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Disciplinary Action After Superannuation

Darashan Parikh
11 Nov 2020 4:30 AM GMT
Disciplinary Action After Superannuation
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Two issues were repetedly causing litigations before various courts including before the Supreme Court:

whether a departmental inquiry initiated before the superannuation can be continued after an employee reaches the age of superannuation and whether a penalty can be imposed after conclusion of such an inquiry or not

  • whether Gratuity can be withheld in the meanwhile, till the inquiry is over and decision is taken on the inquiry report,

Some Judgments of the Supreme Court had taken a view that it can be done and other judgments held that it cannot be done.

Ultimately, recently a Three Judges Bench while answering the questions (on a reference to a larger Bench by a Two Judges Bench) has put to rest the controvercy. This is an effort to bring home the law laid down by the Supreme Court.

For easy reference, the contents of the article are indexed as below.,

GUIDE TO THE CONTENTS


Para

Discription

II

Priliminary Discussion

A

Controversy

B

Summary of Answers given by the Supreme Court

C

Issue is considered in Context of Service / Pension Regulations of Nationalised Banks

D

Provisions of concerned Service and Pension Regulations

E

&

F

Judgments taking a similar view prior to the recent Decesion in case of Chairman cum Managing Director, Mahanadi Coalfields Limited Versus Sri Rabindranath Choubey

G

The recent judgment in case of Chairman cum Managing Director, Mahanadi Coalfields Limited Versus Sri Rabindranath Choubey

H

Judgments taking a contrary view prior to the recent Decesion in case of Chairman cum Managing Director, Mahanadi Coalfields Limited Versus Sri Rabindranath Choubey

III

How a reference came to be made to a Three Judges Bench

IV

Questions before the Larger Bench of the Supreme Court

V

Minority view in dissenting judgment of Hon'ble Mr. Justice Rastogi

VI

Majority Judgment

A

What was considered by the Bench

B

Admitted Facts

C

Basic Submissions of the Employee

D

Basic Submissions of the Employer

E

Basic Observations of the Court

F

Consideration of and overruling of previous Judgment in case of Jaswant Singh Gill

G

How Provisions of S. 4(6) of the Payment of Gratuity Act will be attracted

H

Even otherwise, the Rules permitted withholding of Gratuity

I

Rule not inconsistent with S. 4(6) of the Payment of Gratuity Act

J

Final Decision on Payment of Gratuity

K

Second Question regarding imposition of Penalty

L

Specific findings on the issue of Gratuity and Inquiry

M

Findings with respect to fields of operation of S. 4(1) and 4(6) of the Peyment of Gratuity Act.

N

Conclusion with respect to S. 4(1) of Payment of Gratuity Act

O

What penalties can be imposed

P

Distinction between "Termination and "Dismissal"

Q

Contrary Judgments dealt with

R

Why submissions of employee rejected

S

Further observations regarding application of some general observations

T-U

Observations and final observations in view of various decisions

V

Conclusions on Rules

W

Final conclusions and answers


II Priliminary Discussion

A) Repeatedly the following questions were raised before the Supreme Court and different Benches at different times had taken divergent view on the following questions. However, by a recent Judgment, the controvercy has been now put to rest by the Supreme Court:

  • whether Gratuity can be withheld in the meanwhile, till the inquiry is over and decision is taken on the inquiry report,

B) Supreme Court, has after considering various judgments of the Supreme Court, has answered the questions as follows:

On Question (a)

  • if the Rules / Regulations provide for such a contingency;

(ii) if the departmental inquiry was initiated before Superannuation the same can go on and

(iii)penalties as contemplated in the discipline and conduct rules can be imposed even after the employee has reached age of superannuation

On Question (b)

  • Yes, the Gratuity can be withheld."

C) I will discuss the issue in context of the Nationalised Banks, where the Officers' Service Regulations provide for such a Rule / Regulation.

D) In the Nationalised Banks the following statutory Regulations are made under the provisions (Section 19 (1) read with S. 19 (2) (d), (e) and (f)) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.

  • Officer Employees Service Regulations 1979 and
  • Pension Regulations, 1995.

Regulation 20 (3) of the Officer Employees Service Regulations, 1979 inter alia reads as under:

"3 (i) An officer against whom disciplinary proceedings are pending shall not leave/ discontinue or resign from his service in the Bank without the prior approval in writing of competent authority and any notice or resignation given by such an officer before or during the disciplinary proceedings shall not take effect unless it is accepted by the Competent Authority.

(ii) Disciplinary proceedings shall be deemed to be pending against any employee for the purpose of this regulation if he has been placed under suspension or any notice has been issued to him to show cause why disciplinary proceedings shall not be instituted against him and will be deemed to be pending until final orders are passed by the Competent Authority.

(iii) The officer against whom disciplinary proceedings have been initiated will cease to be in service on the date of superannuation but the disciplinary proceedings will continue as if he was in service until the proceedings are concluded and final order is passed in respect thereof. The concerned officer will not receive any pay and/or allowance after the date of superannuation. He will also not be entitled for the payment of retirement benefits till the proceedings are completed and final order is passed thereon except his own contributions to CPF."

Similar Provisions are also made in the State Bank of India Officers' Service Rules, (1992)

Relevant portions of Regulation 22, 43, 46 and 48 of the Pension Regulations, 1995 of the Nationalised Banks read as follows:

"22. Forfeiture of Service.

  • Resignation or dismissal or removal or termination of an employee from the service of the Bank shall entail for forfeiture of his entire past service and consequently shall not qualify for pensionary benefits;
  • Xxxxxxxxxxxxxxx"

"43. Withholding or withdrawal of pension.

The Competent Authority may, be order in writing, withhold or withdraw a pension or a part thereof, whether permanently or for a specified period, if the pensioner is convicted of a serious crime or criminal breach of trust or forgery or acting fraudulently or is found guilty of grave misconduct;

Provided xxxxxxxxxx"

"46. Provisional Pension.

  • An employee who has retired on attaining the age of superannuation or otherwise and against whom any departmental or judicial proceedings are instituted or where departmental proceedings are continued, a provisional pension, equal to the maximum pension which would have been admissible to him, would be allowed subject to adjustment against final retirement benefits sanctioned to him, upon conclusion of the proceedings but no recovery shall be made where the pension finally sanctioned in less than the provisional pension or the pension is reduced or withheld etc., either permanently or for a specified period.
  • In such cases the gratuity shall not be paid to such an employee until the conclusion of the proceedings against him. The gratuity shall be paid to him on conclusion of the proceedings subject to the decision of the proceedings. Any recoveries to be made from an employee shall be adjusted against the amount of gratuity payable.

Xxxxxxxxxxx"

"48. Recovery of Pecuniary loss caused to the Bank.-

  • The Competent Authority may withhold or withdraw a pension or a part there of, whether permanently or for a specified period, and order recovery from pension of the whole or part of any pecuniary loss caused to the Bank if in any departmental or judicial proceedings the pensioner is found guilty of grave misconduct or negligence or criminal breach of trust or forgery or acts done fraudulently during the period of his service;
  • xxxxxxxxxxxxxx;
  • Provided further that departmental proceedings, if instituted while the employee was in service, shall, after the retirement of the employee, be deemed to the proceedings under these regulations and shall be continued and concluded by the authority by which they were commenced in the same manner as if the employee had continued service.

Provided xxxxxxxx

Provided xxxxxxxxxx""

E) Various decisions were pronounced over a period of time by the Supreme Court. Some of the decisions held Question (a) in the affirmative and that it can be done. However, some of the decisions took a view that it cannot be done.

The decision in case of Y. K. Singla v. Punjab National Bank and others reported in (2013) 3 SCC 472, answered the Question (b) in the affirmative, subject to payment gratuity with interest, in case the employee is ultimately held entitled to gratuity.

After considering the rival judgments, a recent decision of the Supreme Court (judgment dated 27.05.2020 in Civil Appeal No. 9693 of 2013 in case of Chairman cum Managing Director, Mahanadi Coalfields Limited Versus Sri Rabindranath Choubey) has finally put the controversy at rest.

F) Some of the Earlier decisions on the issue:

With respect to Question (a):

  • The Supreme Court, while dealing with a para materia provision on an identical issue sustained the order of dismissal of a bank employee after he reached the age of superannuation in the case of Ramesh Chandra Sharma Vs. Punjab National Bank and another, reported in (2007) 9 SCC 15 (decided on 18.05.2007). The Supreme Court,

The Supreme Court, after considering the contention that the appellant having allowed to superannuate on his reaching the age of superannuation, continuation of the disciplinary proceedings was bad in law and considering the Regulations, came to a conclusion that:

  • The question as to whether a departmental proceeding can continue despite the delinquent officer's reaching the age of superannuation would depend upon the applicability of the extant rules. (Para 11)
  • However, as the consequences of such an order is provided for in the service rule, it would not be correct to contend that imposition of such a punishment would be wholly impermissible in law. (para 11)
  • The question, as to whether continuation of a disciplinary proceeding would be permissible or the employer will have to take recourse only to the pension rules, would depend upon the terms and conditions of the services of the employee and the power of the disciplinary authority conferred by reason of a statute or statutory rules. (para 12)
  • The Court was alive to the Regulations made by the Bank, which are statutory in nature viz. Regulation 20(3)(iii) (supra). (para 12)
  • The said Regulation clearly envisages continuation of a disciplinary proceeding despite the officer ceasing to be in service on the date of superannuation.
  • For the said purpose a legal fiction has been created providing that the delinquent officer would be deemed to be in service until the proceedings are concluded and final order is passed thereon.
  • The said Regulation being statutory in nature should be given full effect. ((c) to (g) from para 12)
  • It was opined that it was permissible for the Bank to continue with the disciplinary proceedings relying on or on the basis of Regulation 20(3)(iii) of the Punjab National Bank (Officers') Service Regulations, 1979.
  • The effect of a legal fiction is well-known. When a legal fiction is created under a statute, it must be given its full effect. (para 13)
  • The question was considered as no more res integra in view of the ratio laid down by the Supreme Court from time to time and particularly in State Bank of India vs. C.B. Dhall [1998(2) SCC 544]. (para 14)
  • In view of Regulation 20(3)(iii), Court was of an opinion that the opinion that it was permissible for the Bank to continue with the disciplinary proceedings relying on or on the basis of Regulation 20(3)(iii) of the Bank (Officers') Service Regulations, 1979. (para 14)
  • Indisputably as a consequence of the order imposing the punishment of dismissal from service the appellant would not have qualified for the pensionary benefits. (para 16)
  • an officer would not qualify for pensionary benefits, if inter alia, he is dismissed from services. (para 17)
  • Regulation 20(3)(iii) of the Discipline and Appeal Regulations must be read in conjunction with the Pension Regulations. (para 17)
  • In any event, if an officer is removed or dismissed from service under Regulation 4 of the (Discipline & Appeal) Regulations, the Bank need not take recourse to Regulation 48 of the Pension Regulations as Regulation 22 thereof would be attracted. (para 17)
  • The Gujarat High Court (per Mr. Justice A S Supehia) by a judgment dated 10.02.2020, after considering this judgment has upheld the penalty imposed by the employer though the employee had reached the age of superannuation.

(II) The Same Bench of the Supreme Court, on the same day, i.e. 18.05.2007, decided the Civil Appeal in the case of UCO Bank and Anr v. Rajinder Lal Capoor reported at AIR 2007 SC 2129.

The Supreme Court, after quoting and considering the Regulation 20 (3) (iii) and the fact that the charge-sheet was issued only on 13.11.98, after the respondent attained the age of superannuation on or before 01.11.1996, it was held that:

Findings on Questions Law:

  • a legal fiction when created, it must be given full effect but it is equally well-settled that the scope and ambit of a legal fiction should be confined to the object and purport for which the same has been created.

(both (a) and (b) from para 19)

  • The Regulation 20(3)(iii) could be invoked only when the Disciplinary Proceedings had clearly been initiated prior to the respondent ceases to be in service.
  • The terminologies used therein are of seminal importance.
  • Only when a disciplinary proceeding has been initiated against an officer of the bank despite his attaining the age of superannuation, can the disciplinary proceeding be allowed on the basis of the legal fiction created thereunder, i.e., continue "as if he was in service".
  • Thus, only when a valid departmental proceeding is initiated by reason of the legal fiction raised in terms of the said provision, the delinquent officer would be deemed to be in service although he has reached his age of superannuation.

(all (c) to (f) from para 21)

  • As Regulation 20 is not applicable in the case of the respondent, we have no other option but to hold that the entire proceeding initiated against the respondent became vitiated in law. (para 23)

III A Bench of three Judges of the Supreme Court in case of State Bank of India Vs. Ram Lal Bhaskar reported in AIR 2011 SCW 6577 (decided on 13.10.2011), considered a pari materia provision in the Service Regulations of State Bank of India.

A Facts:

  • A charge-sheet dated 22.12.1999 alleging various acts of misconduct was served on him. (Para 2)
  • The Employee challenged the decision of the Bank by filing a Writ Petition. (Para 3)

B Submissions on behalf of the Employee:

  • It was submitted that since the employee had retired from service on 31.01.2000, the employer had no jurisdiction to continue with the enquiry against him, irrespective of the fact that the charge-sheet was served on him on 22.12.1999 when he was still in service and he was dismissed from service on 15.05.2001 after he had retired from service.
  • the decision in UCO Bank and another v. Rajinder Lal Capoor [(2007) 6 SCC 694 : (AIR 2007 SC 2129 : 2007 AIR SCW 3656)] was relied upon. (para 5)

C Conclusions:

  • The decision in UCO Bank and another v. Rajinder Lal Capoor (supra), was distinguished on facts that the delinquent officer had already superannuated on 01.11.1996 before the charge-sheet was issued to him on 13.11.1998 and in those facts it was held that the delinquent officer having been allowed to superannuate, the charge-sheet, the enquiry report and the orders of the disciplinary authority and the appellate authority were held to be illegal and without jurisdiction.

However,

  • In the facts of the present case, the charge-sheet was issued on 22.12.1999 when the employee was in service;
  • There were clear provisions in Rule 19(3) of the State Bank of India Officers' Service Rules, 1992, whereby
  • disciplinary proceedings under the relevant rules of service if initiated against an officer before he ceased to be in the Bank's service
  • by the operation of, or by virtue of, any of the rules or the provisions of the rules,
  • the disciplinary proceedings may, at the discretion of the Managing Director, be continued and concluded by the authority by which the proceedings were initiated in the manner provided for in the rules as if the officer continues to be in service,
  • here he shall be deemed to be in service only for the purpose of the continuance and conclusion of such proceedings.
  • A similar provision was also relied upon in UCO Bank and another v. Rajinder Lal Capoor (supra) in regulation 20(3)(iii) of the UCO Bank Officers Employees Service Rules, 1979, where it was held that the aforesaid regulation could be invoked only when the disciplinary proceedings had been initiated prior to the delinquent officer ceased to be in service.
  • Thus, the aforesaid decision of this Court in UCO Bank and another v. Rajinder Lal Capoor (supra) does not support the employee;
  • there is no merit in the contention of the counsel for the respondent No.1 that the enquiry and the order of dismissal were illegal and without jurisdiction.

(all (a) to (i) from para 6)

The Conclusion on the basis of these three Judgments:

Supreme Court had taken a view in case of Nationalised Banks, where, in view of Statutory Regulations, a Deeming Fiction was created

an employee was deemed to be continuing in service if the inquiry is initiated before the date of superannuation

In such a case the Inquiry can be taken to its logical end and a disciplinary order can be passed since he is deemed to be in service.

With respect to Question (b)

Supreme Court, in case of Y. K. Singla (supra), in context of the Pension Regulations of 1995 prevalent in the Nationalised Banks, observed that it was open to the employer not to pay to the employee gratuity, till the culmination of the proceedings pending against him while considering Regulation 46 of the Pension Regulations (supra), and it was observed that:

"It is apparent from a perusal of the reasoning recorded by the High Court, that the High Court relied upon Regulation 46 of the Punjab National Bank (Employees) Pension Regulations, 1995." (from para 11)

"Having perused Regulation 46(2), we are of the view, that the High Court was fully justified in concluding, that it was open to the PNB not to pay to the appellant gratuity, till the culmination of the proceedings pending against him. It is, therefore, apparent, that non-release of gratuity to the appellant after 31.10.1996 (when the appellant retired from his employment, with the PNB), till his acquittal by the Special Judge, CBI Court, Chandigarh, on 31.10.2009, cannot be faulted." (from para 11)

The withholding would be subject to payment of Gratuity with interest as contemplated in section 7 of the Payment of Gratuity Act, 1972, (the Act), in case ultimately the employee was held entitled to the same.

Thus also, withholding of the Gratuity pending the departmental inquiry and passing of the disciplinary order was permissible.

G) This view is now confirmed by a three Judges' Bench (2:1) majority judgment in Civil Appeal No. 9693 of 2013 in case of Chairman cum Managing Director, Mahanadi Coalfields Limited Versus Sri Rabindranath Choubey, (supra) on a reference, as I will discuss hereafter.

H) There are also a few other judgments of the Supreme Court in cases of Nationalised Banks, which took a contrary view that the employee having reached age of superannuation, no disciplinary action can be taken.

The Supreme Court has now come to conclusion that those judgments do not lay down good law since these judgments did not consider the issue of deeming fiction and that a legal fiction must be given full effect and that when a disciplinary proceeding has been initiated against an officer of the bank despite his attaining the age of superannuation, can the disciplinary proceeding be allowed on the basis of the legal fiction created thereunder, i.e., continue "as if he was in service".

Considering this recent judgment in Civil Appeal No. 9693 of 2013 (supra), there is either a specific or implied overruling of such judgments, such other judgments will not be considered good law.

III How a Reference came to be made in case of Civil Appeal No. 9693 of 2013 (supra)

A) Supreme Court, in case of Jaswant Singh Gill Vs. M/S. Bharat Coking Coal Ltd. & Ors reported in (2007) 1 SCC 663, while considering pari materia administrative directions, had after considering facts had observed as follows: the order of the Disciplinary Authority to recorded a finding that in fact no order of termination / dismissal was passed and that this was a case of non-payment of gratuity in contravention of the Payment of Gratuity Act, 1972 in general and Section 4(6) in particular.

  • The order of the disciplinary authority was as follows:

"considering the seriousness of the offence would have imposed the punishment of dismissal from the service of Shri J.S. Gill, the then Chief General Manager, BCCL, but for his superannuation. The undersigned also hereby orders forfeiture of his gratuity."

  • The Rules framed by the Coal India Limited are not statutory rules. They were made by the holding company of the Employer.
  • Even if a disciplinary proceeding was initiated prior to the attaining of the age of superannuation, in the event, the employee retires from service, the question of imposing a major penalty by removal or dismissal from service would not arise.
  • Rule 34.2 no doubt provides for continuation of a disciplinary proceeding despite retirement of employee if the same was initiated before his retirement but the same would not mean that although he was permitted to retire and his services had not been extended for the said purpose, a major penalty in terms of Rule 27 can be imposed.
  • The Rules in any event did not provide for withholding of retrial benefits or gratuity.
  • Clause (a) of Sub-section (6) of Section 4 of the Payment of Gratuity Act (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 and that in this case the disciplinary authority had not quantified the loss or damage.
  • It was not found that the damages or loss caused to Respondent No. 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.

In these circumstances, the appeal came to be allowed and the employee was held to be entitled to Gratuity.

B) Civil Appeal No. 9693 of 2013 (supra) came to be filed before the Supreme Court challenging a judgment of the High Court of Orrisa, which had taken a view based on the judgment of the Supreme Court in case of Jaswant Singh Gill (supra).

  • The said Civil Appeal (supra) came up for hearing before a two Judges of the Supreme Court and was decided on 29.10.2013, reported in AIR 2014 SC 234.
  • In course of the hearing the judgment in case of State Bank of India Vs. Ram Lal Bhaskar (supra) came to be considered and after various observations, the Supreme Court held and directed as under:

"………Having regard to our discussion above of Jaswant Singh Gill (supra) and Ram Lal Bhaskar (supra), this issue needs to be considered authoritatively by a larger Bench. We, therefore, are of the opinion that present appeal be decided by a Bench of three Judges.

26. We accordingly direct the Registry to place the matter before the Chief Justice for constituting a larger Bench to hear this appeal."

  • While doing so, the Honourable Bench inter alia made the certain observations with respect to judgments in cases of UCO Bank and Anr. v. Rajinder Lal Capoor (supra) and Ram Lal Bhaskar (supra), in para 20 and para 22.

C) Consequently, the said Civil Appeal No. 9693 of 2013 (supra) came up before a three Judges bench comprising of M/s. Justice Arun Mishra, M. R. Shah and Ajay Rastogi JJ, and the Supreme Court, by judgment dated 27.05.2020, has put at rest the controversy on the following two issues, which was raging till now.

The Judgment of the Court were delivered by Hon'ble Mr. Justice M. R. Shah for Hon'ble Mr. Justice Arun Mishra and himself and partially concurring and partially dissenting judgment was written returned by Hon'ble Mr. Justice Rustogi.

IV Questions

  • as to whether is it permissible in law for the employer to withhold the payment of gratuity of the employee, even after his superannuation from service, because of the pendency of the disciplinary proceedings against him? And
  • where the departmental enquiry had been instituted against an employee while he was in service and continued after he attained the age of superannuation, whether the punishment of dismissal can be imposed on being found guilty of misconduct in view of the provisions made in Rule 34.2 of the CDA Rules of 1978?

V Minority dissenting judgment of Mr. Justice Rastogi has taken the following view:

Conclusions:

The Mr. Justice Rastogi held that

"I entirely agree with a view on question no. (i) that in view of rule 34.3 of the Coal India Executives' Conduct Discipline and Appeal Rules, 1978(hereinafter being referred to as "Rules 1978"), it is permissible for the employer to withhold gratuity even after retirement/superannuation during pendency of the disciplinary proceedings.

However, unable to persuade myself on question (ii). (para 2)"

And finally, the questions were answered in para 28.

Reading the entire minority judgment and the answers to the questions, it can be concluded that a view is taken to the effect that:

  • Gratuity can be withheld till conclusion of the inquiry;
  • Inquiry can be continued even after superannuation if the rules so provide;
  • The word "termination" in Section 4(1) and 4(6) of the Payment of Gratuity Act will include even the end of service on superannuation
  • consequently, the Gratuity can be forfeited under Section 4(6) of the Payment of Gratuity Act, if the management comes to a conclusion that charges levelled against him are proved,
  • though, a penalty of dismissal cannot be imposed.

However, in view of majority view, the penalty of dismissal can also be imposed as contemplated in discipline and conduct rules.

VI Majority Judgment was delivered by Hon'ble Mr. Justice M. R. Shah and the following points can be culled out from the same:

A) While considering the issues involved in the appeal, the relevant provisions of the CDA Rules and Section 4 of the Payment of Gratuity Act which were considered necessary to be referred to and considered and were quoted.

B) Admitted facts (para 5.1):

  • Charge sheet was served on 01.10.2007 before the employee reached the age of superannuation.
  • During pendency of the disciplinary inquiry the employee reached age of superannuation on 31.07.2010.
  • Gratuity was withheld in view of the pendency of the Disciplinary proceedings;

C) Basic submissions of the Employee (para 5.1):

  • He was permitted to retire on reaching age of superannuation;
  • There was no termination and therefore in view of he was entitled to gratuity and the same could not be forfeited;
  • Employee relied upon the judgment in case of Jaswant Singh Gill (supra)
  • No order of dismissal could have been passed subsequent to his superannuation, though the disciplinary proceedings are permitted to be continued;
  • Hence, in view of Section 4 of the Payment of Gratuity Act, full Gratuity was payable.

D) Basic Submissions of the Employer (para 5.1):

  • the employee was governed by the CDA Rules;
  • Rules 34.2 and 34.3 of the CDA Rules were applicable and the employee was governed by the said provisions.
  • Rule 34.2 permitted the disciplinary proceedings to be continued and concluded even after the employee has attained the age of superannuation, provided the disciplinary proceedings are instituted while the employee was in service.
  • Such disciplinary proceedings shall be deemed to be the proceedings and shall be continued and concluded by the authority by which it was commenced in the same manner as if the employee had continued in service.
  • Rule 34 permitted the management to withhold the gratuity during the pendency of the disciplinary proceedings.

E) Basic Observations of the Court (para 7):

  • Rule 34 permits the management to withhold the gratuity during the pendency of the disciplinary proceedings.
  • Rule 34.2 permits:

(i) the disciplinary proceedings to be continued and concluded even after the employee has attained the age of superannuation, for the limited purpose of continuing and concluding the disciplinary proceedings provided the disciplinary proceedings are instituted while the employee was in service.

(ii) It also further provides that such disciplinary proceedings shall be deemed to be the proceedings and shall be continued and concluded by the authority by which it was commenced in the same manner as if the employee had continued in service.

  • Consequently, at the conclusion of such disciplinary proceedings any of the penalty provided under Rule 27 of the CDA Rules can be imposed by the authority including the order of dismissal.
  1. If the submission that after the employee has attained the age of superannuation and/or he has retired from service, despite Rule 34.2, no order of penalty of dismissal can be passed is accepted, (i) it will be frustrating permitting the authority to continue and conclude the disciplinary proceedings after retirement and (ii) there shall not be any fruitful purpose to continue and conclude the disciplinary proceedings in the same manner as if the employee had continued in service.

F) Consideration of the Judgment in case of Jaswant Singh Gill (supra) and the ratio thereof (para 8 and para 10.27):

It was observed that:

  • for the reasons recorded in para 7 above the Judges were not in agreement with the view taken by the Supreme Court in that case.
  • if no major penalty is permissible after retirement, even in a case where the disciplinary proceedings were instituted while the employee was in service, in that case, Rule 34.2 would become otiose and shall be meaningless.
  • The Court gave emphasis to the fact that there is a decision of three Judge Bench of the Supreme Court in the case of Ram Lal Bhaskar (supra) taking just a contrary view, considering a Rule 19(3) of the State Bank of India Officers Service Rules, 1992, a Rule pari materia with Rule 34.2 of the CDA Rules wherein it was held that

(i) in case disciplinary proceedings under the relevant rules of service have been initiated before he ceased to be in the bank's service;

(ii) by the operation of, or by virtue of, any of the rules or the provisions of the Rules, the disciplinary proceedings may be continued and concluded by the competent authority

(iii) in the manner provided for in the Rules

(iv)as if the officer continues to be in service, and

(v) that he shall be deemed to be in service only for the purpose of the continuance and conclusion of such proceedings.

  • The Court also took note of another decision of this Court in the case of Rajinder Lal Capoor (supra) and observed that the UCO Bank Officer Employees' Service Regulations, 1979 which were also pari materia to the SBI Rules as well as the CDA Rules, could be invoked only when the disciplinary proceedings had been initiated prior to the delinquent officer ceased to be in service.
  • That Jaswant Singh Gill (supra) was a judgment delivered by a two Judge Bench and the judgment in the case of Ram Lal Bhaskar (supra) is a judgment delivered by a three Judge Bench.

And Concluded that:

  • Under the circumstances and even otherwise for the reasons stated and in view of Rule 34.2 of the CDA Rules, even a retired employee who was permitted to retire on attaining the age of superannuation can be subjected to major penalty, provided the disciplinary proceedings were initiated while the employee was in service.

It is finally held about the Judgment (para 10.27) that:

  • The Court does not agree with the said decision as (i) the Rules hold the field and (ii) they are not repugnant to provisions of the Payment of Gratuity Act, 1972.
  • The order of termination was not questioned, nor the authority under the Payment of Gratuity Act, 1972, had jurisdiction to deal with it or to go into the legality of order of the disciplinary authority.
  • The validity or enforceability and vires of service Rules 34.2 and 34.3 were not questioned and the Controlling Authority had no jurisdiction to deal with Rules 34.2 and 34.3 or to pronounce upon validity thereof or of dismissal
  • The scope of the case before this Court was confined to validity of order of Controlling Authority and to questions which could have been dealt with by Controlling Authority.
  • No fetter is caused on the efficacy of the Rules by Section 4(1) and 4(6) of the Payment of Gratuity Act, 1972. The Rules need not be statutory to have efficacy as they are not repugnant to the Payment of Gratuity Act, 1972. This Court did not consider the scope of provisions of the Gratuity Act and provisions of Rule 34.2, providing legal fiction of employee deemed to be in service even after superannuation.
  • The earlier Bench had not considered the issue of the effect of the rule, providing of deeming legal fiction as if he had continued in the service notwithstanding crossing the age of superannuation;
  • When the Controlling Authority and the Appellate Authority ordered the payment of gratuity the main ground employed was that in the order passed by the departmental authority, the quantum of damage or loss caused was not indicated, and it was not the case covered by Section 4(6) (a) and 4(6)(b) hence, the issue was very limited on facts;

The jurisdictional scope in the Jaswant Singh Gill case (supra) was limited (para 10.27) because

  • a writ petition filed by the employer was dismissed.
  • However, the Intra Court Appeal was allowed, and it was opined that the Controlling Authority could not have gone into the validity of the dismissal order and forfeiture of the gratuity since it was not an appellate authority above the disciplinary authority imposing the punishment of dismissal.

Thus held:

(i) the observations made in the Judgment were traveling beyond the scope of the proceedings

(ii) therefore the same cannot be said to be binding

(iii) cannot constitute the ratio with respect to continuance of departmental inquiry after superannuation and what kind of punishment can be imposed by an employer.

(iv) The jurisdiction of authority was only to consider payment of gratuity under Section 4(6) of the Payment of Gratuity Act, 1972.

Therefore, the decision in Jaswant Singh Gill (supra) is overruled.

G) How provisions of the Section 4(6) of the Payment of Gratuity Act will be attracted (para 9)?

The Court based their conclusion on the following:

  • Once it is held that a major penalty which includes the dismissal from service can be imposed,
  • even after the employee has attained the age of superannuation and/or was permitted to retire on attaining the age of superannuation,
  • provided the disciplinary proceedings were initiated while the employee was in service,
  • subsection 6 of Section 4 of the Payment of Gratuity Act shall be attracted and the amount of gratuity can be withheld till the disciplinary proceedings are concluded.

H) Even otherwise, as Per the Rules, withholding was permissible (para 9.1):

  • Rule 34.3 of the CDA Rules permits withholding of the gratuity amount during the pendency of the disciplinary proceedings, for ordering recovering from gratuity of the whole or part of any pecuniary loss caused to the company if have been guilty of offences/misconduct as mentioned in section 4(6) of the Act or to have caused pecuniary loss to the company by misconduct or negligence, during his service.
  • Rule 34.3 for withholding of such a gratuity would be subject to the provisions of Section 7(3) and 7(3A) of the Payment of Gratuity Act, 1972 in the event of delayed payment in the case of an employee who is fully exonerated.

I) Hence the Rule 34.3 of the CDA Rules is not ultra vires the Payment of Gratuity Act (from para 9.1):

  • Rule 34.3 is in consonance with subsection 6 of Section 4 of the Payment of Gratuity Act and there is no inconsistency between subsection 6 of Section 4 of the Payment of Gratuity Act and Rule 34.3 of the CDA Rules.
  • Therefore Section 14 of the Act which has been relied upon shall not be applicable as there is no inconsistency between the two provisions.

J) It was finally held (para 9.2):

  • If a charge is proved and punishment of dismissal is given thereon, the provisions of subsection 6 of Section 4 of the Payment of Gratuity Act would be attracted and it would be within the discretion of the appellant employer to forfeit the gratuity payable to the respondent.
  • Therefore, the appellant employer has a right to withhold the payment of gratuity during the pendency of the disciplinary proceedings.

K) Second Question (para 10, 10.1, 10.5, 10.6, 10.7, 10.8, 10.9 & 10.15):

  • There is a deemed fiction created by the rule concerning the continuance of employee in service during the departmental proceeding. The legal fiction is required to be given a logical effect. (from para 10.1)
  • It depends upon the rules as to what kind of punishment can be imposed even after the employee had attained the age of superannuation. (from para 10.5)
  • The Court considered the Judgment in case of Ramesh Chandra Sharma v. Punjab National Bank & Anr. (supra) (from para 10.6)
  • An inquiry has to be taken to a logical end. (from para 10.7)
  • The judgment in case of Rajinder Lal Capoor (supra), was also considered and the Supreme Court culled out its ratio of the said judgment as:

"it was held that when disciplinary proceedings had been initiated before employee attained the age of superannuation, the rule provided for deemed legal fiction of continuance of employee 'as if he was in service', till finalization of such proceedings, the employee would be deemed to be in service although he has attained the age of superannuation."

  • The Court concluded that when an employee is deemed to be in service, the punishment as prescribed under the Rules can be imposed. (from para 10.8)
  • Based on various judgments, it was concluded that the departmental proceedings which have been pending against the appellant do not suffer from any legal infirmity and in law would be deemed to have been continuing. (from para 10.9)
  • The Court observed and held that(para 10.15):
  • the employee was deemed to be in service for the continuance of proceedings.

(ii) No merit was found in the submission that inquiry and order of dismissal passed after superannuation was illegal and without jurisdiction.

(iii) Rule 34.2 shall hold the field and would be binding, in the absence of any statutory interdiction made by any other provision regarding continuance of the inquiry and for taking it to a logical end in terms of the deemed continuation of the employee in service.

(iv)Decision of the Supreme Court in the case of Ram Lal Bhaskar (supra) is by a three Judge Bench, which is binding.

(i) It was inter alia held that (paras 10.16 and 10.17):

  • The reliance placed on the provision contained in section 4(6) of the Payment of Gratuity Act, 1972, is devoid of substance.
  • The Act is to provide for a scheme for payment of gratuity to the employees.
  • Section 4 deals with the payment of gratuity. Section 4(1) provides that 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, on his superannuation, or retirement or resignation, or his death or disablement due to accident or disease.
  • Section 4(5) provides that 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. What is ensured under the Act is the minimum amount of gratuity.
  • Section 4(6) contains a nonobstante clause to subsection 1.
  • In case of service of the employee have been terminated for wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, gratuity shall be forfeited to the extent of the damage or loss so caused as provided under section 4(6)(a).
  • Even in the absence of loss or damage, gratuity can be wholly or partially forfeited under the provisions of section 4(6)(b), in case termination of services was based upon disorderly conduct or act of violence on his part or offence involving moral turpitude committed during the course of employment.
  • Thus, it is apparent that not only damage or loss can be recovered, but gratuity can be wholly or partially withheld in case services are terminated for the reasons specified in section 4(6)(b).

L) With respect to the Act and the departmental inquiries it was held (para 10.18) that:

  • The Payment of Gratuity Act, 1972, makes no provision with respect to departmental inquiries.
  • Since no statutory provisions of the Payment of Gratuity Act, 1972 come in the way of the CDA Rules to continue the inquiry after superannuation of the employee in case it was instituted while he was in service and his deemed continuance in service;
  • thus, no fetter is caused upon operation of Rule 34.2 providing for a continuation of the inquiry and deemed continuation of the employee in service after the age of superannuation.

M) With respect to operation of Section 4(1) and 4(6) of the Act it is held (para 10.19) that:

  • The provisions of Section 4(6) of the Act of 1972 prevail over Section 4(1) as provisions of Section 4(6) contain nonobstante clause as to Section 4(1).
  • In such a case gratuity would not become payable mandatorily as provided in Section 4(1).
  • The provisions of Section 4(6) provide recovery or forfeiture where services of employee have been terminated for the reasons prescribed in Section 4(6)(a) and 4(6)(b). Section 4(6)(a) and (b) both provide for recovery of loss caused or forfeiture wholly or partially in the case of termination of services.
  • In case after superannuation of employee there cannot be any dismissal i.e., termination of services as contemplated in Section 4(6), then there can be no recovery of pecuniary loss caused by employee or forfeiture of gratuity wholly or partially as that can only be done in the event of termination of services on charges found established.
  • Such an interpretation would render continuance of inquiry otiose and would defeat the public policy and the provisions of Act of 1972.
  • The recovery of loss or forfeiture is one of the punishments which depends on exigency of termination by way of dismissal as mandated by Section 4(6).
  • To give effect to the provisions of the Act, the punishment of dismissal can be imposed in view of Rule 34.2, otherwise it would defeat the intendment of provisions contained in Section 4(6)(a) and 4(6)(b) of the Act of 1972.

N) The Court concluded with respect to Section 4(1) of the Act (paras 10.20, 10.25 and 10.27) that:

  • Section 4(1) used the expression 'termination of employment which covers cases of normal superannuation and does not cover the cases where the departmental inquiry is pending, or dismissal had been ordered.
  • Section 4(1) does not deal with a situation where departmental inquiry is instituted and continued and completed after the age of superannuation and in a case where termination of employment had not taken place on completion of the age of superannuation as there is a deemed continuation of the employment for the purpose of holding an inquiry and passing the appropriate punishment order after the conclusion of the departmental inquiry on the basis of misconduct if any found established.
  • Provisions of section 4(1) do not impinge upon the continuation of inquiry and Section 4(6) prevails on Section 4(6).
  • Neither the provisions in section 4(1) nor section 4(6) of the Payment of Gratuity Act create embargo on the departmental inquiry and its continuance after superannuation and a purposive construction has to be made of the provisions contained in section 4(1).
  • The Payment of Gratuity Act, 1972, can govern only the conditions concerning payment of gratuity.
  • It cannot control and provide with respect to an employer's right to hold a departmental inquiry after retirement, and there is no provision prescribing what kind of punishment can be imposed in the departmental inquiry if it is continued after attaining the age of superannuation.
  • The relevant rules would govern such matters.
  • Such a reading would be taken as a case of over inclusion in the Act.
  • Section 4(6) provides where particular misconduct is found established, how gratuity to be dealt with, but provisions cause no fetter on the power of an employer to impose a punishment of dismissal.
  • It makes no provision in particular with respect to the departmental inquiry but rather buttresses the power of an employer to forfeit gratuity wholly or partially or to recover loss provided in Section 4(6).
  • Thus, provisions of Rule 34.2 of the CDA Rules would prevail.
  • Even the executive instruction can hold the field in the absence of statutory rules and are equally binding and it is only when a statutory provision is otherwise, that executive instructions cannot prevail.
  • no dint is caused by the Payment of Gratuity Act, 1972, and the efficacy of Rules is not adversely affected on the proper interpretation of Section 4(1) and 4(6) of the Act of 1972.

O) The Court therefore held (para 10.21) that:

  • In view of the various decisions of this Court and considering the provisions in rules in question, it is apparent that the punishment which is prescribed under Rule 27 of the CDA Rules, minor as well as major, both can be imposed.
  • Apart from that, recovery can also be made of the pecuniary loss caused as provided in Rule 34.3 of the CDA Rules, which takes care of the provision under subsection (6) of Section 4 of the Payment of Gratuity Act, 1972.
  • The recovery is in addition to a punishment that can be imposed after attaining the age of superannuation.
  • The legal fiction provided in Rules 34.2 of the CDA Rules of deemed continuation in service has to be given full effect.

P) Distinction between "Termination" and "Dismissal"

  • It is only when the termination of the public servant's services can be shown to have been ordered by way of punishment that it can be characterised either as dismissal or removal from service. (from para 10.22 (a))
  • it is not every termination of the services of an employee that falls within the operation of Article 311, and that it is only when the order is by way of punishment that it is one of dismissal or removal under that Article. (from para 10.22 (b))
  • In case of termination of service there is a distinction as to whether it is a simpliciter termination or a punitive dismissal and this court can lift the veil and find out the real nature of termination whether it is simpliciter termination or punitive dismissal (from para 10.23)

Q) Dealing with the contrary Judgments (para 10.26):

The judgments in case of UCO Bank & Ors. v. Rajendra Shankar Shukla, (2018) 14 SCC 92 where the court had not interfered in the peculiar facts of the case and the decision in case of UCO Bank & Ors. v. Prabhakar Sadashiv Karvade (2018) 14 SCC 98 were considered and it is held that,

  • the observation that punishment of dismissal could not have been imposed after superannuation could not be said to be the ratio of the decision.
  • The said judgment was mainly for the reasons mentioned concerning delay, non-payment of subsistence allowance and the employee was deprived of meaningful participation under the departmental inquiry.
  • Though the decision of UCO Bank v. Rajinder Lal Capoor (supra) was referred to by the court, but the effect of deeming fiction of continuance of inquiry and continuance of the employee in the service as pointed out above in the various decisions and it relied upon Regulation 48 providing for pecuniary loss caused to the bank was not considered.
  • The decision in Ramesh Chandra Sharma v. Punjab National Bank & Anr. (supra) and other decisions which were binding upon the Division Bench were not considered wherein it was held that legal fiction of deemed continuation has to be taken to a logical conclusion.
  • consequently, observations made in judgments in UCO Bank & Ors. v. Rajendra Shankar Shukla (supra), was not the ratio of decision, and the opinion expressed on the strength of the said decision in UCO Bank v. Prabhakar Sadashiv Karvade (supra) suffers from infirmity and cannot prevail.

R) The Court rejected the submissions of the Employee:

  • based on various judgments noted in the paras 10.28 (a) to (e) and held that

in view of the rule in question,

which provides for a legal fiction with respect to continuance in service, and

it has to be given full effect. And

  • A mere general observation was made that services cannot be terminated after the age of superannuation, which is notthe ratio of the judgments.

S) The Court observed that (para 10.29)

  • A mere general observation made cannot come in the way of a specific rule and decision cannot be said to be of universal application and cannot be said to be binding in a case the rules provide legal fiction and continuance of employee in the service as if he had continued in service.

T) It is also held that in view of the various decisions: (para 10.30)

  • Looking to the Rules, inquiry can be held in the same manner as if the employee had continued in service and the appropriate major and minor punishment commensurate to guilt can be imposed including dismissal as provided in the Rules and
  • in case pecuniary loss had been caused that can be recovered. Gratuity can be forfeited wholly or partially.

U) The Court finally observed that: (para10.31)

  • Several service benefits would depend upon the outcome of the inquiry, such as concerning the period during which inquiry remained pending.
  • It would be against the public policy to permit an employee to go scot-free after collecting various service benefits to which he would not be entitled, and the event of superannuation cannot come to his rescue and would amount to condonation of guilt.
  • Because of the legal fiction provided under the rules, it can be completed in the same manner as if the employee had remained in service after superannuation, and appropriate punishment can be imposed.
  • The provisions of the Act do not come in the way of departmental inquiry and as provided in Section 4(6) and the Rules in case of dismissal gratuity can be forfeited wholly or partially, and the loss can also be recovered.
  • An inquiry can be continued as provided under the relevant service rules.
  • There is noting in the Payment of Gratuity Act, 1972 that inquiry shall come to an end as soon as the employee attains the age of superannuation.
  • The Act does not deal with the matter of disciplinary inquiry,
  • Act contemplates recovery from or forfeiture of gratuity wholly or partially as per misconduct committed and
  • Act does not deal with punishments to be imposed and does not supersede the Rules
  • The mandate of Section 4(6) of recovery of loss provided under Section 4(6)(a) and forfeiture of gratuity wholly or partially under Section 4(6)(b) is furthered by the Rules.
  • If there cannot be any dismissal after superannuation, intendment of the provisions of Section 4(6) would be defeated.
  • The provisions of section 4(1) and 4(6) of Payment of Gratuity Act, 1972 have to be given purposive interpretation, and they in no way interdict holding of the departmental inquiry and punishment to be imposed is not the subject matter dealt with under the Act.

V) It finally was held that considering the provisions of Rules (para 10.32):

  • the inquiry can be continued given the deeming fiction in the same manner as if the employee had continued in service and
  • appropriate punishment, including that of dismissal can be imposed
  • apart from the forfeiture of the gratuity wholly or partially including the recovery of the pecuniary loss as the case may be.

W) The Court concluded that (para 11):

the employer has a right to withhold the gratuity during the pendency of the disciplinary proceedings, and

  • the disciplinary authority has powers to impose the penalty of dismissal/major penalty upon the respondent even after his attaining the age of superannuation, as the disciplinary proceedings were initiated while the employee was in service.

Views are personal

(Author is a Practicing Lawyer)

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