JUDGMENT By this petition, the petitioner, a cooperative Bank, has brought under challenge order dated 2.2.2007 passed by the appellate authority appointed under Payment of Gratuity Act; 1972 [hereinafter referred to as the Act ] in Gratuity Case No.6 of 2005 whereby, the appellate authority has confirmed order passed by the controlling authority appointed under the Act by which the authority awarded an amount of Rs.3,50,000/- towards gratuity with interest at the rate of 10% in favour of the respondent. 2. The short facts involved in this case are that, the respondent herein joined service of the petitioner Bank and at the material point of time, the respondent was working as Assistant In-charge at Sukhpur Branch of the petitioner Bank. It emerges from the record that while he was in service of the petitioner Bank, certain serious charges of misappropriation of funds of large amount were levelled against him and simultaneously proceedings under Sections 406, 407, 408, 409, 465, 467, 468, 471, 120(B) and 114 of the Indian Penal Code were instituted against him and others. It is jointly submitted by petitioner and respondent that the said proceedings are still pending and since last about 6 years, no charge sheet as yet been filed though the FIR was lodged in 2003. 3. It also emerges from the record that a show cause notice dated 6.9.2003 was issued and the respondent herein was placed under suspension. Before the regular charge sheet could be issued and/or regular departmental inquiry can be initiated and completed, the respondent reached the age of superannuation and has been allowed to retire. 4. It is the case of the petitioner Bank that the respondent was superannuated w.e.f. 17.6.2004 by order dated 14.6.2004 and in the said order it was clearly mentioned that he was being superannuated and allowed to retire on condition of not paying any monetary benefits. 5. After his superannuation w.e.f. 17.6.2004, the respondent herein approached controlling authority by way of an application which was filed in November, 2005. The controlling authority adjudicated the said application and by order dated 20.7.2006 held that the respondent was entitled to claim and receive amount towards gratuity and the petitioner was not justified in withholding the amount of gratuity. 5. After his superannuation w.e.f. 17.6.2004, the respondent herein approached controlling authority by way of an application which was filed in November, 2005. The controlling authority adjudicated the said application and by order dated 20.7.2006 held that the respondent was entitled to claim and receive amount towards gratuity and the petitioner was not justified in withholding the amount of gratuity. Having reached such conclusion, the controlling authority passed aforesaid order directing the petitioner to make payment of Rs.3,50,000/- with interest at the rate of 10% towards gratuity in favour of the respondent. 6. Aggrieved by the said order, the petitioner preferred appeal being Appeal Case No.33 of 2006 before the appellate authority under the Act and by impugned order dated 2.2.2007, the appellate authority rejected the appeal and confirmed the order of the controlling authority. Aggrieved by the said orders, the petitioner Bank is before this Court. 7. Mr. Dave, learned advocate, has appeared for the petitioner and Mr. Shah, learned advocate, has appeared for the respondent. Heard the learned advocates for the respective parties. 8. In view of the contentions raised in the petition Rule. In light of the fact that the issue involved in the petition is related to the retiral benefits of the respondent, it was considered appropriate to hear and decide the petition finally at the admission stage. Thus, at the request of and with the consent of the learned advocates for the contesting parties, Rule has been issued and made returnable forthwith. Mr. Shah, learned advocate has waived service of Rule on behalf of the respondent. 9. Mr. Dave submitted that the respondent has been involved in large scale scam which resulted into misappropriation of huge fund. He submitted that even against the other employees and directors of the Bank who were reportedly involved in the scam, the petitioner Bank has lodged FIR. He submitted that before the respondent reached the age of superannuation, the petitioner Bank had already issued a show cause notice levelling serious charges against the respondent and departmental inquiry was pending or contemplated against the respondent. However, since, in the meanwhile, the respondent reached the age of superannuation, he was allowed to retire with a clear stipulation that any monetary benefit will not be paid to him. Mr. However, since, in the meanwhile, the respondent reached the age of superannuation, he was allowed to retire with a clear stipulation that any monetary benefit will not be paid to him. Mr. Dave submitted that despite such clear stipulation and pendency of the show cause notice, the respondent approached the controlling authority and the controlling authority has, without considering the seriousness of the charges levelled against the respondent and the fact that the respondent has been allegedly involved in misappropriation of the large funds of the petitioner Bank, allowed his application only on the ground that pendency of criminal proceedings is no ground to withhold the payment of gratuity. Mr. Dave submitted that the charges levelled against the respondent also amount to moral turpitude and therefore, the petitioner Bank is justified in withholding the payment of gratuity. He submitted that the respondent has not been exonerated and the criminal proceedings are still pending. Under the circumstances, it is not justified that the respondent may also get benefit of payment of gratuity. Mr. Dave submitted that the appellate authority also failed to appreciate the contention that the order of controlling authority was not sustainable. Mr. Dave submitted that the appellate authority has committed serious error of law and jurisdiction in confirming the order of controlling authority. 10. Mr. Dave, however, admitted during the hearing that until now any charge sheet has not been filed by police against the respondent pursuant to the FIR and since last 6 years the proceedings are pending only at the stage of FIR and any report also has not been submitted. Mr. Dave also submitted during his submission that any regular departmental inquiry has not been yet initiated or conducted against the respondent and any order by competent authority either withholding or forfeiting gratuity under the provisions of the Act has not been passed. 11. Mr. Shah for the respondent submitted that in absence of any order by competent authority before respondent's superannuation, the gratuity amount cannot be withheld or forfeited, whereas in present case even after the superannuation any order has not been passed since last 4 5 years. Mr. Shah also submitted that, more particularly, when the charges are not proved and when even any departmental inquiry has not at all being conducted so as to even establish the charges of misconduct, there is no base or justification for withholding the amount of gratuity. Mr. Shah also submitted that, more particularly, when the charges are not proved and when even any departmental inquiry has not at all being conducted so as to even establish the charges of misconduct, there is no base or justification for withholding the amount of gratuity. Mr. Shah submitted that mere filing of FIR and/or issuance of a show cause notice is no ground to withhold gratuity amount. 12. In light of rival contentions raised during the hearing, reference can be made to the judgment in the case between Gujarat State Fertilisers and Chemicals Ltd., V/s. Surendra T. Amin reported in 2004 (3) GLH 752 and also the judgment of the Hon'ble Division bench of this Court in the case between Gujarat State Road Transport Corporation V/s. Devendrabhai Mulvantrai Vaidya reported in 2006 (1) LLJ 324 . 13. It is relevant to note that there is no dispute about the fact that the order dated 14.6.2004 was passed whereby, after recording the fact about the pendency of criminal proceedings pursuant to FIR against the respondent, it has been ordered that in view of the conduct of the respondent and charges pending against him it was not in the interest of Bank to grant any extension and therefore, it was appropriate to superannuate him w.e.f. 17.6.2004 without granting any monetary benefits. There is also no dispute about the fact that after the issuance of show cause notice and the order putting the respondent under suspension, no further actions have been taken pursuant to the show cause notice and the proceedings are stagnant at that stage. Likewise, the criminal proceedings have also not proceeded further from the stage of F.I.R. i.e. after filing of, FIR and no order by competent authority withholding or forfeiting gratuity has been passed. 14. In present case, merely on the basis of the fact that FIR has been lodged and a departmental show-cause notice has been issued (and that too about 5 years back), the respondent has not been paid the amount towards gratuity. As per the provisions contained under the Act, withholding or forfeiture of gratuity is permissible in the circumstances and eventualities contemplated and provided for under sub-section (6) of Section 4 of the Act. Otherwise, the amount towards gratuity shall stand protected under Section 13 of the Act. As per the provisions contained under the Act, withholding or forfeiture of gratuity is permissible in the circumstances and eventualities contemplated and provided for under sub-section (6) of Section 4 of the Act. Otherwise, the amount towards gratuity shall stand protected under Section 13 of the Act. It is pertinent to note that, in present case, the petitioner has not been able to even cite any provision under relevant and applicable standing orders settled under the provisions of Industrial Employment Standing Orders Act authorizing the employer to withhold gratuity during pendency of departmental action and permitting continuation of departmental proceedings / inquiry after employee reaches age of superannuation. In absence of such provision, the petitioner, even otherwise, cannot withhold gratuity. At this stage, reference needs to be made to the judgment of the Hon'ble Supreme Court in the case of JASWANT SINGH GILL v. BHARAT COKING COAL LTD. & OTHERS reported in (2007) 1 SCC 662 wherein, the Hon'ble Apex Court has observed and held that, 7. 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. Rule 34 provides for special procedure in certain cases stating: "34.2 Disciplinary proceeding, if instituted while the employee was in service whether before his retirement or during his re-employment shall, after the final retirement of the employee, be deemed to be proceeding and shall be continued and concluded by the authority by which it was commenced in the same manner as if the employee had continued in service. 34.3 During the pendency of the disciplinary proceedings, the Disciplinary Authority may withhold payment of gratuity, for ordering the recovery from gratuity of the whole or part of any pecuniary loss caused to the company if have been guilty of offences/ misconduct as mentioned in Sub-section (6) of Section 4 of the Payment of Gratuity Act, 1972 or to have caused pecuniary loss to the company by misconduct or negligence, during his service including service rendered on deputation or on re-employment after retirement. However, the provisions of Section 7(3) and 7(3A) of the Payment of Gratuity Act, 1972 should be kept in view in the event of delayed payment, in the case the employee is fully exonerated." 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 stating: "4.(6)(a)the gratuity of an employee, whose services have been terminated for any act, wilful 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 may be wholly or partially forfeited (i)if the services of such employee have been terminated for his riotous or disorderly conduct or any other act or 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." 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. 10. 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. They have been made by the holding company of Respondent No. 1. 10. 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. 11. Power to withhold penalty contained in Rule 34.3 of the Rules must be subject to the provisions of the Act. Gratuity becomes payable as soon as the employee retires. The only condition therefor is rendition of five years continuous service. 12. 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. 13. 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. 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. 15. Further, when gratuity amount is proposed to be withheld or forfeited under sub-section (6) of Section 4, an employer is supposed to follow procedure of issuing notice of proposal of forfeiture or withholding of gratuity and passing such order, after considering the reply, the order also ought to be in consonance with and within the four corners of sub-section (6) of Section 4. In this regard, reference can be made to the judgment of the Hon'ble Division Bench of this Court in the case between GUJARAT STATE ROAD TRANSPORT CORPORATION v. DEVENDRABHAI MULVANTRAI VAIDYA reported in 2006 (1) LLJ 324 wherein, this court has held that, 3.Sub-section (6) of Section 4 of the Payment of Gratuity Act, 1972 says that the gratuity of an employee shall be forfeited to the extent of damage or loss so caused if the services of such employee has been terminated for any act, wilful omission or negligence causing any damage or loss to or destruction of, property belonging to the employer. For application of this clause, the first submission should be that the services of the employee has been terminated for any act, wilful omission or negligence causing any damage or loss to or destruction of, property belonging to the employer. In the present case, the appellant does not say that for any such misconduct as provided in clause (a) of sub-Section (6), the services have been terminated. So far as clause (b) of Sub-section (6) is concerned, it provides that the gratuity payable to an employee may be wholly or partially forfeited if the services of such employee have been terminated for his riot ous or disorderly conduct or any other act of violence on his part or 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. It is not the case of the appellant that the employee has been terminated for his riotous or disorderly conduct or any other act of violence or he has been terminated for an act which constitutes an offence involving moral turpitude. If the employee/workman was allowed to retire after completing about 38 years on reaching the age of superannuation, then the provisions contained in sub-section (6) of Section 4 would not apply. Before the learned Single Judge, the fact was not disputed that the respondent workman was allowed to retire. Pendency of the criminal case or the departmental enquiry would not entitle the appellant Establishment to forfeit the gratuity either wholly or in part if the employee has not been terminated under the provisions of sub-section (6) of Section 4 of the Act. So far as the judgment of the Supreme Court in the matter of Calcutta Insurance Ltd. (supra) is concerned, we must immediately observe that the reliance placed on the judgment is misconceived. In the said matter, considering the case where an employee voluntarily resigned and brought about termination of his service the Apex Court made such observations. Present is not a case of that nature. In the present matter, the employee was allowed to retire on completion of 38 years on attaining superannuation. The submissions made by the appellant are misconceived. They deserve to and are accordingly rejected. The appeal is dismissed. Consequently, Civil Application for stay is also dismissed. 16. Present is not a case of that nature. In the present matter, the employee was allowed to retire on completion of 38 years on attaining superannuation. The submissions made by the appellant are misconceived. They deserve to and are accordingly rejected. The appeal is dismissed. Consequently, Civil Application for stay is also dismissed. 16. It deserves to be noted that though ex-facie the charges levelled against the respondent appear to be of very serious nature and in petitioner's submission payment of gratuity is not justified so far as the respondent is concerned, however, since the date of FIR and issuance of show-cause notice, the charges have remained merely allegations and the petitioner has not cared to proceed with the departmental inquiry and prove the charges. Thus, when charges are not proved and when no notice for withholding or forfeiting gratuity is issued and when any order to such effect has not been passed after following procedure then it escapes logic as to how the petitioner has for such a long period withheld the payment of gratuity to the respondent. The petitioner has, without completing the departmental proceedings, allowed the respondent to retire. In this regard, reference to the judgment of this court in the case between GUJARAT STATE FERTILISERS & CHEMICALS LTD., v. SURENDRA T. AMIN reported in 2004(3) GLH 752 is also appropriate. In the said judgment, the Hon'ble Court has held that, 3.2.2. The decision of this Court in the case of Ahmedabad Municipal Corporation v. Ellvina Samualbhai Christian reported in 2002 (I) L.L.J. p.342, wherein it has been held as under:- "9. In the said judgment, the Hon'ble Court has held that, 3.2.2. The decision of this Court in the case of Ahmedabad Municipal Corporation v. Ellvina Samualbhai Christian reported in 2002 (I) L.L.J. p.342, wherein it has been held as under:- "9. Section 4(6) of the payment of Gratuity Act provides as under :- "Notwithstanding anything contained in sub-section (1), - (a) the gratuity of an employee, whose services have been terminated for any act, wilful 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 may be wholly or partially 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." 10. It is thus, clear from the above provision that unless a specific order for forfeiture of gratuity either in part or in whole is passed by the employer, the employee becomes entitled to receive gratuity." However, in the present case, no specific order for forfeiture of amount of gratuity is passed by the petitioner. 3.2.3. Similar view has been taken in the case of the decision of the Delhi High Court in the case of Texmaco Ltd. v. Roshan Singh reported in 2001 (II) L.L.J. p.982 [2002 L.L.R p.7.], wherein the Court has held that the orders of authorities are required to be quashed and set aside on the ground that amount of gratuity cannot be withheld without notice as no procedure has been followed by the petitioner. 17. In the judgment in the case between BHARATH GOLD MINES, LTD., KOLAR V/S. REGIONAL LABOUR COMMISSIONER (CENTRAL), BANGALORE, AND OTHERS reported in 1987 LLN 308 the Honourable High Court of judicature at Karnataka has held that:- In view of this significant change, it appears to us that an employer has to take an independent decision after the termination of service of an employee as to whether the gratuity payable should at all be forfeited. In cases which fall under Sub-cl.(i) or Sub-cl.(ii), and if so, to what extent. In cases which fall under Sub-cl.(i) or Sub-cl.(ii), and if so, to what extent. The decision must necessarily depend on the facts and circumstances of the case, such as the length and past record of service, extent and magnitude of the offence and other relevant considerations. Therefore, it follows that the decision has to be taken after giving notice of the proposal to the employee concerned and after due consideration of the reply furnished, any. 18. In view of above, the petitioner has failed to make out any ground to interfere with impugned orders, and/or to hold that the impugned orders are arbitrary or perverse or contrary to law and/or the scheme of the Act. Hence, the petition, at this stage, fails. It is, however, clarified that neither the order passed by the controlling authority nor the appellate authority's order nor this order will come in the way of the petitioner to take appropriate action as may be available and permissible in law and in accordance with law after the disciplinary authority's order and/or order in the criminal proceedings.