The High Court
Case Details
IN THE HIGH COURT OF ORISSA AT CUTTACK W.P.(C) No.8423 of 2011 Managing Director, Orissa Forest Development Corporation Ltd. …. Petitioner Mr. S, K. Pattnaik, Advocate -Versus- Surendra Nath Ojha & others Opposite Parties Mr. P.K. Rout, AGA Mr. Sibasis Mishra, Advocate for O.P. No.1 …. CORAM: JUSTICE R.K. PATTANAIK DATE OF JUDGMENT:12.03.2024 1. Instant writ petition is filed by the petitioner challenging the impugned decision by the order under Annexure-12 under the Payment of Gratuity Act, 1972 (hereinafter referred to the ‘Act’) followed by dismissal of appeal vide Annexure-14 on the grounds inter alia that the direction of payment of full gratuity without directing recovery of dues as illegal and perverse, hence, therefore, the same are liable to be interfered with and set aside in the interest of justice. 2. In fact, opposite party No.2 as the Controlling Authority under the Act passed the order dated 30th January, 2009 (Annexure-12) in P.G.Case No.31 of 2008 and thereafter, the order dated 15th January, 2011 by the learned Appellate Authority under Payment of Gratuity Act-Cum-Deputy Labour Commissioner, Cuttack in P.G.(A) Case No.31 of 2008, which are under challenge at the behest of the petitioner with respect to a direction to pay back opposite party No.1, the gratuity with interest as per Section 7(3) of the Act and later on dismissal of appeal on merit and due to non-compliance of Section 7(7) of the W.P.(C) No.8423 of 2011 Page 1 of 2
Legal Reasoning
Act thereby confirming the order of opposite party No.2 in awarding the balance amount payable towards gratuity. 3. According to the petitioner, the amount of gratuity was paid to opposite party No.1 on 12th May, 2008 on the basis of an undertaking dated 24th April, 2001 to recover the dues from him and the same is permissible under law. The contention is that opposite party No.1 having received leave salary of Rs.1,31,624/-, on the basis of such an undertaking to the effect that recovery may be made from the gratuity, the amount due is recoverable. 4. The Orissa Forest Development Corporation is a Government of Orissa undertaking. As to opposite party No.1, he entered into service of the Corporation on 16th April, 1967 and retired on 31st March, 2001. It is not in dispute that opposite party No.1 after his retirement on 31st March, 2001 submitted a request with an application dated 24th April, 2001 (Annexure-1) for release of his unutilized leave salary with an undertaking that any outstanding dues lying against him shall be adjusted from the gratuity payable to him. It is also not disputed that opposite party No.1 again submitted an application dated 20th June, 2001 (Annexure-2) requesting release of leave salary. On the basis of the aforesaid applications under Annexures-1 and 2, the unutilized leave salary for 223 days was sanctioned by the petitioner vide Order dated 21st June, 2001 (Annexue-3) with an undertaking that any such outstanding amount shall be recovered from the gratuity before its disbursement. Later to such recovery, opposite party No.1 approached opposite party No.2 in P.G.Case No.31 of 2008, which was disposed of by the order under Annexure-12 and the same was challenged in appeal, which stood dismissed vide Annexure-14. W.P.(C) No.8423 of 2011 Page 2 of 10
Legal Reasoning
5. Heard Mr. Pattnaik, learned counsel for the petitioner and Mr. Mishra, learned counsel for opposite party No.1 besides Mr. Rout, learned AGA for the State. 6. It has been pleaded by the petitioner that opposite party No.1 is not an employee within the meaning of Section 2 (e) of the Act. 7. Mr. Mishra, learned counsel for opposite party No.1 submitted that opposite party No.1 is an employee as defined under Section 2(e) of the Act, which is clear and unambiguous and after an amendment with effect from 1st July, 1984, an employee, even if engaged in a managerial or administrative capacity is included and has been brought within the purview of the Act and so therefore, opposite party No.3 rightly referring to the decision of Gujarat High Court in the case of Lalit Kumar D. Thakkar Vrs. Controlling Authority & Assistant Labour Commissioner (Gratuity) and others reported in 2006 (109) FLR 1025 held him as an employee, even though he was working as a Divisional Manager. 8. In fact, in course of hearing Mr. Pattnaik, learned counsel for the petitioner did not press the above ground and confined the argument to the legality of Annexures-12 and 14. Nevertheless, in Lalit Kumar D. Thakkar (supra), it has been held that any employee engaged in managerial function is squarely covered by the definition of an ‘employee’ as specified in Section 2(e) of the Act and the very fact that the Act was amended in 1984 and thereafter in 1994 which made it clear that the whole object of amending the Act was to enlarge the scope of payment of gratuity to the employees and when the legislative intention is very clear, the Court should refrain itself from restricting the said scope. In fact, in the aforesaid case, the payment of gratuity was involved with respect to a Works Manager and while dealing with the same, the Court concluded that the authority concerned did W.P.(C) No.8423 of 2011 Page 3 of 10 commit any error in not granting the benefit of gratuity to which he was otherwise entitled to under the Act. Hence, considering the definition of employee in Section 2(e) of the Act, it has to be held that opposite party No.1, who admittedly was not the employer has to be treated as an employee entitled to payment of gratuity. No other authority is cited for a contrary view, hence therefore, the Court is inclined to subscribe the view expressed in Lalit Kumar D. Thakkar (supra) to hold that opposite party No.1 is an employee within the ambit of Section 2(e) of the Act. 9. Opposite party No.1 received the leave salary amount on 2nd July, 2001. As per the undertaking of opposite party No.1, the petitioner passed the order for recovery of Rs.90,541/- on 15th December, 2006 towards excess drawals and advances and to withhold the retiral dues until finalization of the disciplinary proceeding drawn up on 28th November, 2005. According to Mr. Pattnaik, learned counsel for the petitioner, on 15th December, 2006, the order vide Annexure-7 was passed by the petitioner to recover an amount of Rs.5779/- only from opposite party No.1 out of the huge amount of excess expenditure towards PCO calls. It is further brought to the notice of the Court that order dated 19th April, 2007 vide Annexure-7/a was passed in the disciplinary proceeding for recovery of Rs.23,998/-, which is 5% of the loss alleged and vide Annexure-7/b, for a sum of Rs.6571/- at the rate of 3% of the loss sustained. On 9th May, 2008, a Triangular Committee was constituted to consider the audit pending against opposite party No.1 and decided that an amount of Rs.26,997/- is to be recovered from him. Referring to the undertaking (Annexure-8) dated 24th April, 2001, the petitioner by order dated 9th May, 2008 decided to adjust the recoveries for a total amount of Rs.1,53,997/- from the amount of gratuity and sanctioned payment of Rs.1,96,113/- which was duly W.P.(C) No.8423 of 2011 Page 4 of 10 communicated to him and accordingly, a cheque for the said amount was handed over on 12th May, 2008, which was received without protest. Subsequent to the above adjustment and recovery from the gratuity amount, opposite party No.1 filed P.G.Case No.31 of 2008 which was followed by order under Annexure-12 and confirmed vide Annexure-14 by opposite party No.3. 10. The details of the dues payable by the petitioner as according to Mr. Pattnaik, learned counsel for the petitioner stands at Rs.1,53,887/- which was adjusted from the gratuity by order under Annexure-8 considering the undertaking submitted to the authority which was without any compulsion or coercion, inasmuch as, it was a voluntary act and not as per any suggestion of the Corporation. It is contended by Mr. Pattnaik that opposite party No.1 received the leave salary as per the order dated 21st June, 2001 in terms of the undertaking, so therefore, the adjustment from gratuity in respect of the dues outstanding is not illegal. 11. Mr. Pattnaik, learned counsel for the petitioner relies on the following decisions, namely, Jagannth Barik Vrs. Orissa Khadi and Village Industries Board and others (1995) 1 OriLawRev 430; Wazir Chand Vrs. Union of India JT 2000 (Suppl.) SC 515; Secretary, O.N.G.C. Ltd and Another Vrs. V.U.Warrier AIR 2005 SC 3039 and other citations to contend that such recovery of dues by the employer can be made from the amount of gratuity. On the other hand, Mr. Mishra, learned counsel for opposite party No.1 refers to the following decisions, such as, Shri Khageswar Nayak Vrs. State of Orissa and others 2004 (II) OLR 210 and Jaswant Singh Gill Vrs. Bharat Cooking Coal Ltd. and others (2007) 1 SCC 663 and it is contended that such adjustment W.P.(C) No.8423 of 2011 Page 5 of 10 and recovery from the gratuity amount with respect to the dues payable is not comprehended under the Act. The other decisions, namely, the State Farm Corporation of India Limited Vrs. The Regional Labour Commissioner and another 2007 STPL 1323 Delhi; U.P. State Sugar Corporation Ltd. & others Vrs. Kamal Swaroop Tondan AIR 2008 SC 1235 and Chairman-cum- Managing Director, Mahanadi Coalfields Limited Vrs. Sri Rabindranath Choubey AIR 2020 SC 2978 have been cited at the Bar. 12. In Shri Khageswar Nayak (supra), the Court held that any such amount so assessed if held up from gratuity, even if with the consent in absence of initiation of any disciplinary proceeding for official misconduct or negligence, is not permissible and while reaching at such a conclusion, it relied on a decision of the Apex Court in D.V. Kapoor Vrs. Union of India AIR 1990 SC 1923. In the case of D.V. Kapoor (supra), the Apex Court held that after retirement, the employee has a statutory right to receive gratuity and any order withholding the same must precede with a finding that he committed grave misconduct or negligence. In the decision of Shri Khageswar Nayak (supra), since there was no disciplinary proceeding initiated for misconduct or negligence and in absence of any such finding in respect thereof, the Court held that the gratuity could not have been withheld. Rule 7 of the Orissa Civil Services (Pension) Rules 1992 stipulates that the Government reserve the right of withholding pension or gratuity or both either in full or in part or withholding the pension in full or part whether permanently or a specified period and order in recovery from pension or gratuity of the whole or part of any pecuniary loss caused to it, if in any departmental or disciplinary proceeding, the pensioner is found to be guilty of grave misconduct or negligence in duty during the period of his service W.P.(C) No.8423 of 2011 Page 6 of 10 including service rendered on re-employment after retirement. Thus, on a reading of Rule 7 of the said Rules, such a right remains with the Government to withhold pensionary benefits provided the employee is held guilty for misconduct or negligence in duty during the period of his service. In any case, the petitioner retired from service on 31st March, 2001 and long thereafter, the disciplinary proceeding was initiated. It is contended by Mr. Pattnaik, learned counsel for the petitioner that since opposite party No.1 has been found guilty at the end of the disciplinary proceeding and order was passed for recovery of the amounts for the loss alleged, hence, the adjustment of the dues payable against the gratuity with the consent or undertaking for such adjustment to be perfectly justified and the same could not have been interfered with by opposite party No.2. The case of opposite party No.1 is governed by the Orissa Forest Development Corporation Service Rules, 1986 (in short ‘the Rules’) and as per Rule 123-A thereof, departmental action may be initiated against an employee after his retirement and hence, Mr. Pattnaik, learned counsel for the petitioner would submit that the disciplinary proceeding being initiated in 2007 since it proved the misconduct, so therefore, such withholding of the amount against the gratuity is legally tenable. In reply and response to the above, Mr. Mishra, learned counsel for opposite party No.1 submits that initiation and continuation of proceeding after superannuation or retirement or termination of service in view of Rule 123-A of the Rules was inserted by amendment with effect from 23rd February, 2004 and hence, the same cannot be applied retrospectively. But Rule 123-A of the Rules stipulates that the competent authority as enumerated in Rule 123 of the Rules may institute disciplinary proceedings against an employee after superannuation for his misconduct and for whole or part of any pecuniary loss caused to W.P.(C) No.8423 of 2011 Page 7 of 10 the Corporation, if he is found prima facie responsible for such misconduct or negligence in duty during the period of his service including the service rendered on re-employment after retirement but it shall be subject to approval of the Board of Directors or the CMD as the case may be. Of course, such a provision was introduced on 23rd February, 2004. Notwithstanding Rule 123-A of the Rules and when it is read in juxtaposition to Section 13 of the Act which is to the effect that no gratuity payable under the Act to an employee of any such establishment described therein shall be liable to attachment, the Court cannot justify the alleged deduction. 13. With regard to the undertaking submitted by opposite party No.1, the petitioner claimed that it was not under compulsion or any kind of coercion rather a voluntary act revealed from the conduct of opposite party No.1 and therefore, the adjustment and recovery from the gratuity could not have been opposed. In fact, as per Section 4 of the Act, the gratuity shall be payable to an employee on termination of his employee after he has rendered continuous service not less than five years on his superannuation, retirement or resignation or on his death of disablement due to accident or diseases with other conditions stipulated therein. Opposite party No.1, as it appears retired on 30th June, 2001 and as he had medical condition and shortage of fund necessary for treatment and under such pressing circumstances, he requested for release of leave salary so revealed from Annexures-1 & 2. It is also made to understand that such request was made at a time when opposite party No.1 was in dire need of money for marriage of his son and considering all the above situations, leave salary was allowed to be encashed by order under Annexure-3. Considering the above facts and the pressing need of opposite party No.1 and requests received from W.P.(C) No.8423 of 2011 Page 8 of 10 him under Annexures-1 & 2, the Court is of the humble view that it may be said to be under duress or compulsion. Notwithstanding any such undertaking at the time of release of leave salary, the Court is of the further view that the petitioner could not have adjusted the dues against gratuity in view of Annexure-4/b, a circular dated 18th November, 2002 of the Corporation. On a reading of Annexure 4/b, it is made to understand that the Corporation issued the circular in 2002 with instruction therein not to release the unutilized leave salary of any employee on his retirement/resignation/death or otherwise without obtaining NDCs since no scope is left to realize the outstanding dues as the amount of gratuity and provident fund are not attachable in view of Section 13 of the Act and Section 10 of the EPF and MP Act, inasmuch as, encashment of leave salary is the only source from which the dues can be recovered under Section 94 of the Rules. Even for the outstanding dues payable towards the loss caused to the Corporation, the Court reaches at a conclusion that the amount could not have been adjusted against the gratuity when leave salary had already been encashed and even though the departmental action initiated after superannuation proved the alleged misconduct. Having concluded so, it would not be incorrect to hold that opposite party No.2 rightly directed payment of the balance gratuity amount with interest. The Court also affirms the view of opposite party No.3 for dismissing the appeal due to non-compliance of Section 7(7) of the Act, which is a statutory requirement. Upholding the decision of opposite party No.2 to the effect that the petitioner is an employee of the Corporation and any such undertaking submitted by him was not free from compulsion and for the fact that adjustment and recovery against gratuity is not permissible even if loss is prima facie proved and established with a departmental action post- W.P.(C) No.8423 of 2011 Page 9 of 10 retirement, the Court does not find any justifiable ground or reason to interfere with the impugned orders under Annexures-12 and 14. 14. Accordingly, it is ordered. 15. In the result, the writ petition sans merit and hence, stands dismissed, however, in the circumstances, without any orders as to costs. (R.K. Pattanaik) Judge Balaram Signature Not Verified Digitally Signed Signed by: BALARAM BEHERA Designation: Personal Assistant Reason: eMudhra.App.Views.PartialControls.SigningModeTab.SigningTabVie wModel Location: HIGH COURT OF ORISSA, CUTTACK Date: 13-Mar-2024 12:13:03 W.P.(C) No.8423 of 2011 Page 10 of 10