IMPORTANT POINT
A statutory right accrued under the Payment of Gratuity Act could not be impaired by reason of a rule which did not have force of a statute.

Headnote:Payment of Gratuity Act, 1972 - Section 4(6) - Coal India Executives’ Conduct Discipline and Appeal Rules, 1978 - Rules 27 and 34 - Recovery from pay or gratuity of the whole or part of any pecuniary loss caused to respondent to by negligence or breach of orders or trust - Appellant was working as a Chief General Manager in a mine which vested in respondent Co. - Charge-sheet was issued against him on allegations of shortage of stock of Coal - During pendency of departmental proceedings, appellant was allowed to retire - Payment of gratuity was denied and it was sought to be justified before Labour Commissioner on ground that amount would be adjusted in the event recovery from said amount was directed to be made on disciplinary proceedings - On conclusion of departmental enquiry, disciplinary authority ordered forfeiture of gratuity - Assistant Labour Commissioner held order of forfeiture untenable - Appellate authority upheld the view of Commissioner - Writ petition was dismissed by Single Judge - Division Bench in appeal set aside the order - Appeal - Question for consideration was whether provisions of the Act shall prevail over rules framed by respondent Co. - Rules framed were not statutory rules - Provisions of the Act must prevail over Rules - A statutory right accrued could not be impaired by reason of a rule which did not have force of statute - Disciplinary authority had not quantified the loss or damage - Amount liable to be forfeited could be only to extent of damage or loss caused - Impugned judgment could not be sustained.
       Held : The short question which arises for consideration in this appeal is as to whether the provisions of the said Act shall prevail over the rules framed by Coal India Limited, holding company of Respondent No. 1, known as Coal India Executives Conduct Discipline and Appeal Rules, 1978 (for short "the Rules"). Indisputably, the appellant was governed by the Rules. Rule 27 provides for the nature of penalties including recovering from pay or gratuity of the whole of or part of any pecuniary loss caused to the company by negligence or breach of orders or trust. Major penalties prescribed in Rule 27, however, include reduction to a lower grade, compulsory retirement, removal from service; and dismissal.(Para 8)
       The Act was enacted with a view to provide for a scheme for payment of gratuity to employees engaged inter alia in mines. Section 3 of the Act provides for appointment of an officer to be the controlling authority. Controlling authority is to be responsible for administration of the act. Different authorities, however, may be appointed for different areas. Section 4 of the Act entitles an employee to gratuity after he has rendered continuous service for not less than five years inter alia on his superannuation. Sub-section (6) of Section 4 contains a non-obstante clause.(Para 9)
       The Rules framed by the Coal India Limited are not statutory rules. They have been made by the holding company of Respondent No. 1.(Para 10)
       11. The provisions of the Act, therefore, must prevail over the Rules. Rule 27 of the Rules provides for recovery from gratuity only to the extent of loss caused to the company by negligence or breach of orders or trust. Penalties, however, must be imposed so long an employee remains in service. Even if a disciplinary proceeding was initiated prior to the attaining of the age of superannuation, in the event, the employee retires from service, the question of imposing a major penalty by removal or dismissal from service would not arise. Rule 34.2 no doubt provides for continuation of a disciplinary proceeding despite retirement of employee if the same was initiated before his retirement but the same would not mean that although he was permitted to retire and his services had not been extended for the said purpose, a major penalty in terms of Rule 27 can be imposed.(Para 11)
       A statutory right accrued, thus, cannot be impaired by reason of a rule which does not have the force of a statute. It will bear repetition to state that the Rules framed by Respondent No. 1 or its holding company are not statutory in nature. The Rules in any event do not provide for withholding of retrial benefits or gratuity. (Para 13)
       The Act provides for a closely neat scheme providing for payment of gratuity. It is a complete code containing detailed provisions covering the essential provisions of a scheme for a gratuity. It not only creates a right to payment of gratuity but also lays down the principles for quantification thereof as also the conditions on which he may be denied therefrom. As noticed hereinbefore, sub-section (6) of Section 4 of the Act contains a non-obstante clause vis-a-vis sub-section (1) thereof. As by reason thereof, an accrued or vested right is sought to be taken away, the conditions laid down thereunder must be fulfilled. The provisions contained therein must, therefore, be scrupulously observed. Clause (a) of Sub-section (6) of Section 4 of the Act speaks of termination of service of an employee for any act, willful omission or negligence causing any damage. However, the amount liable to be forfeited would be only to the extent of damage or loss caused. The disciplinary authority has not quantified the loss or damage. It was not found that the damages or loss caused to Respondent No. 1 was more than the amount of gratuity payable to the appellant. Clause (b) of Sub-section (6) of Section 4 of the Act also provides for forfeiture of the whole amount of gratuity or part in the event his services had been terminated for his riotous or disorderly conduct or any other act of violence on his part or if he has been convicted for an offence involving moral turpitude. Conditions laid down therein are also not satisfied.(Para 14)
       For the reasons aforementioned, the impugned judgment cannot be sustained which is set aside accordingly. The appeal is allowed.(Para 24)

JUDGMENT

S.B. Sinha, J. - Leave granted.

2. Respondent – Bharat Coking Coal Limited is a government company incorporated and registered under the Companies Act, 1956. Appellant herein joined as a Chief General Manager. He was working in a coking coal mine which vested in the Bharat Coking Coal Limited pursuant to an appropriate notification issued by the Central Government either under Section 7 of the Coking Coal Mines (Nationalisation) Act, 1972 or Section 5 of the Coal Mines (Nationalisation) Act, 1973.

3. A chargesheet was issued against him on the allegation of shortage of stock of coal in Lodna area of Respondent No. 1. During pendency of the departmental proceeding, the appellant was allowed to retire. He applied for payment of gratuity under the Payment of Gratuity Act, 1972 (for short "the Act") in the year 1998 which was denied. He, therefore, filed an application before the Additional Labour Commissioner, Dhanbad for payment of gratuity on 4.01.2000. Notices having been issued by the said authority, Respondent No. 1 filed reply thereto inter alia contending that the gratuity amount payable to the appellant had been withheld for the purpose of making of adjustment, in the event recovery from the said amount is directed to be made in the disciplinary proceedings. The controlling authority on the said premise allowed the disciplinary authority to proceed in the matter. Upon conclusion of the departmental enquiry, the disciplinary authority by an order dated 5.07.2000 opined:

"Whereas the undersigned has gone through the chargesheet dated 24.02.97 issued to Shri Gill, enquiry proceedings and report of Inquiring Authority dated 18.08.99 and other documents related to the case placed before him. After careful consideration of all the documents placed in the case file, the undersigned, is convinced that Shri Gill had a major role in causing the shortages in the coal stock and conniving with the measurement team in concealing the shortages at the time of annual measurement.

Now, therefore, the undersigned, Chairman-cum-Managing Director, Coal India Limited being the Disciplinary Authority in exercise of power conferred by the Conduct Discipline and Appeal Rules 1978 of CIL, considering the seriousness of the offence would have imposed the punishment of dismissal from the service of Shri J.S. Gill, the then Chief General Manager, BCCL, but for his superannuation. The undersigned also hereby orders forfeiture of his gratuity."

4. The Assistant Labour Commissioner (Central), Dhanbad in the application filed by the appellant under the Act, on the other hand, by an order dated 11.04.2001 held:

"It is clear that Shri J.S. Gill retired on superannuation as per notice for retirement w.e.f. 30.4.98, therefore, he is entitled for the payment of gratuity under the P.G. Act, 1972. As per section 4(6)(a) & 4(6)(b) of the P.G. Act, 1972, gratuity can be forfeited partially or wholly when the service of the employee is terminated for any act, which constitute an offence involving moral turpitude provided that such offence is committed by him in the course of employment. In the instant case, the services of Sri J.S. Gill has not been terminated for the offence mentioned under 4(6)(a) & 4(6)(b) of the P.G. Act, 1972. Therefore, the order of forfeiture of gratuity of Sri J. S. Gill issued by the C.M.D. and Disciplinary Authority of CIL is not tenable. The basic requirement of termination of service for any of the misconduct as enumerated under section 4(6)(a) & 4(6)(b) of the P.G. Act, 1972 has not been fulfilled before the issue of order of forfeiture of gratuity."

5. On an appeal preferred by Respondent No. 1, the appellate authority held:

"3. The appellant has appealed against the direction of the Controlling Authority directing to pay the gratuity to the respondent on the ground that it was beyond his jurisdiction for enter into merit of the forfeiture of the gratuity amount by the competent authority under Section 4(6) of the Act for the

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2006 Supreme(SC) 1089

IMPORTANT POINTA statutory right accrued under the Payment of Gratuity Act could not be impaired by reason of a rule which did not have force of a statute.

Cases Referred (4)

IMPORTANT POINT
A statutory right accrued under the Payment of Gratuity Act could not be impaired by reason of a rule which did not have force of a statute.