KARNATAKA GRAMIN BANK v. HIGH

#3. Brief facts of the case are as under: The Respondent No.2 - workman joined the services of erstwhile Tungabhadra Gramin Bank as a Clerical Trainee on 13.10.1984 and subsequently promoted as Assistant Manager on 28.2.2013. His service conditions were governed by Pragathi Krishna Gramin Bank (Officers & Employees) Service Regulations, 2013 ('Pragathi Regulations, 2013' for short) and as per the said Regulations, the post of 'Assistant Manager' is classified under the category of Group-A Officers.

3.1 The Respondent No.2 - workman while working at Mudugal branch from 11.5.2013 to 2.5.2015, committed serious misconduct of fraudulently debiting the accounts of the customers without their knowledge. The petitioner - bank issued charge sheet for commission of such misconduct against Respondent No.2 on 4.6.2016. - 4 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR Subsequently, departmental enquiry was conducted against Respondent No.2 in respect of charge sheet.

3.2 The Enquiry Officer, after holding enquiry found Respondent No.2 to be guilty of the charges and submitted his findings to the Disciplinary Authority. The Respondent No.2 submitted his reply to the findings of the Enquiry Officer, which was placed before the Disciplinary Authority.

3.3 The Disciplinary Authority taking consideration the oral and documentary evidence adduced during the enquiry proceedings, concurred with the findings of the Enquiry Officer and imposed punishment of dismissal on the ground that Respondent No.2 had committed gross misconduct.

3.4 Aggrieved by the order of punishment of dismissal, the Respondent No.2 preferred an appeal before the Appellate Authority. The Appellate Authority rejected the appeal. - 5 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR

3.5 In view of rejection of the appeal, Respondent No.2 was not paid gratuity in terms of Regulation 72(2)(e) of Pragathi Regulations, 2013.

3.6 Aggrieved by non-payment of gratuity, the Respondent No.2 filed an application before the Controlling Authority under the provisions of the PG Act, 1972. The Controlling Authority, after taking into consideration the claim application, statement of objections filed by the petitioner - bank and submissions, allowed the application of Respondent No.2 and directed the petitioner - bank to pay a sum of Rs.13,76,326/- to Respondent No.2 alongwith interest @ 10% per annum from 20.6.2018 till the date of actual payment.

3.7 Aggrieved by the order of the Controlling Authority, the petitioner - bank filed an appeal before the Appellate Authority, which on reconsideration dismissed the appeal relying upon the judgment of the Hon'ble Supreme Court in the case of Union Bank of India and - 6 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR others -vs- C.G. Ajay Babu and another reported in (2018)9 SCC 529.

3.8 The petitioner - bank is before this Court in the present writ petition questioning the order dated

31.5.2023 passed by the Appellate Authority and the order dated 24.3.2021 passed by the Controlling Authority.

#4. I have heard learned counsel for petitioner as well as learned counsel for respondents.

4.1 Learned counsel for petitioner - bank primarily contends that there is an error and illegality committed by the Appellate Authority in dismissing the appeal of the petitioner - bank and the Appellate Authority failed to take into consideration Regulation 72(2)(e) of Pragathi Regulations, 2013, on the basis of which Respondent No.2 is not entitled for gratuity on his termination.

4.2 It is further contended by learned counsel for petitioner that Appellate Authority has committed an error in relying upon Section 14 of the P.G. Act, 1972 to - 7 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR override the other enactments, which is not applicable in the present case.

4.3 It is also contended by the learned counsel that the Appellate Authority has failed to appreciate that neither the Controlling Authority nor the Appellate Authority has the power to interpret the provisions of service regulations in respect of officers for calculating the gratuity.

4.4 Learned counsel contends that the Appellate Authority ought to have held Respondent No.2 to be not entitled to receive gratuity as per Regulation 72(2)(e) of the Service Regulations.

4.5 Learned counsel for petitioner relies upon the judgment of the Hon'ble Supreme Court in the case of P. Rajan Sandhi -vs- Union of India & another in Civil Appeal No.4095 of 2006 mainly to contend that a special law in the said case i.e., Working Journalists Act would prevail over the general law viz., the Payment of Gratuity Act. Therefore, he contends that in the present case, - 8 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR Regulation 72(2)(e) of Pragathi Regulations, 2013 would prevail over the PG Act, 1972.

4.6 On these grounds, learned counsel for petitioner - bank seeks to allow the petition and consequently set aside the impugned order passed by the appellate authority.

#5. Per contra, Sri Timmanna Bhat, learned Central Government Counsel appearing for Respondent No.1 and learned counsel - Sri Madhusudan appearing Respondent No.2 - workman sustain the orders passed by the Controlling Authority and the Appellate Authority.

5.1 It is also contended by learned counsel for respondent No.2 - workman that the petitioner - bank has not followed the exemption prescribed under Section 4(6) of the PG Act, 1972. He further contends that Respondent No.2 - workman has not caused any loss to the bank, nor Respondent No.2 has been convicted for any offence of moral turpitude, for the bank to seek forfeiture of the - 9 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR gratuity amount either under Section 4(6) of the PG Act, 1972 or under Regulation 72(2)(e) of the Pragathi Regulations, 2013. He further contends that Pragathi Regulations, 2013 would not override the PG Act, 1972 in the facts and circumstances of the present case. On these grounds, learned counsel seeks to dismiss the petition filed by the petitioner.

5.2 In support of his contentions, learned counsel for Respondent No.2 relies on the judgment of the Hon'ble Supreme Court in the case of C.G. Ajay Babu stated supra.

#6. Having heard learned counsels for parties, the question that arises for consideration in the present petition is: "Whether the Controlling Authority and the Appellate Authority are justified in ordering the payment of Gratuity to Respondent No.2 ?"

#7. In the present case, Respondent No.2 - K.Mohan Rao while working at Mudugal branch of the petitioner - - 10 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR bank, was subjected to disciplinary action on the charges of preparing Credit Reports recklessly without ensuring closure of previous loan accounts of five KCC customers and recommended for sanction, debiting five KCC accounts without the knowledge of the parties and crediting the proceeds to a customer's account who is nowhere connected to the said loan accounts with fraudulent motives and fraudulently debited Rs.25,000/- customer's JND account and credited to SB account of a customer who is nowhere connected to said transaction and said amount was withdrawn.

#8. The Respondent No.2 was issued with the charge sheet for the said misconduct and on enquiry, the disciplinary authority found him guilty and the penalty of dismissal from service was imposed. Aggrieved by the order of dismissal, the Respondent No.2 preferred an appeal before the Appellate Authority. The Appellate Authority rejected the appeal. In view of rejection of the appeal, Respondent No.2 was not paid gratuity in terms of - 11 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR Regulation 72(2)(e) of Pragathi Regulations, 2013. Aggrieved by non-payment of gratuity, the Respondent No.2 filed an application before the Controlling Authority. The Controlling Authority came to the conclusion that the forfeiture of the gratuity by the petitioner was not justified by relying on the judgment of the Hon'ble Supreme Court in the case of C.G. Ajay Babu stated supra and directed the petitioner - bank to pay the gratuity amount of Rs.13,76,326/- to Respondent No.2 alongwith interest. The Controlling Authority also observed Respondent No.2 is eligible to get gratuity within 30 days of cessation of his services i.e., 19.5.2018 and that the Respondent No.2 is entitled to interest on the delayed payment of gratuity from 20.6.2018 till the actual payment of gratuity.

#9. The order of the Controlling Authority challenged by the petitioner - bank before the Appellate Authority, which on reconsideration dismissed the appeal relying on - 12 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR the judgment of the Hon'ble Supreme Court in the case of C.G. Ajay Babu stated supra.

#10. It is relevant to note that in the present case, there is no monetary loss to the bank. Learned counsel for Respondent No.2 has placed reliance on judgments, one of the Coordinate Bench of this Court and another of the Division Bench of this Court. The Coordinate Bench of this Court similar circumstances dealing with similar set of facts of the very same petitioner - bank, considered at length the provisions of the PG Act, 1972; the Regulation 72(2)(e) of Pragathi Regulations, 2013 and also relied on the judgment of the Hon'ble Supreme Court in the case of C.G. Ajay Babu (supra) and came to the conclusion at paragraphs 18 and 19 as under: "18. The Apex Court has held that the forfeiture of the gratuity amount is permissible only if the termination of an employee is for any misconduct which constitutes an offence involving moral turpitude, and has been - 13 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR convicted for the offence by a Court of competent jurisdiction. The Apex Court in the case of C.G. Ajay Babu, stated supra, held that the Act would prevail over the rules on the payment of gratuity framed by the employer and the Bank cannot take recourse on its own rules, ignoring the Act.

#19. In the instant case, the financial loss to the Bank has already been received by the Bank therefore, the said context, petitioner’s contention that the gratuity amount has to be forfeited in light of the punishment of termination from service is not sustainable. Accordingly, the point raised for consideration is answered in favour of the workman."

#11. The judgment of learned Single Judge of this Court was taken up in the appeal by the petitioner - bank in Writ Appeal No.353/2024. The Division Bench of this Court, on reconsideration of the entire materials and the arguments putforth by learned counsels for both parties in the light of the PG Act, 1972 and Pragathi Regulations of 2013 and also relying on the judgment of the Hon'ble - 14 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR Supreme Court in the case of C.G. Ajay Babu (supra), did not agree with the contentions putforth by the petitioner - bank. It is relevant to refer to paragraphs 12 to 21 of the judgment of Division Bench of this Court, which read as under: "12. Having heard the learned counsel for the parties and perused the record, the short issue that arises for consideration in this appeal is:- “Whether the learned Single Judge is justified the writ in dismissing petition and thereby upholding the order of the Controlling Authority and the Appellate Authority directing the appellant herein to pay a sum of Rs.10.00 Lakhs to the Respondent No.2, who was service for certain misconduct?” removed

#13. The answer to the above issue lies in a very narrow compass i.e., on the construction of Regulation- 72(2)(e) of the Regulations 2013, which we re-produce as under:- " 72. Gratuity:- xxx xxx xxx xxx (2) Every Officer or Employee shall be eligible for gratuity on,- xxx xxx xxx xxx - 15 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR (e) Termination of service in any other way except by way of punishment after completion of 10 years of service. xx xxx xxx xxx in respect of an Provided that employee there shall be no forfeiture of gratuity for dismissal on account of misconduct except in cases where such misconduct causes financial loss to the bank and in that case to that extent only.”

#14. Though the learned Single Judge has proceeded in the judgment on the premise that Respondent No.2 is a workman, but the Respondent No.2 on the date of his removal was working as an Assistant Manager. In that sense, he was working in the Officer Cadre. Be it noted that there is not much of an issue in this regard.

#15. Having said that, on perusal of Regulation-72, it is seen that an officer is eligible for gratuity only on termination of service in any other way, except by way of punishment. The case of the appellant is that, he is not eligible for gratuity.

#16. The submission of Mr. Hegde is the Regulations of 2013 cannot discriminate between an employee and an - 16 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR officer. He relied upon Regulation-2 of the Regulations of 2013 to contend that, an employee/ officer shall be eligible payment of gratuity either as per the provisions of the Act of 1972 or sub- regulation (2), whichever is higher.

#17. On the other hand, Sri. Muthanna, the learned counsel for the appellant had primarily relied upon the Regulation-72(2) of the Regulations of 2013, more specifically provisio clause contend that, as Regulation 72(2) include/ incorporate the officers and the exception carved-out for payment of gratuity on dismissal when there is no financial loss shall good only for employees. So, his argument was the Respondent No.2 being an officer, who has been removed from service by way of punishment, shall not be entitled to gratuity.

#18. In other words, it is his submission that Respondent No.2 was removed while he was working as an Assistant Manager in the Officer Cadre, he shall not be eligible for gratuity on his removal. Mr. Hegde has placed heavy reliance on the judgment in - 17 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR the case of Union of India Vs. C.G. Ajay Babu (supra).

#19. We agree with the submission made by Mr.Hegde by holding that the issue which arises for consideration is no more res integra in view of the judgment of the Hon’ble Supreme Court in C.G. Ajay Babu (Supra), which judgment has also been relied upon by the learned Single Judge in Paragraph-17 of the impugned order. In this regard, we re-produce the Paragraphs- 10 & 11, which read as under:-

#10. Having heard learned counsel for the petitioner, learned for respondent No.1 and CGC learned counsel for respondent No.2, the only point that would arise for consideration before this Court is: “Whether the Controlling Authority and the Appellate Authority were justified in ordering the Payment of Gratuity to respondent No.2 in the present facts and circumstances of the case?”

#11. In the instant case, respondent No.2 was charged with the articles of charges for his misconduct to steal the bank funds to the tune of Rs.3,50,000/-. The said amount has been received back by the bank, which is not in dispute. The Enquiry Officer though held that - 18 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR the workman was guilty of the charges and passed an order of the Appellate dismissal, which Authority modified and held that the punishment of dismissal to removal from service shall not be a future disqualification employment. It is also not in dispute that the Respondent No.2 in the instant case has not been convicted by any Court of Law for any offence of moral turpitude.

#20. It is not the case of the appellant that the removal of Respondent No.2 was on the ground of conviction for an offence involving moral turpitude. Nor, the removal of Respondent No.2 is for loss caused to the appellant-Bank.

#21. In view of the above discussion we are of the view that, no interference is called for with the impugned order of the learned Single Judge. The appeal being without any merit is dismissed. No costs."

#12. The facts and circumstances of the present case and the grounds raised in the present petition being similar to the cases hereinabove referred and the question involved in the present petition being squarely covered by the judgments of Coordinate Bench and Division Bench of - 19 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR this Court stated supra, nothing further survives for this Court to delve upon for the reason that all the aspects have been covered and dealt with in the said judgments. Accordingly, the question raised in the present petition is answered. Following the judgments of Coordinate Bench and Division Bench of this Court stated supra, the present petition is also liable to be dismissed.

#13. My view is also fortified by the judgment of the Hon'ble Supreme Court in the case of C.G. Ajay Babu stated supra, wherein at paragraph-19 it is held as under: "19. In the present case, there is no conviction of the respondent for the misconduct which according to the Bank is an offence involving moral turpitude. Hence, there is no justification for the forfeiture of gratuity on the ground stated in the order dated 20-4-2004 that the “misconduct proved against you amounts to acts involving moral turpitude”. At the risk of redundancy, we may state that the requirement of the statute is not the proof of misconduct of acts involving moral turpitude but the acts should constitute an offence involving moral - 20 - NC: 2025:KHC:35090 WP No. 15471 of 2023 HC-KAR turpitude and such offence should be duly established in a court of law."

#14. For the reasons stated above, I pass the following: O R D E R i) Writ Petition is dismissed; ii) In view of dismissal of writ petition, pending interlocutory application does not survive for consideration and the same pales into insignificance. Sd/- (PRADEEP SINGH YERUR) JUDGE GSS List No.: 1 Sl No.: 13