Tarun Agarwala, J.;—

The respondent No.3 was employed in the petitioner bank and was discharged from service by an order dated 27.3.2006 on account of disciplinary action taken against him. The order of discharge indicated that he would be discharged with superannuation benefits, i.e., pension, provident fund and gratuity would be payable to the employee. Pursuant to the order of discharge, the Provident Fund, Gratuity and Leave Encashment were all processed by the petitioner and appropriate cheques were issued accordingly. On 28.11.2007 the respondent bank computed an amount of Rs.2,43,525/- towards gratuity. Another amount of Rs.72,226.74 was issued towards the provident fund and another sum of Rs.37,512.26 was issued towards pension payment.

The employee, respondent No.3, had taken various loans from the bank, which he could not repay during his service tenure. In the loan agreement executed between he employee and the bank, it was provided-

"in the event of your ceasing to be in the banks service before the loan is liquidated, the balance outstanding and the interest due if any in the loan account will be adjusted out of the bank's contribution to Provident Fund payable to you/your nominee in terms of the relevant fund rules, if bank's contribution to Provident Fund and/or Gratuity and or Leave Encashment at the time of retirement. To enable the bank to receive the money from the trustee of Provident Fund and Gratuity Fund and Gratuity Fund, necessary authority letters as annexed are to be executed by you and the nominee in favour of the Bank."

The respondent No.3 consciously consented that in the event his services comes to an end and the loan amount remains outstanding, the balance amount could be adjusted from the Provident Fund, Gratuity or Leave Encashment.

In the light of the aforesaid loan agreement the amount payable towards gratuity was adjusted by the bank towards liquidation of the Home Loan taken by the respondent No.3. The employee-respondent No.3, not being happy with the action of the petitioner, filed a claim application before the controlling authority under the Payment of Gratuity Act, 1972. The petitioner took a specific objection before the authority that the gratuity was calculated and the amount of Rs.2,43,525/- was adjusted towards the Home Loan Account of the respondent No.3. The controlling authority rejected the contention of the petitioner and directed the petitioner to pay a sum of Rs.3,50,000/- along with interest @ 12% p.a. The petitioner, being aggrieved by the said order, preferred an appeal, which was also rejected.

The authority, while allowing the claim of the employee, rejected the contention of the petitioner after considering the provisions of Section 4(6) of the Payment of Gratuity Act.

Heard Ms. Manisha Ambwani, the learned counsel holding brief of Sri Vipin Sinha, the learned counsel for the petitioner and Sri P.K.Sinha and Sri Rajesh Kumar Mishra, the learned counsel for the respondents.

The controversy involved in the present petition is, whether outstanding loans taken by the employee could be adjusted from the gratuity payable to the employee. Rule 4(6) of the Payment of Gratuity Act provides:-

"(6) Notwithstanding anything contained in sub-section (1),-

(a) the gratuity of an employee, whose services have been terminated for any act, willful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused;

(b) the gratuity payable to an employee shall be wholly forfeited,-

(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or

(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment."

The said provision provide that the gratuity of an employee, whose ser