R.N.Khanna vs Amrik Singh Nayyar

S.K. Jain, J.

R.N. Khanna petitioner herein, is the Director of M/s. Sri Krishna Woollen Mills (P) Ltd. Bombay. Amrik Singh, respondent was employed with the said company with effect from 1101958 to 30111988. He tendered his resignation which was accepted and he was relieved on 31101988. Since the company failed to pay the amount of his gratuity, Amrik Singh Nayyar instituted complaint Annexure P2 under Section 405/420 of Indian Penal Code, on 24121991 in the Court of Chief Judicial Magistrate, Ludhiana. Vide his order dated 31101991 the said Magistrate summoned the petitioner. Through this petition under Section 482 of the Code of Criminal Procedure Shri R.N. Khanna, Petitioner has sought quashing of the complaint Annexure P2 and summoning order Annexure P.1.

On being served, respondent has filed the reply.

I have heard learned counsel for the parties.

The learned counsel for the petitioner has urged that a bare reading of the complaint will show that no offence whatsoever has been made out even prima facie.

In reply, it has been argued on behalf of the respondent that pension and gratuity are no longer any bounty to be distributed by the employer to his employees on their retirement but are valuable rights and property in their hands and any culpable delay in settlement and disbursement thereof must be visited with penalty.

I have given a thoughtful consideration to the entire matter and the question now is as to whether nonpayment of gratuity by an employer to its employee on his retirement or acceptance of resignation from service could supply a cause of action to the employee to bring complaint before a criminal Court under Section 406/420 of the Indian Penal Code.

In order to succeed in this petition like the one, the petitioner was required to fulfill the essential ingredients of the provisions of Sections 405 and 406, Indian Penal Code. Secondly, he is also required to indicate that the respondent company failed to comply with the relevant provisions of the payment of Gratuity Act, 1972. It appears that on both counts, the petitioner failed badly.

SEction 405 in the relevant provision which defines the criminal breach of trust. Section 406 prescribes the punishment for criminal breach of trust. The essential ingredient of the section are:

The accused must have been entrusted with property or with dominion over property;

(a) The accused must have misappropriated or converted to its own use that property; or

(b) Used or disposed of that property in violation of any direction of law prescribing the mode in which such Trust is to be discharged; or

(c) Used or disposed of the property in violation of any legal contract (express or implied) which he has made touching the discharge of such trust; or

(d) Willfuly suffered any other person so to do.

Such misappropriation or user or disposal must be dishonest or such sufferance must be wilful.

In the absence of proof of entrustment of property or dominion over the property of another, this Section will not apply. Similarly, in the absence of proof of the dishonest intention, the rigour of this Section will not be attracted.

In this view of the matter one has first to find out if the petitioner has entrusted any amount to the company which they in turn have put to their own user. There cannot be any entrustment in the case of the payment of gratuity amount. It is not disputed that at no point of time any amounts contributed by the employee or deducted from his salary towards the gratuity fund. Section 4 of the payment of Gratuity Act, 1972, lays down an obligation on the employer to the pay gratuity to the employee on the termination of his employment after he has rendered service or on his death or his disablement due to accident or disease. For every completed year of service or part thereof in excess of six months, the employer has to pay gratuity at the rate of 15 days wages based on the rate of wages last drawn by the employee concerned. However, this amount of gratuity payable to an employee is not to exceed 20 months'' wages.

The gratuity payable can also be wholly or partially forfeited if his services are terminated for his riotous or disorderly conduct or any other act of violence on his part, or if his services have been terminated for any act which constitutes an offence involving moral turpitude. Section 7 of the Payment of Gratuity Act deals with determination of amount of gratuity within such time as may be prescribed. If there is a dispute in this regard, the Controlling Authority has to decide it. The Gratuity Act is a complete Code by itself. The liability to pay the gratuity arises only after the retirement or death and it is the responsibility of the employer to find the money and pay the same.

The matter can be viewed from another angle also. Even in the authority, State of Kerala and others v. M. Padmanabhan Nair, AIR 1985 SC 356, their Lordships of the Supreme Court have held as under :

"Pension and gratuity are no longer any bounty to be distributed by the Government to its employees on their retirement but are valuable rights and property in their hands and any culpable delay in settlement and disbursement thereof must be visited with the penalty of payment of interest at the current market rate till actual payment. The liability to pay penal interest on these dues at the current market rate commences at the expiry of two months from the date of retirement.

The claim for interest made by the Govt. servant who was paid his pension and gratuity more than two years and three months after his retirement due to nonproduction of Last Pay Certificate by the retiree, it was held, was rightly granted as the delay was due to lapse on the part of the Treasury Officer enjoined to issue the certificate under Rule 186 of Treasury Code (Bombay)".

As mentioned herein before, the payment of Gratuity Act, 1972, is a complete Code in itself. Section 9(1) of the said Act provides that whoever, for the purpose of avoiding any payment to be made by himself under the Act or of enabling any other person to avoid such payment, knowingly makes or causes to be made any false statement or false representation shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to ten thousand rupees or with both.

Subsection 2 of Section 9 provides that an employer who contravenes, or makes default in complying with, any of the provisions of this Act or any rule or order made there under shall be punishable with imprisonment for a term which shall not be less than three months but which may extend to one year, or with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees, or with both.

Proviso to subsection 2 of Section 9 lays down that where the offence relates to nonpayment of gratuity under this Act the employer shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to two years unless the Court trying the offence for reasons to be recorded by it in writing, is of opinion that a lesser term of imprisonment or the imposition of a fine would meet the ends of justice.

Under Section 11, a complaint can be filed for an offence punishable under this Act. Proviso to Subsection 1 of Section 11 provides that where the amount of gratuity has not been paid, or recovered, within six months from the expiry of the prescribed time, the appropriate Government shall authorise the Controlling Authority to make a complaint against the employer, whereupon the Controlling Authority shall, within fifteen days from the date of such authorisation, make such complaint to a Magistrate having jurisdiction to try the offence.

When the facts and circumstances of this case are tested on the anvil of the above said provisions of the Code and the Act, the irresistible conclusion arrived at is that no offence either under Section 406 or Section 420 Indian Penal Code is made out even prima facie. That being so,the complaint, Annexure P1 and summoning order dated 24111991, passed by Judicial Magistrate Ist Class, Ludhiana, Annexure P2 are hereby quashed. The petitioner will be at liberty to seek his remedy under the payment of Gratuity Act, 1972 or under Civil law, if so advised.