An employer is entitled to withhold gratuity and adjust penal rent for unauthorized occupation of employer-allotted accommodation. Gratuity and vacation of premises are reciprocal obligations, and interest is not payable on withheld gratuity during the period of unauthorized occupation.

Headnote:(A) Gratuity Rules - Withholding of gratuity - Non-vacation of employer-allotted accommodation - Employer's right to withhold gratuity for non-compliance with rules - Whether interest is payable on withheld gratuity during unauthorized occupation.

(B) Precedent - Binding nature of orders - Order passed on specific facts of a case as a concession does not constitute a binding precedent - Penal rent as a natural consequence of unauthorized occupation.

(C) Reciprocal Obligations - Simultaneous discharge of obligations - Duty to vacate premises and duty to release gratuity - Neither obligation enforceable in isolation.

Facts of the case:
Employees retired and failed to vacate employer-allotted quarters. Management withheld gratuity. Lower courts initially relied on a previous order to grant full gratuity with interest. Management challenged this, asserting the right to adjust penal rent against gratuity.

Findings of Court:
The court held that the management is entitled to withhold gratuity and adjust penal rent for unauthorized occupation. Interest is not payable on withheld gratuity during the period of unauthorized occupation. The court fixed a reasonable penal rent for the specific batch to balance the interests of the parties.

Issues: Whether reliance on a previous order as a binding precedent is sustainable; whether management can adjust penal rent from gratuity.

Ratio Decidendi: Reciprocal obligations exist; gratuity serves as security for the vacation of premises. Penal rent is a natural consequence of unauthorized occupation. An order passed on specific facts as a concession cannot be elevated to a binding precedent. Equitable relief was granted by fixing a reasonable penal rent for the specific batch to prevent hardship.

Result: Appeals allowed.

Table of Content
1. overview of litigation regarding gratuity withholding for quarters retention. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8)
2. framework for gratuity withholding and unauthorized occupation policy. (Para 9 , 10 , 11 , 12 , 13)
3. parties' contentions on gratuity adjustment and penal rent fairness. (Para 14 , 15)
4. limited precedential value of factual orders on penal rent. (Para 16 , 17 , 18)
5. reciprocal obligation to vacate quarters and permissible rent adjustment. (Para 19 , 20 , 21)
6. final order granting appeal and ruling out interest on gratuity. (Para 22 , 23)

S.V.N. BHATTI, J.

1. Leave Granted.

2. The batch of Civil Appeals arises from Civil Review Order dated 16.05.2024 in Civil Review No. 45 of 2021, etc., and the Order dated 20.01.2020 in LPA No. 561 of 2017 and batch. The questions of fact and law are the same in the Civil Appeals. The Civil Appeals were heard on 09.03.2026 and 11.03.2026, respectively, and reserved for judgment. Through the instant Judgment, the Civil Appeals are considered and disposed of.

3. There are two types of cases before this Court. One type where the Writ Petition was decided after the Order dated 31.03.2017 of this Court in Civil Appeal No. 4740 of 2017, and the other is where the Writ Petition was decided before the Order dated 31.03.2017 of this Court in Civil Appeal No. 4740 of

2017. To illustrate the two types of cases before this Court in the present batch of Civil Appeals, a table is presented below:

4. The management of Steel Authority of India is the Appellant, and the Respondents are retired employees of the Steel Authority of India/Bokaro Steel Plant. For convenience, the parties are referred to as SAIL and Ex- Employee(s), respectively. The circumstances, dates, and events in the Civil Appeal filed against Shambu Prasad Singh/Ex-Employee against the Order in Civil Review Petition No. 45 of 2021 in LPA No. 561 of 2017, against Writ Petition No. 1681 of 2012, are referred to and would be sufficient for disposing of the batch of Civil Appeals.

5. The Civil Appeals examine the workability of the right of SAIL to withhold the gratuity of Ex-Employees because the Ex-Employees did not surrender vacant possession of the quarter allotted to them while in service. The consideration of circumstances and mutual legal obligations arises under the SAIL Gratuity Rules, 1978 and O&M/Procedure/789 dated 26.03.2009. The incidental consideration is the applicability of the Order dated 31.03.2017 in Civil Appeal No. 4740 of 2017 or the Order dated 15.12.2020 in S.L.P. (C)

No. 11025 of 2020.

6. Shambu Prasad Singh/Ex-Employee, on 31.05.2006, retired from the service of Bokaro Steel Plant. He was allotted a staff quarter, and through representations made between 11.09.2007 and 20.09.2010, the Ex- Employee(s), including Shambu Prasad Singh, requested that the management allows retention of the allotted quarter beyond the permissible period under the Rules of retention. The management, instead of accepting the request to retain the allotted quarter post-retirement, issued notices calling upon the Ex-Employees to vacate and hand over possession to the management. Subsequently, Shambu Prasad Singh filed W.P. (C) No. 1681 of

2012 challenging the notice of eviction, which was dismissed. The said Writ Petition was dismissed on 28.07.2016, following the Order dated 24.01.2014 passed by the Division Bench of the High Court. In the batch of LPAs filed by the Ex-employees, the Division Bench of the High Court of Jharkhand, by Order dated 20.01.2020, disposed of the LPAs by relying on Ram Naresh Singh v. Bokaro Steel Limited., Civil Appeal No. 4740 of 2017. On 15.12.2020, in S.L.P. (C) No. 11025 of 2020, this Court took a different view and observed that regulating the discretion of management to adjust the penal rent payable from the gratuity was misplaced. The management, relying on the Order dated 15.12.2020, preferred Civil Review before the Division Bench to review the Order dated 20.01.2020. Through the

Click Here to Read the rest of this document

2026 Supreme(Online)(SC) 518

SUPREME COURT OF INDIAPankaj Mithal, S.V.N. Bhatti, JJManagement Of Steel Authority Of India – AppellantVersusShambu Prasad Singh – RespondentCIVIL APPEAL NOS. __________ OF 2026 | SPECIAL LEAVE PETITION (CIVIL) NOS. 025516 – 025517 OF 2024

An employer is entitled to withhold gratuity and adjust penal rent for unauthorized occupation of employer-allotted accommodation. Gratuity and vacation of premises are reciprocal obligations, and interest is not payable on withheld gratuity during the period of unauthorized occupation.

Cases Referred (1)

SUPREME COURT OF INDIA
Pankaj Mithal, S.V.N. Bhatti, JJ
Management Of Steel Authority Of India – Appellant
Versus
Shambu Prasad Singh – Respondent
CIVIL APPEAL NOS. __________ OF 2026 | SPECIAL LEAVE PETITION (CIVIL) NOS. 025516 – 025517 OF 2024