Pushpalal V.S. v. District Collector, Ernakulam & Others

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HON'BLE THE CHIEF JUSTICE MRS. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN FRIDAY, THE 22ND DAY OF FEBRUARY 2013/3RD PHALGUNA 1934 ## **W.A.No.1970 of 2012** ------------------------------------------AGAINST THE JUDGMENT IN W.P.(C).No.24667/2012, DATED 01-11-2012. ---------- ## **APPELLANT/** PETITIONER:- --------------------------------------- PUSHPALAL.V.S. VENGAD HOUSE, VADUTHALA P.O., KOCHI-23. BY ADV. SRI.P.K.BABU. ## **RESPONDENTS/** RESPONDENTS:- ------------------------------------------------- 1. THE DISTRICT COLLECTOR, ERNAKULAM - 682 030. 2. THE CHAIRMAN, KERALA STATE FINANCIAL ENTERPRISES, K.S.PRESS BUILDING, KOCHI-682018. 3. THE UNION BANK OF INDIA, REPRESENTED BY ITS MANAGER, MARINE DRIVE, SOUTH CHITOOR, PIN- 682 030. 4. THE SPECIAL DEPUTY TAHSILDAR (RR), KERALA STATE FINANCIAL ENTERPRISES LTD., ERNAKULAM - 682 030. 5. SHOBHANA DEVADAS, M.I.G.-11, KASTHURBHA NAGAR, KADAVANTHARA, KOCHI-682026. R1 BY SPECIAL GOVERNMENT PLEADER SMT.GIRIJA GOPAL. R2 BY SENIOR ADVOCATE SRI.BABU VARGHESE & STANDING COUNSEL SRI.JOHNSON T.JOHN. R3 BY STANDING COUNSEL SRI.A.S.P.KURUP. THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 14/02/2013, THE COURT ON 22-02-2013 DELIVERED THE FOLLOWING:- ## W.A.NO.1970 OF 2012 ## APPENDIX APPELLANT'S ANNEXURE:- ------------------------------------------ ANNEXURE A1 - TRUE COPY OF THE STATEMENT DATED 15.11.2012 ISSUED BY THE 3RD RESPONDENT BANK TO THE RESPONDENT. RESPONDENT'S ANNEXURES:- --------------------------------------------- ANNEXURE R2(a) - TRUE COPY OF APPLICATION FORM WITH THE AGREEMENT FOR RECOVERY FROM SALARY/DCRG/TERMINAL BENEFITS ETC. EXECUTED BY THE PETITIONER DATED 23.3.2009. ANNEXURE R2(b) - TRUE COPY OF APPLICATION FORM WITH THE AGREEMENT FOR RECOVERY FROM SALARY/DCRG/TERMINAL BENEFITS EXT. EXECUTED BY THE PETITIOENR DATGED 6.10.2009. ANNEXURE R2(c) - TRUE COPY OF APPLICATION FORM WITH THE AGREEMENT FOR RECOVERY FROM SALARY/DCRG/TERMINAL BENEFITS ETC. EXECUTED BY THE PETITIONER DATED NIL. ANNEXURE R2(d) - TRUE COPY OF AGREEMENT EXECUTED IN RCLAGT NO.461. ANNEXURE R2(e) - TRUE COPY OF SECURITY BOND EXECUTED IN CHITTY NO.42/09. ANNEXURE R2(d) - TRUE COPY OF AGREEMENT EXECUTED IN RCLAGT NO.461. ANNEXURE R2(f) - TRUE COPY OF THE SECURITY BOND EXECUTED IN CHITTY NO.65/09. - true copy - Manjula Chellur, C.J. & K.Vinod Chandran, J. ---------------------------------W.A.No.1970 of 2012 ---------------------------------Dated this, the 22[nd] day of February, 2013 ## JUDGMENT ## K.Vinod Chandran,.J. The appellant was aggrieved by the revenue recovery action taken by the 4[th] respondent to recover amounts due from the 5[th] respondent to the 2[nd] respondent; for which the appellant stood as surety. The appellant impugn the judgment of the learned Single Judge dismissing the writ petition, finding the recovery initiated to be proper and perfectly legal. The learned Single Judge found that the appellant's claim, regarding he being only one of the sureties and no recovery proceedings having been initiated against the other sureties and the original borrower, could not be sustained, since the liability of the borrower and the sureties are joint and several. As rightly noticed by the learned Single Judge, the remedy, if any, to the surety from whom recovery is made is to sue the original defaulter or the other sureties to recover proportionate contribution due from them. W.A.No.1970 of 2012 - 2 - 2. The learned counsel for the appellant before us raised a contention that the amounts payable under the Payment of Gratuity Act, 1972 (hereinafter referred to as “the Gratuity Act”) is not attachable for satisfaction of a decree of a Court or otherwise. The recovery has been attempted by the 2[nd] respondent through the 4[th] respondent by virtue of Annexures R2(a) and R2(b). It is the contention of the 2[nd] respondent that the appellant, while offering himself as surety for the loan availed by the 5[th] respondent, made the aforesaid declarations before the 2[nd] respondent voluntarily submitting to recovery of amounts defaulted by the original borrower from the appellant's salary and from his DCRG/terminal benefits/VRS proceeds and other benefits. Hence, it is the claim of the 2[nd] respondent that the 3[rd] respondent Bank, from whose services the appellant retired, is obliged to recover the amounts due to the 2[nd] respondent from the retirement benefits of the appellant. 3. The 3[rd] respondent Bank, on the specific direction of this Court, has filed an affidavit dated 28.1.2013 explaining the stand of the Bank as also produced, by way of memo, the Gratuity Fund Rules of the respondent-Bank. The learned counsel appearing for the Bank would rely on Rule 6 of the W.A.No.1970 of 2012 - 3 - Gratuity Fund Rules to contend that in the event of a restraint or a prohibitory order being served on the trustees in respect of any benefits available under the Rules to a Member or his Beneficiary, then the Member shall forfeit all his rights and claims thereto and the same shall lapse to the Trustees. In such contingency, it is the submission of the learned counsel, the gratuity amounts could only be forfeited and cannot be paid to the 2[nd] respondent for satisfaction of its debts. It is the submission of the learned counsel for the Bank that the said provision is brought in the Rules specifically to deter any employee from attempting to encumber the gratuity dues and the said rule is in consonance with the spirit and tenor of the Gratuity Act. 4. With respect to the amounts remaining with the 3[rd] respondent Bank, it is submitted on affidavit that the total retirement benefits due to the appellant was Rs.10,69,280/-, out of which his liabilities to the employer Bank came to Rs.7,00,444/37; which has already been recovered and credited to the Bank. However, the remaining amount of Rs.3,68,835/63 retained by the Bank in a sundry account, comprises the Gratuity amount of Rs.2,37,520.63 and Leave Encashment - 4 - W.A.No.1970 of 2012 amount of Rs.1,33,315/-. The said amounts are kept with the Bank only by reason of the communication of the Deputy Tahsildar (RR) for recovery of an amount of Rs.8,73,112/-. 5. The learned counsel for the appellant would strenuously urge that the amounts retained by the Bank being amounts due under the Gratuity Act, are not liable to be attached. The appellant also relies on the decisions reported in _**Som Prakash Rekhi v. Union of India**_ **[(1981) 1 SCC 449]** and _**Calcutta Dock Labour Board v. Sandhya**_ **[1985 Lab.I.C. 714]** to canvass the said position. It is also contended that the Rules generally and the particular provision with respect to forfeiture of gratuity amounts is inconsistent with Section 13 and 14 of the Gratuity Act and is rendered ineffective by reason of Section 23 of the Contract Act. The learned counsel placed reliance on the decisions reported in _**State of Rajasthan & Others v. Basant Nahata,**_ **[(2005) 12 SCC 77]** and _**Krishna Menon alias Appu Menon v. Narayana Ayyar & others**_ **[1961 KLT 620]** to contend that the Gratuity Act is a welfare legislation with the welfare of the employees at its core and since Section 13 prohibits any attachment of the amounts payable under the Gratuity Act, the agreement to the contrary W.A.No.1970 of 2012 - 5 - would be against public policy and would be hit by Section 23 of the Contract Act. Hence, the prohibitory order being not one which could have been made under the Gratuity Act is to be ignored and Rule 6 would not at all come into operation. The alternative submission is that Rule 6 is violative of Section 13 of the Gratuity Act. 6. We have to first consider as to whether the revenue recovery contemplated against the amounts payable as gratuity would lie. Going by the precedents referred to by the learned counsel for the appellant and looking at the provisions of the Gratuity Act, we are of the definite opinion that the gratuity amounts, as long as it remains with the employer as gratuity, are not liable to be attached. Hence, there can be no recovery effected against the amounts kept as gratuity. However, the amounts lying in the account of the employee as Encashment of Privilege Leave would stand on a different footing. That the 3[rd] respondent Bank would have to concede to the revenue recovery authorities in compliance of the attachment made by the 4[th] respondent. The disbursal of the amounts remaining with the 3[rd] respondent Bank as gratuity would depend on the interpretation given to the rules. - 6 - W.A.No.1970 of 2012 7. We have carefully perused Rule 6 of the Gratuity Fund Rules of the 3[rd] respondent Bank, which is extracted hereunder: ## _“6._ RESTRAINT ON ANTICIPATION OR ENCUMBRANCE: _The benefits provided under the Fund are strictly personal and cannot be assigned, charged or alienated in any way._ _If a restraint or a prohibitory order is served on the Trustees in respect of any benefit available under the Rules to a Member or his Beneficiary or if a Member of his beneficiary shall become bankrupt or attempt to assign charge or in any way encumber any benefits hereunder, he shall forfeit all rights and claims thereto and the same shall lapse to the Trustees but without prejudice to the powers of the Trustees at their absolute discretion to grant the benefit either immediately or after an interval to him or to his Beneficiary”._ While prohibiting assignment, charge or alienation of the benefits provided under the Fund, the said rule postulates the following situations where the Member would forfeit all his rights and claims thereto. They are: - (i) When a restraint or a prohibitory order is served on the Trustee in respect of any benefits available under the Rules; - (ii) if a Member or his Beneficiary becomes bankrupt; and - (iii) if there is attempt to assign charge or in any way encumber any benefits under the Rules. W.A.No.1970 of 2012 - 7 - The fact that Section 13 prohibits an attachment or prohibitory order against the amounts payable as gratuity, need not be considered to interpret Rule 6, according to us. Annexures R2(a) & R2(b) are specific attempts by the Member, i.e., the appellant, who was the employee, to encumber the benefits payable as gratuity under the Rules. 8. We do not think, Rule 6 is against public policy and would run counter to Section 13 of the Gratuity Act. Section 13 of the Act specifically prohibits attachment of gratuity payable to an employee against execution of any decree or order of any civil, revenue or criminal Court. Section 14 of the Gratuity Act, is a _non-obstante_ clause giving primacy to the provisions of the Act over any inconsistent law, instrument or contract. What is contemplated by the rule is not a recovery and it is, as contended by the learned counsel for the Bank, a deterrence on an employee, in his interest, from encumbering in any manner the amounts due as gratuity. We say that this serves the public policy, because the Gratuity Act provides for prohibition from attachment of amounts payable under the Act to ensure that a retired employee is not left in the streets. It is the very same public policy which the employer has adopted to deter the W.A.No.1970 of 2012 - 8 - employee by a voluntary act, some times without knowledge of the consequence; from encumbering the amounts which he is entitled to on retirement as a compensation for the years served under the employer. Hence, we cannot, in the above circumstances, find Rule 6 of the Gratuity Fund Rules to be against the spirit and tenor of the Gratuity Act or hit by Section 23 of the Contract Act. The attempt to encumber being very evident, we cannot but find the amounts payable as gratuity conceding to Rule 6 regulating the scheme of gratuity in the 3[rd] respondent Bank. However, we hasten to add that Rule 6 also provides for release of the amounts immediately or after a lapse of time to the Member of his Beneficiary; at the discretion of the Trustees. We are sure, that the Trustees of the Scheme would exercise such discretion properly and taking into account the facts and circumstances available before them. We desist from making any observation on that count, since it is left to the discretion of the Trustees. The discretion conferred takes it out of the mischief that is sought to be overridden by Sections 13 and 14 of the Gratuity Act. 9. We are also faced with the contention of the 2[nd] respondent, who has initiated the recovery process, that there is W.A.No.1970 of 2012 - 9 - a binding agreement between the employer-Bank, the employee-appellant and the 2[nd] respondent that the default made by the original borrower would be compensated by the surety-appellant from his salary, DCRG/terminal benefits/VRS proceeds and other benefits. We are unable to find any such agreement by the 3[rd] respondent-Bank who is the employer of the surety. Annexures R2(a) and R2(b) are Employment Certificates, with details of the service and salary having been attested by the employer. We find an “Agreement for Recovery from Salary” beneath the above details, which contains a declaration by the employee agreeing to recovery of defaulted amounts from the salary, DCRG/terminal benefits/VRS proceeds and other benefits. This declaration is to be signed by the surety and has to be countersigned by the employer and only then the same would be a tripartite agreement and the employer Bank obliged to comply with the same. Though the said agreement is signed by the employee/appellant, there is no counter-signature by the employer and the contention of the 2[nd] respondent does not, in such circumstance, hold water. The 3[rd] respondent Bank cannot be held down to the terms of the agreement for the simple reason of there being no such agreement on the part of - 10 - W.A.No.1970 of 2012 the Bank. The mere fact that the details of the appellant's employment were certified would not and cannot lead to a conclusion that the employer Bank agreed to recover amounts from the salary and other sources of the employee; whose service and salary alone were certified. A separate agreement is seen provided in the very same format which, as noticed above, was not executed. If the 2[nd] respondent accepted the same as an agreement of the 3[rd] respondent Bank, then it is at the 2[nd] respondent's peril. In the circumstances stated above, we set aside the judgment of the learned Single Judge to the extent mentioned above and dispose of the appeal with the aforementioned observations. The Writ Appeal is, hence, disposed of as above, without costs. Sd/Manjula Chellur, Chief Justice Sd/K.Vinod Chandran, Judge. vku/ ( true copy )