KARNATAKA GRAMIN BANK v. THE APPELLATE AUTHORITY

whereby, the Appellate Authority has confirmed the order of the Regional Labour Commissioner and dismissed the appeal preferred by the Karnataka Gramin Bank - petitioner herein. - 3 - NC: 2024:KHC:1481 WP No. 15460 of 2023

Petitioner herein is referred as Bank and respondent No.2 is termed as workman for the sake of convenience.

Workman joined the services of the petitioner - Bank as a clerical trainee. Due to the misconduct in meticulously engineering a plan to steal the Bank funds to the tune of Rs.3,50,000/- from the safe custody of the Bank, the workman was issued with the charge sheet for commission of misconduct. The enquiry officer, after holding an enquiry, held that the workman was guilty of the charges. The Disciplinary Authority, considering the report of the Enquiry Officer and considering the materials placed before him, imposed the punishment of dismissal, which shall be ordinarily, be a disqualification for future employment. The workman preferred an appeal before the Appellate Authority, the Appellate Authority modified the punishment of dismissal to remove from service, which shall not be a disqualification for future employment. - 4 - NC: 2024:KHC:1481 WP No. 15460 of 2023

Respondent No.2-workman filed an application before the Controlling Authority and Regional Labour Commissioner (Central), Bellary (‘Controlling Authority’ for short) under Section 4 of the PG Act, 1972 and the Controlling Authority allowed the application, directed the petitioner - Bank to pay Rs.10 Lakhs to the workman along with interest at 10% per annum from 03.03.2017 till the date of actual payment of gratuity. Appeal preferred by the Bank before the Appellate Authority came to be dismissed confirming the order of the Controlling Authority.

Heard Shri. T.P. Muthanna, learned counsel for the petitioner, Shri. Timmanna, learned CGC respondent No.1 and Shri. Madhusudan P.N, learned counsel for respondent No.2.

Learned counsel the petitioner would contend that the Appellate Authority has failed to appreciate that as per Regulation 72 (2) (e) of Pragathi Krishna Gramin Bank (Officers & Employees) Service - 5 - NC: 2024:KHC:1481 WP No. 15460 of 2023 Regulations 2013, (‘Pragathi Regulations, 2013’ for short) respondent No.2 - workman is not entitled for gratuity on his termination from service by way of punishment. Emphasizing his contention, learned counsel would contend that the termination of the workman from service by way of punishment for committing misconduct causing financial loss to the bank and to that extent, the amount of gratuity has to be forfeited and would contend that neither the Controlling Authority nor the Appellate Authority have taken this into consideration. Under the circumstances, learned counsel would contend that the order passed by the Controlling Authority and the Appellate Authority warrant interference by this Court.

Per contra, learned Central Government Counsel appearing for respondent No.1 would justify the order passed by the Controlling Authority and the Appellate Authority.

Learned counsel appearing for respondent No.2 would justify the orders and would contend that the Bank - 6 - NC: 2024:KHC:1481 WP No. 15460 of 2023 has not followed the exemption prescribed under Section 4(6) of the PG Act, 1972. Learned counsel would contend that the workman has not caused any loss to the bank, nor has a criminal case against the employee, nor has the employee been convicted by any Court of law for any offence of moral turpitude, for the bank to seek forfeiture of the gratuity amount either under Section 4 (6) of the PG Act or under Regulations 72 (2) (e) of the Pragathi Regulations, 2013. Reliance is placed to the decision of the Apex Court in the case of Union Bank of India and others v. C.G. Ajay Babu and another1 (C.G. Ajay Babu).

Having heard the learned counsel for the petitioner, learned CGC for respondent No.1 and 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 1 (2018) 9 SCC 529 - 7 - NC: 2024:KHC:1481 WP No. 15460 of 2023 Payment of Gratuity to respondent No.2 in the present facts and circumstances of the case?"

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 the workman was guilty of the charges and passed an order of dismissal, which the Appellate Authority modified and held that the punishment of dismissal to removal from service shall not be a disqualification for future employment. It is also not in dispute that respondent No.2 in the instant case has not been convicted by any Court of Law for any offence of moral turpitude.

Learned counsel for the petitioner placed reliance on the Regulation 72 (2) (e) of Pragathi Regulations, 2013, which reads as under: "72. Gratuity

1. An officer or employee shall be eligible for payment of gratuity either as per - 8 - NC: 2024:KHC:1481 WP No. 15460 of 2023 the provisions of the Payment of Gratuity Act, 1972 (39 of 1972) or as per sub- regulation (2), whichever is higher.

2. Every officer or employee shall be eligible for gratuity on, - (a) retirement, (b) death, (c) disablement rendering him unfit for further service as certified by a medical officer approved by the Bank, or (d) resignation after completing 10 years of continuous service, or (e) termination of service in any other way except by way of punishment after completion of 10 years of service: Provided that in respect of an 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. "

A plain reading of the said regulations envisages that an officer or employee shall be eligible for payment of gratuity either as per the provisions of the PG Act, 1972 or as per Sub-Regulations 2 of 72, whichever is higher. Sub- - 9 - NC: 2024:KHC:1481 WP No. 15460 of 2023 regulations (2) of 72 envisages that every officer or employee shall be eligible for gratuity as per (a) to (e). Sub-clause (e) to sub-regulations (2) states termination of service in any other way except by way of punishment after completion of ten years of service, proviso to the Regulations to Sub-Regulations (2) of 72 is in respect of an 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.

Section 4 (6) of the PG Act reads as under:-

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: - 10 - NC: 2024:KHC:1481 WP No. 15460 of 2023 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. xxx xxx xxx (5) Nothing in this section shall affect the right of an employee to 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, 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; - 11 - NC: 2024:KHC:1481 WP No. 15460 of 2023 (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 him in the course of his employment.

(Emphasis supplied)

A plain reading of the Sub-Section (6) of Section 4 envisages that 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. A conjoint reading of Section 4(6) of the PG Act, 1972 and Regulation 72 (2) (e) of the Pragathi Regulations, 2013 clearly indicate that there shall not be a forfeiture of gratuity for dismissal on account of misconduct, willful omission or negligence except in cases where such misconduct causes financial loss to the bank and the forfeiture would be to that extent only. Thus, there is no - 12 - NC: 2024:KHC:1481 WP No. 15460 of 2023 inconsistency in the PG Act, 1972 and in the Pragathi Regulations, 2013, even otherwise Section 14 of the PG Act, 1972 overrides the other enactments and there cannot be a rule which is inconsistent with the Act.

Admittedly, the amount for which the workman was charge sheeted for commission of the misconduct has already been received by the Bank.

The Apex Court in the case of C.G. Ajay Babu, stated supra, has held at paragraph Nos.17 and 18 as under:- "17. Though the learned Counsel for the appellant-Bank has contended that the conduct of the respondent employee, which leads to the framing of charges in the departmental proceedings, involves moral turpitude, we are afraid the contention cannot be appreciated. It is not the conduct of a person involving moral turpitude that is required forfeiture of gratuity but the conduct or the act should constitute an offence involving moral turpitude. To be an offence, the act should be made punishable under law. That is absolutely in the realm of criminal law. It is not for the Bank to decide - 13 - NC: 2024:KHC:1481 WP No. 15460 of 2023 whether an offence has been committed. It is for the Court. Apart from the disciplinary proceedings initiated by the appellant - Bank, the Bank has not set the criminal law in motion either by registering an FIR or by filing a criminal complaint so as to establish that the misconduct leading to dismissal is an offence involving moral turpitude. Under sub- Section (6)(b)(ii) of the Act, forfeiture of gratuity is permissible only if the termination of an employee is for any misconduct which constitutes an offence involving moral turpitude, and convicted accordingly by a Court of competent jurisdiction.

In Jaswant Singh Gill v. Bharat Coking Coal Limited and others [(2007)1 SCC 663], it has been held by this Court that forfeiture of gratuity either wholly or partially is permissible under sub-Section (6)(b)(ii) only in the event that the termination is on account of riotous or disorderly conduct or any other act of violence or on account of an act constituting an offence involving moral turpitude when he is convicted. To quote paragraph-13:

13. The Act provides for a close-knit 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 - 14 - NC: 2024:KHC:1481 WP No. 15460 of 2023 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-à-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, wilful 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 damage or loss caused to Respondent 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.

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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 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.

In the instant case, the financial loss to the Bank has already been received by the Bank and therefore, in the said context, the 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.