Dr. Bharat Bhushan Parsoon, J.:- Two points involved in this case requiring consideration and adjudication are:

(i) As to whether for the purposes of gratuity, basic pay drawn by the employee during the last month of his service or basic pay which the employee on the last day of his service (on account of imposition of penalty of reduction in rank or scale) is to be accounted; and,

(ii) Whether the employer is entitled to withhold his share of provident fund and interest thereon, on the ground that some loss is apprehended against the retiree.

2. The petitioner working as Manager with the respondents, for his acts of omission and commission during his service after having been proceeded against departmentally, was reduced by one stage in his existing scale on 24.2.1993 and after a few days i.e. on 28.2.1993, he superannuated. For purposes of calculation of gratuity amount payable to him, basic pay drawn by him on the last day of the month of his service, was taken into account against which action of the respondents he is before this Court claiming that the gratuity has to be calculated on the basis of basic pay actually drawn by him during the last month of his service and not on the basis of basic pay which he drew on the last day of his service on account of imposition of penalty of reduction by stages in his existing scale.

3. Hearing has been provided to counsel for the parties while going through the paper book.

4. According to Regulation 46 of the Punjab National Bank (Officers’) Service Regulations, 1979 (hereinafter referred to as, the Regulations), every officer of the respondent-bank is eligible for payment of gratuity interalia on retirement. Regulation 46 of the Regulations for ready reference is appended as below:

“46. Gratuity

(1) Every officer shall be eligible for Gratuity on-

(a) Retirement.

(b) Death.

(c) Disablement rendering him unfit for further services as certified by a Medical Officer approved by the Bank.

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

(e) Termination of service in any other way except by way of punishment after completion of 10 years of 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 months’ Pay.

Provided that where an officer has completed more than 30 years of service, he shall be eligible by way of Gratuity for an additional amount at the rate of one half of a month’s pay for each completed year of service beyond thirty years.

Note:- If the fraction of service beyond completed years of service is six months or more, gratuity will be paid pro rata for the period.

5. Appendix-I to the Punjab National Bank Employees Gratuity Fund Rules provides for computation of gratuity payable to an employee. Said Appendix-I for quick reference is also reproduced as under:

“Appendix-I

1. Upon normal Retirement of the employee at or after age 57.

‘A’

For Officers.

At the rate of one month’s basic pay last drawn by him for each completed year of service subject to a maximum of 15 months basic pay. If an officer has put in service for over 30 years, an additional amount at the rate of half month’s basic pay last dawn by him for each completed year of service beyond 30 years shall also become payable. The basic pay will not include allowance of any kind, bonus or other remuneration or any perquisite.”

6. Incidentally, both these provisions which are under consideration in this case came up for consideration before the Himachal Pradesh High Court at Shimla in a case titled S.K.Mitra Versus Punjab National Bank and others 1996 DLJ (Enquiries) 131 where in para 20 of the judgment, it has been held as under:

“It is well settled law that liberal interpretation should be given to the provisions of the Act or Rules relating to the retiral benefits. In the present case the gratuity and leave encashment being the retiral benefits, it was incumbent upon the respondents to have applied th