Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) No. 7302/2012
th
% 26 September, 2013
P.K.KATARIA ......Petitioner
Through: Ms. Anju Bhattacharya and Mr. Elgin
Matt John, Advocates.
VERSUS
THE CHAIRMAN AND MANAGING DIRECTOR NATIONAL
FERTILIZERS LTD. ...... Respondents
Through: Mr.Ghanshyam Joshi and Mr. Gireish
Kandpal, Advocates.
CORAM:
HON’BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not? Yes
VALMIKI J. MEHTA, J (ORAL)
1. This writ petition is filed by the petitioner who
retired/superannuated from the respondent no.1/National Fertilizers Ltd. on
30.4.2011. Petitioner claims the relief of release of the gratuity and leave
encashment amounts which have been withheld by the respondent.
Petitioner also claims payment of interest on such amounts not paid.
2. The respondent places reliance upon Rule 35-A of the National
Fertilizers Limited Employees‟ (Conduct, Discipline and Appeal)
WPC 7302/2012 Page 1 of 7
Rules and the circular dated 10.9.1996 of the respondent to deny the claim of
the petitioner. On the basis of Rule 35-A and the circular dated 10.9.1996, it
is argued that respondent is entitled to withhold the gratuity and leave
encashment on account of pendency of disciplinary proceedings pending
against the petitioner.
3. To decide the issue in the present case, it will be necessary to
interpret Rule 35-A and the circular dated 10.9.1996, and therefore the same
are reproduced hereunder:-
Rule 35-A
“ 35A Withholding of Gratuity during the pendency of
discipline proceedings
During the pendency of disciplinary proceedings, the
disciplinary authority may withhold payment of gratuity, for
ordering the recovery from gratuity of the whole or part of any
pecuniary loss caused to the Company if the employee is found
in a disciplinary proceedings or judicial proceeding to 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 including service rendered on
deputation or on re-employment after retirement. However, the
provisions of Section 7(3) and 7(3-A) of the Payment of
Gratuity Act, 1972 should be kept in view in the event of the
delayed payment, in case the employee is exonerated.”
Circular dated 10.9.1996
“No. NFL/Pere/1(93)/2358 September 10, 1996
WPC 7302/2012 Page 2 of 7
Sub: Withholding of Leave Salary/Leave Encashment in
respect of employees against disciplinary proceedings are
pending/contemplated.
th
The Board of Directors in their 214 meeting held on
16.08.1996 have decided that the payment on account of leave
salary/leave encashment due to an employee may be withheld if
disciplinary proceedings for imposing major penalty are
contemplated and/or pending against him/her on the charge of
having caused loss/damage to the Company and from whom
some amount will become recoverable if charges are proved.
The above decision will be effective from the date of
Board‟s approval i.e 16.08.1996 and will be applicable to all
employees of the Company.
You are requested to take necessary action and also
circulate this among all employees at your Unit/Office.
(P.K.Bansal)
Manager (P&A)”
4. A reference to the aforesaid rule and circular shows that
gratuity and leave encashment can be withheld if there is a charge against
the employee of having caused pecuniary loss to the respondent or having
caused loss/damage to the company. In terms of Rule 35-A, there is an
additional entitlement to withhold gratuity amount in terms of Section 4(6)
of the Payment of Gratuity Act, 1972.
5. When we refer to the chargesheet dated 19.3.2013 in the present
case, and which has been issued during the pendency of the writ petition,
WPC 7302/2012 Page 3 of 7
there are allegations against the petitioner of wrongly seeking to favour M/s
Accor Radha Krishna Corporate Services Pvt. Ltd. (in short „M/s Accor‟) for
supply of meal vouchers at NFL, Panipat Unit. A reading of the statement
of imputation accompanying the chargesheet shows that petitioner is stated
to be guilty of violation of certain directions and circulars and for possible
manipulations in the tender conditions to favour M/s Accor. A complaint, as
per which the tender was examined, came from the competitor-bidder
namely M/s Sodexo SVC India Pvt. Ltd. (in short „Sodexo‟). Ultimately, the
Panipat unit issued NIT to both the parties namely M/s Accor and M/s
Sodexo on 13.5.2009. The charge is that open tender should have been
invited and not a limited tender to two parties. In the entire imputation of
misconduct there is no charge against the petitioner for having caused
pecuniary loss to the respondent-company or that the respondent-company
has been caused loss or damage on account of any infraction by the
petitioner. Therefore, on the plain language of Rule 35-A and the circular
dated 10.9.1996 the gratuity and leave encashment amounts cannot be
withheld because there is no charge against the petitioner of causing
pecuniary loss or any other loss or damage to the respondent-company.
WPC 7302/2012 Page 4 of 7
6. The only other aspect requiring examination is that whether
respondent is entitled to withhold the gratuity and leave encashment
amounts in view of Section 4(6) (b) (ii) of the Payment of Gratuity Act,
1972, and this provision reads as under:-
“ 4. Payment of Gratuity-
xxxxxxxxxxxxx
(6)(b)(ii) if the service s of such employee have been
terminated for any act which constitutes an offence involving moral
turpitude, provided that such offence is committed by him in the
course of his employment.”
7. The requirement of this provision for withholding the payment
of gratuity is that the chargesheeted officer is guilty of moral turpitude.
Moral turpitude is not defined in the Payment of Gratuity Act, 1972 or in the
relevant Rules of the respondent-organization. Surely every infraction or
misconduct would not amount to moral turpitude. The expression „moral
turpitude‟ must be therefore interpreted as per its meaning commonly
understood, and by which imputation is really on the moral character of a
person, for example sexual harassment of a female employee or questionable
acts of personal morals. Also, as per the aforesaid provision of Payment of
Gratuity Act, it is necessary that findings of moral turpitude must be in the
course of the employment of the employee with the employer. In my
WPC 7302/2012 Page 5 of 7
opinion, when we see the chargesheet and the related imputation of
misconduct as already stated above, there is only allegations of violations of
rules in floating a tender or calling for limited parties pursuant to the tender
and thus the charges are issues of misconduct of violating of directions, and
thus not issues of moral turpitude. Therefore, in my opinion, present is not a
case where on the ground of moral turpitude provided for in Section 4 (6) (b)
(ii) there can be withholding of gratuity by the respondent.
8. In view of the above, it is clear that respondent has no legal
entitlement to withhold the gratuity and leave encashment benefits of the
petitioner. Supreme Court in the case of State of Jharkhand & Ors. Vs.
Jitendra Kumar Srivastava & Anr. in Civil Appeal No. 6770/2013 decided
on 14.8.2013 has held that terminal benefits are not bounties which are given
to employees and terminal benefits are in fact payable on account of
rendering service by the employee during the entire period of service of such
employee with the employer. Such monetary benefits have been held by the
Supreme Court as a property and which cannot be taken away without
following the process of law as per Article 300A of the Constitution of
India. Supreme Court has clarified that only where there exist a statutory
rule or rule of the employer-organization, entitling withholding of terminal
WPC 7302/2012 Page 6 of 7
benefits of an employee, only then the same can be withheld by the
employer. I have held in the present case that there is no entitlement of the
respondent-employer to withhold terminal benefits because the relevant rule
and the circular which are relied upon do not apply because of the fact that
there is no chargesheet whereby allegations are made against the petitioner
of any loss or damage being caused to the respondent by the petitioner.
9. In view of the above, the writ petition is allowed and
respondent is directed to release the gratuity and leave encashment amounts
due to the petitioner on the date of his retirement. The amounts be paid
within a period of three months from today alongwith interest at 6% per
annum simple from the date of superannuation of the petitioner on 30.4.2011
and till the date of payment. In case the payment is not made to the
petitioner within a period of three months, thereafter interest at 9% per
annum simple will be payable. The writ petition is allowed and disposed of
accordingly.
SEPTEMBER 26, 2013 VALMIKI J. MEHTA, J.
ib
WPC 7302/2012 Page 7 of 7
+ W.P.(C) No. 7302/2012
th
% 26 September, 2013
P.K.KATARIA ......Petitioner
Through: Ms. Anju Bhattacharya and Mr. Elgin
Matt John, Advocates.
VERSUS
THE CHAIRMAN AND MANAGING DIRECTOR NATIONAL
FERTILIZERS LTD. ...... Respondents
Through: Mr.Ghanshyam Joshi and Mr. Gireish
Kandpal, Advocates.
CORAM:
HON’BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not? Yes
VALMIKI J. MEHTA, J (ORAL)
1. This writ petition is filed by the petitioner who
retired/superannuated from the respondent no.1/National Fertilizers Ltd. on
30.4.2011. Petitioner claims the relief of release of the gratuity and leave
encashment amounts which have been withheld by the respondent.
Petitioner also claims payment of interest on such amounts not paid.
2. The respondent places reliance upon Rule 35-A of the National
Fertilizers Limited Employees‟ (Conduct, Discipline and Appeal)
WPC 7302/2012 Page 1 of 7
Rules and the circular dated 10.9.1996 of the respondent to deny the claim of
the petitioner. On the basis of Rule 35-A and the circular dated 10.9.1996, it
is argued that respondent is entitled to withhold the gratuity and leave
encashment on account of pendency of disciplinary proceedings pending
against the petitioner.
3. To decide the issue in the present case, it will be necessary to
interpret Rule 35-A and the circular dated 10.9.1996, and therefore the same
are reproduced hereunder:-
Rule 35-A
“ 35A Withholding of Gratuity during the pendency of
discipline proceedings
During the pendency of disciplinary proceedings, the
disciplinary authority may withhold payment of gratuity, for
ordering the recovery from gratuity of the whole or part of any
pecuniary loss caused to the Company if the employee is found
in a disciplinary proceedings or judicial proceeding to 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 including service rendered on
deputation or on re-employment after retirement. However, the
provisions of Section 7(3) and 7(3-A) of the Payment of
Gratuity Act, 1972 should be kept in view in the event of the
delayed payment, in case the employee is exonerated.”
Circular dated 10.9.1996
“No. NFL/Pere/1(93)/2358 September 10, 1996
WPC 7302/2012 Page 2 of 7
Sub: Withholding of Leave Salary/Leave Encashment in
respect of employees against disciplinary proceedings are
pending/contemplated.
th
The Board of Directors in their 214 meeting held on
16.08.1996 have decided that the payment on account of leave
salary/leave encashment due to an employee may be withheld if
disciplinary proceedings for imposing major penalty are
contemplated and/or pending against him/her on the charge of
having caused loss/damage to the Company and from whom
some amount will become recoverable if charges are proved.
The above decision will be effective from the date of
Board‟s approval i.e 16.08.1996 and will be applicable to all
employees of the Company.
You are requested to take necessary action and also
circulate this among all employees at your Unit/Office.
(P.K.Bansal)
Manager (P&A)”
4. A reference to the aforesaid rule and circular shows that
gratuity and leave encashment can be withheld if there is a charge against
the employee of having caused pecuniary loss to the respondent or having
caused loss/damage to the company. In terms of Rule 35-A, there is an
additional entitlement to withhold gratuity amount in terms of Section 4(6)
of the Payment of Gratuity Act, 1972.
5. When we refer to the chargesheet dated 19.3.2013 in the present
case, and which has been issued during the pendency of the writ petition,
WPC 7302/2012 Page 3 of 7
there are allegations against the petitioner of wrongly seeking to favour M/s
Accor Radha Krishna Corporate Services Pvt. Ltd. (in short „M/s Accor‟) for
supply of meal vouchers at NFL, Panipat Unit. A reading of the statement
of imputation accompanying the chargesheet shows that petitioner is stated
to be guilty of violation of certain directions and circulars and for possible
manipulations in the tender conditions to favour M/s Accor. A complaint, as
per which the tender was examined, came from the competitor-bidder
namely M/s Sodexo SVC India Pvt. Ltd. (in short „Sodexo‟). Ultimately, the
Panipat unit issued NIT to both the parties namely M/s Accor and M/s
Sodexo on 13.5.2009. The charge is that open tender should have been
invited and not a limited tender to two parties. In the entire imputation of
misconduct there is no charge against the petitioner for having caused
pecuniary loss to the respondent-company or that the respondent-company
has been caused loss or damage on account of any infraction by the
petitioner. Therefore, on the plain language of Rule 35-A and the circular
dated 10.9.1996 the gratuity and leave encashment amounts cannot be
withheld because there is no charge against the petitioner of causing
pecuniary loss or any other loss or damage to the respondent-company.
WPC 7302/2012 Page 4 of 7
6. The only other aspect requiring examination is that whether
respondent is entitled to withhold the gratuity and leave encashment
amounts in view of Section 4(6) (b) (ii) of the Payment of Gratuity Act,
1972, and this provision reads as under:-
“ 4. Payment of Gratuity-
xxxxxxxxxxxxx
(6)(b)(ii) if the service s of such employee have been
terminated for any act which constitutes an offence involving moral
turpitude, provided that such offence is committed by him in the
course of his employment.”
7. The requirement of this provision for withholding the payment
of gratuity is that the chargesheeted officer is guilty of moral turpitude.
Moral turpitude is not defined in the Payment of Gratuity Act, 1972 or in the
relevant Rules of the respondent-organization. Surely every infraction or
misconduct would not amount to moral turpitude. The expression „moral
turpitude‟ must be therefore interpreted as per its meaning commonly
understood, and by which imputation is really on the moral character of a
person, for example sexual harassment of a female employee or questionable
acts of personal morals. Also, as per the aforesaid provision of Payment of
Gratuity Act, it is necessary that findings of moral turpitude must be in the
course of the employment of the employee with the employer. In my
WPC 7302/2012 Page 5 of 7
opinion, when we see the chargesheet and the related imputation of
misconduct as already stated above, there is only allegations of violations of
rules in floating a tender or calling for limited parties pursuant to the tender
and thus the charges are issues of misconduct of violating of directions, and
thus not issues of moral turpitude. Therefore, in my opinion, present is not a
case where on the ground of moral turpitude provided for in Section 4 (6) (b)
(ii) there can be withholding of gratuity by the respondent.
8. In view of the above, it is clear that respondent has no legal
entitlement to withhold the gratuity and leave encashment benefits of the
petitioner. Supreme Court in the case of State of Jharkhand & Ors. Vs.
Jitendra Kumar Srivastava & Anr. in Civil Appeal No. 6770/2013 decided
on 14.8.2013 has held that terminal benefits are not bounties which are given
to employees and terminal benefits are in fact payable on account of
rendering service by the employee during the entire period of service of such
employee with the employer. Such monetary benefits have been held by the
Supreme Court as a property and which cannot be taken away without
following the process of law as per Article 300A of the Constitution of
India. Supreme Court has clarified that only where there exist a statutory
rule or rule of the employer-organization, entitling withholding of terminal
WPC 7302/2012 Page 6 of 7
benefits of an employee, only then the same can be withheld by the
employer. I have held in the present case that there is no entitlement of the
respondent-employer to withhold terminal benefits because the relevant rule
and the circular which are relied upon do not apply because of the fact that
there is no chargesheet whereby allegations are made against the petitioner
of any loss or damage being caused to the respondent by the petitioner.
9. In view of the above, the writ petition is allowed and
respondent is directed to release the gratuity and leave encashment amounts
due to the petitioner on the date of his retirement. The amounts be paid
within a period of three months from today alongwith interest at 6% per
annum simple from the date of superannuation of the petitioner on 30.4.2011
and till the date of payment. In case the payment is not made to the
petitioner within a period of three months, thereafter interest at 9% per
annum simple will be payable. The writ petition is allowed and disposed of
accordingly.
SEPTEMBER 26, 2013 VALMIKI J. MEHTA, J.
ib
WPC 7302/2012 Page 7 of 7