Withholding the payment of gratuity due to disciplinary proceedings and dismissal after superannuation - Landmark Cases!


Court :
Apex Court

Brief :
Apex Court held that in view of Rule 34.2 of the CDA Rules, even a retired employee who was permitted to retire on attaining the age of superannuation can be subjected to major penalty, provided the disciplinary proceedings were initiated while the employee was in service and there is no inconsistency between sub­section 6 of Section 4 of the Payment of Gratuity Act and Rule 34.3 of the CDA Rules.

Citation :
Jaswant Singh Gill v. Bharat Coking Coal Ltd., reported in (2007) 1 SCC 663

In a big blow to employees, Apex Court (2:1) by majority held that Payment of Gratuity can be withhold if the disciplinary proceedings were pending and further holds that employee can be dismissed from service if disciplinary proceedings were initiated before retirement and punishment even of dismissal can be imposed after superannuation from service.

Brief facts of the case is that employee was posted as Chief GM (Production) at Rajmahal area under Mahanadi Coalfields Limited and Conduct, Discipline & Appeal Rules, 1978 (hereinafter referred to as the “CDA Rules”) were applicable in the instant case. There was very serious allegation of misconduct alleging dishonestly causing coal stock shortages amounting to Rs.31.65 crores and thereby causing substantial loss to the employer. Employee was suspended and departmental enquiry was pending and on completion of 60 years of age, employee was superannuated. Then employee/respondent filed application before Controlling Authority under Payment of Gratuity for release of Gratuity as he was superannuated from service. However, controlling authority held that matter was premature. Then it was challenged before Ld. Single Judge High Court who held that Writ Petition not maintainable. Then the same was challenged before Division Bench of High Court. The Division Bench of the High Court has held that the writ petition was maintainable. On merits and relying upon the decision of Apex Court in the case of Jaswant Singh Gill v. Bharat Coking Coal Ltd., reported in (2007) 1 SCC 663, the High Court ruled that the disciplinary proceedings against the respondent were initiated prior to the age of superannuation. However, the respondent retired from service on superannuation and hence the question of imposing a major penalty of removal from service would not arise. Division Bench of the High Court has further held that the statutory right accrued to the respondent to get gratuity cannot be impaired by reason of the Rules framed by the Coal India Limited which do not have the force of a statute.

Judgment of Division Bench was challenged by Employer before Apex Court

Arguments by Appellant/Employer:

  1. Rule 34.3 authorises and/or permits the disciplinary authority to withhold the payment of gratuity, or order the recovery from gratuity of the whole or part of any pecuniary loss caused to the company if such an employee has been guilty of offences/misconduct as mentioned in sub­section (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.

  2. Rule 34.3 of the CDA Rules is in conformity and/or in consonance with sub­section (6) of Section 4 of the Payment of Gratuity Act, 1972 and there is no conflict between the two

  3. State Bank of India v. Ram Lal Bhaskar, reported in (2011) 10 SCC 249. It is submitted that while considering the pari materia provisions under the State Bank of India Officers’ Service Rules, 1992, namely, Rule 19(3), this Court has confirmed the order of dismissal of an employee which was passed after his retirement.

Apex Court held that in view of Rule 34.2 of the CDA Rules, even a retired employee who was permitted to retire on attaining the age of superannuation can be subjected to major penalty, provided the disciplinary proceedings were initiated while the employee was in service and there is no inconsistency between sub­section 6 of Section 4 of the Payment of Gratuity Act and Rule 34.3 of the CDA Rules. Question of the effect of deemed fiction of continuance of employee in service after the employee had attained the age of superannuation was considered in D.V. Kapoor v. Union of India, (1990) 4 SCC 314. Rule 9(2) of the Civil Services Pension Rules, 1972, came up for consideration. Wherein it was held that merely because the appellant was allowed to retire,the government is not lacking jurisdiction or power to continue the proceedings already initiated to the logical conclusion thereto. Reliance was also placed by Apex Court in reported cases i.e. Ramesh Chandra Sharma v. Punjab National Bank & Anr.(2007) 9 SCC 15, Union of India v. Ajoy Kumar Patnaik(1995) 6 SCC 442, V. Padmanabham v. Government of Andhra Pradesh & Ors. (2009) 15 SCC 537, State of Maharashtra v. M.H. Mazumdar (1988) 2 SCC 52, State of West Bengal & Ors. v. Pronab Chakraborty(2015) 2 SCC 496, State Bank of India v. A.N. Gupta & Ors.(1997) 8 SCC 60, Takhatray Shivadattray Mankad v. State of Gujarat (1989)Supp.2 SCC 110. Decision in Jaswant Singh Gill (supra) is overruled.

 

ronak
on 01 June 2020
Published in Labour & Service Law
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