Allahabad High Court
Baroda Uttar Pradesh Gramin Bank vs Union Of India And 3 Others on 6 August, 2019
HIGH COURT OF JUDICATURE AT ALLAHABAD Court No. - 18 Reserved A.F.R. Case :- WRIT - C No. - 39978 of 2018 Petitioner :- Baroda Uttar Pradesh Gramin Bank Respondent :- Union Of India And 3 Others Counsel for Petitioner :- Pradeep Kumar Sinha Counsel for Respondent :- A.S.G.I., Amit Kumar Srivastava, Arpan Srivastava, Dr. Mukteshwar Upadhyay Hon'ble J.J. Munir,J.
1. This writ petition preferred by the Baroda Uttar Pradesh Gramin Bank through its Chairman is directed against an order dated 11.04.2018 passed by the Controlling Authority, Payment of Wages Act, 1972, rendered in P.G. Case no. LKO 36(09)/2017, and the order dated 16.10.2018 passed by the Appellate Authority, Payment of Gratuity Act, 1972 in File no. K-36/17/2018/C.1., affirming the order of the Authority of first instance.
2. The facts giving rise to this petition are that the fourth respondent, Nihar Kanti Lal was posted as the Chief Manager, Fatehpur Main Branch of the petitioner, the Baroda Uttar Pradesh Gramin Bank from 11.07.2011 to 29.12.2012, and again from 09.11.2013 to 30.04.2014. During this period of time, he committed serious financial irregularities, that the petitioner have described as those ''involving Rs.2.24 crores potential loss to the petitioner Bank'. Disciplinary proceedings were initiated against the fourth respondent, and a charge sheet was served upon him by the petitioner Bank on 31.03.2015. This was followed by another charge sheet dated 23.06.2015. A departmental inquiry ensued. Pending disciplinary proceedings, the fourth respondent was due to superannuate on 30.06.2015. The petitioner Bank appear to have informed the fourth respondent by their letter, dated 30.05.2015 that he would cease to be in service in accordance with Regulation 45(3) and Regulation 45(4) of the Baroda Uttar Pradesh Gramin Bank (Officers and Employees) Service Regulations, 2010 (for short '' the Regulations'), but the disciplinary proceedings initiated against him would continue. It was further indicated in the letter dated 30.05.2015 that though the fourth respondent would cease to be in service on the date of superannuation, but payment of his retirement benefits shall be subject to Regulation 45(4) of the Regulations. A perusal of Regulation 45(4) shows that it lays an embargo on the right of an employee to receive any pay or allowance after the date of superannuation, as also post retirement benefits, till disciplinary proceedings are completed, and a final order is passed disposing of those proceedings. The only exception is the employee's entitlement to his own contribution of the Contributory Provident Fund.
3. The fourth respondent was found guilty on all charges by the Inquiry Officer. The Disciplinary Authority, acting on the report of the Inquiry Officer, punished the fourth respondent vide order dated 24.04.2016 in the following terms (extracted verbatim from the punishment order):
"1. Reduction from his present grade i.e. Scale-iv (Chief Manager) to a lower grade-I (Assistant Manager) with initial Basic Pay of Rs.23700/-
2. Recovery of Rs. five lacs from his terminal benefits."
4. The aforesaid order of punishment was challenged in a departmental appeal by the fourth respondent before the Appellate Authority in the petitioner Bank's establishment, which was dismissed vide order dated 24.04.2014, affirming the order of punishment, dated 24.08.2016. The appellate order was not challenged further, and is said to have become final. This position has not been denied by the fourth respondent in his counter affidavit. Post finalization of all these departmental proceedings, the petitioner Bank calculated the gratuity payable to the fourth respondent, worked out on his basic pay and allowances applicable to the post of Officer Grade-I (Assistant Manager), the post to which the fourth respondent had been reduced in rank post retirement, in consequence of the punishment order. It was not calculated with reference to the emoluments last drawn by the fourth respondent at the time of his retirement, on 30.05.2015. It may be well to remember that the fourth respondent demitted office on the day last mentioned while holding post of Scale-IV, Chief Manager, that he lost to the order of reversion passed in disciplinary proceedings on 24.08.2016. The petitioner Bank determined the fourth respondent's gratuity at a sum of Rs.6,39,128/-, worked out with reference to the reverted post of Officer Grade-I (Assistant Manager), placed at the initial basic pay, in terms of the punishment order. The petitioner Bank further enforced the order of punishment regarding recovery of Rs.5 lakhs, by recovering the said sum of money from the amount of gratuity determined as aforesaid, payable to the fourth respondent. In consequence of deducting a sum of Rs. 5 lakhs from the calculated sum of gratuity, determined at a figure of Rs.6,39,128/-, a balance of Rs.1,39,128/- alone were paid to the fourth respondent.
5. The case of respondent no.4 is that his gratuity was to be calculated on the basis of salary drawn by him, on the day of cessation of his service. He had retired on 30.05.2015 upon attaining the age of superannuation, demitting office as Officer Grade-IV (Chief Manager). It was the emoluments drawn by him on the said date, which alone could serve as the basis to calculate the sum of gratuity payable to him. The reckoning of gratuity could not be postponed by the petitioner Bank to the date when he was punished, a year and half later, and reduced in rank to the post of Officer Grade-I (Assistant Manager), placed at the basic scale of that grade. It was also the fourth respondent's case that the sum of Rs.5 lakhs recovered by the petitioner-Bank from his terminal benefits, could not be recovered from his gratuity. Respondent no.4, employee claimed these benefits on the basis of his rights under the Payment of Gratuity Act, 1972 (for short the ''Act').
6. In order to enforce those rights of his under the Act, respondent no.4, moved the Controlling Authority under the Act, through an application, dated 30.07.2017. The petitioner, Bank contested the said application by filing a written statement, dated 13th September, 2017.
7. The petitioner Bank took a stand that the fourth respondent's entitlement to gratuity had to abide by the emoluments attached to the post, to which he had been reduced in rank, as a result of the order of punishment, passed in the disciplinary proceedings. The fourth respondent had been reduced from the post of Officer Grade-IV (Chief Manager) to Officer Grade-I (Assistant Manager), by the order last mentioned, and placed in the basic pay scale of Rs.23,700/-. The petitioner Bank contended that they rightly calculated gratuity payable to respondent no.4, the employee, on the post of Officer Grade-I, in the basic scale.
8. The Controlling Authority under the Act by its impugned order, dated 11.04.2018 held that respondent no.4, the employee was entitled to calculation of his gratuity on the basis of salary drawn by him on the date of his retirement. It was further held that under the Act, the maximum gratuity payable was a sum of Rs.10 lakhs. Deducting the sum of Rs.1,39,128/- already paid by the petitioner Bank towards gratuity, a balance of Rs.8,60,872/- was ordered to be payable by the petitioner-Bank to the employee. The Controlling Authority also awarded 10% interest from 01.06.2015 to 31.03.2018, that works out a figure of Rs.2,43,914/-, according to the petitioner Bank.
9. The petitioner-Bank challenged the impugned order of the Controlling Authority, dated 11.04.2018 by an appeal to the Appellate Authority, under Section 7(7) of the Act. The appeal was filed on 08.06.2018, heard and dismissed by means of the impugned order dated 16.10.2018.
10. Aggrieved, the present writ petition has been filed by the petitioner-Bank.
11. Parties have exchanged affidavits, and by their consent, the matter proceeded to hearing on 02.04.2019. The writ petition was heard on 02.04.2019, 10.04.2019, 17.04.2019, 24.04.2019, 01.05.2019 and 07.05.2019, when judgment was reserved.
12. Heard Sri P.K. Sinha learned counsel for the petitioner, Sri Anil Bhushan, learned Senior Advocate assisted by Sri Amit Kumar Srivastava, learned counsel for respondent no. 4 and Dr. Mukteshwar Upadhyay, learned counsel appearing on behalf of respondent nos. 1 to 3.
13. There are two questions that fall for consideration, in this matter. These are:
(i) Whether the Employers are entitled to reckon their employee's gratuity worked out on the basis of his reduced rank/ lower post, to which he was reverted post retirement, in consequence of the punishment awarded in the disciplinary proceedings? and,
(ii) Whether the Employers are entitled to recover a sum of Rs.5 lakhs, ordered to be realized from the terminal benefits of the employee in enforcement of the punishment order made in disciplinary proceedings, by deducting it from gratuity payable to the employee?
14. Sri P.K. Sinha, learned counsel for the petitioner submits that the entitlement to gratuity of an employee depends upon the post that is held by him at the time of retirement, and is calculated on the basis of the wages last drawn. He submits that though the fourth respondent retired from service on 30.06.2015, upon attaining the age of superannuation, demitting office of Officer Grade-IV (Chief Manager) then held by him, but that would not be the post from which he would be deemed to have retired for the purpose of calculation of his post retiral benefits, including gratuity. He submits that the fourth respondent would be deemed to have retired from the post of an Officer Grade-I (Assistant Manager), to which he was reduced in rank/ reverted, in consequence of the punishment awarded to him in disciplinary proceedings, post retirement vide order, dated 24.08.2016. Sri Sinha has invoked a legal fiction about the post deemed to have been held by the fourth respondent, at the time of his retirement, which is far lower in rank than the post that he actually held at the relevant time, on 30.06.2015. This legal fiction, according to the learned counsel for the petitioner is inferable from Regulation 45(3) of the Regulations, which reads as under:
"45. Disciplinary proceedings after retirement -
(1) x x x x (2) x x x x (3) The officer or employee against whom disciplinary proceeding has been initiated shall cease to be in service on the date of superannuation but the disciplinary proceeding shall continue as if he was in service until the proceedings are concluded and final order is passed in respect thereof.
(4) x x x x"
15. In the submission of Sri Sinha, Regulation 45(3) creates a legal fiction, vis-à-vis, employees against whom disciplinary proceedings have been initiated while in service, but continued beyond their superannuation. It does not provided for their retention in service beyond the age of superannuation, but postulates cessation of their service on the date they attain the age of superannuation, like any other employee. But, unlike other employees, it creates a fiction whereby disciplinary proceedings are deemed to continue against a retired employed as if he were in service, till those proceedings are concluded, and a final order made in relation to those proceedings. Thus, by fiction, in the submission of the learned counsel, an employee like the fourth respondent who retires from service pending disciplinary proceedings, would be deemed to be in service for the purposes of those proceedings. He submits that this fiction has been created under Regulation 45(3) in order to enable disciplinary proceedings initiated before the superannuation of an employee, to reach their logical end. It is to inflict the punishment awarded, in case that is result of the disciplinary proceedings, that the employee is deemed to be in service.
16. It is pointed out by Sri Sinha that it is a reputed principle of statutory interpretation that a legal fiction is not to be confined or limited in its scope by any inhibition, on its logical consequences. It is to be given full effect, as if the fiction created, were dealing with a subject that is real. Thus, when at the terminus of disciplinary proceedings, the fourth respondent has been inflicted with punishment, that has reduced him in rank from an Officer Grade-IV (Chief Manager) to an Officer Grade-I (Assistant Manager), it would be limiting or suppressing the full play of fiction created under Regulation 45(3), if the post actually held by the fourth respondent on the date of his superannuation, were to be regarded as the post held by him for reckoning his wages last drawn, in order to calculate his gratuity. The legal fiction, according to Sri Sinha, would operate in consonance with the intent of Regulation 45(3), only when it is allowed to work in a way that the post to which the fourth respondent has been reverted, is effectively regarded as the post that he held at the time of his superannuation. Else, according to Sri Sinha, the provisions of Regulation 45(3), including the statutory fiction created thereby, would be rendered otiose and redundant. It is, therefore, imperative and the only logical consequence of the punishment order, that the fourth respondent must be deemed to have retired on the date of his superannuation, as an Officer Grade-I (Assistant Manager) with initial basic pay, and not the office that he actually demitted, that is Officer Grade-IV (Chief Manager). He submits, therefore, that the fourth respondent's gratuity has been rightly calculated on the basis of the post/ grade to which he has been reduced, in consequence of the punishment order, dated 24.08.2016 by working out his entitlement to gratuity on the basis of pay last drawn, on the post of Officer Grade-I (Assistant Manager), with initial basic pay. This calculation, of course, has been done from the date of his superannuation.
17. Sri Anil Bhushan, learned Senior Advocate, rebutting the submissions made on behalf of the petitioner has contended that the Act is a special statute, vis-à-vis, matters of determination and timely payment of gratuity to the employees of any establishment, to which the Act is applicable. He submits that the Act has been given overriding effect by virtue of Section 14 thereof, which provides that the Act or any Rule made under it, shall have effect notwithstanding anything to the contrary in anything other Act or instrument or contract that derives force through any statute. He submits that the Regulations may have created a legal fiction in order to bring disciplinary proceedings against an employee to their logical end, but the Regulations cannot impinge upon the rights of an employee to receive gratuity under the Act, that is governed by the provisions of Section 14(2). To the extent that the Regulations come in conflict with the provisions of the Act, governing an employee's entitlement to gratuity, the same would stand excluded by the overriding effect given to the Act, vis-à-vis, other statutes, by virtue of Section 14.
18. Sri Anil Bhushan submits at this stage, to underline a feature that is common ground between parties, that there is no issue raised by the petitioners about the inapplicability of the Act, to their establishment. Even otherwise, the Act is clearly applicable to the petitioners' establishment by virtue of Section 1(3) (b). There is no quarrel on any basis about its applicability, according to the learned Senior Advocate. Indeed, across the length and breadth of the petition, there is no such case taken, or ground urged, that the petitioners' establishment is one to which Act does not apply. Sri Anil Bhushan has drawn the attention of this Court to the provisions of Section 4 of the Act, to submit that under sub-Section (1) of Section 4, gratuity is payable to an employee, who has rendered not less than five years continuous service upon termination of his employment, to use the precise phraseology employed by the statute.
19. Dwelling on the three clauses of sub-Section (1) of Section 4 of the Act, learned Senior Advocate submits that termination of employment, which is the event envisaged under Section 4(1), upon the happening of which the Employers' liability to pay gratuity falls, can be in any of the three forms envisaged under Clauses (a), (b) and (c) of sub-Section (1) of Section 4 of the Act. It could be the contingencies of superannuation, or retirement, or resignation, or the death or disablement of the employee, due to accident or disease. He submits that the fourth respondent's case, falls under Section 4(1) (a), inasmuch as, the fourth respondent's employment with the petitioner has terminated on his superannuation. This superannuation admittedly was on 30.06.2015, while the fourth respondent was holding the post of Officer Grade-IV (Chief Manager), and indeed, for a fact the fourth respondent's last salary drawn/ wages last drawn, would be those attached to the post of Officer Grade-IV (Chief Manager), a post from which he was reduced post retirement, in consequence of the punishment order made in disciplinary proceedings. Sri Anil Bhushan submits that going by the mandate of Section 4(1) (a) of the Act, the fourth respondent's entitlement to gratuity has to be worked out, in accordance with Section 4(2), with reference to the ''wages based on the rate of wages last drawn by the employee concerned'; again, as he says, borrowing the phraseology of the statute. In the submission of Sri Anil Bhushan, what is relevant under the Act, therefore, is the salary last drawn by the fourth respondent, on the date of his superannuation; all post superannuation incidents of disciplinary proceedings would be irrelevant for the purposes of reckoning the fourth respondent's gratuity, though they may impact other post retiral benefits, in consequence of reversion to a lower post.
20. In the context of making an adjustment of a sum of money due to the Employer at the end of disciplinary proceedings, wherein an employee of Bharat Coking Coal Ltd. was allowed to retire pending disciplinary proceedings, it was held by the Supreme Court in Jaswant Singh Gill vs. Bharat Coking Coal Ltd.1, thus:
"11. Power to withhold penalty (sic gratuity) contained in Rule 34.3 of the Rules must be subject to the provisions of the Act. Gratuity becomes payable as soon as the employee retires. The only condition therefor is rendition of five years' continuous service."
(Emphasis by Court)
21. Likewise, in Union Bank of India vs. C.G. Ajay Babu2, in the context of a cause of action where the Employers, the Union Bank of India decided to forfeit an amount of Rs.1,77,900/- from the gratuity payable, after the employee was dismissed from service, in consequence of misconduct established against him in disciplinary proceedings, it was held by their Lordships:
"20. 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 [Jaswant Singh Gill v. Bharat Coking Coal Ltd., (2007) 1 SCC 663 : (2007) 1 SCC (L&S) 584]. Therefore, the appellant cannot take recourse to its own Rules, ignoring the Act, for denying gratuity."
(Emphasis by Court)
22. Both these decisions have been pressed into service by Sri Anil Bhushan, learned Senior Advocate, in order to buttress his submission that the right of the fourth respondent to receive gratuity would be determined in accordance with Section 4(1) of the Act, and not the Regulations. In his submission, as already said it would mean, that his entitlement to gratuity has to be worked out on the basis of whatever post he held on the date of his superannuation, and the wages last drawn at the time of his actual superannuation from service. It cannot be determined, in the submission of the learned Senior Counsel, with reference to his reduced rank or post to which he was reverted after retirement, at the conclusion of disciplinary proceedings. If that were permitted, it would amount to according primacy to Regulations 45(3) and 45(4) of the Regulations, over Section 4(1) of the Act. This is contrary to what the authority holds regarding the overriding effect of the Act, vis-a-vis, service Regulations, or even another statutory instrument, or still more a different Act.
23. This Court has considered the effect of the aforesaid decisions on the issue in hand. The law laid down by their Lordships is explicit in Jaswant Singh Gill (supra) in relation to deductions made from gratuity by the Employer, or an order of forfeiture of a particular part of the gratuity, as in Union Bank of India vs. C.G. Ajay Babu (supra). In one case, it was held that the action that was undertaken under non-statutory Rules of the holding company, or in the other under statutory Rules of the Employers, would both have to yield to the overriding effect of the Act. The said authorities lay down binding precedent. The authorities, however, bind this Court, for whatever principle is laid down there.
24. The question in hand is not about the right of the Employer to withhold or forfeit gratuity, but about the rate at which gratuity is to be worked out. It is about the post which the employee must in law be deemed to have held, at the time of his superannuation, for the purpose of reckoning his entitlement to gratuity, on the basis of wages last drawn. The context in which this question has arisen is absolutely explicit, and need not be commented upon further. No doubt, Regulation 45(3) postulates a fiction, by which an employee who actually superannuates, and ceases to be in service, is deemed to continue by a legal fiction in service for the purposes of completion of disciplinary proceedings, that have commenced before his superannuation. Regulation 45(4) postpones the entitlement of an employee to receive his post retiral benefits, after the date of his superannuation, till proceedings come to terminus and a final order is made, except his own contribution to the Contributory Provident Fund. A reading of the Regulations in terms does show that these are statutory in nature, and have been framed under the Regional Rural Banks Act, 1976. Proceeding on the basis that the Regulations are statutory, it has to be determined whether Regulations 45(3) and (4) do conflict with the provisions of Section 14(1) of the Act, in the context of a retiring employee against whom disciplinary proceedings continue, post superannuation. If, indeed, they do, the authority by their Lordships in Jaswant Singh Gill (supra) and Union Bank of India vs. C.G. Ajay Babu (supra), besides other decisions that acknowledge overriding effect of the Act over other statutes, would prevail. The key to resolve this question is to be found upon a construction of the provisions of Section 14(1) of the Act, in particular, as to what superannuation means there. More precisely put, it would have to be answered whether the word 'superannuation' occurring in Section 14(1) of the Act would mean the attainment of age of superannuation of an employee coupled with his actual retirement from service, or the 'superannuation' mentioned there, could be construed fictionally also to mean a date until which, by that fiction, for the purpose of carrying on disciplinary proceedings, the employee is deemed in service.
25. The most classical statement of the law about what legal fiction means is well renowned to be found in the speech of Lord Asquith of Bishopstone in East End Dwelling Co Ltd vs. Finsbury Borough Council: HL 19523, where the learned Law Lord said:
"Lord Asquith said: ''If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.'"
(Emphasis by Court)
26. Again, in Aneeta Hada vs. M/s. Godfather Travels & Tours4, their Lordships of the Supreme Court dealing with the concept of a legal fiction held:
"37. In State of T.N. v. Arooran Sugars Ltd. [(1997) 1 SCC 326 : AIR 1997 SC 1815] the Constitution Bench, while dealing with the deeming provision in a statute, ruled that the role of a provision in a statute creating legal fiction is well settled. Reference was made to Chief Inspector of Mines v. Karam Chand Thapar [AIR 1961 SC 838 : (1961) 2 Cri LJ 1], J.K. Cotton Spg. and Wvg. Mills Ltd. v. Union of India [1987 Supp SCC 350 : 1988 SCC (Tax) 26 : AIR 1988 SC 191], M. Venugopal v. LIC [(1994) 2 SCC 323 : 1994 SCC (L&S) 664 : (1994) 27 ATC 84 : AIR 1994 SC 1343] and Harish Tandon v. ADM, Allahabad [(1995) 1 SCC 537 : AIR 1995 SC 676] and eventually, it was held that when a statute creates a legal fiction saying that something shall be deemed to have been done which in fact and truth has not been done, the Court has to examine and ascertain as to for what purpose and between which persons such a statutory fiction is to be resorted to and thereafter, the courts have to give full effect to such a statutory fiction and it has to be carried to its logical conclusion.
38.From the aforesaid pronouncements, the principle that can be culled out is that it is the bounden duty of the court to ascertain for what purpose the legal fiction has been created. It is also the duty of the court to imagine the fiction with all real consequences and instances unless prohibited from doing so. That apart, the use of the term "deemed" has to be read in its context and further, the fullest logical purpose and import are to be understood. It is because in modern legislation, the term "deemed" has been used for manifold purposes. The object of the legislature has to be kept in mind."
(Emphasis by Court)
27. It may be mentioned here that the word ''deemed' is not used in Regulation 45(3), it is settled on the authority of their Lordships of the Supreme Court in CIT vs. Urmila Ramesh5, that though the word ''deemed' is usually employed where it is intended to create a legal fiction, a fiction may also be enacted without using that word.
28. A question that could logically arise is whether a fiction would have the same effect, if not created by the statute itself, but by delegated legislation. This is so, as the fiction propounded by Sri Sinha in the present case is founded on a piece of delegated legislation, that is to say, Section 45(3) of the Act. It is not the fourth respondent's case that the Regulations framed by the Bank under the Regional Rural Banks Act, 1976 is ultra vires the power of the Bank to frame such Service Regulations. Once the power to frame Service Regulations has been delegated under the Act to the Bank, the Regulations, indeed, have been framed not in exercise of an executive power, but power of delegated legislation. The said question has been answered by the Supreme Court in Union of India vs. M/s. Jalyan Udyog6, where it has been held in paragraph 23 of the Report thus:
"23.We are equally unable to agree that a legal fiction can be created only by a legislature and not by the executive. Here the Central Government is exercising a power conferred upon it by the Parliament. The provision conferring such power does contemplate and empower the Central Government to create such a fiction, as explained hereinabove. Sub-section (1) as well as sub-section (3) place the matter beyond any doubt. To repeat, the nature of power under Section 25 is conditional legislation or a species of delegated legislation; an exemption notification under Section 25 is not an executive act. No decision has been brought to our notice in support of the said contention -- which is raised only in the written submissions."
29. Now, as the rights of parties stand on facts here, there is hardly any quarrel. There is, indeed, a fiction created under Regulation 45(3), that postulates that though the employee would retire on attaining the age of superannuation, but the disciplinary proceedings shall continue as if he were in service until proceedings are concluded and a final order made. This fiction has been created in aid of the Employers' power to bring to an end disciplinary proceedings commenced when the employee was in service, but has retired before conclusion of proceedings. The object of the fiction is to save the disciplinary proceedings from abatement. Added to it are the provisions Regulation 45(4) which say that pending decision of disciplinary proceedings commenced against an employee, no post retiral benefits would be paid to such an employee upon his superannuation till those proceedings are completed and a final order passed, except the employee's contribution to the provident fund. Clauses (3) and (4) of Regulation 45 read together, furnish a clear intendment to the fiction under Clause (3). And, that is that disciplinary proceedings should not abate on the superannuation of an employee but continue beyond his actual retirement. In order to ensure that the punishment, if any, meted out to him, if that be the case, is effective, the post retiral benefits of the employee have been provided to be withheld by Clause (4), which complements the fiction in Clause (3).
30. The conclusion, therefore, is that fiction is indeed created under Regulation 45(3) of the Regulations by which the employee would be deem to be in service for the purpose of disciplinary proceedings. The consequence of this fiction read together with the provisions in Clause (4) of Regulation 45 would be that the employee is in fact to be placed in the position of an employee in service, so far as the consequences of disciplinary proceedings are concerned. Though superannuated, he is to suffer the consequences of punishment awarded to him, at the conclusion of disciplinary proceedings, if any. The issue that still survives for determination is whether by the legislative generation of this fiction under the Regulations, the employee would be held reduced in rank on the date of superannuation in consequence of the punishment order passed in disciplinary proceedings, post his actual superannuation.
31. No doubt, the legal fiction postulated under Regulation 45(3), read with the consequences of punishment in Regulation 45(4), has to be construed in a manner that on the date of superannuation, the third respondent is to be treated as an officer retiring from the reverted post. If this were not done it would be a situation where the consequences and incidents of the fiction would not be allowed to follow and translate into reality. This would violate the fundamental principle about legal fictions, spoken of earlier in this judgment. For all purposes, thus, the consequence of the punishment order would be that respondent no. 3 must be deemed to have retired from the post of an officer Grade I, placed in the basic pay-scale on the date of his superannuation. This is how the fiction would operate retroactively to determine the status of the third respondent at the time of his superannuation from service, in consequence of the supervening order of punishment.
32. This conclusion still does not take care of the first question as to what rank or post the third respondent must be deemed to have held, when he superannuated on 30.06.2015, much before the punishment order dated 24.08.2016 came, as far as his entitlement to gratuity under the Act is concerned. This is so as the entitlement to receive gratuity actually accrues on the termination of employment, under Section 4(1) of the Act, whether it be on the employees superannuation, or his retirement, or resignation, or death, or disablement due to accident or disease. The right to receive gratuity by the employee thus accrues immediately upon termination of his service, which in this case would be superannuation on 30.06.2015. The provisions of Section 7 of the Act, in general, and Section 7(3), in particular, provide for the determination of the amount of gratuity payable in various eventualities of dispute as to entitlement or quantification, and the time when the right to receive it, actually matures. It is 30 days from the date when gratuity becomes payable by the employers. But, by virtue of Section 4(1) it becomes payable immediately upon termination of employment, in any of the various modes contemplated there.
33. In this connection, the law laid down by their Lordship's of the Supreme Court in Jaswant Singh Gill (supra) is clear, to which allusion has been made in an earlier part of this judgment. It must, therefore, be held that the third respondent became entitled to receive gratuity on 30.06.2015. The consequence, therefore, is that the right of the third respondent to receive gratuity crystallized on the date of his superannuation, that is on 30.06.2015, much before the order of punishment dated 24.08.2016, made in disciplinary proceedings reducing him in rank to the post of Officer Grade I with initial basic pay, came into existence. On the date of superannuation, the third respondent was admittedly holding the post of officer scale IV (Chief Manager) and demitted office holding that post. His rights crystallized on the date of his superannuation, and consequent upon retirement, to receive gratuity on 30.06.2015, reckoned with reference to the post and the wages last drawn by him on that date. The rate at which the third respondent is entitled to receive gratuity, therefore, stands crystallized and concluded under Section 4(1) of the Act on the basis of the post that he held on the date of his superannuation, and consequent retirement. This gratuity reckoned in that manner became payable on the said date by virtue of Section 4(1). The fact that it was not paid, would not attract the consequences of a change in the third respondent's entitlement to gratuity, with reference to the post that he actually held on 30.06.2015, based on his subsequent diminution in rank to a lower post much after retirement.
34. Now, if the fiction were to be applied with all incidents, as if the third respondent retired from the reverted post of an Officer Grade I (Assistant Manager) on the date of his superannuation, that is 30.06.2015, in accordance with the supervening punishment order dated 24.08.2016, the fiction cannot be applied to detract from an accrued and crystallized right of the third respondent to reckon his gratuity, in the manner indicated above. The fiction would operate for the purposes of all other incidents, that is to say, the reckoning of other post retiral benefits, the right to receive which was not crystallized at the time of the third respondent's superannuation on account of the provisions of Regulation 45(4); but the right to receive gratuity would have to be excepted out of the fiction, as a concluded and accrued right, finally and actually determined with reference to the state of things, dehors the fiction. This would, particularly be so, as the provisions of the Section 4(1) of the Act in the matter of payment of gratuity, would override the provisions of Regulation 45(4) by the dint of Section 14 of the Act. Thus, in consequence of the claim to gratuity being an accrued and concluded the right, already crystallized in favour of the third respondent on the date of his superannuation, that is 30.06.2015, the Rule about carrying a legal fiction to all its logical incidents would stand excluded under the principle relating to fiction, that makes allowance for situations, where application of the fiction is prohibited. Here, it is prohibited because it cannot take away an accrued and concluded right under an overriding statute like the Act. Thus, question no. (I) is answered in the negative.
35. The second question is about the legality of the petitioner's action in deducting the sum of Rs. Five lacs from the gratuity payable to the petitioner, in order to enforce recovery of that sum, adjudged payable by the petitioner in terms of the order of punishment made in disciplinary proceedings.
36. The submission of the learned counsel for the petitioner again rests on Regulation 45(4) of the Regulations. The provisions of Regulation 45(4) are quoted in extenso:
"Regulation 45(4) - The Officer or employee against whom disciplinary proceeding has been initiated shall not receive any pay and/ or allowances after the date of superannuation and also not be entitled for the payment of retirement benefits till the proceeding is completed and final order is passed thereon except his own contribution to Contributory Provident Fund (CPF)."
37. Sri P.K. Sinha, learned counsel for the petitioner urges that Regulation 45 of the Regulations, across its various clauses, is an integrated scheme in regard to disciplinary proceedings against an employee after retirement. It is his contention that Clause (4) of Regulation 45, specifically permits postponement of payment of all terminal dues that an employee is entitled to, except his own contribution to the provident fund. The appended explanation to the Regulations expressly indicates that the terminal benefits which Clause (4) of Regulation 45 envisages, include retirement benefits such as encashment of leave and gratuity. These may be withheld till completion of disciplinary proceedings, and further indicates that the competent authority is entitled to decide upon the question of release of these benefits, after it passes final orders in the disciplinary proceedings. According to Sri Sinha, gratuity can be forfeited under the Act, as well as under the Regulations, in order to make good the loss occasioned to the petitioner by the third respondent, of which he has been found responsible at the conclusion of disciplinary proceedings. It is his contention that once there are specific regulations governing the subject of gratuity, the Act would not apply, and even if it does, Section 4(6) (a) thereof entitles the petitioner to recover damage or loss occasioned to it, by forfeiting so much of the sum of gratuity, as would make good the loss occasioned by an employee, like the third respondent who has been found guilty of misconduct and of causing that loss, at the conclusion of disciplinary proceedings. Section 4(6) of the Act is quoted infra:
"4. Payment of gratuity.--(1) x x (2) x x (3) x x (4) x x (5) x x (6) Notwithstanding anything contained in sub-section (1),--
(a) the gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused;
(b) the gratuity payable to an employee may be wholly or partially forfeited--
(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment."
38. It has already been held while answering question no. (i) that the Act has overriding effect vis-à-vis the Regulations, in the matter of reckoning and payment of gratuity - all that is about the third respondent's entitlement to gratuity. This is the inevitable effect of Section 14 of the Act, which completely excludes the applicability of Regulations, so far as the matters relating to gratuity payable to the third respondent are concerned. No more need be said about this. This brings up the issue that given the liability of the third respondent to pay a sum of Rs. Five lacs, adjudged against him as punishment for the loss caused to the petitioner in the disciplinary proceedings, is it open to the petitioner to recover the said amount from the third respondent's gratuity? It may be made clear in unqualified terms that the order of punishment has become final between parties, and there is no doubt that the third respondent is liable to pay the petitioner a sum of Rs. Five lacs under the order of punishment, unless that order be set aside in some competent proceedings. But, does that entitle the petitioner to recover the said sum of money from the third respondent's gratuity, is the moot question?
39. Sri P.K. Sinha, learned counsel for the petitioner has relied upon the decision of the Gujarat High Court in Union Bank of India vs. K.R. Ajwalia7 to submit that there can be a forfeiture of gratuity in accordance with the provisions of the Act, and also under the Regulations of the Employer, after due opportunity to the employee. A reading of the decision in Union Bank of India vs. K.R. Ajwalia (supra) shows that it related to a case where the employee had been compulsorily retired on humanitarian grounds, instead of inflicting the punishment of dismissal. The bank had ordered, however, the forfeiture of the entire of his gratuity. It was done, without opportunity of hearing to the employee. The entire decision turns on the requirement of hearing an employee before his gratuity is forfeited, where orders of the Authorities under the Act were upheld by the Court, safeguarding the rights of the Employer to pass fresh orders in accordance with law, after affording opportunity of hearing on the question of forfeiture. In this connection, Sri Sinha has invited the attention of the Court to the almost operative portion of the judgment, that figures in paragraph 19 of the report. It reads thus:-
"19. In conclusion, therefore, I find that the order of forfeiture passed by the petitioner was in violation of principles of natural justice, since no hearing was granted to the respondent before passing the said order. The authorities below therefore did not commit any illegality in setting aside the said order. I, therefore, concur with the view of the authorities below under the Payment of Gratuity Act that the order, dated 29 August 2802, passed by the petitioner ordering forfeiture of the entire amount of gratuity of the respondent was not lawful, however, for different reasons which are narrated above. 1, therefore, find that the petition is required to be dismissed. However, in view of the observations made hereinabove, I am of the opinion that nothing that has been said by the authorities under the Payment of Gratuity Act nor my action of rejecting of the petition shall come in the way of the petitioner in passing fresh orders in accordance with law after affording a reasonable opportunity to the respondent of being heard regarding forfeiture of gratuity."
40. This Court, is of opinion that in Union Bank of India vs. K.R. Ajwalia (supra) the point was not mooted whether the Act vis-a-vis gratuity payable to an employee, would prevail over the service rules. It was also not a point raised or argued in the said decision, whether sub-Section (6) of Section 4 of the Act at all made it permissible for the Employers to forfeit the employee's gratuity, in the given facts of that case. Although, the said decision did involve compulsory retirement, which may by some stretch of reasoning, be construed as termination of service for the purposes of Section 4(6) of the Act, the present case is not one where at the end of disciplinary proceedings the services of respondent no. 3 have been terminated, in any manner, like an order of dismissal or removal, or even compulsory retirement. Post retirement, services of the third respondent could not have been terminated. There is thus absolutely no principle involved in Union Bank of India vs. K.R. Ajwalia (supra), which Sri Sinha may gainfully rely on.
41. Sri Anil Bhushan, learned Senior Advocate on the other hand submitted that no recovery can be made of whatever amount has been adjudged by the order of punishment, made in the disciplinary proceedings, from the gratuity payable to the third respondent. He points out that the only source of power to effect a forfeiture is Section 4(6) of the Act, that he submits is not at all attracted to the third respondent's case, since he has not been visited with the punishment of termination. It is his submission that under any of the clauses of sub-Section (6) of Section 14 of the Act, and the various contingencies contemplated there, termination of service is a sine qua non for the exercise of power to forfeit gratuity under the Act. The third respondent's services have never been terminated as would ex facie appear from the order of punishment made in the disciplinary proceedings; and, therefore, the power to forfeit gratuity cannot be exercised. If the power to forfeit cannot be exercised, no recovery can be made from any sum of money payable as gratuity.
42. Sri Anil Bhushan, learned Senior Advocate, in particular, has drawn the attention of the Court to Section 13 of the Act, which speaks about protection of gratuity, and makes the sum of gratuity payable under the Act (except an employee of an establishment exempted under Section 5) not liable to attachment, in execution of any decree or order of any Civil, Revenue or Criminal Court. It is his submission that inapplicability of any of the clauses for the forfeiture of gratuity on one hand, and the protection of money payable as gratuity from attachment in the execution of a decree of any Court, Civil, Revenue or Criminal on the other, completely insulates any sum of money payable to an employee as gratuity from the right of the employer to recover any of his dues, otherwise lawfully recoverable from the employee. Section 13 of the Act is extracted below:-
"13. Protection of gratuity.--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 Section 5] shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court."
43. Before a consideration of the rival submissions on the issue, it would be profitable to do a survey of authority that has bearing on the point.
44. Sri Anil Bhusan, learned Senior Advocate has relied upon the decision of the Supreme Court in Jaswant Singh Gill (supra) that has been referred to earlier in another context, while answering the first of the two questions involved in this case. He has referred to the said authority of their Lordships in connection with proposition that forfeiture of gratuity can be ordered only in the manner prescribed under Section 4(6) of the Act, but not otherwise. It has been pointed out that in the said authority termination of service for any of the causes enumerated under sub-Section (6) of Section 4 of the Act is a condition essential for the exercise of power to forfeit of gratuity. Reference has been made to paragraphs 12, 13 and 14 of the report in Jaswant Singh Gill (supra), where it is held:
"12.A statutory right accrued, thus, cannot be impaired by reason of a rule which does not have the force of a statute. It will bear repetition to state that the Rules framed by Respondent 1 or its holding company are not statutory in nature. The Rules in any event do not provide for withholding of retiral benefits or gratuity.
13. The Act provides for a close-knit scheme providing for payment of gratuity. It is a complete code containing detailed provisions covering the essential provisions of a scheme for a gratuity. It not only creates a right to payment of gratuity but also lays down the principles for quantification thereof as also the conditions on which he may be denied therefrom. As noticed hereinbefore, sub-section (6) of Section 4 of the Act contains a non obstante clause vis-à-vis sub-section (1) thereof. As by reason thereof, an accrued or vested right is sought to be taken away, the conditions laid down thereunder must be fulfilled. The provisions contained therein must, therefore, be scrupulously observed. Clause (a) of sub-section (6) of Section 4 of the Act speaks of termination of service of an employee for any act, wilful omission or negligence causing any damage. However, the amount liable to be forfeited would be only to the extent of damage or loss caused. The disciplinary authority has not quantified the loss or damage. It was not found that the damages or loss caused to Respondent 1 was more than the amount of gratuity payable to the appellant. Clause (b) of sub-section (6) of Section 4 of the Act also provides for forfeiture of the whole amount of gratuity or part in the event his services had been terminated for his riotous or disorderly conduct or any other act of violence on his part or if he has been convicted for an offence involving moral turpitude. Conditions laid down therein are also not satisfied.
14. Termination of services for any of the causes enumerated in sub-section (6) of Section 4 of the Act, therefore, is imperative."
(Emphasis by Court)
45. Likewise, reliance has been placed by the learned Senior Advocate appearing for the respondents on a decision of the Supreme Court in Union Bank of India vs. C.G. Ajay Babu (supra), also referred to in another context while deciding the first question involved here. In the said decision also, the overriding effect given to Section 4(6) of the Act in the matter of forfeiture of gratuity has been acknowledged by their Lordships, though in that case, the effect of the provision regarding forfeiture in the bipartite settlement has also been taken into consideration. It was held in Union Bank of India vs. C.G. Ajay Babu (supra) thus:
"14. That there is a bipartite settlement in the appellant Bank is not in dispute. That the settlement provides for forfeiture only if there is a loss caused on account of misconduct leading to dismissal, is also not in dispute. There is no case for the Bank that the misconduct of the respondent employee has caused any financial loss to the Bank, and therefore, forfeiture, taking recourse to sub-section (6) of Section 4 of the Act, cannot be resorted to. Thus, we are in respectful agreement with the view taken by the High Court that the respondent employee is entitled to the protection of the bipartite settlement.
15. Under sub-section (6)(a), also the gratuity can be forfeited only to the extent of damage or loss caused to the Bank. In case, the termination of the employee is for any act or wilful omission or negligence causing any damage or loss to the employer or destruction of property belonging to the employer, the loss can be recovered from the gratuity by way of forfeiture. Whereas under clause (b) of sub-section (6), the forfeiture of gratuity, either wholly or partially, is permissible under two situations: (i) in case the termination of an employee is on account of riotous or disorderly conduct or any other act of violence on his part, (ii) if the termination is for any act which constitutes an offence involving moral turpitude and the offence is committed by the employee in the course of his employment. Thus, clause (a) and clause (b) of sub-section (6) of Section 4 of the Act operate in different fields and in different circumstances. Under clause (a), the forfeiture is to the extent of damage or loss caused on account of the misconduct of the employee whereas under clause (b), forfeiture is permissible either wholly or partially in totally different circumstances. Clause (b) operates either when the termination is on account of: (i) riotous, or (ii) disorderly, or (iii) any other act of violence on the part of the employee, and under clause (ii) of sub-section (6)(b) when the termination is on account of any act which constitutes an offence involving moral turpitude committed during the course of employment.
16. "Offence" is defined, under the General Clauses Act, 1897, to mean "any act or omission made punishable by any law for the time being in force" [Section 3(38)].
17. Though the learned counsel for the appellant Bank has contended that the conduct of the respondent employee, which leads to the framing of charges in the departmental proceedings involves moral turpitude, we are afraid the contention cannot be appreciated. It is not the conduct of a person involving moral turpitude that is required for forfeiture of gratuity but the conduct or the act should constitute an offence involving moral turpitude. To be an offence, the act should be made punishable under law. That is absolutely in the realm of criminal law. It is not for the Bank to decide whether an offence has been committed. It is for the court. Apart from the disciplinary proceedings initiated by the appellant Bank, the Bank has not set the criminal law in motion either by registering an FIR or by filing a criminal complaint so as to establish that the misconduct leading to dismissal is an offence involving moral turpitude. Under sub-section (6)(b)(ii) of the Act, forfeiture of gratuity is permissible only if the termination of an employee is for any misconduct which constitutes an offence involving moral turpitude, and convicted accordingly by a court of competent jurisdiction."
46. Learned Senior Counsel has also placed reliance upon the decision of the Supreme Court in State of Jharkhand and others vs. Jitendra Kumar Srivastava and another8. This was a case regarding withholding of a part of pension during the pendency of departmental/criminal proceedings by the State Government. The decision was relied on the premise that the right to receive pension or gratuity stand on the same foot and are both property in the hands of the employer, protected by Article 300A of the Constitution. An employee can be deprived of either of these only in accordance with law. He could not be deprived of it on the basis of mere executive instructions. At the end of a long and incisive analysis of the right to receive pension by a Government servant, their Lordships in the decision under reference held thus:
"16. The fact remains that there is an imprimatur to the legal principle that the right to receive pension is recognised as a right in "property". Article 300-A of the Constitution of India reads as under:
"300-A. Persons not to be deprived of property save by authority of law.--No person shall be deprived of his property save by authority of law."
Once we proceed on that premise, the answer to the question posed by us in the beginning of this judgment becomes too obvious. A person cannot be deprived of this pension without the authority of law, which is the constitutional mandate enshrined in Article 300-A of the Constitution. It follows that attempt of the appellant to take away a part of pension or gratuity or even leave encashment without any statutory provision and under the umbrage of administrative instruction cannot be countenanced.
17. It hardly needs to be emphasised that the executive instructions are not having statutory character and, therefore, cannot be termed as "law" within the meaning of the aforesaid Article 300-A. On the basis of such a circular, which is not having force of law, the appellant cannot withhold even a part of pension or gratuity. As we noticed above, so far as statutory Rules are concerned, there is no provision for withholding pension or gratuity in the given situation. Had there been any such provision in these Rules, the position would have been different."
47. Sri Anil Bhusan, learned Senior Counsel has further relied on a decision of a Division Bench of this Court in Bankey Bihari Chauhan vs. State of U.P. and others9, where in the context of facts that the employee in the course of disciplinary proceedings had been held guilty of negligence in the performance of his duties, and found to have caused loss in the sum of Rs. 2,19,846/-, he was punished by an order of the disciplinary authority, requiring him to make good the said loss of the employer-Roadways Corporation by deduction of a sum of Rs. 500/- per month from his salary, until his retirement. The employee filed a writ petition which was dismissed on 24.07.2006, with liberty to file a departmental appeal. The appeal was dismissed by the Appellate Authority, about which the employee claimed that the order in appeal was never served upon him. The employee moved the Prescribed Authority under the Payment of Wages Act, 1936. The Payment of Wages Authority by an order, dated 22.06.2009 granted that application and set aside the deduction of Rs. 500 per month from the employee's salary with a direction to refund an amount of Rs. 22,000/- to him, which by then had already been deducted by the employer. The said amount was refunded to the employee. The employer appealed to the Appellate Authority from the last mentioned direction by the Payment of Wages Authority. The Employers' appeal was rejected. The employee filed a writ petition challenging those orders, wherein interim stay of operation of the orders passed by the Payment of Wages Authorities was granted, but the stay order as indicated in the decision under reference was not extended beyond a certain date. The act giving rise to the cause of action was that the Employers passed an order on 01.09.2014 sanctioning the employee's gratuity, in the sum of Rs. 2,50,945/- and adjusting it against a sum of Rs. 2,89,250/-, indicated to be recoverable as loss caused to the employer. The result was that the entire amount of gratuity was adjusted against the recovery of money that was ordered against the employee, in the disciplinary proceedings. The writ petition came up before a learned Single Judge who dismissed the same. This Court on Special Appeal held in the decision under reference thus:
"8. In the present case, it is not in dispute that the services of the appellant were never terminated. The appellant continued to be in service and retired on attaining the age of superannuation. In the circumstances, the basic pre-condition for the forfeiture of gratuity under Section 4(6) of the Act was not fulfilled. We may also note that Regulation 63 of the Regulations provides for penalties and clause (4) thereof provides for the recovery from pay or deposit at the credit of an employee of the whole or part of a pecuniary loss caused to the Corporation by negligence or breach of an order. The Regulations must necessarily be harmonized with the provisions of the Act and cannot override the express statutory provision. In any event, it is clear that even Regulation 63 contains no such provision of recovery from gratuity. In these circumstances, we are of the view that the action for recovery from gratuity was contrary to law and in the teeth of the express provision of the Act. The learned Single Judge, with great respect, was not justified in dismissing the petition on the ground that the appellant had not challenged the order of penalty or the appellate order. For the purposes of the present proceedings, it is not necessary for the Court to enquire into the grievance of the appellant that he was not served with the appellate order. Moreover, we may clarify that the learned counsel for the appellant has only confined himself to the payment of gratuity. Even if the order of penalty has attained finality, as is urged on behalf of the employer, any recovery or adjustment of the amount of gratuity has to be made by following the statutory provisions contained in the Act. Since the conditions set out in Section 4(6) of the Act for forfeiture of the gratuity have not been fulfilled, the action of the employer was ultra vires."
48. Reliance has further been placed on behalf of the respondents on a decision of this Court in Amod Prasad Rai vs. State of U.P. and another10. The petitioner in that case had been found guilty of misconduct in making some excess payment to some third party, along with his superior officers. In consequence of the departmental inquiry, recovery of a sum of Rs. 3,49,746/- was ordered together with a censure entry. The employer set-off the sum of Rs.3,49,746/- against the sum of gratuity payable to the petitioner and it was pointed out that the petitioner made an application to the Executive Engineer, part of his employers establishment that the sum of Rs.3,49,746/-, pursuant to the punishment order dated 02.04.2007, may be realised from his gratuity. It was in the aforesaid context that this Court in Amod Prasad Rai (supra) held:
"9. The main question which is to be examined in the present case is, whether recovery can be made from the gratuity or not. There is a special Act, relating to payment of gratuity known as the Payment of Gratuity Act, 1972 (hereinafter referred to as the ''Act' for the sake of brevity). The provision of payment of gratuity has been provided under section 4 of the Act, wherein sub-clause (6) spells out the conditions, under which gratuity of an employee can be stopped or withheld.
10. Section 4 sub-clause (1) says that gratuity shall be payable to an employees on the termination of his employment after he has rendered continuous sen/ice for not less than five years--(a) on his superannuation; (b) on his retirement or resignation; or (c) on his death or disablement due to accidence or disease; and sub-clause (6) reads as under;
"(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 or destruction of property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused;
(b) the gratuity payable to an employee may be wholly or partially forfeited--
(i) If the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
(ii) If the services of such employee have been terminated for any act which constitutes a offence involving moral turpitude, provided that such offence is committed by him in the course of his employment."
11. A Division Bench of this Court in Writ Petition No. 1519 (S/B) of 2002, Kanti Prasad Sharma v.Uttar Pradesh Co-operative Dairy Federation and Milk Union Centralised Services, decided on 26.4.2004, had an occasion to consider the provisions of the aforesaid section 4 of Payment of Gratuity Act and the Court found that if none of the conditions aforesaid as given in section 4 subclause (6) exists, the gratuity cannot be withheld.
12. In the present case, the services of the petitioner has not been terminated but a punishment order has been passed for recovery of the amount and a censure entry was awarded. Therefore, none of the conditions, referred to above, falls under any of the conditions otherwise given in sub-section (6) and its sub-clauses. Even if the petitioner has given an application that amount sought to be recovered may be recovered from gratuity payable to him, as pointed by the learned Standing Counsel, it was the duty of the authority concerned to examine the matter that whether such an application can be accepted. Suppose, a Government servant gives an application for grant of certain benefit, which is not legally permissible to him, the competent authority will reject the same on the ground that relevant law does not permit for grant of such benefit. Similarly, if a government servant gives an application out of his own free-will that amount should be recovered from the gratuity, it is the duty of the authority concerned to scrutinize the same in the light of the relevant provisions of law and the Payment of Gratuity Act, 1972 and, thereafter, pass appropriate order in accordance with law. In the case in hand, the Chief Engineer, Kanpur Division, Kanpur, acted on the application of the petitioner in haste without applying his mind and examining the application in light of the relevant provisions. An authority cannot and should not act contrary to law."
49. Learned Senior Advocate for the employer has also referred to a decision of the Madras High Court in Salem Agricultural Producers' Co-operative Marketing Society Ltd. vs. V. Rajendran and others11. In the said decision the cause of action arose on account of non payment of gratuity by the employer society upon the employee's retirement. The justification put forward before the Controlling Authority under the Act was that proceedings under Section 87 Tamilnadu Cooperative Societies Act, 1983 were pending against the employee. The defence was rejected by the Authorities under the Act, leading the employers to file a writ petition challenging those orders. It was in the context of the aforesaid facts that it was held by D Hariparanthaman, J.:
"6. As rightly contended by the learned Counsel for the petitioner, section 13 of the Payment of Gratuity Act gives protection to the amount of gratuity payable to an employee from being attached in execution of any decree or order of any civil, revenue or Criminal Court. At this juncture, it is relevant to extract section 13 of the Payment of Gratuity Act, 1972, as follows:
"13. Protection of gratuity,--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 section 5 shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal Court."
7. Section 13 of the Payment of Gratuity Act gives protection to the gratuity earned by an employee for rendering the service. Unless the employee is terminated from service, section 4(6) of the Act cannot be invoked for forfeiture.
8. Admittedly, the first respondent was not dismissed. Even in the case of termination, very limited scope is available for the employer for forfeiting the gratuity. In view of the same, I have no hesitation to uphold the orders of the Authority."
50. Sri Anil Bhushan, Learned Senior Advocate has further placed reliance on the decision of the Patna High Court in Most. Prabha Shukla vs. State of Bihar and others12, where it has been held:
"7. In the present writ petition, no counter-affidavit has been filed on behalf of Respondent Nos. 1 to 5. However, on record, an affidavit shown by the Dy. Superintendent of Police (Headquarters), Nalanda purported to be filed on behalf of Respondent No. 6 is available. Respondents have not controverted the statement made in the writ petition specifically in its paragraph-8 that the husband of the petitioner was on duty in Police Line, Nalanda between the period for which recovery order has been passed. Fact remains that the recovery of Rs. 99,858/- was directed to be made from the gratuity amount of husband of the petitioner, who died-in-harness. The death of the husband of the petitioner had occurred on 27.12.2004 and recovery order has been passed after about two years from the death of her husband. It is also not in dispute that before passing order for recovery, no opportunity of hearing was given to the petitioner and violating the principles of natural justice, the order for recovery was passed. So far as recovery from the amount of gratuity is concerned, the Court is of the opinion that recovery from the amount of gratuity was not permissible by the Respondents, particularly in view of statutory bar under section 13 of the Payment of Gratuity Act. At this juncture, it would be appropriate to quote Section-13 of the Payment of Gratuity Act, 1972 which is as follows:
"13. Protection of gratuity--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 section 5] shall be liable to attachment in execution of any decree or order of any civil, Revenue or Criminal Court."
8. In view of the aforesaid provision, there is no ambiguity that the amount payable under the head of gratuity is not even liable to be attached in execution of decree or order. It is evident that right to receive the payment of gratuity amount is protected right and it cannot be taken away by the employer...................."
51. In tune with the said authorities, there is another decision of a Division Bench of the Jharkhand High Court in State of Jharkhand vs. Namlem Topno13, where dealing with the overriding effect of the Act and the insulation of any sum of money payable as gratuity from the reach of the employers, in order to recover any kind of their dues against the employee, it was held thus by Virendra Singh, C.J. speaking for the in Bench (quoted provisions of the Act omitted):
"9. There is another aspect of the matter which cannot be left unattended. The Payment of Gratuity Act, 1972 is a special enactment and section 14 provides that the provisions of the Act or any Rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in an enactment or instrument or contract effected through any enactment other than the Payment of Gratuity Act, 1972. Section 4 of the said Act mandates payment of gratuity to an employee on his superannuation or his retirement or resignation provided the employee has rendered continuous service for not less than five years. An exception has been carved out in the case of death or disablement, in which case completion of service of five years is not necessary and the amount of gratuity shall be paid on the death or disablement of the employee. Section 13 provides that the amount of gratuity shall not be subject of attachment in execution of any decree or order of a civil, revenue or criminal court.......
10. A perusal of the aforesaid provisions under the Payment of Gratuity Act, 1972 makes it abundantly clear that only when conditions under sub-section 6 to Section 4 are satisfied, gratuity of an employee can be fortified wholly or partially. None of the conditions enumerated therein is satisfied in the present case. Infact, the writ petitioner was not terminated from service."
52. Sri P.K. Sinha, learned counsel for the petitioners has endeavoured to make a distinction between an order for the forfeiture of gratuity and mere adjustment of some outstandings due against the employee, on any account, that are adjusted from the sum of gratuity available in the hands of the employer. He submits that the inhibiting provisions of Section 4(6) of the Act would only come into play, in case gratuity were forfeited. He points out that the decisions of their Lordships of Supreme Court in Jaswant Singh Gill (supra) and Union Bank of India vs. C.G. Ajay Babu and another (supra), both were rendered in the context of an order of forfeiture of gratuity that did not conform to the mandate of Sub Section (6) of Section 4 of the Act. The said decisions, according to Sri Sinha, are not at all relevant in the context where gratuity is sanctioned and not forfeited, but merely set-off to satisfy an employer's claim against the employee that is otherwise lawful and just.
53. This Court is afraid that the contention of the learned counsel for the petitioner cannot be accepted. It is true that in Jaswant Singh Gill (supra) and in Union Bank of India vs. C.G. Ajay Babu (supra), there were orders passed for the forfeiture of gratuity that did not conform to the requirements of the Act, whereas in the present case there is no order of forfeiture made. Instead, what the petitioners have done in the present case is to recover a sum of Rs.5,00,000/-, ordered to be paid under the punishment order from the sum of gratuity held due to the petitioner. To the understanding of this Court, the distinction between formally ordering a forfeiture of gratuity and the contingency of recovering the sum of money adjudged as penalty or punishment against an employee, may be in the legal sense is different, but in its impact, it comes to the same thing which works as a forfeiture of gratuity, cloaked as a mere recovery. In the decision of the Division Bench of this Court in Bankey Bihari Chauhan (supra) and that of the learned Single Judge in Amod Prasad Rai (supra), these were precisely the facts, where there was no order of forfeiture of gratuity formally made but adjustment of dues of the employer, levied as loss in consequence of departmental proceedings. Though, this point was not specifically raised in those decisions before the Court, nevertheless this kind of adjustment was recorded as one that amounted to forfeiture of gratuity, and, therefore, subject of rigor of the Act. The decision of the Madras High Court in Salem Agricultural Producers' Co-operative Marketing Society Ltd.(supra), the Patna High Court in Most. Prabha Shukla (supra) and the Division Bench of Jharkhand High Court in State of Jharkhand vs. Namlem Topno (supra) would seem to have dealt with this submission also, again though not expressly urged, in any of those cases where it has been unanimously held, relying on Section 13 of the Act that gratuity being not attachable in execution of any decree, the employer cannot proceed to recover from the sum of gratuity any of his otherwise lawful dues.
54. This Court is in respectful agreement with all those decisions and finds that indeed what is not attachable in enforcement a decree of any Court, Civil, Revenue or Criminal, cannot be made available to the employer to recover his dues, howsoever, lawfully adjudged. This Court is also of opinion as briefly indicated earlier that by mere forbearance from passing an order of forfeiture of gratuity, the petitioner cannot defeat the mandate of Section 4(6) of the Act. This would well stand the test of legality of the proposition on multiple count. In case, the employers had proceeded to order forfeiture of the sum of Rs. 5,00,000/- from the fourth respondent's gratuity that they have adjusted in penalty against him by means of the order dated 30.06.2015, the order of forfeiture would be bad under Section 4(6) of the Act for the simple reason that in consequence of disciplinary proceedings, the services of fourth respondent have not been terminated. It has been held in Union Bank of India and others vs. C.G. Ajay Babu (supra) that forfeiture of gratuity is attracted only where his conduct has led to a termination of his services. Elsewhere also, no different view of law has been taken, which is the clear purport of Section 4(6) of the Act. The result is that short of the actual exercise of the power of forfeiture, the petitioners have exercised that power by resort to a camouflage, dubbing it as mere recovery from the gratuity. This goes against that well settled principle of law that whatever the law prohibits being done directly, cannot be done indirectly. Thus, the answer to the question (ii) is in the negative.
55. In the result, this petition fails and is dismissed with costs. Interim order dated 11.12.2018 is hereby vacated.
Order Date :- 6.8.2019 Anoop/Deepak/BKM