Case: Jaswant Singh Gill Vs. M/S. Bharat Coking Coal Ltd.

2. Respondent Bharat Coking Coal Limited is a government company incorporated and registered under the Companies Act, 1956. Appellant herein joined as a Chief General Manager. He was working in a coking coal mine which vested in the Bharat Coking Coal Limited pursuant to an appropriate notification issued by the Central Government either under Section 7 of the Coking Coal Mines (Nationalisation) Act, 1972 or Section 5 of the Coal Mines (Nationalisation) Act, 1973.3. A chargesheet was issued against him on the allegation of shortage of stock of coal in Lodna area of Respondent No. 1. During pendency of the departmental proceeding, the appellant was allowed to retire. He applied for payment of gratuity under the Payment of Gratuity Act, 1972 (for short "the Act") in the year 1998 which was denied. He, therefore, filed an application before the Additional Labour Commissioner, Dhanbad for payment of gratuity on 4.01.2000. Notices having been issued by the said authority, Respondent No. 1 filed reply thereto inter alia contending that the gratuity amount payable to the appellant had been withheld for the purpose of making of adjustment, in the event recovery from the said amount is directed to be made in the disciplinary proceedings. The controlling authority on the said premise allowed the disciplinary authority to proceed in the matter. Upon conclusion of the departmental enquiry, the disciplinary authority by an order dated 5.07.2000the undersigned has gone through the chargesheet dated 24.02.97 issued to Shri Gill, enquiry proceedings and report of Inquiring Authority dated 18.08.99 and other documents related to the case placed before him. After careful consideration of all the documents placed in the case file, the undersigned, is convinced that Shri Gill had a major role in causing the shortages in the coal stock and conniving with the measurement team in concealing the shortages at the time of annual measurement.Now, therefore, the undersigned, Chairman-cum-Managing Director, Coal India Limited being the Disciplinary Authority in exercise of power conferred by the Conduct Discipline and Appeal Rules 1978 of CIL, considering the seriousness of the offence would have imposed the punishment of dismissal from the service of Shri J.S. Gill, the then Chief General Manager, BCCL, but for his superannuation. The undersigned also hereby orders forfeiture of his gratuity.The Assistant Labour Commissioner (Central), Dhanbad in the application filed by the appellant under the Act, on the other hand, by an order dated 11.04.2001is clear that Shri J.S. Gill retired on superannuation as per notice for retirement w.e.f. 30.4.98, therefore, he is entitled for the payment of gratuity under the P.G. Act, 1972. As per section 4(6)(a) & 4(6)(b) of the P.G. Act, 1972, gratuity can be forfeited partially or wholly when the service of the employee is terminated for any act, which constitute an offence involving moral turpitude provided that such offence is committed by him in the course of employment. In the instant case, the services of Sri J.S. Gill has not been terminated for the offence mentioned under 4(6)(a) & 4(6)(b) of the P.G. Act, 1972. Therefore, the order of forfeiture of gratuity of Sri J. S. Gill issued by the C.M.D. and Disciplinary Authority of CIL is not tenable. The basic requirement of termination of service for any of the misconduct as enumerated under section 4(6)(a) & 4(6)(b) of the P.G. Act, 1972 has not been fulfilled before the issue of order of forfeiture of gratuity.On an appeal preferred by Respondent No. 1, the appellate authorityThe appellant has appealed against the direction of the Controlling Authority directing to pay the gratuity to the respondent on the ground that it was beyond his jurisdiction for enter into merit of the forfeiture of the gratuity amount by the competent authority under Section 4(6) of the Act for the reasons mentioned therein. On the other hand the respondent had also filed an appeal about not allowing interest by the Controlling Authority for delayed payment of gratuity which is numbered as P.G. Appeal/(53)/2001. Since the matter of appeal filed by the Appellant and the respondent is against the same direction of the controlling authority hence both cases heard jointly and their oral argument were heard and hearing was concluded on that date.4. *** ***5. From perusal of the case record of the Controlling Authority it is observed that the respondent submitted an application in form N on 5.1.2001 after his superannuation from 30.4.1998 when the appellant did not pay the gratuity amount. It is observed from the decision/direction of the Controlling Authority that he has rightly determined the amount of gratuity as well as correctly interpreted Section 4(6) of the Payment of Gratuity Act, 1972. For Application of Section 4(6) it is pre-condition that the service should have been terminated for any act. For the purpose of section 4(6)(a) such act should be about willful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused and for the purpose of sub-section 4(6)(b) the gratuity can be forfeited wholly or partially only if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence etc. on his part. It is observed from the punishment order that the services have not been terminated and rather could not have been terminated and also does not indicate the extent of damage of loss. Since neither the service terminated nor there is anything about extent/quantification of damage or loss in punishment order, question of forfeiture of gratuity does not arise as per Section 4(6).Aggrieved by and dissatisfied with the orders of the authority under the Act as also the appellate authority, a writ petition was filed by Respondent No. 1 in the High Court of Jharkhand at Ranchi which was marked as W.P.(C) No. 5957 of 2001. By a judgment and order 13.12.2001, a learned Single Judge of the said refused to interfere therewith and dismissed the writ petition. In an intra-court appeal preferred by Respondent No. 1, a Division Bench of the said Court, however, set aside the judgment and order of the learned Single Judgeour opinion, the Controlling Authority under the Act being not the appellate or the Competent Authority against the order dated 5.7.2000 passed by the CMD-cum-Disciplinary Authority inflicting punishment of forfeiture of gratuity against the respondent no. 3 the comments on the said order as well as interference therewith either by him or the Appellate Authority under section 7(7) of the Act is unwarranted and without jurisdiction.The appellant is, thus, before us.

Court's reasoning:
10. The Rules framed by the Coal India Limited are not statutory rules. They have been made by the holding company of Respondent No. 1.11. The provisions of the Act, therefore, must prevail over the Rules. Rule 27 of the Rules provides for recovery from gratuity only to the extent of loss caused to the company by negligence or breach of orders or trust. Penalties, however, must be imposed so long an employee remains in service. Even if a disciplinary proceeding was initiated prior to the attaining of the age of superannuation, in the event, the employee retires from service, the question of imposing a major penalty by removal or dismissal from service would not arise. Rule 34.2 no doubt provides for continuation of a disciplinary proceeding despite retirement of employee if the same was initiated before his retirement but the same would not mean that although he was permitted to retire and his services had not been extended for the said purpose, a major penalty in terms of Rule 27 can be imposed.12. Power to withhold penalty contained in Rule 34.3 of the Rules must be subject to the provisions of the Act. Gratuity becomes payable as soon as the employee retires. The only condition therefor is rendition of five years continuous service.13. A statutory right accrued, thus, cannot be impaired by reason of a rule which does not have the force of a statute. It will bear repetition to state that the Rules framed by Respondent No. 1 or its holding company are not statutory in nature. The Rules in any event do not provide for withholding of retrial benefits or gratuity.14. The Act provides for a closely neat scheme providing for payment of gratuity. It is a complete code containing detailed provisions covering the essential provisions of a scheme for a gratuity. It not only creates a right to payment of gratuity but also lays down the principles for quantification thereof as also the conditions on which he may be denied therefrom. As noticed hereinbefore, sub-section (6) of Section 4 of the Act contains a non-obstante clause vis-à-vis sub-section (1) thereof. As by reason thereof, an accrued or vested right is sought to be taken away, the conditions laid down thereunder must be fulfilled. The provisions contained therein must, therefore, be scrupulously observed. Clause (a) of Sub-section (6) of Section 4 of the Act speaks of termination of service of an employee for any act, willful omission or negligence causing any damage. However, the amount liable to be forfeited would be only to the extent of damage or loss caused. The disciplinary authority has not quantified the loss or damage. It was not found that the damages or loss caused to Respondent No. 1 was more than the amount of gratuity payable to the appellant. Clause (b) of Sub-section (6) of Section 4 of the Act also provides for forfeiture of the whole amount of gratuity or part in the event his services had been terminated for his riotous or disorderly conduct or any other act of violence on his part or if he has been convicted for an offence involving moral turpitude. Conditions laid down therein are also not satisfied.15. Termination of services for any of the causes enumerated in Sub-section (6) of Section 4 of the Act, therefore, is imperative.