Syndicate Bank v. The Appellate Authority

THE HONOURABLE SRI JUSTICE M. SATYANARAYANA MURTHY WRIT PETITION No.27974 OF 2014 ORDER:

Syndicate Bank filed this writ petition questioning the order of the second respondent which is confirmed by the first respondent as illegal, arbitrary and against the principles of law, set aside the same by issuing Writ of Certiorari.

02. The third respondent-S.K.Sarangi was working as Assistant General Manager in the office of the petitioner. He was due for superannuation on 30.11.2011. The conditions of service of the third respondent are governed by the Syndicate Bank (Officers') Service Regulations, 1979, Syndicate Bank Officer Employees' (Conduct) Regulations, 1976 and Syndicate Bank Officer Employees' (Discipline & Appeal) Regulations, 1976 and that they were enacted under Regulation 19 of the Banking Companies Acquisition and Transfer of Undertaking Act, 1970 in consultation with the RBI and with the provisions sanction of the Central Government and that they have statutory force. As per Syndicate Bank (Officers') Service Regulations 1979 retirement age of the officers is 60 years. Regulation No.

20 (3) (iii) of the Syndicate Bank Officer Employees' (Service) Regulations stipulate that the Officer against whom disciplinary proceedings have been initiated will cease to be in service on the date of superannuation, but the disciplinary proceedings will continue as if he was in service, in the proceedings until the proceedings are concluded and final order is passed in respect thereof. The said provision enables the Bank not to pay retirement benefits even after the date of superannuation till completion of enquiry and passing of final order.

03. The disciplinary proceedings are pending against the third respondent on the date of superannuation i.e. 30.11.2011 in the matter of charge sheet No.427/PD:IRD/DA-3 dated 24.11.2011 issued to him

under Syndicate Bank Officer Employees' (Discipline & Appeal) Regulations 1976. Thus, though he retired from service he was treated as employee for the purpose of enquiry in terms of the Regulation 20 (3) (iii). Proceeding was served informing that the petitioner withholding the retirement benefits till final order is passed. Thereupon the third respondent filed application before the second respondent under Payment of Gratuity Act on 06.02.2013 seeking settlement of his gratuity. Since the gratuity payable to the third respondent is withheld as per the provisions of the Service Regulations, the action of the Management cannot be faulted with as held by the Apex Court in Y.K. SINGH V. PUNJAB NATIONAL BANK AND OTHERS[1]. But the second respondent did not consider the legal position and passed an order in favour of the third respondent.

04. Aggrieved by the order of second respondent under Payment of Gratuity Act and the Assistant Labour Commissioner (Central) in PG Application No.48(4)/2013-E2 dated 31.12.2013 the petitioner-Bank preferred appeal before the first respondent under the Payment Gratuity Act. The first respondent without appreciating the facts and law dismissed the appeal confirming the order of the second respondent.

05. The present writ petition is filed challenging the order of the second respondent-Controlling Authority which was confirmed by the first respondent-appellate authority under Payment of Gratuity Act on various grounds, mostly contending that the authorities under Payment of Gratuity Act did not consider the purport of the Syndicate Bank (Officers') Service Regulations 1979, and effect of regulation No.20(3) (iii) of Syndicate Bank (Officers') Service Regulations, 1979 so also the charge sheet served on the third respondent pending enquiry. Therefore, the third respondent though ceased to be an employee for all practical purposes except for the purpose of pending enquiry, but the authorities on erroneous appreciation of facts and law concluded that the petitioner is liable to pay gratuity due to him, passed the impugned

order and prayed to set aside declaring the same as arbitrary and illegal.

06. The third respondent alone filed counter since respondents 1 and 2 who passed the orders under Payment of Gratuity Act are the formal parties.

07. The third respondent raised the following preliminary objections:

a) The petitioner has not placed the true facts of the matter before this Court.

b) The writ petition is filed misrepresenting the facts and on this ground alone the writ petition is liable to be dismissed.

c) As per the orders of second respondent-controlling authority and the third respondent-appellate authority, gratuity amount was released to the third respondent, received amount, hence the writ petition become infructuous and on this ground also, the petition is liable to be dismissed.

08. The third respondent explained in detail the facts leading to filing served copy of charge sheet and initiating disciplinary proceedings against the petitioner. He further admitted that the charge sheet No.432/PD:IRD/DA-3 dated 25.11.2011, 433/PD:IRD/DA-3 dated 25.11.2011 and 427/PD:IRD/DA-3 dated 24.11.2011 and the enquiry ordered based on the above charge sheets are pending as on the date of his superannuation i.e. 30.11.2011.

In the first charge sheet No.432/PD: IRD/DA-3 dated 25.11.2011, he intend to act as guarantor to his wife's house loan, but the Bank turned down the request to permit him as a Guarantor. He clarified that he did not stand as Guarantor and his brother-in-law i.e. his wife's brother was the guarantor for the said loan and thereupon the enquiry was dropped accepting his explanation vide reference No.87/PD:IRD/DA-6 dated 31.10.2012.

09. The allegation made in the charge sheet No.433 was that R.3

deposited Rs.9 lakhs in his wife's SB Account under his signature on the deposit slip and that he did not reflect the said amount in his assets and liabilities statement for the relevant year. He clarified that the amount was a gift to his wife from his mother-in-law after sale of her house property situated at Cuttak and distributed the sale proceeds among her sons and daughters, as he was obliged to report only those of his assets kept in his family members names in the assets and liabilities statement and the above amount not belonging to him nor being his earnings. Therefore, he did not report. The petitioner-bank closed the charge sheet by imposing penalty Censure vide reference No.030/PD:IRD/DA-7 dated 03.04.2012, though it is unwarranted and imposition of such penalty without regular departmental enquiry and without furnishing the documents etc., is illegal.

10. The allegation made in the 3rd charge sheet No.427/PD:IRD/DA-3 was that the third respondent influenced his subordinate executive, also sanctioning authority to grant overdraft facility of Rs.50 lakhs to a particular party. Thereupon, the respondent informed the Regional Manager, he did not sanction, but placed his observations while taking note of sanction of the overdraft facility by subordinate officer. Thereupon, he sought a copy of the Office note, which is in the custody of the petitioner-Bank to enable him to reply the charge sheet, but without furnishing documents, the petitioner-Bank ordered enquiry against the 3rd respondent.

Despite request, the petitioner did not supply necessary documents to defend himself in the departmental enquiry. Thereupon, the third respondent approached the High Court of Odisha, Cuttack, challenging the action of the petitioner in proceeding with the enquiry without furnishing documents and following prescribed procedure. The High Court was pleased to grant stay of enquiry and it is in force till date.

11. It is contended that the Chief Manager, who was the sanctioning authority of the overdraft facility was also served with the

charge sheet, imposed minor penalty and allowed to superannuate with all his terminal retirement benefits granted as the overdraft facility was closed in the month of March, 2009 itself, in the routine course without any concessions. Therefore, even if the charges against the third respondent were to be proved, a minor penalty can be imposed on par with the sanction authority i.e., Chief Manager, who retired from service after imposing minor penalty. As the petitioner did not pay retirement benefits including gratuity on superannuation, he filed a claim before the second respondent- Controlling Authority under Section 4 of Payment of Gratuity Act and obtained order for release of gratuity and aggrieved by the same, the petitioner preferred an appeal which ended against the petitioner.

Therefore, the petitioner is not entitled to claim any relief in the present writ petition and that the Syndicate Bank (Officers') Service Regulations will not override the provisions of Payment of Gratuity Act and Payment of Gratuity Act enables the petitioner to claim gratuity on superannuation, but contrary to the Payment of Gratuity Act the petitioner withheld the gratuity which is highly illegal and arbitrary and prayed to dismiss the writ petition.

12. During hearing, Sri Deepak Bhattacharji, learned counsel for the petitioner, would contend that the Syndicate Bank (Officers') Service Regulations 1979 and other Regulations governing the Service conditions of Syndicate Bank employees which were enacted in pursuance of the power conferred on the Bank under Regulation 19 of the Banking Companies Acquisition and Transfer of Undertaking Act, 1970 and even Section 46 of the Payment of Gratuity Act, enables the employer to withheld the retiremental benefits including gratuity subject to fulfilling certain conditions. It is further contended that the Disciplinary Proceedings are pending till date and on account of stay granted by the High Court of Odisha, Cuttack, the enquiry could not be completed. Therefore, withholding of retirement benefits including gratuity is only in exercise of power conferred by Regulation No.20 of the Syndicate Bank (Officers') Service Regulations 1979 and not in violation of any Act.

13. Per contra, Sri Laxmi Narayana, learned counsel for the third respondent, would contend that Section 14 of the Payment of Gratuity Act is a non-abstentee clause and it will override the other enactments or regulations, if any, and therefore, the petitioner is not entitled to withhold the gratuity. In fact, the person who sanctioned overdraft facility was already suffered minor penalty and retired from service without any objection, but the allegations made against the third respondent is that he influenced the Chief Manager who sanctioned overdraft facility of Rs.50 lakhs was suffered from minor penalty. At best, even if the third respondent is found guilty he is liable for minor penalty.

In those circumstances withholding of gratuity is not in accordance with law and the order passed by the first respondentappellate authority confirming the order of the second respondentcontrolling authority is not in accordance with law and that too the scope of judicial review under Article 226 is limited and unless the court finds that the findings of the authorities are perverse and not based on any material available on record.

This Court cannot interfere while exercising the power of judicial review. On this ground alone, the petition is liable to be dismissed.

14. Considering rival contentions, perusing the material on record, the point that arise for consideration is, "Whether the order passed by the second respondent confirmed by the first respondent in proceeding No.36/02/2014-E1/PG dated 06.02.2014 is contrary to the rules and regulations of Syndicate Bank (Officers') Service Regulations 1979. If so, the order of the second respondent is liable to be set aside?" POINT:

15. Undisputedly, the enquiry ordered against the third respondent in charge sheet No.427/PD:IRD/DA-3 dated 24.11.2011 is pending in view of stay granted by the High Court of Odisha. The allegation made against the third respondent in the said charge sheet is that he

influenced the Chief Manager to sanction overdraft facility of Rs.50 lakhs to a particular person. The third respondent gave a suitable reply, however initiated regular departmental enquiry against the third respondent and the then Chief Manager who sanctioned overdraft facility. Curiously based on the explanation of the Chief Manager, minor penalty was imposed against him and allowed him to retire on superannuation, released all retirement benefits including gratuity, but for different reasons, the petitioner did not impose any minor penalty against the third respondent and proceeding with enquiry into the matter.

16. No doubt the penalty to be imposed against the third respondent, even if he has found guilty for the alleged misconduct, it must be on par with the penalty imposed against the person who sanctioned over draft facility i.e. Chief Manager, otherwise it amounts to imposing disproportionate penalty, without maintaining parity

17. In any view of the matter, the scope of interference of this court in such matters while exercising the power of judicial review under Article 226 of the Constitution is limited in view of the Judgment of the Apex Court in SHRILEKHA VIDYARTHI AND OTHERS V. STATE OF U.P. AND OTHERS[2] wherein the Apex court discussed about the scope of judicial review and held that:

"(A) Every State action, in order to survive, must not be susceptible to the vice of arbitrariness which is the crux of Article 14 of the Constitution and basic to the rule of law, the system which governs us. Arbitrariness is the very negation of the rule of law. Satisfaction of this basic test in every State action is sine qua non to its validity and in this respect, the State cannot claim comparison with a private individual even in the field of contract. This distinction between the State and a private individual in the field of contract has to be borne in the mind. Arbitrariness is anathema to State action in every sphere and wherever the vice percolates, the Court would not be impeded by technicalities to trace it and strike it down. This is the surest way to ensure the majesty of rule of law guaranteed by the Constitution of India.

Conferment of the power together with the discretion which goes with it to enable proper exercise of the power is coupled with the duty to shun arbitrariness in its exercise and to promote the object for which the power is conferred, which undoubtedly is public interest and not individual or private gain, whim or caprice of any individual. All persons entrusted with any such power have to bear in mind its necessary concomitant which alone justifies conferment of power under the rule of law.

The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every state action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that 'be you ever so high, the laws are above you'. This is what men in power must remember, always.

Therefore, irrespective of the nature of appointment of the Government Counsel in the districts in the State of U.P. and the security of tenure being even minimal as claimed by the State, the impugned circular, in order to survive, must withstand the attak of arbitrariness and be supported as an informed decision which is reasonable.

(B) The scope of judicial review is limited to oversee the State action for the purpose of satisfying that it is not vitiated by the vice of arbitrariness and no more. The wisdom of the policy or the lack of it or the desirability of a better alternative is not within the permissible scope of judicial review in such cases. It is not for the courts to recaste the policy or to substitute it with another which is considered to be more appropriate, once the attak on the ground of arbitrariness is successfully repelled by showing that the act which was done, was fair and reasonable in the facts and circumstances of the case. The power of judicial review is limited to the grounds of illegality, irrationality and procedural impropriety. In the case of arbitrariness, the defect of irrationality is obvious."

18. Thus, in view of the law declared by the Apex Court in the

judgment referred above, this Court cannot interfere unless it is established that the order passed by the second respondent and confirmed by the first respondent is perverse and without considering the material on record or considering the extraneous material, which is not on record or the order is against the rules.

19. It is not the case of the petitioner that the order of the second respondent and confirmed by the first respondent which is under challenge in this writ petition is based on no material or based on extraneous material is perverse, but the sole contentions is that it is contrary to law. Therefore, at best, this Court is required to examine the illegality of the order under challenge to find out whether the second respondent passed the order contrary to the Syndicate Bank Officer Employees' (Conduct) Regulations, 1976 and Payment of Gratuity Act, 1972.

20. If for any reason, this Court finds that the order of the second respondent, confirmed by the first respondent which is under challenge is against the regulations of the petitioner and Payment of Gratuity Act, this Court can certainly interfere and set aside the same.

21. The second respondent-controlling authority passed an order in P.G. Application No.4 of 2013 vide its order dated 31.12.2013, directed the petitioner herein to pay gratuity amount as calculated by the applicant as per the Form-R enclosed with the said order within 30 days from the date of receipt of order and report compliance to the authority.

22. Aggrieved by the said order, the petitioner represented by its Chief Manager preferred an appeal No.36/02/2014-E1/PG, which ended in dismissal confirming the order passed by the second respondentcontrolling authority, wherein the first respondent-appellate authority directed the petitioner as follows:

"The end result of discussion of the instant appeal is that the appeal petition dated 06.02.2014 of the Appellant is partially allowed and impugned order dated 31.12.2013 of the Controlling

Authority under Payment of Gratuity Act 1972 & Assistant Labour Commissioner (Central), Hyderabad passed in case No.04/2013 dated 31.12.2013 is modified in respect of awarding interest for the period from 01.12.2011 to 03.02.2014 (i.e. date of demand draft deposited with the Appellate Authority & Regional Labour Commissioner (Central), Hyderabad over the gratuity amount of Rs.10,00,000/- to the tune of Rs.2,14,242/-. As the amount of Rs.12,08,334/- has already been deposited by the Appellant while preferring the instant appeal the balance amount of Rs.5,913/- is to be paid directly to the respondent by Demand Draft/ Cheque within 30 days receipt of this appeal order by the Appellant. Accordingly, the Controlling Authority under Payment of Gratuity Act and ALC(C)-I, Hyderabad is hereby directed to issue Form 'S' as required under Rule 18 (8) of the Payment of Gratuity Act, 1972."

23. Thus, the appellate authority modified the order passed by the second respondent-controlling authority exonerating the petitioner from payment of interest from 01.12.2011 to 03.02.2014. Before this Court, the contention of the petitioner is that regulation No. 20 (3) (iii) enables the second respondent-controlling authority to withhold the retirement benefits including gratuity. Thereby withholding the gratuity amount is in accordance with the rules and the same cannot be faulted on any ground.

24. Admittedly the third respondent retired from service in the year 2011 and in normal course of events, the petitioner is liable to pay retirement benefits including gratuity as per rules, but because of pendency of enquiry ordered against the third respondent, withheld the retirement benefits and gratuity exercising the power under regulation 20(3) (iii) of Syndicate Bank (Officers') Regulations 1979, it is relevant to extract a specific regulation for better appreciation: "The officer against whom the disciplinary proceedings have been initiated will cease to be in service on the date of superannuation but the disciplinary proceedings will continue as if he was in service until the proceedings are concluded and final order is passed in respect thereof. The concerned officer in whose case these provisions are invoked will not receive any pay and/or allowance after the date of superannuation and will also not entitle fro the payment of retirement benefits till the

proceedings are completed and final order is passed thereon except his own contribution of PF."

25. The above extracted rule enables the petitioner to proceed with disciplinary enquiry, but the regulations will have no precedence over the Payment of Gratuity Act. According to Section 14 of payment of gratuity Act, the provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act.

26. Thus, when a specific Rule for payment of gratuity, if any inconsistency with the Act, shall, to the extent of such inconsistency, be ineffective. In the absence of exemption of the regulation from the application of the provisions of Payment of Gratuity Act, specifically, the provisions of Payment of Gratuity Act will apply to the petitioner-Bank. Therefore, regulation 20(3) (iii) is inconsistent with the provisions of Payment of Gratuity Act and thereby it will have no application to the extent with its inconsistency to the provisions of Payment of Gratuity Act.

27. Section 4 of the Payment of Gratuity Act deals with payment of gratuity and according to it, 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 subject to the proviso contained therein, however, they are not relevant. But sub- section (6) of Section 4 of the Payment of Gratuity Act is relevant to decide the real controversy and it is extracted herein:

"4 Payment of gratuity. - .....

(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 17 [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 him in the course of his employment."

28. But, in the present case, it is not the contention of the petitioner that the third respondent terminated for any act, willful omission or negligence causing any damage or loss to the employer, but the reason for withholding amount is that the pendency of departmental enquiry initiated against the third respondent and it is not the case of the petitioner that on account of their act complained against the third respondent, the Bank sustained any loss. The reason assigned by the petitioner for withholding gratuity amount would not fall within any of the clause of sub-section 6 of section 4 of the Payment of Gratuity Act. Even to forfeit the amount of gratuity under section 4 (6) can only be taken after affording opportunity to the employee concern, the gratuity cannot be forfeited unless loss or damage is caused to the Management.

29. A similar question came up before this Court M.NARASIMHA RAO V. DISTRICT COOPERATIVE CENTRAL BANK LIMITED[3] wherein this Court held that the service of the employee can be terminated on attaining the age of superannuation and on account of willful omission and they are not caused gratuity cannot be held by invoking sub-Section 6 of Section 4 of the Payment of Gratuity Act.

30. The principle laid down in the above Judgment is clearly

applicable to the present facts of the case as the petitioner terminated the service of the third respondent only on attaining the age of superannuation. In such case, the petitioner is not entitled to withhold the amount payable towards gratuity to the third respondent.

31. The learned counsel for the petitioner would contend that the order of respondents 1 and 2 suffers from illegality and the authorities did not appreciate facts with reference to the law, more particularly, the regulations of the Bank referred above. A perusal of the order under challenge passed by the second respondent confirmed by the first respondent they considered each and every fact with reference to the law laid down by the Apex Court and declared the action of the petitioner as illegal and directed the petitioner to pay gratuity. Even on reappraisal of the law laid down by this Court in the judgment referred supra, the petitioner is not entitled to withhold the amount payable as gratuity. Hence, I find no illegality in the order passed by respondent No.2, confirmed by respondent No.1, warranting interference of this Court, exercising power of judicial review under Article 226 of the Constitution and accordingly the point is held in favour of the respondents 3 and against the petitioner.

32. In the result, the writ petition is dismissed confirming the order of the first respondent in Appeal No.36/02/2014-E1/PG dated 18.06.2014. No costs.

33. Miscellaneous petitions, if any, pending in this writ petition shall stand closed.

___________________________________ M. SATYANARAYANA MURTHY, J Date: -06-2016 BV [1] (2013) 2 LLJ SC

[2] (1991) 1 SCC 212 [3] 1998 LLR 850 (AP)