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Judgment
The petitioner seeks gratuity from his employer.
Learned Advocate for the petitioner submits that, the
petitioner was an employee of a bank. A disciplinary proceeding was
initiated by the bank. The petitioner was dismissed from service in
such disciplinary proceeding. According to him, the petitioner is
entitled to pension and gratuity. Gratuity was directed to be paid by
an Order dated May 2, 2013. The employer had deliberately
deposited such amount in an account which was frozen by it. In such circumstances, the petitioner had approached the Assistant
Labour Commissioner (Central)-I, Kolkata and controlling authority
under Section 7 of the Payment of Gratuity Act, 1972 read with
Rule 10(1) of the Payment of Gratuity Rules, 1972. The controlling
authority had initially passed an Order dated December 15, 2014
directing the bank to pay the sum of Rs.3,50,000/- along with
simple interest at the rate of 10%. A subsequent order was passed
on February 13, 2015. The respondent no. 6 had by a writing dated
march 18, 2015 requested the petitioner to inform the savings bank
account number in which the cheque can be deposited. The
petitioner had replied thereto by a writing dated march 31, 2015
and requested issuance of the cheque of the petitioner in the correct
name. The petitioner wrote further letters requesting for the cheque.
However, without issuing any cheque the respondent no. 6 had
informed the petitioner by a writing dated May 14, 2015 that, an
amount of Rs.3,50,000/- had been credited to the petitioner''s
savings bank account lying with the Malda Branch of United Bank
of India. The petitioner, thereafter, enquired with the Malda Branch,
where he was informed that, the account was dormant. These facts
were brought to the notice of the controlling authority who by an Order dated May 26, 2015 issued a certificate under Section 7 of
the Payment of Gratuity Act, 1972 to the District Collector. By such
order the controlling authority had directed recovery of the amount
of Rs.3,50,000/- along with compound interest thereon from may
27, 2015 till the date of recovery at the rate of 15%, as arrears of
land revenue. The petitioner had written to the concerned District
Magistrate for initiation of the recovery proceedings. The authorities
not taking any steps, the petitioner had approached the Writ Court.
Learned Advocate for the petitioner submits that, no
proceedings were taken under Section 54(6) of the Payment of
Gratuity Act, 1972. The gratuity receivable by the petitioner cannot
be attached. The bank has deliberately put it into frozen account so
as to deny payment to the petitioner. Moreover, the bank is seeking
to adjust such amount receivable which the bank is not entitled to.
In support of such contentions, he relies upon 2000 Volume 3
Calcutta Law Times page 468 ( Ram Ranjan Mukherjee & Ors.
v. Mining and Allied Machinery Corpn. Ltd .), 2013 Volume 12
Supreme Court Cases page 210 ( State of Jharkhand & Ors. v.
Jitendra Kumar Srivastava & Anr .) and an unreported decision of the Kerala High Court dated November 19, 2014 passed in W.A.
No. 1628 of 2014 in WP (C). 923 of 2014 ( Kodanad Service Co-
operative Bank Ltd. v. K.K. Sushama & Anr .).
Learned Advocate for the bank refers to the prayer made in the
writ petition and submits that, the relief sought for has since been
granted. He refers to page 43 of the affidavit-in-opposition in
support of such contention. Referring to page 23 of the affidavit-in-
opposition he submits that, the petitioner had permitted the bank
to adjust the loan amount from the amount receivable by the
petitioner on account of gratuity and provident fund. The petitioner,
therefore, had volunteered and created a charge over the amount of
gratuity receivable by the petitioner. There are amounts
outstanding due and payable by the petitioner to the bank. The
bank has, therefore, rightly adjusted such dues with the amount of
gratuity receivable by the petitioner. In any event, the amount
receivable by the petitioner on account of gratuity was paid into a
bank account of the petitioner. Therefore, there is no default on the
part of the bank in paying the gratuity warranting a certificate case
to be initiated. In support of the contention that, gratuity can be allowed to be adjusted towards loan amounts, learned Advocate for
the bank relies upon an unreported decision of the Allahabad High
Court dated March 8, 2013 rendered in Civil Misc. Writ Petition
No. 48530 of 2009 ( State Bank of Bikaner & Jaipur v. the
Appellate Authority & Ors .).
Learned Advocate for the petitioner in reply submits that, the
issue of adjustment was sought to be raised before the controlling
authority. Such issue cannot now be allowed to be raised by the
bank as such issue is barred by the principles of res judicata.
I have considered the rival contentions of the parties and the
materials made available on record.
The petitioner was an employee of the bank. A disciplinary
proceeding was initiated against him. Such disciplinary proceeding
culminated into an order of punishment dated May 26, 2009 by
which the petitioner was dismissed without notice. Such order of
punishment is the subject matter of challenge in a writ petition
being W.P. No. 10301(W) of 2009. Apparently, the petitioner had
filed another writ petition being W.P. No. 4532 (W) of 2009
challenging the jurisdiction of the disciplinary authority. Such writ petition was disposed by an Order dated April 6, 2009. The
petitioner being dismissed from service without any financial
punishment, the petitioner became entitled to pension and gratuity.
The liability to pay gratuity was acknowledged by the bank. An
amount of Rs.3,50,000/- was acknowledged as payable by the bank
to the petitioner on account of gratuity by a writing dated May 13,
2013. The bank, however, deposited such gratuity amount in a
bank account of the petitioner maintained with the bank which was
frozen, even before the date of deposit of the sum, by the bank. The
petitioner, therefore, not being able to withdraw the gratuity
amount, approached the respondent no. 4 under Section 7 of the
Payment of Gratuity Act, 1972 read with Rule 10(1) of the Payment
of Gratuity Rules, 1972. The respondent no. 4 directed the bank to
pay the amount of Rs.3,50,000/- as gratuity along with simple
interest at the rate of 10 per cent per annum. The last of such
orders of payment is dated February 13, 2015. The proceeding was
kept pending. The bank had, thereafter, called upon the petitioner
to inform the bank as to which bank account the petitioner would
like such payment to be made. Various correspondence ensued
between the parties. The petitioner ultimately by a writing dated August 27, 2015 informed the bank that, he has a savings bank
account with State Bank of India, Diamond Harbour Branch which
may be credited. The account number was given. It appears that,
the bank had deposited the amount of Rs.3,50,000/- in a bank
account in the name of the petitioner at its Malda Branch. The
petitioner approached the Malda Branch for operating the account.
The Malda Branch did not allow such operation. The application
under Section 7 of the Payment of Gratuity Act, 1972 was
subsequently taken up for consideration on May 26, 2015 when
after noticing the bank''s refusal to pay the petitioner, an order was
passed directing the bank to pay the petitioner the amount of
Rs.3,50,000/- as gratuity along with compound interest at the rate
of 15 per cent per annum calculated from May 27, 2015 till the date
of recovery. The bank did not comply with such order. The
petitioner approached the respondent no. 2 to initiate certificate
proceeding. The certificate proceeding has not been initiated till
date.
Apparently, the petitioner had obtained a loan from bank and
executed documents authorising the bank to adjust the receivable amounts on account of pension, gratuity and provident fund with
the loan amount. The bank seeks to do so now. The bank claims
that, it has banker''s lien over the amount receivable and in any
event, the petitioner has authorized the bank to receive such
amount.
The bank did not take the defence of adjustment or banker''s
lien in the proceedings under the Payment of Gratuity Act, 1972.
The competent authority under the Act of 1972 has directed
payment of gratuity in presence of the bank. The bank has accepted
such direction and has acted in purported compliance thereof. The
direction for payment was made notwithstanding the so-called
defence of adjustment being available to the bank. In State Bank
of Bikaner & Jaipur (supra) a proceeding before the controlling
authority under the Payment of Gratuity Act, 1972 was under
consideration by the High Court. The bank had taken the defence
that it is entitled to adjust the loan amount with the gratuity
receivable as authorized by the borrower. In such context it has
held that, such amount can be adjusted. As noted above, in this
case, the bank has not taken this defence in the proceeding before the controlling authority. Rather it had allowed the controlling
authority to issue the direction for payment. The bank is, therefore,
bound by such direction given by the controlling authority. It
cannot set up a defence to a writ petition on an issue which it could
have raised in the other proceeding and did not raise the same. In
Kodanad Service Co-operative Bank Ltd. (supra), the provisions
of the Payment of Gratuity Act, 1972 were considered along with
banker''s lien and general lien. It has held that, lien cannot be
exercised over the terminal benefits of a deceased employee. It has
also noted the provisions of Section 14 of the Act of 1972. Ram
Ranjan Mukherjee & Ors. (supra) has held that, payment of
gratuity cannot be withheld merely because of claim for damages of
unauthorized occupation is pending. It has held that, the right to
gratuity is not depended upon the employee vacating the official
accommodation. Pension and gratuity are not bounties but are
properties. It is an earning of an employee. The right to this
property cannot be taken away without due process of law. This is
the finding in Jitendra Kumar Srivastava & Anr. (supra).
Section 13 of the Payment of Gratuity Act, 1972 protects a
gratuity payable under the Act of 1972 from attachment in
execution of any decree or order of any civil, revenue or criminal
Court. Section 4 of the Act of 1972 deals with payment of gratuity.
Sub-section (6) thereof permits an employer to forfeit gratuity on
the grounds specified therein. The gratuity of an employee whose
services have been terminated for any act of willful omission or
negligence causing any damage or loss to the employer will forfeit
the gratuity to the extent of the damage or loss so caused. The
gratuity payable to an employee may be wholly or partially forfeited
for the grounds as provided in sub-clause (i) and (ii) of clause (b) of
Sub-section (6) of Section 4 . In other words, an employer forfeits
gratuity on the happening of events specified in Section 4(6) of the
Act of 1972 and not otherwise. Except the forfeiture provided for in
Section 4(6) of the Act of 1972, gratuity is payable and is immune
from attachment. The gratuity receivable by the employee is,
therefore, protected. The protection is not available only when the
conditions in Section 4(6) are fulfilled.
In the present case, although the petitioner was discharged
from service, in a disciplinary proceeding, the order of punishment
was without any financial implication. The order of punishment
does not impose a forfeiture of gratuity. An employee of the bank
may have dual capacities while dealing with the bank. A person can
be an employee of the bank as well as its borrower at the same
time. There will therefore be two contracts. One being the contract
of employment and the other being the contract of loan. As an
employee, it may be entitled to receive gratuity for the services
rendered in terms of the contract of employment. As a borrower,
under the contract of loan, the employee concerned can or may
execute documents authorising the bank to adjust the amounts
receivable as pensionary and retirement benefits including gratuity
with that of the loan amount. The present case concerns gratuity
only. The intentions of the legislature under the provisions of the
Act of 1972 are clear. An employee is entitled to gratuity unless
forfeited in the manner and for the grounds provided for in Section
4(6) of the Act of 1972. The gratuity received under the Act of 1972
is immune from execution of an order of Court. Therefore, a bank
cannot approach a Court for the purpose of attaching a gratuity received or receivable by an employee including its own employee
for adjustment toward the loan amount. The question is whether a
bank, who is not entitled to approach the Court to attach a
pensionary benefit, is entitled to adjust the pensionary benefit with
a loan without recourse to a Court of law on the strength of
documents executed by the employee. The documents executed by
the employee permitting the bank to adjust the pensionary benefits
will not allow the bank to obtain an order of attachment from the
Court in view of Section 13 of the Act of 1972. The same set of
documents, therefore, should not be read to mean that it would
permit the bank to adjust the loan amount with the pensionary
benefits on its own. Such permission would initiate against the
provisions of Section 23 of the Contract Act, 1872. The loan
documents permitting the bank to adjust gratuity would be without
lawful consideration and with an unlawful object as, if, permitted, it
would defeat the provisions of the Act of 1972. Even if the borrower
is an employee of the bank, then also the bank cannot adjust the
pensionary benefits with the outstanding loan amount on its own.
The bank has to physically make over the gratuity amount to the
employee. Upon the employee receiving the benefits, the employee concerned may voluntarily pay the loan amount to the bank. There
has to be an act of wilful volition by the employee concerned in
making over the gratuity to the bank towards adjustment of the
loan amount after receipt of the gratuity amount. Deposit of the
pension amount in the bank account in the name of the employee
and having the same adjusted towards the loan amount on the
strength of documents executed by the employee will not suffice.
Essentially the bank is seeking to obtain relief indirectly which
it could not obtain directly. It could have raised the issue of
adjustment or banker''s lien before the competent authority. It did
not do so. A banker''s lien or a general lien is available only when a
property belonging to the borrower comes into the custody of the
bank in its usual course of business. The gratuity receivable by an
employee cannot be said to be a property of the employee coming
into the possession of a bank, in its usual course of business,
before the actual physical payment thereof to the employee
concerned. The contract of employment between the bank and its
employee gives rise to the earnings of the employee. Such earnings
are the property of the employee, which the bank, who pays or makes over the same to its employee. Moreover, by payment of the
amount in a bank account of the employee, the employer cannot
claim that, the quantum of retiral benefits such as pension or
gratuity paid to the employee, come into its possession and,
therefore, can be adjusted or a banker''s lien can be validly
exercised thereon. The adjustment or exercise of banker''s lien can
be made, only if, the employee makes over the pensionary benefits
voluntarily to the bank. In this case, the petitioner has not done so.
In such circumstances, the respondent no. 2 is directed to
take immediate steps for the purpose of recovering the amount due
to the petitioner from the bank as a public demand, and make over
the same to the petitioner forthwith, on realization. It is expected
that, the respondent no. 2 will commence the recovery proceedings
within a week from the date of communication of this order to him.
He will endeavour to complete the proceedings within a fortnight
thereafter. He will make over the amount due to the petitioner
immediately on receipt of the same.
W.P. No. 15420 (W) of 2017 is disposed of. No order as to
costs.
Urgent certified website copies of this order, if applied for, be
made available to the parties upon compliance of the requisite
formalities.