Orissa High Court
The Sr. Branch Manager vs The Deputy Chief Labour on 15 March, 2024
IN THE HIGH COURT OF ORISSA, CUTTACK
W.P.(C) No.20160 of 2019
The Sr. Branch Manager, the
National Small Industries
Corporation Ltd., Bhubaneswar
and another ....... Petitioners
-Versus-
The Deputy Chief Labour
Commissioner (Central),
Bhubaneswar-cum-the
Appellate Authority and
others ....... Opp. Parties
For Petitioners : Mr. P.K. Jena,
Advocate
For Opp. Party No.3 : Mr. R.D. Sarkar,
Advocate
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CORAM: JUSTICE SANJAY KUMAR MISHRA
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Date of Hearing: 20.12.2023 Date of Judgment: 15.03.2024
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S.K. Mishra, J. The Writ Petition has been preferred by the Employer-
Corporation challenging the Order dated 12.11.2018 passed by
the Controlling Authority-cum-Assistant Labour Commissioner
(C), Bhubaneswar under Payment of Gratuity Act, 1972 (shortly,
"P.G. Act" 1972) in Application Case No.36(03)/2018-B.III
(Annexure-2). Vide the said order a direction was given to the
Petitioners-Employer to pay the Opposite Party No.3 an amount of
Rs.10,00,000/- along with simple interest @ 10% per annum for
the period from 01.12.2016 till the date of payment. The said
order being confirmed by the Order dated 26.09.2019 (Annexure-
1) passed by the Appellate Authority under the P.G. Act, 1972 &
Deputy Chief Labour Commissioner (Central), Bhubaneswar, is
also under challenge.
2. The background facts, as detailed in the Writ Petition,
are that the Opposite Party No.3 joined on 10.03.1981 as Lower
Division Clerk (LDC) in the National Small Industries Corporation
Ltd. at the Sub-Office, Patna, in the State of Bihar under the
control of Regional Office, Kolkata of the Corporation. Thereafter,
he was promoted from time to time. At the time of retirement, he
was working as Manager, Sub-Branch, Balasore. On attaining
the age of superannuation, the Opposite Party No.3 was
superannuated from service w.e.f. 30.11.2016.
3. While working as Manager in the Sub-Branch of the
Corporation at Bhubaneswar, just before his retirement, a
disciplinary proceeding was contemplated against the Opposite
Party No.3 by the Zonal General Manager (East) vide Order dated
W.P.(C) No.20160 of 2019 Page 2 of 79
24.08.2016. The Opposite Party No.3 was placed under
suspension with immediate effect in terms of rule 4 of National
Small Industries Corporation Limited (Control and Appeal Rules,
1968), shortly, "NSIC Ltd (C & A Rules, 1968)". On 24.11.2016,
by order of the Disciplinary Authority i.e. the ZGM-SG (East), it
was proposed to hold an enquiry against the Opposite Party No.3
under rule 8 of the NSIC Ltd (C & A Rules, 1968). The Opposite
Party No.3 was directed to submit his written statement of
defence so also to state as to whether he desires to be heard in
person.
4. In response to the said charge-sheet, the Opposite Party
No.3, by submitting his statement of defence dated 03.04.2017,
denied the charges. Thereafter, the Disciplinary Authority, vide
Order dated 12.09.2017, in exercise of power conferred under
sub-rule (2) of rule 9 of the NSIC Ltd (C & A Rules, 1968),
appointed an Enquiry Officer to enquire into the charges framed
against the Opposite Party No.3.
5. In spite of several intimation and service of notices, the
Opposite Party No.3 did not cooperate in the said enquiry.
Rather, he sent letters dated 13.12.2017 and 23.07.2017 to the
Inquiry Officer indicating therein that he being a retired
W.P.(C) No.20160 of 2019 Page 3 of 79
employee of the Corporation cannot be proceeded against and the
place of inquiry at New Delhi is against his wishes. In response
to the said communication made by the Opposite Party No.3, the
Inquiry Officer, vide Order dated 29.12.2017, recorded that rule
3 (3) of the NSIC Ltd (C & A Rules, 1968) is very clear on the
subject as well as the rules and Policy of NSIC with regard to
travel, lodging and boarding expenses and the charged employee
intentionally and deliberately, showing ignorance of the same,
writing so with the sole intention to delay the inquiry proceeding
for indefinite period. In absence of the Opposite Party No.3, for
his deliberate non-cooperation, the inquiry was proceeded ex-
parte and finally, the same was concluded.
6. The Inquiry Officer submitted his report dated
20.02.2018 to the Disciplinary Authority with the finding that
the charges laid down in Article of Charges I to VII are well
proved against the Opposite Party No.3. The copy of the Inquiry
Report was sent to the Opposite Party No.3 vide letter dated
20.02.2018 by the Disciplinary Authority providing him with an
opportunity to submit his response to the said findings of the
Inquiry Officer's Report, if any, within a period of fifteen days
from the date of receipt of the said Report. The Opposite Party
W.P.(C) No.20160 of 2019 Page 4 of 79
No.3 duly received the copy of the said Report and chose not to
submit any response to the findings given by the Inquiry Officer,
though various letters were sent by him opposing to the place of
enquiry, jurisdiction of NSIC, etc.
7. The Disciplinary Authority dealt with the points raised
by the Opposite Party No.3 and was finally convinced that the
inquiry was conducted as per the prescribed procedure. The
charges being grave and serious in nature, putting investment of
the Corporation at greater risk, it was held that the Opposite
Party No.3 is liable for major penalty. Accordingly, it was ordered
to dismiss him from service w.e.f. 30.11.2016 i.e. the date of his
superannuation and to forfeit his retiral dues i.e. gratuity and
encashment of leave. In the said Order, the Disciplinary
Authority made it clear that the Appellate Authority in the said
case would be the Board of Directors.
8. It is further case of the Petitioners-Corporation that in
course of service of Opposite Party No.3 as Manager (B.D.) in the
Branch Office of the Corporation at Salt Lake, Kolkata, regarding
involvement in financial irregularities, FIR was lodged in Bidhan
Nagar P.S. Case No.161/16 dated 26.07.2016 under sections
420/ 406/408/409/467/468 and 120-B of the IPC. Upon
W.P.(C) No.20160 of 2019 Page 5 of 79
investigation, charge sheet was submitted by the CID, West
Bengal, on 28.04.2018 against the Opposite Party No.3 and
others, who are facing criminal charges in the Special Court of
Additional District Judge, Barasat, in Case No.157 of 2018. In
the said case, the Opposite Party No.3 was arrested and
subsequently released on bail.
9. Thereafter, he approached the High Court of West
Bengal at Kolkata in W.P.(C) No.25663 of 2017 assailing the
initiation of disciplinary proceeding at New Delhi. However, the
Kolkata High Court not being inclined to entertain such
Application, the Opposite Party No.3 did not press the Writ
Petition and withdrew the case on 15.02.2018 with liberty to file
the case before the appropriate forum.
10. Thereafter, the Opposite Party No.3 approached the
Central Administrative Tribunal, Kolkata Bench vide O.A.
No.382/2018, which was filed on 19.03.2018, challenging the
legality of the disciplinary proceeding initiated against him.
Ultimately, the Tribunal, vide Order dated 13.06.2019, disposed
of the case by observing that no statutory Appeal has been
preferred against the penalty imposed by the Disciplinary
Authority. Accordingly, the Opposite Party No.3 was given liberty
W.P.(C) No.20160 of 2019 Page 6 of 79
to approach the Appellate Authority within four weeks from the
date of receipt of the copy of the said Order, with a further
direction to dispose of the said Appeal within a period of four
weeks from the date of receipt of the said Order dated
13.06.2019. Liberty being so granted by the Tribunal, the
Opposite Party No.3 preferred an Appeal before the Appellate
Authority i.e. Board of NSIC, which is still pending for disposal.
11. When the matter stood thus, the Opposite Party No.3
approached the Controlling Authority under Payment of Gratuity
Act, 1972 (present Opposite Party No.2) praying for release of the
gratuity in his favour. The Petitioners-Corporation, being noticed,
resisted the said prayer contending that the services of the
Opposite Party No.3 were terminated for his involvement in
financial irregularities amounting to Rs.173.50 crores. Hence,
the Order of forfeiting gratuity by the Employer is justified. It was
also contended before the Controlling Authority that when the
matter regarding initiation of proceeding is pending before the
Tribunal, any order passed by the Opposite Party No.2
(Controlling Authority) would lead to multiplicity of proceeding.
Upon consideration of the materials on record and hearing the
Parties, the Controlling Authority-Cum-Assistant Labour
W.P.(C) No.20160 of 2019 Page 7 of 79
Commissioner, Bhubaneswar, vide Order dated 12.11.2018
directed the Petitioners-Corporation to pay Rs.10.00 lacs with
simple interest @ 10% per annum over the principal gratuity
amount for the period from 01.12.2016 till the date of payment
with a further direction to pay the said amount within a period of
30 days from the date of receipt of the said Order.
12. Being aggrieved by the said order dated 12.11.2018
passed by the Opposite Party No.2, the Petitioners-Corporation
preferred P.G. Appeal No.36 (431)/2018-B.I. before the Opposite
Party No.1. However, without application of mind to the facts and
law involved in the case, the Opposite Party No.1 confirmed the
order of the Opposite Party No.2 vide its Order dated 26.09.2019.
Hence, this Writ Petition.
13. The Order passed by the Controlling Authority so also
confirming Order passed by the Appellate Authority have been
challenged basically on the following grounds:
i) The Petitioners-Corporation was justified to
forfeit the gratuity of the Opposite Party No.3 as
the Inquiry Officer submitted a report regarding
fraud of Rs.173.50 Crores committed by the
W.P.(C) No.20160 of 2019 Page 8 of 79
accused persons, including the present Opposite
Party No.3.
ii) The Opposite Party No.3 was very much in
service while he was put under suspension on
the allegation of financial irregularities. Only
after service of charge sheet upon him on
24.11.2016, the Opposite Party No.3 was
superannuated on 30.11.2016. In terms of rule
3(3) of the NSIC Ltd (C & A Rules, 1968), it will
be deemed that the Opposite Party No.3
continued in service and the proceeding, which
was instituted before his retirement, is allowed
to be continued and concluded by the Authority
after his retirement. So, the finding of the
Authority under the P.G. Act, 1972 that such
proceeding is technically not correct is
untenable/ unsustainable in the eye of law.
iii) The Controlling Authority, so also Appellate
Authority under the P.G. Act, 1972 have failed
to appreciate that in course of departmental
inquiry, several opportunities were provided to
W.P.(C) No.20160 of 2019 Page 9 of 79
the Opposite Party No.3 in order to defend
himself. However, he chose not to participate in
the said proceeding and was set ex-parte.
Hence, the Disciplinary Authority has passed
the Order rightly with regard to forfeiture of
gratuity of the Opposite Party No.3.
iv) During pendency of the Appeal preferred by the
Opposite Party No.3 before the Board of
Directors, the impugned Orders have been
passed without waiting for the outcome of the
said Appeal, despite bringing the said fact to the
notice of the Authorities under the P.G. Act,
1972.
v) The findings of the Opposite Parties about non-
service of notice under the P.G. Act, 1972 on the
issue of forfeiture of gratuity of Opposite Party
No.3 is not sustainable in view of the settled
position of law that technicality should not
stand as a bar against dispensation of justice.
Since the Opposite Party No.3 was given ample
opportunity to safeguard his interest before the
W.P.(C) No.20160 of 2019 Page 10 of 79
Enquiry Officer on the allegation of huge
financial irregularities, which culminated in the
termination of the services so also forfeiture of
gratuity of the Opposite Party No.3, the Opposite
Party Nos.1 and 2 are not justified in passing
the said impugned Orders.
vi) The view taken by the Appellate Authority under
the Act, 1972 that after retirement, the
Employer and employee relationship no more
existed is incorrect in view of rule 3(3) of the
NSIC Ltd. (C & A Rules, 1968) and the Opposite
Party No.3 was deemed to have continued in
service in view of the initiation of the
departmental proceeding during his service
tenure.
vii) The Opposite Party No.1 has misinterpreted the
provision of section 14 of the P.G. Act, 1972,
which categorically provides that the provision
of the Act or any Rules made there under shall
have effect notwithstanding anything
inconsistent therewith, contained in any
W.P.(C) No.20160 of 2019 Page 11 of 79
enactment other than the Act or any instrument
or contract having effect by virtue of any
enactment other than the Act.
viii) Even though it was not possible to exactly
quantify the amount of loss sustained by the
Corporation for the negligence of the Opposite
Party No.3, he may not be absolved from the
charges on the ground that the criminal trial
has not been concluded. Hence, the Opposite
Party Nos. 1 and 2 should not have passed the
Orders for release of gratuity of an amount of
Rs.10,00,000/- with interest and the impugned
Orders are unjustified and irrational.
14. Opposing to the prayer made in the Writ Petition, an
affidavit-in-opposition has been filed by the Opposite Party
No.3 stating therein that there is no infirmity in the impugned
order dated 26th September, 2019 passed by the Appellate
Authority in P.G. Appeal Case No.36(431)/2018-B.1 so also
the Order dated 12th November, 2018 passed by the
Controlling Authority in Application Case No.36(03)/2018-
B.III. Apart from that, it has been stated in the said Affidavit
W.P.(C) No.20160 of 2019 Page 12 of 79
that in absence of conviction of the employee for an offence
involving moral turpitude, a strict application of the said
provision of the Act, 1972 does not disentitle the employee to
receive gratuity amount. In the present case, the Employer
held up the payment of gratuity in anticipation of the
conviction likely to be awarded by the Special Criminal Court,
which may lead to forfeiture of gratuity amount. It has further
been averred in the said Affidavit that mere termination or
dismissal of an employee concerned would not ipso facto
constitute an offence involving moral turpitude to attract
section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972 and an
Employer would have no jurisdiction to invoke the said
provision to forfeit gratuity of an employee under the said Act,
1972. It has been further pleaded that no Show Cause for
forfeiture of gratuity was issued at any point of time. Since
the Opposite Party No.3 retired w.e.f. 30.11.2016 on attaining
the age of superannuation, the relationship between the
Employer and employee ceased from that date. Therefore,
such act of Petitioners amount to violation of principles of
natural justice.
W.P.(C) No.20160 of 2019 Page 13 of 79
15. Mr. Jena, learned Counsel for the Petitioners, reiterating
the stand taken in the Writ Petition submitted, sub-section 6 of
section 4 of P.G. Act, 1972 clearly provides for forfeiture of
gratuity of an employee, whose services have been terminated for
willful omission or negligence causing damage/loss or
destruction of property belonging to the Employer to the extent of
damage or loss so caused. He further submitted that during the
course of enquiry, huge financial irregularity of Rs.173.50 crores
was found to have been committed by the accused persons,
including the Opposite Party No.3, to whom sufficient opportunity
was given in order to defend his case. In spite of receiving notice
and submission of reply, the Opposite Party No.-3 did not
participate in the said proceeding for which he was rightly set ex-
parte by the Inquiry Officer. He did not even prefer to submit any
representation to the Disciplinary Authority after receiving the
copy of the inquiry report, as a result of which the order of
dismissal was passed vide which his gratuity as well as other
after retiral dues were forfeited. Hence, it cannot be said that the
Disciplinary Authority has passed the order in violation of
principles of natural justice.
W.P.(C) No.20160 of 2019 Page 14 of 79
16. Mr. Jena further submitted, as per rule 3 (3) of Rules,
1968, since the Disciplinary Proceeding was instituted before his
retirement, the Opposite Party No.3 is deemed to have continued
in service and his dismissal from service and forfeiture of gratuity
is justified. He further submitted that the Disciplinary Authority
is competent to forfeit the Gratuity of Opposite Party No.3, who
was provided opportunity by issuance of notice to participate in
the departmental proceeding. Since the provisions under Rules,
1968 are not inconsistent with the provisions of P.G. Act and
Rules made there under, no separate notice was required to be
issued to Opposite Party No.3. He further submitted that both
the Authorities under the Act, 1972 have failed to appreciate that
when the order of dismissal and forfeiture of gratuity was passed
by the Disciplinary Authority, the Opposite Party No.3 was
informed that the Appellate Authority would be the Board of
Directors. But the Opposite Party No.3 choose not to prefer any
appeal in time. Rather, he challenged the order of the
Disciplinary Authority before the Central Administrative Tribunal,
which was not inclined to entertain the application, though
liberty was given to him to approach the Appellate Authority of
the Corporation vide order dated 13.06.2019. Though the
W.P.(C) No.20160 of 2019 Page 15 of 79
Opposite Party No.3 preferred an appeal against his termination
and forfeiture of gratuity before the Board of Directors, NSIC,
during pendency of the said Appeal, the Opposite Party No.1,
without waiting for the outcome of the said Appeal, has passed
the impugned order under Annexure-1, which is bad in the eye of
law and deserves interference.
17. Mr. Jena further submitted that finding of the Opposite
Party No.1 that after retirement, the Employer and employee
relationship no more existed is incorrect in view of rule 3(3) of the
Rules, 1968. The Opp. Party No.3 was deemed to be continuing in
service in view of the initiation of the disciplinary proceeding
during his service-tenure. He further submitted that Opposite
Part No.1 has misinterpreted the Provision of section 14 of the
P.G. Act, 1972.
18. Mr. Jena submitted that the Opposite Party Nos.1 and 2
have failed to appreciate that a criminal case has already been
instituted during the service tenure of the Opposite Party No.3
and charge sheet has been submitted on 28.04.2018 before the
trial Court against the Opposite Party No.3 and others and in the
disciplinary proceeding, financial irregularities amounting to
Rs.173.50 Crores was recorded. He further submitted that both
W.P.(C) No.20160 of 2019 Page 16 of 79
the authorities have failed to appreciate that it is not possible to
exactly quantify the amount of loss sustained by the Corporation
for the negligence of the Opposite Party No.3 at this stage and on
that ground he cannot be absolved from the charges, as the
criminal trial is yet to be concluded. Therefore, the Opposite Party
Nos.1 and 2 should not have passed orders for release of gratuity
amount of Rs.10,00,000/- with interest.
19. Relying on Judgments of the apex Court in Chairman-
cum-Managing Director, Mahanadi Coalfields Limited vs.
Rabindranath Choubey, reported in AIR 2020 SC 2978, Mr.
Jena submitted that since the impugned orders have been
passed by the Controlling Authority so also the Appellate
Authority relying on the judgment passed by the apex Court in
Jaswant Singh Gill vs. Bharat Cooking Co. Ltd., reported in
(2007) 1 SCC 663, which has been over ruled by the apex Court
in Rabindranath Choubey (supra), both the said impugned
orders/judgments deserve to be set aside.
20. Though no such stand has been taken in the writ
petition, Mr. Jena further submitted that even though there is no
such finding given by the Inquiry Officer, in view of the judgment
of the apex Court in Allahabad bank and others Vs. Deepak
W.P.(C) No.20160 of 2019 Page 17 of 79
Kumar Bhola, reported in (1997) 4 SCC 1, the misconducts,
which have been proved against the Opposite Party No.3, amount
to moral turpitude. Hence, the Petitioners-Employer was also
justified to impose the punishment of forfeiture of gratuity of the
Opposite Party No.3.
21. Apart from reiterating the facts detailed in the
Counter Affidavit, vide which most of the averments made in
the Writ Petition have been denied, Mr. Sarkar, learned
Counsel for Opposite Party No.3 submitted that in view of the
settled position of law, so also pleadings and evidences on
record, taking into account his total period of service, the
Appellate Authority was justified in upholding the order of the
Controlling Authority, wherein a direction was given to the
Opposite Party/Employer (Petitioners herein) to pay the
gratuity amount of Rs.10,00,000/- and also simple interest
thereon @ 10% per annum for the period from 01.12.2016 till
the date of actual payment. He further submitted that the
Controlling Authority, while passing the order, has rightly
observed that though there was certain fraudulent activity
where the Officers of United Bank of India (UBI), Hazra
Branch and Jadavpur Vidyapith Branch issued two bank
W.P.(C) No.20160 of 2019 Page 18 of 79
guarantees on the same number against the rules and the
bank officials were arrested, nothing has been recovered from
Opposite Party No.3. Hence, the question of wrongful gain and
wilful loss, as alleged, does not arise. Therefore, no offence
can be attributed to the Opposite Party No.3, thereby forfeiting
his gratuity by way of punishment.
22. Mr. Sarkar further submitted that mere termination
or dismissal of an employee concerned would not ipso facto
constitute an offence involving moral turpitude to attract
section 4(6)(b)(ii) of the Act, 1972, without any finding or
observation made to the said effect and the Petitioners-
Employer has no jurisdiction to invoke the said provision to
forfeit the gratuity of his client under the Payment of Gratuity
Act, 1972.
To counter the submission made by the learned
Counsel for the Petitioners as to applicability of the judgment
of the apex Court in Rabindranath Choubey (supra), Mr.
Sarkar submitted that the facts and circumstances of the said
case is different from the present case. That apart, the said
Judgment has been delivered after the impugned orders were
delivered by the Controlling Authority as well as the Appellate
W.P.(C) No.20160 of 2019 Page 19 of 79
Authority under the Act, 1972 and hence, will have
prospective effect.
Mr. Sarkar further submitted that though in
Rabindranath Choubey (supra) it was held that the Employer
has a right to withhold the gratuity during pendency of the
disciplinary proceeding, but no where it has been held or
observed vide the said Judgment that gratuity can be forfeited
without any notice, that to by way of punishment, in absence
of any rules to the said effect to impose such punishment.
Mr. Sarkar also submitted, though the
Administrative Tribunal gave a direction to deal with and
dispose of the Appeal of the Opposite Party No.3 within a
period of four month from the date of receipt of the order
dated 13.06.2019, but the same was intentionally kept
pending to debar the Opposite Party No.3 from getting the
gratuity and to take a plea before the Authority concerned as
to pendency of the said Appeal before the Appellate Authority
i.e. Board of Directors. Relying on the order dated 17.01.2020,
which has been filed by the Opposite Party No.3 along with his
written notes, Mr. Jena submitted, the Appeal was rejected
much after the period as directed by the Administrative
W.P.(C) No.20160 of 2019 Page 20 of 79
Tribunal during pendency of the present Writ Petition. Even
though there is no such provision under rule 5 of the NSIC
Ltd.(C & A Rules, 1968) to impose the punishment of
forfeiture of gratuity and the Appellate Authority could have
dealt with the said issue while dealing with the Appeal of the
Opposite Party No.3, but have left the said issue unattended
on the plea of pendency of the present Writ Petition.
23. To substantiate his submission, Mr. Sarkar relied on
Judgments of the apex Court in Union Bank of India and
others vs. C.G. Ajay Babu and others, reported in (2018) 9
SCC 529, in Jaswant Singh Gill vs. Bharat Cooking Coal
Ltd. and others, reported in (2007) 1 SCC 663, D.V. Kappor
vs. Union of India and others, reported in (1990) 4 SCC 314
and in H. Gangahanume Gowda vs. Karnataka Agro
Industries Corpn. Ltd., reported in (2003) 3 SCC 40. He also
relied on the Judgment of the High Court of Karnataka in
Karnataka State Road Transport Corporation and another
vs. Mahadev and others, reported in 2009 III LLJ 90 Kant
and Judgment of the High Court of Judicature at Bombay in
The Chairman and Managing Director, Bank of
W.P.(C) No.20160 of 2019 Page 21 of 79
Maharashtra and others vs. Shri Kishore and others,
passed in W.P.(C) No.1572 of 2022 on 19.08.2022.
24. So far as the judgments cited by the learned Counsel
for the Petitioners, in Rabindranath Choubey (supra) the
apex Court, vide paragraphs-9, 9.2, 10.21, 10.30, 11 and 28
held as follows:
"9. Once it is held that a major penalty which
includes the dismissal from service can be imposed,
even after the employee has attained the age of
superannuation and/or was permitted to retire
on attaining the age of superannuation,
provided the disciplinary proceedings were
initiated while the employee was in service,
sub-section 6 of Section 4 of the Payment of
Gratuity Act shall be attracted and the amount
of gratuity can be withheld till the disciplinary
proceedings are concluded.
9.2 It is required to be noted that in the present
case the disciplinary proceedings were initiated
against the respondent- employee for very serious
allegations of misconduct alleging dishonestly causing
coal stock shortages amounting to Rs.31.65 crores
and thereby causing substantial loss to the employer.
Therefore, if such a charge is proved and
punishment of dismissal is given thereon, the
provisions of sub-section 6 of Section 4 of the
Payment of Gratuity Act would be attracted and
it would be within the discretion of the
appellant-employer to forfeit the gratuity
payable to the respondent. Therefore, the
appellant- employer has a right to withhold the
payment of gratuity during the pendency of the
disciplinary proceedings.
10.21 In view of the various decisions of this Court
and considering the provisions in rules in question, it
is apparent that the punishment which is
prescribed under Rule 27 of the CDA Rules,
minor as well as major, both can be imposed.
Apart from that, recovery can also be made of
W.P.(C) No.20160 of 2019 Page 22 of 79
the pecuniary loss caused as provided in Rule
34.3 of the CDA Rules, which takes care of the
provision under sub-section (6) of Section 4 of the
Payment of Gratuity Act, 1972. The recovery is
in addition to a punishment that can be imposed
after attaining the age of superannuation. The
legal fiction provided in Rules 34.2 of the CDA
Rules of deemed continuation in service has to
be given full effect.
10.30 In view of the various decisions, it is
apparent that under Rule 34.2 of the CDA Rules
inquiry can be held in the same manner as if the
employee had continued in service and the
appropriate major and minor punishment
commensurate to guilt can be imposed including
dismissal as provided in Rule 27 of the CDA Rules
and apart from that in case pecuniary loss had
been caused that can be recovered. Gratuity can
be forfeited wholly or partially.
11. In view of the above and for the reasons
stated above and in view of the decision of three
Judge Bench of this Court in Ram Lal Bhaskar (supra)
and our conclusions as above, it is observed and held
that (1) the appellant - employer has a right to
withhold the gratuity during the pendency of the
disciplinary proceedings, and (2) the
disciplinary authority has powers to impose the
penalty of dismissal/major penalty upon the
respondent even after his attaining the age of
superannuation, as the disciplinary proceedings
were initiated while the employee was in service.
Under the circumstances, the impugned judgment
and order passed by the High Court cannot be
sustained and the same deserves to be quashed and
set aside and is accordingly hereby quashed and set
aside and the order passed by the Controlling
Authority is hereby restored. However, the
appellant-employer is hereby directed to conclude the
disciplinary proceedings at the earliest and within a
period of four months from today and pass
appropriate order in accordance with law and on
merits and thereafter necessary consequences as
per Section 4 of the Payment of Gratuity Act,
1972, more particularly sub-section (6) of
Section 4 of the Gratuity Act and Rule 34.3 of
the CDA Rules shall follow. The present appeal is
W.P.(C) No.20160 of 2019 Page 23 of 79
accordingly allowed. However, in the facts and
circumstances of the case, there shall be no order as
to costs.
28. Thus, according to me, where the disciplinary
proceedings are instituted while the employee was in
service but retired thereafter during its pendency,
under the special procedure provided under Rule 34.2
of the Rules, 1978 the authority is empowered to
continue and conclude the disciplinary inquiry in the
same manner as if the employee had continued in
service by deeming fiction, however, the
relationship of employer and employee shall not
be severed until conclusion of the disciplinary
enquiry but may withhold payment of gratuity in
terms of Rule 34.3 pending disciplinary inquiry
and in furtherance thereof if later held guilty,
the competent authority to the extent pecuniary
loss has been caused for the misconduct,
negligence in the discharge of duties order for
recovery from gratuity either be forfeited in the
whole or in part, to the extent pecuniary loss
has been caused to the company for the
offences/misconduct as a measure of penalty in
terms of Rule 34.3 of the Rules read with
sub-section (6) of Section 4 of the Act, 1972."
(Emphasis supplied)
25. In Jaswant Singh Gill (supra) which was partially
overruled in Rabindranath Choubey (supra) the apex Court,
vide paragraphs-7 and 10 to 14, held as follows:
"7. The short question which arises for
consideration in this appeal is as to whether the
provisions of the said Act shall prevail over the rules
framed by Coal India Limited, holding company of
Respondent No. 1, known as Coal India Executives'
Conduct Discipline and Appeal Rules, 1978 (for short
"the Rules"). Indisputably, the appellant was governed
by the Rules. Rule 27 provides for the nature of
penalties including 'recovering from pay or gratuity of
the whole of or part of any pecuniary loss caused to
the company by negligence or breach of orders or
W.P.(C) No.20160 of 2019 Page 24 of 79
trust'. Major penalties prescribed in Rule 27, however,
include reduction to a lower grade, compulsory
retirement, removal from service; and dismissal. Rule
34 provides for special procedure in certain cases
stating:
"34.2 Disciplinary proceeding, if instituted
while the employee was in service whether
before his retirement or during his re-
employment shall, after the final retirement
of the employee, be deemed to be
proceeding and shall be continued and
concluded by the authority by which it was
commenced in the same manner as if the
employee had continued in service.
34.3 During the pendency of the
disciplinary proceedings, the Disciplinary
Authority may withhold payment of
gratuity, for ordering the recovery from
gratuity of the whole or part of any
pecuniary loss caused to the company if
have been guilty of offences/ misconduct as
mentioned in Sub-section (6) of Section 4 of
the Payment of Gratuity Act, 1972 or to
have caused pecuniary loss to the company
by misconduct or negligence, during his
service including service rendered on
deputation or on re-employment after
retirement. However, the provisions of
Section 7(3) and 7(3A) of the Payment of
Gratuity Act, 1972 should be kept in view in
the event of delayed payment, in the case
the employee is fully exonerated."
10. The provisions of the Act, therefore, must
prevail over the Rules. Rule 27 of the Rules
provides for recovery from gratuity only to the
extent of loss caused to the company by
negligence or breach of orders or trust.
Penalties, however, must be imposed so long an
employee remains in service. Even if a
disciplinary proceeding was initiated prior to
the attaining of the age of superannuation, in
the event, the employee retires from service, the
question of imposing a major penalty by removal
or dismissal from service would not arise. Rule
34.2 no doubt provides for continuation of a
disciplinary proceeding despite retirement of
W.P.(C) No.20160 of 2019 Page 25 of 79
employee if the same was initiated before his
retirement but the same would not mean that
although he was permitted to retire and his
services had not been extended for the said
purpose, a major penalty in terms of Rule 27 can
be imposed.
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.
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 No. 1 or its holding
company are not statutory in nature. The Rules in any
event do not provide for withholding of retrial benefits
or gratuity.
13. The Act provides for a closely neat 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-a-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, willful
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 No. 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
W.P.(C) No.20160 of 2019 Page 26 of 79
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 supplied)
26. In Allahabad Bank (supra) the apex Court, vide
paragraphs-8 & 9, held as follows:
"8. What is an offence involving "moral turpitude"
must depend upon the facts of each case. But
whatever may be the meaning which may be given to
the term "moral turpitude" it appears to us that one of
the most serious offences involving "moral turpitude"
would be where a person employed in a banking
company dealing with money of the general public,
commits forgery and wrongfully withdraws money
which he is not entitled to withdraw.
9. This Court in Pawan Kumar vs. State of
Haryana and another. (1996) 4 SCC 17 dealt with the
question as to what is the meaning of expression
"moral turpitude" and it was observed as follows:
"Moral turpitude" is an expression
which is used in legal as also societal
parlance to describe conduct which is
inherently base, vile, depraved or
having any connection showing
depravity".
This expression has been more elaborately
explained in Baleshwar Singh vs. District Magistrate
and Collector, Banaras, AIR 1959 all. 71 where it was
observed as follows:
"The expression "moral turpitude' is not
defined anywhere. But it means
anything done contrary to justice,
honesty, modesty or good morals. It
implies depravity and weakness of
W.P.(C) No.20160 of 2019 Page 27 of 79
character or disposition of the person
charged with the particular conduct.
Every false statement made by a
person may not be moral turpitude, but
it would be so if it discloses vileness or
depravity in the doing of any private
and social duty which a person owes
to his fellowmen or to the society in
general. If therefore the individual
charged with a certain conduct owes a
duty, either to another individual or to
the society in general, to act in a
specific manner or not to so act and he
still acts contrary to it and does so
knowingly, his conduct must be held to
be due to vileness and depravity. It will
be contrary to accepted customary rule
and duty between man and man"
27. So far as the judgment cited by the learned Counsel
for the Opposite Party No.3 in Union Bank of India (Supra),
the apex Court, vide Paragraph Nos.17 to 21, held as follows:
"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.
W.P.(C) No.20160 of 2019 Page 28 of 79
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.
18. In Jaswant Singh Gill v. Bharat Coking Coal
Ltd. [Jaswant Singh Gill v. Bharat Coking Coal Ltd.,
(2007) 1 SCC 663 : (2007) 1 SCC (L&S) 584] , it has
been held by this Court that forfeiture of gratuity either
wholly or partially is permissible under sub-section
(6)(b)(ii) only in the event that the termination is on
account of riotous or disorderly conduct or any other
act of violence or on account of an act constituting an
offence involving moral turpitude when he is convicted.
To quote para 13: (SCC p. 670)
xxx xxx xxx
"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
damage or loss caused to Respondent 1 was
more than the amount of gratuity payable to
the appellant. Clause (b) of sub-section (6) of
W.P.(C) No.20160 of 2019 Page 29 of 79
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."
19. In the present case, there is no conviction
of the respondent for the misconduct which
according to the Bank is an offence involving
moral turpitude. Hence, there is no justification
for the forfeiture of gratuity on the ground stated
in the order dated 20-4-2004 that the
"misconduct proved against you amounts to acts
involving moral turpitude". At the risk of
redundancy, we may state that the requirement
of the statute is not the proof of misconduct of
acts involving moral turpitude but the acts
should constitute an offence involving moral
turpitude and such offence should be duly
established in a court of law.
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. Therefore,
the appellant cannot take recourse to its own Rules,
ignoring the Act, for denying gratuity.
21. To sum up, forfeiture of gratuity is not
automatic on dismissal from service; it is subject
to sub-sections (5) and (6) of Section 4 of the
Payment of Gratuity Act, 1972."
(Emphasis supplied)
28. In D.V. Kappor vs. Union of India and (supra) the
apex Court, vide paragraph-10 held as follows:
"10. Rule 9 of the rules empowers the President
only to with- hold or withdraw pension permanently
or for a specified period in whole or in part or to order
recovery of pecuniary loss caused to the State in
whole or in part subject to minimum. The employee's
right to pension is a statutory fight. The measure of
W.P.(C) No.20160 of 2019 Page 30 of 79
deprivation therefore, must be correlative to or
commensurate with the gravity of the grave
misconduct or irregularity as it offends the right to
assistance at the evening of his life as assured under
Art. 41 of the Constitution. The impugned 'order
discloses that the President withheld on
permanent basis the payment of gratuity in
addition to pension. The fight to gratuity is also
a statutory right. The appellant was not
charged with nor was given an opportunity that
his gratuity would be withheld as a measure of
punishment. No provision of law has been brought to
our notice under which, the President is empowered to
withhold gratuity as well, after his retirement as a
measure of punishment. Therefore, the order to
withhold the gratuity as a measure of penalty is
obviously illegal and is devoid of jurisdiction."
(Emphasis supplied)
29. In H. Gangahanume Gowda (supra) the apex Court,
vide paragraph-9, held as follows:
"9. It is clear from what is extracted above from
the order of learned Single Judge that interest on
delayed payment of gratuity was denied only on the
ground that there was doubt whether the appellant
was entitled to gratuity, cash equivalent to leave etc.,
in view of divergent opinion of the courts during the
pendency of enquiry. The learned Single Judge having
held that the appellant was entitled for payment of
gratuity was not right in denying the interest on the
delayed payment of gratuity having due regard to
Section 7(3A) of the Act. It was not the case of the
respondent that the delay in the payment of
gratuity was due to the fault of the employee
and that it had obtained permission in writing
from the controlling authority for the delayed
payment on that ground. As noticed above, there is
a clear mandate in the provisions of Section 7 to the
employer for payment of gratuity within time and to
pay interest on the delayed payment of gratuity.
There is also provision to recover the amount of
gratuity with compound interest in case amount of
W.P.(C) No.20160 of 2019 Page 31 of 79
gratuity payable was not paid by the employer in
terms of Section 8 of the Act. Since the employer did
not satisfy the mandatory requirements of the
proviso to Section 7(3A), no discretion was left to
deny the interest to the appellant on belated
payment of gratuity. Unfortunately, the Division
Bench of the High Court, having found that the
appellant was entitled for interest, declined to
interfere with the order of the learned Single Judge as
regards the claim of interest on delayed payment of
gratuity only on the ground that the discretion
exercised by the learned Single Judge could not be
said to be arbitrary. In the first place in the light of
what is stated above, the learned Single Judge could
not refuse the grant of interest exercising discretion as
against the mandatory provisions contained in Section
7 of the Act. The Division Bench, in our opinion,
committed an error in assuming that the learned
Single Judge could exercise the discretion in the
matter of awarding interest and that such a discretion
exercised was not arbitrary."
(Emphasis supplied)
30. In Karnataka State Road Transport Corporation
(supra) the Karnataka High Court, vide paragraphs-3, 4 & 5,
held as follows:
"3. A bare reading of the aforesaid provision of
the Act discloses that the full amount of Gratuity can
be forfeited, in the event the employee is convicted for
an offence involving moral turpitude. In the absence
of a conviction, of the respondent for an offence
involving moral turpitude, a strict application
for the said provision of the Act does not
disentitle, the respondent to receive gratuity
amount, and the petitioner was not justified in
denying the gratuity to the respondent.
4. The observation of the Apex Court in
JASWANT SING GILL -VS- BHARAT COOKING COAL
LOTD & OTHERS reported in (2007) 1 SCC 663 while
interpreting Sec.4(6)(b)(ii) of the Act in the
circumstances is apposite:
W.P.(C) No.20160 of 2019 Page 32 of 79
"The Act provides for close-knit scheme
providing for payment of gratuity. It is
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 rights 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,
willful 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 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."
(emphasis supplied)
5. In the light of the aforesaid observations, an
exception can be taken to the orders impugned of the
controlling authority and the appellate authority,
holding that the petitioner is liable to make payment
of the entire sum of gratuity due and payable to the
respondent under the Act."
(Emphasis supplied)
W.P.(C) No.20160 of 2019 Page 33 of 79
31. In Chairman and Managing Director (supra) the
Bombay High Court, vide paragraphs-30 & 31, held as
follows:
"30. This Court is of the opinion that an
employer cannot simply issue notice in Form-M
to the employee rejecting claim for payment of
gratuity. This has to be preceded by a show
cause notice, because the gratuity amount to
which the employee is otherwise entitled is to be
forfeited, which is a drastic consequence for the
employee. Such a notice would enumerate the basis
and extent of financial loss as claimed by the
petitioner- employer, due to the alleged willful
omission or negligence of the employee. An
opportunity would also be available for the employee
to contest the same, ensuring fairness of procedure. In
the present case, admittedly show cause notice was
not issued to the respondent No.1 before the said
notice rejecting claim for payment of gratuity was
directly issued to him under Form-M on 06/10/2012.
The reason stated by the petitioner-employer in the
said notice for forfeiting gratuity reads as follows:
"Reasons: - There is a loss to the Bank to
the extent of Rs.69.72 lacs plus unapplied
interest thereon on account of your
misconduct."
31. The said reason is not only cryptic, but there
are no details as to on what basis, the petitioner-
employer concluded that the respondent No.1 was
responsible for loss to the extent of Rs.69.72 Lakhs
plus unapplied interest thereon. The manner in which
the petitioner-employer proceeded is clearly arbitrary,
apart from being violative of the principles of natural
justice. The petitioner-employer is not justified in
referring to and relying upon the enquiry report, on the
basis of which the respondent No.1 was compulsorily
retired from service. An attempt was made on behalf
of the petitioner-employer to refer to the contents of
the enquiry report to contend that grave financial loss
was caused due to the alleged willful negligence on
W.P.(C) No.20160 of 2019 Page 34 of 79
the part of respondent No.1. It is found that on the
basis of the conclusions rendered in the enquiry
report, the respondent No.1 has already suffered the
punishment of compulsory retirement. The
respondent No.1 is justified in contending that
even if the contents of the enquiry report are to
be referred, it is recorded therein that due to the
alleged negligence of the respondent No.1,
certain loan amounts disbursed to individuals,
could be only partially recovered or not
recovered at all. But, there was no material on
record to indicate as to what steps the
petitioner-employer had taken for recovery of
amounts from those individuals and after
having taken any such steps, as to what was the
extent of financial loss really caused to the
petitioner-employer."
(Emphasis supplied)
32. So far as applicability of a Judgment, in General
Manager Uttaranchal Jal Sansthan vs. Laxmi Devi & others
reported in AIR 2009 SC 3121, vide paragraph Nos.23 & 24, it
was held as follows.
"23. Submission of the learned counsel
for the respondents is that the said
decision in Umadevi (3) case [(2006) 4 SCC
1 : 2006 SCC (L&S) 753] is not applicable:
(a) as it was rendered in 2006
whereas the cause of action for filing the
writ petition arose in 2002; and
(b) a distinction must be made
between the appointment on ad hoc basis and
appointment on compassionate ground.
24. As to the first submission above, it
is worth mentioning that judicial decisions
unless otherwise specified are
retrospective. They would only be
W.P.(C) No.20160 of 2019 Page 35 of 79
prospective in nature if it has been
provided therein. Such is clearly not the case
in Umadevi (3) [(2006) 4 SCC 1 : 2006 SCC
(L&S) 753] . Accordingly, even though the cause
of action would have arisen in 2002 but the
decision of Umadevi (3) [(2006) 4 SCC 1 : 2006
SCC (L&S) 753] would squarely be applicable to
the facts and circumstances of the case.
Secondly, before a person can claim a status of
a government servant not only his appointment
must be made in terms of the recruitment rules,
he must otherwise fulfil the criterion therefor.
Appointment made in violation of the
constitutional scheme is a nullity. Rendition of
service for a long time, it is well known, does
not confer permanency. It is furthermore not a
mode of appointment."
(Emphasis supplied)
33. Similarly, in B.A. Linga Reddy Etc. Etc. Vs.
Karnataka State Transport Authority reported in 2015 AIR
SCW 279 vide paragraph No.36, the apex Court held as follows:
"36. The view of the High Court in
Ashrafulla (AIR 2002 SC 629) (supra) has been
reversed by this Court. The decision is of
retrospective operation, as it has not been laid
down that it would operate prospectively;
moreso, in the case of reversal of the judgment.
This Court in P.V.George and Ors. v. State
of Kerala and Ors. [2007 (3) SCC 557 : (AIR
2007 SC 1034 in paras 19 and 29)] held
that the law declared by a court will have
a retrospective effect if not declared so
specifically. Referring to Golak Nath v.
State of Punjab [AIR 1967 SC 1643] it had
also been observed that the power of
prospective overruling is vested only in the
Supreme Court and that too in
constitutional matters. It was observed :
"19. It may be true that when the
doctrine of stare decisis is not adhered to,
W.P.(C) No.20160 of 2019 Page 36 of 79
a change in the law may adversely affect
the interest of the citizens. The doctrine
of prospective overruling although is
applied to overcome such a situation,
but then it must be stated expressly.
The power must be exercised in the
clearest possible term. The decisions
of this Court are clear pointer
thereto.x x x x x
29. Moreover, the judgment of the
Full Bench has attained finality. The
special leave petition has been
dismissed. The subsequent Division
Bench, therefore, could not have said as
to whether the law declared by the Full
Bench would have a prospective
operation or not. The law declared by a
court will have a retrospective effect if not
otherwise stated to be so specifically. The
Full Bench having not said so, the
subsequent Division Bench did not have
the jurisdiction in that behalf."
(Emphasis supplied)
34. So far as the doctrine of per incuriam, in Madhya
Pradesh Road Development Authority and another Vs. L.G.
Chaudhary Engineers and Contractors, reported in (2012) 3
SCC 495, the apex Court vide paragraph Nos.26 to 34 held as
follows.
"26. It is clear, therefore, that in view of the
aforesaid finding of a coordinate Bench of this
Court on the distinct features of an Arbitral
Tribunal under the said M.P. Act in Anshuman
Shukla case [(2008) 7 SCC 487] the provisions
of the M.P. Act are saved under Section 2(4) of
the AC Act, 1996. This Court while rendering
the decision in Va Tech [(2011) 13 SCC 261]
has not either noticed the previous
W.P.(C) No.20160 of 2019 Page 37 of 79
decision of the coordinate Bench of this
Court in Anshuman Shukla [(2008) 7 SCC
487] or the provisions of Section 2(4) of the
AC Act, 1996. Therefore, we are
constrained to hold that the decision of
this Court in Va Tech [(2011) 13 SCC 261]
was rendered per incuriam.
27. This was the only point argued before
us by the learned counsel for the appellant.
28. The principle of per incuriam has been
very succinctly formulated by the Court of
Appeal in Young v. Bristol Aeroplane Co. Ltd.
[1944 KB 718 (CA)] Lord Greene, Master of
Rolls formulated the principles on the basis of
which a decision can be said to have been
rendered "per incuriam". The principles are: (KB
p. 729)
"... Where the court has construed a
statute or a rule having the force of a
statute its decision stands on the same
footing as any other decision on a
question of law, but where the court is
satisfied that an earlier decision was
given in ignorance of the terms of a
statute or a rule having the force of a
statute the position is very different. It
cannot, in our opinion, be right to
say that in such a case the court is
entitled to disregard the statutory
provision and is bound to follow a
decision of its own given when that
provision was not present to its
mind. Cases of this description are
examples of decisions given per
incuriam."
29. The decision in Young [1944 KB 718
(CA)] was subsequently approved by the House
of Lords in Young v. Bristol Aeroplane Co. Ltd.
[1946 AC 163 (HL)] , AC at p. 169 of the Report.
Lord Viscount Simon in the House of Lords
expressed His Lordship's agreement with the
views expressed by Lord Greene, the Master of
Rolls in the Court of Appeal on the principle of
per incuriam (see the speech of Lord Viscount
W.P.(C) No.20160 of 2019 Page 38 of 79
Simon in Bristol Aeroplane Co. Ltd. case [1946
AC 163 (HL)] , AC at p. 169 of the Report).
30. Those principles have been followed by
the Constitution Bench of this Court in Bengal
Immunity Co. Ltd. v. State of Bihar [AIR 1955
SC 661 : (1955) 2 SCR 603] (see the discussion
in SCR at pp. 622 and 623 of the Report).
31. The same principle has been reiterated
by Lord Evershed, Master of Rolls, in Morelle
Ld. v. Wakeling [(1955) 2 QB 379 (CA)] , QB at
p. 406. The principle has been stated as
follows:
"... As a general rule the only cases in
which decisions should be held to have
been given per incuriam are those of
decisions given in ignorance or
forgetfulness of some inconsistent
statutory provision or of some authority
binding on the court concerned; so that in
such cases some part of the decision or
some step in the reasoning on which it is
based is found, on that account, to be
demonstrably wrong."
32. In State of U.P. v. Synthetics and
Chemicals Ltd. [(1991) 4 SCC 139] this Court
held (SCC p. 162, para 40) that the doctrine of
"per incuriam" in practice means "per
ignoratium" and noted that the English courts
have developed this principle in relaxation of
the rule of stare decisis and referred to the
decision in Bristol Aeroplane Co. Ltd. [1946 AC
163 (HL)] The learned Judges also made it clear
that the same principle has been approved and
adopted by this Court while interpreting Article
141 of the Constitution (see Synthetics and
Chemicals Ltd. case [(1991) 4 SCC 139] , SCC
para 41).
33. In MCD v. Gurnam Kaur [(1989) 1
SCC 101] a three-Judge Bench of this Court
explained this principle of per incuriam
very elaborately in SCC para 11 at p. 110
of the Report and in explaining the
principle of per incuriam the learned
Judges held:
"11. ... A decision should be treated
as given per incuriam when it is
W.P.(C) No.20160 of 2019 Page 39 of 79
given in ignorance of the terms of a
statute or of a rule having the force
of a statute."
34. In para 12 the learned Judges observed
as follows: (Gurnam Kaur case [(1989) 1 SCC
101] , SCC p. 111)
"12. ... One of the chief reasons for the
doctrine of precedent is that a matter that
has once been fully argued and decided
should not be allowed to be reopened.
The weight accorded to dicta varies with
the type of dictum. Mere casual
expressions carry no weight at all. Not
every passing expression of a Judge,
however eminent, can be treated as an ex
cathedra statement, having the weight of
authority."
(Emphasis supplied)
35. Similarly, in V Kishan Rao Vs. Nikhil Super Speciality
Hospital and another, reported in (2010) 5 SCC 513 vide
paragraphs No.54, the apex Court held as follows:
"54. When a judgment is rendered by
ignoring the provisions of the governing
statute and earlier larger Bench decision
on the point such decisions are rendered
per incuriam. This concept of per incuriam has
been explained in many decisions of this Court.
Sabyasachi Mukharji, J. (as his Lordship then
was) speaking for the majority in A.R. Antulay
v. R.S. Nayak [(1988) 2 SCC 602 : 1988 SCC
(Cri) 372] explained the concept in the following
words : (SCC p. 652, para 42)
"42. ... 'Per incuriam' are those
decisions given in ignorance or
forgetfulness of some inconsistent
statutory provision or of some authority
binding on the court concerned, so that in
such cases some part of the decision or
some step in the reasoning on which it is
W.P.(C) No.20160 of 2019 Page 40 of 79
based, is found, on that account to be
demonstrably wrong."
Subsequently also in the Constitution
Bench judgment of this Court in Punjab Land
Development and Reclamation Corpn. Ltd. v.
Labour Court [(1990) 3 SCC 682 : 1991 SCC
(L&S) 71] , similar views were expressed in
para 40 at p. 705 of the report."
(Emphasis supplied)
36. As is revealed from one of the impugned orders, as at
Annexure-2, while deciding the Application filed by the Opposite
Party No.3, the Controlling Authority framed the following two
issues.
"1. Whether the OP has the right to forfeit the
amount of gratuity payable to the applicant and
has done so in accordance with the provision of
the law?
2. Whether there is delay in payment of
gratuity and if so whether the applicant is entitled
to get interest upon delayed payment of gratuity
amount?"
37. So far as Issue No.1 as to right to forfeit the amount of
gratuity payable to Opposite Party No.3, the Controlling
Authority (Opposite Party No.2) observed as follows:
"As far as 1st issue is concerned, it is an
admitted fact that the OP/employer has
withheld the gratuity if any payable to the
applicant. The same was not communicated
to the applicant at all and only after filing
of this application before Controlling
Authority the reasons have been brought in
writing. Thus, it remains primarily un-
W.P.(C) No.20160 of 2019 Page 41 of 79
notified and non-communicated. It is also an
admitted fact that the OP has not
communicated any order regarding
forfeiture of gratuity as required under
Section 4 Sub Section (6) of PG Act, 1972 to
be read with rule (8) (ii) under the Payment of
Gratuity (Central) Rules, 1972 which is
against the Principle of Natural justice. The
reason communicated during hearing indicates,
since the criminal proceeding initiated by the
departmental lodged through an FIR filed by the
authorities of NSIC Ltd. is still pending before the
Special Court, it is not possible at this stage to
arrive at the conclusion regarding imposition of
penalty or otherwise is considered against
provision of law. Moreover, the criminal
proceeding has been submitted by the police
in favour of 11 persons including the
applicant over fraudulent bank guarantees
issued by the respective branches of UBI for
releasing the payment to different suppliers
of raw materials.
Moreover, a department regulation cannot
override the provisions of the Act. A departmental
enquiry is to meet the obligations of an employer
to follow the procedure stipulated under the
standing order/service rules so as to find out
whether an employee has committed any
misconduct. The scope and focus of the enquiry is
thus different from that of given under section 4(6)
of the act. Even though a charge sheet is
issued and even if the financial loss is
quantified therein and departmental enquiry
is conducted and the charges are proved, it
would not amount to compliance of
requirement under section 4(6) as the
employee is not put on notice about
forfeiture of gratuity in a departmental
enquiry. The object of section 4(6) is to
require the employer to put the employee on
notice that his conduct would result in
forfeiture of gratuity. Therefore, it is
incumbent upon the employer to serve a
show cause notice on the employee, putting
him on notice that his conduct would lead to
W.P.(C) No.20160 of 2019 Page 42 of 79
forfeiture of his gratuity and after hearing
his submission, the employer has to pass an
order of forfeiture."
(Emphasis supplied)
38. Similarly, while confirming the said order dated
12.11.2018 passed by the Controlling Authority under the Act,
1972, the Appellate Authority, vide Order dated 26.09.2019,
observed as follows:
"Findings of the Appellate Authority
1. That the respondent had joined as a Lower
Division Clerk on 10.03.1981 and retired from
service w.e.f. 30.11.2017 on attaining the age of
superannuation. At the time of superannuation,
the respondent was working as Manager (under
suspension) Sub-Branch, Balasore,
Bhubaneswar. He had served with the appellant
bank for 36 years and 8 months. The disciplinary
action were initiated on 24.8.2016 and
termination took place on 20.02.2018 which is
much after his retirement/superannuation on
30.11.2016.
2. That though the disciplinary proceedings
were contemplated which matured to termination
after superannuation the same is technically
wrong as by that time the non-applicant has
already retired from the services. That the
entitlement of gratuity starts soon after retirement
as per section 4(1)(a) read with section 7(3) of the
P.G. Act, 1972.
3. In the instant case, it is found that Section
4(6)(a)(b) of the Gratuity Act, 1972 has not been
followed because the non-applicant has already
retired from service on 30.11.2016 whereby his
service with the aforesaid management is already
dispensed with. In the event of having no
employer and employee relationship following the
provision of Payment of Gratuity Act, 1972 under
W.P.(C) No.20160 of 2019 Page 43 of 79
Section 4(6)(a) and (b) does not arise. That the
aforesaid situation only would have arisen when
the applicant was still in job. A look at the case of
Jaswant Singh Vrs Bharat Cooking coal Ltd the
Hon'ble Supreme Court has categorically stated
that it is infirm to forfeit gratuity in the event of a
person who has already retired from his services.
4. In the present case department rule which
mandates for disciplinary action after
superannuation cannot overrule the statutory
provision as per section 14 of the PG Act, 1972.
More so when the departmental rule and
statutory rule and regulations both apply to a
situation statutory rule will always prevail.
5. That the quantum of loss has not been
quantified before the forfeiture of gratuity. It
has been pointed out by the appellant that
quantum could not be assessed because loss
is attributed to a group of people. However,
as per section 4(6)(a) of the PG Act 1972
gratuity can be forfeited to the extent of
damage or loss which has not been
quantified hence the forfeitures is not as per
the statutory provision.
6. No notice has been given to the
applicant as a part of natural justice before
such forfeiture.
That there is no provision under the
Gratuity Act, 1972 to forfeit gratuity without
following due procedure of law as gratuity is
being considered as property under article
300 A of the constitution which can be
forfeited only after following due procedure
of law.
7. As far as the present case is concerned the
non-applicant has become entitled for gratuity
and as per section 4(1) read with section 7(3) and
7(3A) when he has superannuated from this
service which is much before imposition of
penalty.
8. That there is no such decision of the
Apex Court which mandates to withhold
gratuity with interest if a criminal
W.P.(C) No.20160 of 2019 Page 44 of 79
proceeding/Termination is not in consonance
with Section 4(6)(a) and (b) of the PG Act
1972 and the rules there under."
(Emphasis Supplied)
39. In view of the stand taken by the Petitioners in the Writ
Petition so also the stand of the contesting Opposite Party No.3,
it would be apt to extract below the rules 3 & 5 of the National
Small Industries Corporation Ltd. (Control & Appeal Rules,
1968), shortly, hereinafter "Rules, 1968", being relevant for the
purpose of proper adjudication of the present lis.
"Rules 3 & 5 of NSIC Ltd (C & A Rules, 1968)
3. Application:
(1) These rules shall apply to every employee
but shall not apply to:
a. Those employees working in the Prototype
Production & Training Centres to whom the
Standing Orders framed for the respective
P.T.Cs, are applicable.
b. Any person in casual employment.
(2) If any doubt arises relating to the
interpretation of these rules, it shall be referred to the
Corporation whose decision shall be final.
(3) Note: As amended vide Board's Resolution
No. 4 dt. 31 Oct. 2000.
"Disciplinary proceedings, if instituted while
the employee was in service whether before
his retirement or during his re-
employment, shall after the final
W.P.(C) No.20160 of 2019 Page 45 of 79
retirement of the employee, be deemed to
be proceeding and shall be continued and
concluded by the authority by which it was
commenced in the same manner as if the
employee had continued in service.
5. Penalties:
The following penalties may, for good and
sufficient reasons and as hereinafter provided, be
imposed on an employee.....
Minor Penalties:
(i) Censure
(ii) With holding of his promotion
(iii) Recovery from his pay of the whole or part
of any pecuniary loss caused by him to the
Corporation by negligence or breach of
orders;
(iv) With holding of increment of pay;
Major Penalties:
(v) Reduction to a lower stage in the time scale
of pay for a specified period, with further
directions as to whether or not the employee
will earn increments of pay during the
period of such reduction and whether on the
expiry of such period, the reduction will or
will not have the effect of postponing the
further increments of his pay.
(vi) Reduction to a lower time scale of pay
'grade' post or service which shall
ordinarily be a bar to the promotion of the
employee to the time scale of pay, grade,
post or service from which he was reduced,
with or without further directions regarding
condition of restoration to the grade or post
or service from which the employee was
reduced and his seniority and pay on such
restoration to that grade; post or service.
W.P.(C) No.20160 of 2019 Page 46 of 79
(vii) Compulsory retirement;
(viii) Removal from service which shall not be
disqualification for future employment.
(ix) Dismissal from service which shall
ordinarily be a disqualification for future
employment.
(x) Note: As amended vide Board's Resolution
No.4 dt. 31 Oct. 2000.
"During the pendency of the
disciplinary proceedings, the
disciplinary authority, may withhold
payment of gratuity, for ordering the
recovery from gratuity of the whole or
part of any pecuniary loss caused to
the Company if the employee is found
in a disciplinary proceedings or
judicial proceeding to have been guilty
of offences /misconduct as mentioned
in Sub-section(6) of section 4 of the
Payment of Gratuity Act, 1972 or to
have caused pecuniary loss to the
Company by misconduct or negligence,
during his service including service
rendered on deputation or on re-
employment after retirement. However,
the provisions of Section 7(3) and 7(3A)
of the Payment of Gratuity Act, 1972
should be kept in view the event of
delayed payment, in case the employee
is fully exonerated."
(Emphasis supplied)
40. Since in rule 5 of the said Rules, 1968, there is a
reference to sub-section (6) of Section 4 so also section 7(3) and
section 7(3A) of the Payment of Gratuity Act, 1972, the said
provisions under the Act, 1972 are also extracted below for ready
reference.
W.P.(C) No.20160 of 2019 Page 47 of 79
"Sub-section (6) of section 4 of P.G. Act, 1972
(6) Notwithstanding anything contained in sub-
section (1), -
(a) the gratuity of an employee, whose services
have been terminated for any act, willful omission or
negligence causing any damage or loss to, 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.
Section-7(3) & (3A) of P.G. Act, 1972
7. (3) The employer shall arrange to pay the
amount of gratuity within thirty days from the
date it becomes payable to the person to whom
the gratuity is payable.
(3A) If the amount of gratuity payable under
sub-section (3) is not paid by the employer within the
period specified in sub-section (3), the employer shall
pay, from the date on which the gratuity becomes
payable to the date on which it is paid, simple
interest at such rate, not exceeding the rate notified
by the Central Government from time to time for
repayment of long-term deposits, as that Government
may, by notification specify:
Provided that no such interest shall be
payable if the delay in the payment is due to the
fault of the employee and the employer has
W.P.(C) No.20160 of 2019 Page 48 of 79
obtained permission in writing from the
controlling authority for the delayed payment
on this ground.]"
(Emphasis supplied)
41. To decide the issue involved in the present lis, it would
also be appropriate to reproduce below section 4(1) of the Act,
1972 so also rules, 7(1)(5) & (6), 8 (1) & (4) & 10 of Rules, 1972
and Form 'M' (as prescribed under Clause (ii) of sub-rule (1) of
rule 8 of the 1972 Rules).
"Section-4(1) of Payment of Gratuity Act, 1972
4. Payment of gratuity.- (1) Gratuity shall be
payable to an employee on the termination of his employment
after he has rendered continuous service for not less than five
years, -
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to
accident or disease:
Provided that the completion of continuous
service of five years shall not be necessary where
the termination of the employment of any employee
is due to death or disablement: Provided further that
in the case of death of the employee, gratuity
payable to him shall be paid to his nominee or, if no
nomination has been made, to his heirs, and where
any such nominees or heirs is a minor, the share of
such minor, shall be deposited with the controlling
authority who shall invest the same for the benefit of
such minor in such bank or other financial
W.P.(C) No.20160 of 2019 Page 49 of 79
institution, as may be prescribed, until such minor
attains majority.]
Explanation. : For the purposes of this
section, disablement means such disablement as
incapacitates an employee for the work which he,
was capable of performing before the accident or
disease resulting in such disablement.
Relevant portions of Rules-7, 8 & 10 & Form
'M' under clause(ii) of sub-rule (1) of Rule-8 of
Payment of Gratuity (Central) Rules, 1972
7. Application for gratuity.-- (1) An employee
who is eligible for payment of gratuity under the Act,
or any person authorised, in writing, to act on his
behalf, shall apply, ordinarily within thirty days
from the date the gratuity became payable, in
Form 'I' to the employer:
Provided that where the date of
superannuation or retirement of an employee is
known, the employee may apply to the employer
before thirty days of the date of superannuation or
retirement.
(2) XXX
(3) XXX
(4) XXX
(5) An application for payment of gratuity filed after
the expiry of the periods specified in this rule shall
also be entertained by the employer, if the applicant
adduces sufficient cause for the delay in preferring
his claim, and no claim for gratuity under the
Act shall be invalid merely because the
claimant failed to present his application
within the specified period. Any dispute in this
regard shall be referred to the controlling authority
for his decision.
(6) An application under this rule shall be presented
to the employer either by personal service or by
registered post acknowledgement due.
W.P.(C) No.20160 of 2019 Page 50 of 79
"8. Notice for payment of gratuity.-- (1) Within
fifteen days of the receipt of an application under
rule 7 for payment of gratuity, the employer shall--
(i) if the claim is found admissible on verification,
issue a notice in Form 'L' to the applicant employee,
nominee or legal heir, as the case may be, specifying
the amount of gratuity payable and fixing a date, not
being later than the thirtieth day after the date of
receipt of the application, for payment thereof, or
(ii) if the claim for gratuity is not found
admissible, issue a notice in Form 'M' to the
applicant employee, nominee or legal heir, as
the case may be, specifying the reasons why
the claim for gratuity is not considered
admissible.
In either case a copy of the notice shall be
endorsed to the controlling authority."
(2) xxx
(3) xxx
(4) A notice in form 'L' or Form 'M' shall be
served on the applicant either by personal service
after taking receipt or by registered post with
acknowledgement due.
(5) xxx
10. Application to controlling authority for
direction.--(1) If an employer--
(i) refuses to accept a nomination or to
entertain an application sought to be filed
under rule 7, or
(ii) issues a notice under sub-rule (1) of
rule 8 either specifying an amount of gratuity which
is considered by the applicant less than what is
payable or rejecting eligibility to payment of
gratuity, or
(iii) having received an application under
rule 7 fails to issue any notice as required under rule
8 within the time specified therein, the claimant
employee, nominee or legal heir, as the case may be,
may, within ninety days of the occurrence of the
cause for the application, apply in Form 'N' to the
controlling authority for issuing a direction under
W.P.(C) No.20160 of 2019 Page 51 of 79
sub-section (4) of section 7 with as many extra
copies as are the opposite parties:
Provided that the controlling authority may
accept any application under this sub-rule, on
sufficient cause being shown by the applicant, after
the expiry of the specified period.
(2) Application under sub-rule (1) and other
documents relevant to such an application shall be
presented in person to the controlling authority or
shall be sent by registered post acknowledgement
due.
FORM 'M'
[See clause (ii) of sub-rule (1) of rule 8]
NOTICE REJECTING CLAIM FOR PAYMENT OF
GRATUITY
To
......................................................................
[Name and address of the applicant employee/
nominee/ legal heir]
You are hereby informed as required under
clause (ii) of sub-rule (i) of rule 8 of the Payment
of Gratuity (Central) Rules, 1972 that your claim
for payment of
gratuity as indicated on your application in Form......
........under the said rules is not admissible for the
reasons stated below:
REASONS
[Here specify the reasons]
Place Signature of the employer/
Date Authorised Officer.
Name or description of
establishment or rubber
stamp thereof.
Copy to : The Controlling Authority.
Note: Strike out the words not applicable."
(Emphasis supplied)
W.P.(C) No.20160 of 2019 Page 52 of 79
42. On examination of the various legal provisions under
the Act, 1972 and Rules made thereunder so also the Judgments
cited by the learned Counsel for the parties, as detailed above,
this Court is of the following views:
a) As prescribed under section 4(1) of the Act,
1972, gratuity shall be payable to an employee
on the termination of his employment after he
has rendered continuous service for not less
than five years on his superannuation or on his
retirement or resignation or on his death or
disablement due to accident or disease.
However, completion of continuous service of
five years shall not be necessary where the
termination of the employment of any employee
is due to death or disablement.
b) In terms of section 7(1) of the Act, 1972 read
with rule 7(1) & (6) of the Rules, 1972, a person,
who is eligible for payment of gratuity under the
said Act, 1972 or any person authorized, in
writing, to act on his behalf, shall send a written
application to the Employer in Form 'I'
W.P.(C) No.20160 of 2019 Page 53 of 79
ordinarily within thirty days from the date the
gratuity became payable, either by personal
service or by registered post acknowledgement
due.
c) As provided under rule 7 (1) of the Rules, 1972
where the date of superannuation or retirement
of an employee is known, the employee may
apply to the Employer before thirty days of the
date of superannuation or retirement for
payment of gratuity.
d) Rule 7(5) of the Rules, 1972 provides that an
application for payment of gratuity filed after the
expiry of the periods specified in rule 7(1) of the
Rules, 1972 shall also be entertained by the
Employer, if the applicant adduces sufficient
cause for the delay in preferring his claim.
e) As provided under rule 7(5) of the Rules, 1972.
no claim for the gratuity under the Act, 1972
shall be invalid merely because the claimant
W.P.(C) No.20160 of 2019 Page 54 of 79
has failed to present his application within the
specified period.
f) In terms of Rule-8(1) under Rules, 1972
prescribes that within fifteen days of the receipt
of an application under rule 7 for payment of
gratuity, the Employer shall, if the claim is
found admissible on verification, issue a notice
in Form 'L' to the applicant employee, nominee
or legal heir, as the case may be, specifying the
amount of gratuity payable and fixing a date,
not being later than the thirtieth day after the
date of receipt of the application, for payment
thereof.
g) As provided under rule 8(1) (ii) of the Rules,
1972, if the claim for gratuity is not found
admissible, the Employer is to issue a notice in
Form 'M' to the applicant employee, nominee or
legal heir, as the case may be, specifying the
reasons as to why the claim for gratuity is not
considered admissible. In either case,
where the gratuity claimed is admissible or
W.P.(C) No.20160 of 2019 Page 55 of 79
inadmissible, a copy of the notice in Form 'L' or
'M' given to the applicant shall be endorsed to
the Controlling Authority.
h) An Employer cannot simply issue notice in
Form-M to the employee rejecting claim for
payment of gratuity. This has to be preceded by
a Show Cause Notice, because the gratuity
amount to which the Employee is otherwise
entitled is to be forfeited, which is a drastic
consequence for the Employee.
i) As provided under rule 10(1)(iii) of the Rules,
1972, if pursuant to the application filed in
terms of rule 7 of Rules, 1972 a notice is given
under rule 8(1) either specifying an amount of
gratuity which is considered by the application
less than what is payable or rejecting his/her
eligibility for payment of gratuity or the
Employer fails to issue any notice as required
under rule 8 within the time specified therein,
the claimant employee, nominee or legal heir, as
the case may be, may, within ninety days of the
W.P.(C) No.20160 of 2019 Page 56 of 79
occurrence of the cause for the application,
apply in Form 'N' to the Controlling Authority
for issuing a direction under section 7(4) of the
Act, 1972 with as many extra copies as are the
opposite parties.
j) In view of the provisions enshrined under
section 7(2) of the Act, 1972, as soon as gratuity
becomes payable, the Employer shall, whether
an application referred to in sub-section (1) has
been made or not, determine the amount of
gratuity and give notice in writing to the person
to whom the gratuity is payable and also the
Controlling Authority, specifying the amount of
gratuity so determined.
k) As prescribed under section 7(3) of the Act,
1972, the Employer shall arrange to pay the
amount of gratuity, within thirty days from the
date it becomes payable to the person to whom
the gratuity is payable.
W.P.(C) No.20160 of 2019 Page 57 of 79
l) In terms of section 7(3-A) of the Act, 1972, if
the amount of gratuity payable under sub-
section (3) is not paid by the Employer within
the period specified in sub-section (3), the
Employer shall pay, from the date on which the
gratuity becomes payable to the date on which it
is paid, simple interest at such rate, not
exceeding the rate notified by the Central
Government from time to time for repayment of
long-term deposits, as that Government may, by
notification specify (As per the notification dated
10.10.1987 issued by the Central Government,
in exercise of powers conferred under sub-
section (3-A) of section 7 of the P.G. Act, 1972,
10% interest is payable).
m) In view of the proviso under section 7(3-A) of the
Act, 1972, no such interest is payable if the
delay in the payment is due to the fault of the
employee and the Employer has obtained
permission in writing from the Controlling
W.P.(C) No.20160 of 2019 Page 58 of 79
Authority for the delayed payment on the said
ground.
n) As prescribed under section 7(4)(a) of the Act,
1972, if there is any dispute as to the amount of
gratuity payable to an employee under the said
Act or as to the admissibility of any claim of, or
in relation to, an employee for payment of
gratuity, or as to the person entitled to receive
the gratuity, the Employer shall deposit with the
Controlling Authority such amount as he admits
to be payable by him as gratuity.
o) Where there is a dispute with regard to any
matter or matters specified in clause (a), the
Employer or employee or any other person
raising the dispute may make an application to
the Controlling Authority for deciding the
dispute, in terms of section 7(4)(b) of the Act,
1972.
p) As provided under section 7(4)(c) of the Act,
1972, the Controlling Authority shall, after due
W.P.(C) No.20160 of 2019 Page 59 of 79
inquiry and after giving the parties to the
dispute a reasonable opportunity of being
heard, determine the matter or matters in
dispute and if, as a result of such inquiry any
amount is found to be payable to the employee,
the Controlling Authority shall direct the
Employer to pay such amount or, as the case
may be, such amount as reduced by the amount
already deposited by the Employer.
q) As provided in sub-section (6) of section 4 of the
Act, 1972, 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.
r) As per the settled position of law, as detailed
above, before forfeiting the gratuity of an
employee in terms of clause (1) of sub-section 6
of section 4 of the Act, 1972, any damage or loss
W.P.(C) No.20160 of 2019 Page 60 of 79
to, or destruction of, property belonging to the
Employer has to be quantified by the Employer.
s) Similarly, as prescribed in clause (b) of sub-
section 6 of section 4 of the Act, 1972, the
gratuity payable to an employee may be wholly
or partially forfeited, 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 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.
t) As held by the apex Court in Union Bank of
India (supra), under sub-section (6)(b)(ii) of
section 4 of the Act, forfeiture of gratuity is
permissible if the termination of an employee is
for any misconduct which constitutes an offence
involving moral turpitude, and the employee
concerned is convicted accordingly by a Court of
W.P.(C) No.20160 of 2019 Page 61 of 79
competent jurisdiction. It is not for the
Employer to decide whether the offence has
been committed amounting to involving moral
turpitude.
u) If departmental proceeding has been initiated
against an employee before his retirement, if the
service rules of the Employer provide so, the
departmental proceeding can continue even
after retirement of an employee and if the
employee is found guilty, minor or major
punishment, including the punishment of
dismissal can be imposed by the Employer, as
held in Rabindranath Choubey (supra).
v) As held by the apex Court in Rabindranath
Choubey (supra) the enquiry proceeding has to
be concluded first on merit and after passing
appropriate order in accordance with law,
thereafter necessary consequences as per
section 4 of the Act, 1972, more particularly
sub-section (6) of section-4 of the Act, 1972 and
the Rules of the Employer shall to follow. The
W.P.(C) No.20160 of 2019 Page 62 of 79
recovery, as provided under section-4(6) of the
Act, 1972, is in addition to a punishment that
can be imposed on an employee after his
superannuation.
43. Admittedly, as per sub-rule (3) of rule 3 of the Rules,
1968 of the Petitioners-Corporation, as quoted above,
disciplinary proceedings, if instituted while the employee was in
service, whether before his retirement or during his re-
employment, shall after the final retirement of the employee, be
deemed to be proceeding and shall be continued and concluded
by the Authority by which it was commenced in the same
manner, as if the employee had continued in service. Similarly,
in terms of sub-rule (x) of rule 5 of the said Rules, 1968, during
pendency of the disciplinary proceeding, the Disciplinary
Authority may withhold payment of gratuity for ordering the
recovery from gratuity of the whole or part of any pecuniary loss
caused to the Company, if the employee is found in a
disciplinary proceeding or judicial proceeding to have been guilty
of offences/misconduct, as prescribed under sub-section (6) of
section 4 of the Payment of Gratuity Act, 1972 or have caused
pecuniary loss to the Company by misconduct or negligence,
W.P.(C) No.20160 of 2019 Page 63 of 79
during his service, including service rendered on deputation or
on re-employment after retirement, which will be subject to
provisions of section 7(3) and 7(3A) of the P.G. Act, 1972. On a
bare reading of the said rules, as quoted above, it is amply clear
that the Employer (present Petitioners) has to follow the
provisions under sub-section (3A) of section 7, which mandates
that the Employer shall not be liable to pay interest on the
gratuity payable, if the delay in payment is due to the fault of the
employee and the Employer has obtained permission in writing
from the Controlling Authority for the delayed payment on the
said ground. Apart from the same, rule 8 of the Payment of
Gratuity (Central) Rules, 1972 deals specifically with regard to
notice for payment of gratuity. Clause (ii) in sub-rule (1) of rule 8
of the Rules, 1972 prescribes that if the claim for gratuity is not
found admissible, the Employer has to issue notice in Form 'M'
to the applicant employee, nominee or legal heirs, as the case
may be, specifying the reasons as to why the claim for gratuity is
not considered admissible and copy of the same has to be
endorsed to the Controlling Authority.
44. Though there is no such pleadings in the Writ Petition
so also Affidavit-in-Opposition filed by the Opposite Party No.3-
W.P.(C) No.20160 of 2019 Page 64 of 79
employee, in the list of date of events filed by the Opposite Party
No.3, it has been mentioned that he claimed gratuity in Form 'I'
on 23.11.2017 and the same was rejected by the Employer on
28th November, 2017, as a result of which the Opposite Party
No.3 filed an application in Form 'N' before the Controlling
Authority on 29th December, 2017 claiming gratuity. Neither the
Petitioners nor the Opposite Party No.3 has disclosed the said
alleged communication/rejection of the application submitted by
the Opposite Party No.3 claiming gratuity to ascertain the reason
for rejection of the said application. It is not the case of the
Petitioners that due communication was made to the Opposite
Party No.3 to withhold his gratuity on the ground of pendency of
the departmental proceeding against him and permission was
sought for from the Controlling Authority in terms of the proviso
in section 7 (3A) of the P.G. Act, 1972. No communication was
made in Form-'M' to the Opposite Party No.3 and also no
intimation was given to the Controlling Authority regarding
rejection of the application of the Opposite Party No.3 for
gratuity. For the first time, while passing the order of dismissal
dated 27.11.2018, as at Annexure-6, apart from imposing the
major penalty of dismissal from service with effect from the date
W.P.(C) No.20160 of 2019 Page 65 of 79
of his superannuation i.e. 30.11.2016, it was also ordered to
forfeit the retiral dues of the Opposite Party No.3 i.e. gratuity and
encashment of leave as a punishment. The relevant portion of
the order of dismissal, vide which it was ordered to forfeit the
gratuity of the Opposite Party No.3, is extracted below:
"NOW, THEREFORE, the undersigned being the
Appointing Authority in the above case decided to
impose the major penalty of "Dismissal from
service with effect from the date of his
superannuation i.e. 30.11.2016 and forfeiture
of his retiral dues (i.e. Gratuity and Encashment
of Leave)" on Shri Jayanta Das, Manager (u/s)
under the NSIC Control & Appeal Rules, 1968
and orders accordingly, with immediate effect. As
such, the Appellate Authority in this case would be
the Board of Directors.
The undersigned, in view of the charges having been
proved against Shri Jayanta Das and a penalty
imposed upon his, has decided that his period of
suspension i.e. from 24.08.2016 to 30.11.2016, will
not be treated as period spent on duty by Shri
Jayanta Das and he will not be paid any pay and
allowances for the said period. However, the
subsistence allowance already paid to him will
remain paid.
(RAVINDRA NATH)
Chairman-cum-Managing Director/
Appointing Authority"
(Emphasis supplied)
45. Admittedly, the said order of dismissal is based on the
ex-parte Enquiry Report dated 20.02.2018 submitted by the
W.P.(C) No.20160 of 2019 Page 66 of 79
Enquiry Officer, as at Annexure-5. The findings of the Enquiry
Officer, being relevant, are extracted below:
"Findings of the Inquiry Officer:
From the deposition of MW-1, MW-2 & MW-3 and the
documents on record of inquiry (MEs), it is proved
that the CE has not diligently observed the
guidelines specified in the Financial Services
Manual regarding appraisal of application
received for assistance under RMA against Bank
Guarantees as detailed below:-
a) Inadequate infrastructure was available as
per the inspection reports, the value of
machinery available was inadequate, yet CE
recommendation was made for huge sanction
of Rs.300 lakh each to these units under
RMA.
b) At the time of appraisal, VAT registration
status was not checked, increase/decrease
in turnover/raw material was not diligently
analyzed by CE in proper perspective.
c) Further at the time of processing of contingent
bill for release of payment to supplies,
verification of VAT, status of the registration
of the supplies etc. was not properly
analyzed by CE, but payment was released
to the suppliers by CE.
d) The memorandum of receipts being the
signature of CE are not backed by
forwarding letters of units for such receipts
and there have been instances as narrated
above where receipt from one unit has been
adjusted to accounts of other two units
without any supporting document. In few
instances as stated above, there has been
adjustment of invocation proceeds as
repayment from the units and subsequent
issue of payment to supplier on account of
this false memorandum adjustment causing
exposure of NSIC funds to greater rist.
W.P.(C) No.20160 of 2019 Page 67 of 79
e) There have been instances as stated above of
renewal of limits by the CE to the RMA units
without completion of proper procedure and
approval of the competent authority.
From the above facts detailed, it is proved that the
charges laid down in the Articles of Charge-I to VII are
proved"
(Emphasis supplied)
46. Though in para-10 of the Writ Petition it has been
stated that the Appeal preferred by the Opposite Party No.3
before the Board of Directors is pending, during hearing of this
case, both the Petitioners-Corporation as well as Opposite Party
No.3 filed photocopy of the order dated 17.01.2020 passed by the
Appellate Authority, the contents of which is extracted below:
"ORDER
WHEREAS departmental disciplinary proceedings
for a major penalty, under Rule 8 of the NSIC Control
& Appeal rules, 1968 were initiated against Shri
Jayanta Das, the then Manager (u/s). NSIC Ltd.,
Sub Branch, Balasore vide Office Memorandum
No.ZOE/02/2016-17 dated 24.11.2016.
AND WHEREAS after concluding the inquiry
proceedings, the manor penalty of "Dismissal from
service with effect from the date of his
superannuation i.e. 30.11.2016 and forfeiture of his
retiral dues (i.e. Gratuity and Encashment of Leave)"
was imposed on Shri Jayanta Das, Manager (u/s)
vide order No.3/79/SIC/VIG/2016 dated
27.03.2018.
AND WHEREAS, Shri Jayanta Das has made an
appeal dated 09.07.2019 to the Appellate Authority
(i.e. Board of Directors, NSIC) against the
aforementioned order.
W.P.(C) No.20160 of 2019 Page 68 of 79
AND WHEREAS the appeal dated 09.07.2019 of Shri
Jayanta Das was placed before the Board of
Directors in its 526th meeting held on 28.08.2019
wherein the Board of Directors decided to have more
deliberation on the matter. The said appeal was
further considered by the Board of Directors in its
528th meeting held on 16.12.2019. In the said
meeting, as directed by the Board, Shri Jayanta Das
appeared before the Board of Directors in person.
The Board heard the submissions made by Shri
Jayanta Das for quashing the dismissal order and
for release of his Gratuity.
AND WHEREAS the Board of Directors in its 529th
meeting held on 27.12.2019 noted that as the
gratuity matter is already under adjudication before
the High Court, Cuttack, the relief cannot be
considered in another forum and the claim to that
extent is barred by res judicata.
AND WHEREAS the Board after deliberations on the
facts and circumstances of the case noted that the
appeal does not contain any additional points /
facts, which were not examined by the inquiry
officer. The Board further noted that as the
gratuity matter is already under adjudication
before the High Court, Cuttack, the relief
cannot be considered in another forum and the
claim to that extent is barred by res judicata.
NOW, THEREFORE, the Board decided that the
appeal submitted by Shri Jayanta Das is not
sustainable and is liable to be rejected. Accordingly,
the order issued by the then CMD dated 27.03.2018
is upheld.
By order and on behalf of the
Board of Directors
Sd/-
(Nistha Goyal)
Company Secretary"
(Emphasis supplied)
Admittedly, the said order was passed much after the
period as directed by the Central Administrative Tribunal,
W.P.(C) No.20160 of 2019 Page 69 of 79
Kolkata Bench vide order dated 13.06.2019, vide which it was
directed to dispose of the Appeal of the Opposite Party No.3
within a period of four weeks from the date of receipt of the
Appeal. Since one of the punishments imposed was forfeiture of
gratuity and the Opposite Party No.3 had prayed before the
Appellate Authority for release of his gratuity, instead of dealing
with the said issue, the Appellate Authority has passed the order
dated 17.01.2020, as quoted above, keeping it open to be
decided by this Court.
47. Law is well settled that any judgment contrary to the
statute is hit by the law of per incuriam. Admittedly, the Rule,
1968 is a delegated legislation, whereas Act, 1972 is a
parliamentary legislation and provisions under the Act, 1972 will
have an overriding effect over the provisions in Rules, 1968, if
there is any inconsistency between the Rule, 1968 vis-a-vis the
Act, 1972. Rather, in the present case, rule 5 of the 1968 Rules
prescribes that so far as withholding of gratuity, the same shall
be governed by section 7(3A) of the P.G. Act, 1972, the proviso
under which enshrines that the Authority concerned should take
permission from the Controlling Authority, if it desires to
W.P.(C) No.20160 of 2019 Page 70 of 79
withhold the payment of gratuity on the plea of pendency of
disciplinary proceeding or judicial proceeding.
48. The law is also well settled that power of prospective
overruling is vested only in the Supreme Court. Unless it is so
mentioned in a judgment, vide which an earlier judgment of the
apex Court is overruled, that the same will be made applicable
prospectively, it will have a retrospective operation and will be
made applicable to all the pending litigations, even though the
impugned order/judgment in the pending litigation is based on a
judgment of the apex Court, which was in vogue at the relevant
juncture, but was subsequently overruled by a larger Bench.
49. From the background admitted facts, various provisions
under the P.G. Act, 1972 and rules made thereunder, so also
relevant Rules of the Petitioners-Employer pertaining to
continuance of Departmental Enquiry after retirement of an
employee and penalties to be imposed on the delinquent
employee so also settled position of law, as detailed above, this
Court is of the following irresistible conclusions:
W.P.(C) No.20160 of 2019 Page 71 of 79
i) The provisions of the Rules, 1968 cannot be in
derogation of the provisions enshrined under
section 7(3) & 7(3A) of the P.G. Act, 1972.
ii) In view of the provisions under rule 3(3) of the
Rules, 1968, the Petitioners-Employer had a
right to continue with the disciplinary
proceeding till its conclusion, as the same was
instituted before retirement of the Opposite
Party No.3.
iii) The Petitioners-Employer had a right to impose
the major penalty of dismissal with retrospective
effect i.e. the date when the Opposite Party No.3
was superannuated and legality of punishment
imposed is subject to judicial scrutiny.
iv) In terms of proviso in sub-section (3-A) of
section 7 of the Act, 1972, if the Employer
wants to withhold the gratuity of a retired
employee, it has to seek permission from the
Controlling Authority to do so, failing which the
Employer is liable to pay interest. But no such
W.P.(C) No.20160 of 2019 Page 72 of 79
permission was sought for in the present case to
withhold the gratuity of Opposite Party No.3, till
it was mentioned in order of dismissal dated
27.03.2018 that from the date of dismissing him
from service i.e. with effect from 30.11.2016, his
gratuity and encashment of leave stand
forfeited.
v) So far as the penalty to be imposed by the
Disciplinary Authority has been detailed in rule
5 of the Rules, 1968. There is no such provision
under the said Rule to impose the punishment
of forfeiture of gratuity. Though the said Rule
prescribes as to withholding payment of
gratuity, for ordering the recovery from the
gratuity of whole or part of the pecuniary loss
caused to the corporation, in the order of
dismissal, it was mentioned that the Appointing
Authority decided to impose major penalty of
"Dismissal from service with effect from the date
of his superannuation i.e. 30.11.2016, and
forfeiture of his retiral dues i.e. Gratuity and
W.P.(C) No.20160 of 2019 Page 73 of 79
Encashment of Leave." The said act of the
Petitioners-Employer is illegal and is devoid of
jurisdiction, as held by the apex court in Para-
10 of its judgment reported in D.V. Kappor
(supra)
vi) There is no such findings given by the Enquiry
Officer or the Disciplinary Authority that the
misconduct, allegedly proved against the
present Opposite Party No.3, amounts to moral
turpitude. Apart from that, as held in Paras-17
& 19 of the judgment of the apex Court in
Union Bank of India (supra), the requirement
of the statute is not the proof of misconduct of
acts involving moral turpitude, but the acts
should constitute an offence involving moral
turpitude and such offence should be duly
established in a Court of law. It is not for the
Petitioners-Employer to decide whether the
offence has been committed amounting to
involving moral turpitude.
W.P.(C) No.20160 of 2019 Page 74 of 79
vii) Though there was an alleged loss caused to the
Corporation for the misconduct proved against
the opposite party No.3, the said loss has never
been quantified by the Enquiry Officer or the
Disciplinary Authority. Still, invoking the alleged
power delegated under rule 5 of the Rules,
1968, the Disciplinary Authority imposed the
punishment of forfeiture of gratuity in addition
to forfeiture of earned leave, without following
the procedure to forfeit the Gratuity prescribed
under the Act, 1972.
viii) As held by the apex Court in Jaswant Singh
Gill (supra), which was partially overruled in
Rabindranath Choubey (supra), it is held that
the amount liable to be forfeited would be only
to the extent of damage or loss caused and the
disciplinary authority has to quantify the same
before ordering for forfeiture of the gratuity.
ix) Though the Opposite Party No.3 submitted an
application in Form 'I' in terms of sub-rule (1) of
rule 7 of the Rules, 1972 claiming gratuity, no
W.P.(C) No.20160 of 2019 Page 75 of 79
communication was made to him in Form 'M' in
terms of Clause (i) in sub-rule (1) of rule 8 of
Rules, 1972, intimating him that his claim for
payment of gratuity, as indicated in his
application in Form 'I' under the said Rule, is
not admissible assigning cogent reason to do so
marking a copy of the same to the Controlling
Authority.
x) Admittedly, the judgment in Rabindranath
Choubey (supra) is a larger Bench judgment,
vide which the judgment of the apex Court in
Jaswant Singh Gill (supra) was partially
overruled to the effect that the Disciplinary
Authority has power to impose the penalty of
dismissal/major penalty upon the delinquent
employee even after his attaining the age of
superannuation, as the disciplinary proceedings
were initiated while the employee was in service.
As there is no such observation in the said
judgment as to applicability of the said
judgment prospectively, the principles decided
W.P.(C) No.20160 of 2019 Page 76 of 79
in the said case shall be made applicable to the
present case. But the facts and circumstances
of the said case are different from the present
case, in view of the observations already made
by this Court in the preceding paragraphs.
xi) In view of the observation made by the apex
Court in Para-11 of the judgment in
Rabindranath Choubey (Supra), the
Appellant- Employer has a right to withhold the
gratuity during pendency of the disciplinary
proceedings and the Disciplinary Authority has
power to impose the penalty of dismissal/major
penalty on the Opposite Party No.3 even after
his attaining the age of superannuation, as the
disciplinary proceeding was initiated against
him while he was in service. Hence, the
observation made in paras- 2 to 4 of the
impugned order passed by the Opposite Party
No.1 (the Appellate Authority under the P.G.
Act, 1972), relying on the judgment of the apex
Court in Jaswant Singh Gill (Supra), the same
W.P.(C) No.20160 of 2019 Page 77 of 79
having been overruled to the effect as indicated
above, is bad and liable to be set aside.
xii) However, further observation made by the
Appellate Authority in Paragraphs-5 to 8 of the
impugned judgment passed in P.G. Appeal
No.36(431)/2018-B.I., being in consonance with
the various provisions under the P.G. Act, 1972,
as detailed above, so also the settled position of
law, does not need any interference.
xiii) There being no error or infirmity in the
impugned order dated 12.11.2018 passed by the
Controlling Authority, as at Annexure.2, needs
no interference.
50. In view of the observations as detailed above so also the
views taken by this Court, as detailed in Para-42 above, the
findings of the Appellate Authority in Paras 2 to 4 of the
impugned order dated 26.09.2019 as at Annexure-1, being
contrary to the observations made in Rabindranath Choubey
(supra), are hereby set aside.
W.P.(C) No.20160 of 2019 Page 78 of 79
51. Though there is a specific mechanism provided under
section 8 of the Act, 1972 read with rule 19 of Rules, 1972 for
recovery of gratuity ordered by the Controlling Authority, in the
peculiar facts and circumstances, as the issue regarding
payment of gratuity to the Opposite Party No.3 is pending since
2016 and the Petitioners obtained an order of stay of operation of
the impugned orders thereby debarring the Opposite Party No.3
to get his gratuity in terms of the order passed by the Controlling
Authority, this Court directs the Petitioners to promptly act in
terms of the direction given by the Controlling Authority vide
order dated 12.11.2018, as at Anenxure-2 and implement the
same within a period of four weeks from the date of production of
the certified copy of this order.
52. With the aforesaid observations and directions, the Writ
Petition stands disposed.
................................
S.K. MISHRA, J.
Orissa High Court, Cuttack The 15th of March, 2024/Prasant Signature Not Verified Digitally Signed W.P.(C) No.20160 of 2019 Signed by: PRASANT KUMAR PRADHAN Page 79 of 79 Designation: Secretary Reason: Authentication Location: High Court of Orissa, Cuttack. Date: 22-Mar-2024 19:54:53