IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 18.11.2010 CORAM: THE HON'BLE MRS.JUSTICE CHITRA VENKATARAMAN W.P.No.10930 of 2006 Shri V.Gopal ...Petitioner Vs. 1.The Regional Labour Commissioner (Central) Sastri Bhavan, Chennai. 2.M/s Wyeath Ltd., RBC Mahindra Towers 4th Floor, "A" Wing, Dr.G.M.Bhosale Road, Worli, Mumbai. ...Respondents Petition filed under Article 226 of the Constitution of India praying to issue a writ of Certiorarified Mandamus calling for the records from the first respondent peraining to the impugned order No.G.A.7 of 2004 dated 23.9.2005 ans quash the same and consequently direct the 2nd respondent to pay the gruatuity amount of sum of Rs.1,62,564/- along with interest at the rate of 10% from the date on which the gratuity becomes payable to the petitioner. For Petitioner : Mr.V.Lakshminarayanan for Mr.P.Vijendran For Respondent No.1: Mr.V.Bharathidasan Senior Central Govt. Standing Counsel For Respondent No.2: Mr.Sanjay Mohan for M/s Ramasubramaniam Associates O R D E R The writ petitioner joined the service of the second respondent as early as 24.02.1977 and his services were terminated on 31.7.1998. After termination, the petitioner filed a petition before the Controlling Authority under the Payment of Gratuity Act, 1972 and Assistant Labour Commissioner dated 25.07.2001. On 11.5.2004, an order was passed in the gratuity application, directing the Management to pay the gratuity amount to the tune of Rs.1,62,564/- along with interest @ 10% per annum on the gratuity amount payable. As against this, the Management preferred an appeal before the Labour Commissioner in P.G.Appeal No.7/2004. An order was passed by the https://hcservices.ecourts.gov.in/hcservices/ Labour Commissioner on 23.09.2005, holding that once the order of dismissal became final, the reasonable presumption is that the petitioner has no valid ground to challenge the said decision of the Management. Hence the order of the Controlling Authority was liable to be set aside. The Labour Commissioner pointed out that if the petitioner had not caused any damage or loss to the employer company, nothing would have prevented him from challenging the order under the Shops and Establishment Act/Industrial Disputes Act. So holding, the said authority held that the petitioner may challenge the decision of the authority to substantiate his cause as regards the correctness of the dismissal from service and hence the appeal was allowed. 2. It is seen from the affidavit that the petitioner's services were terminated without holding an enquiry and without giving an opportunity to defend himself as regards the allegations made against him and the termination order was passed on 31.07.1998. Thereupon, the petitioner sent a lawyer's notice on 25.08.1998 for damages and other legal dues, for which, there was no reply from the Management. On 26.11.1998, the petitioner sent a letter to the second respondent along with Form 1 and requested the Management to settle the gratuity. On 16.8.2000, the petitioner received a letter from the President-Finance, proposing to forfeit the entire gratuity amount which was computed by them at a sum of Rs.1,62,564.14. Aggrieved by the same, the petitioner filed an application under Form "N" of the Payment of Gratuity Act, 1972, before the Controlling Authority. 3. Learned counsel appearing for the petitioner placing reliance on Section 4(6) of the Payment of Gratuity Act, which contemplates that the Management has to work out the amount payable in terms of Sub-Clause (a) and sub-Clause (b). Section 4 of the Payment of Gratuity Act provides for computation of the gratuity payable. Sub Section (6) of Section 4 of the Act deals with the right of the employer to invoke the forfeiture provision in the event of terminating the employee's services for any act of negligence or wilful omission, causing damage or loss or destruction of the employer's property to the extent of the damage or loss so caused. Section 7 of the Payment of Gratuity Act deals with determination of the amount of gratuity payable. Section 7 of the Payment of Gratuity Act states that a person eligible for payment of gratuity has to send a written application to the employer for payment of gratuity. Sub Section 4(c) of Section 7 of the Act states that after due inquiry and after giving opportunity to the parties, the controlling authority shall determine the matter or matters in dispute and ultimately to pass an order as to the extent of liability of the employer to pay the amount of gratuity. As far as the present case is concerned, the petitioner submits that without complying with the said condition, the order had been passed denying the benefits against the Service Rules. https://hcservices.ecourts.gov.in/hcservices/ 4. Learned counsel for the petitioner placed reliance on the decision of the Apex Court in Jaswant Singh Gill Vs.. Bharat Coking Coal Ltd., reported in CDJ 2006 SC 969, wherein, the Apex Court considered Section 4(6) and Section 7 of Payment of Gratuity Act and under the regulations of the company as regards the payment of gratuity. The Apex Court pointed out that the power to withhold or cause forfeiture as per Rule 34.3 of the Regulations is subject to the provisions of the Payment of Gratuity Act. Gratuity is payable as soon as the employee retires. The only condition therefor is rendition of five years of continuous service. In paragraph 13 of the Judgment, the Apex Court pointed out that the statutory right of an employee to receive gratuity cannot be impaired by reason of a regulation which does not have the force of a statute. The said decision further pointed out that quantification has to be done in terms of Section 4 of the Act. If the employer invokes the forfeiture clause as per Sub-Section (6) of Section 4 of the Act and thereby, the accrued right of the employee is sought to be taken away by the employer therein, the conditions as laid down under Section 4(6) of the Act have to be fulfilled. 5. Applying the said decision to the facts of this case, a perusal of the dismissal order shows that the petitioner was alleged to have colluded with another colleague and submitted bogus orders in the name of certain stockists and diverted the goods to persons of his choice, thereby causing loss to the employer. It is stated that the petitioner had diverted the goods to various other persons. In so holding, taking note of the said misconduct of the petitioner, the Management decided to dismiss the petitioner from the service of the company. The dismissal order dated 31.07.1998 with immediate effect, explained the reasons for not conducting any enquiry before passing the order of dismissal and pointed out that the company reserved its right to support this order of dismissal with such oral and documentary evidence before any appropriate forum as necessitated. The termination order stood as it is and unchallenged. In the background of the said fact that when the petitioner made an application for payment of gratuity on 25.07.2001, the controlling authority, in its order dated 11.04.2004, held that the dismissal order passed without any reasonable opportunity of being heard was in violation of the principles of natural justice. The action of the second respondent in wholly forfeiting the amount of gratuity payable to the petitioner was therefore not in conformity with law. 6. A reading of the order of the first respondent shows that the second respondent took a specific contention that the Labour Court/Controlling Authority should have taken the dismissal order as it is or he should have gone into the facts as regards the termination of services of the employee and by reserving the right of the employer to establish the misconduct by letting in evidence before the appropriate forum. Accepting the plea of the second respondent, the first respondent herein upheld the view of the second https://hcservices.ecourts.gov.in/hcservices/ respondent that the Controlling Authority had passed the order in question mechanically on the presumption of non-compliance of the principles of natural justice by the second respondent. The first respondent, consequently, set aside the order of the Controlling Authority, thereby allowed the appeal by the second respondent, ordering forfeiture of the gratuity amount payable to the petitioner herein. I do not think, the course adopted by the first respondent could be upheld by this Court, since the order of the second respondent as well as the first respondent, failed to take note of Section 4(6) of the Payment of Gratuity Act that before ordering forfeiture, it is but necessary that the employer must ascertain the loss suffered by the Management and to the extent of the loss suffered alone that the forfeiture could be ordered. Taking note of the fact that even though Sub-Section (6) of Section 4 of the Act restricts the employee and entitles the employer to forfeit the amount of earned gratuity of the employee whose services are terminated for any act causing damage or loss, yet, it contains a non-obstante clause that the vested right cannot be taken away without the conditions laid down, fulfilled, under the provisions of Section 4(6) of the Payment of Gratuity Act. The dismissal of the petitioner from service is a matter in which the Management alone is the authority to decide. But for payment of gratuity, necessarily the Management has to go by the provisions of the Payment of Gratuity Act. Applying the said decision, I have no hesitation in setting aside the order passed by the first respondent under the provisions of Section 4(6) of the Payment of Gratuity Act. 7. Learned counsel for the Management, however, pointed out that the petitioner had not challenged the order of dismissal, which tantamounts to the petitioner accepting the loss caused to the Management. Hence, they are entitled to get the entire amount forfeiting the gratuity payable to the petitioner. I do not think such a line of reasoning could be accepted by this Court, that the forfeiture is an automatic and logical end to the order of dismissal. Whatever be the merits of the order of dismissal, when the Management thought it fit to order forfeiture of the gratuity amount payable, it must necessarily follow the provisions of Sub Section (6) of Section 4 of the Act that without quantifying the extent of damage suffered by the second respondent, it is not possible to go by a straight formula to negate the claim of the petitioner absolutely. In the circumstances, I have no hesitation in setting aside the order of the first respondent. If the second respondent finds that it had suffered loss and hence the petitioner is not entitled to gratuity as claimed by him, the proper course for the second respondent would be to go by Section 4(6) of the Payment of Gratuity Act and not otherwise. https://hcservices.ecourts.gov.in/hcservices/ Consequently, the writ petition is allowed. No costs. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar VJY To 1.The Regional Labour Commissioner (Central) Sastri Bhavan, Chennai. 2. M/s.Wyeath Ltd., RBC Mahindra Towers 4th Floor, "A" Wing, Dr.G.M.Bhosale Road, Worli, Mumbai. W.P.NO.10930 OF 2006 vd(co) pmk.10.1.2011 https://hcservices.ecourts.gov.in/hcservices/