CDA Rules| Management Can Withhold Gratuity & Recover Pecuniary Loss Of Company Caused Due To Employee’s Negligence: Calcutta High Court

The High Court was considering an intra-Court appeal filed by the appellant/company challenging a judgment of the Single Judge upholding the applicability of the provisions of the Payment of Gratuity Act, 1972, in the case of the first respondent, who did not fall within the definition of ‘employee’ as per the Act of 1972.

The Division Bench of Justice Lanusungkum Jamir and Justice Rai Chattopadhyay held, “Therefore, it is evident and clear that the MSTC CDA Rules, 1980 has made provisions and granted authority and discretion to the management to withhold gratuity and recover any pecuniary loss of company from the same, if the loss is proved to be attributable to the negligence of an employee.”

Senior Advocate Soumya Majumder represented the Appellant, while Advocate Biplab Ranjan Bose represented the Respondent.

Factual Background

The first respondent, who was a Presidential appointee to the Board of Directors of the appellant, was working as the Chairman and Managing Director (CMD) of the appellant/company. The said respondent was issued with three charge sheets in 2009 on the charges of loss of the appellant company of several crores of rupees, owing to importing scrap at an excess value and also causing loss by retention of stock without appropriate compensation payable to the company by the customers. The Ministry directed the appellant/company to withhold the gratuity of the respondent, pending completion of the disciplinary proceeding.

In 2009, the respondent retired. After conclusion of the disciplinary proceeding an order was issued, imposing upon the respondent, a penalty for recovery of Rs 10 lakh, payable to him on account of gratuity, as per provision under Rule 23 (d) read with Rule 30A(ii) of the MSTC CDA Rules, for the loss caused to the company by the respondent due to his negligence in conduct and breach of order. A review application filed by the said respondent against that order was rejected by the Ministry, being the Disciplinary Authority. In 2017, the respondent wrote to the company for payment of gratuity and also lodged his claim of gratuity before the competent statutory authority. The Controlling Authority rejected the respondent’s claim. The Appellate Authority reversed the order of the Controlling Authority and directed the payment of gratuity to the respondent with simple interest.

Reasoning

The Bench found that the incidents alleged pertained to the years 1995, 2002 and 2008. Issuance of a charge sheet against the respondent was at the fag end of his career, when immediately after the same, he retired on April 30, 2009. The respondent was exonerated of the charges in the charge sheet dated April 20, 2009 and one of the charges in the charge sheet dated April 29, 2009. For the rest of the charges, he was found guilty.

The Bench also found that no challenge was ever put forth by the respondent against the proceeding or the punishment order. Only vide a letter in 2017, he first raised his claim for payment of gratuity before the appellant company. During the years in between, the first respondent did not agitate for the order of punishment against him and accepted the same. As per the Bench, the order of punishment, which was in terms of the CDA Rules, 1980, thus became final and binding. “The Rules allows delayed payment of gratuity only in case of an exonerated employee”, it added.

The Bench also noticed that Rule 30 A (ii) of the CDA Rules, 1980 operates in two situations, either if the employee is found guilty of misconduct as enumerated in the Payment of Gratuity Act, 1972 or if he is found guilty of misconduct of negligence causing pecuniary loss to the company, for recovery of that loss. “These two situations being considered in exclusion of each other, availability of any one of those in case of the respondent No. 1 renders him liable under the provisions of the CDA Rules”, it added.

Allowing the appeal and setting aside the judgment of the Single Judge as well as the order of the appellate authority under the Payment of Gratuity Act, the Bench upheld the order of the controlling authority.

Cause Title: MSTC Limited v. Malay Sengupta (Case No.: FMA 959 of 2025)

Appearance

Appellant: Senior Advocate Soumya Majumder, Victor Chatterjee, Jayeeta Sengupta

Respondent: Advocate Biplab Ranjan Bose

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