Retirement Dues Issues


I superannuated from Bank as General Manager. I served the bank for more than 36 years. A Charge Sheet was served under major penalty proceeding on the day of my retirement. Orders for Invocation of Regulation 20 (3) (iii) was passed and I was not paid.

  1. Gratuity
  2. Leave encashment
  3. Commutation of Pension

Some of my other colleagues have also not been paid their dues on account of similar/other reasons.

This gave me an opportunity to understand the subject in greater details. Having studied it now, I thought of starting a debate on various issues involved with the sole aim of bringing clarity on the subject and in case any corrective action is needed, let the authorities/concerned persons take appropriate decision to reduce the suffering of these employees at least financially. Their mental suffering in these cases is relatively more difficult to handle.

I shall try my best to raise issue without my own prejudice based on the Circular/ Regulations/ Legal Cases & the relevant prevailing law, but still there is a possibility that I may not be able to present the other view. I shall therefore be too happy to receive a contrary view from anybody. After discussing the issue, I shall also propose to suggest an action which I feel needs to be taken by the Management/aggrieved employee.

Issue: Payment of Gratuity - Retired Employees facing Court Cases:

Bank had NOT been paying Gratuity to the Employees having a judicial proceeding case pending against him as per provision of Section 46(1) & (2) of Employees’ Pension Regulation 1995.

Many Employees of the Bank are having cases against them in a court of law filed by the Bank’s Customer/Police/CBI and in some cases by family members of employees on account of wide range of issues.

A few of these employees had gone to Court/Controlling Authority under the Gratuity Act against the Bank and the Bank paid Gratuity to them based on the decision of the Court/Controlling Authority. However, no attempt was made either to pay gratuity in earlier cases or to at least start paying in future cases till Jan2014.

Payment of Gratuity is governed by Employees (Pension) Regulations, Officers Service Regulations & Payment of Gratuity Act.

The method of calculation of interest for delay, forfeiture of Gratuity is different in Gratuity Act, Award / Bipartite Settlement and Officers Service Regulations.

The Gratuity Act also provides that employees’ request to receive better terms of gratuity under any Award or Settlement with the employer shall be protected. The employee should therefore be paid higher amount of gratuity payable either in Act or Award Settlement.

It is clear that provision of Payment of Gratuity Act 1972 shall have an overriding effect on all other provisions relating to gratuity. In view of the plain language of Section 14, every eligible employee is notwithstanding anything inconsonant contained in any other enactment or instrument or contract, is entitled to receive gratuity.

Provision 14 of the Act will, therefore, have overriding effect over the Pension Regulation 46 (2) non-payment of gratuity will deprive the employee of his legal right culminated on the eve of his superannuation, Bank was not having any right to withhold the gratuity.

Section 7 (3A) of the Act says that if the gratuity is not paid within 30 days employer shall pay interest on the delayed period of payment @ 10% p.a. simple.

Accepting these judgements of Controlling Authority/Appellate Authority/Courts, Bank started paying Gratuity to the employees as per provision of the Gratuity Act 1972, where the employees were facing judicial proceedings &cases were pending in Court of Law for a considerable period on one to one basis. Some of these cases were pending for more than a decade & the employee got the interest for the intervening period also.

Suggested Action: This decision of the Bank to pay Gratuity to employees facing judicial proceedings need not only be publicized but also circulated to all employees to boost the morale of retiring employees. Simultaneously, this shall help the Bank making timely payment to retired/retiring employees by making the various authorities sanctioning the Gratuity Proposals aware of the guidelines.

Aggrieved Employees: In case of any Retired employee facing judicial proceedings (Court case) against him where the gratuity is not paid so far should make a representation to the concerned Bank giving his Employee Number, Date of Retirement, Details of case against him, Last Date of hearing, Next Date of hearing along with Purpose thereof.

Offices where such employees who are facing any judicial proceedings (Court Case) against them and due to retire within one year should move for sanction of Gratuity Proposal by submitting a reference to Bank well in advance so that the payment is made in time. Such employees should be paid Gratuity as per Provisions of Gratuity Act and not as per Service Regulations. If the case is not likely to be decided before retirement, it is better to have the Gratuity as per Act rather than not having anything as per Regulations. It may be noted that as of now the limit in the Act is maximum of Rs.10 lacs and there is no limit under the Regulations.

Issue: Payment of gratuity as per Gratuity Act 1972 to Officer in respect of whom Section 20(3) is invoked.

Bank has started paying gratuity as per Gratuity Act 1972 to officers facing judicial proceedings based on various judgments irrespective of the provision of section 46(1) & (2) of Pension Regulations1995 as the provision 14 of the Gratuity act has overriding effect.

The same sections 46(1) & (2) are being applied in respect of officers in respect of whom section 20(3) is being invoked. Hence, taking the same logic they are entitled to payment of gratuity as per the Gratuity Act.

Officers in respect of whom section 20(3) is invoked may be paid gratuity as per the provisions of Payment of Gratuity Act 1972 if they so desire.

Banks has however, not accepted this argument so far &continues to withhold the gratuity till the Disciplinary action is finalized. The officer is entitled to gratuity once the Disciplinary action is finalized. The officer is entitled to interest on the gratuity amount @10% simple for the period from the date of retirement till the date of payment of gratuity.

Officer in respect of whom section 20(3) is invoked can claim Gratuity under the Act by approaching the Controlling Authority under the Payment of Gratuity Act by filing Form N with the Asst. Labour Commissioner under whose jurisdiction he falls. 

Issue: Payment of Gratuity in cases where the service of an employee is terminated by way of Compulsory Retirement, Dismissal & Removal.

Gratuity is payable even in such Cases of termination of Services by way of CRS, Dismissal & Removal, unless a financial loss is caused to the bank AND the competent authority has passed an Order for forfeiture of gratuity.

Section4 (6) of the gratuity act provides -

- 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;

- 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 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.

- There shall be NO forfeiture of Gratuity on dismissal/removal from service of any workman (award staff) on account of misconduct, except in cases where misconduct causes financial loss to the bank and in that case to that extent only.

- Incases where gratuity is to be forfeited under Sec. 4(6)of the Gratuity Act, the competent authority is required to pass Speaking Order in respect of forfeiture of the gratuity after issuing show cause notice to the concerned employee.

- It is, therefore, a statutory obligation to either pass an Order for Sanction of the payment of Gratuity or Forfeiture of Gratuity.

To sum up, the Gratuity Sanction / Forfeiture Proposal is, therefore, to be submitted in all such cases along with the copy of the Speaking Order passed for the gratuity forfeiture Incumbents In charge shall be personally accountable for any delay in settlement of terminal dues at the branch level. If the delay is at other levels, concerned Dealing Officer and immediate next senior officer shall be jointly held accountable for the same.

Suggested Action: Officer falling under this category who has neither been paid the gratuity nor received any notice of forfeiture of gratuity can approach the respective Circle Offices& claim Gratuity under the Act. In case no response is received, officer may approach the Controlling Authority under the Payment of Gratuity Act by filing Form N with Asst Labour Commissioner under whose jurisdiction he falls.

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Published in Labour & Service Law
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