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2009 Supreme(Cal) 284
HIGH COURT OF CALCUTTA
DIPANKAR DATTA, J.
Steel Authority of India Ltd. - Appellant
Versus
Taraknath Sengupta - Respondent
W.P. No. 22336 (W) of 2008
Decided on : Apr 03, 2009
L.K. Gupta, Soumendra Ghosh
The main legal point established in this judgment is that an employer is not entitled to deduct any amount from the gratuity payable to an employee for amounts owed by the employee after retirement, as the Payment of Gratuity Act does not permit such deductions. The court emphasized that gratuity is a statutory right and cannot be impaired except as permitted by the Act.
Headnote:
The court analyzed the provisions of sections 4(6), (13), and (14) of the Payment of Gratuity Act, which deal with the payment of gratuity, attachment of gratuity, and the overriding effect of the Act, respectively. The court also examined Rule 3.2.1(c) of the Gratuity Rules of the company, which allows the company to withhold the gratuity amount for non-compliance with the company's rules, including non-vacation of company accommodation. The court concluded that the Gratuity Rules of the company, being non-statutory, could not override the provisions of the Act.
Fact of the Case:
The first respondent, an employee of the first petitioner, retired and approached the Controlling Authority under the Payment of Gratuity Act to claim his gratuity. The company resisted the claim, stating that the first respondent did not vacate the official accommodation allotted to him. The company offered to pay the gratuity after deducting certain amounts owed by the first respondent. The Controlling Authority directed the company to make full payment of gratuity. The company appealed, but the Appellate Authority affirmed the order of the Controlling Authority. The company challenged the order of the Appellate Authority in the present petition.
Finding of the Court:
The company contended that it was entitled to deduct amounts from the gratuity payable to the first respondent as per its Gratuity Rules. The company argued that there is a distinction between forfeiture and deduction, and it had not forfeited any part of the gratuity but had deducted amounts owed by the first respondent. The company relied on previous court decisions to support its contention. The court examined the provisions of the Payment of Gratuity Act and the Gratuity Rules of the company. It held that the company was not entitled to deduct any amount from the gratuity payable to the first respondent, as the Act does not permit withholding or deduction of gratuity for amounts owed by an employee after retirement. The court emphasized that gratuity is a statutory right and cannot be impaired except as permitted by the Act. The court also held that the Gratuity Rules of the company, being non-statutory, could not override the provisions of the Act. The court referred to previous court decisions that supported its view. The court concluded that no deduction from gratuity could be made by the employer that is inconsistent with the provisions of the Act.
Ratio Decidendi: The court held that the employer is not entitled to deduct any amount from the gratuity payable to an employee for amounts owed by the employee after retirement, as the Payment of Gratuity Act does not permit such deductions. The court emphasized that gratuity is a statutory right and cannot be impaired except as permitted by the Act. The court also held that non-statutory rules of the employer cannot override the provisions of the Act.
Result: The court dismissed the writ petition and confirmed the order of the Appellate Authority directing the company to make full payment of gratuity to the first respondent. The court directed the Controlling Authority to release the deposited amount of gratuity to the first respondent.
1. THE first respondent was an employee of the first petitioner (hereafter the company). On attaining the age of superannuation, he retired on 31.12.1998.
2. THE first respondent had the occasion to approach the Controlling Authority under the Payment of Gratuity Act (hereafter the Act), since the company did not release gratuity to which he was entitled in law. THE company resisted his claim. According to it, despite cessation of employer-employee relationship, the first respondent did not vacate the official accommodation that had been allotted to him. It was only on 20.4.2004 that the company could recover possession thereof. For unauthorized occupation of official accommodation, the first respondent was liable to pay penal rent amounting to Rs. 81,562.50p. That apart, he was liable to pay outstanding house rent of Rs.36/- and outstanding electricity charges of Rs.41,891/- apart from bearing the charges of a missing RRC slab worth Rs.400/-. THE company was ready and willing to pay gratuity to the first respondent after deducting a sum of Rs.l,23,889.50p from the gratuity payable; being Rs.1,99,185/-. THE net payable amount of Rs.75,295.90p was offered to the first respondent who refused to accept it. In terms of the Gratuity Rules of the company, it was authorised to deduct gratuity payable to an ex-employee if he did not vacate accommodation provided to him. It was, therefore, contended that over and above the sum which was offered to the first respondent, he was not entitled to anything more. The Controlling Authority did not accept the contention of the company and by its order dated 24.7.2006, directed the company to make full payment of gratuity i.e. Rs. 1,99,185/- within 30 days from date of the order.
3. FEELING aggrieved, the company preferred an appeal before the appropriate appellate authority under the Act. The Appellate Authority by its order dated 28.2.2008 dismissed the appeal and confirmed the order of the Controlling Authority.
4. THE order of the Appellate Authority affirming the order of the Controlling Authority, directing payment of full amount of gratuity to the first respondent without making any deduction forms the subject matter of challenge in the present petition. Despite service of notice, none has appeared either for the first respondent or the authorities under the Act who are the other respondents in the petition.
5. MR. Gupta, learned Senior Advocate representing the company contended that in terms of its Gratuity Rules, which had not been questioned by the first respondent, the company was entitled to deduct amounts on account of penal rent, electricity charges, and other dues from the gratuity payable to the first respondent and, therefore, the Controlling Authority and the Appellate Authority under the Act erred in law in allowing the application filed by the first respondent and dismissing the company's appeal respectively.
6. REFERRING to the provisions of section 4(6) of the Act, he contended that forfeiture of the whole or part of gratuity payable to an employee is permissible in terms thereof; however, since the first respondent's service had not been terminated on any of the grounds referred to in section 4(6), the company had not forfeited any part of gratuity payable to him but had proceeded to deduct from the gratuity the amounts that were due to it from the first respondent. A distinction, according to him, has to be drawn between a forfeiture and a deduction. He placed Black's Law Dictionary which defines forfeiture as : "something to which the right is lost by the commission of a crime or fault or the losing of something by way of penalty". Elaborating on this point, he further contended that the company had not forfeited any part of gratuity payable to the first respondent; instead, it allowed him 100% of gratuity payable to him but has then deducted a portion therefrom on account of dues which the first respondent owes to the company. Since the company has proceeded to
