An employee is entitled to gratuity despite being dismissed from service, if the alleged misconduct did not cause any loss to the employer, and the employee is entitled to gratuity at the rates mentioned in the relevant service regulations.

1. The short question in this writ petition is whether an employee of a Nationalised Bank who has been dismissed from service is entitled to gratuity. The answer will depend on the concept of gratuity and the impact of the statutory provisions.

2. The petitioner, a senior Manager, Canara Bank, was dismissed from service on 29-9-1981. He thereafter applied for disbursement of his terminal benefits. He has received the full provident fund; but was denied the gratuity claimed by him. He was informed as per Ext. P5 issued by the Personnel Administration Section thus:

"Under Canara Bank Officers' Service Regulations gratuity is payable only on retirement, death, disablement and resignation after completing 10 years of service. Hence, the same is not payable in your case."

3. This was reiterated in Ext. P7. The petitioner prays for quashing Exts. P5 and P7 and for consequential reliefs.

4. The Canara Bank is now a Nationalised Bank, coming within the purview of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, Act 5 of 1970. It is not disputed that it is a "State" within the meaning of Art.12 of the Constitution and that it is amenable to the writ jurisdiction under Art.226 of the Constitution.

5. As early as 1955, long before the Bank was nationalised, the Bank constituted, under an irrevocable trust, a gratuity fund, "Canara Bank Employees Gratuity Fund" for the benefit of the employees of the Bank and made rules and regulations for the purpose, binding on the employees and the Bank. The object of the fund is "to provide moneys for payment of gratuities in India to the employees of the Bank in accordance with the provisions of these rules." The relevant clauses in these rules are these:

"10. (1) The Gratuity shall become payable:

(a) On the death of an employee whilst in the service of the Bank, the amount of gratuity being payable to the heirs, executors, administrators or assigns of the employee or in case he has executed a nomination paper in the form prescribed under these rules to the nominee of such employee.

(b) On an employee becoming physically or mentally incapable of further service or on termination of his service as the employee in accordance with the Rules of the Bank.

(c) On the retirement Of an employee from the service of the Bank.

(d) On the resignation of the employee after completion of 10 years of continuous service in the Bank.

".....(ii) The Gratuity due to an employee shall be payable during the 12 months next following death, disability, retirement, resignation or termination of service as the case may be.

12. Notwithstanding anything contained in the preceding Clauses where an employee has been dismissed for misconduct and such misconduct has caused financial loss to the Bank, he shall not be eligible to receive the gratuity to the extent of the financial loss caused to the Bank."

6. After nationalisation, in 1979, the Board of Directors of the Bank in consultation with the Reserve Bank of India and with the previous sanction of the Central Government made regulations in exercise of the powers conferred by S.19 read with S.12(2) of the Central Act 5 of 1970. The relevant provision reads thus:

"46(1) Every officer shall be eligible for gratuity on:

(a) retirement

(b) death

(c) disablement rendering him unfit for further service as certified by a medical officer approved by the Bank, or

(d) resignation after completing ten years of continuous service.

(2) The amount of gratuity payable to an officer shall be one month's pay for every completed year of service, subject to a maximum of 15 month's pay:

7. The petitioner therefore contends that under the Gratuity Fund Rules of the Bank, the employee was entitled to gratuity "on termination of his service as the employee in accordance with the rules of the Bank" and also "on retirement of an employee from the Bank" and therefore as his services have been terminated, he is entitled to gratuity. Moreover he states that as per the saving clause (