1. Compulsory retirement of bank officer — Denial of terminal benefits including gratuity and employer's provident fund contribution — Challenge to forfeiture based on alleged financial loss. (Para 1 , 2 , 3 , 4 )
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2023 Supreme(SC) 1110
SUPREME COURT OF INDIA
J.K. MAHESHWARI, K.V. VISWANATHAN, JJ.
Jyotirmay Ray – Appellant
Versus
The Field General Manager, Punjab National Bank and Others – Respondents
Civil Appeal No. 6611 of 2015
Decided On : 06-11-2023
Important Points
IMPORTANT POINTS
(1) Forfeiture of gratuity may be directed to the extent of damage or loss so caused or destruction of property belonging to employer.
(2) Provisions of Gratuity Act have superiority over all other provisions of Regulations.
(1) Forfeiture of gratuity may be directed to the extent of damage or loss so caused or destruction of property belonging to employer.
(2) Provisions of Gratuity Act have superiority over all other provisions of Regulations.
Subject
Employment Law - Employee Benefits
Act Referred
GRATUITY ACT: S.4
PAYMENT OF GRATUITY ACT: S.4(1)
Punjab National Bank Employees Provident Fund Trust Rules: R.13
Punjab National Bank Officer Employees Discipline and Appeal Regulations: Reg.4
PUNJAB NATIONAL BANK OFFICERS SERVICE REGULATIONS: Reg.38, Reg.46(2), Reg.46
PAYMENT OF GRATUITY ACT: S.4(1)
Punjab National Bank Employees Provident Fund Trust Rules: R.13
Punjab National Bank Officer Employees Discipline and Appeal Regulations: Reg.4
PUNJAB NATIONAL BANK OFFICERS SERVICE REGULATIONS: Reg.38, Reg.46(2), Reg.46
Headnote
(A) Punjab National Bank (Officers’) Service Regulations, 1979 – Regulation 38 – Compulsory retirement – Denial of terminal benefits – Bank shall have first lien on contributions made by it to individual account of any member together with interest thereon or accretions thereto, to recover any loss, damages and liabilities, sustained any time by Bank or incurred by reasons of any dishonest act, deed or omission or gross misconduct of member – Board of Directors has not afforded an opportunity to appellant on the issue of causing loss or damage to Bank, prior to passing of the resolution of appropriation of contribution of Bank from provident fund account of appellant – Findings recorded by Single Judge with regard to payment of Bank’s contribution of provident fund is equitable, just and is liable to be upheld, setting aside findings of Division Bench. (Paras 10 and 13)
(B) Payment of Gratuity Act, 1972 – Section 4 – Punjab National Bank (Officers’) Service Regulations, 1979 – Regulation 46 – Withholding of gratuity – Forfeiture of gratuity may be directed to the extent of damage or loss so caused or destruction of property belonging to employer – In twin situations where termination is due to riotous or disorderly conduct or involvement of employee in a criminal case involving moral turpitude, gratuity shall be wholly forfeited – Provisions of Gratuity Act have superiority over all other provisions of Regulations – Facts of case at hand are not a case of riotous behaviour of appellant or his involvement in any criminal case – While passing an order of withholding of gratuity, opportunity of hearing has not been afforded to appellant – Act of forfeiture of gratuity is not envisaged in present case as provisions are silent on aspect of forfeiture in case of compulsory retirement – Division Bench erred in reversing Judgment of Single Judge – Judgment rendered by Division Bench set aside. (Paras 17, 19, 20, 23, 24, 26 and 27)
Facts of the case:
Appellant, who was compulsorily retired as Sr. Manager, was denied benefit of leave encashment, employer’s contribution of provident fund, gratuity and pension by Punjab National Bank. On rejection of his representation by the authorities, a challenge was made by filing a writ petition before the High Court. Writ petition was contested by the Bank, taking the plea that due to irregularities in granting loans and cash credit facilities under Credit Guarantee Fund Trust Scheme for Micro & Small Enterprises and otherwise in routine loans, loss was caused to Bank.
Only question that falls for consideration is whether the denial of employer’s contribution of Provident Fund and non-payment of gratuity to appellant because of order of compulsory retirement, as directed by impugned order, is justified or not?
Findings of Court:
Taking a holistic view of the 1977 Regulations, 1979 Regulations, Circular dated 16.01.1997 and facts on record, present civil appeal deserves to be allowed.
Result : Appeal allowed.
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Mr. Irshad Ahmad, AOR
For the Respondent(s): Mr. Rajesh Kumar Gautam, AOR Mr. Anant Gautam, Adv. Mr. Samir Mudgil, Adv. Mr. Sumit Sharma, Adv. Ms. Anani Achumi, Adv. Mr. Dinesh Sharma, Adv. Ms. Shivani Sagar, Adv.
For the Appellant(s) : Mr. Irshad Ahmad, AOR
For the Respondent(s): Mr. Rajesh Kumar Gautam, AOR Mr. Anant Gautam, Adv. Mr. Samir Mudgil, Adv. Mr. Sumit Sharma, Adv. Ms. Anani Achumi, Adv. Mr. Dinesh Sharma, Adv. Ms. Shivani Sagar, Adv.
Table of Contents
2. Whether terminal benefits can be forfeited based on unilateral board resolutions without quantification of loss in the charge-sheet or enquiry report. (Para 6 , 7 , 8 )
3. Forfeiture of PF and gratuity requires proof of quantifiable loss; unilateral board resolutions without notice to the employee are legally unsustainable. (Para 10 , 12 , 13 , 24 , 25 )
4. The Payment of Gratuity Act overrides inconsistent service regulations; forfeiture of gratuity requires specific findings of loss or moral turpitude. (Para 18 , 19 , 22 , 25 )
5. Appeal allowed — Division Bench order set aside — Findings of Single Judge directing payment of gratuity and provident fund contribution affirmed. (Para 27 )
6. Can a bank forfeit the employer's contribution to a provident fund based on a board resolution?
Yes, if there is a lien for loss due to dishonest acts or gross misconduct. However, such forfeiture requires quantification of loss and adherence to natural justice, including providing the employee an opportunity to respond before the resolution is passed. (Para 10 , 13 )
7. Which prevails when bank service regulations and the Payment of Gratuity Act are inconsistent?
The Payment of Gratuity Act prevails. Section 14 of the Act grants it superiority over any other enactment, instrument, or contract that is inconsistent with its provisions. (Para 18 , 19 )
8. Under what conditions can gratuity be legally forfeited?
Gratuity can be forfeited to the extent of damage or loss caused by willful omission or negligence, or wholly forfeited for riotous conduct, violence, or offences involving moral turpitude committed during employment. (Para 16 , 17 , 22 )
9. Does the penalty of compulsory retirement automatically lead to the forfeiture of gratuity?
No. While compulsory retirement is a major penalty, it does not automatically result in forfeiture of gratuity unless the termination is based on specific grounds like moral turpitude or quantifiable loss as per the Gratuity Act and relevant bank circulars. (Para 21 , 22 , 26 )
JUDGMENT :
J.K. MAHESHWARI, J.
1. Appellant, who was compulsorily retired as Sr. Manager, was denied the benefit of leave encashment, employer’s contribution of provident fund, gratuity and pension by the Punjab National Bank (hereinafter referred to as the “Bank”). On rejection of his representation by the authorities, a challenge was made by filing a writ petition before the High Court. The said writ petition was contested by the Bank, taking the plea that due to irregularities in granting loans and cash credit facilities under the Credit Guarantee Fund Trust Scheme for Micro and Small Enterprises (for short “CGTMSE”) and otherwise in routine loans, loss was caused to the Bank.
2. The background facts were that earlier, the appellant was charge-sheeted on 16.10.2009 and also served with a supplementary charge-sheet on 20.11.2009. On submitting of reply by the appellant, departmental enquiry was conducted and the enquiry report dated 11.01.2010 was submitted to the disciplinary authority who found him guilty and vide order dated 29.01.2010, penalty of compulsory retirement was inflicted. The appeal filed by the appellant was also dismissed by appellate authority on 28.07.2010.
3. The appellant by filing the writ petition did not challenge the order of compulsory retirement and only claimed the terminal benefits i.e. leave encashment, employer’s contribution of provident fund, gratuity and pension. In the meantime, the review filed by the appellant before the appellate authority was also dismissed on 06.01.2011. During pendency of the writ petition, the Board of Directors of the Bank vide resolution dated 20.12.2010 refused to give employer’s contribution of provident fund to the tune of Rs. 8,80,085/to the appellant. Learned Single Judge vide order dated 03.04.2012 allowed the said writ petition in part and directed the Bank to release the employer’s contribution of the provident fund as well as gratuity with interest @ 8.5% p.a. and leave encashment in terms of Regulation 38 of the Punjab National Bank (Officers’) Service Regulations, 1979 (for short “1979 Regulations”). It was also clarified that the dues be calculated from the date of compulsory retirement and be released within a period of eight weeks from the date of communication. Learned Single Judge denied the benefit of pension because the appellant was not an in-service candidate when the scheme for shifting to the pension regime became operational.
4. On filing the Special Appeal by the Bank, the Division Bench allowed the same in part maintaining the order of grant of leave encashment, but set-aside the grant of provident fund (Bank’s contribution) and gratuity on the pretext that by an act of the appellant, loss has been caused to the Bank.
5. In view of the foregoing facts, grant of leave encashment to appellant is no more res integra. The appellant is not challenging the refusal to grant pension as he was not an in-service candidate at the time of change of scheme. The only question that falls for consideration is whether the denial of employer’s contribution of Provident Fund and nonpayment of gratuity to appellant because of the order of compulsory retirement, as directed by the impugned order, is justified or not?
6. Mr. Irshad Ahmad, learned counsel appearing for the appellant contends that Rule 13 of the Punjab National Bank Employees’ Provident Fund Trust Rules (for short “P.F. Trust Rules”) gives first lien to the Bank on the contributions made by it to recover any loss, damages and liabilities which the Bank may at any time sustain or incur by reasons of any dishonest act, deed or omission or gross misconduct by a member of the provident fund. It is submitted that in the main charge-sheet or in the supplementary charge-sheet, it is not alleged that due to grant of loan under the scheme or in other loans, any loss has been caused to the Bank. In the report of enquiry, finding of loss having been caused to the Bank has not been recorded. Learned counsel conten
