Dismissed

The Management, v. the Controlling Authority

Madras HC10 May 2017WP(MD)/6718/2016

Case brief

AI extract

What is this about?

The Madurai Bench held that an employer cannot withhold a gratuity amount payable to a retired employee to adjust anticipated surcharge dues. The Court ruled that the Payment of Gratuity Act overrides such claims, directing the bank to pay the withheld sum with interest.

What did the court decide?

The petitioner Bank must pay Rs.25,000 along with 10% interest p.a. from 03.02.2009 to the date of payment to the retired employee within four weeks.

The Management, Vs the Controlling Authority — Pension and Retirement Benefits | Madras HC (2017)

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BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT

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DATED: 10.05.2017

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CORAM:

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THE HONOURABLE MR.JUSTICE R.SURESH KUMAR

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W.P.(MD)No.6718 of 2016 and

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W.M.P.(MD)Nos.9362 & 5799 of 2016

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The Management,

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Madurai Sourashtra Co-Operative Bank Limited, No.206, South Masi Street, Madurai-01, Rep. by its President.

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.. Petitioner

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Vs.

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The Controlling Authority-

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Under the Payment of Gratuity Act, (Assistant Commissioner of Labour) Madurai.

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T.V.Chandrasekaran .. Respondents

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PRAYER: Writ Petition filed under Article 226 of the Constitution of India for issuance of a writ of certiorari to call for the records from the 1^st respondent in his order in PA.KO.6 of 2011 dated 31.08.2015 and quash the same.

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For Petitioner : Mr.N.Sathish Babu

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For Respondents : Mr.K.P.Krishnadas

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Government Advocate

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for R1

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Mr.V.O.S.Kalaiselvam for R2

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O R D E R

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The Prayer in the Writ Petition is for a writ of certiorari calling for the records from the first respondent in his order in PA.KO.6 of 2011, dated 31.08.2015 and quash the same.

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The petitioner is a Co-Operative Bank under whom the second https://hcservices.ecourts.gov.in/hcservices/ respondent worked as Assistant Manager and retired from service on 31.01.2009. After the retirement of the second respondent, the

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gratuity amount of Rs.3,50,000/- payable to him was not fully paid. Instead, the petitioner Bank paid only Rs.3,25,000/- and the remaining amount of Rs.25,000/- was withheld by the petitioner Bank.

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3.Hence, the second respondent approached the first respondent under the Payment of Gratuity Act by filing PA.KO.No.6 of 2011. The said proceedings before the first respondent was concluded by a final order passed by the first respondent, dated 31.08.2015. In the said order, the first respondent directed the petitioner to pay a sum of Rs.25,000/-, which was in fact withheld, being a part amount of the gratuity payable to the second respondent, along with interest of 10% p.a from 03.02.2009 till the date of payment. Aggrieved by the said order of the first respondent, the petitioner has come out with this writ Petition with the aforesaid prayer.

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4.Heard both sides.

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5.Mr.N.Sathish Babu, learned Counsel appearing for the petitioner would submit that though the second respondent was permitted to retire on 31.01.2009 from the petitioner Bank on his superannuation, the said permission was without prejudice to the right of the petitioner Bank to proceed against him by way of surcharge proceedings, which was about to be initiated against him. If such surcharge proceedings is conducted and concluded, certainly the second respondent has to pay some amount to the petitioner Bank. Therefore, only in anticipation of that due payable to the petitioner and also after having adjusted for the personal lone due payable by the second respondent to the petitioner Bank, out of the total sum of Rs.3,50,000/- being the gratuity payable to the second respondent, only Rs.25,000/was withheld for the purpose of adjusting the same towards the surcharge proceedings.

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6.As expected, the surcharge proceedings was concluded on 23.10.2010, whereby the second respondent and six others were directed to pay jointly a sum of Rs.1,51,048/- towards the petitioner Bank. Out of the said amount, the second respondent due alone would come around Rs.21,500/- and with interest of 18% p.a. Therefore, whatever withheld i.e. Rs.25,000/- out of the gratuity amount of the second respondent, the same can very well be adjusted towards the surcharge due payable by the second respondent.

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7.The learned counsel appearing for the petitioner would also submit that, if the amount of Rs.21,500/- along with interest 18% p.a. is calculated, that will definitely go beyond Rs.25,000/https://hcservices.ecourts.gov.in/hcservices/ withheld by the petitioner and therefore only in that context, the proceedings initiated by the second respondent was contested by the petitioner Bank before the first respondent authority.

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Nevertheless, the first respondent authority without considering these aspects, has passed the impugned order directing the petitioner Bank to pay the said amount of Rs.25,000/- along with 10% interest to the second respondent from 03.02.2009 till the date of payment. Therefore, the learned counsel for the petitioner would submit that when the second respondent himself has to pay the amount which comes more than what has been withheld by the petitioner Bank, the order now passed by the first respondent directing the petitioner Bank to pay the said amount of Rs.25,000/- along with the interest to the second respondent is unjustifiable and unsustainable and therefore, aggrieved by the same the petitioner Bank approached this Court and at the admission stage the petitioner was able to get the stay of the impugned order herein.

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8.Per contra, Mr.V.O.S.Kalaiselvam, learned counsel appearing for the second respondent would submit that the second respondent was infact on superannuation permitted to retire from service on 31.01.2009. At the time retirement, there was no surcharge proceedings initiated against the second respondent and therefore the contention raised in this regard on behalf of the petitioner Bank that for the purpose of adjusting the amount towards the surcharge proceedings alone, the said sum of Rs.25,000/- out of the gratuity payable to the second respondent was withheld, is totally untenable.

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9.The learned counsel for the second respondent in this regard would rely upon the counter statement filed by the petitioner Bank, who was the respondent before the first respondent authority in the gratuity proceedings, where at Paragraph No.4 of the counter statement the petitioner bank has stated as follows:

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“(4) nkYk; i\ kDjhuiu bghWj;jtiu mtUila gzp Xa;tpw;F

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gpwF mth; kPJ xU xGq;F eltof;if nkw;bfhs;sg;gl;lJ. i\ xGq;F

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eltof;ifapy; eph;thfk; mth;kPJ rhl;oapUe;j Fw;wr;rl;Lfs; bjhlh;ghf

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xU xGq;F tprhuiza[k; elj;jp Koj;jJ.”

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10.The learned counsel for the second respondent would also submit that, whatever due whether is payable or not by the employee towards employer, to adjust or to set off the same, the gratuity payable to such employee cannot be withheld. In support of this proposition, the learned counsel appearing for the second respondent would rely upon a decision of this Court made in W.P. (MD) NO.9144 of 2010 in the matter of the Management, Sivagangai District Central Co-Operative Bank Limited Vs. The Joint Commissioner of Labour and others dated 22.11.2010. The learned https://hcservices.ecourts.gov.in/hcservices/ counsel for the second respondent would rely upon Paragraph Nos.13 to 15 of the said judgment which reads thus:

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“13.Therefore, on the first question, the petitioner management must fail because not only the third respondent was allowed to retire, but the question of forfeiture was raised only in the counter pleadings before the controlling Authority. No termination was made on account of ingredients found under Section 4(6) of the PG.Act.

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14.The second question, i.e. right to continue the proceedings even after reaching the age of superannuation, the appellate authority had erred in upholding the contention of the third respondent. The issue is no longer res integra. A division bench of this Court in The Registrar of Co-Operative Societies, Kilpauk, Chennai-10 and another Vs. G.Manoharan reported in 2010 (2) CTC 234, after reviewing the case laws in paragraph 33 held as follows:

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“33.From the records produced in this case, the following facts are obvious:

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(a)The activities of the first respondent had caused a great deal of consternation among the authorities and they were forced to transfer him from the place where, according to them, he was causing a lot of damage.

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(b)The disciplinary proceedings had been actually initiated before his age of superannuation, since the first charge memo is dated 6.6.2003, whereas his age of superannuation is 31.6.2003.

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(c)He had also given a reply to the charge memo dated 6.6.2003, but had not chosen to reveal the fact of the issuance of this earlier charge memo in his writ affidavit.

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(d)No orders had been passed permitting him to retire; on the contrary, he was suspended on the eve of his attaining the age of superannuation.

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(e)The Supreme Court has held that even if a person had retired, if it is proved that he had caused loss to the establishment, then proceedings can be initiated to recover the amount of loss from him.

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(f)Even if a person has attained the age of superannuation, it is possible to dismiss him, in which event, he will not be entitled to his terminal dues vide (2007) 9 S.C.C. 15 (supra).

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(g)In any event, Section 87 of the Act gives the https://hcservices.ecourts.gov.in/hcservices/ power to proceed against even a past employee for recovery and restoration of the financial loss caused to the society.” (Emphasis added)

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15.Therefore, it is always open to the petitioner Bank to proceed against the third respondent for recovering the amounts ordered to be surcharged against him in person as well as against his property. But, however the payment of gratuity on that score cannot be withhold in view of the non obstante clause found under Section 14 of the payment of Gratuity Act and also the payment is freed from any attachment as provided under Section 13 of the Act.”

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11.In view of the legal position that the Payment of Gratuity Act, being a special legislation having over riding effect, the gratuity payable to the employee at any cost cannot be withheld by the employer for the alleged reason of adjusting the same towards any due payable to him, especially a due like surcharge proceedings in the co-operative society sector. Therefore, the learned counsel for the second respondent would submit that the impugned order of the first respondent is strictly in consonance with the Provisions of the Payment of Gratuity Act and therefore it does not require any interference. Hence, he prays that the stay granted by this Court against the impugned order has to be vacated and the Writ Petition has to be dismissed.

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12.This Court has considered the rival submissions made by both sides.

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13.Before adverting to the issue raised in this Writ Petition, the relevant provision of Gratuity Act, can be usefully referred to. Under section 4(6) of the Act, the gratuity can be withheld or forfeited only in certain circumstances, which is explained in sub Section 6 of Section 4 and the same is reproduced here in:

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“(6)Not withstanding anything contained in subsection (1),--

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(a) the gratuity if 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 tto the extent of the damage or loss so caused;

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(b) the gratuity payable to an employee [may be wholly or partially forfeited]

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(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

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(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 https://hcservices.ecourts.gov.in/hcservices/ committed by him in the course of his employment.”

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14.Also Sections 13 and 14 of the Act can also be referred herein. Hence the said provisions are extracted here under.

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“13. Protection of gratuity - No gratuity payable under this Act [and no gratuity payable to an employee employed in any establishment, factory, mine, oil-field, plantation, port, railway company or shop exempted under section 5] shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court.

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14. Act to override other enactment, etc. - The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment than this Act.”

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15.Whether the provisions of the Payment of Gratuity Act will have a overriding effect in the teeth of Section 14 of the Act has been considered by this Court in the said judgment as cited supra as relied upon by the learned counsel for the second respondent, wherein this issue has been exhaustively discussed and decided. The learned Judge has framed two questions at para 7 and the two questions have been answered in the said decision. Therefore, in order to appreciate the same in a better manner the relevant portions of the judgment cited supra are reproduced hereunder:

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“7.The two questions that arise for consideration in the present case are as follows:

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(a) whether the petitioner can deny the payment of gratuity by invoking the provisions in Section 4(6) of the payment of gratuity Act? And

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(b) whether the Cooperative society can conduct an enquiry even after an employee had reached the age of superannuation?

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8.Before proceeding to deal with the case, it is necessary to refer to Section 4 (6) (a) of the payment of Gratuity Act which reads as follows:

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4.(6) Notwithstanding anything contained in sub-section (1),-

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(a)the gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or

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https://hcservices.ecourts.gov.in/hcservices/ loss so caused;”

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9.As to whether an employer can rise a plea of adjustment of gratuity towards the loss sustained by it for the first time before the authority and also whether without passing an order of termination on such misconduct can claim to withhold the gratuity on that score came up for consideration by various court.

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10.In Gujarat State Road Transport Corporation Vs. Devendrabhai Mulvantrai Vaidya reported in 2004 (1) LLJ 77, it was held that forfeiture can be made only when employee's service was terminated for the reasons set out in Section 4 (6). Similarly, in Radheyshyam Khichrolia Vs. Madhya Pradesh State Cooperative Marketing Federations Ltd. and another reported in 2002 (3) LLJ 513, it was held that there should be a valid order of dismissal or imposition of punishment before forfeiture can be claimed.

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11.In Gujarat State Fertilizers and Chemicals Ltd. Vs. Surendra T.Amin reported in 2005 (1) LLN 221, it was held that forfeiture issue cannot be raised for the first time before the authority. In Dunlop India Ltd. Vs. Union of India and others reported in 2003 (3) LLJ 1125, it was held that termination of service is sine qua non for the applicability of Section 4(6). A similar view was also taken in Travancore Plywood Industries Ltd. Vs. Regional Joint Labour Commissioner reported in 1996 (2) LLJ 85 and the Court held that the employer's right to withhold the gratuity under Section 4(6) can be made only if there was prior termination.

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12.Very recently, the Supreme Court vide its decision reported in P.Rajan Sandhi v. Union of India reported in (2010) 10 SCC 338, while dealing with the case of a working Journalist having right to get gratuity under Section 5 of the Working Journalists Act held that the Working Journalists Act is a special Act and it will prevail over the general Act like the Payment of Gratuity Act. In that context, in paragraphs 11 and 12, it was observed as follows:

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11.It may be seen that there is a difference between the provisions for denial of gratuity in the payment of Gratuity Act and in the Working Journalists Act. Under the Working Journalists Act gratuity can be denied if the service is terminated as a punishment inflicted by way of disciplinary act, as has been done in the instant https://hcservices.ecourts.gov.in/hcservices/ case. We are of the opinion that Section 5 of the working Journalists Act being a special law will prevail over Section 4(6) of the payment of

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Gratuity Act which is a general law. Section 5 of the Working Journalists Act is only for working journalists, whereas the payment of Gratuity Act is available to all employees who are covered by that Act and is not limited to working journalists. Hence, the Working Journalists Act is a special law, whereas the Payment of Gratuity Act is a general law. It is well settled that special law will prevail over the general law, vide G.P. Singh's principles of Statutory Interpretation, 9^th Edn., 2004, pp.133 and 134.

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12.The Special law i.e. Section 5(1) (a) (i) of the Working Journalists Act, does not require any allegation or proof of any damage or loss to, or destruction of, property, etc. as is required under the general law i.e. the Payment of the Gratuity Act. All that is required under the Working Journalists Act is that the termination should be as a punishment inflicted by way of disciplinary action, which is the position in the case at had. Thus, if the service of an employee has been terminated by way of disciplinary action under the Working Journalists Act, he is not entitled to gratuity.”

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16.From above judgment , which in fact has considered these two issues as to whether the gratuity amount can be withheld for the purpose of any another provisions of any other Act, or whether an employee of the cooperative institution can be proceeded after his retirement, the learned Judge has given complete answer, ofcourse after considering the judgments in this regard of the the Hon'ble Apex Court. On perusal of the same, this Court is of the firm view that the issue raised in this Writ Petition is no more res integra as the same has been settled in the manner referred to above in the judgments cited supra.

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17.Here in the case in hand, though the petitioner claimed that the surcharge proceedings was initiated even before or at the time of retirement of the second respondent, that is factually incorrect through their own statement especially at paragraph No.4 of the counter statement filed before the first respondent authority, as they have averred, that the surcharge proceedings were initiated only after the retirement of the petitioner. Therefore, the petitioner in fact was permitted to retire peacefully on 31.01.2009 itself and thereafter out of the total amount of Rs.3,50,000/- being the gratuity amount, a sum of Rs.3,25,000/- alone was paid, which includes adjustment towards https://hcservices.ecourts.gov.in/hcservices/ the personal loan obtained by the second respondent. Only a portion of the gratuity amount that is Rs.25,000/- was withheld for the alleged reasons that the surcharge proceedings was

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initiated against the second respondent, in order to adjust towards the due payable to the petitioner for the said surcharge proceedings, if it is concluded, the said amount of Rs.25,000/was withheld. This kind of withholding the gratuity amount that too in anticipation of any such proceedings which was admittedly initiated subsequently to the retirement of the second respondent, the said withholding of the gratuity amount cannot be held to be a valid action in the eye of law, especially, in the teeth of the said provisions of Section 13 and 14 of the Act, as has been interpreted and amplified by the decision of this Court cited supra. Therefore, the action on the part of the petitioner to withhold the said amount of Rs.25,000/- payable to the second respondent, as part of his gratuity amount, is totally unjustifiable and unsustainable. Therefore, this Court has no hesitation to hold that there is absolute no infirmity in that order passed by the first respondent authority under the Act with a direction to the petitioner Bank to pay the amount that is gratuity towards the second respondent with interest.

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18.The learned Counsel for the petitioner would also make a submission that atleast interest of 10% can be modified or reduced in the interest of justice.

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19.With regard to this plea, this Court is of the view that the 10% interest has been awarded by the first appellant authority by exercising his power under the Act, since it is the special legislation as by which, the interest of not less than 10% can very well be imposed on the belated payment of gratuity towards the employee. This Court feels that the said imposition of interest of 10% p.a cannot be interfered with.

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If at all the petitioner Bank wishes to recover 1/7^th of the amount of surcharge proceedings of Rs.1,51,048/- as per the order of the Deputy Registrar of Cooperative Societies dated 23.10.2010, it is open to the petitioner Bank to recover the same from the second respondent, with interest in the manner known to law.

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21.In fact, in the said surcharge proceedings, the amount of Rs.1,51,048/- was directed to be recovered from seven persons including the second respondent with interest of 18% p.a. That being so, the petitioner bank cannot make a plea that the 10% of interest imposed by the first respondent authority is on the higher side. Therefore for that reason also, the plea for reduction on interest, made on behalf of the petitioner, is liable to be rejected.

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22.For all these reasons the Writ Petition is dismissed with https://hcservices.ecourts.gov.in/hcservices/ the following directions:

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(1)The amount due of Rs.25,000/- along with interest of 10% p.a. from 03.02.2009 till dated of payment has to be paid by the petitioner Bank to the second respondent within a period of four weeks from the date of receipt of a copy of this order.

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(2)Since the petitioner had the benefit of Stay of the impugned order from this Court from 07.04.2016 till today, this period can be excluded from calculating the interest of 10% on the said amount of Rs.25,000/-.

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No Costs. Consequently, connected Miscellaneous Petitions are closed.

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Sd/-

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Assistant Registrar(CS-I)

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/True Copy/

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Sub Assistant Registrar

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