An employer may legally adjust and recover outstanding loan dues from an employee's terminal benefits, including gratuity, if the employee has voluntarily provided written consent for such deduction and local statutes authorize the recovery of pecuniary loss from retiring personnel.

J U D G M E N T

1.Heard.

2.The present writ petition has been filed by the District Central Co-operative Bank, Dharmapuri, challenging the order passed by the first respondent—Appellate Authority under the Payment of Gratuity Act, 1972—in A.G.A. No. 45 of 2019. By the said order, the Appellate Authority allowed the appeal filed by the third respondent, set aside the order of the second respondent dated 22.01.2019 in P.G. Case No. 73 of 2018, and directed the petitioner bank to pay a sum of Rs. 5,41,025/- to the third respondent within 30 days. The order further stipulated that, in the event of default, interest at the rate of 10% per annum shall be payable on the delayed amount.

3.When the writ petition was taken up for admission on 02.02.2021, notice was accepted on behalf of respondents 1 and 2, and the Court directed issuance of notice to the third respondent. The third respondent has since entered appearance through counsel. Pending the writ petition, an interim stay was granted for a period of four weeks. When the matter was listed on 23.04.2024, this Court directed that the case be referred to the National Lok Adalat scheduled for 08.06.2024, for an attempt at amicable resolution. However, as no settlement could be arrived at, the matter was returned to this Court for final adjudication.

4.Subsequently, when the matter was listed on 05.11.2024, this Court directed that it be referred to the Tamil Nadu Mediation and Conciliation Centre for resolution. However, the mediation efforts were unsuccessful, and no settlement could be reached between the parties. Accordingly, the matter was returned to this Court with a covering letter dated 09.01.2025.

5.The primary contention advanced by the petitioner bank is that the third respondent joined its service on 09.01.1992 and retired on 31.01.2016. Shortly before her retirement, she submitted a letter dated 28.01.2016 stating that she had availed a loan of Rs. 5,00,000/- from the Co-operative Thrift and Loan Society, and that monthly instalments towards the loan were being deducted from her salary. As on 28.01.2016, an outstanding sum of Rs. 4,97,795/- remained payable by her to the society. In the same letter, the third respondent further agreed that if any surcharge was imposed on her in the pending proceedings under Section 81 of the Tamil Nadu Co-operative Societies Act, the same could be recovered from the terminal benefits payable to her, and the remaining balance disbursed thereafter.

6.In its reply dated 29.01.2016, the petitioner bank informed the third respondent that upon conclusion of the surcharge proceedings under Section 81 of the Tamil Nadu Co-operative Societies Act, and after determining the amount due from her, the dues would be adjusted against her terminal benefits, and the remaining balance would be paid to her. The third respondent, by her communication dated 30.01.2016, agreed to abide by this condition. However, she subsequently submitted another letter dated 14.02.2016, stating that she had received a sum of Rs. 1,45,000/- from the bank, but had not paid interest on the same. She accordingly requested the bank to adjust the said amount from her terminal benefits and release the balance due to her.

7.In response to the third respondent’s letter dated 10.08.2016, the bank informed her that payment of the terminal benefits would be made upon completion of the enquiry under Section 81 of the Tamil Nadu Co-opera