Gratuity Can't Be Withheld To Recover Loan Even If Retired Employee Was Guarantor: Orissa High Court

The Orissa High Court has held that gratuity can't be withheld/ forfeited to recover loan default, even if the retired employee stood guarantor.

The Court was considering an Appeal against an order of the single bench wherein the Writ Petition filed by the Appellant challenging the judgment and order passed by the Appellate Authority under the Payment of Gratuity Act, 1972 was dismissed.

The Division Bench of Chief Justice Harish Tandon and Justice Murahari Sri Raman held, "The gratuity is neither a bounty nor a bonanza, but a deferred payment of salary to an employee. It is recognition of his successful accomplishment of the services rendered to the employer and, therefore, is required to be paid on the date of superannuation. The statutory sum or the amount entitled to an employee under a particular Act cannot be forfeited nor be denied in absence of any power conferred upon the employer. The moment the power is to be exercised in a particular eventuality, any other eventuality cannot be impliedly engulfed into the said provision as the authority has to travel within the circumference of the statutory provision and cannot wriggle out from the provisions applicable in this regard. The amount of gratuity can only be forfeited in the event of a termination of service for an act or the things done while in the employment causing a damage or loss to the employer and not otherwise."

The Appellant was represented by Advocate Dr. Patanjali Tripathy, while the Respondent was represented by Additional Government Advocate Sanjay Rath.

The employee was a Deputy Manager in the Appellant-Bank and attained the age of superannuation with effect from July 31, 2010. Despite having allowed to retire from service without any blemish or disciplinary proceeding having been initiated while in employment, the retiral benefit was withheld by the Appellant which constrained the the employeeto move to the authority under the Payment of Gratuity Act, 1972 for release of the gratuity amount.

The Appellant took a plea that said that the employee stood as a guarantor to a loan disbursed to the principal borrower, who failed and neglected to pay the loan amount and, therefore, the liability to pay the amount is coextensive and thus the recovery can be made from her and for such reason, the amount of gratuity was not disbursed to the employee. However, the authority did not find any conditions, stipulation and/or powers conferred under the statute upon the Appellant to withhold the gratuity amount and directed the payment to be made.

The order was assailed before the Appellate Authority under the said Act and the stood dismissed. Thereafter, the Writ Petition was filed assailing the order of the Appellate Authority reiterating and restating the factual grounds as taken before the original authority, but the writ Court did not find any power conferred upon the Bank to deny the disbursement of the gratuity amount to the employee after she attained the age of superannuation.

The Court referred to Sub-section (6) of Section 4 of the Payment of Gratuity Act, 1972 and ruled that the gratuity of an employee shall be forfeited to the extent of damage or loss so suffered, provided such employee has been terminated from service for any act, willful omission or negligence which causes the damage or loss or destruction of the property belonging to the employer.

"The said sub-section starts with the non-obstante clause and, therefore, has an overriding effect on the preceding sub-sections of Section 4 thereof. The legislature has restricted the applicability of said provision only in the event of contingencies incorporated therein and, therefore, any transgression therefrom or imbibing any other contingencies not contemplated therein, in the action is illegal and not sustainable in law", the Court held.

The Appeal was accordingly dismissed.

Cause Title: Cuttack Central Co-operative Bank Ltd. v. The Joint Labour Commissioner

Appearances:

Appellant- Advocate Dr. Patanjali Tripathy

Respondent- Additional Government Advocate Sanjay Rath, Advocate S. Sunandini

Click here to read/ download Order