2020 Supreme(SC) 381

SUPREME COURT OF INDIA
Arun Mishra, M.R. Shah, Ajay Rastogi, JJ.
Chairman-cum-Managing Director, Mahanadi Coalfields Limited – Appellant
Versus
Sri Rabindranath Choubey – Respondent
Civil Appeal No. 9693 of 2013
Decided on : 27-05-2020

IMPORTANT POINTS
(1) Employer has a right to withhold gratuity during pendency of disciplinary proceedings.
(2) Disciplinary authority has powers to impose penalty of dismissal/major penalty even after employee attaining age of superannuation where disciplinary proceedings were initiated while employee was in service.

Headnote:

Per M.R. Shah, J. (For Himself and Arun Mishra, J.)(Majority View)

(A) Payment of Gratuity Act, 1972 – Section 4 – Conduct, Discipline & Appeal Rules, 1978 – Rule 34.3 – Withholding of amount of gratuity – Pendency of disciplinary proceedings – Once it is held that a major penalty which includes dismissal from service can be imposed, even after employee has attained age of superannuation and/or was permitted to retire on attaining age of superannuation, provided disciplinary proceedings were initiated while employee was in service, sub-section 6 of Section 4 of Payment of Gratuity Act shall be attracted and amount of gratuity can be withheld till disciplinary proceedings are concluded – Even otherwise, Rule 34.3 of CDA Rules permits withholding of gratuity amount during pendency of disciplinary proceedings, for ordering recovering from gratuity of whole or part of any pecuniary loss caused to company if have been guilty of offences/misconduct – Rule 34.3 for withholding of such a gratuity would be subject to provisions of Section 7(3) and 7(3A) of Payment of Gratuity Act, 1972 in the event of delayed payment in case of an employee who is fully exonerated – Rule 34.3 of CDA Rules is in consonance with sub-section (6) of Section 4 of Payment of Gratuity Act and there is no inconsistency between sub-section (6) of Section 4 of Payment of Gratuity Act and Rule 34.3 of CDA Rules. (Paras 9 and 9.1)

(B) Conduct, Discipline & Appeal Rules, 1978 – Rule 34.2 – Payment of Gratuity Act, 1972 – Section 4 – Dismissal from service after superannuation – There is a deemed fiction created by rule concerning continuance of employee in service during departmental proceeding – Legal fiction is required to be given a logical effect – It depends upon rules in a case where a departmental inquiry was instituted while employee was in service, proceedings had been continued, under Rule what kind of punishment can be imposed after employee had attained age of superannuation – An inquiry has to be taken to a logical end – An employee cannot get rid of pending departmental proceedings by efflux of time – When an employee is deemed to be in service, punishment as prescribed under Rules can be imposed – Rule 34.2 of CDA Rules holds field and is binding, in absence of any statutory interdiction made by any other provision regarding continuance of inquiry and for taking it to a logical end in terms of deemed continuation of employee in service – In case after superannuation of employee there cannot be any dismissal i.e., termination of services as contemplated in Section 4(6), then there can be no recovery of pecuniary loss caused by employee or forfeiture of gratuity wholly or partially as that can only be done in event of termination of services on charges found established – Such an interpretation would render continuance of inquiry otiose and would defeat public policy and provisions of Act of 1972 – Recovery of loss or forfeiture is one of punishments which depends on exigency of termination by way of dismissal as mandated by Section 4(6) – To give effect to provisions of Act, punishment of dismissal can be imposed in view of Rule 34.2, otherwise it would defeat intendment of provisions contained in Section 4(6)(a) and 4(6)(b) of Act of 1972 – Recovery is in addition to a punishment that can be imposed after attaining age of superannuation. (Paras 10.1, 10.5, 10.7, 10.8, 10.15, 10.19 and 10.21)

(C) Service Law – Dismissal – In case of termination of service there is a distinction as to whether it is a simpliciter termination or a punitive dismissal – This court can lift veil and find out real nature of termination whether it is simpliciter termination or punitive dismissal. (Paras 10.23 and 11)

(D) Payment of Gratuity Act, 1972 – Section 4 – Conduct, Discipline & Appeal Rules, 1978 – Rule 34.2 – Dismissal from service after superannuation – Withholding of amount of gratuity – Section 4(1) deals with normal superannuation and does not cover cases where departmental inquiry is pending, or dismissal had been ordered – It did not interdict departmental inquiry if it was initiated while employee was in service and continued after superannuation as if employee continued in service – Section 4 of Payment of Gratuity Act, 1972 contains no bar, and purposive construction has to be made of provisions contained in Section 4(1) – Section 4(6) provides where particular misconduct is found established, how gratuity to be dealt with, but provisions cause no fetter on power of an employer to impose a punishment of dismissal – It makes no provision in particular with respect to departmental inquiry but rather buttresses power of an employer to forfeit gratuity wholly or partially or to recover loss provided in Section 4(6) – Neither provisions in Section 4(1) nor Section 4(6) of Payment of Gratuity Act create embargo on departmental inquiry and its continuance after superannuation – Provisions of Rule 34.2 of CDA Rules would prevail – Even executive instruction can hold field in absence of statutory rules and are equally binding – Appellant-employer has a right to withhold gratuity during pendency of disciplinary proceedings and disciplinary authority has powers to impose penalty of dismissal/major penalty upon respondent even after his attaining age of superannuation, as disciplinary proceedings were initiated while employee was in service – Impugned judgment and order passed by High Court cannot be sustained and same deserves to be quashed and set aside and accordingly quashed and set aside and order passed by Controlling Authority restored. (Para 10.25, 10.32 and 11)

Facts of the Case:

Questions of law which fell for consideration of this Court are, (i) as to whether is it permissible in law for the appellant (employer) to withhold the payment of gratuity of the respondent (employee), even after his superannuation from service, because of the pendency of the disciplinary proceedings against him?, and (ii) where the departmental enquiry had been instituted against an employee while he was in service and continued after he attained the age of superannuation, whether the punishment of dismissal can be imposed on being found guilty of misconduct in view of the provisions made in Rule 34.2 of Conduct, Discipline & Appeal Rules, 1978?

Findings of the Court:

Substantive penalties provided under the schedule of penalties referred to under Rule 27 could be inflicted on a delinquent employee while he is in service but in case where the delinquent employee stood retired or superannuated from service pending disciplinary inquiry, at least either of the substantive penalties provided under Rule 27 are not available to the disciplinary authority to be inflicted with retrospective effect but at the same time punishment of forfeiture of gratuity if held guilty for misconduct or negligence to the extent damage or pecuniary loss has been caused to the employer can be inflicted upon the delinquent in terms of Rule 34.3 of Rules 1978 read with sub-section (6) of Section 4 of the Act, 1972 and in case the delinquent employee stands exonerated he became entitled for gratuity for the delay in payment in terms of Sections 7(3) and 7(3A) of Act, 1972 and as a matter of caution, it should not be presupposed that where the disciplinary inquiry remain pending and could not be concluded while the delinquent employee was in service in due course of time, he shall be held guilty and punished under the scheme of Rules, 1978.

Result : Appeal allowed.