B.D.C.C. Bank vs K. Shivaram and Others

Anand Byrareddy, J.—Heard the learned counsel for the petitioner. The learned counsel for respondent No. 1 is absent. However, since the ground raised in the present petition turns on a narrow compass, the petition is heard and disposed of.

The petitioner is said to be a Co-operative Bank registered under the Karnataka Co-operative Societies Act, 1959, having its registered office at Hospet. The first respondent was said to be appointed as a cashier as on 26.05.1969 in the petitioner''s bank. He was responsible for cash transactions of the customers of the petitioner. While discharging duty as a cashier, he is said to have misappropriated a sum of Rs. 81,200/-. This was brought to light on 04.08.1994 and he was served with a notice promptly. He remained absent and his whereabouts were not found. Therefore, criminal proceedings had been initiated. He was subsequently traced and charge-sheeted for the offence punishable under the relevant provisions of the Indian Penal Code, 1860 (hereinafter referred to as ''I.P.C.'', for brevity). Parallelly, a domestic enquiry was conducted in respect of the charges levelled against him. Therefore, the enquiry report having been filed, a second show cause notice was issued to the first respondent. Since the explanation offered by the first respondent was not satisfactory, his services came to be dismissed with effect from 28.11.2002. Insofar as the criminal proceedings were concerned, the competent court had passed the judgment in C.C. No. 1729/1994 convicting the first respondent for an offence punishable under Section 409 of the IPC and it sentenced him to undergo rigorous imprisonment for two years and a fine of Rs. 3,000/- was imposed.

It was the petitioner''s case that the first respondent was liable to reimburse the misappropriated amount and to pay interest on the said amount during his services. It further transpires that during the course of his service, the first respondent had borrowed a house loan and there were other dues. In all, he was liable to pay a sum of Rs. 2,43,077/- to the petitioner which was deducted out of the gratuity amount of Rs. 2,60,140/- and the remaining amount was credited to his account. When matter stood thus, the first respondent had filed an application under Section 7(1) of the Payment of Gratuity Act, 1972, (hereinafter referred to as ''the Act'' for brevity) claiming gratuity of Rs. 2,74,615/- with interest at 15% p.a. from 28.11.2002. A case was registered in PGA No. 61/07-08. The petitioner had entered appearance and submitted a written statement denying the claim made by the first respondent and contested the claim pointing out that the claim was barred by limitation. In that, he was terminated from service on 28.11.2002 whereas the application was filed on 12.12.2007. Evidence was tendered before the said authority and the second respondent had passed an order dated 19.06.2008 allowing the application and directed the petitioner to pay a sum of Rs. 1,90,560/- with interest at 10% p.a. from 29.11.2002. Being aggrieved by the same, an appeal was preferred by the petitioner before the third respondent. The appellate authority dismissed the appeal by an order dated 29.11.2008. It is that which is under challenge in the present petition.

The first respondent has not filed any statement of objections. Therefore, there being a finding of fact as to the gratuity payable to the first respondent, the question is whether the petitioner would withhold the entire gratuity amount on the footing that since the first respondent was convicted in a criminal case and since Section 4(6)(b) of the Act permits such withholding of the gratuity amount, whether the petitioner could withhold the amount in entirety. The petitioner apart from this contention, has also pointed out that there was loan transactions and when first respondent was terminated from service, the loan was outstanding and the first respondent has not repaid those amounts. The petitioner, therefore, claims that even those amounts could be deducted out of the gratuity payable to the first respondent. The gratuity payable to an employee is mandated in law. The question of making deductions out of the said sum is impermissible except in terms of Section 4 of the Act. It is not evident that the conviction had attained finality. There is no material placed on record to demonstrate that an appeal was preferred against the said criminal case.

Be that as it may. Insofar as the petitioner''s claim that the petitioner is entitled to withhold amounts due under the loan transaction could also be deducted from out of the gratuity amount, may not hold water. It is for the petitioner to independently recover some amounts, if, it is possible from the respondent.

Insofar as the gratuity amount is concerned, it is possible for the petitioner to relate the criminal case to the amount that was misappropriated and of which the first respondent was found guilty and the corresponding amount being withheld, would stand to reason for Section 4 of the Act does provide that said gratuity could be withheld wholly or in part. Though, earlier the provision was to permit the employer to withhold the gratuity wholly, it has now been amended since the year 1994, to indicate that there is a discretion offered to the employer to withhold the gratuity wholly or in part. This discretion, however, should be exercised with judicially and in a fair manner and there should be reasons afforded in withholding the gratuity. In the present case on hand, the reason for withholding the gratuity is relatable to the amount of loss caused to the Society by virtue of misappropriation which has been established in a criminal case and for which the first respondent was convicted with the punishment. Therefore, the gratuity that would be withheld by the petitioner is restricted to a sum of Rs. 81,200/- and since the petitioner has already deposited the amount with the competent authority and since the respondent has been restrained from withdrawing that amount by virtue of an order of stay granted by this Court, the stay stands vacated to the extent that a sum of Rs. 81,200/- shall be refunded to the petitioner by the competent authority and the remaining amount shall be permitted to be withdrawn by the first respondent.

Insofar as any recoveries to be made by the petitioner, if, the law of limitation permits any such recovery, that remedy could be exercised before the appropriate forum.

With that observation, the petition is allowed in part, in terms as above. The impugned orders stand modified to the extent as aforesaid.