Excess payments made to employees can be deducted from the balance payable, and Section 13 of the Payment of Gratuity Act does not prevent such deductions.

SHIV NARAYAN DHINGRA, J, J.

( 1 ) BY this writ petitioner, the petitioner has challenged the legality of order dated 8th July, 2004, passed by the Appellate Authority under Payment of gratuity Act (herein after referred to as 'the Act') whereby the petitioner was directed to pay 10% simple interest on the amount of gratuity already paid and also to pay an amount of Rs. 12549. 00 which was deducted by the petitioner out of gratuity as an excess payment already made to the petitioner.

( 2 ) BRIEFLY, the facts are that the respondent No. 2 was working with the petitioner corporation. He sought voluntary retirement under the Voluntary retirement Scheme (herein referred as VRS), promulgated by the petitioner. He received all benefits to which he was entitled under the scheme. By inadvertent mistake he was paid an excess amount of Rs. 12549. 00 which represented one month's notice pay to which he was not entitled as per rules. At the time, when the scheme was promulgated, it was made known to all the employees, who were seeking vrs that the payment of gratuity shall take around 8 months' time because of the financial implications.

( 3 ) THE respondent No. 2 accepted VRS on 23. 3. 2001. He was paid gratuity of rs. 1,78,536. 00 on 10th April, 2002. He was paid another amount of Rs. 5206. 00 on 19. 4. 2002 towards gratuity. He made an application before Controlling Authority under the Act, alleging that his due gratuity amounted to Rs. 1,90,905. 00 and he was not paid due gratuity on due date. The VRS was accepted on 23/3/2001, while he was paid gratuity after about 13 months. He claimed the amount of Rs. 12549. 00 and interest on the the entire amount for delayed period. His plea was rejected by the Controlling Authority on the ground that he had already received out of rs. 12,543. 00, a sum of Rs. 5,206. 00. He was made excess payment while dues were paid to him after VRS. He was not entitled to claim interest since he had not completed legal formalities as per rule 10 (1) of PG (Central Rules, 1972 ).

( 4 ) AGAINST the order of the Controlling Authority, the respondent No. 2 preferred an appeal before the Appellate Authority and the impugned order was passed by the Appellate Authority. A perusal of the order would show that the appellate Authority did not take into account the amount already paid to the respondent. It was not disputed by the respondent No. 2 that he received an amount of Rs. 1,78,356. 00 on 10/4/2002 and another amount of Rs. 5206. 00 on 19. 4. 2002 but Appellate Authority again ordered payment of Rs. 12,543. 00. The appellate Authority observed that as per Section 13 of the Act, the deduction of rs. 12549. 00 could not be made from the gratuity payable to the respondent No. 2 and the action of deducting excess amount already paid to the respondent No. 2, was therefore bad. It was further observed by the Appellate Authority that the gratuity becomes payable within 30 days from the date of retirement and no condition can be read in the rules of making an application by the employee or any other legal formality to be completed. Therefore, the Appellate Authority directed 10% interest to be paid to the respondent on the amount of delayed payment.

( 5 ) IT is undisputed fact that the respondent No. 2 had sought VRS under the scheme which was promulgated as per directions of Central Government. It is settled law that where a person accepts VRS under a scheme, the retirement gives effect to contractual obligations. The VRS was promulgated by the petitioner/corporation and other public sector undertakings to shed extra burden of employees and to make the enterprises economically viable. It was one of the conditions of VRS that there will be delay in disbursing of terminal benefits including gratuity because of financial crunch. The respondent No. 2 accepted vrs, knowing this condition.

( 6 ) THE employees who work in public sector undertakings, State instrumentalities or State are bound by the rules framed by the Gove