IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 14.2.2011 CORAM: THE HONOURABLE MR.JUSTICE P.JYOTHIMANI W.P.No.16247 of 2007 Binny Limited 65, Armenian Street Chennai – 600 001 rep. by its General Manager (Pers. & HRD) .. Petitioner Vs. 1. The Assistant Commissioner of Labour (Authority under the Payment of Gratuity Act, 1972), Office of the Deputy Commissioner of Labour-I DMS Compound, Teynampet Chennai – 600 006. 2. V.Vajjiravelu 3. The Tahsildar Fort–Tondiarpet Circle Chennai – 600 003. .. Respondents PRAYER: Petition under Article 226 of the Constitution of India for issue of a writ of Certiorarified Mandamus to call for the records of respondents 1 and 3 and quash the order of the first respondent dated 17.2.2005 in PG Case No.255/04 and quash the consequential recovery notice of the third respondent dated 19.4.2007 in proceedings No.A4/5247/06 and direct the second respondent to handover the vacant possession of the quarters namely House No.6, Block No.'O', Venkateshwara Village, Chennai – 600 012. For Petitioner : Mr.S.Raveendran for M/s.T.S.Gopalan & Co. For Respondents: Mr.R.Murali Government Advocate for respondents 1 and 3 Mr.S.Vijay Anand for 2nd respondent https://hcservices.ecourts.gov.in/hcservices/ ORDER The writ petition is directed against the order of the first respondent/Authority under the Payment of Gratuity Act, 1972 dated 17.2.2005 and the consequential recovery notice issued by the third respondent dated 19.4.2007 and for a direction against the second respondent to hand-over vacant possession of the quarters, namely House No.6, Block No.'O', Venkateshwara Village, Chennai – 600 012. 2.1. The petitioner, which is a company registered under the provisions of the Companies Act, is stated to have ceased to function from 15.6.1996. The second respondent was working in the petitioner/company and he was occupying quarters, viz., House No.6, Block No.'O', Venkateshwara Village, Chennai – 600 012, pursuant to the deed of licence dated 9.2.1981. As per the licence, the second respondent should deliver vacant possession of the house to the petitioner within the time prescribed in the notice of termination of licence. 2.2. The second respondent has reached the age of superannuation on 13.9.2003. Even prior to that, on 16.8.2003, the petitioner issued notice to the second respondent revoking the licence in respect of the quarters and directed the second respondent to deliver vacant possession of the quarters within four weeks from 1.10.2003. However, even after 01.11.2003, the second respondent continued to be in unauthorised occupation of the quarters. 2.3. It is stated that the second respondent has filed a PG Case before the first respondent claiming an amount of ` 71,747/- as gratuity due to him. That was objected to by the petitioner stating that unless the second respondent vacates the quarters, he would have no right to claim gratuity. 2.4. The petitioner issued notice on 22.1.2005 to the second respondent stating that as per the order of this Court in W.P.No.14856 of 2003, the workmen residing in the quarters should vacate on or before 2.11.2003 and since the second respondent is in unauthorised occupation of the quarters, he would be liable to pay liquidated damages of ` 25,000/- and ` 2,000/- per month as damages from January, 2005. It was also informed to the second respondent that the amount will be adjusted from the legal dues to which he would be entitled. 2.5. By order dated 17.2.2005, the first respondent has rejected the case of the petitioner and directed that the second respondent should be paid the gratuity amount of ` 71,747/- along with interest at the rate of 10% per annum. Based on the said order, the third respondent has issued recovery notice claiming recovery of ` 71,747/-. The said orders are challenged on the following grounds: https://hcservices.ecourts.gov.in/hcservices/ (i) that the impugned order of the first respondent is illegal and perverse; (ii) that the first respondent ought to have considered that second respondent by unlawfully squatting in the quarters even after retirement from service cannot claim benefit of gratuity; (iii) that the impugned order has been passed by the first respondent in a mechanical manner; and (iv) that the first respondent has committed an error of law in applying the provisions of the Payment of Gratuity Act, 1972 (for brevity, "the Act") in a pedantic manner. 3.1. In the affidavit filed by the second respondent in support of his petition to vacate the order of stay granted by this Court, it is his case that as against the order of the first respondent, the petitioner has got a right of appeal under Section 7(7) of the Act. 3.2. It is stated that the petitioner has filed this writ petition after waiting for two years from the date of the order of the first respondent, when the third respondent has issued notice to recover the amount as per the order of the first respondent and therefore, the petitioner has approached this Court belatedly. 3.3. It is also stated that the mere fact that the second respondent is in occupation of the quarters given by the petitioner while he was in employment under the petitioner/company, does not take away his right to get gratuity, which is payable and accrued to him in law. 4.1. Mr.S.Raveendran, learned counsel for the petitioner would submit that while in law the payment of gratuity is a statutory amount liable to be paid, inasmuch as under the licence granted to the second respondent the petitioner/company has clearly retained its right of deducting the damages or amount due for continuing occupation of the quarters after the termination of the licence, the petitioner should be entitled to recover the amount by way of deduction from the lawful amount due to the second respondent and the first respondent ought to have taken note of the same. He would add that for the purpose of conferring statutory benefit to the second respondent, the valuable right of the petitioner cannot be taken away and the second respondent shall not be allowed to be an usurper of a property to which he is not entitled. 4.2. It is his submission that the second respondent cannot be expected to get two benefits, viz., the gratuity as well as the usurping of the property by way of unauthorised retention of the accommodation granted to him. He would rely upon the judgment of the Calcutta High Court in Hindustan Cables Ltd., Burdwan v. The https://hcservices.ecourts.gov.in/hcservices/ Appellate Authority under the Payment of Gratuity Act, 1972 and others, 2005 (3) LLN 242. 4.3. He would also submit that even if the amount of gratuity can be held to be an amount accrued to the employee, this Court while exercising equitable jurisdiction under Article 226 of the Constitution of India, must balance the issue to see that the employee should not be permitted to unauthorisedly occupy the quarters by way of retention. In this regard, he would rely upon the judgment of the Supreme Court in Secretary, Oil and Natural Gas Commission Ltd. and another v. V.U.Warrier, 2005 (3) LLN 74. 5.1. On the other hand, it is the contention of Mr.S.Vijay Anand, learned counsel appearing for the second respondent that the petitioner/ company itself has entered a memorandum of understanding with the Madras Labour Union and B&C Mills Staff Union for the purpose of settlement of workers issues and one such understanding was that the individual plots measuring 500 sq.ft. each can be allotted by way of drawal and the petitioner/company, which has been closed, has also passed a resolution in this regard authorising the Company Secretary of the petitioner/company to execute sale deeds in favour of the members as per the memorandum of understanding and in respect of at least one person, Arumugam, such sale deed has been executed. Therefore, according to him, when the petitioner/company itself is taking efforts to allot the plots, it cannot be said that the second respondent is an unauthorised occupant. 5.2. It is his submission that the amount of gratuity payable to him is a statutory amount, which cannot be withheld under any circumstances. He would rely upon the judgments in A.Padmanabhan v. Joint Commissioner of Labour, [2009] 2 MLJ 560, Neyveli Lignite Corporation Limited v. O.Raju and others, 2010 [1] CTC 595 and an unreported judgment of the Calcutta High Court in Steel Authority of India and another v. Taraknath Sengupta and others, (order dated 3.4.2009 in W.P.No.22336(W) of 2008) to substantiate his contention. 6. Admittedly, the petitioner/company has ceased to function from 15.6.1996. As far as the contention of the learned counsel for the second respondent that there has been a memorandum of understanding entered, a reference to the communication of the petitioner/company addressed to one allottee shows that there has been a memorandum of understanding entered between the management and the Madras Dock Labour Union and B&C Mills Staff Union with regard to the settlement of issues pertaining to workmen. In respect of that there has been some decision arrived at. One such resolution appears to be "draw layout of the Carnatic Mill Vilalge with 249 individual plots of 500 sq.ft. each, serially numbered, and provide a copy of the layout plan to the unions". It is not the case of the second respondent that he belongs to any of the unions. In the absence of any such averment that he belongs to a particular union, he has no https://hcservices.ecourts.gov.in/hcservices/ right to claim the benefit of the memorandum of understanding for the purpose of remaining in occupation even after the licence is terminated. 7. Indisputably, the petitioner/company has terminated the licence granted to the second respondent in the year 2003 itself and the claim of the petitioner is that from that date onwards the petitioner/company is entitled to damages for use and occupation and in that regard, the amount has been claimed by the petitioner, which, according to the petitioner/ company, it is entitled to deduct from the gratuity amount payable to the second respondent. 8. In the impugned order dated 17.2.2005 passed by the first respondent under Section 7 of the Act, the petitioner was directed to pay the gratuity amount of ` 71,747/- along with interest at the rate of 10% per annum to the second respondent. This order which has been passed under Section 7(4) of the Act is appealable to the Government under Section 7(7) of the Act, which is as follows: "Section 7: Determination of the amount of gratuity: (1) to (6) .... (7) Any person aggrieved by an order under sub-section (4), may, within sixty days from the date of the receipt of the order, prefer an appeal to the appropriate Government or such other authority as may be specified by the appropriate Government in this behalf: Provided that the appropriate Government or the appellate authority, as the case may be, may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of sixty days, extend the said period by a further period of sixty days. Provided further that no appeal by an employer shall be admitted unless at the time of preferring the appeal, the appellant either produces a certificate of the controlling authority to the effect that the appellant has deposited with him an amount equal to the amount of gratuity required to be deposited under sub-section (4), or deposits with the appellate authority such amount." 9. The period of limitation for filing appeal to the Government has been stipulated as 60 days, which can be extended by another 60 days by the Government and for filing of an appeal, a certificate must be obtained by the management to the effect that the gratuity amount has been deposited. https://hcservices.ecourts.gov.in/hcservices/ 10. The impugned order having been passed by the first respondent under Section 7(4) of the Act, when there is a statutory appeal available against the said order, the writ petition cannot be ordinarily entertained. But, in the present case, the writ petition was admitted in the year 2007 and there has been an order of interim stay on condition that the amount should be deposited with the authority. Since the amount was deposited, the interim order was also made absolute on 23.12.2008 and the second respondent was permitted to withdraw 50% of the amount deposited and the remaining amount was directed to be deposited in a nationalised bank and the said order continues as on date. 11. The question that has to be considered at this stage is whether it will be proper for this Court to drive the petitioner to file an appeal, especially when the petitioner/company has not disputed its obligation of payment of gratuity, but has only raised a point as to whether the second respondent can be shown indulgence when the quarters allotted to him by virtue of his employment under the petitioner/company has not been handed over to the company, when the company itself has been liquidated. In other words, the question for consideration is as to whether the second respondent can get the benefit conferred under the Act and also at the same time get the benefit of quarters, which he has got by way of licence only due to the employment, and whether in such circumstances, the order of this Court while exercising its jurisdiction under Article 226 of the Constitution of India, which is equitable in nature, can be extended to help the second respondent to continue to be an usurper of the quarters. 12.1. In this regard, it is relevant to refer to the judgment of the Supreme Court in Secretary, Oil and Natural Gas Commission Ltd. and another v. V.U.Warrier, 2005 (3) LLN 74, wherein the Supreme Court while deciding about the Oil and Natural Gas Commission (Death, Retirement and Terminal Gratuity) Regulations, 1969 in the light of the Payment of Gratuity Act, 1972, has explained the extent of the equitable jurisdiction of this Court under Article 226 of the Constitution of India. While holding that under Article 226 of the Constitution of India the powers conferred on this Court are discretionary and there can be no limit, it was held that it must be exercised on the recognized lines and not in an arbitrary manner. The Supreme Court has held as follows: "31. The matter can be considered from another angle also. It is well-settled that the jurisdiction of the High Court under Article 226 of the Constitution is equitable and discretionary. The power under that Article can be exercised by the High Court "to reach injustice wherever it is found". Before more than fifty years, in G.Veerappa Pillai, Proprietor, Sathi Vilas Bus https://hcservices.ecourts.gov.in/hcservices/ Service, Porayar, Tanjore District, Madras v. Raman & Raman Ltd., Kumbakonam, Tanjore District and Ors., AIR 1952 SC 192, the Constitution Bench of this Court speaking through Chandrasekhara Aiyer, J., observed that the writs referred to in Article 226 of the Constitution are obviously intended to enable the High Court to issue them "in grave cases where the subordinate tribunals or bodies or officers act wholly without jurisdiction, or in excess of it, or in violation of the principles of natural justice, or refuse to exercise a jurisdiction vested in them, or there is an error apparent on the face of the record, and such act, omission, error, or excess has resulted in manifest injustice." 32. Similarly, in the leading case of Sangram Singh v. Election Commissioner, Kotah and Anr. [1955 2 SCR 1], dealing with the ambit and scope of powers of High Courts under Article 226 of the Constitution, Bose, J., stated-- "That, however, is not to say that the jurisdiction will be exercised whenever there is an error of law. The High Courts do not, and should not, act as Courts of appeal under Article 226. Their powers are purely discretionary and though no limits can be placed upon that discretion it must be exercised along recognized lines and not arbitrarily; and one of the limitations imposed by the Courts on themselves is that they will not exercise jurisdiction in this class of cases unless substantial injustice has ensued, or is likely to ensue. They will not allow themselves to be turned into Courts of appeal or revision to set right mere errors of law which do not occasion injustice in a broad and general sense, for, though no legislature can impose limitations on these constitutional powers it is a sound exercise of discretion to bear in mind the policy of the legislature to have disputes about these special rights decided as speedily as may be. Therefore, writ petitions should not be lightly entertained in this class of case." 33. The above principle has been reiterated and followed by this Court in several subsequent cases. https://hcservices.ecourts.gov.in/hcservices/ 34. As already adverted to by us hereinabove, the facts of the present case did not deserve interference by the High Court in exercise of equitable jurisdiction under Article 226 of the Constitution. The respondent- petitioner before the High Court-, was a responsible officer holding the post of Additional Director (Finance & Accounts). He was, thus, "gold collar" employee of the Commission. In the capacity of employee of the Commission, he was allotted a residential quarter. He reached the age of superannuation and retired after office hours of February 28, 1990. He was, therefore, required to vacate the quarter allotted to him by the Commission. The Commission, as per its policy, granted four months' time to vacate. He, however, failed to do so. His prayer for continuing to occupy the quarter was duly considered and rejected on relevant and germane grounds. The residential accommodation constructed by him by taking loan at the concessional rate from the Commission was leased to Commission, but the possession of that quarter was restored to him taking into account the fact that he had retired and now he will have to vacate the quarter allotted to him by the Commission. In spite of that he continued to occupy the quarter ignoring the warning by the Commission that if he would not vacate latest by June 30, 1990, penal rent would be charged from him. In our judgment, considering all these facts, the High Court was wholly unjustified in exercising extraordinary and equitable jurisdiction in favour of the petitioner - respondent herein - and on that ground also, the order passed by the High Court deserves to be set aside." 12.2. In that case, while referring to Regulation 5 of the Regulations, as stated above, which enables the appointing authority or any other authority empowered by the Oil and Natural Gas Commission to have the right to make recovery of Commission's dues before the payment of the death-cum-retirement gratuity due in respect of an officer even without obtaining his consent or without obtaining the consent of the members of his family in the case of the deceased officer, it was held that in the light of the said Regulation, there is no doubt that the Commission has right to effect recovery of its dues from any officer without his consent from the gratuity. That was also the case where the residential quarters was not vacated by an employee and it was vacated only after the eviction proceedings were initiated by the Commission and the Commission intended to deduct penal charges for unauthorised occupation from the gratuity payable . It was approving the said conduct of the Commission and by setting aside the judgment of the High Court, the Supreme Court has rendered the said judgment. The Supreme Court has https://hcservices.ecourts.gov.in/hcservices/ also held that while gratuity cannot be held to be a matter of boon, it is a statutory right and if the workman commits a misconduct causing financial loss to the employer, the employer would under the general law have a right of action against the employee for the loss caused by making a provision for withholding payment of gratuity. 13.1. The said view was also magnified by the Calcutta High court in Hindustan Cables Ltd., Burdwan v. The Appellate Authority under the Payment of Gratuity Act, 1972 and others, 2005 (3) LLN 242. In the said case, when an employee after retirement under the voluntary retirement scheme and having received the benefits under the scheme, failed to vacate the quarters and when a question arose as to whether the gratuity can be withheld in respect of the penal rent, the High Court has framed the following question for consideration: "The question before this Court is that as to whether such amount can be released by the authority without vacating the quarter which has been illegally withheld by the concerned employee or not, as against the claim of the respondent No. 3-applicant/employee in respect of the gratuity along with interest." 13.2. The Calcutta High Court has referred to the judgment of the Supreme Court in Wazir Chand v. Union of India and others, 2001 (3) LLN 822, wherein it was held that an employee who is unauthorisedly occupying the government quarters is liable to pay penal rent and such amount is adjustable against the death-cum- retirement dues, and held as follows: "3. ..... Admittedly, the gratuity amount has been deposited by the company with the appropriate authority or the appellate authority under the Act wherefrom the same will be recovered by the employee. In the judgment reported in 2001 (3) LLN 822, Wazir Chand v. Union of India and Ors., the Supreme Court categorically viewed that an employee who unauthorisedly occupied the Government quarters, is liable to pay the penal rent in accordance with rules, and therefore, there is no illegality in those dues being adjusted against the Death-cum-Retirement dues of the appellant. Therefore, there is no illegality in the impugned order which requires the interference by the Supreme Court. The gravity of the situation is to be understood on the basis of such judgment. No question of voluntary scheme available there but even then on the basis of superannuation the Supreme Court was pleased to say that there is no illegality of recovery of penal rent in accordance with rules to get it adjusted with the Death- cum-Retirement Rules of the employees. There should be a https://hcservices.ecourts.gov.in/hcservices/ balance in between getting the superannuation benefits by the employees and getting release of the quarters in favour of the employer. Instant case stands on a much better position. In the judgment reported in 1998 Lab IC 2993, Union of India and Anr. v. K. Balkrishna Nambiar, it was held by a three-Judges Bench of the Supreme Court that the payment of Death-cum-Retirement Gratuity to an employee can be withheld for unauthorised retention of the Government accommodation after his retirement. Here, it was categorically held that the interest was not payable along with the gratuity amount in respect of the period when the employee unauthorisedly occupied the Government accommodation. In the judgment reported in 2002 (1) LLN 456, Dibakar Mahanty v. Steel Authority of India Ltd. and Ors., the same ratio was followed by the Orissa High Court as regards withholding the payment of gratuity and other dues payable after retirement till he remains in unauthorised occupation of the quarters allotted to him by the management when he was in service." 13.3. The Calcutta High Court has ultimately narrated the entire case law on the subject and held as follows: "4. ..... In this circumstances, the respondent No. 3- applicant/employee is admittedly a defaulter. Such employee cannot get any equity only on the ground that the gratuity cannot be withheld for any reason of withholding quarters. Here the employee wants to get double benefit when one is lawful and other is unlawful. In the judgment reported in [1994] 6 SCC 589, Rekhi Kapur v. Director of Inspection (Painting and Publication) Income-tax and Anr., the Supreme Court held that the right of the retired employee to get gratuity cannot be depended for overstaying of the Government accommodation. Again such case has arisen out of the terminal benefits as per the statute. Moreover, the ratio of the Supreme Court judgments in the years 1994 and 1995 cannot be accepted at this stage. In the judgment of our High Court reported in 2004 (1) CLJ (Cal) 191, Atul