PNB Regulations | Bank Can't Withhold PF & Gratuity Without Proving Actual Loss Caused By Employee : Supreme Court

The Supreme Court recently ruled in favor of an employee(appellant), directing the Punjab National Bank (PNB) to release the provident fund (PF) and gratuity due to him who was compulsorily retired. The court held that as per the Punjab National Bank (Officers’) Service Regulations, 1979(1979 Regulations), the bank could withhold the PF amount only when any loss is proved to be caused to it by an employee’s act. In this case, the bank not only failed to prove the alleged loss but also denied a fair hearing to him.It observed, “The Single Judge was right in observing that the Board of Directors has not afforded an opportunity to the appellant on the issue of causing loss or damage to the Bank, prior to the passing of the resolution of appropriation of the contribution of the Bank from the provident fund account of the appellant.”On the issue of payment of gratuity, the court considered the provisions of the 1979 Regulations and provisions of the Gratuity Act and further relied on the judgment of YK Singhla Punjab National Bank (2013) 3 SCC 472 which held that the Gratuity Act prevails over all regulations. Furthermore, the court pointed out that the bank's circular only classified dismissal/removal for denial of gratuity and not the penalty for compulsory retirement.The bench opined “The explanation as given in clause 14(1)(a) of the said Circular clarifies that in case of termination after at least 10 years of service in the Bank, if such termination is not by way of punishment as dismissal or removal, the gratuity may be paid. In the said explanation, the denial of gratuity to an employee, who is inflicted with the major penalty of compulsory retirement, has not been included. Therefore, the gratuity is payable to the appellant under the 1979 Regulations in terms of the explanation under the said Circular.”The Supreme Court bench comprising Justices JK Maheshwari and Justice K.V. Vishwanathan was hearing an appeal against the division bench judgment of the Calcutta High Court which denied PF and gratuity to the appellant who was compulsorily retired from the PNB.In the present case, the appellant was compulsorily retired as Senior Manager of the Punjab National Bank after he was found guilty by the disciplinary authority in 2010. As a result, he was denied leave encashment, employer’s contribution of provident fund, gratuity, and pension. He filed a writ petition before the HC claiming only the terminal benefits accruing to him but did not challenge his compulsory retirement. Meanwhile, the Board of Directors passed a resolution in 2010 denying his employer’s contribution to the provident fund. The Single Judge HC in 2012 directed the bank to pay PF, gratuity, and leave encashment within 8 weeks. No pension was granted since he was not an inservice candidate when the scheme for shifting to the pension regime became operational. In the appeal, the division bench set aside the grant of provident fund (Bank’s contribution) and gratuity on the pretext that by an act of the appellant, the loss has been caused to the Bank.Aggrieved by the same, the appellant approached the Supreme Court.The only issue before the court was regarding the denial of the employer’s contribution of Provident Fund and nonpayment of gratuity to the appellant because of the order of compulsory retirement.Bank failed to prove any loss and denied fair hearing to employee, must pay its share of PFThe Court began by referring to Chapter IX of the 1979 Regulations, which outlined the terminal benefits for bank employees. By analyzing Punjab National Bank Employees’ Provident Fund Trust Rules(P.F. Trust Rules) 13 and 14, the court found that the bank retained the first lien on its contributions made to the individual accounts of its members, to recover any losses incurred at any time.Although it was alleged that there were irregularities in granting loans by the appellant, the court observed that the charge sheet did not accuse the appellant of causing any loss to the bank, nor did it quantify the alleged loss.The court found that the resolution of the Board of Directors was passed unilaterally without allowing the appellant to respond or explain. Therefore, the court ruled that the findings recorded by the Single Judge about payment of the Bank’s contribution to the provident fund was equitable, just and liable to be upheld, setting aside the findings of the Division BenchPenalty of compulsory retirement not a ground for denial of gratuity, it’s only in the case of dismissal/removalNext, on the issue of payment of gratuity, the court began by examining Regulation 46 of Chapter IX of the 1979 Regulations, which deals with gratuity for bank employees. But it found that “the said Regulations were silent on the contingency as to what would happen if an officer is met with a penalty of compulsory retirement.” To resolve this matter, the court delved into Section 4(6) of the Payment of Gratuity Act,1972 (Gratuity Act), which outlined...

PNB Regulations | Bank Can't Withhold PF & Gratuity Without Proving Actual Loss Caused By Employee : Supreme Court

Suraj Parmar

Tags