PANKAJAVALLY.K.N v. STATE OF KERALA

by Ext.P6 judgment dated 24.08.2022, disposed of the writ petition as follows: WPC 13380/2023 -3- “Resultantly, this writ petition is ordered and Ext.P6 is quashed; with a consequential direction to the 4th respondent to rehear the petitioner, adverting to my observations above and to the statutory scheme, particularly under Sections 37 and 69 of the "KCS Act"; thus culminating in an appropriate order and necessary action thereon, as expeditiously as is possible but not later than two months from the date of receipt of a copy of this judgment. Needless to say, if the petitioner has not executed any loan or guarantee documents, nor offered any undertaking under Section 37 of the KCS Act to the effect that the liability can be recovered from her retiral benefits; or if the Society has not, in that event, obtained any interdictory order from the competent Forum quantifying the alleged liability, Society shall disburse her retiral benefits within the afore time frame. It must also be borne in mind by the Society that they will be eligible to withhold the "No Liability Certificate" under Rule 198(8) of the KCS Rules, only if there is a legally quantified liability and in no other manner.”

2. In obedience to Ext.P6 direction, Ext.P7 is issued by the 4th respondent on 20.10.2022, wherein it is stated that on the basis of the bond executed by the petitioner and also on the basis of the award in ARC 1185/20, all pensionary benefits, including gratuity, have been adjusted WPC 13380/2023 -4- towards the liability. Impugning Ext.P7, the petitioner approached this Court for quashing Ext.P7 and for further direction to the respondents to disburse the gratuity and the pensionary benefits and arrears of DA payable to the petitioner.

3. A counter-affidavit is filed on behalf of the 4th respondent in which it is stated that the loan has been taken by the husband of the petitioner together with the petitioner, which can be seen from Ext.R4(b) application. The bond executed by the petitioner is produced as Ext.R4(a), which also shows that the petitioner was a co- borrower for the business loan. The contention taken by the petitioner that the loan is availed by the husband is not correct. It is also contended that Ext.P6 judgment specifically says that DCRG needs to be paid if only the petitioner has not executed any loan or guarantee WPC 13380/2023 -5- documents or if the society has not obtained any interdictory order from the competent forum quantifying the alleged liability. It is also stated that, in the judgment, this Court has directed that recovery can be made only as per the statutory schemes and based on the relevant loan documents or statutory undertakings, if any. Ext.P6 is an inter-party judgment which is binding on the petitioner. Therefore, when there is a guarantee document executed by the petitioner and when there is no interdictory order on fixing the liability, the petitioner cannot contend that society is not competent to adjust the amount due to the petitioner in any manner. Ext.P7 is perfectly valid and does not suffer from any infirmities. The petitioner approached this Court, suppressing the fact that an award is already obtained under Section 69 of the Kerala Co-operative Societies Act (for short, the KCS Act). When there is a WPC 13380/2023 -6- liability in society the respondent is justified in not issuing a non-liability certificate, and unless a non-liability certificate is issued, the retirement benefits, including gratuity, cannot be paid to the petitioner.

4. Heard the counsel for the petitioner as well as the Standing Counsel for the 4th respondent.

5. It is a fact that the petitioner approached this Court on earlier occasions by filing W.P.(C) No. 21811/2021, alleging that the retirement benefits have not been released to her and for the reason that a loan has been availed by her husband and amounts are due under the said loan. This Court, after hearing both parties, disposed of the writ petition as mentioned above. It is specifically stated that the petitioner has not executed any loan or guarantee documents nor offered any undertakings . Under Section 37 WPC 13380/2023 -7- of the KCS Act, if a member of a society execute an agreement in favour of the society providing that his employer or the officer disbursing his salary or wages shall be competent to deduct from the salary or wages payable to him by the employer, such amount as may be specified in the agreement and to pay the amounts so deducted to the society. It is also made clear that they will be eligible to withhold the non-liability certificate under Rule 198(8) of Kerala Co-operative Societies Rules, 1969 (for short, the KCS Rules), if there is a legally quantified liability and in no other manner.

6. Section 4(1) of the Payment of Gratuity Act, 1972 (for short, the Gratuity Act’) directs that ‘the 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, WPC 13380/2023 -8- a) on his superannuation, or b) on his retirement or resignation, or c) on his death or disablement due to accident or disease.

7. Section 13 of the Gratuity Act deals with the ‘Protection of the gratuity’, which says that no gratuity payable under this Act and no gratuity payable to an employee employed in any establishment, factory, mine, oilfield, plantation, port, railway company or shop exempted under section 5 shall be liable to attachment in execution of any decree or order of any civil court, revenue or criminal Court.

8. Section 7(3) of the Gratuity Act directs that the employer shall arrange to pay the amount of gratuity, within thirty days from the date it becomes payable to the person to whom the gratuity is payable and (3-A) which is WPC 13380/2023 -9- specifically inserted, says that if it is not paid by the employer within the period specified in sub Section (3), the employer shall pay, from the date on which the gratuity becomes payable to the date on which is paid, simple interest at such rate, not exceeding the rate notified by the Central Government from time to time for repayment of long term deposits, as that Government may, by notification specify.

9. The counsel for the respondent relies on Rule 198(8) of the KCS Rules and argues that, in respect of all employees save the Chief Executive Officer of a society, no retirement benefits shall be sanctioned and disbursed until after the due issuance of a Non-liability Certificate by the Chief Executive Officer and approval of the same by the committee of the society within thirty days from the date of retirement of such employee. WPC 13380/2023 -10-

10. He also submits that by Ext.P6 judgment, this Court has specifically taken note of this fact and held that the Society will be eligible to withhold the non-liability certificate under Rule 198(8) of the KCS Rules only if there is a legally quantified liability and in no other manner.

11. He also refers to Ext.R4(a) bond executed by the petitioner along with her husband, giving consent to the Bank to recover the amounts due to the bank from the loan from the retirement benefits. Therefore, the Bank is fully justified in appropriating all the service benefits, including the gratuity with the loan account.

12. The counsel for the petitioner relies on judgment of this Court in Kunju Mohammad V.A v. KSFE Ltd. and Others (2009 (4) KHC 185), Pushpalal V.S v. District Collector and Others (2013 KHC 2715) and Mathew K.C v. WPC 13380/2023 -11- Plantation Corporation of Kerla Ltd. and Ors. (2000 SCC online Ker 35) and contends for the proposition that on default of loan and recovery, even though the person who has taken the loan has given his consent for recovery from the gratuity, the same cannot be enforced as gratuity stands on a different footing and is free from all encumbrances.

13. The counsel for the respondent relies on the judgment of the Apex Court in Neelima Srivastava v. State of Uttar Pradesh and others (2021 KHC 6380) as well as Gorie Gouri Naidu (Minor) and Another v. Thandrothu Bodemma and others (1997 KHC 722) and the contends for the proposition that an inter-party judgment between the parties is binding on and therefore, they cannot wriggle out of the said findings entered by this Court in Ext.P6 judgment. As Ext.P6 specifically directs that the Bank can withhold the non-liability certificate if there is dues, and WPC 13380/2023 -12- going by Rule 198(8) of the KCS Rules, the Bank is justified in doing so.

14. A perusal of Ext.P6 judgment would shows that this Court has directed that if there is no undertaking by the petitioner under Section 37 of the KCS Act, the liability can be recovered from the retirement benefits. The Society is not justified in withholding the gratuity amount. Section 37 of KCS Act deals with ‘Deduction from salary to meet society’s claim in certain cases’. It specifically states that any member of the society may execute an agreement in favour of the society, providing that his employer or the officer disbursing his salary or wages shall be competent to deduct from the salary or wages payable to him by the employer. So, Section 37 excludes the payment of gratuity. When there is a specific bar under the Central Act, ie., the payment of Gratuity Act, no recovery can be done from any WPC 13380/2023 -13- liability to the Bank, and there is a positive direction in Section 7(3) of the Gratuity Act, that the gratuity shall be payable to the person within thirty days from the date it becomes due. The respondent is not justified in appropriating the same to the loan account of the petitioner.

15. It is also brought to the notice of this Court that, in execution of the ARC, steps are being taken for the recovery of the amount from the movable and immovable properties of the petitioner, and it is under process.

16. Therefore, I have no hesitation to hold that the act of the respondent-Bank in appropriating the gratuity amount to the loan account of the petitioner is illegal. Therefore, Ext.P7 stands quashed. The gratuity payable to the petitioner shall be paid to the petitioner within thirty days from today, irrespective of the fact that there is an WPC 13380/2023 -14- embargo under Rule 198(8) of the KCS Rules, which is only a rule made under the State Act. The respondent Bank is at liberty to execute the ARC award for the amounts due to the Bank in all spirit and rigour except for the gratuity amount due to the petitioner. The Writ petition is allowed. Sd/- BASANT BALAJI JUDGE JS WPC 13380/2023 -15- APPENDIX OF WP(C) 13380/2023 PETITIONER EXHIBITS EXHIBIT P1 TRUE COPY OF THE REPLY DATED 16.07.2021 MARKED AS EXHIBIT P1 EXHIBIT P1(A) TRUE COPY OF THE ADVOCATE NOTICE SENT TO THE 4TH EXHIBIT P2 EXHIBIT P3 EXHIBIT P4 EXHIBIT P5 EXHIBIT P6 EXHIBIT P7 EXHIBIT P8 EXHIBIT P 9 RESPONDENT BY THE PETITIONER DATED 25.06.2021 TRUE COPY OF THE REPRESENTATION SUBMITTED TO THE 2ND RESPONDANT DATED 25.06.2021 TRUE COPY OF THE REPRESENTATION FILED BEFORE THE 3RD RESPONDANT DATED 25.06.2021 TRUE COPY OF THE COMMUNICATION SENT BY THE 3RD RESPONDENT DATED 19.07.2021 TO THE PETITIONER TRUE COPY OF THE COMMUNICATION SENT BY THE 4TH RESPONDENT DATED 07.08.2021 TRUE COPY OF THE JUDGEMENT DATED 24.8.2022 IN W.P (C) NO.21811/2021 TRUE COPY OF THE COMMUNICATION SENT BT THE 4TH RESPONDANT DATED 20.10.2022 TRUE COPY OF THE NOTICE SENT BY THE 4TH RESPONDENT DATED 30.4.21 TRUE COPY OF THE RECOVERY NOTICE SENT BY THE 4TH RESPONDENT IN RELATION TO E.P.611/2022 IN ARC NO.1185/2020 DATED 3.11.2022 RESPONDENT EXHIBITS EXHIBIT R4(A) A TRUE COPY OF THE BOND EXECUTED BY THE PETITIONER AND HER HUSBAND DATED 16-06-2017 EXHIBIT R4(B) A TRUE COPY OF THE APPLICATION SUBMITTED BY THE PETITIONER AND HER HUSBAND DATED 27-05-2017 EXHIBIT R4(C) A TRUE COPY OF THE AWARD IN ARC 1185/2020 OF THE ARBITRATOR UNDER SECTION 69 OF THE KERALA CO- OPERATIVE SOCIETIES ACT DATED 20-12-2020