THE KARNATAKA STATE CO OP AGRICULTURE AND RURAL DEVELOPMENT BANK LTD vs STATE OF KARNATAKA

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WP No. 351 of 2024


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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

ND
DATED THIS THE 2 DAY OF NOVEMBER, 2026

BEFORE

THE HON'BLE MR. JUSTICE H.T. NARENDRA PRASAD

WRIT PETITION NO. 351 OF 2024 (L-PG)

BETWEEN:

THE KARNATAKA STATE CO-OP
AGRICULTURE AND RURAL
DEVELOPMENT BANK LTD
P B NO 1811, FORT
TIPPU SULTAN ROAD
CHAMARAJPET, BENGALURU 560018
REP. BY ITS MANAGING DIRECTOR.
REGISTERED UNDER THE MYSORE
CORPORATION SOCIETIES
REGISTRATION ACT.
…PETITIONER
(BY SRI. P ANAND., ADVOCATE)










AND:

1. STATE OF KARNATAKA
DEPARTMENT OF LABOUR
MULTISTORIED BUILDING
DR B R AMBEDKAR VEEDI
BENGALURU-560001
REP. BY ITS PRINCIPAL SECRETARY.

2. THE ASSISTANT LABOUR COMMISSIONER
AND APPELLATE AUTHORITY UNDER
THE PAYMENT OF GRATUITY ACT 1972
BENGALURU DIVISION 2
MANJUNATHANAGAR BAGALAGUNTE
BENGALURU -560073.

Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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3. THE LABOUR OFFICER CUM
CONTROLLER UNDER PAYMENT
OF GRATUITY ACT
SUB DIVISION, 5, ROOM NO 21 AND 22
ND
2 FLOOR KARNATAKA STATE LABOUR
INSTITUTE MANJUNATHANAGAR
BAGALAGUNTE, BENGALURU-560073.

4. MR A N SHIVALINGE GOWDA
S/O LINGEGOWDA
AGED ABOUT 64 YEARS
ST
R/AT NO 19/1, 1 CROSS
RAGHAVA NAGAR, NEW TIMBER LAYOUT,
MYSORE ROAD, BENGALURU-560026.
…RESPONDENTS
(BY SRI.M RAJAKUMAR, AGA FOR R1 TO R3:
SRI. H.M. MURALIDHAR., ADVOCATE FOR C/R4)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO
QUASH THE ORDER DATED: 20.05.2023 PASSED BY THE R3 IN
CLAIM PETITION NO.KA.A/BEM-5/PGA/CR-66/2019-20 VIDE
ANNEXURE-M AND QUASH THE ORDER DATED: 23.08.2023
PASSED BY THE R2 IN APPEAL NO.NO.SAKABEM-
2/UPAKA(MAY)/CR-18/2023-24, VIDE ANNEXURE-N AND ETC.
THIS PETITION, COMING ON FOR PRELIMINARY HEARING
IN ‘B’ GROUP, THIS DAY, ORDER WAS MADE THEREIN AS
UNDER:
CORAM: HON'BLE MR. JUSTICE H.T. NARENDRA PRASAD

ORAL ORDER

1. This writ petition has been filed by the petitioner
under Articles 226 and 227 of the Constitution of India,
challenging the order dated 20.05.2023 passed by
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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respondent No.3 vide Annexure-M and also order dated
23.08.2023 passed by respondent No.2 vide Annexure-N,
whereby the order dated 20.05.2023 passed by
respondent No.3 has been confirmed.

2. The petitioner is a State-level Federal Agricultural
Credit Co-operative Bank consisting of 178 Primary Co-
operative Agriculture and Rural Development Banks
functioning throughout the State of Karnataka.
Respondent No.4 was an employee of the petitioner-Bank.
He joined the service of the petitioner Bank on 19.02.1986
as a Second Division Assistant (SDA) on temporary basis
and his services were regularised in the year 1990. He
retired from service on 30.06.2019. The mother of
respondent No.4, namely, Mrs.Parvathamma, had availed
a loan of Rs.2,82,600/- under the Sericulture Scheme
during the year 2009-10 from the Primary Co-operative
Agriculture and Rural Development Bank, Maddur
(PCARDB, Maddur). She had subsequently availed another
loan of Rs.8,73,460/- under the Poultry Scheme during the
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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year 2014-15. In terms of the policy of the petitioner
Bank, respondent No.4 executed bonds undertaking to
repay the loan in the event of default by the loanee and
also stood as surety for the said loans. The said loans were
not repaid and the mother of respondent No.4 died
intestate in the year 2016. As on 09.05.2019, the amounts
outstanding under the two loan accounts were
Rs.1,34,192/- and Rs.7,00,760/- respectively. Since
respondent No.4 was due to retire on 30.06.2019, the
PCARDB, Maddur, requested the petitioner Bank to recover
the outstanding amount from his retirement benefits. The
petitioner Bank thereafter issued a letter dated
29.06.2019 calling upon respondent No.4 to repay the
outstanding loan amounts. In response, respondent No.4,
by letter dated 28.06.2019, authorised the petitioner Bank
to withhold a sum of Rs.8,34,952/- from his surrender
leave encashment and gratuity amounts towards
repayment of the said loans. Accordingly, the petitioner
Bank adjusted Rs.4,11,798/- from the gratuity amount
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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and Rs.4,23,154/- from the leave encashment amount
towards the outstanding loan accounts. Out of the gratuity
amount of Rs.11,32,522/-, a sum of Rs.7,20,724/- was
paid to respondent No.4. The petitioner Bank also
intimated respondent No.4 about the adjustment by notice
dated 29.08.2019. Subsequently, respondent No.4 cleared
the remaining outstanding amount and the PCARDB,
Maddur, issued a Loan Discharge Certificate dated
14.12.2021. Thereafter, respondent No.4 requested the
petitioner Bank to refund the amount of Rs.4,11,798/-
withheld from his gratuity, contending that the entire loan
amount had subsequently been repaid. Respondent No.4
thereafter filed a claim petition before the Labour
Commissioner-cum-Authority under the Payment of
Gratuity Act seeking payment of Rs.4,11,798/- with
interest. By order dated 20.05.2023, respondent No.3
directed the petitioner Bank to pay the said amount with
interest at 10% per annum from 16.03.2020 till payment.
Aggrieved by the said order, the petitioner Bank preferred
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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an appeal before respondent No.2. By order dated
23.08.2023, respondent No.2 confirmed the order passed
by respondent No.3. Being aggrieved by the orders dated
20.05.2023 and 23.08.2023, the petitioner Bank has
preferred the present writ petition.

3. Learned counsel for the petitioner has contended that
the mother of respondent No.4 had availed a loan from the
PCARDB, Maddur, and respondent No.4 stood as surety for
the said loan. Therefore, the authority has deducted the
amount due towards the petitioner-Bank, from the
retirement benefits payable to respondent No.4 and the
remaining amount has been paid to him. He further
contended that respondent No.4 himself had given an
undertaking/representation vide Annexure-D dated
28.06.2019, stating that the loan amount may be withheld
and the remaining amount may be released. On the basis
of the said undertaking/representation, the original
documents which had been pledged with the Bank were
released and, after deducting the loan amount, the
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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remaining amount was released in favour of respondent
No.4. The authority, without considering this aspect of the
matter, has passed the impugned orders. Hence, he
sought for allowing the petition.

4. Per contra, learned counsel appearing for respondent
No.4 has contended that, at no point of time, respondent
No.4 had stood as surety for the loan sanctioned in favour
of his mother. He further contended that Annexure-D is
not an undertaking given by respondent No.4. Respondent
No.4 had only requested the petitioner-Bank to release the
remaining amount in his favour forthwith. At no point of
time had he requested for deduction of the outstanding
loan amount from his gratuity. Lastly, he contended that
he had not personally borrowed any loan from the
petitioner-Bank and had not given any undertaking.
Therefore, under the Payment of Gratuity Act, the
petitioner-Bank has no authority to deduct the gratuity
amount payable to respondent No.4.
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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5. Learned counsel for other respondents has only
contended that the liberty may be reserved to the
petitioner to recover the amount in accordance with law.

6. Heard the learned counsel for the parties. Perused
the writ petition papers.

7. It is not in dispute that respondent No.4 was working
as a SDA in the petitioner-Bank. It is also not in dispute
that the PCARDB, Maddur, is affiliated to the petitioner-
Bank and had sanctioned loans in favour of the mother of
respondent No.4, Smt.Parvathamma, amounting to
Rs.11,56,060/-. It is also not in dispute that respondent
No.4 retired from service. Out of the total loan amount of
Rs.11,56,060/, the total outstanding loan amount of
Rs.8,34,952/- as on the date of his retirement was
deducted. Out of the said amount, Rs.4,23,154/- was
adjusted or transferred from the leave encashment
benefits payable to respondent No.4 and Rs.4,11,798/-
was adjusted towards the Sericulture loan from the
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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gratuity amount payable to him. Insofar as the gratuity
amount is concerned, the same can be forfeited only in
accordance with Section 4(5) and (6) of the Payment of
Gratuity Act, 1972, and cannot be deducted unless
respondent No.4 has given an undertaking. The aforesaid
relevant provisions of the 1972 Act, are extracted below:
“4. Payment of gratuity.
(1) xxx
(2) xxx
(3) xxx
(4) xxx
(5) Nothing in this section shall affect the right of an
employee receive better terms of gratuity under any
award or agreement or contract with the employer.
(6) Notwithstanding anything contained in sub-
section (1),—
(a) the gratuity of an employee, whose services have
been terminated for any act, wilful 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;
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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(b) the gratuity payable to an employee 5 [may be
wholly or partially forfeited]—
(i) if the services of such employee have been
terminated for his riotous or disorderly conduct
or any other act violence on his part, or
(ii) if the services 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.”


8. Annexure-D, which has been produced in this case, is
not an undertaking given by respondent No.4 and is
merely a letter requesting the petitioner-Bank to withhold
the amount of Rs.8,34,952/- and pay the remaining

amount.

9. Subsequently, respondent No.4 approached the
competent authority for recovery of the withheld amount
which was allegedly adjusted by the petitioner-Bank
unauthorisedly. Accordingly, the authority passed the
impugned orders and directed the petitioner-Bank to
Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

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refund the gratuity amount which had been withheld, i.e.,
a sum of Rs.4,11,798/-. Therefore, there is no error or
illegality in the orders passed by the authority. Hence, the
writ petition is liable to be dismissed. Accordingly, it is
dismissed.

10. It is made clear that this order will not come in the
way of the petitioner-Bank to recover the loan amount, if
any outstanding, in accordance with law, if law permits.

Digitally Signed by NARENDRA PRASAD
HAREKOPPA THIMMANNA GOWDA

(H.T. NARENDRA PRASAD)
JUDGE





HA
LIST NO.: 1 SL NO.: 32