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1997 Supreme(Pat) 223
PATNA HIGH COURT
S.K.Chattopadhyaya, J.
Project Development India Limited
Versus
Union Of India
Criminal Writ Jurisdiction No. 2462 of 1994 ;
Decided On : MARCH 18, 1997
An employer can take reasonable steps to ensure that its quarters are vacated by retired employees, including withholding gratuity.
Headnote:
GRATUITY - PAYMENT - WITHHOLDING - OCCUPATION OF QUARTER AFTER RETIREMENT - LEGALITY - EMPLOYER'S RIGHT TO WITHHOLD GRATUITY - CIRCULAR ISSUED BY COMPANY - VALIDITY - PAYMENT OF GRATUITY RULES (CENTRAL RULES), 1972 - RULE 10(1).
Fact of the Case:
The petitioner company challenged the order of the Controlling Authority directing it to pay gratuity to the respondent, a retired employee, who continued to occupy the company's quarter after retirement. The company had a circular policy of withholding gratuity until the employee vacated the allotted quarter.
Finding of the Court:
The court held that the company's circular policy of withholding gratuity until the employee vacated the allotted quarter was valid and reasonable. The court noted that the company had a legitimate interest in ensuring that its quarters were available for current employees and that the continued occupation of quarters by retired employees caused hardship to those waiting for allotment.
Issues: Whether the company's circular policy of withholding gratuity until the employee vacated the allotted quarter was valid and reasonable.
Ratio Decidendi: The court relied on the following legal principles in reaching its decision: * An employer has a legitimate interest in ensuring that its quarters are available for current employees. * The continued occupation of quarters by retired employees causes hardship to those waiting for allotment. * A company can take reasonable steps to ensure that its quarters are vacated by retired employees, including withholding gratuity.
Final Decision: The court allowed the petition and set aside the order of the Controlling Authority. The court held that the company was justified in withholding gratuity from the respondent until he vacated the company's quarter.
S.K.Chattopadhyaya, J.
1. This application is directed against the judgment dated 11.8.1994 and the order dated 12.8.1994 passed by respondent No. 2 directing the petitioner/management to pay the amount of gratuity along with interest at the rate of 10%.
2. Inspite of several notices both under ordinary process and registered post, the respondent No. 3 did not respond and, as such, by order dated 29.6.1995 notice on him was deemed to have been served.
3. It is not in dispute that the petitioner company is a sister concern of the Fertilizer Corporation of India and the quarters belong, to FCI which are given to the employees of the petitioner company. The rent for such quarters are being deducted by the petitioner company from its employee and sent to the FCI. But as the respondent No. 3 has retired and occupying the quarter without payment of rent. The petitioner-company has to pay the rent to the FCI.
4. It appears that the respondent No. 3 submitted an application on 27.9.1993 under Sub-rule (1) of Rule 10 of Payment of Gratuity Rules (Central Rules,) 1972 for a direction to his employer to make payment of gratuity amount to him. Respondent No. 3 retired on 1.12.1990, and, as such, he was entitled for the said amount without any hindrance. The management took a plea that respondent No. 3 was an employee under the exempted category and he is governed by the companys own scheme of payment of gratuity. The management/ petitioner though admitted that respondent No. 3 was entitled to get the amount of gratuity under the companys scheme but the same was not paid because even after his retirement, respondent No. 3 has refused to give vacant possession of the quarter which was allotted to him when he was in service. Respondent No. 2 rejecting the plea of the petitioner-company, held that non-vacation of quarter cannot be a ground for refusal to pay the amount of gratuity.
5. It appears that the petitioner/company has its own Death-cum-Retirement Gratuity Scheme which provides that on superannuation the whole time employee including the Chief Executive and full time Financial Directors and Ex-Service man will be entitled for gratuity for good, efficient and faithful service. A circular dated 6.6.1983 was issued by the company which, inter alia, contemplates that till the allotted quarter/bunglow is vacated by the employee, after termination of services, the terminal dues of retired/deceased employee including gratuity etc. shall be withheld in full. This circular was issued by the company on consideration of the factual aspect that even after retirement or cessation of extension, retention of allotted quarters/bunglow was increasing at alarming rate. This has resulted in hardship to the employer who are waiting for years together on the line for due allotment but the management is helpless in providing them suitable quarters/bunglows because the retired employees are not vacating their allotted quarters.
6. On this background the said circular was issued directing therein to produce a certificate in writing from the Administrative Department showing therein that the Quarter has been vacated. This circular further provides that apart from taking this step of withholding the amount usual practices of imposing of penal rent and other legal proceedings under the Public Premises (Acquisition of unauthorized encroachment) Act can be taken against such employees.
7. The question as to whether for not vacating an allotted quarter by a retired employee, gratuity amount can be withheld, has been dealt with by this Court times without number. In the case of Mukh Ram Sharma V/s. Project and Development India Ltd. and Ors., 2003 (4) JCR 706 (Pat)(RB) a Division Bench of this Court by order dated 13.4.1993 passed in CWJC No. 3022/92(R) has, inter alia, held as follows :-
- "We are of the opinion that after superannuation from service, the petitioner had no legal right to continue in the quarters and, therefore, he is liable to pay rent inc
