Dr Mohan R Bolla Law Lectures Gratuity act

The Payment of Gratuity Act,
1972
employees who complete five years of continuous service are eligible to receive
gratuity when they leave the organisation. The gratuity ceiling was last revised
from 3.5 lakh to 10 lakh in 2010 after the Sixth Pay Commission
recommendation had raised the limit for central government employees. Soon
private sector workers could receive gratuity up to ₹20 lakh, doubling the
present maximum payout of ₹10 lakh that they are eligible to get after leaving
an organisation after five years of continuous service.
a gratuitous payment, a gift or a boon made by
the employer to the employee as per his sweet
will.

Social Security
William Beveridge
William Beveridge, defined ‘social security’ -
“security of an income to take the place of
earnings when they are interrupted by
unemployment, sickness or accident,
to provide for retirement through age,
to provide against loss of support by death of
another person and
to meet exceptional expenditure-such as those
concerned with birth, death and marriage.”

Social Security
William Beveridge
In industrial societies, income insecurity resulting from
various contingencies of life such as disablement, old
age and death and others, has become a serious
problem. The problem has become more acute in view
of phenomenal growth of the permanent class of
wage-earners.
uring such contingencies the income of the earners either
stops altogether or is reduced substantially or becomes
intermittent causing hardships not only to the earners,
but also to their family members. One of the
outstanding measures to mitigate the hardship is to
make available social security benefits under the
coverage of legislation

S Mukharji J.,
Shree Sajjan Mills Ltd vs
Commissioner Of Income Tax, M.P. AIR 1986 SC 484,
Although payment of gratuity is made on
retirement or termination of service, It was not
for the service rendered during the year In
which the payment is made but it is made in
consideration of the entire length of service and
its ascertainment and computation depend
upon several factors.

S Mukharji J.,
Shree Sajjan Mills Ltd vs
Commissioner Of Income Tax, M.P. AIR 1986 SC 484
The right to receive the payment accrued to the employees on their retirement or termination of their
services and the liability to pay gratuity became the accrued liability of the assessee when the
employees retired or their services, were terminated.
Until then the right to receive gratuity is a contingent right and the liability to pay gratuity continues to
be a contingent ability qua the employer.
An employer might pay gratuity when the employee retires or his service is terminated and claim the
payment made as an expenditure incurred for the purpose of business under section 37.
He might, if he followed the mercantile system, provide for the payment of gratuity which became
payable during the previous year and claim it as an expenditure on the accrued basis under section 37
of the said Act. Since the amount of gratuity payable in any given year would be a variable amount
depending upon the number of employees who would be entitled to receive the payment during the
year, the amount being a large one in one year and a small one in another year, the employer often
finds it desirable and/or convenient to set apart for future use a sum every year to meet the contingent
liability as a provision for gratuity or a fund for gratuity. He might create an approved gratuity fund for
the exclusive benefit of his employees under an irrevocable trust and make contributions to such fund
every year. Contingent liabilities do not constitute expenditure and can not be the subject matter of
deduction even under the mercantile system of accounting.
Expenditure which was deductible for income tax purposes is towards a liability actually existing at the
time but setting apart money which might become expenditure on the happening of an event is not
expenditure.

The Payment of Gratuity Act 1972
Applicability
The Act came into force w.e.f. September 21, 1972.
-applies to the whole of India and so far as it relates to ports
and plantations it does not apply to the State of Jammu and
Kashmir.
It applies to: (a) every factory, mine, oilfield, plantation, port
and railway company.
(b) Every shop or establishment within the meaning of any
law for the time being in force in relation to shops and
establishment in a State, in which 10 or more persons are
or were employed on any day in the preceding 12 months.
(c) Such other establishments or class of establishment, in
which 10 or more employees are or were employed on any
day in the preceding 12 months, as the Central Government
may notify in this behalf.

Salient features- the Payment of
Gratuity Act, 1972
The Act is fairly sweeping in coverage, as it applies to all factories,
mines, oil fields, plantations, ports and railways irrespective of the
number of workmen employed by them. It also covers shops and
establishments employing 10 or more persons.
The Act gives a statutory right of gratuity to all the employees, who
have rendered five years’ continuous service and whose services
stand terminated after coming into force of the Act on account of
superannuation, or retirement, or resignation, or death or
disablement.
The Act provides both executive and quasi-judicial machinery for
matters pertaining to nomination, determination and recovery of
gratuity. The executive machinery pertains to maintenance of
records regarding opening, change or closure of establishments,
display of notices and maintenance of records by the controlling
authority.

Salient features- the Payment of
Gratuity Act, 1972
The quasi-judicial functions have been divided between
the employers and the Controlling Authority in as much
as for payment of gratuity, the first forum provided is
an application to the employer. When the employer has
declined or avoided payment of gratuity, then an
application is required to be made to the Controlling
Authority.
The machinery provided for recovery rests with the
Controlling Authority. The orders of the Controlling
Authority for payment or determination of gratuity are
applicable before the appropriate government or the
appellate authority.

P B Sawant J., SC
Bakshish Singh vs
Darshan Engineering Works AIR 1994 SC 251
These two appeals one by the Union of India and the other by the
aggrieved employee are directed against the decision dated March
24, 1983 of the Punjab and Haryana High Court whereby the High
Court has struck down Section 4(1)(b) of the Payment of Gratuity
Act, 1972 as being violative of Article 19(1(g) of the Constitution of
India.
On the employee's resignation w.e.f. December 10, 1978 which was
accepted by the respondent-employer, he claimed gratuity under
Section 4(1)(b) of the Act. His claim not having been accepted, he
approached the Controlling Authority under Section 7 of the Act.
The claim was resisted by the employer on the ground firstly that
the employee was entitled to gratuity only till the date he reached
his superannuation age which was 58 years and since he had not
completed 5 years of service by the time he attained 58 years of
age, he was not entitled to gratuity under Section 4(1) of the Act.

P B Sawant J., SC
Bakshish Singh vs
the contentions were negatived by the Controlling
Authority by pointing out that Section 4(1) provided for
payment of gratuity to the employee on the
termination of his employment after he has rendered
continuous service of not less than five years on the
occurrence of any of the three events viz.,
(a) on the employee reaching his superannuation age, or
(b) on his retirement or resignation, or (c) on his death
or disablement due to accident or disease.
In case of the third event, the qualifying continuous
service of five years is not necessary.

P B Sawant J., SC
Bakshish Singh vs
Since in the present case the employer had not chosen to superannuate the
employee on his attaining 58 years of age and had continued him in
service till the employee himself resigned on December 10, 1978 by which
date he had completed more than 10 years of service, the employee was
entitled to the gratuity for the period of his entire service upto the date of
his resignation. The Controlling Authority, therefore, calculated the
amount of gratuity due to the employee as Rs 1782 at the rate of 15 days'
wages per year of service for all the IO years taking the last drawn wages
of Rs 3 35 per month as the basis of the said calculation. This order was
challenged by the employer before the Appellate Authority under the Act.
The Appellate Authority confirmed the finding of the Controlling Authority
and dismissed the appeal. In the writ petition filed before the High Court
under Articles 226 and 227 of the Constitution, the High Court held that
the provisions of Section 4(1)(b) of the Act which entitles an employee to
gratuity on his retirement or resignation after a continuous service of only
5 years was an unreasonable restriction on the employer to carry on his
business and, therefore, violative of Article 19(1)(g) of the Constitution.

P B Sawant J., SC
Bakshish Singh vs
The dictionary meaning may suggest that gratuity is a gratuitous payment, a gift or a boon made by the employer to
the employee as per his sweet will. It necessarily means that it is in the discretion of the employer whether to
make the payment or not and also to choose the payee as well as the quantum of payment. However, in the
industrial adjudication it was considered as a reward for a long and meritorious service and its payment, therefore,
depended upon the duration and the quality of the service rendered by the employee.
At a later stage, it came to be recognised as a retiral benefit in consideration of the service rendered and the employees
could raise an industrial dispute for introducing it as a condition of service. The industrial adjudicators recognised
it as such and granted it either in lieu of or in addition to other retiral benefit(s) such as pension or provident fund
depending mainly upon the financial stability and capacity of the employer.
The other factors which were taken into consideration while introducing gratuity scheme were the service conditions
prevalent in the other units in the industry and the region, the availability or otherwise of the other retiral
benefits, the standard of other service conditions etc. The quantum of gratuity was also determined by the said
factors. The recognition of gratuity as a retiral benefit brought in its wake further modifications of the concept. It
could be paid even if the employee resigned or voluntarily retired from service. The minimum qualifying service
for entitlement to it, rate at which it was to be paid and the maximum amount payable was determined likewise
on the basis of the said factors. It had also to be acknowledged that it could not be denied to the employee on
account of his misconduct.
He could be denied gratuity only to the extent of the financial loss caused by his misconduct, and no more. Thus even
before the present Act was placed on the statute book, the courts had recognised gratuity as a legitimate retiral
benefit earned by the employee on account of the service rendered by him. It became a service condition
wherever it was introduced whether in lieu of or in addition to the other retiral benefit(s).
The employees could also legitimately demand its introduction as such retiral benefit by raising an industrial dispute in
that behalf, if necessary. The industrial adjudicators granted or rejected the demand on the basis of the factors
indicated above.

P B Sawant J., SC
Bakshish Singh vs
It is true that while doing so, the industrial adjudicators insisted upon certain minimum years of
qualifying service before an employee could claim it whether on superannuation or resignation or
voluntary retirement. This was undoubtedly inconsistent with the concept of the gratuity being an
earning for the services rendered. What is, however, necessary to remember in this connection is
that there is no fixed concept of gratuity or of the method of its payment. Like all other service
conditions, gratuity schemes may differ from establishment to establishment depending upon the
various factors mentioned above, prominent among them being the financial capacity of the
employer to bear the burden.
There has commonly been one distinction between a retiral benefit like provident fund and gratuity, viz.
the former generally consists of the contribution from the employee as well. It is, however, not a
necessary ingredient and where the employee is required to make his contribution, there is no
uniformity in the proportion of his share of contribution. Likewise, the gratuity schemes may also
provide differing qualifying service for entitlement to gratuity. It is true that in the case of gratuity
an additional factor weighed with the industrial adjudicators and courts, viz. that being entirely a
payment made by the employer without there being a corresponding contribution from the
employee, the gratuity scheme should not be so liberal as would induce the employees to change
employment after employment after putting in the minimum service qualifying them to earn it.
But as has been pointed out by this Court in the Straw Board Mfg. Co. Ltd. case" in view of the
constantly growing unemployment, the surplus labour and meager opportunities for employment,
the premise on which a longer qualifying period of service was prescribed for entitlement to
gratuity on voluntary retirement or resignation, was unsupported by reality. In the face of the dire
prospects of unemployment, it was facile to assume that the labour would change or keep changing
employment to secure the paltry benefit of gratuity.

P B Sawant J., SC
Bakshish Singh vs
Even assuming that the presumption that a longer period of service for
entitlement to gratuity on voluntary retirement or resignation is necessary
to prevent labour from changing employment frequently, that
consideration has no bearing on the question whether a short period of
qualifying service is violative of Article 19(1)(g) of the Constitution. That
article comes into picture only if, among others, (a) it is shown that the
short qualifying period of service throws on any particular employer such
financial burden as would force him to close his establishment and (b) the
provision is not one of the minimum service conditions which must be
made available to the employees. Hence, the provision for a short
qualifying period per se is not invalid and cannot be struck down generally
as being violative of Article 19(1)(g) of the Constitution as is done by the
High Court in the present case. The High Court's reliance on the decisions
referred to by it, for the purpose of holding that the provision of a period
of service of five years is violative of Article 19(1)(g) of the Constitution, is
misplaced for the Court has failed to notice that the view taken by this
Court was in a different factual context.

P B Sawant J., SC
Bakshish Singh vs
In the first instance, at that time, gratuity had not come to be accepted as one of the
minimum service conditions, much less any particular scheme of gratuity.
Secondly, the courts in those cases were concerned with establishments of differing
financial capacity in a particular industry and with evolving uniform service
conditions for the industry as a whole for the maintenance of industrial peace.
Further, except the decision of this Court in Express Newspaper case2 the other
decisions which have laid down more than five years' qualifying service, have not
based their conclusion on the vulnerability of the shorter qualifying service on the
anvil of Article 19(1)(g) of the Constitution.
On the other hand, in Wenger and Co. case8 this Court pointed out that in dealing
with the financial obligations involved on account of the introduction of the
gratuity scheme, it was necessary to bear in mind the actual rather than the
theoretical impact of the scheme.
Since not more than 3 to 4 per cent of the employees retired every year, the financial
burden caused by the gratuity scheme was much less than what its theoretical
enunciation would indicate. The Court there also held that the minimum qualifying
period of five years' service was reasonable.

P B Sawant J., SC
Bakshish Singh vs
In Delhi Cloth and General Mills Co. Ltd. case9 the Court
was at pains to point out that in matters relating to the
grant of gratuity and even generally in the settlement
of disputes arising out of industrial relations, there
were no fixed principles on the application of which
the problems arising before the tribunals or the courts
could be determined and often precedents of cases
determined ad hoc were utilised to win the claims or to
resist them. It was, therefore, futile to attempt to
reduce the grounds of the decisions given by the courts
to the dimensions of any recognised principle.

P B Sawant J., SC
Bakshish Singh vs
In Straw Board Mfg. Co. Ltd. case11 which was decided
after the present statute came into operation, as
pointed out above, the Court upheld the five years'
minimum qualifying period of service for entitlement
to gratuity on voluntary retirement or resignation, by
stating that the qualifying period of ten years' service
prescribed in British Paints case, was not meant to be
laid down as a uniform standard to be followed in all
cases.
This is apart from the fact that the court also stated there
that the premise underlying the reasons which
impelled the said higher qualifying service was not in
conformity with the current reality

the Payment of Gratuity Act, 1972
The Payment of Gratuity Act, 1972 which came
into force on 16th September, 1972.

D.M Dharmadhikari, J.,
Ahmedabad Pvt. Teachers Association vs.
Admin. Officer 2004 LLR 97SC
This appeal has been preferred by Ahmedabad Private
Primary Teacher's Association. The Association complains
that in the petition filed by an individual teacher
[respondent no. 2 herein] employed in a school run by
Ahmedabad Municipal Corporation, the Full Bench of the
High Court of Gujarat by impugned judgment dated
04.5.2001 in Special Civil Application No. 5272 of 1987
not only rejected the claim of the teacher for payment of
gratuity under the provisions of Payment of Gratuity Act.
1972 but has decided an important question of law
against the teachers as a class that they do not fall within
the definition of 'employee' as contained in Section 2(e)
of the Act and hence can raise no claim to gratuity under
the Act.

'2(e). 'employee' means any person (other than an
apprentice) employed on wages, in any establishment,
factory, mine, olifield, plantation, port, railway company
or shop, to do any skilled, semi-skilled or unskilled,
manual, supervisory, technical or clerical work, whether
the terms of such employment are express or implied,
[and whether or not such person is employed in a
managerial or administrative capacity, but does not
include any such person who holds a post under the
Central Government or a State Government and is
governed by any other Act or by any rules providing for
payment of gratuity].

The Act is a piece of social welfare legislation and deals with the
payment of gratuity which is a kind of retiral benefit like pension,
provident fund etc. As has been explained in the concurring opinion
of one of the learned judges of the High Court 'gratuity in its
etymological sense is a gift, especially for services rendered, or
return for favours received.' It has now been universally recognized
that all persons in society need protection against loss of income due
to unemployment arising out of incapacity to work due to invalidity,
old age etc. For the wage earning population, security of income,
when the worker becomes old or infirm, is of consequential
importance. The provisions contained in the Act are in the nature of
social security measures like employment insurance, provident fund
and pension. The Act accepts, in principle, compulsory payment of
gratuity as a social security measure to wage earning population in
industries, factories and establishments.

Thus, the main purpose and concept of gratuity is to help
the workman after retirement, whether, retirement is a
result of rules of superannuation, or physical disablement
or impairment of vital part of the body. The expression,
'gratuity' itself suggests that it is a gratuitous payment
given to an employee on discharge, superannuation or
death. Gratuity is an amount paid unconnected with any
consideration and not resting upon it. and has to be
considered as something given freely voluntarily or
without recompense. It is sort of financial assistance to
tide over post-retiral hardships and inconveniences.

Our conclusion should not be misunderstood that
teachers although engaged in very noble profession of
educating our young generation should not be given any
gratuity benefit. There are already in several States
separate statutes, rules and regulations granting gratuity
benefits to teachers in educational institutions which are
more or less beneficial than the gratuity benefits
provided under the Act. It is for the Legislature to take
cognizance of situation of such teachers in various
establishments where gratuity benefits are not available
and think of a separate legislation for them in this regard.
That is the subject matter solely of the Legislature to
consider and decide.

R. Banumathi, J.,
S.Seshachalam & Ors.Etc vs
Chairman Bar Council of Tamilnadu ... JT 2014 (14) SC 52
The appellants are retired employees either from
government service or other organisations qualified with
law degree who have enrolled themselves as advocates
after retiring from their respective services and now are
said to be practising in courts. Challenging the impugned
provision and Explanation II (5) of Section 16 of the Tamil
Nadu Advocates' Welfare Fund Act, the appellants filed
writ petitions contending that the benefit of Welfare
Fund Act is denied to the kin of advocates who are in
receipt of pension or gratuity or other terminal benefits
from any State or Central Government or organization is
arbitrary, unreasonable and violative of Article 14 of the
Constitution of India.

R. Banumathi, J.,
Chairman Bar Council Of Tamilnadu ... JT 2014 (14) SC 52
The Advocates' Welfare Fund Act, 2001 enacted by the
Parliament enjoins the appropriate Government to
constitute a fund to be called the "Advocates' Welfare
Fund" with the object of providing social security in the
form of financial assistance to junior lawyers and welfare
scheme for indigent or disabled advocates. Advocates'
Welfare Fund is administered by a Trustee Committee. As
per the provisions of the Welfare Fund Act, the fund shall
vest in and be held and administered by the Trustee
Committee established under Section 4 of the Act. The
functions of the Trustee Committee is enumerated in
Section 9 of the Welfare Fund Act.

R. Banumathi, J.,
Chairman Bar Council of Tamilnadu
... JT 2014 (14) SC 52
By a careful reading of Section 16, it is evident that prior to 2001 amendment,
Explanation II (5) of Section 16 of the Welfare Fund Act contemplated that on
the death of a member of the Fund within five years from the date of his
admission to the Fund, his nominee or legal heirs was/were eligible for
payment at the rate of one thousand rupees for each year of his practice.
That was because under Section 16(1) of the Welfare Fund Act, the schedule
payment is possible only if as an advocate he has completed five years as a
member of the Fund. Explanation II (5) to Section 16 of the Welfare Fund Act
stood amended with effect from 1.2.2001as extracted above, as per which
lump sum amount of two lakh rupees is payable on the death of a member of
the Fund irrespective of the years of membership of the Fund.
After GO. Ms. 688 dated 19.9.2012, the above financial assistance of two lakh
rupees payable to the nominee/legal heirs of the deceased advocates in terms
of Section 16 Explanation II (5) has been enhanced to five lakh and twenty five
thousand rupees. This lump sum of two lakh rupees (as per Amendment 2001)
is denied to a member of a Fund who has enrolled himself after retirement
from government service or any other organization who was in receipt of
pension or other terminal benefits.

R. Banumathi, J.,
Chairman Bar Council Of Tamilnadu ... JT 2014 (14) SC 52
Contention of the appellants is that as per definition of
"advocate" in Section 2 (a) of the Welfare Fund Act, there
cannot be a differentiation between the advocates.
Reliance was placed upon Section 2(i) of the Welfare Fund
Act which defines the term "member of the Fund" and it
was submitted that when once the retired employees like
the appellants have been admitted as members of the
Fund, they should be treated equally with others and
there cannot be an artificial classification made amongst
one homogeneous group of advocates and such
classification is violative of Article 14 of the Constitution
of India.

R. Banumathi, J.,
Chairman Bar Council of Tamilnadu ... JT 2014 (14) SC 52
The Division Bench of the Madras High Court made meticulous
analysis of various provisions of the Welfare Fund Act and
referred to various decisions of this Court dealing with
interpretation of Article 14 of the Constitution of India and
rightly concluded that there is reasonable classification between
the advocates who had set up practice after demitting their
office from the Central/State government/Organization and
advocates who have set up practice straight from the law
college. It would be right to say that the retired officials who
joined legal profession constitute a separate class and the
disentitlement of the benefit of lump sum welfare fund to this
group of advocates cannot be said to be unreasonable. We do
not find any infirmity in the impugned judgment of the Madras
High Court and the appeals are liable to be dismissed
accordingly.

Kurian Joseph, J.,
Jorsingh Govind Vanjari vs
Divisional Controller Maharashtra State RTC
Civil Appeal No. 11807 of 2016
arising out of S.L.P. (C) No. 26366 of 2016
The appellant, a bus conductor aggrieved by the termination from
service, raised an industrial dispute leading to the award in Reference
IDA No. 42 of 2007 dated 20.06.2013 of the Labour Court, Jalgaon,
Maharashtra. The Labour Court set aside the dismissal order.
However, noticing that the appellant had already crossed the date of
superannuation, viz., 31.05.2005, it was ordered that from the date
of termination to the date of superannuation, the appellant would be
entitled to all service benefits except back wages which were limited
to 50 per cent.
The respondent challenged the award before the High Court of
Bombay. The award was modified by the HC by granting only a one-
time compensation of an amount equivalent to 50 per cent of the
back wages as awarded by the Labour Court.
Thus aggrieved, the appellant is before this Court.

Kurian Joseph, J.,
Jorsingh Govind Vanjari vs
Divisional Controller, Maharashtra State RTC
Civil Appeal No. 11807 of 2016
arising out of S.L.P. (C) No. 26366 of 2016
the High Court itself has granted compensation since the Court felt that the
termination was unjustified and since reinstatement was not possible on
account of superannuation. In case, the High Court was of the view that
termination was justified, it could not have ordered for payment of any
compensation.
In order to deny gratuity to an employee, it is not enough that the alleged
misconduct of the employee constitutes an offence involving moral turpitude
as per the report of the domestic inquiry. There must be termination on
account of the alleged misconduct, which constitutes an offence involving
moral turpitude.
Thus, viewed from any angle, the judgment of the High Court cannot be
sustained. It is hence set aside. The appeal is allowed. The award dated
20.06.2013 of the Labour Court, Jalgaon, Maharashtra in Reference IDA No.
42 of 2007 is restored. Consequently, the appellant shall be entitled to
gratuity in respect of his continuous service from his original appointment till
the date of his superannuation.

Prafulla C. Pant, J.,
Bindeshwari Chaudhary vs
State of Bihar & Ors on 29 November, 2016
appellant was posted as Executive Engineer with Irrigation
Department of State of Bihar, in the District of Singhbhum. The
Appellant awarded a contract on 29.08.1989 to one M/s. D.K.
Road Lines, for bed and slope lining of canal in Galudih. In terms
of the contract, the contractor was required to furnish bank
guarantee, and the same was submitted by him for an amount
of Rs.23,61,500/-. In order to verify the genuineness of the bank
guarantee furnished by the contractor, the appellant sent his
Accounts Clerk to Punjab & Sindh Bank, Jamshedpur, with letter
dated 29.08.1989 (Annexure-P1). In response to said letter,
appellant received letter dated 01.09.1989 (Annexure-P-3) from
Shri T.S. Gandhok, Branch Manager of the bank, confirming the
bank guarantee.

The appellant made payment of Rs.15,00,000/- on 02.09.1989
towards mobilization advance to the contractor. On 04.09.1989,
Superintending Engineer, issued letter (Annexure P-4), directing
the appellant not to make mobilization advance. But,
subsequently said authority allowed the appellant to make
second mobilization advance to the contractor vide its letter
dated 27.10.1989, consequently the appellant released payment
of Rs.8,60,000/- on 31.10.1989 towards second mobilization
advance. After three months, the Superintending Engineer, vide
letter dated 23.12.1989 (Annexure-P-5) approved the work done
by M/s D.K. Road Lines assessing the work done at
Rs.42,79,021/-. On 12.02.1990, the appellant made further
payment of Rs.2.55 lacs.

On 04.04.1991, appellant was placed under suspension in
contemplation of departmental proceedings. The appellant
challenged order of suspension in Writ Petition before the High Court
which was disposed of with the observation that if charge sheet is
not served within three weeks on the appellant, the suspension
order shall stand quashed. On 13.06.1991 the respondent authorities
served charge sheet (dated 02.05.1991) on the appellant, relating to
payment of unsecured advance of Rs.14.5 lacs to the contractor.
The appellant then filed another Writ Petition C.W.J.C. No. 4439 of
1991 once again seeking quashing of the suspension order, and the
High Court vide its order dated 10.10.1991, quashed the same.
The respondent authorities vide order dated 05.12.1991 (Annexure–
P12) revoked the suspension order, and departmental enquiry was
dropped. Consequently on 14.01.1992, the appellant joined his new
assignment as a Technical Advisor to Water Nigam Circle, Dumka.

Meanwhile, when new Manager took over the charge of
Jamshedpur Branch of Punjab & Sindh Bank, issued letter dated
13.02.1990 (Annexure-P-7), asking the appellant to send
photocopy of the bank guarantee in question. And vide letter
dated 20.03.1990 (Annexure-P-8) the new Manager informed
the appellant that no such bank guarantee has been issued by
the bank. Appellant has pleaded that he received said letter on
10.04.1990, and by then the appellant had released further
payment of Rs.7.33 lacs towards bill of the contractor. On
04.05.1990, bank cancelled its earlier communication dated
01.09.1989. The appellant finally released Rs.4.4 lacs towards
current bill of the contractor, whereafter he was transferred on
11.06.1990 to Daltanganj. It appears that C.B.I. registered a case
RC37(A)/91, Patna in pursuance to the fraudulent/forged bank
guarantee furnished by the contractor.

After investigation, C.B.I. submitted charge sheet against accused T.S.
Gandhok, Manager of Punjab & Sindh Bank who confirmed the bank
guarantee, and accused Ramdahin Singh, Senior Accounts Clerk of
the Irrigation Department who received the bank guarantee from the
contractor and verified. The appellant has pleaded that he is not
accused in the charge sheet, still on 18.06.1993, after the
departmental enquiry was earlier dropped, the respondent
authorities awarded punishment against the appellant withholding
his three increments with cumulative effect, and also ‘censured’ for
the year 1989-90. As such, third C.W.J.C. No. 942 of 1994 was filed by
the appellant challenging the above order of punishment. The said
writ petition was allowed on 23.03.1995 by the High Court holding
that withholding of three increments with cumulative effect is a
major punishment, and could not have been awarded without
resorting to regular departmental enquiry. However punishment of
“Censure’ was not interfered with by the High Court.

On 20th May, 1995, the respondent authorities initiated fresh
departmental enquiry against the appellant, and second charge
sheet (Annexure-P13) was served on him relating to the same
allegations of release of unsecured advance of Rs. 14.5 lacs to
the contractor against the order of Superintending Engineer. The
appellant filed his objections and participated in the enquiry.
The enquiry report dated 18.10.1996 (enclosure with the
Annexure P-17) was submitted by the enquiry officer to the
State Government with the finding that part of the charge stood
proved.
Consequently, show cause notice dated 23.10.1996 was issued
to the appellant to which he responded on 07.01.1997.
Thereafter the appellant stood retired on 31.01.1997. On
24.09.1997, appellant was awarded punishment of withholding
of 100% pension and gratuity.

Finally, the appellant filed fourth Writ Petition C.W.J.C. No.
11788 of 1997 before the High Court challenging the order of
withholding of pension and gratuity. During the pendency of
said writ petition, another show cause notice dated 17.06.1998
(Annexure-P18) was issued against the appellant under Rule 43
(b) read with Rule 139 of Bihar Pension Rules, as to why the
pension benefits be not decided at zero.
The High Court, vide its order dated 04.12.1998, dismissed the
writ petition.
Aggrieved by said order, Letters Patent Appeal No. 436 of 2000
was filed by the appellant which was disposed of by the High
Court vide impugned order dated 20.05.2008 restricting
withholding of gratuity and pension to the extent of fifty
percent.

we find force in submission of learned counsel of the appellant that the appellant was
bonafide in making the payment in question to the contractor, as he did make
enquiries from the bank concerned before releasing mobilizing advance to the
contractor.
The Enquiry Report dated 18.10.1996 (enclosure to Annexure P-17), in its para 8,
shows that though it is mentioned that charge is proved against the appellant in the
enquiry, but the finding is based on earlier enquiry report. The earlier enquiry report
was in question in C.W.J.C. No. 942 of 1994 in which punishment of withholding of
three increments with cumulative effect was quashed.
The authorities could not and should not have relied upon said enquiry report as basis
in fresh enquiry for holding the appellant guilty of the charge and to award
punishment of withholding of pension and gratuity. In the circumstances, we do not
find that there was sufficient reason for the respondent authorities to exercise the
powers under Rule 43 (b) read with Rule 139 of Bihar Pension Rules as neither there
was pecuniary loss to the State, nor the present case is of a grave misconduct on the
part of the appellant.
For the reasons as discussed above, we are inclined to interfere with the impugned
order passed by the High Court. Therefore, the appeal is allowed. The orders dated
24.09.1997 and 17.06.1998, passed by the respondent authorities shall stand quashed.

State of Uttar Pradesh And 2 Ors vs
Dhirendra Pal Singh
, 2016
Dhirendra Pal Singh was Assistant Store Superintendent with the Irrigation
Department of the State of Uttar Pradesh. He stood retired on 30.06.2009 on
attaining the age of superannuation.
At the time of his retirement GPF, leave encashment and 70% of gratuity and
pension were cleared, but rest of the 30% of gratuity and computation of
pension were held up.
The stand of the appellants is that there were some discrepancies in the stock
in the store of the department and some enquiries were going on as to loss
caused to the public exchequer.
After making representations when the remaining amount of gratuity and
pension was not cleared, the respondent filed Civil Suit No. 338 of 2012.
However, the same was dismissed as withdrawn as the appellants/State
authorities, vide order dated 23.07.2015 finally, on the basis of alleged
discrepancies withheld the remaining part of gratuity and pension of the
respondent and, vide order dated 06.08.2015, directed recovery of
Rs.7,26,589/-, from the retiral dues payable to the respondent, which was
challenged in the writ petition.

Dhirendra Pal Singh
, 2016
There was no departmental enquiry initiated against the
respondent and after about more than six years order as to
finally withholding of remaining pension on the ground of
alleged misconduct and the recovery was directed to be made
from the respondent after serving a notice on him. Learned
single Judge of the High Court found that the orders challenged
in the writ petition cannot be sustained in law as neither
recourse of Article 351-A of UP Civil Service Regulations was
resorted to, nor any departmental enquiry was held.
Learned single Judge further directed that the remaining
amount of gratuity and pension of the respondent shall be
released with interest at the rate of 10% p.a. on the sum
withheld by the State authorities.
The Division Bench, in special appeal filed by the State, found no
illegality in the order passed by the learned single Judge.

Dhirendra Pal Singh
, 2016
Article 351-A of UP Civil Service Regulations reads as under: -“351-A. The Governor reserves to himself the
right of withholding or withdrawing a pension or any part of it, whether permanently or for a specified
period and the right of ordering the recovery from a pension of the whole or part of any pecuniary loss
caused to Government, if the pensioner is found in departmental or judicial proceedings to have been guilty
of grave misconduct, or to have caused pecuniary loss to Government by misconduct or negligence, during
his service, including service rendered on re-employment after retirement.Provided that: such departmental
proceedings, if not instituted while the officer was on duty either before retirement or during re-
employment – Shall not be instituted with the sanction of the Governor, shall be in respect of event which
took place not more than four years before the institution of such proceedings, and shall be conducted by
such authority and in such place or places as the Governor may direct and in accordance with the procedure
applicable to proceedings on which an order of dismissal from service may be made.Judicial proceedings, if
not instituted while the officer was on duty either before retirement or during re-employment, shall have
been instituted in accordance with sub-clause (ii) of clause (a), and the Public Service Commission, U.P., shall
be consulted before final orders are passed.
Explanation – For the purposes of this article – departmental proceedings shall be deemed to have been
instituted when the charges framed against the pensioner are issued to him, or, if the officer has been
placed under suspension from an earlier date, on such date; and judicial proceedings shall be deemed to
have been instituted: in the case of criminal proceedings, on the date on which complaint is made, or a
charge-sheet is submitted, to a criminal court; and in the case of civil proceedings, on the date on which the
plaint is presented or, as the case may be, an application is made to a civil court.”

Dhirendra Pal Singh
, 2016
Admittedly, no departmental enquiry was initiated in the present case
against the respondent for the misconduct, if any, nor any proceedings
drawn as provided in Article 351-A of UP Civil Service Regulations.
Learned single Judge of the High Court has observed that the document
which is the basis of enquiry and relied upon by the State authorities,
copy of which was Annexure C.A.1 to counter affidavit filed in the writ
petition, itself reflected that the document showing discrepancy in the
stock was dated 26.12.2009, i.e. after about more than five months of
retirement of the respondent. In the circumstances, keeping in view
Article 351-A of UP Civil Service Regulations, we agree with the High
Court that the orders dated 23.07.2015 and 06.08.2015 were liable to
be quashed and, to that extent, we decline to interfere with the
impugned order.

Dhirendra Pal Singh
, 2016
In the light of law laid down by this Court, as above, and further
considering the facts and circumstances of the case,
we modify the impugned order passed by the High Court in respect of
interest directed to be paid on the amount of withheld gratuity and
pension.
We direct that the appellants shall pay interest at the rate of 6% per
annum on the unpaid amount of pension from the date it had fallen due
and interest at the rate of 8% per annum on the unpaid amount of
gratuity from the date of retirement of the employee.

A.G.M, Karnataka State Financial Corporation vs
Gen.Sec.,Mysore Division Industrial Workers General Union

Dr Mohan R Bolla Law Lectures Gratuity act

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