BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 22/11/2010
CORAM
THE HONOURABLE MR.JUSTICE K.CHANDRU
W.P.(MD)NO.9144 OF 2010
AND
M.P.(MD)Nos.1 and 2 of 2010
The Management,
Sivagangai District Central
Cooperative Bank Ltd.,
rep by its Special Officer,
Sivagangai. .. Petitioner
Vs.
1.The Joint Commissioner of Labour
No.76,Keela Maarat Street,
Anjali Towers,
Madurai.
2.The Assistant Commissioner of Labour,
Sundaram Theatre Road,
K.K.Nagar, Madurai-20.
3.S.Tajudeen .. Respondents
This writ petition is preferred under Article 226 of the Constitution of
India praying for the issue of a writ of certiorari to call for the records
relating to the order passed by the first respondent in P.G.A.No.2/2010, dated
28.05.2010 confirming the order passed by the second respondent in
P.G.No.46/2008 dated 26.05.2009 and to quash the same.
!For Petitioner ... Mr.D.Shanmugaraja Sethupathi
^For Respondents ... Mr.S.C.Herold Singh, GA for RR1 and 2
Mr.V.O.S.Kalaiselvan for R-3
- - - -
:ORDER
The petitioner is the management. The matter arises under the Payment of
Gratuity Act, 1972 (for short PG Act). Aggrieved by the order passed by the
first respondent the appellate authority under the Payment of Gratuity Act in
P.G.Appeal No.2 of 2010 confirming the order passed by the second respondent
Controlling authority, dated 26.5.2009, the writ petition came to be filed. The
writ petition was admitted on 16.7.2010 and an interim stay was granted on the
same day.
2.Heard the arguments of Mr.D.Shanmugaraja Sethupathi, learned counsel
appearing for the petitioner, Mr.S.C.Herold Singh, learned Government Advocate
taking notice for respondents 1 and 2 and Mr.V.O.S.Kalaiselvan, learned counsel
appearing for the third respondent employee.
3.The third respondent was employed by the petitioner District Central
Cooperative Bank as an Assistant Manager. The third respondent reached the age
of superannuation on 31.10.2006. He was relieved from service on the same day.
But, however in the order it was indicated that his relieve was without
prejudice to the disciplinary action pending against him vide charge memo, dated
18.7.2005 as well as the surcharge proceedings, dated 14.10.2006.
4.It was also claimed by the petitioner that the third respondent had
given an indemnity bond, dated 30.10.2006, stating that in case any irregularity
in the work of the third respondent is found and if there is any finding of loss
caused to the Bank, he had agreed to have the amount recovered both from him as
well as from his legal heirs together with interest. However, when the third
respondent was not paid his gratuity after his retirement, he filed a gratuity
application before the second respondent in P.G.Case No.46 of 2008. In the
meanwhile, the petitioner Bank tried to invoke execution proceedings for
recovering the amount computed by the Surcharge Officer. A counter statement,
dated 12.08.2008 was also filed by the petitioner herein and a reference was
drawn to Section 4(6)(1)(a) of the Payment of Gratuity Act, wherein an employer
can withhold the gratuity in case the employee was terminated for any act either
by wilful omission or negligence causing damages or loss to the property
belonged to the employer.
5.Before the Controlling Authority, the third respondent examined himself
as P.W.1 and marked seven documents as Exs.P.1 to P.7. On the side of the
petitioner Bank, one Somanathan, the manager, was examined as R.W.1 and on their
side, five documents were filed and marked as Exs.R.1 to R.5. The Controlling
Authority held that the question of invoking the defence under Section
4(6)(1)(a) will arise only when termination was made against the employee for
having caused loss to the employer’s property. But, in the present case, the
petitioner therein was allowed to retire without prejudice to the disciplinary
action. Therefore, the defence in terms of Section 4(6) is not available. It was
also held that on the basis of the by-laws and service conditions available to
the petitioner Bank, no enquiry can be held after reaching the age of
superannuation. Therefore, it directed the Bank to pay the gratuity for a sum of
Rs.3,48,061/-. The petitioner bank deposited the said amount with the second
respondent on 21.8.2009.
6.The Bank had filed an appeal before the first respondent the appellate
authority under Section 7(7) of the Payment of Gratuity Act. Reliance was placed
upon the judgment of the Supreme Court in Jarnail Singh Vs. Secretary, Ministry
of Home Affairs reported in 1993 (1) SCC 47 for contending that the employer can
withhold the gratuity and adjust the dues payable to the State. Further reliance
was also placed upon a judgment of the Supreme Court in U.P.State Sugar
Corporation Ltd. Vs. Kamal Swaroop Tondon reported in 2008 (2) SCC 4. This case
was relied on for the purpose of contending that an enquiry can be conducted
even after reaching the age of superannuation as the third respondent was
entitled to get the terminal benefits. The said appeal was taken on file as P.G.
Appeal No.2 of 2010. Notice was given to the third respondent. The third
respondent had filed a counter statement. He contended that the judgment in
Jarnail Singh case (cited supra) will not apply as it arose out of the Central
Civil Services (Pension) rules, 1972, wherein specific provision has been
provided for withholding the DCRG in case of any dues to the State. Likewise,
the judgment in U.P. State Sugar Corporation Ltd. (cited supra) also have no
relevance since in that case the employee was not allowed to retire. Therefore,
the Supreme Court held the proceedings can continue. But, in the present case,
the petitioner was allowed to retire from service and there is no service
conditions to continue the disciplinary proceedings. The appellate authority had
held that termination was not due to any misconduct, in which the allegation was
that the employee had committed loss to the employer on account of his
negligence. Therefore, the judgments relied on by the petitioner Bank will no
apply to the case of the petitioner and dismissed the appeal by an order, dated
28.5.2010.
7.The two questions that arise for consideration in the present case are
as follows:
(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
(b)Whether the Cooperative society can conduct an enquiry even after an
employee had reached the age of superannuation?
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:
4.(6)Notwithstanding anything contained in sub-section (1),-
(a)the gratuity of an employee, whose services have been terminated for
any act, wilful omission or negligence causing any damage or loss to, or
destruction of, property belonging to the employer, shall be forfeited to the
extent of the damage or loss so caused;”
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 courts.
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.
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.
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 Journalist Act held that the Working Journalist 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:
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 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 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, 9th Edn., 2004, pp.133 and 134.
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 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 hand. 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.”
(Emphasis added)
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.
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 :
“33.From the records produced in this case, the following facts are
obvious:-
(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.
(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.
(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.
(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.
(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.
(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).
(g)In any event, Section 87 of the Act gives the power to proceed against
even a past employee for recovery and restoration of the financial loss caused
to the Society.” (Emphasis added)
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.
16.In view of the above, the writ petition will stand dismissed. No costs.
Consequently, connected miscellaneous petitions stand closed.
vvk
To
1.The Joint Commissioner of Labour
No.76,Keela Maarat Street,
Anjali Towers,
Madurai.
2.The Assistant Commissioner of Labour,
Sundaram Theatre Road,
K.K.Nagar, Madurai-20.