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Section 4 of the Gratuity Act, that an employee has the right to make a choice of being governed by some alternative provision/instrument, other than the Gratuity Act, for drawing the benefit of gratuity. If an employee makes such a choice, he is provided with a statutory protection, namely, that the concerned employee would be entitled to receive better terms of gratuity under the said provision/instrument, in comparison to his entitlement under the Gratuity Act. This protection has been provided through Section 4 (5) of the Gratuity Act. Furthermore, from the mandate of Section 14 of the Gratuity Act, it is imperative to further conclude, that the provisions of the Gratuity Act would have overriding effect, with reference to any inconsistency therewith in any other provision or instrument. Thus viewed, even if the provisions of the 1995, Regulations, had debarred payment of interest on account of delayed payment of gratuity, the same would have been inconsequential. The benefit of interest enuring to an employee, as has been contemplated under section 7(3A) of the Gratuity Act, cannot be denied to an employee, whose gratuity is regulated by some provision/instrument other than the Gratuity Act. This is so because, the terms of payment of gratuity under the alternative instrument has to ensure better terms, than the ones provided under the Gratuity Act. The effect would be the same, when the concerned provision is silent on the issue. This is so, because the instant situation is not worse than the one discussed above, where there is a provision expressly debarring payment of interest in the manner contemplated under Section 7(3A) of the Gratuity Act. Therefore, even though the 1995, Regulations, are silent on the issue of payment of interest, the appellant would still be entitled to the benefit of Section 7(3A) of the Gratuity Act. If such benefit is not extended to the appellant, the protection contemplated under section 4(5) of the Gratuity Act would stand defeated. Likewise, even the mandate contained in section 14 of the Gratuity Act, deliberated in detail hereinabove, would stand negated. We, therefore, have no hesitation in concluding, that even though the provisions of the 1995, Regulations, are silent on the issue of payment of interest, the least that the appellant would be entitled to, are terms equal to the benefits envisaged under the Gratuity Act. Under the Gratuity Act, the appellant would be entitled to interest, on account of delayed payment of gratuity (as has already been concluded above). We therefore hold, that the appellant herein is entitled to interest on account of delayed payment, in consonance with sub-Section (3A) of Section 7 of the Gratuity Act. We, accordingly, direct the PNB to pay to the appellant, interest at “…the rate notified by the Central Government for repayment of long term deposits…”. In case no such notification has been issued, we are of the view, that the appellant would be entitled to interest, as was awarded to him by the learned Single Judge of the High Court vide order dated 4.5.2011, i.e., interest at the rate of 8%. The PNB is directed, to pay the aforesaid interest to the appellant, within one month of the appellant’s furnishing to the PNB a certified copy of the instant order. The appellant shall also be entitled to costs quantified at Rs.50,000/-, for having had to incur expenses before the Writ Court, before the Division Bench, and finally before this Court. The aforesaid costs shall also be disbursed to the appellant within the time indicated hereinabove.

“REPORTABLE”

English: The supreme court of india. Taken abo...

English: The supreme court of india. Taken about 170 m from the main building outside the perimeter wall (Photo credit: Wikipedia)

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.9087 OF 2012
(Arising out of SLP (Civil) No.14570 of 2012)
Y.K. Singla …. Appellant

Versus

Punjab National Bank & Ors. …. Respondents
O R D E R
JAGDISH SINGH KHEHAR, J.

1. Leave granted.

2. The appellant was inducted into the service of the Punjab National
Bank (hereinafter referred to as, the PNB) in the clerical cadre on
19.2.1958. He was successively promoted against the posts of Special
Assistant and Accountant with effect from 23.8.1972 and 26.12.1974. He
also gained further promotions to the cadres of Manager-B Grade and
thereafter, Manager-A Grade with effect from 24.11.1977 and 18.12.1982
respectively. He finally came to be promoted to the post of Chief Manager
with effect from 1.10.1986. Whilst holding the post of Chief Manager, the
appellant retired from service, on attaining the age of superannuation on
31.10.1996.

3. During 1981-1982, when the appellant was posted as Manager at the
Sector 19, Chandigarh Branch of the PNB, he was accused of having entered
into a conspiracy with R.L. Vaid, the then Regional Manager of the PNB,
Chandigarh, and Dr. A.K. Sinha, IAS, the then Secretary, Department of Town
and Country Planning, Haryana and thereby, of fraudulently having
sanctioned a loan of Rs.2,70,000/- to Mrs. Rama Sinha (wife of Dr. A.K.
Sinha, aforementioned). The said loan was granted to Mrs.Rama Sinha, for
construction of a building on a plot in Sector 6, Panchkula. The said
building, after its construction, was leased to the PNB, at an allegedly
exorbitant rent of Rs.4,985/- per month. The loan amount, was to be
adjusted out of the rent account. The PNB was allegedly, not in the need
of the said building, because it was already housed in a building in Sector
17, Chandigarh, at a nominal rent of Rs.1,650/- per month. The building
rented from Mrs. Rama Sinha was said to have remained unoccupied from
1.5.1982 to 21.1.1987. This factual position, it was alleged, was
sufficient to infer, that the PNB was not in need of the building taken on
rent from Mrs.Rama Sinha. Based on the aforesaid factual position, it was
felt, that the action of the conspirators caused a pecuniary loss of
Rs.2,70,000/- to the PNB. It was also sought to be assumed, that the
aforesaid loan and lease were favours extended to Dr. A.K. Sinha, IAS,
through his wife Mrs. Rama Sinha. Based on the aforesaid allegations, the
appellant Y.K. Singla, the aforesaid R.L. Vaid and Dr. A.K. Sinha, IAS,
were charged under Section 120B of the Indian Penal Code and Section 5(2)
read with Section 13(1)(d) of the Prevention of Corruption Act, 1988.

 

4. The trial in the above matter was conducted by the Special Judge, CBI
Court, Chandigarh. On the conclusion of the trial, the Special Judge, CBI
Court, Chandigarh arrived at the conclusion, that the prosecution had
failed to produce any evidence on the issue of criminal conspiracy. The
trial Court accordingly, acquitted all the three accused of the charges
framed against them on 31.10.2009, by holding, that the prosecution had
failed to establish the charges beyond a shadow of reasonable doubt.

5. During the subsistence of the aforesaid criminal proceedings, the
appellant Y.K. Singla retired from the employment of the PNB, on having
attained the age of superannuation, on 31.10.1996. On his retirement, on
account of the pendency of the criminal proceedings being conducted against
him, gratuity, leave encashment and commutation of permissible portion of
pension, were withheld. While withholding the aforesaid monetary
benefits, the appellant was informed by the PNB through a communication
dated 13.5.2000, that the eventual release of the aforesaid retiral
benefits, would depend on the outcome of the pending criminal proceedings.

6. As already noticed above, the appellant was acquitted of the charges
framed against him, by the Special Judge, CBI Court, Chandigarh, on
31.10.2009. Based on his aforesaid acquittal, the appellant addressed a
letter dated 26.11.2009 to the Executive Director of the PNB seeking
release of his gratuity, encashment of privileged leave balance and
commutation of permissible portion of pension. Additionally, he claimed
interest, from the date the aforesaid retiral benefits became due to him,
till the actual payment thereof. It will also be relevant to mention, that
by this time, the appellant was over 73 years old. In its reply dated
5.2.2010, the PNB informed the appellant, that it had released leave
encashment of Rs.1,28,716.24 on that day itself i.e., on 5.2.2010 itself.
The appellant was also informed through the aforesaid communication, that a
duly sanctioned gratuity proposal had been sent to the Provident Fund and
Pension Department of the PNB, for disbursement of gratuity. Thereupon,
the appellant actually received the gratuity payable to him, on 12.2.2010.

7. Having received encashment of privileged leave balance, as also,
gratuity in February, 2010, the appellant reiterated his claim for
interest, on account of delayed payment of the aforesaid amounts, through
another letter dated 17.2.2010. In the instant letter, the appellant
pointed out, that he had retired on attaining the age of superannuation on
31.10.1996, and as such, the PNB had withheld the aforesaid monetary
benefits due to him for a period of more than 13 years up to February,
2010. The appellant’s request for interest on the aforesaid delayed
payments, was responded to by the PNB through a letter dated 12.3.2010.
The appellant was informed, that he was entitled to interest on account of
withholding of his retiral benefits, only with effect from the date of
culmination of the proceedings pending against him. Having found the
appellant entitled to interest with effect from 31.10.2009 i.e., when the
Special Judge, CBI Court, Chandigarh acquitted him, the PNB released a sum
of Rs.1,881/- as interest towards delayed payment of leave encashment, and
another sum of Rs.3,336/- as interest on account of having withheld his
gratuity. The aforesaid interest, the appellant was informed, had been
calculated at the rate of 5.5%.

8. Dissatisfied with the action of the PNB, in not paying interest to
him from the date the aforesaid retiral benefits became due (on his
retirement on 31.10.1996), till their eventual release (in February, 2010),
the appellant filed Civil Writ Petition no. 6469 of 2010 before the High
Court of Punjab & Haryana at Chandigarh (hereinafter referred to as, the
High Court). The aforesaid Writ Petition came to be allowed on 4.5.2011.
While allowing the Writ Petition filed by the appellant, the High Court
directed the PNB to pay the appellant, interest at the rate of 8% from the
date retiral benefits had became due to the appellant, till the actual
payment thereof to him.

9. Dissatisfied with the order dated 4.5.2011, passed by the learned
Single Judge of the High Court, the PNB preferred Letters Patent Appeal no.
1950 of 2011. The Letters Patent Appeal filed by the PNB was partly
allowed by a Division Bench of the High Court, on 29.11.2011. The Division
Bench of the High Court arrived at the conclusion, that the appellant was
not entitled to any interest on delayed payment of Gratuity. The award of
interest to the appellant for withholding the other retiral benefits was,
however, not interfered with. The decision (dated 29.11.2011) rendered by
the Division Bench of the High Court, has been assailed by the appellant,
through the instant appeal.

10. The reasons which prompted the Division Bench of the High Court to
deny interest on the withheld amount of gratuity to the appellant, are
ascertainable from the paragraph 7 of the impugned order, which is being
extracted hereunder:-

“7. On having considered the matter, we are in agreement with the
submission made by the learned counsel appearing for the
appellant-Bank insofar as withholding of gratuity is concerned.
The language of the relevant Rule i.e. Rule 46 of the 1995 Rules
is clear and unambiguous. The mandate of the Rule is such that
it operates as a bar insofar as the Bank is concerned, as
regards the release of gratuity to an employee against whom the
departmental or judicial proceedings were pending on the date
such employee attains the age of superannuation. The Rule
stipulates that such withheld amount of gratuity would become
payable only upon conclusion of the proceedings. Admittedly,
judicial proceedings were pending against the respondent on the
date of his superannuation i.e. 31.10.1996 and concluded only
upon his acquittal vide order dated 31.10.2009. The amount viz.
gratuity has since been released on 13.2.2010 and interest
thereupon has also been paid for the period 31.10.2009 till the
date of payment. We, accordingly, hold that respondent no. 1 is
not entitled to any interest for the period 31.10.1996 till the
conclusion of the trial and his acquittal i.e. 31.10.2009 on the
withheld amount of gratuity.”

11. It is apparent from a perusal of the reasoning recorded by the High
Court, that the High Court relied upon Regulation 46 of the Punjab National
Bank (Employees) Pension Regulations, 1995 (hereinafter referred to as, the
1995 Regulations). Regulation 46 is being extracted hereunder:-

“46. Provisional Pension
(1) An employee who has retired on attaining the age of
superannuation or otherwise and against whom any
departmental or judicial proceedings are instituted or
where departmental proceedings are continued, a provisional
pension, equal to the maximum pension which would have been
admissible to him, would be allowed subject to adjustment
against final retirement benefits sanctioned to him, upon
conclusion of the proceedings but no recovery shall be made
where the pension finally sanctioned is less than the
provisional pension or the pension is reduced or withheld
etc. either permanently or for a specified period.

(2) In such cases the gratuity shall not be paid to such an
employee until the conclusion of the proceedings against
him. The gratuity shall be paid to him on conclusion of
the proceedings subject to the decision of the proceedings.
Any recoveries to be made from an employee shall be
adjusted against the amount of gratuity payable.”
(emphasis is ours)

Having perused Regulation 46(2), we are of the view, that the High Court
was fully justified in concluding, that it was open to the PNB not to pay
to the appellant gratuity, till the culmination of the proceedings pending
against him. It is, therefore, apparent, that non-release of gratuity to
the appellant after 31.10.1996 (when the appellant retired from his
employment, with the PNB), till his acquittal by the Special Judge, CBI
Court, Chandigarh, on 31.10.2009, cannot be faulted.

12. The right to withhold gratuity, is an issue separate and distinct,
from the claim of interest, which has been raised by the appellant. The
question that arises for consideration is, whether an employee whose
gratuity has been withheld under Regulation 46(2) of the 1995 Regulations,
would he be entitled to interest on the withheld payment of gratuity, if he
is found not to be at fault? According to the simple logic of the
appellant, since his gratuity was withheld from 1996 (when he retired from
service) till 2010 (when gratuity was eventually released to him), i.e.,
for a period of 14 years, for no fault of his, he is most definitely
entitled to interest on the delayed payment. It is, however, not the
simple logic of the appellant, which will determine the controversy in
hand. For, logic gave rise to diametrically opposite views, one of which
was expressed by the Writ Court, and the other by the Letters Patent Bench.
We shall therefore endeavour to search for a legal answer, to the issue in
hand.

13. The 1995, Regulations, are silent on the subject of an employee’s
rights whose gratuity has been withheld, even in circumstances where it has
eventually been concluded, that he was not at fault. This is exactly the
situation in the present controversy, inasmuch as, the appellant’s retiral
benefits including gratuity, were withheld on 31.10.1996 when he retired on
attaining the age of superannuation. The aforesaid withholding, was on
account of a pending criminal proceeding. The said withholding has
appropriately been considered as valid, under Regulation 46(2) of the 1995,
Regulation. But the appellant was acquitted from the criminal prosecution
initiated against him on 31.10.2009. As such, it is inevitable to
conclude, that his gratuity was withheld without the appellant being at
fault. It is in the aforesaid background, that we shall venture to
determine the claim of the appellant for interest, despite the PNB having
validly withheld his gratuity under Regulation 46(2) of the 1995,
Regulations.

14. Insofar as the issue in hand is concerned, reference needs to be made
to certain provisions of the Payment of Gratuity Act, 1972 (hereinafter
referred to as, the Gratuity Act). In our considered view, Sections 4, 7
and 14 of the Gratuity Act are relevant. Section 4 is being extracted
hereunder:-
“4. Payment of gratuity –

(1) Gratuity shall be payable to an employee on the
termination of his employment after he has rendered
continuous service for not less than five years,–

(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or
disease:

Provided that the completion of continuous service of
five years shall not be necessary where the
termination of the employment of any employee is due
to death or disablement:
Provided further that in the case of death of the
employee, gratuity payable to him shall be paid to
his nominee or, if no nomination has been made, to
his heirs, and where any such nominees or heirs is a
minor, the share of such minor, shall be deposited
with the controlling authority who shall invest the
same for the benefit of such minor in such bank or
other financial institution, as may be prescribed,
until such minor attains majority.
Explanation – For the purposes of this section,
disablement means such disablement as incapacitates
an employee for the work which he was capable of
performing before the accident or disease resulting
in such disablement.
(2) For every completed year of service or part thereof
in excess of six months, the employer shall pay
gratuity to an employee at the rate of fifteen days’
wages based on the rate of wages last drawn by the
employee concerned:
Provided that in the case of a piece-rated employee,
daily wages shall be computed on the average of the
total wages received by him for a period of three
months immediately preceding the termination of his
employment, and, for this purpose, the wages paid for
any overtime work shall not be taken into account:
Provided further that in the case of an employee who
is employed in a seasonal establishment and who is
not so employed throughout the year, the employer
shall pay the gratuity at the rate of seven days’
wages for each season.
Explanation.– In the case of a monthly rated
employee, the fifteen days’ wages shall be calculated
by dividing the monthly rate of wages last drawn by
him by twenty-six and multiplying the quotient by
fifteen.

(3) The amount of gratuity payable to an employee shall
not exceed one lakh rupees.

(4) For the purpose of computing the gratuity payable to
an employee who is employed, after his disablement,
on reduced wages, his wages for the period preceding
his disablement shall be taken to be the wages
received by him during that period, and his wages for
the period subsequent to his disablement shall be
taken to be the wages as so reduced.

(5) Nothing in this section shall affect the right of an
employee receive better terms of gratuity under any
award or agreement or contract with the employer.

(6) 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
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.”
(emphasis is ours)

It is not a matter of dispute, that the appellant was entitled to gratuity
when he retired on attaining the age of superannuation on 31.10.1996. The
quantification of the appellant’s gratuity by the PNB is not in dispute.
As such, sub-sections (1) to (4) of section 4 of the Gratuity Act are
clearly not relevant to the present controversy. Only sub-section (5) of
section 4 is relevant in so far as the present case is concerned.
Likewise, since the appellant has not been found to be at any fault, sub-
section (6) of section 4 is also not attracted in this case.

15. Sub-Section (5) of section 4 of the Gratuity Act permits an employee
to be regulated for purpose of gratuity, under an alternative
provision/arrangement (award or agreement or contract), other than the
Gratuity Act. In such an eventuality, sub-section (5) aforesaid, assures
the concerned employee, “…to receive better terms of gratuity under any
award or agreement or contract with the employer…” Since the appellant’s
claim for gratuity is regulated, under the 1995, Regulations, it is
evident, that his claim for gratuity is liable to be determined by ensuring
his right to better terms than those contemplated under the Gratuity Act.
In the instant process of consideration, the aforesaid conclusion, namely,
that an employee who receives gratuity under a provision, other than the
Gratuity Act, would be entitled to better terms of gratuity, will
constitute one of the foundational basis, of determination. Having
examined section 4 of the Gratuity Act, we may unhesitatingly record, that
none of the other sub-sections of section 4 of the Gratuity Act, as well
as, the other provisions of the Gratuity Act, have the effect of negating
the conclusion drawn hereinabove.

16. For the determination of the present controversy, it is also relevant
to take into consideration Section 7 of the Gratuity Act, which is being
extracted hereunder:-
“7. Determination of the amount of gratuity.-
(1) A person who is eligible for payment of gratuity under
this Act or any person authorized, in writing, to act on
his behalf shall send a written application to the
employer, within such time and in such form, as may be
prescribed, for payment of such gratuity.
(2) As soon as gratuity becomes payable, the employer shall,
whether an application referred to in sub-section (1) has
been made or not, determine the amount of gratuity and give
notice in writing to the person to whom the gratuity is
payable and also to the controlling authority specifying
the amount of gratuity so determined.
(3) The employee shall arrange to pay the amount of gratuity,
within thirty days from the date it becomes payable to the
person to whom the gratuity is payable.
(3A) If the amount of gratuity payable under sub-Section (3) is
not paid by the employer within the period specified in sub-
Section (3), the employer shall pay, from the date on which
the gratuity becomes payable to the date on which it is
paid, simple interest at such rate, not exceeding the rate
notified by the Central Government from time to time for
repayment of long-term deposits, as that Government may, by
notification specify:
Provided that no such interest shall be payable if the
delay in the payment is due to the fault of the employee
and the employer has obtained permission in writing from
the controlling authority for the delayed payment on this
ground.
(4) (a) If there is any dispute as to the amount of gratuity
payable to an employee under this Act or as to the
admissibility of any claim of, or in relation to, an
employee for payment of gratuity, or as to the person
entitled to receive the gratuity, the employer shall
deposit with the controlling authority such amount as he
admits to be payable by him as gratuity.
(b) Where there is a dispute with regard to any matter
specified in clause (a), the employer or employee or any
other person raising the dispute may make an application to
the controlling authority for deciding the dispute.
(c) The controlling authority shall, after due inquiry and
after giving the parties to the dispute a reasonable
opportunity of being heard, determine the matter or matters
in dispute and if, as a result of such inquiry any amount
is found to be payable to the employee, the controlling
authority shall direct the employer to pay such amount or,
as the case may be, such amount as reduced by the amount
already deposited by the employer.
(d) The controlling authority shall pay the amount
deposited including the excess amount, if any, deposited by
the employer, to the person entitled thereto.
(d) as soon as may be after a deposit is made under clause
(a), the controlling authority shall pay the amount of the
deposit-
(i) to the applicant where he is the employee; or
(ii) where the applicant is not the employee, to the
nominee or, as the case may be, the guardian of
such nominee or heir of the employee if the
controlling authority is satisfied that there
is no dispute as to the right of the applicant
to receive the amount of gratuity.
(5) For the purpose of conducting an inquiry under sub-section
(4), the controlling authority shall have the same powers
as are vested in a court, while trying a suit, under the
Code of Civil Procedure, 1908, (5 of 1908) in respect of
the following matters, namely :-
(a) enforcing the attendance of any person or examining
him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commission for the examination of witnesses.
(6) Any inquiry under this section shall be a judicial
proceeding within the meaning of sections 193 and 228, and
for the purpose of section 196, of the Indian Penal Code
(45 of 1860).
(7) Any person aggrieved by an order under sub-section (4)
may, within sixty days from the date of the receipt of the
order, prefer an appeal to the appropriate Government or
such other authority as may be specified by the appropriate
Government in this behalf:
Provided that the appropriate Government or the appellate
authority, as the case may be, may, if it is satisfied that
the appellant was prevented by sufficient cause from
preferring the appeal within the said period of sixty days,
extend the said period by a further period of sixty days:
Provided further that no appeal by an employer shall be
admitted unless at the time of preferring the appeal, the
appellant either produces a certificate of the controlling
authority to the effect that the appellant has deposited
with him an amount equal to the amount of gratuity required
to be deposited under sub-Section (4), or deposits with the
appellate authority such amount.

(8) The appropriate Government or the appellate authority, as
the case may be, may, after giving the parties to the
appeal a reasonable opportunity of being heard, confirm,
modify or reverse the decision of the controlling
authority.”
(emphasis is ours)

A perusal of sub-Section (2) of Section 7 reveals, that it is the onerous
responsibility of the employer, to determine the amount of gratuity payable
to a retiring employee. Sub-Section (3) of Section 7 enjoins a further
responsibility on the employer, to disburse the amount of gratuity payable
to an employee, within 30 days from the date it becomes payable. Since the
appellant had attained the age of superannuation on 31.10.1996, it is
apparent, that gratuity had become payable to him on 31.10.1996.
Accordingly, the same ought to have been calculated in terms of sub-Section
(2) of Section 7 of the Gratuity Act, and should have been dispersed to the
appellant by 30.11.1996 in terms of sub-Section (3) of Section 7 of the
Gratuity Act.

17. Sub-Section (3A) of Section 7 of the Gratuity Act is the most
relevant provision for the determination of the present controversy. A
perusal of the sub-Section (3A) leaves no room for any doubt, that in case
gratuity is not released to an employee within 30 days from the date the
same become payable under sub-Section (3) of Section 7, the employee in
question would be entitled to “…simple interest at such rate, not exceeding
the rate notified by the Central Government from time to time for repayment
of long term loans, as the Government may, by notification specify…” There
is, however, one exception to the payment of interest envisaged under sub-
Section (3) of Section 7 of the Gratuity Act. The aforesaid exception is
provided for in the proviso under sub-Section (3A) of Section 7. A perusal
of the said proviso reveals, that no interest would be payable “…if the
delay in the payment is due to the fault of the employee, and the employer
has obtained permission in writing from the controlling authority for the
delayed payment on this ground…” The exception contemplated in the proviso
under sub-Section (3A) of Section 7 of the Gratuity Act, incorporates two
ingredients. Where the two ingredients contemplated in the proviso under
sub-Section (3A) are fulfilled, the concerned employee can be denied
interest despite delayed payment of gratuity. Having carefully examined
the proviso under sub-Section (3A) of Section 7 of the Gratuity Act, we are
of the view, that the first ingredient is, that payment of gratuity to the
employee was delayed because of some fault of the employee himself. The
second ingredient is, that the controlling authority should have approved,
such withholding of gratuity (of the concerned employee) on the basis of
the alleged fault of the employee himself. None of the other sub-sections
of Section 7 of the Gratuity Act, would have the effect of negating the
conclusion drawn hereinabove.

18. Insofar as the present controversy is concerned, the appellant was
accused of having entered into a conspiracy with a bank employee superior
to him, so as to extend unauthorized benefits to a member of the Indian
Administrative Services belonging to the Haryana Cadre. Based on the
aforesaid alleged fault of the appellant, the PNB, by an order dated
13.5.2000, informed the appellant, that the release of certain retiral
benefits including gratuity was being withheld, because of pending of
criminal proceedings against him. The appellant was also informed, through
the aforesaid communication, that release of his retiral benefits including
gratuity, would depend on the outcome of the pending criminal proceedings.
It is, therefore apparent, that the second ingredient expressed in the
proviso under sub-Section (3A) of Section 7 of the Gratuity Act was clearly
satisfied, when the competent authority approved the action of withholding
the appellant’s gratuity. The instant conclusion is inevitable, because it
is not the case of the appellant, that the communication dated 13.5.2000,
by which his gratuity was withheld, had not been issued at the instance of
the concerned controlling authority. The only question which, therefore,
arises for consideration is, whether the first ingredient (culled out
above) for the applicability, of the proviso under sub-Section (3A) of
Section 7 of the Gratuity Act, can be stated to have been satisfied, in the
facts and circumstances of the instant case. If it can be concluded, that
the aforesaid ingredient is also satisfied, the appellant would have no
right to claim interest, despite delayed release of gratuity. Our
determination of the first ingredient is, as follows. We are of the
considered view, that consequent upon the acquittal of the appellant by the
Special Judge, CBI Court, Chandigarh, it would be erroneous to conclude,
that the gratuity payable to the appellant on attaining the age of
superannuation i.e., on 31.10.1996, was withheld on account of some fault
of the appellant himself. We may hasten to add, if the appellant had been
convicted by the Special Judge, CBI Court, Chandigarh, then the first
ingredient would also be deemed to have been satisfied. Conversely,
because the appellant has been acquitted, he cannot be held to be at fault.
Accordingly it emerges, that the “fault” ingredient of the employee
himself, for denial of gratuity when it became due, remains
unsubstantiated. Since one of the two salient ingredients of the proviso
under sub-Section (3A) of Section 7 of the Gratuity Act is clearly not
satisfied in the present case, we are of the view, that the appellant
cannot be denied interest under the proviso to section 7(3A) of the
Gratuity Act. Accordingly, the appellant has to be awarded interest under
section 7(3A) of the Gratuity Act. Therefore, if the provisions of the
Gratuity Act are applicable to the appellant, he would most definitely be
entitled to interest under sub-Section (3A) of Section 7 of the Gratuity
Act, on account of delayed payment of gratuity.

19. The most important question which arises for our consideration is,
whether the provisions of the Gratuity Act can be extended to the
appellant, so as to award him interest under sub-Section (3A) of Section 7
of the Gratuity Act. Insofar as the instant aspect of the matter is
concerned, it was the vehement contention of the learned counsel appearing
on behalf of the appellant, that the provisions of the Gratuity Act are
extendable to the appellant, and as such, he would be entitled to
disbursement of interest under Section 7(3A) thereof. The plea at the
behest of the PNB, however, was to the contrary. The contention of the
learned counsel representing the PNB was, that the PNB having adopted the
1995, Regulations, the claim of the appellant could only be determined
under the provisions of the said Regulations. It was pointed out, that
denial of payment of gratuity in the present case, was valid and justified
under Regulation 46(2) of the 1995 Regulations. Furthermore, it was
pointed out, that the 1995 Regulations, did not make any provision for the
award of interest in case of delayed payment of gratuity. Therefore, since
gratuity had legitimately been withheld, under the provisions of the 1995,
Regulations, and the payment of gratuity to the appellant is not regulated
under the Gratuity Act, there was no question of payment of interest to the
appellant. It was submitted that the appellant’s gratuity had been
withheld during the pendency of criminal proceedings initiated against him,
his entitlement to gratuity stood extended to such time as the said
criminal proceedings were eventually disposed of. Thus viewed, the
entitlement to gratuity stood extended to 31.10.2009 (i.e., the date of the
disposal of the proceedings pending against him). In this behalf, it was
also pointed out, that as soon as the criminal proceedings pending against
the appellant, concluded in his favour, the PNB released all the
appellant’s retiral benefits, including gratuity. The documents available
on the record of the case reveal, that gratuity was released to the
appellant on 12.2.2010. As such, the delay in release of gratuity, if at
all, was only from 31.10.2009 to 12.2.2010. For the aforesaid delayed
payment of gratuity, the appellant was admittedly awarded interest
quantified at Rs.3,336/- (calculated at the rate of 5.5%).

20. In order to determine which of the two provisions (the Gratuity Act,
or the 1995, Regulations) would be applicable for determining the claim of
the appellant, it is also essential to refer to Section 14 of the Gratuity
Act, which is being extracted hereunder:-
“14. Act to override other enactments, etc. – The provisions of this
Act or any rule made thereunder shall have effect
notwithstanding anything inconsistent therewith contained in any
enactment other than this Act or in any instrument or contract
having effect by virtue of any enactment other than this Act.”
(emphasis is ours)

A perusal of Section 14 leaves no room for any doubt, that a superior
status has been vested in the provisions of the Gratuity Act, vis-à-vis,
any other enactment (including any other instrument or contract)
inconsistent therewith. Therefore, insofar as the entitlement of an
employee to gratuity is concerned, it is apparent that in cases where
gratuity of an employee is not regulated under the provisions of the
Gratuity Act, the legislature having vested superiority to the provisions
of the Gratuity Act over all other provisions/enactments (including any
instrument or contract having the force of law), the provisions of the
Gratuity Act cannot be ignored. The term “instrument” and the phrase
“instrument or contract having the force of law” shall most definitely be
deemed to include the 1995 Regulations, which regulate the payment of
gratuity to the appellant.

21. Based on the conclusions drawn hereinabove, we shall endeavour to
determine the present controversy. First and foremost, we have concluded
on the basis of Section 4 of the Gratuity Act, that an employee has the
right to make a choice of being governed by some alternative
provision/instrument, other than the Gratuity Act, for drawing the benefit
of gratuity. If an employee makes such a choice, he is provided with a
statutory protection, namely, that the concerned employee would be entitled
to receive better terms of gratuity under the said provision/instrument, in
comparison to his entitlement under the Gratuity Act. This protection has
been provided through Section 4 (5) of the Gratuity Act. Furthermore, from
the mandate of Section 14 of the Gratuity Act, it is imperative to further
conclude, that the provisions of the Gratuity Act would have overriding
effect, with reference to any inconsistency therewith in any other
provision or instrument. Thus viewed, even if the provisions of the 1995,
Regulations, had debarred payment of interest on account of delayed payment
of gratuity, the same would have been inconsequential. The benefit of
interest enuring to an employee, as has been contemplated under section
7(3A) of the Gratuity Act, cannot be denied to an employee, whose gratuity
is regulated by some provision/instrument other than the Gratuity Act. This
is so because, the terms of payment of gratuity under the alternative
instrument has to ensure better terms, than the ones provided under the
Gratuity Act. The effect would be the same, when the concerned provision is
silent on the issue. This is so, because the instant situation is not worse
than the one discussed above, where there is a provision expressly
debarring payment of interest in the manner contemplated under Section
7(3A) of the Gratuity Act. Therefore, even though the 1995, Regulations,
are silent on the issue of payment of interest, the appellant would still
be entitled to the benefit of Section 7(3A) of the Gratuity Act. If such
benefit is not extended to the appellant, the protection contemplated under
section 4(5) of the Gratuity Act would stand defeated. Likewise, even the
mandate contained in section 14 of the Gratuity Act, deliberated in detail
hereinabove, would stand negated. We, therefore, have no hesitation in
concluding, that even though the provisions of the 1995, Regulations, are
silent on the issue of payment of interest, the least that the appellant
would be entitled to, are terms equal to the benefits envisaged under the
Gratuity Act. Under the Gratuity Act, the appellant would be entitled to
interest, on account of delayed payment of gratuity (as has already been
concluded above). We therefore hold, that the appellant herein is entitled
to interest on account of delayed payment, in consonance with sub-Section
(3A) of Section 7 of the Gratuity Act. We, accordingly, direct the PNB to
pay to the appellant, interest at “…the rate notified by the Central
Government for repayment of long term deposits…”. In case no such
notification has been issued, we are of the view, that the appellant would
be entitled to interest, as was awarded to him by the learned Single Judge
of the High Court vide order dated 4.5.2011, i.e., interest at the rate of
8%. The PNB is directed, to pay the aforesaid interest to the appellant,
within one month of the appellant’s furnishing to the PNB a certified copy
of the instant order. The appellant shall also be entitled to costs
quantified at Rs.50,000/-, for having had to incur expenses before the Writ
Court, before the Division Bench, and finally before this Court. The
aforesaid costs shall also be disbursed to the appellant within the time
indicated hereinabove.

22. Disposed of in the aforesaid terms.
…………………………….J.
(B.S. Chauhan)
…………………………….J.
(Jagdish Singh Khehar)
New Delhi;
December 14, 2012.
———————–
21

 

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