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Rule 34 of CDA and Payment of Gratuity Act – Departmental enquiry – holding of Gratuity of a retired person – Since there is a conflict in opinion of three Bench judgment of this Court which is later in point of time. State Bank of India vs. Ram lal Bhaskar and Anr. 2011(10)SCC249. and the judgement of Jaswant Singh Gill vs. Bharat Coking Coal Ltd. & Ors. (2007) 1 SCC 663. matter referred to larger bench – Referred to larger Bench = = Ch. cum Man. Director Mahanadi Coalfield Ltd. ………..Appellant Versus Rabindranath Choubey ……..Respondent = http://judis.nic.in/supremecourt/filename=40916

Rule 34 of CDA  and Payment of Gratuity Act – Departmental enquiry – holding of Gratuity of a

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)

retired person – Since there is a conflict in opinion of three Bench judgment of this  Court  which  is  later  in point of time.  State Bank of India  vs.  Ram  lal Bhaskar and Anr. 2011(10)SCC249.  and the judgement of Jaswant  Singh  Gill  vs.  Bharat Coking Coal Ltd. & Ors. (2007) 1 SCC 663. matter referred to larger bench  – Referred to larger Bench =

whether it is  permissible  in  law  for  the appellant to withhold the payment of  gratuity  to  the  respondent, even after his superannuation from service, because of the  pendency  of disciplinary proceedings against him.-

whether gratuity can be withheld in the wake of Rule 34  of  CDA  Rules when examined in juxtaposition with the provisions of the Gratuity Act.

 

The  Division

       Bench  of  the  High  Court  has  held  that   writ   petition   was

       maintainable. 

On merits, it ruled that the disciplinary  proceedings

       against the respondent were initiated prior to attaining the age  of

       superannuation.   

The   respondent   retired   from    service    on

       superannuation and hence the question of imposing a major penalty of

       removal or dismissal  from  service  would  not  arise  as  per  the

       decision of the Supreme Court  in  Jaswant  Singh  Gill  vs.  Bharat

       Coking Coal Ltd. & Ors. (2007) 1 SCC 663. 

The High Court has further

       held that the power to withhold payment of gratuity as contained  in

       Rule 34(3) of the Rules, 1978 shall be subject to the provisions  of

       the Payment of Gratuity Act, 1972. 

Therefore,  the  statutory  right

       accrued to the Respondent to get  gratuity  cannot  be  impaired  by

       reason of the Rules framed by the Coal India Ltd. which do not  have

       the force of a statute. 

On that basis, direction  is  given  to  the

       appellant  to  release  the  amount  of  gratuity  payable  to   the

       respondent. =

 

    To put it otherwise, whether in the scheme of  Gratuity  Act,  gratuity

    has to be  necessarily  released  to  the  concerned  employee  on  his

    retirement even if departmental proceedings are  pending  against  him.

    We find that Jaswant Singh Gill’s case directly answers this  question,

    that too in the context of these very CDA Rules. However, it is because

    of the reason that the said judgment proceeds on the basis  that  after

    the retirement of an employee, penalty of dismissal cannot  be  imposed

    upon the retired  employee.  If  this  view  is  not  correct  and  the

    imposition of penalty of dismissal is still permissible, employer  will

    get the right to forfeit the  gratuity  of  such  an  employee  in  the

    eventualities provided under Sections 4(1)  & 4 (6) of the  Payment  of

    Gratuity Act which reads as under:-

 

 

            Section 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 hi m 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.

 

 

           xxxxxxxxxxxxxxxxxxxxxxxxxxxxx

 

 

        (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 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 hi m in  the  course  of

        his employment.

 

 

 

 

 

 

    24.    Thus for invoking Clause (a) or (b) of sub-section 6 of  Section

    4 necessary pre-condition is the termination of service on the basis of

    departmental enquiry or conviction in a criminal case.  This  provision

    would not get  triggered  if  there  is  no  termination  of  services.

 

 

 

 

    25.    It is the case of the appellant that in the charge sheet  served

    upon the respondent herein,  there  are  very  serious  allegations  of

    misconduct alleging dishonestly causing coal stock  shortage  amounting

    to Rs. 31.65 crores,  and  thereby  causing  substantial  loss  to  the

    employer.

 If such a charge is proved and  punishment  of  dismissal  is

    given thereupon, the provisions of  Section  4(6)  of  the  Payment  of

    Gratuity would naturally get attracted  and  it  would  be  within  the

    discretion of the appellant to forfeit  the  gratuity  payable  to  the

    respondent. 

As a corollary one can safely say  that  the  employer  has

    right to withhold the gratuity pending departmental  inquiry.  

However,

    as explained  above,  this  course  of  action  is  available  only  if

    disciplinary authority has necessary powers to impose  the  penalty  of

    dismissal upon the respondent even after his retirement. 

Having  regard

    to our discussion above of Jaswant  Singh  Gill  (supra)  and  Ram  Lal

    Bhaskar (supra), this issue needs to be considered authoritatively by a

    larger Bench. 

We, therefore, are of the opinion that present appeal  be

    decided by a Bench of three Judges.

 

 

    26.    We accordingly direct the Registry to place  the  matter  before

    Hon’ble the Chief Justice for constituting a larger Bench to hear  this

    appeal.

 

[REPORTABLE]
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9693/2013
[SPECIAL LEAVE PETITION (CIVIL)NO. 31583 OF 2013]
Ch. cum Man. Director Mahanadi Coalfield Ltd.
………..Appellant
Versus
Rabindranath Choubey
……..Respondent
J U D G M E N T
A.K. SIKRI, J.
1. Leave granted.
2. The respondent was working as Chief General Manager (Production)
since 17.2.2006 at Rajmahal area under Mahanadi Coalfields Ltd., the
appellant herein. A memo containing articles of charge was issued to
him on 1.10.2007 alleging that there was shortage of stock of coal
in Rajmahal Group of mines which was under his management and
enquiry was proposed to be conducted under Rule 29 of the Conduct,
Discipline & Appeal Rules.
3. During the pendency of the departmental proceeding, the Respondent
was allowed to retire on 31.7.2010 on attaining the age of
superannuation. The Respondent submitted an application on 21.9.2010
to the Director (Personnel) for payment of gratuity. On the same
date, he also submitted an application before the Controlling
Authority under Payment of Gratuity Act cum-Regional Labour
Commissioner for payment of gratuity.
4. Notice was issued to the Appellant to appear. The appellant appeared
and stated that the payment of gratuity was withheld due to reason
that disciplinary case is pending against him. The controlling
authority held that the claim of the Respondent was pre-mature.
5. The respondent challenged the order by filing the writ petition. The
single Judge dismissed the writ petition holding that in view of the
existence of an appellate forum against the order passed by the
Authority, the Respondent may file an appeal before the Appellate
Authority within 21 days from the date of passing of the impugned
order.
6. The Respondent then filed Intra Court Writ Appeal. The Division
Bench of the High Court has held that writ petition was
maintainable. On merits, it ruled that the disciplinary proceedings
against the respondent were initiated prior to attaining the age of
superannuation. The respondent retired from service on
superannuation and hence the question of imposing a major penalty of
removal or dismissal from service would not arise as per the
decision of the Supreme Court in Jaswant Singh Gill vs. Bharat
Coking Coal Ltd. & Ors. (2007) 1 SCC 663. The High Court has further
held that the power to withhold payment of gratuity as contained in
Rule 34(3) of the Rules, 1978 shall be subject to the provisions of
the Payment of Gratuity Act, 1972. Therefore, the statutory right
accrued to the Respondent to get gratuity cannot be impaired by
reason of the Rules framed by the Coal India Ltd. which do not have
the force of a statute. On that basis, direction is given to the
appellant to release the amount of gratuity payable to the
respondent.
7. In the aforesaid circumstances, the question which falls for
consideration is as to whether it is permissible in law for the
appellant to withhold the payment of gratuity to the respondent,
even after his superannuation from service, because of the pendency
of disciplinary proceedings against him.
8. Before we proceed to answer this question in the light of arguments
advanced by Counsel on either side, we would like to point out that
the question of maintainability of the writ petition against the
order of the Controlling Authority under the Payment Gratuity Act
was not raised before us by the learned Counsel for the appellant.
Thus, the learned Counsel did not challenge the approach of the writ
appeal Court in entertaining the writ appeal on merits by giving the
reason that it was so doing to avoid confusion and ambiguity, more
so when there were no disputed facts involved and the issue involved
was pure question of law. We are, therefore, not called upon to
decide as to whether the approach of the Division Bench in
entertaining the writ appeal on merits was erroneous or not.
9. Reverting to the issue framed above, before we examine the same, we
would also like to narrate some more facts for clear understanding
of the issue involved. The appellant- Ch.-cum-Man. Director Mahanadi
Coalfield Limited (CIL) has framed the Conduct Discipline and Appeal
Rules, 1978 (hereinafter to be referred as ‘CDA Rules’). These are
applicable to the employees of the appellant company as well.
10. Rule 27 of these CDA Rules mentions the authorities who are
empowered to impose various punishments which are specified in
column III of the Schedule attached to these Rules. Rule 29 enlists
the procedure for imposing major penalties for misconduct and
misbehaviour. The CDA Rules are not statutory in nature. However,
they govern the employees of the appellant.
11. When the respondent was served with charge sheet dated 1.10.2007, he
was posted as Chief General Manager, Rajmahal, Group of Mines, ECL.
Shortly, after the service of charge sheet, respondent was made to
join as Chief General Manager, Mining in M-3 Grade on transfer and
was posted as Chief General Manager, Production, MCL. On 9.2.2008,
he was suspended from service under Rule 24.1. of the CDA Rules,
pending departmental inquiry against him. This suspension, however,
was revoked from 27.2.2009 without prejudice to the departmental
inquiry. On completion of 60 years of age, the respondent was
superannuated with effect from 31.7.2010 for which notice for
retirement on superannuation was given by the appellant to the
respondent vide letter dated 8.2.2010.
12. It would also be pertinent to mention that the inquiry against the
respondent was concluded on 25.3.2009. However, thereafter nothing
has been heard by the respondent. It is not known as to whether the
Inquiry Officer has submitted the report on the said inquiry and if
a report is submitted whether he has exonerated the respondent or
held him guilty of the charges. Be as it may even if there is any
report, no further action has been taken on the said report by the
disciplinary authority till date and more than 4 ½ years have lapsed
in the meantime.
13. On the aforesaid facts, the case of the respondent before the courts
below was that his statutory rights to receive the gratuity could
not be interdicted and as per the provisions of Payment of Gratuity
Act he was entitled to have the payment of gratuity on his
superannuation. Since, the appellant had referred to the Rules
framed under which gratuity could be withheld pending inquiry, this
position was sought to be countered by the respondent with a
submission that such Rules which were non-statutory in nature could
not thwart the right of the respondent to claim the gratuity which
was statutorily recognised in his favour under the Payment of
Gratuity Act, 1972. As noted above, while giving brief narration of
facts, the High Court has accepted the aforesaid plea of the
respondent and while doing so it has referred to the judgment of
this Court in the case of Jaswant Singh Gill v. Bharat Coking Coal
Ltd. and Ors. (supra). Some of the judgments cited by the appellant
before the High Court, which would be referred to at a later stage,
have been distinguished by the High Court holding that they are not
applicable.
14. The arguments of the learned Counsel for the respondent were same
which were addressed before the High Court. Likewise, learned
Counsel for the appellant also made the very same submissions. He
argued that in view of Rule 34 of the CDA Rules, the management had
a right to withhold payment of gratuity. He also submitted that this
rule was not contrary to any provisions of the Payment of Gratuity
Act. The submission in this behalf was that in Payment of Gratuity
Act there is no provision that gratuity has to be released even when
departmental proceedings are pending against an employee. The
learned Senior Counsel for the appellant placed strong reliance on
the judgment of this Court in State Bank of India vs. Ram Lal
Bhaskar and Anr. ; 2011(11)SCALE 589; 2011(10)SCC249.
15. In so far as rule position is concerned, it is not in doubt that
Rule 34 permits the management to withhold the gratuity during the
pendency of the disciplinary proceedings. Rule 34.2 and 34.3 of the
CDA Rules are relevant in this behalf which make the following
reading:
“34.2 Disciplinary proceeding, if instituted while the employee
was in service whether before his retirement or during his re-
employment shall, after the final retirement of the employee, be
deemed to be proceeding and shall be continued and concluded by
the authority by which it was commenced in the same manner as if
the employee had continued in service.
34.3 During the pendency of the disciplinary proceedings, the
Disciplinary Authority may withhold payment of gratuity, for
ordering the recovering from gratuity of the whole or part of
any pecuniary loss caused to the company if have been guilty of
offences/ misconduct as mentioned in Sub-section (6) of Section
4 of the payment of gratuity act, 1972 or to have caused
pecuniary loss to the company by misconduct or negligence,
during his service including service rendered on deputation or
on re-employment after retirement. However, the provisions of
Section 7(3) and 7(3A) of the Payment of Gratuity Act 1972
should be kept in view in the event of delayed payment in the
case the employee is fully exonerated.”
16. The bone of contention is as to whether this rule is contrary to
the provisions of the Payment of Gratuity Act and, therefore, this rule
being non-statutory is to be ignored and the provisions of the Gratuity
Act are to be preferred. In this behalf we will have to examine the
scheme of the Gratuity Act to find whether as per the Gratuity Act,
such a person like the respondent, would become entitled to receive the
gratuity under this Act.
17. It is because of the reason that a statutory right accrued,
thus, cannot be impaired by reason of a rule which does not have the
force of statute. It will bear repetition to state that the Rules
framed by Respondent No. 1 or its holding company are not statutory in
nature.
18. It would be of interest to note that the inter play of these
very CDA Rules, 1978 of CIL and the Provisions of Gratuity Act came for
consideration in the case of Jaswant Singh Gill (supra) and this Court
explained the legal position of CDA Rules vis-a-vis Gratuity Act/
gratuity of an employee in the following manner:-
“The Act was enacted with a view to provide for a scheme for
payment of gratuity to employees engaged inter alia in mines.
Section 3 of the Act provides for appointment of an officer to
be the controlling authority. Controlling authority is to be
responsible for administration of the act. Different
authorities, however, may be appointed for different areas.
Section 4 of the Act entitles an employee to gratuity after he
has rendered continuous service for not less than five years
inter alia on his superannuation. Sub- Section (6) of Section 4
contains a non-obstante clause stating:

(a) the gratuity of an employee, whose services have been
terminated for any act, willful omission or negligence
causing any damage or loss to, or destruction of, property
belonging to the employer, shall be forfeited to the extent
of the damage or loss so caused;

(b) the gratuity payable to an employee may be wholly or
partially forfeited

(i) if the services of such employee have been
terminated for his riotous or disorderly conduct or any
other act or violence on his part, or

(ii) if the services of such employee have been
terminated for any act which constitutes an offence
involving moral turpitude, provided that such offence is
committed by him in the course of his employment.

9. The Rules framed by the Coal India Limited are not statutory
rules. They have been made by the holding company of
Respondent No. 1. The provisions of the Act, therefore, must
prevail over the Rules. Rule 27 of the Rules provides for
recovery from gratuity only to the extent of loss caused to
the company by negligence or breach of orders or trust.
Penalties, however, must be imposed so long an employee
remains in service. Even if a disciplinary proceeding was
initiated prior to the attaining of the age of
superannuation, in the event, the employee retires from
service, the question of imposing a major penalty by removal
or dismissal from service would not arise. Rule 34.2 no doubt
provides for continuation of a disciplinary proceeding
despite retirement of employee if the same was initiated
before his retirement but the same would not mean that
although he was permitted to retire and his services had not
been extended for the said purpose, a major penalty in terms
of Rule 27 can be imposed. Power to withhold penalty
contained in Rule 34.3 of the Rules must be subject to the
provisions of the Act. Gratuity becomes payable as soon as
the employee retires. The only condition therefore is
rendition of five years continuous service. A statutory right
accrued, thus, cannot be impaired by reason of a rule which
does not have the force of a statute. It will bear repetition
to state that the Rules framed by Respondent No. 1 or its
holding company are not statutory in nature. The Rules in any
event do not provide for withholding of retrial benefits or
gratuity.
10. The Act provides for a closely neat scheme providing for
payment of gratuity. It is a complete code containing
detailed provisions covering the essential provisions of a
scheme for a gratuity. It not only creates a right to payment
of gratuity but also lays down the principles for
quantification thereof as also the conditions on which he may
be denied therefrom. As noticed hereinbefore, Sub-section (6)
of Section 4 of the Act contains a non- obstante clause vis.
Sub-section (1) thereof. As by reason thereof, an accrued or
vested right is sought to be taken away, the conditions laid
down thereunder must be fulfilled. The provisions contained
therein must, therefore, be scrupulously observed. Clause (a)
of Sub-section (6) of Section 4 of the Act speaks of
termination of service of an employee for any act, willful
omission or negligence causing any damage. However, the
amount liable to be forfeited would be only to the extent of
damage or loss caused. The disciplinary authority has not
quantified the loss or damage. It was not found that the
damages or loss caused to Respondent No. 1 was more than the
amount of gratuity payable to the appellant. Clause (b) of
Sub-section (6) of Section 4 of the Act also provides for
forfeiture of the whole amount of gratuity or part in the
event his services had been terminated for his riotous or
disorderly conduct or any other act of violence on his part
or if he has been convicted for an offence involving moral
turpitude. Conditions laid down therein are also not
satisfied. Termination of services for any of the causes
enumerated in Sub-section (6) of Section 4 of the Act,
therefore, is imperative.”

19. The principles which are laid down in the aforesaid judgment are
recapitulated below:-
(i) No doubt, Rule 34.2 of CDA Rules provides for
continuation of disciplinary proceedings despite retirement
of an employee if the same was initiated before his
retirement However, after his retirement, major penalty in
terms of Rule 27 cannot be imposed. We may state here that
rule 27 of CDA Rules provides for the nature of penalties
including ‘recovery from pay or gratuity of the whole part
of any back loss cause to the company by negligence or
breach of orders for trust’. Major penalties which are
prescribed under Rule 27 are reduction to a lower grade,
compulsory retirement, removal from service and dismissal.
The Court thus, held that these major penalties cannot be
imposed upon a retired employee.
(ii) Gratuity Act gives right to an employee to receive
gratuity on rendition of 5 years continuous service.
Gratuity become payable as soon as the employee retires.
This statutory right which accrues to an employee cannot be
impaired by reason of a rule which does not have the force
of a statute. Therefore, Rule 34.3 of the CDA Rules, which
is non-statutory in nature, is contrary to the provisions of
the Gratuity Act. As such, gratuity cannot be withheld on
the retirement of an employee even if departmental
proceedings were initiated against him before his retirement
and are pending at the time of retirement.
20. Jaswant Singh Gill (supra) was a judgment delivered by two judge
Bench. Mr. Mahavir Singh, learned senior counsel has placed strong
reliance to a three Bench judgment of this Court which is later in
point of time. This case is known as State Bank of India vs. Ram lal
Bhaskar and Anr. 2011(10)SCC249. In that case, Rule 19(3) of the State
Bank of India Officers Service Rules, 1992 came up for interpretation
which was para materia with rule 13.42 of the CDA Rules. Said rule
19(3) of SBI Officers Service Rules also permits disciplinary
proceedings to continue even after the retirement of an employee if
those were instituted when the delinquent employee was in service. Then
for the purpose of such proceedings the otherwise retired employee is
deemed to be in service and those proceedings shall be continued and
concluded as if the employee had continued in service. Thus, such an
employee is deemed to be in service for limited and specified purpose
only viz. for the purposes of continuance and conclusion of the
proceedings. In that case, charge sheet was served upon the respondent
before his retirement. The proceedings continued after his retirement
and were conducted in accordance with relevant rules wherein charges
were proved. On that basis punishment of dismissal was imposed. After
exhausting the departmental remedies, the respondent filed the writ
petition in the High Court which was allowed and order of dismissal was
quashed. This Court reversed the said decision of the High Court.
However, we find that there is no direct discussion, in the said
judgment, on the issue as to whether it is permissible for the
disciplinary authority to impose the penalty of dismissal of service
after the retirement of the employee. In fact the Court had dealt
with two aspects. One question which was deliberated was as to whether
inquiry could continue after the retirement of the respondent from
service. This question was answered in the affirmative having regard to
Rule 19(3) of the SBI Officers Service Rules. The Court distinguished
another judgment in UCO Bank & Anr. vs. Rajinder Lal Capoor;
2007(6)SCC694 on a ground that in the said case the delinquent officer
had already been superannuated and the charge sheet was served after
his retirement. In these circumstances the court had taken the view in
Rajinder Lal Capoor’s case that when an employee is allowed to
superannuate, no inquiry can be initiated against him thereafter.
However, if charge sheet is served before the retirement enquiry can
continue even after the retirement as per Rule 19(3). This proposition
thus stands settled viz. if the Rules permit, enquiry can continue
even after the retirement of the employee.
21. Other aspect which was dealt with was as to whether the High
Court could interdict the findings of disciplinary authority and arrive
at its conclusion that the findings recorded by the Inquiry Officer was
not substantiated by any officer on record on the basis of evidence
produced. This Court held that so long the findings of the
disciplinary authority are supported by some evidence, the High Court
is not empowered to re-appreciate the evidence as an appellate
authority and came to a different and independent findings on the basis
of that evidence. This is not the issue before us in the instant case.
22. It is thus, clear that the question as to whether penalty of
dismissal could be imposed after a retirement was not categorically
raised or dealt with. No doubt, penalty of dismissal was inflicted upon
the employee in that case. But it was not specifically on in clear
terms contended that such a penalty could not be imposed on an employee
who is already permitted to retire. At the same time, innuendo, the
judgment gives a semblance of indication that such a penalty is
permissible because of the reason that as per the rules, for the
purposes of enquiry, the employee shall be deemed to be in service. As
a sequittor, one can deduce the principle that when the Rules, by
creating fiction, treat the officer still in service, albeit for the
limited purpose of the continuance and conclusion of such proceedings,
then any of the prescribed penalties, including dismissal, can be
imposed. However, as we have pointed out above, the issue of
permissibility of penalty of dismissal on such a retired official was
neither raised nor any direct discussion followed thereupon. At the
same time, fact remains that penalty of dismissal, even after the
retirement, was upheld. This goes contrary to the dicta laid down in
Jaswant Singh Gill (supra) which took the view that no major penalty is
permissible after retirement was not even referred to.
23. The issue which confronts us in the instant appeal is as to
whether gratuity can be withheld in the wake of Rule 34 of CDA Rules
when examined in juxtaposition with the provisions of the Gratuity Act.
To put it otherwise, whether in the scheme of Gratuity Act, gratuity
has to be necessarily released to the concerned employee on his
retirement even if departmental proceedings are pending against him.
We find that Jaswant Singh Gill’s case directly answers this question,
that too in the context of these very CDA Rules. However, it is because
of the reason that the said judgment proceeds on the basis that after
the retirement of an employee, penalty of dismissal cannot be imposed
upon the retired employee. If this view is not correct and the
imposition of penalty of dismissal is still permissible, employer will
get the right to forfeit the gratuity of such an employee in the
eventualities provided under Sections 4(1) & 4 (6) of the Payment of
Gratuity Act which reads as under:-
Section 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 hi m 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.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxx
(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 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 hi m in the course of
his employment.
24. Thus for invoking Clause (a) or (b) of sub-section 6 of Section
4 necessary pre-condition is the termination of service on the basis of
departmental enquiry or conviction in a criminal case. This provision
would not get triggered if there is no termination of services.
25. It is the case of the appellant that in the charge sheet served
upon the respondent herein, there are very serious allegations of
misconduct alleging dishonestly causing coal stock shortage amounting
to Rs. 31.65 crores, and thereby causing substantial loss to the
employer. If such a charge is proved and punishment of dismissal is
given thereupon, the provisions of Section 4(6) of the Payment of
Gratuity would naturally get attracted and it would be within the
discretion of the appellant to forfeit the gratuity payable to the
respondent. As a corollary one can safely say that the employer has
right to withhold the gratuity pending departmental inquiry. However,
as explained above, this course of action is available only if
disciplinary authority has necessary powers to impose the penalty of
dismissal upon the respondent even after his retirement. Having regard
to our discussion above of Jaswant Singh Gill (supra) and Ram Lal
Bhaskar (supra), this issue needs to be considered authoritatively by a
larger Bench. We, therefore, are of the opinion that present appeal be
decided by a Bench of three Judges.
26. We accordingly direct the Registry to place the matter before
Hon’ble the Chief Justice for constituting a larger Bench to hear this
appeal.

……………………………………J.
[K.S. RADHAKRISHNAN]
…………………………………….J.
[A.K. SIKRI]
New Delhi
October 29 , 2013

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