Case: CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS LIMITED Vs. SRI RABINDRANATH CHOUBEY

of Directors, O.S.F.C. & Ors. (1999) 3 SCC 666 was also referred to in which it was held: 7. In view of the absence of such a provision in the abovesaid regulations, it must be held that the Corporation had no legal authority to make any reduction in the retiral benefits of the appellant. There is also no provision for conducting a disciplinary enquiry after retirement of the appellant and nor any provision stating that in case misconduct is established, a deduction could be made from retiral benefits. Once the appellant had retired from service on 30-6-1995, there was no authority vested in the Corporation for continuing the departmental enquiry even for the purpose of imposing any reduction in the retiral benefits payable to the appellant. In the absence of such an authority, it must be held that the enquiry had lapsed and the appellant was entitled to full retiral benefits on retirement. As there was no provision for conducting a disciplinary inquiry after retirement and that in case misconduct was established, a deduction could be made from the retiral benefits. Thus, it was held that retiral benefits could not have been deducted and became payable. The rule was different. (e) In Anant R. Kulkarni (supra), the decision in U.P. State Sugar Corporation Ltd. & Ors. v. Kamal Swaroop Tandon (2008) 2 SCC 41 was also considered in which the proceedings were initiated after retirement in which it was held that in case of retirement, master and servant relationship continue for grant of retiral benefits. Proceedings for recovery of financial loss from an employee was permissible even after his retirement. The case relates to the departmental inquiry to be instituted post- retirement for the financial loss caused during the course of employment. The question of dismissal did not arise as the inquiry was instituted after retirement. There cannot be any quarrel that it would depend upon the relevant rule. 10.29 On the basis of the abovementioned decisions in the State of Assam & Ors. v. Padma Ram Borah, State of Punjab v. Khemi Ram, Bhagirathi Jena v. Board of Directors, O.S.F.C. & Ors., Kirti Bhusan Singh v. State of Bihar, U.P. State Sugar Corporation Ltd. & Ors. v. Kamal Swaroop Tandon (supra) this court in Anant R. Kulkarni (supra) opined that relevant rules governing the service conditions of an employee are the determining factor as to whether or not the domestic inquiry can be held against an employee who stood retired after reaching the age of superannuation. To this extent, there is no problem caused by the aforesaid decision. However, this court made a general observation that if the inquiry had been initiated while the delinquent employee was in service, it would continue even after his retirement, but the nature of punishment would change. The punishment of dismissal, removal from service would not be imposed. The 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. 10.30 In view of the various decisions, it is apparent that under Rule 34.2 of the CDA 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 Rule 27 of the CDA Rules and apart from that in case pecuniary loss had been caused that can be recovered. Gratuity can be forfeited wholly or partially. 10.31 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. Various provisions of the Gratuity Act discussed above do not come in the way of departmental inquiry and as provided in Section 4(6) and Rule 34.3 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 as it is not provided in the Payment of Gratuity Act, 1972 that inquiry shall come to an end as soon as the employee attains the age of superannuation. We reiterate that the Act does not deal with the matter of disciplinary inquiry, it contemplates recovery from or forfeiture of gratuity wholly or partially as per misconduct committed and does not deal with punishments to be imposed and does not supersede the Rules 34.2 and 34.3 of the CDA 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 34.2 and 34.3. 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 no way interdict holding of the departmental inquiry and punishment to be imposed is not the subject matter dealt with under the Act. 10.32 Thus considering the provisions of Rules 34.2 and 34.3 of the CDA Rules, 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.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]5.2 It is not in dispute that a chargesheet came to be served upon the respondent-employee much before he attained the age of superannuation, i.e., on 1.10.2007. That while the disciplinary proceedings were pending, the respondent-employee attained the age of superannuation on 31.07.2010. In view of the pendency of the disciplinary proceedings, the appellant-employer withheld the payment of gratuity7. Indisputably, the respondent was governed by the CDA Rules. Therefore, Rules 34.2 and 34.3 of the CDA Rules shall be applicable and the respondent-employee shall be governed by the said provisions. Rule 34 permits the management to withhold the gratuity during the pendency of the disciplinary proceedings. Rule 34.2 permits 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. 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. Therefore, as such, on a fair reading of Rule 34.2 of the CDA Rules, an employee shall be deemed to be continued in service, after he attains the age of superannuation/retired, for the limited purpose of continuing and concluding the disciplinary proceedings which were instituted while the employee was in service. Therefore, 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. If the submission on behalf of the employee 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, in that case, it will be frustrating permitting the authority to continue and conclude the disciplinary proceedings after retirement. If the order of dismissal cannot be passed after the employee has retired and/or has attained the age of superannuation in the disciplinary proceedings which were instituted while the employee was in service, in that case, 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 service8. It is true that while considering the very provisions of the CDA Rules, namely, Rule 34.2 and Rule 34.3 of the CDA Rules, this Court in the case of Jaswant Singh Gill (supra) has observed and held that once the employee is permitted to retire on attaining the age of superannuation, thereafter no order of dismissal can be passed. However, for the reasons stated hereinabove, we are not in agreement with the view taken by this Court in the case of Jaswant Singh Gill (supra). As observed hereinabove, 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. On the contrary, there is a decision of three Judge Bench of this Court in the case of Ram Lal Bhaskar (supra) taking just a contrary view9. 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, sub-section 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 concluded9.1 Even otherwise, 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 sub- section 6 of Section 4 of the Payment of Gratuity Act, 1972 or to have caused pecuniary loss to the company by misconduct or negligence, during his service. It further makes clear that 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. Rule 34.3 of the CDA Rules is in consonance with sub-section 6 of Section 4 of the Payment of Gratuity Act and there is no inconsistency between sub-section 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 provisions9.2 It is required to be noted that in the present case the disciplinary proceedings were initiated against the respondent- employee for very serious allegations of misconduct alleging dishonestly causing coal stock shortages amounting to Rs.31.65 crores and thereby causing substantial loss to the employer. Therefore, if such a charge is proved and punishment of dismissal is given thereon, the provisions of sub-section 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 proceedings10.15 In Ram Lal Bhaskar (supra), the employee was in service when the inquiry was initiated. He was dismissed from service after attaining the age of superannuation. This court considered the argument that the order of the appellate authority was illegal and without jurisdiction. The Rules provided that disciplinary proceedings could be continued in the same manner as if the officer continued to be in service. Thus, it was held that the employee was deemed to be in service for the continuance of proceedings. No merit was found in the submission that inquiry and order of dismissal passed after superannuation was illegal and without jurisdiction. The relevant discussion is extracted hereunder:8. The learned counsel for Respondent 1, on the other hand, supported the impugned order of the High Court and submitted that there is no infirmity in the impugned order of the High Court. He further submitted that in any case Respondent 1 had retired from service on 31-1-2000, and though the charge-sheet was served on him on 22-12-1999 when he was still in service, the enquiry report was served on him by letter dated 28-9-2000 and he was dismissed from service on 15-5-2001 after he had retired from service. He submitted that after the retirement of Respondent 1, the appellant had no jurisdiction to continue with the enquiry against Respondent 1. In support of this contention, he cited the decision of this Court in UCO Bank v. Rajinder Lal Capoor (2007) 6 SCC 694 9. We have perused the decision of this Court in UCO Bank v. Rajinder Lal Capoor and we find that in the facts of that case the delinquent officer had already superannuated on 1-11-1996 and the charge-sheet was issued after his superannuation on 13-11- 1998 and this Court 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 must be held to be illegal and without jurisdiction. In the facts of the present case, on the other hand, we find that the charge-sheet was issued on 22-12-1999 when Respondent was in service and there were clear provisions in Rule 19(3) of the State Bank of India Officers Service Rules, 1992, that in case disciplinary proceedings under the relevant rules of service have been initiated against an officer before he ceased to be in the banks 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 whom the proceedings were initiated in the manner provided for in the Rules as if the officer continues to be in service, so however, that he shall be deemed to be in service only for the purpose of the continuance and conclusion of such proceedings10. We may mention here that a similar provision was also relied on behalf of UCO Bank in UCO Bank v. Rajinder Lal Capoor (supra) in Regulation 20(3)(iii) of the UCO Bank Officer Employees Service Regulations, 1979, but this Court 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 v. Rajinder Lal Capoor (supra) does not support Respondent 1 and there is no merit in the contention of the counsel for Respondent 1 that the enquiry and the order of dismissal were illegal and without jurisdictionIn the instant case, Rule 34.2 of the CDA Rules holds the field and is 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. Decision of this Court in the case of Ram Lal Bhaskar (supra) is by a three Judge Bench, which is binding10.16 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 2(A) of the Act specifies the continuous service and what would amount to interruption and exclusion therefrom. An employee in continuous service, within the meaning of section 2(A)(1), for one year or six months, as provided, shall be deemed to be in continuous service. Section 3 deals with the appointment of the Controlling Authority. 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. Five years of continuous service shall not be necessary in case a person ceased to be in service due to death or disability. Section 4(2) provides for entitlement of gratuity for every completed year of service or part thereof, in excess of six months, the employer shall pay gratuity at the rate of fifteen days wages based on the rate of wages last drawn by the employee concerned. 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 gratuity10.17 Section 4 provides for payment of gratuity. Section 4(6) contains a non-obstante clause to sub-section 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)10.18 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 superannuation10.21 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 sub-section (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 effect10.23 It is a settled proposition of law that 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 as held in B.T. Krishnamurthy v. Sri Basaveswara Education Society (2013) 4 SCC 490 , Paramjit Singh v. Director of Schools (Public Instructions), (2010) 14 SCC 416 , State of U.P. v. Ram Vinai Sinha, (2010) 15 SCC 305 , Jaswantsingh Pratapsingh Jadeja v. Rajkot Municipal Corpn. (2007) 10 SCC 71 , the State of Punjab v. Rajesh Kumar (2006) 12 SCC 418 , Jai Singh v. Union of India (2006) 9 SCC 717 10.25 Section 4(1) deals with normal superannuation and does not cover the cases where the departmental inquiry is pending, or dismissal had been ordered. It did not interdict the departmental inquiry if it was initiated while the employee was in service and continued after superannuation as if the employee continued in service. Section 4 of the Payment of Gratuity Act, 1972 contains no bar, and purposive construction has to be made of the provisions contained in section 4(1). 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). 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. 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 as laid down in State of Madhya Pradesh and Anr. v. Kumari Nivedita Jain and Ors., (1981) 4 SCC 296 , State of Andhra Pradesh and Anr. v. Lavu Narendranath and Ors. etc., AIR 1971 SC 2560 , Distt. Registrar, Palghat and Ors. v. M.B. Koyakutty and Ors., (1979) 2 SCC 150 , Union of India and Anr. v. Tulsiram Patel, AIR 1985 SC 1416 . This Court held that only when statutory provision is otherwise, executive instructions cannot prevail. In our opinion, 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 197210.27 In Jaswant Singh Gill v. Bharat Coking Coal Ltd. (2007) 1 SCC 663 , it was held that the provisions of section 4(6) of the Payment of Gratuity Act, 1972 would prevail over the non- statutory Bharat Coking Coal Ltd. - a subsidiary of Coal India Ltd. Rules 34.2 and 34.3 and provisions of Payment of Gratuity Act, 1972, were considered. It was held that even if the disciplinary inquiry was initiated before attaining the age of superannuation, if the employee attains the age of superannuation, the question of imposing a major penalty by removal or dismissal from service would not arise. Once the employee had retired and his services had not been extended for the purpose of imposing punishment, a major penalty could not be imposed. It was also held that the rule framed by Coal India Ltd. are non-statutory rules, and in view of the provisions of the Payment of Gratuity Act, 1972, they cannot prevail. In the said case, the order of dismissal was passed after the age of superannuation. It was found that misconduct did not cover the grounds mentioned in section 4(6)(a) for recovery of the loss, nor it was the case of misconduct in which gratuity could have been withheld wholly or partially in the exigencies as provided in section 4(6)(b). We find it difficult to agree with the said decision as Rules hold the field and are not repugnant to provisions of the Payment of Gratuity Act, 1972. This Court held that Rules could not hold the field as they were not statutory; thus, the effect of the rule providing of deeming legal fiction as if he had continued in the service notwithstanding crossing the age of superannuation was not considered. Apart from that, the validity of Rules 34.2 or 34.3 could not have been decided as it was not in question in the said case. 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). 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 of disciplinary authority imposing the punishment of dismissal. Thus, the jurisdictional scope in the Jaswant Singh Gill case (supra) was limited. We are unable to agree with the decision rendered in Jaswant Singh Gill case (supra) inter alia for the following reasons:(i) The order of termination was not questioned, nor the authority under the Payment of Gratuity Act, 1972, had jurisdiction to deal with it(ii) The validity or enforceability and vires of service Rules 34.2 and 34.3 were not questioned(iii) The Controlling Authority under the Payment of Gratuity Act, 1972, had no jurisdiction to go into the legality of order of the disciplinary authority(iv) 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(v) 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(vi) The Controlling Authority had no jurisdiction to deal with Rules 34.2 and 34.3 or to pronounce upon validity thereof or of dismissal. Thus, the observations made, traveling beyond the scope of the proceedings, cannot be said to be binding and cannot constitute the ratio with respect to continuance of departmental inquiry after superannuation and what kind of punishment can be imposed by an employer. The jurisdiction of authority was only to consider payment of gratuity under Section 4(6) of the Payment of Gratuity Act, 1972Thus, we overrule the decision in Jaswant Singh Gill (supra)The decision is of no avail, in view of the rule in question, which provides for legal fiction with respect to continuance in service, and it has to be given full effect to the ratio of decision negate the submission of the employee10.29 On the basis of the abovementioned decisions in the State of Assam & Ors. v. Padma Ram Borah, State of Punjab v. Khemi Ram, Bhagirathi Jena v. Board of Directors, O.S.F.C. & Ors., Kirti Bhusan Singh v. State of Bihar, U.P. State Sugar Corporation Ltd. & Ors. v. Kamal Swaroop Tandon (supra) this court in Anant R. Kulkarni (supra) opined that relevant rules governing the service conditions of an employee are the determining factor as to whether or not the domestic inquiry can be held against an employee who stood retired after reaching the age of superannuation. To this extent, there is no problem caused by the aforesaid decision. However, this court made a general observation that if the inquiry had been initiated while the delinquent employee was in service, it would continue even after his retirement, but the nature of punishment would change. The punishment of dismissal, removal from service would not be imposed. The 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 service10.30 In view of the various decisions, it is apparent that under Rule 34.2 of the CDA 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 Rule 27 of the CDA Rules and apart from that in case pecuniary loss had been caused that can be recovered. Gratuity can be forfeited wholly or partially10.31 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. Various provisions of the Gratuity Act discussed above do not come in the way of departmental inquiry and as provided in Section 4(6) and Rule 34.3 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 as it is not provided in the Payment of Gratuity Act, 1972 that inquiry shall come to an end as soon as the employee attains the age of superannuation. We reiterate that the Act does not deal with the matter of disciplinary inquiry, it contemplates recovery from or forfeiture of gratuity wholly or partially as per misconduct committed and does not deal with punishments to be imposed and does not supersede the Rules 34.2 and 34.3 of the CDA 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 34.2 and 34.3. 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 no way interdict holding of the departmental inquiry and punishment to be imposed is not the subject matter dealt with under the Act10.32 Thus considering the provisions of Rules 34.2 and 34.3 of the CDA Rules, 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.