Bombay High Court
Vaijayanti S. Sabnis vs The General Manager (The Oriental Bank ... on 16 January, 2025
2025:BHC-AS:2981
Megha 4_wp_860_2006_fc.docx
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.860 OF 2006
Smt. Vaijayanti S. Sabnis ...Petitioner
V/s.
The Manager, Punjab National
Bank and Anr. ...Respondents
______________
Mr. Vicky Nagrani with Mr. Swapnil R. Patil for the Petitioner.
Mr. S.C. Naidu with Mr. T.R. Yadav and Mr. Abhishek T. Ingale
i/b. M/s. C.R. Naidu and Co. for the Respondents.
______________
CORAM : SANDEEP V. MARNE, J.
Dated : 16 January 2025.
ORAL JUDGMENT:-
1) Petition challenges order dated 4 March 2005 passed by the Appellate Authority under the Payment of Gratuity Act, 1972 allowing the Appeal preferred by the Respondent-Bank and reversing the judgment and order dated 24 January 2003 passed by the Controlling Authority and Assistant Labour Commissioner (C)-I, Mumbai. The Controlling Authority had allowed the application filed by the Petitioner and had directed MEGHA Digitally signed by MEGHA SHREEDHAR Respondent -Bank to pay balance unpaid gratuity amount of Rs.
SHREEDHAR PARAB
PARAB Date:
2025.01.22
14:58:48
+0530
87,945/- together with interest @ 10% from 26 August 1995. The Controlling Authority had further directed the Respondent-Bank Page No. 1 of 12 16 January 2025 ::: Uploaded on - 22/01/2025 ::: Downloaded on - 25/01/2025 07:00:38 ::: Megha 4_wp_860_2006_fc.docx to pay interest @ 10% per annum on the delayed payment of gratuity of Rs. 25,904.22 from 26 August 1995 to 6 November 1997. Similarly, in respect of delayed payment of Rs. 4805.07 interest @10% per annum was directed to be paid from 26 August 1995 to 18 March 1998. The order dated 24 January 2003 was corrected vide Corrigendum.
2) Petitioner was employed with the Respondent-Bank on the post of Clerk-cum-Cashier on 1 December 1980. She was promoted to the post of Officer in November-1999. It appears that there were allegations of absenteeism against the Petitioner, for which she was issued memo dated 10 May 1995. On 26 May 1995, Petitioner tendered notice of resignation. The notice was to come into effect after end of period of three months. She apparently did not attend duties for three months but requested to adjust the notice period against leave. The resignation was apparently accepted and came into effect from 26 August 1995 i.e. after the notice period of three months. Petitioner sent letter dated 6 November 1997 for settlement of her legal dues and it appears that the Respondent-Bank assessed the amount of Rs. 77,570.85 towards excess payment made to her. It appears that the Bank paid an amount of Rs.21,099.15 towards gratuity to the Petitioner by reducing the excess payment of Rs. 77,570.85 on 6 November 1997. Later, the Bank realised that its claim of excess payment of Rs.4805.78 was erroneous and accordingly paid Rs. 4805.78 to the Petitioner on 18 March 1998 thereby reducing the claim of excess amount to Rs. 72,765/-.
Page No. 2 of 12 16 January 2025 ::: Uploaded on - 22/01/2025 ::: Downloaded on - 25/01/2025 07:00:38 ::: Megha 4_wp_860_2006_fc.docx 3) Petitioner issued notice to pay an amount of Rs.72,765.07
towards gratuity on 11 December 1999 and filed application in Form I on 24 March 2000. She thereafter filed Application before the Controlling Authority on 8 May 2000 claiming gratuity of Rs.77,570.85. It appears that during pendency of the proceedings Petitioner filed Form-I and corrected the amount of her claim to Rs.1,13,850/- and after deducting an amount of Rs. 25,904.93 already received by her she claimed balance of Rs.87,945.07 by amending her claim. The Controlling Authority allowed the application of the Petitioner by directing payment of balance amount of gratuity of Rs. 87945.78 together with interest @ 10% per annum from 26 August 1995. The Controlling Authority has directed payment of interest @ 10% per annum on delayed payment of Rs. 21,099.15 for the period from 26 August 1995 to 6 November 1997. In respect of payment made to Petitioner of Rs.4805.07, there is a direction to pay interest @10% per annum from 26 August 1995 to 18 March 1998. The order dated 24 January 2003 was corrected vide corrigendum. Respondent- Bank filed Appeal before the Appellate Authority challenging the order of the Controlling Authority. The Appellate Authority has proceeded to set aside the order of the Controlling Authority by its judgment and order dated 4 March 2005, which is subject matter of challenge in the present Petition. The Petition came to be admitted by this Court by order dated 21 March 2006, which has been called out for final hearing.
4) I have heard Mr. Nagrani, the learned counsel appearing for the Petitioner and Mr. Naidu, the learned counsel appearing Page No. 3 of 12 16 January 2025 ::: Uploaded on - 22/01/2025 ::: Downloaded on - 25/01/2025 07:00:38 ::: Megha 4_wp_860_2006_fc.docx for the Respondent -Bank. I have gone through the judgment of the Controlling Authority and the Appellate Authority as well as relevant records of the case placed alongwith the pleadings.
5) Having considered the submissions canvassed by the learned counsel appearing for the parties, the short issue that arises for consideration is whether Respondent Bank is justified in making any recovery from gratuity of the Petitioner towards its alleged claim of overpayment. So far as the total amount of gratuity payable to the Petitioner is concerned, there appears to be no dispute about the fact that the Petitioner is entitled to receive total gratuity of Rs. 1,13,850/ as on the date of cessation of her services i.e. 26 August 1995. Respondent-Bank has ultimately recovered an amount of Rs.72,765.07 towards excess payment. In her letter dated 17 June 1998, the Petitioner has given a breakup of the said amount of Rs.72,765.07, which is as under:
You have recovered from my gratuity, the salary for March 1995 to May 95 Rs. 26,026.80 June 1995 Rs. 8,691.04 July 1995 Rs. 8,691.04 Three months in lieu of notice Rs. 29,356.19 TOTAL Rs. 72,765.07
6) Except Petitioner's letter dated 17 June 1998, there appears to be no proper communication from the Respondent -
Bank to the Petitioner as to how it initially sought to recover Rs.
72,570.85 from her gratuity. It appears that initially, Page No. 4 of 12 16 January 2025 ::: Uploaded on - 22/01/2025 ::: Downloaded on - 25/01/2025 07:00:38 ::: Megha 4_wp_860_2006_fc.docx
Respondent-Bank paid lumpsum amount of Rs. 21099.15 to Petitioner towards gratuity without giving her any particulars. She was reported to address letter dated 14 November 1997 to the Bank enquiring as to why she was paid only 21,099.15 when her entitlement towards gratuity was approximately 1.13 lakhs. It is only after Petitioner wrote to the Bank on 14 November 1997 that a response was issued to her on 12 December 1997. The letter dated 12 December 1997 is not placed on record. However, Bank's subsequent letter dated 6 March 1998, which is on record, appears to be quite vague and does not give any particulars about the exact breakup of the recovery. In that situation I am left with no other alternative but to accept the breakup provided by Petitioner in her letter dated 17 June 1998, which has been reproduced above.
7) What is most shocking from the above breakup of amount of recovery of Rs. 72,765.07 is that an amount of Rs. 29,356.19 has been recovered towards salary of three months in lieu of notice. According to the Bank, though Petitioner issued notice of resignation of three months on 26 May 1995, she actually did not work for three months till the resignation became effective on 26 August 1995. For Petitioner's this act, the salary paid to her for months of June and July 1995 of Rs. 8691.04 x 2 = 17,382.08 is separately recovered. Thus, for not actually working during months of June and July-1995, the salary is already denied to her. It is not that the resignation of Petitioner is accepted w.e.f. 26 May 1995. It is accepted w.e.f. 26 August 1995. Therefore, how salary for notice period can be recovered is incomprehensible.
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The Bank has thus used the resignation of Petitioner for unjustly enriching itself by recovering the pay for notice period twice.
8) So far as recovery of amount of Rs. 26,026 towards salary for March to May 1995 is concerned, Petitioner stated as under
in her representation:
Thus, you have cancelled the leave sanctioned earlier and recovered total eight months salary from my gratuity dues reducing my terminal benefits by Rs. 72,765.07.
This recovering is very wrong, unjust and arbitrary on your part because my leave from March 1995 to July 1995 was not unauthorized under the rules and regulations of the Bank Rule 13 of officers conduct regulations 1982 (encl.3) Rules 33 & 34 of officers Service Regulations 1982 (Encl.4,5).
I was on leave on medical grounds in this period and had submitted medical certificates regularly, which you can call from the branch for verification.
The salary was paid to me regularly for March, 1995 to July, 1995 and my leave balance was reduced every month, which clearly indicates that the leave was sanctioned at that time. For verification of my statement, you can examine salary register and leave register available at the branch.
The salary paid in March 1995 to July 1995 is recovered by you in September, 1997 without any prior intimation or correspondence in the meantime.
9) It thus appears that Petitioner had submitted medical certificates supporting her medical leave during March to 26 May 1995 and she was paid salary for this period, meaning thereby that the leave as sanctioned to her. However, two years later, the Bank withdrew the leave and decided to recover amount of Rs. 26026 in September 1997. The reason of cancellation of leave was communicated to the Petitioner after three years on 6 March 1998. Therefore, the recovery under this head is again arbitrary.
Page No. 6 of 12 16 January 2025 ::: Uploaded on - 22/01/2025 ::: Downloaded on - 25/01/2025 07:00:38 ::: Megha 4_wp_860_2006_fc.docx 10) The third instance of recovery of amount of Rs. 4805.78 is
most glaring. The Respondent-Bank arbitrarily recovered the said amount by ignoring the fact that recovery of the said amount was already effected by the Branch earlier. The Bank was later required to refund the said recovered amount of Rs. 4805.78.
11) The above actions would show complete arbitrariness in actions on the part of the Respondent-Bank, which appears to have been glossed over by the Appellate Authority while allowing the Appeal filed by the Respondent -Bank.
12) Coming back to the issue of permissibility for the Respondent-Bank to make any recovery from retirement benefits of an employees, it appears that the Appellate Authority has relied upon provisions of Rule 71 of the Central Civil Services (Pension) Rules 1972 and has thereby upheld the power of Respondent-Bank to make adjustments towards excess payment from gratuity. However, when the Appellate Authority rendered its judgment on 4 March 2005, it did not have the benefit of law enunciated by the Apex Court in State of Punjab and Others etc. V/s. Rafiq Masih (Whate Washer) etc.1 The Apex Court has summarised the principles relating to recoveries to be made from government servant in paragraph 12, which reads thus:
12. It is not possible to postulate all situations of hardship, which would govern employees on the issue of recovery, where payments have mistakenly been made by the employer, in excess of their entitlement. Be that as it may, based on the 1 [2014] 13 S.C.R. 1343 Page No. 7 of 12 16 January 2025 ::: Uploaded on - 22/01/2025 ::: Downloaded on - 25/01/2025 07:00:38 ::: Megha 4_wp_860_2006_fc.docx decisions referred to herein above, we may, as a ready reference, summarise the following few situations, wherein recoveries by the employers, would be impermissible in law:
(i) Recovery from employees belonging to Class-
Ill and Class-IV service (or Group 'C' and Group 'D' service).
(ii) Recovery from retired employees, or employees who are due to retire within one year, of the order of recovery.
(iii) Recovery from employees, when the excess payment has been made for a period in excess of five years, before the order of recovery is issued.
(iv) Recovery in cases where an employee has wrongfully been required to discharge duties of a higher post, and has been paid accordingly, even though he should have rightfully been required to work against an inferior post.
(v) In any other case, where the Court arrives at the conclusion, that recovery if made from the employee, would be iniquitous or harsh or arbitrary to such an extent, as would far outweigh the equitable balance of the employer's right to recover.
Thus, under para 12 (ii) of the judgment in Rafiq Masih, it is impermissible to make a recovery from retired employees or employees who are due to retire within a period of one year. Mr. Naidu would rely upon findings of the Apex Court in paragraph 10 of the judgment, which reads thus:
10. In view of the afore-stated constitutional mandate, equity and good conscience, in the matter of livelihood of the people of this country, has to be the basis of all governmental actions. An action of the State, ordering a recovery from an employee, would be in order, so long as it is not rendered iniquitous to the extent, that the action of recovery would be more unfair, more wrongful, more improper, and more unwarranted, than the corresponding right of the employer, to recover the amount. Or in other words, till such time as the recovery would have a harsh and arbitrary effect on the employee, it would be permissible in law. Orders passed in given situations repeatedly, even in exercise of the power vested in this Court under Article 142 of the Constitution of India, will disclose the parameters of the realm of an action of Page No. 8 of 12 16 January 2025 ::: Uploaded on - 22/01/2025 ::: Downloaded on - 25/01/2025 07:00:38 ::: Megha 4_wp_860_2006_fc.docx recovery (of an excess amount paid to an employee) which would breach the obligations of the State, to citizens of this country, and render the action arbitrary, and therefore, violative of the mandate contained in Article 14 of the Constitution of India.
13) According to Mr. Naidu, since recovery is neither harsh nor arbitrary it would be permissible in law. I have already observed above that at several heads of the recovery sought to be effected by the Respondent-Bank are totally arbitrary. Petitioner had rendered over 15 years of service and had become entitled to draw gratuity in respect of past services rendered by her. She was paid meager amount of Rs.21,099.15 and was driven to litigation for claiming the balance amount of gratuity. Such an action on the part of the Respondent-Bank is undoubtedly harsh as well as arbitrary. Most of the heads of the recovery sought to be effected by the Respondent-Bank are otherwise imaginary. It appears that initially an amount of Rs.4805.78 was sought to be recovered without any basis and it is only after the Chief Manager of Kalbadevi Branch confirmed that said amount of Rs.4805.78 was already recovered by the Branch, the Respondent-Bank finally relented and refunded Rs.4805.78 to Petitioner on 18 March 1998. The recovery of amount of Rs. 29,356.19 towards three months' notice period is clearly arbitrary for the reasons aforestated. Similarly, the action of cancellation of leave and recovery of wages for March to May 1995 after two years is also arbitrary.
14) In my view therefore, almost all the heads of recovery sought to be effected by the Respondent-Bank are not only harsh Page No. 9 of 12 16 January 2025 ::: Uploaded on - 22/01/2025 ::: Downloaded on - 25/01/2025 07:00:38 ::: Megha 4_wp_860_2006_fc.docx and iniquitous, but absolutely arbitrary. Merely because the Respondent-Bank had with it the amount of gratuity payable to the Petitioner, it went on adding baseless and arbitrary heads for making the huge recovery of Rs.77,507.85 and a paltry sum of Rs. 21,099.15 was paid to Petitioner. Though amount of Rs.4805.78 was already recovered, they recovered the same twice and only after Petitioner made correspondence, said amount of Rs.4805.78 was returned to her.
15) In my view, though the Petitioner has not retired from service and was required to tender resignation, she would stand on a same footing as that of a retired employee considering the facts and circumstances of the present case. The underlying objective behind not permitting recovery from retired employees is because of the difficulty faced by the retired employees in repaying the amount of excess payment made to them during the period of their service. The underlying principle being what was received during the period of service cannot be sought to be recovered after the employee ceases to be in service. The principle is based on inability of person to refund the amount of excess payment once the salary is stopped. In my view therefore, the principle enunciated by the Apex Court in Rafiq Masih (supra) in paragraph 12 (2) would fully apply to the present case. As a matter of fact, it is not even necessary to invoke the principle enunciated by Apex Court in Rafiq Masih ((supra) as three out of the four heads of the recovery are otherwise found to be totally baseless and arbitrary.
Page No. 10 of 12 16 January 2025 ::: Uploaded on - 22/01/2025 ::: Downloaded on - 25/01/2025 07:00:38 ::: Megha 4_wp_860_2006_fc.docx 16) After considering the overall conspectus of the case, I am
of the view that the Appellate Authority has completely misdirected itself in reversing the decision of the Controlling Authority. It has not even applied its mind to the fact as to whether recovery sought to be made was justified or not. The order passed by the Appellate Authority thus suffers from the vices of perversity as well as non-application of mind. Order of the Appellate Authority is indefensible and liable to be set aside.
17) Mr. Naidu would urge that even if Petitioner's entitlement for payment of balance amount of gratuity is upheld by this Court, the Respondent-Bank be relieved from liability to pay exorbitant rate of interest of 10%. He would submit that Petitioner approached the Controlling Authority after delay, which was required to be condoned for entertaining her application on merits. He would further submit that the Petition was dismissed for default and was required to be restored and therefore mere pendency of the present Petition for such a long period cannot be a ground for putting the responsibility of payment of interest at exorbitant rate of interest of 10% on the Bank during pendency of the present Petition. He would also submit that Respondent-Bank otherwise pays more beneficial terms of gratuity to its employee by paying them gratuity at the rate of one month's salary per completed year of service as opposed to statutory requirement of 15 days salary per completed year of service. He would therefore urge these factors be also taken into consideration while considering the rate of interest to be awarded on the balance amount of gratuity.
Page No. 11 of 12 16 January 2025 ::: Uploaded on - 22/01/2025 ::: Downloaded on - 25/01/2025 07:00:38 ::: Megha 4_wp_860_2006_fc.docx 18) Considering the unique facts and circumstances of the
present case, where the period during which interest is payable is fairly long (35 years from 1995 to 2025), I am of the view that the rate of interest payable on the balance amount of gratuity as well as delayed payments made to the Petitioner is required to be reduced from 10% to 8% per annum.
19) I accordingly proceed to pass the following order:
(i) Judgment and order dated 4 March 2005 passed by the Appellate Authority is set aside.
(ii) Judgment and order dated 24 January 2003 read with corrigendum is confirmed subject to the modification that rate of interest payable in respect of three heads of payments of Rs.
87,945/-, 21,099.15 and Rs.4805.07 shall stand reduced from 10% to 8% and there shall be no change in respect of the period during which the interest would be payable.
(iii) All payments arising out the present order shall be made to the Petitioner within a period of three months.
20) With the above directions, the Writ Petition is allowed. Rule is made absolute. There shall be no orders as to costs.
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