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2024 Supreme(Online)(MAD) 15099
HIGH COURT OF MADRAS
Honourable Mrs Justice J. NISHA BANU
S.SUNDARAM – Appellant
Versus
THE AREA MANAGER – Respondent
Compulsory retirement does not equate to termination; gratuity cannot be forfeited without a quantified loss or clear statutory basis.
Headnote:
Gratuity - Employment Termination - Payment of Gratuity Act, 1972 - Section 4(6) - The court held that compulsory retirement does not equate to termination of service, and without a quantified loss or statutory provision for forfeiture, the judgment favored the employee's entitlement to gratuity.
Fact of the Case:
The employee, before retirement, was charged with ineffective supervision leading to loss of food grain bags. After inquiry and penalty of compulsory retirement with gratuity forfeiture, he contested the forfeiture, arguing it was unjustified under applicable regulations and the Payment of Gratuity Act.
Finding of the Court:
The court found that compulsory retirement was not equivalent to termination of service, and since forfeiture of gratuity was not justified under the statutory provisions without quantified loss, the employee remained entitled to the gratuity amount.
Issues: Whether compulsory retirement with forfeiture of gratuity was justified and if it constitutes termination under the Payment of Gratuity Act.
Ratio Decidendi: The court ruled that forfeiture of gratuity requires quantification of loss and compulsory retirement is distinct from termination of service under the Payment of Gratuity Act.
Final Decision: The writ appeal is allowed, restoring the order of the Controlling Authority for gratuity payment to the employee.
(Judgement of the Court was made by J.NISHA BANU, J. and P.DHANABAL.J. ) This Writ Appeal has been preferred by the employee as against the order passed in W.P.No.37816 of 2015, whereby the Writ Court quashed the order of the Assistant Labour Commissoner (Central) dated 17.12.2014 and consequently the order dated 04.11.2015 made in Gratuity Appeal No.56 of 2014, in and by which the Statutory Authorities directed the respondents 1 to 3 -Food Corporation of India (Employer) to pay Rs.5,00,000/- gratuity amount with interest at 10% per annum.
2. The facts of the case in nutshell is as follows:- (2.1.) The appellant was employed as Assistant General Manager (Quality Control) in the respondent Food Corporation of India. Five days before his retirement, a charge sheet was issued under Regulation 58 of Food Corporation of India (Staff) Regulations, 1971 [hereinafter called as “Rules”].
Charges framed against the employee is that while he was working as Area Manager, FCI, Cuddalore, in the physical verification by a squad, it was found that there was shortage of food grains bags valued to the tune of Rs.91,96,140/-.(2.2) Appellant submitted his explanation to the charge memo. As the explanation was not satisfactory, an inquiry was held. In the Inquiry report, it was held that charges framed against the employee are proved on account of ineffective supervision over depot personnel and its operations leading to misappropriation and thereby caused huge loss to the Management.
- (2.3) On serving of the inquiry report, employee denied that there was no shortage of bags. The Disciplinary Authority, on perusing the findings of the inquiry report, imposed penalty of compulsory retirement along with forfeiture of 50% of gratuity payable to the employee-appellant herein.
- (2.4) Aggrieved by the deprivation of 50% gratuity, employee preferred Gratuity Application No.56/2014 before the 5th respondent herein [Controlling Authority]. The Controlling Authority, held that the employee is entitled to payment of Rs.5,00,000/- as per the provisions of the Act and interest thereon at 10% per annum on the said gratuity.
- (2.5) The FCI-Employer preferred appeal in Gratuity Appeal No.113 of 2015 before the 4th respondent herein [Appellate Authority]. The Appellate Authority confirmed the order of the Controlling Authority.
- (2.6) Aggrieved by the order of the Appellate Authority, the Employer filed W.P.No.37816 of 2015. The Writ court, held that it is a case of 'punishment', hence, forfeiture of Gratuity is permissible. Thereby, the Writ Court quashed the orders of Controlling and Appellate Authorities and directed the Controlling Authority to refund Rs.6,28,613/- together with accrued interest to the Management within 45 days from the date of receipt of the order.
- (2.7) Feeling dissatisfied with the order of the learned Single Judge, this writ appeal is filed by the employee.
3. Mr.Balan Haridas, learned counsel for the appellant-employee would contend that under Regulation 54(vii), compulsory retirement is a punishment contemplated; under Regulation 54(viii) and (ix), punishment of dismissal and removal from service is contemplated. As such there is no punishment of compulsory retirement with forfeiture of gratuity. Therefore, there was no justification for imposing punishment of compulsory retirement and forfeiture of gratuity amount by the Disciplinary Authority. The appellant is covered by Food Corporation of India (Staff) Regulations,1971. Even as per the Payment of Gratuity Act, for the punishment of removal from service, the gratuity amount can be forfeited, but the amount liable to be forfeited would be only to the extent of loss caused. The learned counsel would submit that in the case on hand, the disciplinary authority has not quantified the loss. The 5th respondent (Controlling Authority) has passed a reasoned order after referring the concerned Rules and directed the respondents 1 to 3 (FCI), to release the gratuity amount of Rs.5 Lakhs. The 4th r
