CHAIRMAN CUM MANAGING DIRECTOR MAHANADI COALFIELDS LIMITED Vs SRI RABINDRANATH CHOUBEY
Bench: K.S. RADHAKRISHNAN,A.K. SIKRI
Case number: C.A. No.-009693-009693 / 2013
Diary number: 30261 / 2013
Advocates: GP. CAPT. KARAN SINGH BHATI Vs
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[REPORTABLE]
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9693/2013 [SPECIAL LEAVE PETITION (CIVIL)NO. 31583 OF 2013]
Ch. cum Man. Director Mahanadi Coalfield Ltd. ...........Appellant
Versus
Rabindranath Choubey ........Respondent
J U D G M E N T
A.K. SIKRI, J.
1. Leave granted.
2. The respondent was working as Chief General Manager (Production) since
17.2.2006 at Rajmahal area under Mahanadi Coalfields Ltd., the appellant
herein. A memo containing articles of charge was issued to him on
1.10.2007 alleging that there was shortage of stock of coal in Rajmahal
Group of mines which was under his management and enquiry was
proposed to be conducted under Rule 29 of the Conduct, Discipline &
Appeal Rules.
3. During the pendency of the departmental proceeding, the Respondent was
allowed to retire on 31.7.2010 on attaining the age of superannuation. The
Respondent submitted an application on 21.9.2010 to the Director 1
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(Personnel) for payment of gratuity. On the same date, he also submitted an
application before the Controlling Authority under Payment of Gratuity Act
cum-Regional Labour Commissioner for payment of gratuity.
4. Notice was issued to the Appellant to appear. The appellant appeared and
stated that the payment of gratuity was withheld due to reason that
disciplinary case is pending against him. The controlling authority held that
the claim of the Respondent was pre-mature.
5. The respondent challenged the order by filing the writ petition. The single
Judge dismissed the writ petition holding that in view of the existence of an
appellate forum against the order passed by the Authority, the Respondent
may file an appeal before the Appellate Authority within 21 days from the
date of passing of the impugned order.
6. The Respondent then filed Intra Court Writ Appeal. The Division Bench of
the High Court has held that writ petition was maintainable. On merits, it
ruled that the disciplinary proceedings against the respondent were initiated
prior to attaining the age of superannuation. The respondent retired from
service on superannuation and hence the question of imposing a major
penalty of removal or dismissal from service would not arise as per the
decision of the Supreme Court in Jaswant Singh Gill vs. Bharat Coking
Coal Ltd. & Ors. (2007) 1 SCC 663. The High Court has further held that
the power to withhold payment of gratuity as contained in Rule 34(3) of the
Rules, 1978 shall be subject to the provisions of the Payment of Gratuity 2
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Act, 1972. Therefore, the statutory right accrued to the Respondent to get
gratuity cannot be impaired by reason of the Rules framed by the Coal India
Ltd. which do not have the force of a statute. On that basis, direction is
given to the appellant to release the amount of gratuity payable to the
respondent.
7. In the aforesaid circumstances, the question which falls for consideration is
as to whether it is permissible in law for the appellant to withhold the
payment of gratuity to the respondent, even after his superannuation from
service, because of the pendency of disciplinary proceedings against him.
8. Before we proceed to answer this question in the light of arguments
advanced by Counsel on either side, we would like to point out that the
question of maintainability of the writ petition against the order of the
Controlling Authority under the Payment Gratuity Act was not raised before
us by the learned Counsel for the appellant. Thus, the learned Counsel did
not challenge the approach of the writ appeal Court in entertaining the writ
appeal on merits by giving the reason that it was so doing to avoid
confusion and ambiguity, more so when there were no disputed facts
involved and the issue involved was pure question of law. We are, therefore,
not called upon to decide as to whether the approach of the Division Bench
in entertaining the writ appeal on merits was erroneous or not.
9. Reverting to the issue framed above, before we examine the same, we
would also like to narrate some more facts for clear understanding of the 3
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issue involved. The appellant- Ch.-cum-Man. Director Mahanadi Coalfield
Limited (CIL) has framed the Conduct Discipline and Appeal Rules, 1978
(hereinafter to be referred as 'CDA Rules'). These are applicable to the
employees of the appellant company as well.
10.Rule 27 of these CDA Rules mentions the authorities who are empowered to
impose various punishments which are specified in column III of the
Schedule attached to these Rules. Rule 29 enlists the procedure for
imposing major penalties for misconduct and misbehaviour. The CDA Rules
are not statutory in nature. However, they govern the employees of the
appellant.
11.When the respondent was served with charge sheet dated 1.10.2007, he was
posted as Chief General Manager, Rajmahal, Group of Mines, ECL. Shortly,
after the service of charge sheet, respondent was made to join as Chief
General Manager, Mining in M-3 Grade on transfer and was posted as Chief
General Manager, Production, MCL. On 9.2.2008, he was suspended from
service under Rule 24.1. of the CDA Rules, pending departmental inquiry
against him. This suspension, however, was revoked from 27.2.2009
without prejudice to the departmental inquiry. On completion of 60 years of
age, the respondent was superannuated with effect from 31.7.2010 for
which notice for retirement on superannuation was given by the appellant to
the respondent vide letter dated 8.2.2010.
12.It would also be pertinent to mention that the inquiry against the respondent 4
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was concluded on 25.3.2009. However, thereafter nothing has been heard by
the respondent. It is not known as to whether the Inquiry Officer has
submitted the report on the said inquiry and if a report is submitted whether
he has exonerated the respondent or held him guilty of the charges. Be as it
may even if there is any report, no further action has been taken on the said
report by the disciplinary authority till date and more than 4 ½ years have
lapsed in the meantime.
13.On the aforesaid facts, the case of the respondent before the courts below
was that his statutory rights to receive the gratuity could not be interdicted
and as per the provisions of Payment of Gratuity Act he was entitled to have
the payment of gratuity on his superannuation. Since, the appellant had
referred to the Rules framed under which gratuity could be withheld
pending inquiry, this position was sought to be countered by the respondent
with a submission that such Rules which were non-statutory in nature could
not thwart the right of the respondent to claim the gratuity which was
statutorily recognised in his favour under the Payment of Gratuity Act,
1972. As noted above, while giving brief narration of facts, the High Court
has accepted the aforesaid plea of the respondent and while doing so it has
referred to the judgment of this Court in the case of Jaswant Singh Gill v.
Bharat Coking Coal Ltd. and Ors. (supra). Some of the judgments cited by
the appellant before the High Court, which would be referred to at a later
stage, have been distinguished by the High Court holding that they are not 5
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applicable.
14.The arguments of the learned Counsel for the respondent were same which
were addressed before the High Court. Likewise, learned Counsel for the
appellant also made the very same submissions. He argued that in view of
Rule 34 of the CDA Rules, the management had a right to withhold
payment of gratuity. He also submitted that this rule was not contrary to any
provisions of the Payment of Gratuity Act. The submission in this behalf
was that in Payment of Gratuity Act there is no provision that gratuity has to
be released even when departmental proceedings are pending against an
employee. The learned Senior Counsel for the appellant placed strong
reliance on the judgment of this Court in State Bank of India vs. Ram Lal
Bhaskar and Anr. ; 2011(11)SCALE 589; 2011(10)SCC249.
15.In so far as rule position is concerned, it is not in doubt that Rule 34 permits
the management to withhold the gratuity during the pendency of the
disciplinary proceedings. Rule 34.2 and 34.3 of the CDA Rules are relevant
in this behalf which make the following reading:
“34.2 Disciplinary proceeding, if instituted while the employee was in service whether before his retirement or during his re- employment shall, after the final retirement of the employee, be deemed to be proceeding 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.
34.3 During the pendency of the disciplinary proceedings, the Disciplinary Authority may withhold payment of gratuity, for
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ordering the 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 including service rendered on deputation or on re-employment after retirement. However, the provisions of Section 7(3) and 7(3A) of the Payment of Gratuity Act 1972 should be kept in view in the event of delayed payment in the case the employee is fully exonerated.”
16. The bone of contention is as to whether this rule is contrary to the
provisions of the Payment of Gratuity Act and, therefore, this rule being non-
statutory is to be ignored and the provisions of the Gratuity Act are to be
preferred. In this behalf we will have to examine the scheme of the Gratuity
Act to find whether as per the Gratuity Act, such a person like the respondent,
would become entitled to receive the gratuity under this Act.
17. It is because of the reason that a statutory right accrued, thus, cannot be
impaired by reason of a rule which does not have the force of statute. It will
bear repetition to state that the Rules framed by Respondent No. 1 or its
holding company are not statutory in nature.
18. It would be of interest to note that the inter play of these very CDA
Rules, 1978 of CIL and the Provisions of Gratuity Act came for consideration
in the case of Jaswant Singh Gill (supra) and this Court explained the legal
position of CDA Rules vis-a-vis Gratuity Act/ gratuity of an employee in the
following manner:-
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“The Act was enacted with a view to provide for a scheme for payment of gratuity to employees engaged inter alia in mines. Section 3 of the Act provides for appointment of an officer to be the controlling authority. Controlling authority is to be responsible for administration of the act. Different authorities, however, may be appointed for different areas. Section 4 of the Act entitles an employee to gratuity after he has rendered continuous service for not less than five years inter alia on his superannuation. Sub- Section (6) of Section 4 contains a non- obstante clause stating:
(a) the gratuity of an employee, whose services have been terminated for any act, 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;
(b) the gratuity payable to an employee 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 or 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.
9. The Rules framed by the Coal India Limited are not statutory rules. They have been made by the holding company of Respondent No. 1. 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
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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. 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 therefore is rendition of five years continuous service. 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.
10. 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. 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. Termination of services for any of the causes enumerated in Sub-section (6) of Section 4 of the Act, therefore, is imperative.”
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19. The principles which are laid down in the aforesaid judgment are
recapitulated below:-
(i) No doubt, Rule 34.2 of CDA Rules provides for continuation of disciplinary proceedings despite retirement of an employee if the same was initiated before his retirement However, after his retirement, major penalty in terms of Rule 27 cannot be imposed. We may state here that rule 27 of CDA Rules provides for the nature of penalties including 'recovery from pay or gratuity of the whole part of any back loss cause to the company by negligence or breach of orders for trust'. Major penalties which are prescribed under Rule 27 are reduction to a lower grade, compulsory retirement, removal from service and dismissal. The Court thus, held that these major penalties cannot be imposed upon a retired employee.
(ii) Gratuity Act gives right to an employee to receive gratuity on rendition of 5 years continuous service. Gratuity become payable as soon as the employee retires. This statutory right which accrues to an employee cannot be impaired by reason of a rule which does not have the force of a statute. Therefore, Rule 34.3 of the CDA Rules, which is non- statutory in nature, is contrary to the provisions of the Gratuity Act. As such, gratuity cannot be withheld on the retirement of an employee even if departmental proceedings were initiated against him before his retirement and are pending at the time of retirement.
20. Jaswant Singh Gill (supra) was a judgment delivered by two judge
Bench. Mr. Mahavir Singh, learned senior counsel has placed strong reliance to
a three Bench judgment of this Court which is later in point of time. This case
is known as State Bank of India vs. Ram lal Bhaskar and Anr. 10
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2011(10)SCC249. In that case, Rule 19(3) of the State Bank of India Officers
Service Rules, 1992 came up for interpretation which was para materia with
rule 13.42 of the CDA Rules. Said rule 19(3) of SBI Officers Service Rules
also permits disciplinary proceedings to continue even after the retirement of
an employee if those were instituted when the delinquent employee was in
service. Then for the purpose of such proceedings the otherwise retired
employee is deemed to be in service and those proceedings shall be continued
and concluded as if the employee had continued in service. Thus, such an
employee is deemed to be in service for limited and specified purpose only viz.
for the purposes of continuance and conclusion of the proceedings. In that case,
charge sheet was served upon the respondent before his retirement. The
proceedings continued after his retirement and were conducted in accordance
with relevant rules wherein charges were proved. On that basis punishment of
dismissal was imposed. After exhausting the departmental remedies, the
respondent filed the writ petition in the High Court which was allowed and
order of dismissal was quashed. This Court reversed the said decision of the
High Court. However, we find that there is no direct discussion, in the said
judgment, on the issue as to whether it is permissible for the disciplinary
authority to impose the penalty of dismissal of service after the retirement of
the employee. In fact the Court had dealt with two aspects. One question
which was deliberated was as to whether inquiry could continue after the
retirement of the respondent from service. This question was answered in the 11
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affirmative having regard to Rule 19(3) of the SBI Officers Service Rules. The
Court distinguished another judgment in UCO Bank & Anr. vs. Rajinder Lal
Capoor; 2007(6)SCC694 on a ground that in the said case the delinquent
officer had already been superannuated and the charge sheet was served after
his retirement. In these circumstances the court had taken the view in Rajinder
Lal Capoor’s case that when an employee is allowed to superannuate, no
inquiry can be initiated against him thereafter. However, if charge sheet is
served before the retirement enquiry can continue even after the retirement as
per Rule 19(3). This proposition thus stands settled viz. if the Rules permit,
enquiry can continue even after the retirement of the employee.
21. Other aspect which was dealt with was as to whether the High Court
could interdict the findings of disciplinary authority and arrive at its conclusion
that the findings recorded by the Inquiry Officer was not substantiated by any
officer on record on the basis of evidence produced. This Court held that so
long the findings of the disciplinary authority are supported by some evidence,
the High Court is not empowered to re-appreciate the evidence as an appellate
authority and came to a different and independent findings on the basis of that
evidence. This is not the issue before us in the instant case.
22. It is thus, clear that the question as to whether penalty of dismissal
could be imposed after a retirement was not categorically raised or dealt with.
No doubt, penalty of dismissal was inflicted upon the employee in that case.
But it was not specifically on in clear terms contended that such a penalty 12
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could not be imposed on an employee who is already permitted to retire. At the
same time, innuendo, the judgment gives a semblance of indication that such a
penalty is permissible because of the reason that as per the rules, for the
purposes of enquiry, the employee shall be deemed to be in service. As a
sequittor, one can deduce the principle that when the Rules, by creating fiction,
treat the officer still in service, albeit for the limited purpose of the continuance
and conclusion of such proceedings, then any of the prescribed penalties,
including dismissal, can be imposed. However, as we have pointed out above,
the issue of permissibility of penalty of dismissal on such a retired official was
neither raised nor any direct discussion followed thereupon. At the same time,
fact remains that penalty of dismissal, even after the retirement, was upheld.
This goes contrary to the dicta laid down in Jaswant Singh Gill (supra) which
took the view that no major penalty is permissible after retirement was not even
referred to.
23. The issue which confronts us in the instant appeal is as to whether
gratuity can be withheld in the wake of Rule 34 of CDA Rules when
examined in juxtaposition with the provisions of the Gratuity Act. To put it
otherwise, whether in the scheme of Gratuity Act, gratuity has to be
necessarily released to the concerned employee on his retirement even if
departmental proceedings are pending against him. We find that Jaswant
Singh Gill's case directly answers this question, that too in the context of
these very CDA Rules. However, it is because of the reason that the said 13
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judgment proceeds on the basis that after the retirement of an employee,
penalty of dismissal cannot be imposed upon the retired employee. If this
view is not correct and the imposition of penalty of dismissal is still
permissible, employer will get the right to forfeit the gratuity of such an
employee in the eventualities provided under Sections 4(1) & 4 (6) of the
Payment of Gratuity Act which reads as under:-
Section 4 - Payment of gratuity
(1) 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,--
(a) on his superannuation, or (b) on his retirement or resignation, or (c) on his death or disablement due to accident or disease:
Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement:
Provided further that in the case of death of the employee, gratuity payable to hi m shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.]
Explanation.--For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.
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(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;
(b) the gratuity payable to an employee 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 of 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 hi m in the course of his employment.
24. Thus for invoking Clause (a) or (b) of sub-section 6 of Section 4
necessary pre-condition is the termination of service on the basis of
departmental enquiry or conviction in a criminal case. This provision would
not get triggered if there is no termination of services.
25. It is the case of the appellant that in the charge sheet served upon the
respondent herein, there are very serious allegations of misconduct alleging
dishonestly causing coal stock shortage amounting to Rs. 31.65 crores, and
thereby causing substantial loss to the employer. If such a charge is proved
and punishment of dismissal is given thereupon, the provisions of Section
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4(6) of the Payment of Gratuity would naturally get attracted and it would be
within the discretion of the appellant to forfeit the gratuity payable to the
respondent. As a corollary one can safely say that the employer has right to
withhold the gratuity pending departmental inquiry. However, as explained
above, this course of action is available only if disciplinary authority has
necessary powers to impose the penalty of dismissal upon the respondent
even after his retirement. Having regard to our discussion above of Jaswant
Singh Gill (supra) and Ram Lal Bhaskar (supra), this issue needs to be
considered authoritatively by a larger Bench. We, therefore, are of the opinion
that present appeal be decided by a Bench of three Judges.
26. We accordingly direct the Registry to place the matter before Hon'ble
the Chief Justice for constituting a larger Bench to hear this appeal.
….......................................J. [K.S. RADHAKRISHNAN]
…........................................J. [A.K. SIKRI]
New Delhi October 29 , 2013
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