learned Judge erred in coming to a finding to the contrary. (10) Mr. Sanyal then referred to sections 4(6) and 13 of PGA and submitted that an employee can waive the protection against the attachment of gratuity by contracting out of the statute. He referred to documents executed by Bidyut in favour of the Bank whereby Bidyut authorized the Bank to adjust the loan taken by him against the proceeds of gratuity and also agreed that till the re-payment of loan, the bank would have lien on the gratuity amount. Learned counsel submitted that by executing such documents Bidyut contracted out of the PGA and has waived the immunity that has been granted under the PGA.
(11) He submitted that Bidyut had waived his statutory right and protection under the PGA to obtain the benefit of loan at a meagre rate of interest. In support of his contention, learned counsel relied on the decision of the Hon'ble Supreme court in the case of Krishna Bahadur vs. M/s Purna Theatre and others reported in 2004(2) CLJ (SC)
177. Mr. Sanyal also relied on the decision of the Hon'ble Supreme Court in the case of Wazir Chand vs. Union of India and others reported in (2001) 6 SCC 596 wherein gratuity was allowed to be adjusted against the penal rate of rent payable for unauthorized occupation of railway quarter by the employee after his retirement. He also relied on the decision in the case of Secretary, ONGC Ltd and other vs. V.U. Warrier reported in (2005) 5 SCC 245 in support of his submission that the dues of the employer can be recovered from the gratuity payable to the employee upon retirement. (12) Mr. Sanyal then referred to the decision of the Hon'ble Supreme Court in the case of High Court of Punjab and Haryana and others vs. Jagdev Singh reported in AIR 2016 SC 3523 wherein the Hon'ble Supreme Court held that the principles of law that any over payment made to an employee cannot be recovered from him after he has retired from the service of the State, will have no application to a situation where an undertaking was specifically furnished by the officer at the time when his pay was initially revised accepting that any payment found to have been made in excess would be liable to be adjusted. While opting for the benefit of the revised pay scale, the officer was clearly put on notice of the fact that future re-fixation or revision may warrant an adjustment of the excess payment made, if any.
(13) Learned counsel then relied on the following two decisions for the proposition that the Bank has a general lien on the account of its constituents for moneys due from the constituent to the Bank and the Bank has the right to adjust the moneys lying in the constituent's account against the bank's dues:-
(i) Syndicate Bank vs. Vijay Kumar and others reported in AIR 1992 SC 1066.
(ii) State Bank of India, Kanpur vs. Deepak Malviya and others reported in AIR 1996 (Allahabad) 165.
(14) Learned counsel also relied on the decision of the Supreme Court in the case of Punjab National Bank and others vs. Surendra Prasad Sinha reported in AIR 1992 SC 1815 in support of the proposition that even a time barred debt to the bank can be adjusted against security held by the Bank.
(15) Finally, Mr. Sanyal submitted the section 23 of the Contract Act has no manner of application to the facts of the present case since there is nothing illegal with the contract entered into by and between the Bank and Bidyut whereby the Bank is entitled to adjust the gratuity receivable by Bidyut on account of outstanding loan and such contract or arrangement does not offend public policy. (16) On the meaning 'public policy' learned counsel relied on the following three decisions:-
(1) Zoroastrian Cooperative Housing Society Ltd and another vs. District Registrar, Cooperative Societies (Urban) and others reported in AIR 2005 SC 2306.
(2) State of Rajasthan and others vs Basant Nahata reported in AIR 2005 SC 3401.
(3) Central Bank of India vs. M/s Multi Block Private Ltd and others reported in AIR 1997 Bombay 109.
(17) Appearing for Bidyut, Mr. Banerjee, learned counsel submitted that the Bank is precluded from contending that it has the right to adjust the gratuity payable to Bidyut against the dues of the Bank.
The orders passed by the Controlling Authority clearly held that the Bank has no such right. In particular by his order dated 15th December 2014, the Controlling Authority under the PGA held that the adjustment of the gratuity amount against the outstanding loan is against the provisions of the PGA. There is no appeal from such finding. Hence, the Bank is prevented by the principles of estoppel from urging the said issue again.
(18) Learned counsel then submitted that once payment of gratuity was made to Bidyut, the Bank lost its alleged lien over such amount. Assuming for the sake of argument that the bank has such a lien, by making payment of the gratuity amount into Bidyut's account, the Bank had waived such lien.
(19) He then submitted that the certificate dated 26.05.2015 issued by the Controlling Authority has not been challenged by the Bank. The same is binding on the Bank.
(20) Mr. Banerjee next submitted that PGA is a statue based on public policy. One cannot contract out of such a statute. One cannot waive the right conferred on the employee under the PGA. (21) He submitted that the Bank cannot rely on the documents executed by Bidyut in his favour ostensibly authorizing the Bank to adjust the gratuity amount against the outstanding loan. Such documents militate against section 14 of the PGA which is to the effect that the provisions of the Act or Rules made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than the said Act or in any instrument or contract having effect by virtue of any enactment other than the said Act. He submitted that Bidyut had no option but to sign on dotted lines as per mandate of the Bank in view of the Bank's superior bargaining power as otherwise the Bank would not have advanced the housing loan to Bidyut.
(22) Mr. Banerjee next submitted that even when the gratuity amount is paid into the employee's account, the same does not lose the character of gratuity and hence cannot be attached. In support of his submission that under no circumstances gratuity can be withheld, the learned counsel relied on the following decisions:
(i) Ram Ranjan Mukherjee-vs.-Mining and Allied Machinery Corporation Limited reported in 2000(3) CLT 468.
(ii) Eastern Coalfields Limited Vs. Kripa Sankar Somany and others reported in (2004) 1 CHN 662.
(iii) Radhey Shyam Gupta vs. Punjab National Bank and another reported in (2009) 1 SCC 376.
(iv) State of Jharkhand and others vs. Jitendra Kumar Srivastava and another reported in (2013) 12 SCC 210.
He also relied on an unreported judgement dated 19.11.2014 of a Division Bench of Kerala High Court in WA No.1628 of 2014 in WP(C) 923 of 2014.
(23) He then relied on the decision of the Hon'ble Supreme court in the case of Harbans Singh-vs.-Sant Hari Singh reported in 2009(2) SCC 826 in support of his submission that the principles of estoppel precludes the Bank from arguing that it has right to adjust the gratuity amount payable to Bidyut against his outstanding loan. (24) Mr. Banerjee finally relied on the following two decisions of the Hon'ble Supreme Court.
(i) J.Kodanda Rami Reddy vs. State of A.P. and others reported in 2011 (1) SCC 197.
(ii) Bhanu Kumar Jain vs. Archana Kumar and another reported in 2005(1) SCC 787.
(25) In reply, Mr. Sanyal submitted that a total amount of Rs.7,09,095/- was due from Bidyut to the Bank as on 28.02.2015. The amount is much larger now. By obtaining the lien documents from Bidyut, the employee's right under section 4 of the PGA has not been touched. Hence section 14 of the PGA does not come into operation. Moreover, in the cases cited by Mr. Banerjee, there was no voluntary act of the employee offering his gratuity as his security for loan granted by the employer and hence those cases have no manner of application to the facts of the present case.
Court's View:
(26) Admittedly, the sum of Rs. 3.5 lacs is payable to Bidyut by the Bank on account of gratuity. It is also not in dispute that Bidyut owes money to the Bank on account of loan taken by Bidyut from the Bank in the course of his service. The short question is whether or not the Bank can withhold the gratuity amount payable to Bidyut and/or adjust the same against the dues of the Bank from Bidyut? (27) Sec. 13 of the PGA provides that 'no gratuity payable under this Act and no gratuity payable to an employee employed in any establishment, factory, mine, oilfield, plantation, port, railway company or shop exempted under Sec. 5 shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court'. The said Act has an overriding effect by virtue of Sec. 14 thereof which provides that the provisions of the Act or Rules made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than the said Act or in any instrument or contract having effect by virtue of any enactment other that the said Act. Hence, it is abundantly clear that the gratuity payable to a superannuated employee cannot be withheld or adjusted or forfeited except in the circumstance mentioned in the said Act.
Such circumstances are mentioned in Sec. 4(6) of the said Act which 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, willful omission or negligence causing any damage or loss to, of 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, provides that such offence is committed by him in the course of his employment."
It is nobody's case that Bidyut has caused any damage or loss or destruction of property belonging to the Bank nor that his service was terminated for his riotous or disorderly conduct or any other act of violence or for any act which constitutes an offence involving moral turpitude. Hence, in our view, the Bank cannot withhold the gratuity payable to Bidyut whether by way of forfeiture or by way of adjustment against the outstanding loan.
(28) We may also note that Sec. 60(1)(g) of the Code of Civil Procedure, 1908 makes gratuities immune to attachment in execution of a decree. Thus, even if the Bank files an appropriate legal proceeding for recovery of its dues from Bidyut and succeeds, the Bank would not be able to execute the order/decree by attaching the gratuity amount payable to Bidyut. The Bank may execute such order/decree by obtaining orders for attachment of other properties of Bidyut, attachment of which the law permits, but his gratuity cannot be touched. The immunity granted to gratuity under the said Act as also under the CPC is reflective of a public policy. Gratuity is paid to a retired employee by way of a social welfare measure to enable such employee to tide over the immediate financial crunch experienced by the retired employee by reason of cessation of a regular flow of monthly income. Hence, the Parliament deemed it fit and proper to grant immunity to gratuity against attachment. Thus, if the Bank cannot touch Bidyut's gratuity through court process, a situation where the Bank on its own attaches/adjusts/forfeits such gratuity cannot be countenanced in law. The Bank cannot achieve something indirectly which it could not have achieved directly. (29) It was contended on behalf of the Bank that Bidyut waived his right or protection under Sec. 13 of the said Act by executing documents in favour of the Bank permitting the Bank to adjust the amount of gratuity payable to him against outstanding loan. We are unable to accept such contention. As noted above, the said Act has overriding effect notwithstanding anything contrary in any contract. Even if for the sake of argument it is held that such documents executed by Bidyut constitute a contract between him and the Bank, such contract would be overridden by the provisions of the said Act and the documents executed by Bidyut will have no effect. It is well- known that borrowers are made to sign on dotted lines by the Banks and the borrowers have no option but to follow the dictates of the Banks as otherwise they would not be able to get the loan that they might desperately require.
(30) Mr. Sanyal relied on the Apex Court's decision in the case of Krishna Bahadur-vs.-M/s. Purna Theatre (supra), in support of his submission that a statutory right can be waived by a party for whose benefit the statute has been enacted. In that case, the Hon'ble Apex Court clarified that a right can be waived by the party for whose benefit certain requirements or conditions have been provided by the statute subject to the condition that no public interest is involved therein (emphasis is ours). In that case it was held that the requirement to comply with the provisions of Sec. 25F(b) of the Industrial Disputes Act, 1947 is mandatory before retrenchment of a workman is given effect to and such right/protection cannot be waived. In our view, the Payment of Gratuity Act has been enacted in public interest and the right/protection granted to a retired employee by the said Act cannot be waived.
Mr. Sanyal also relied on the decision in the case of Secretary, ONGC Ltd.-vs.-V. U. Warrier (supra). In that case, there were statutory rules/regulations which entitled the employer to deduct from the gratuity payable to the employee, penal rent for unauthorized retention of official accommodation by the employer after his retirement. To the same effect is the decision in Wazir Chand-vs.- Union of India (supra). In both those cases the employer had suffered loss to property by reason of unlawful occupation of official quarters even after superannuation and hence, Sec. 4(6) of the said Act entitled the employer to adjust the penal rent against the gratuity payable to the superannuating employee. In our view, none of those decisions apply to the facts of the present case as admittedly the Bank has not suffered any financial loss or damage to property by reason of any act or conduct of Bidyut.
(31) The decision in High Court of Punjab and Haryana-vs.-Jagdev Singh (supra), also does not help the Bank. In that case, the Apex Court held that over payments made to an employee could be recovered from him after his retirement where an undertaking was specifically furnished by the officer at the time when his pay was revised accepting that if any payment was found to have been made in excess, the same would be liable to be adjusted against his retiral benefits. The facts of that case are completely different and distinguishable from the facts of the present case. (32) The cases on general lien of the Bank cited by Mr. Sanyal would not have any manner of application to the facts of the present case. Those cases do not lay down that the Bank can exercise a lien on the gratuity payable to its retired employee. In none of those cases the issue of withholding of gratuity was involved. In Syndicate Bank-vs.- Vijay Kumar (supra), the question was whether or not the Bank had a general lien on a fixed deposit receipt deposited with it by the constituent. State Bank of India, Kanpur-vs.-Deepak Malviya (supra), is a case involving general pledge in faovur of the Bank. The decision in the case of Punjab National Bank-vs.-Surendra Prasad Sinha (supra) also does not help the Bank as the issue of withholding/adjustment of gratuity was not involved in that case. (33) We refrain from dealing with the three decisions cited by Mr. Sanyal on the meaning of 'public policy' as we do not feel that the same is necessary for the purpose of deciding the present appeal. (34) Even assuming that the Bank had a lien on the gratuity amount payable to Bidyut, in our opinion, the Bank lost such loan once the money was put in the account of Bidyut albeit a frozen account. It is elementary law that a banker's possessory lien is lost once it gives up possession. This Court has held in several cases that except under Sec. 4(6) of the 1972 Act, no deduction can be made from the amount of gratuity payable to an employee under the provisions of the said Act. In this connection reference may be had to the cases in Ram Ranjan Mukherjee-vs.-Mining and Allied Machinery Corporation Ltd. (supra) and Eastern Coalfields Limited-vs.-Kripa Sankar Somany (supra). In Radhey Shyam Gupta-vs.-Punjab National Bank (supra), the Apex Court held that retiral benefits such as pension and gratuity even when received by the retiree, do not lose their character and continue to be covered by proviso (g) to Sec. 60 (1) of the CPC and continue to enjoy immunity against attachment. In State of Jharkhand-vs.-Jitendra Kumar Srivastava (supra), the Apex Court reiterated that gratuity and pension are not bounties. An employee earns these benefits by dint of his long, continuous and faithful service. It is hard earned benefit which accrues to an employee and is in the nature of 'property'. Such right to property cannot be taken away without due process of law as per the provisions of Article 300A of the Constitution of India. It was held that the attempt of the appellant State Government to take away a part of pension or gratuity or even leave encashment without any statutory provision could not be countenanced. In the unreported judgment of a Division Bench of the Kerala High Court in WA 1628 of 2014 in WP (C) 923 of 2014 the employer Bank sought to adjust alleged dues from the deceased employee against the gratuity payable to his legal heirs. The Division Bench upheld the learned Single Judge's order striking down such action on the part of the Bank holding that the gratuity due to an employee could not be withheld except under Sec. 4(6) of the 1972 Act. The Bank had also argued that it had a right of lien under Sec. 171 of the Contract Act. The Division Bench held that the amounts claimed by the legal heirs of the deceased employee were the terminal benefits that were due to the deceased employee and the same could not be retained by taking recourse to the lien of the Bank and in any event, having regard to Sec. 14 of the Payment of Gratuity Act which gives it overriding effect, such right of lien could not be exercised by the Bank in respect of the gratuity amount. (35) We are also of the view and in agreement with the submission of Mr. Banerjee that the Bank is precluded by the principles of issue estoppel or principles analogous to res judicata from contending that it has the right to adjust the gratuity amount payable to Bidyut against its dues from Bidyut. The Controlling Authority clearly held by his order dated 15 December, 2014 that the adjustment of the gratuity amount against the outstanding loan is against the provisions of PGA. The Bank did not prefer any appeal therefrom. Further, the certificate dated 26 May, 2015 issued by the Controlling Authority under the 1972 Act has not been challenged by the Bank and the Bank is bound by the same.
(36) For the reasons aforesaid, we are of the considered opinion that the appellant Bank is bound to pay the admitted gratuity amount to Bidyut. It cannot by a circuitous method deprive Bidyut of the gratuity amount by depositing the same in a bank account of Bidyut which had been frozen by the Bank. This amounts to sharp practice and we deprecate the same. We find no infirmity in the judgment and order impugned before us and we affirm the same. The appellant Bank shall pay the gratuity payable to Bidyut by bank draft with interest calculated at the rate of 9 per cent per annum from the date following the date of termination of Bidyut's service till the date of payment within four weeks from date. Upon making such payment the Bank shall be entitled to reverse the credit entry of Rs. 3.5 lacs made in the frozen bank account of Bidyut.
(37) MAT No. 1522 of 2017 and CAN No. 8857 of 2017 are accordingly dismissed with costs assessed at Rs. 15,000/- to be paid by the appellant Bank to the respondent no. 1 within four weeks from date.
I agree.
(Jyotirmay Bhattacharya, ACJ.) (Arijit Banerjee, J.)