Payment Of Gratuity Act Overrides Other State Pension Rules: Bombay HC

Bombay High Court: A single judge bench of justice MS Jawalkar held that the Payment of Gratuity Act, 1972 ('Act'), prevails over the Maharashtra Civil Services (Pension) Rules, 1982 ('MCS Rules'), unless a specific exemption is provided under Section 5 of the Act. The court clarified that the mere pendency of proceedings or any minor punishment under the latter, cannot justify withholding gratuity under Section 4(6) of the Act. Background Ganesh Nawale had retired as a Zilla Parishad employee, on 31 Jan 2020. His retirement benefits became due thereafter; however, the Zilla Parishad withheld all payment, citing some prior disciplinary proceedings. Ganesh Nawale had earlier faced a departmental enquiry, that had already concluded in 2014. The enquiry held that he had used inappropriate language towards his seniors. Thus, the CEO of the Zilla Parishad passed an order that reduced Nawale's pay scale. Meanwhile, Nawale had filed an application before the Authority under the Act, seeking full gratuity with interest. He also received a favourable order from the Controlling Authority, that directed the payment of Rs. 18,33,300 as gratuity. Aggrieved, the Zilla Parishad filed a writ petition challenging this order. Arguments The Zilla Parishad argued that Nawale was involved in over 6 legal proceedings, departmental enquiries, and suspensions. They argued that the Act was not applicable to him at all, as he was an employee of the Zilla Parishad, and gratuity should be determined as per the MCS Rules. Citing a Government Resolution dated 01-03-2019, they argued that the gratuity cap for Zilla Parishad employees was only Rs. 14 Lakhs. Further, they submitted that Rule 130, MCS Rules, permitted the withholding of gratuity if any inquiries or proceedings were pending. Thus, since the departmental proceedings were pending, the Zilla Parishad argued that Nawale's claim should be denied. On the other hand, Ganesh Nawale argued that as per Section 5 and 14 of the Act, the Act overrides all other enactments. Section 5 allows the appropriate govt to exempt any establishment from the Act if it provides better gratuity benefits, and Section 14 allows the Act to override any inconsistent provision in other laws. He argued that even if his pension were governed by the MCS Rules, his gratuity must follow the Payment of Gratuity Act, unless a specific exemption was granted under Section 5. Nawale submitted that his employer had no grounds to withhold gratuity, as the inquiry was over and no termination or major misconduct was established under the Act. Court's Reasoning Firstly, referring to Suresh Laxman Tikhile v. Municipal Council, (Writ Petition No. 4810/2024), the court held that all municipal employees who are not explicitly exempted under Section 5 of the Gratuity Act, are governed by the Act for their gratuity benefits. The court clarified that unless an establishment has been explicitly exempted through a govt notification under Section 5 of the Act, the Act continues to apply regardless of the MCS Rules. Secondly, the court reiterated that gratuity is a statutory right, and the Payment of Gratuity Act is a beneficial legislation. The court clarified that Section 4(5) provides an employee with the right to better terms under a contract, but does not dilute any statutory entitlement under the Act itself. Since the Zilla parishad had not received any exemption from the appropriate govt, the court held that it could not rely on the MCS Rules to deny gratuity benefits to an employee. Thirdly, the court noted that the only charges proved against Nawale were that of arrogance and filthy language, and no other charges were established. The court explained that Section 4(6) allows the forfeiture of gratuity if there is termination due to misconduct, causing damage, riotous behaviour, etc. Noting that the punishment awarded to Nawale in this case was not dismissal, termination, or misconduct, the court held that withholding gratuity under Section 4(6) is not justified. Fourthly, the court noted that there was no financial loss, damage to property, or any violence; neither was there any offence involving moral turpitude. Thus, the court held that the criteria for invoking Section 4(6) itself was not met. Thus, the court dismissed the writ petition and directed the Zilla Parishad to release the gratuity due to the employee. Decided on: 09-06-2025 Neutral Citation: 2025:BHC-NAG:5311 Counsel for the Petitioner: Mr. Milind Rathi Counsel for the Respondent: Mr. C. D. GawandeClick Here To Read/Download The Order

Payment Of Gratuity Act Overrides Other State Pension Rules: Bombay HC

Pranav Kumar

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