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2018 DIGILAW 262 (KAR)

Syndicate Bank v. K. E. Balakrishna

2018-02-23

ARAVIND KUMAR

body2018
ORDER : Petitioner is assailing the correctness and legality of the order dated 31.12.2012 passed by second respondent in Gratuity Application No.48/02/2012- A/M – Annexure-A and order dated 21.11.2014 passed by third respondent in Appeal No.36(1)2014-B1-Annexure-B. 2. First respondent (for short referred to as ‘DEO’ hereinafter) herein was working as a Manager at Mangalore, Ashok Nagar Branch of petitioner – Bank and during the period 23.01.2008 to 22.06.2009 he is alleged to have abused his official position and fraudulently transferred certain sums from End Point Account to his ODC account and alleging misappropriating bank’s money and also alleging that he had allowed exceedings in his ODC account without authority. Hence, charge sheet came to be issued. On submitting reply, Disciplinary Authority was not convinced with the same and as such ordered for conducting departmental enquiry. On conclusion of enquiry a report came to be submitted by the Enquiry Officer on 22.12.2010 holding that charges leveled against petitioner were proved. After issuing second show cause notice and on considering the reply submitted by first respondent thereto, the disciplinary authority by order dated 30.03.2011 ordered for DEO being compulsorily retired from service. Being aggrieved by the same an appeal came to be filed by first respondent, which ended in its dismissal by order dated 26.07.2011 – Annexure-E and order of the disciplinary authority has reached finality. 3. Thereafter, petitioner-Bank issued a show cause notice on 21.07.2011 to first respondent as to why his gratuity amount should not be forfeited under Section 4 sub-section (6) Clause (b)(ii) of the Payment of Gratuity Act, 1972 (for short ‘the Act’) amounting to Rs.8,76,918/-. A reply in detail came to be submitted by first respondent on 08.08.2011 – Annexure-G and subsequently petitioner–bank rejected said objections raised by the DEO and as required under Rule 8(1)(ii) of the Payment of Gratuity (Central) Rules, 1972, filed Form 4 before the competent authority. In other words, the claim for payment of gratuity came to be rejected. 4. Being aggrieved by the same, first respondent approached the Controlling Authority for determination of payment of gratuity and for a direction being issued to the employer – bank. The Controlling Authority after considering the rival contentions and on perusal of material available before it formulated following two (2) points for its consideration: (i) Whether forfeiture of gratuity of the Applicant by the Respondent is legal and justified? The Controlling Authority after considering the rival contentions and on perusal of material available before it formulated following two (2) points for its consideration: (i) Whether forfeiture of gratuity of the Applicant by the Respondent is legal and justified? (ii) If the answer to the above question is in negative, what is the gratuity amount the applicant is entitled to? 5. On Point No.(i) Controlling Authority held that forfeiture of gratuity by the petitioner-bank was legal and justified and on the procedural aspects as to whether there has been substantial compliance of Section 4(6)(b)(ii) of the Act came to be held that show cause notice issued is vague or not convincing and there was no reasonable speaking order as to how the alleged act of misappropriation amounts to moral turpitude before forfeiting the gratuity payable to the employee. On Point No.(ii) the Controlling Authority determined the gratuity payable to the first respondent herein and directed to pay a sum of Rs.6,70,449/- with interest @ 10% p.a. from the date on which it became payable till the date of actual payment. 6. Being aggrieved by the same petitioner herein namely, employer filed an appeal before the Appellate Authority under Section 7(7) of the Act. Appellate Authority after considering the grounds urged in the appeal and extracting the same held that claim of employee was justified and as such affirmed the order of the Controlling Authority by holding as under: “I have examined the documents placed by both the parties and heard their arguments. After examination of these documents and the arguments adduced before me, I am of the considered view that the respondent is entitled for full gratuity amount and the order passed by the learned Controlling Authority & Assistant Labour Commissioner (Central), Mangalore dated 31.12.2012 is modified as under.” 7. I have heard the arguments of Sri. Radhesh Prabhu, learned counsel appearing for petitioner – Bank and Sri. S.N. Bhat, learned counsel appearing for first respondent. Perused the records. 8. It is the contention of Sri. Radhesh Prabhu, learned counsel appearing for the petitioner-Bank that Controlling Authority as well as Appellate Authority has erred in not analyzing and considering the tenor of sub-clause (ii) of clause (b) of sub-section (6) of Section 4 of the Act in proper perspective and as such it has resulted in an erroneous order being passed by the Controlling Authority. Radhesh Prabhu, learned counsel appearing for the petitioner-Bank that Controlling Authority as well as Appellate Authority has erred in not analyzing and considering the tenor of sub-clause (ii) of clause (b) of sub-section (6) of Section 4 of the Act in proper perspective and as such it has resulted in an erroneous order being passed by the Controlling Authority. He would further submit that Appellate Authority though was conscious of the fact that several grounds had been urged, for reasons best known it did not examine the same and in a perfunctory manner has passed the impugned order, which is not a speaking order though it may disclose that several paragraphs of the appeal memorandum submitted by the petitioner having been extracted. Since Appellate Authority is the last fact finding authority, it ought to have examined the grounds urged by the appellant and recorded its finding by a reasoned order. On these grounds, he contends that order of Appellate Authority is liable to be quashed. Hence, he prays for allowing the writ petition. In support of his submission he has relied upon the following judgments: (i) 2001 (5) Kar.L.J. 200 : J.B. Micheal D’Souza vs. Appellate Authority Under Payment of Gratuity Act, Bangalore And Others (ii) ILR 1986 Kar 2755: M/s. Bharath Gold Mines Ltd. Vs. Regional Labour Commissioner 9. Per contra, Sri. S.N. Bhat, learned counsel appearing for first respondent would submit that punishment imposed by the petitioner on employee being compulsory retirement and there being no quantification either in the enquiry proceedings or appellate proceedings regarding substantial loss that was caused to the Bank, question of forfeiture of gratuity would not arise, since payment of gratuity is not a bounty by the employer and it is a statutory right of the employee to receive the gratuity amount for the services rendered to the employer over the years. Hence, relying upon the following judgments he prays for dismissing the writ petition: (i) AIR 1962 SC 673 : The Garment Cleaning Works, Bombay Vs. The Workmen (ii) Unreported judgment of High Court of Punjab & Haryana dated 07.03.2013 in LPA No.566/2012. 10. There cannot be any dispute to the proposition of law that payment of gratuity to an employee by the employer is mandatory and curtailment of such right is circumscribed by Section 4(6)(a) and (b). The Workmen (ii) Unreported judgment of High Court of Punjab & Haryana dated 07.03.2013 in LPA No.566/2012. 10. There cannot be any dispute to the proposition of law that payment of gratuity to an employee by the employer is mandatory and curtailment of such right is circumscribed by Section 4(6)(a) and (b). As otherwise, payment of gratuity stems from the right given to an employee under the Act, which enactment is a social beneficial legislation. Withholding of gratuity is not permissible under any circumstance except under those circumstances prescribed under Section 4(6) of the Act and right to receive the gratuity amount is a statutory right conferred on an employee under the Act. Sub-clause (6) of Section 4 of the Act contains a non-obstante clause namely, perusal of sub-section (i) thereof would disclose that an accrued or vested right is sought to be taken away subject to conditions laid down thereunder being attracted. The provisions contained thereunder must therefore be scrupulously observed and followed. Section 4(6)(a) of the Act speaks of termination of services of an employee for any act, willful omission or negligence causing any damage. However, the amount liable to be forfeited would only be to the extent of damage or loss so caused. Section 4(6)(b) of the Act also provides for forfeiture in the event of services of an employee 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 or if his service has been terminated for any act which constitutes an offence involving moral turpitude. Thus, conditions laid down therein if not satisfied the employer is debarred from withholding the gratuity. 11. Keeping these principles in mind when the facts on hand are examined it would clearly disclose that charge leveled against DEO as already noticed hereinabove was first respondent had abused his official position and had fraudulently transferred a sum of Rs.36,050/- and Rs.31,107.12 from End Point Account to his ODC account by misappropriating bank’s money and allowing exceedings in his ODC’s account without authority. The Enquiring Authority, Disciplinary Authority as well as Appellate Authority have found that charges leveled against DEO was proved and order passed by Appellate Authority has reached finality. The Enquiring Authority, Disciplinary Authority as well as Appellate Authority have found that charges leveled against DEO was proved and order passed by Appellate Authority has reached finality. It is because of this precise reason show cause notice came to be issued to DEO for forfeiture of gratuity payable to him by invoking Section 4(6)(b)(ii) of the Act on 21.07.2011 – Annexure-F. It has been alleged in the notice to the following effect: “WHEREAS you have been compulsorly retired from the services of the Bank with effect from 08.04.2011 vide proceedings No.151/PD-IRD/DA-6 dated 30.03.2011 of the Disciplinary Authority for the misconduct proved against you AND WHEREAS you are not eligible to receive Gratuity under Syndicate Bank (Officers) Service Regulations, 1979 in view of termination of your service by way of punishment vide Regulation No.46(1)(e) of the said Regulation. AND WHEREAS a sum of Rs.8,76,918/- (Rupees Eight Lakh seventy six thousand nine hundred eighteen only) is payable to you as Gratuity under Payment of Gratuity Act, 1972. AND WHEREAS as per the provisions of Clause No.6(b)(ii) of Payment of Gratuity Act, 1972 the gratuity of an employee, whose services have been terminated for any act which constitutes an offence involving Moral Turpitude shall forfeit the Gratuity payable to him/her NOW THEREFORE you are directed to show cause within 15 days from the date of receipt of this letter, as to why Clause No.6(b)(ii) of Gratuity Act should not be invoked and Gratuity of Rs.8,76,918/- payable to you under the Payment of Gratuity Act, 1972, should not be forfeited to the extent of Rs.8,76,918/-. If not reply is received from you within the stipulated period it will be presumed that you have nothing to say in the matter accordingly the Gratuity will be settled.” 12. A reply has been submitted by DEO on 08.08.2011 - Annexure-G in detail as to the reasons on which gratuity amount cannot be forfeited. There is no specific order passed by the petitioner rejecting claim of gratuity by assigning reasons, Sri. Radhesh Prabhu, learned counsel appearing for petitioner is partially correct in contending that Form No. M – Annexure-H dated 19.09.2011 submitted to the statutory authority would meet the requirement of statutory compliance. There is no specific order passed by the petitioner rejecting claim of gratuity by assigning reasons, Sri. Radhesh Prabhu, learned counsel appearing for petitioner is partially correct in contending that Form No. M – Annexure-H dated 19.09.2011 submitted to the statutory authority would meet the requirement of statutory compliance. However, this Court cannot lose sight of the fact that when a civil right is involved namely, right to receive gratuity amount granted under the Act, which is recognized as statutory right is being curtailed by forfeiture, it should be for a justifiable and cogent reason. As otherwise, said order smacks of injustice. 13. At this juncture, it would be apt and appropriate to notice the judgment of Division Bench in the case of M/s. Bharath Gold Mines Ltd. vs. Regional Labour Commisioner reported in ILR 1986 Kar. 2755 whereunder it has been held that in a given case if Section 4(6)(b)(ii) is to be applied, the conditions stipulated therein must not only be existing but also employer has to take an independent decision as to whether gratuity payable should at all be forfeited in cases falling under said clause and decision must necessarily depend on the facts obtained, such as length of service and past record service, extent and magnitude of the offence and other relevant considerations. It has been held by the Division Bench as under: “14. Before concluding, it is necessary to observe that though complying with rules of natural justice was unnecessary, for forfeiting Gratuity under Section 4(6)(b) of the Act as it stood when the decision was taken by the appellant as it provided that the gratuity shall stand wholly forfeited under circumstances specified in Clauses (i) and (ii), the position has since changed in view of the amendment of Section 4(6)(b)(ii) of the Act with effect from 1-7-1984. After the amendment, it reads thus : "4(6) Notwithstanding anything contained in Sub-section (1)- XXX XXX XXX (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." (Underlined by us) The change brought about is underlined. 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-clause (i) or (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, if any.” 14. Keeping the above stated principle in mind when the facts on hand are looked into, it would not detain this Court for too long to hold that at the initial stage itself order of rejection of claim of the first respondent by its employer is erroneous or in other words, order of forfeiture of payment of gratuity to DEO – first respondent does not disclose the reasons for forfeiture. In the absence of any reasoning assigned by the employer in the order withholding payment of gratuity or rejecting the claim for payment of gratuity, such order cannot be sustained. In the absence of any reasoning assigned by the employer in the order withholding payment of gratuity or rejecting the claim for payment of gratuity, such order cannot be sustained. When this initial flaw itself is found, the only recourse which the Controlling Authority as well as Appellate Authority ought to have taken was to remit the matter back to the petitioner – Bank namely, employer to pass an order as required under Section 4(6)(b)(ii) namely, it should have directed the petitioner-Bank to ascertain from the facts obtained in the instant case as to whether it was a fit case so as to attract Section 4(6)(b)(ii) of the Act to forfeit gratuity amount either in full or partially. Such an exercise having not been undertaken, not only impugned orders but also order of rejection or notice of rejection dated 19.09.2011 – Annexure-H also cannot be sustained. Hence, I proceed to pass the following: ORDER (i) Writ petition is hereby allowed-in-part. (ii) Order dated 31.12.2012 passed by second respondent in Gratuity Application No.48/02/2012-A/M – Annexure-A and order dated 21.11.2014 passed by third respondent in Appeal No. 36(1)2014-B1- Annexure-B and notice of rejection dated 19.09.2011 – Annexure-H passed by respondent Nos.2, 3 and 1 respectively are hereby quashed. (iii) Matter is remitted back to the petitioner-Bank for adjudication of claim for payment of gratuity in the light of observations made hereinabove. (iv) Petitioner – bank shall dispose of the petition expeditiously at any rate within 45 days from the date of receipt of certified copy of this order. (v) Petitioner has deposited a sum of Rs.6,70,449/- before the Controlling Authority, which shall be kept in a fixed deposit initially for a period of one year and depending upon the outcome of decision that would be taken by the petitioner-Bank, it can regulate the payment of said amount to either of the parties. (vi) It is needless to state that successful party would be entitled to receive the amount in deposit and also its profit. Ordered accordingly.