Chairman-Cum-Managing Director, Mahanadi Coalfields Limited vs Sri Rabindranath Choubey

Disposing of the appeal, the Court

HELD:

PER M. R. SHAH, J. (FOR HIMSELF AND ARUN

MISHRA, J.)

1.1 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. [Para 7][25-E-H; 26-A-C]

State Bank of India v. Ram Lal Bhaskar (2011) 10 SCC

249 : [2011] 12 SCR 1036 – referred to.

1.2 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 concluded. 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. [Paras 9, 9.1][274-E-H; 28-A-B]

D.V. Kapoor v. Union of India (1990) 4 SCC 314 : [1990] 3 SCR 697; State Bank of Patiala & Anr. v. Ram Niwas Bansal (Dead) Thr. LRs. (2014) 12 SCC 106 : [2014] 3 SCR 984; R. Jeevaratnam v. The State of Madras AIR 1966 SC 951 : [1966] 2 SCR 204; Ramesh Chandra Sharma v. Punjab National Bank & Anr. (2007) 9 SCC 15 : [2007] 7 SCR 585; Union of India v. Ajoy Kumar Patnaik (1995) 6 SCC 442 : [1995] 3 Suppl. SCR 449; UCO Bank v. Rajinder Lal Capoor (2008) 5 SCC 257 : [2008] 5 SCR 775;

V. Padmanabham v. Government of Andhra Pradesh & Ors. (2009) 15 SCC 537 : [2009] 11 SCR 455; State of Maharashtra v. M.H. Mazumdar (1988) 2 SCC 52 : [1988] 3 SCR 31; State of West Bengal & Ors. v. Pronab Chakraborty (2015) 2 SCC 496 : [2014] 11 SCR 76; State Bank of India v. A.N. Gupta & Ors. (1997) 8 SCC

60 : [1997] 4 Suppl. SCR 383; Takhatray Shivadattray Mankad v. State of Gujarat (1989) Suppl. 2 SCC 110 : [1989] 3 SCR 214; The Secretary, Forest Department & Ors. v. Abdur Rasul Chowdhury (2009) 7 SCC 305 : [2009] 9 SCR 695; State Bank of India v. Ram Lal Bhaskar (2011) 10 SCC 249 : [2011] 12 SCR 1036– referred to.

2.1 Section 4(1) provides that gratuity shall be payable to an employee on 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. Section 4(6) contains a non-obstante clause to sub-section 1. In case 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). The Payment of Gratuity Act, 1972, makes no provision w ith 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 superannuation.[Paras 10.16-10.18][53-G-H; 54-A-F]

2.2 The provisions of Section 4(6) of the Act of 1972 prevail over Section 4(1) as provisions of Section 4(6) contain nonobstante clause as to Section 4(1). It would prevail over the provisions made in Section 4(1) and gratuity would not become payable mandatorily as provided in Section 4(1). Section 4(6)(a) and (b) both provide for recovery of loss caused or forfeiture wholly or partially in the case of termination of services. In case after superannuation of employee there cannot be any dismissal i.e., termination of services as contemplated in Section 4(6), then there can be no recovery of pecuniary loss caused by employee or forfeiture of gratuity wholly or partially as that can only be done in the event of termination of services on charges found established. Such an interpretation would render continuance of inquiry otiose and would defeat the public policy and the provisions of Act of 1972. The recovery of loss or forfeiture is one of the punishments which depends on exigency of termination by way of dismissal as mandated by Section 4(6). To give effect to the provisions of the Act, the punishment of dismissal can be imposed in view of Rule 34.2, otherwise it would defeat the intendment of provisions contained in Section 4(6)(a) and 4(6)(b) of the Act of 1972. [Para 10.19][54-F-H; 55-A-C]

2.3 Section 4(1) used the expression ‘termination of employment after five years by way of superannuation, retirement or resignation or on his death or disablement due to accident or disease’ that is in a normal course. It does not deal with a situation where departmental inquiry is instituted and continued and completed after the age of superannuation and termination of employment had not taken place on completion of the age of superannuation as there is a deemed continuation of the employment for the purpose of holding an inquiry and passing the appropriate punishment order after the conclusion of the departmental inquiry on the basis of misconduct if any found established. Provisions of section 4(1) do not impinge upon the continuation of inquiry. Section 4(6) prevails on it. The Payment of Gratuity Act, 1972 govern the conditions concerning payment of gratuity. It cannot control and provide with respect to an employer’s right to hold a departmental inquiry after retirement, and there is no provision prescribing what kind of punishment can be imposed in the departmental inquiry if it is continued after attaining the age of superannuation. The relevant rules would govern such matters. In case the Payment of Gratuity Act, 1972, is interpreted to interdict the departmental inquiry after the age of superannuation and to deal with the nature of punishment to be imposed, it would be taken as a case of over-inclusion in the Act which deals exclusively with the payment of gratuity. [Para 10.20][55-C-G]

2.4 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 effect. [Para 10.21][55-G-H; 56-A]

M. Ramanatha Pillai v. The State of Kerala & Ors. (1973) 2 SCC 650; Jagdish Mitter v. Union of India AIR 1964 SC 449; P. Balakotaiah v. Union of India AIR 1958 SC 232 : [1958] SCR 1052; Shyam Lal v. State of Uttar Pradesh & Ors. AIR 1954 SC 369 : [1955]

1 SCR 26; Ravindra Kumar Misra v. UP State Handloom Corpn. Ltd. & Anr. (1987) Suppl. SCC 739 : [1988] 1 SCR 501; Registrar General, High Court of Gujarat & Anr. v. Jayshree Chamanlal Buddhbhatti (2013) 16 SCC

59 : [2013] 11 SCR 395; Dinesh Chandra Sangma v. State of Assam and Ors. (1977) 4 SCC 441 : [1978] 1 SCR 607; Workers Employed in Hirakud Dam v. State of Orissa & Ors. (1971) 1 SCC 583 : [1971] 3 SCR 646; Satish Chandra Anand v. Union of India AIR 1953 SC 250 : [1953] SCR 655; State Bank of India v. The Workmen of State Bank of India & Ors. (1991) 1 SCC

13 : [1990] 1 Suppl. SCR 11 – referred to.

3.1 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 to find out the real nature of termination. 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. [Paras 10.23, 10.25][63-C-D; 64-C-F]

UCO Bank & Ors. v. Prabhakar Sadashiv Karvade (2018) 14 SCC 98; State of Assam & Ors. v. Padma Ram Borah AIR 1965 SC 473; State of Punjab v. Khemi Ram (1969) 3 SCC 28 : [1970] 2 SCR 657 – held inapplicable.

Bhagirathi Jena v. Board of Directors, O.S.F.C. & Ors. (1999) 3 SCC 666 : [1999] 2 SCR 354 – distinguished.

Jaswant Singh Gill v. Bharat Coking Coal Ltd. (2007)

1 SCC 663 : [2006] 8 Suppl. SCR 1064 – overruled. Anant R. Kulkarni v. Y.P. Education Society & Ors. (2013) 6 SCC 515 : [2013] 6 SCR 1124; Noida

Entrepreneurs Association v. Noida & Ors. (2011) 6 SCC 508 : [2011] 8 SCR 25; B.T. Krishnamurthy v. Sri Basaveswara Education Society (2013) 4 SCC 490 : [1982] 1 SCR 759; 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 : [2007] 10 SCR 112; State of Punjab v. Rajesh Kumar (2006) 12 SCC 418 : [2006]

9 Suppl. SCR 208; Jai Singh v. Union of India (2006)

9 SCC 717 : [2006] 4 Suppl. SCR 734; State of Madhya Pradesh and Anr. v. Kumari Nivedita Jain and Ors, (1981) 4 SCC 296 : [1982] 1 SCR 759; State of Andhra Pradesh and Anr. v. Lavu Narendranath and Ors. etc. AIR 1971 SC 2560 : [1971] 3 SCR 699; Distt. Registrar, Palghat and Ors. v. M.B. Koyakutty and Ors. (1979) 2 SCC 150 : [1979] 3 SCR 242; Union of India and Anr. v. Tulsiram Patel AIR 1985 SC 1416 : [1985] 2 Suppl. SCR 131; Kirti Bhusan Singh v. State of Bihar (1986) 3 SCC 675 : [1986] 3 SCR 230; U.P. State Sugar Corporation Ltd. & Ors. v. Kamal Swaroop Tandon (2008) 2 SCC 41 : [2008] 1 SCR 887 – referred to.

3.2 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. 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. 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. 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. [Para 10.31 and 10.32][73-G-H; 74-A-F]

PER AJAY RASTOGI, J. (PARTLY DISSENTING):

1. Retiral benefits are earned by an employee for a long and meritorious service rendered by him/her and it is not paid gratuitously or merely as a matter of boon, it is paid to him/her for dedicated and devoted work. The Act, 1972 also acknowledges under sub-section (6) of Section 4 to forfeit it to the extent pecuniary loss so caused from the amount of gratuity payable to the employee. [Para 12][80-D-E]

2. The purpose of holding an inquiry against a delinquent is not only with a view to establish the charge levelled against him or to impose a penalty, but is also conducted with the object of such an inquiry recording the truth of the matter, and in that sense, the outcome of an inquiry may either not establishing or vindicating his stand, hence result in his exoneration. Therefore, there should be a fair action on the part of the authority concerned in holding disciplinary inquiry for the misconduct, if any, being committed by an employee in discharge of his duties even if retired from service during pendency of disciplinary proceedings after adopting the procedure prescribed under the relevant disciplinary rules alike Rules, 1978 in the instant case and indeed the scheme of Rules, 1978 is neither in derogation nor in contravention to the scheme of the Act, 1972. It is also well settled that the competence of an authority to hold an enquiry or to continue enquiry against an employee who has retired from service depends upon the scheme of rules and the terms and conditions of service of the employee are the determining factors as to whether and in what manner the disciplinary enquiry can be held against an employee who stood retired or superannuated from service. [Paras 14, 15][81-F-H; 82-A-B]

3. Those who were the serving employees, if held guilty on conclusion of the disciplinary proceedings, minor/major penalties as referred to under Rule 27 could be inflicted by the disciplinary authority after recording good and sufficient reason commensurate with the nature of misconduct and in the case of an employee who stood retired/superannuated from service pending disciplinary proceedings, the disciplinary authority has a right to withhold the payment of gratuity pending disciplinary inquiry and if found guilty in the inquiry for the offences/misconduct as indicated in sub-section (6) of Section 4 of Act 1972, can be recovered from his gratuity payable under Section

4 of the Act, 1972. At the same time, if he is exonerated by the disciplinary authority after retirement/superannuation from service, he shall be entitled for payment of gratuity along with interest for the delay in payment in terms of Section 7(3) and Section 7(3A) of Act, 1972. [Para 16][82-B-D]

4. Where the disciplinary proceedings are instituted while the employee was in service but retired thereafter during its pendency, under the special procedure provided under Rule 34.2 of the Rules, 1978, the authority is empowered to continue and conclude the disciplinary inquiry in the same manner as if the employee had continued in service by deeming fiction, however, the relationship of employer and employee shall not be severed until conclusion of the disciplinary enquiry but may withhold payment of gratuity in terms of Rule 34.3 pending disciplinary inquiry and in furtherance thereof if later held guilty, the competent authority to the extent pecuniary loss has been caused for the misconduct, negligence in the discharge of duties order for recovery from gratuity either be forfeited in the whole or in part, to the extent pecuniary loss has been caused to the company for the offences/misconduct as a measure of penalty in terms of Rule 34.3 of the Rules read with sub-section (6) of Section 4 of the Act, 1972. [Para 17][82-E-G]

5.1 Gratuity became payable to an employee under Section 4(1) of the Act, 1972 on termination of his employment after he rendered a minimum qualifying service and termination of his employment is either can be on his superannuation or retirement or resignation or death or disablement due to accident or disease or any other cause may be. The word ‘termination’ referred to under sub-section (1) or under sub-section (6) of Section 4 of the Act, 1972 is in reference to the severance of relationship of employer and employee and sub-section (6) of Section 4 being couched with a non-obstante clause empowered the authority in case the delinquent employee held guilty of wilful omission or negligence causing any damage or loss or destruction to the property of the company during the course of employment as a measure of penalty gratuity may be forfeited wholly or partially to the extent misconduct found proved. [Para 19][83-B-D]

5.2 The term ‘termination’ may not be understood with the penalty of dismissal or removal from service specified under Rule

27 of Rules, 1978. The expressions in the schedule of substantive penalties under Rule 27 of the Rules, 1978 refers to various penalties including reduction in rank, compulsory retirement, dismissal, removal, etc. and could possibly be inflicted on the serving employee and indeed cannot be effected with retrospective effect on the delinquent employee who stood retired from service. [Para 20][83-E-F]

5.3 Many a times ‘termination’ and ‘dismissal’ are held to be synonymous but the difference between ‘termination’ and ‘dismissal’ is that dismissal could be on account of misconduct with loss of future employment involving dishonesty or criminality and penal in character but that is not in the case of termination. The “termination” as per Black’s Law Dictionary is the complete severance of relationship of employer and employee which in the instant case could be saved during pendency of the disciplinary proceedings in view of Rule 34.2 of the Rules, 1978 which clearly envisaged that disciplinary proceedings, if instituted while the employee was in service, shall be deemed to be pending 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 and by legal fiction, the relationship of employer and employee shall be deemed to continue for the limited purposes of conclusion of the disciplinary proceedings and the delinquent employee becomes qualified to claim gratuity subject to the outcome of the disciplinary proceedings in terms of Rule 34.3 of the Rules, 1978 read with sub-section (6) of Section 4 of the Act, 1972. [Para 21][83-G-H; 84-A-C]

Jaswant Singh Gill v. Bharat Coking Coal Ltd. (2007)

1 SCC 663 : [2006] 8 Suppl. SCR 1064; State Bank of India v. Ram Lal Bhaskar and Another (2011) 10 SCC

249 : [2011] 12 SCR 1036; State of Maharashtra v. M.H. Mazumdar (1988) 2 SCC 52 : [1988] 3 SCR 31; UCO Bank & Ors. v. Rajendra Shankar Shukla (2018)

14 SCC 92 : [2018] 2 SCR 636; UCO Bank and Ors. v. Prabhakar Sadashiv Karvade (2018) 14 SCC 98; UCO Bank and Ors. v. Rajinder Lal Capoor (2007) 6 SCC

694 : [2007] 7 SCR 543 – referred to.

7. The substantive penalties provided under the schedule of penalties referred to under Rule 27 could be inflicted on a delinquent employee while he is in service but in case where the delinquent employee stood retired or superannuated from service pending disciplinary inquiry, at least either of the substantive penalties provided under Rule 27 are not available to the disciplinary authority to be inflicted with retrospective effect but at the same time punishment of forfeiture of gratuity if held guilty for misconduct or negligence to the extent damage or pecuniary loss has been caused to the employer can be inflicted upon the delinquent in terms of Rule 34.3 of Rules 1978 read with subsection (6) of Section 4 of the Act, 1972 and in case the delinquent employee stands exonerated he became entitled for gratuity for the delay in payment in terms of Sections 7(3) and 7(3A) of Act, 1972 and as a matter of caution, it should not be pre-supposed that where the disciplinary inquiry remain pending and could not be concluded while the delinquent employee was in service in due course of time, he shall be held guilty and punished under the scheme of Rules, 1978. [Para 27][87-B-E]