Sri. Raju M.C. v. Kaduthuruthy Urban Co-operative Bank Ltd. and Others

W.P(C).19839/2020 1 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** **THE HONOURABLE MR. JUSTICE SUNIL THOMAS FRIDAY, THE 13[TH] DAY OF AUGUST 2021 / 22ND SRAVANA, 1943 WP(C) NO. 19839 OF 2020** ## **PETITIONER/S:** SRI. RAJU M.C., AGED 58 YEARS, S/O. CHACKO, MUTTATHIL KAROTTU HOUSE, AYAMKUDY P.O, KOTTAYAM DISTRICT, PIN-686 613 BY ADVS. P.N.MOHANAN C.P.SABARI AMRUTHA SURESH 1 KADUTHURUTHY URBAN CO-OP BANK LTD., K-3999, REP. BY ITS GENERAL MANAGER, KADUTHURUTHY P.O, KOTTAYAM-686 604 2 MANAGING COMMITTEE OF KADUTHURUTHY URBAN CO-OP BANK LTD., REP. BY ITS CHAIRMAN, KADUTHURUTHY P.O, KOTTAYAM-686 604 3 JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (G) OFFICE OF THE JOINT REGISTRAR (GENERAL), COLLECTORATE P.O, KOTTAYAM-686 002 BY ADVS. SRI.T.R.HARIKUMAR GOVERNMENT PLEADER SRI.K P HARISH ## **RESPONDENT/S:** ## **OTHER PRESENT:** SR.GP K.P HARISH THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13.08.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P(C).19839/2020 2 ## **JUDGMENT** The writ petitioner retired from the service of the first respondent bank on 31.05.2020 as General Manager. While he was holding the office, the Joint Registrar of the Co-operative Societies had called for few documents maintained by the bank, in its course of regular business. While so, by Ext.P3 proceedings dated 25.05.2020, the Joint Registrar directed the bank not to disburse the retiral benefits to the petitioner, anticipating his retirement on 31.05.2020 and informed that, retiral benefits shall be released only after completion of audit and release of NLC. It is now stated that the audit for the period 2018-2019 and 2019-2020 are completed, evidenced by Exts.P4 and P5 audit reports. 2. It is stated that, for the payment of gratuity, bank had availed a Group Gratuity Assurance Scheme operated by the LIC of India. The maximum gratuity payable under S.4 of the Payment of Gratuity Act was Rs.20,00,000/-. It is stated that, bank had released some amount and retained a sum of two lakhs marking lien over the property. According to the petitioner, this was illegal since Exts.P4 and P5 did not evidence any liability against the petitioner and that, even otherwise, the gratuity and other terminal benefits due to the petitioner could not be recovered or could not be deducted from the W.P(C).19839/2020 3 terminal benefits. It was contended that, no amount could be deducted under S.4(6) of Payment of Gratuity Act and under S.4(7), except in case of termination for riotous behaviour, appropriate amounts totalling to the quantified damages cannot be recovered from the petitioner. Except those, no amount could be recovered from the petitioner. 3. Learned counsel for the petitioner, to buttress the argument, relied on the decisions reported in **B.Lalitha v. State of Kerala and Ors. [2014(2) KLJ 707]** to contend that, if an employee is permitted to retire on superannuation, no portion of the gratuity can be withheld, unless it falls within the campus Sec.4(6) or 4(7). 4. Relying on the Division Bench decision reported in **Philip v. Registrar of Co-operative Societies [2018(3) KLT 347],** petitioner contended that, bank cannot suo motu appropriate the amounts from the retiral benefits to recompense the loss suffered as it has to be quantified in an adjudicatory process as envisaged under Section 69 of the Act. 5. The petitioner has approached this Court contending that the withholding of the gratuity amount and other benefits awaiting the audit was incorrect. It was also contended that, unless there was a determination of any amount if due, there could not be retention of the money anticipating it. It was also contended that, the petitioner, W.P(C).19839/2020 4 after being permitted to retire on superannuation, the bank has to resort to specific reliefs under S.69 of the Kerala Co-operative Societies Act to recover the money, if any, due. 6. There is no dispute that, a sum of Rs. Twenty lakhs was allotted by the State Bank of India to the first respondent bank including Rs. twenty lakhs towards the gratuity amount. It is also an admitted fact that, audit of the year 2018-2019 and 2019-2020 have been completed and there was no adverse report against the petitioner. However, he had worked till May 2021, the audit report for the period 20-21 has to be awaited, as per the order of Joint Registrar produced as Ext.P3, and correctly so. 7. Sec.4(6) of the Payment of Gratuity Act provides that, notwithstanding anything contained in Sub-section (1), the gratuity payable to the employee may be wholly or partially forfeited, if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part. Sec.4(6) (a) of the Act provides that, the gratuity of an employee, whose services have been terminated for any act, willful 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. Evidently, Secs.4(6)(a) and 4(6)(b) contemplates partial or full forfeiture of the money due to the 5 W.P(C).19839/2020 employer, out of the gratuity amount, if the petitioner has been terminated for negligence for the situations mentioned in Secs.4(6)(a) and 4(6)(b). Admittedly, the petitioner has not been terminated but has been permitted to retire on attainment of superannuation. Evidently, the situation contemplated under S.4(6)(a) and 4(6)(b) are not attracted in the case at hand. Necessarily, the judgment of this Court in **Lalitha v. State of Kerala** (supra) is applicable to the facts of the case. 8. Even assuming that the petitioner has committed loss and even if any adverse remarks are incorporated in the audit report covering the period 2020-2021, that by itself is not sufficient to forfeit the gratuity amount. The Division Bench has clearly stated that, bank cannot suo moto appropriate the amounts from the retiral benefits, unless it has been quantified by an adjudicatory process as envisaged under S.69 of the Act. The Court noted that, learned Single Judge has observed that the principles of unjust enrichment and restitution enables the bank to suo moto appropriate the amounts from the retiral benefits to recompose the loss suffered. However, the Division Bench could not agree with that proposition, since the loss allegedly suffered by the bank has to be quantified by an adjudicatory process, as envisaged under S.69 of the Act. Dispute of that nature can be raised by the bank even against a past member going by the terminology of W.P(C).19839/2020 6 S.69 and the retirement of the appellant is immaterial. 9. To counter this argument, learned counsel for the respondent relied on the counter affidavit filed by the respondents and the additional statements filed by the Joint Registrar of Cooperative Societies. 10. It is clear that, no enquiry has been conducted. It is also clear that, the liability has not been fixed on the respondent. Having considered this, the retiral benefit due to him, including the gratuity, cannot be withheld. 11. The learned Senior Government Pleader to counter this argument relied on the decision reported in **Secretary, ONGC Ltd. And Another v. V.U.Warrier [(2005)5 SCC 245]** wherein the Honourable Supreme Court held that, where there is an unauthorized retention of official accommodation by the employee, after his retirement entailing penal interest, employer was entitled to deduct it from the gratuity payable to the employee, penal rent in terms of such statutory Rules/Regulations. It was held that, if a person after retirement holds the official accommodation for more period than permitted, the amount due can be recovered from the gratuity. It seems from the above decision that there was a specific provision in the regulation which enabled the employer to deduct the amount from the gratuity amount. In the above Supreme Court decision, the W.P(C).19839/2020 7 determination and deduction fo the amount due to the employer towards the accommodation had a statutory backing, which is not applicable to the case at hand. The above decision has no application to the facts of this case. The above view, was thereafter reiterated by this Court in **Steel Authority of India Ltd. v. Raghbendra Singh and Ors [SLP 11025 of 2020 reported in** ## **MANU/SCOR/46090/2020]** . 12. Having considered this, I am inclined to hold that the retention of the gratuity due to the petitioner is illegal and shall be forthwith be released, if there is no other legal embargo except the pendency of the audit proceedings. It is also held that, the employer unless situations contemplated under Secs.4(6)(a) and 4(6)(b) are attracted are not entitled to deduct from the gratuity amount. The remaining amount, shall be forthwith released, after the audit is over, and no liability is cast on the employee. Writ Petition is allowed as above. Sd/- **SUNIL THOMAS** **JUDGE** ## **Sbna/** W.P(C).19839/2020 8 ## **APPENDIX OF WP(C) 19839/2020** PETITIONER EXHIBITS EXHIBIT P1 A TRUE COPY OF THE LETTER DATED 18.05.2020 OF THE 3RD RESPONDENT. EXHIBIT P2 A TRUE COPY OF THE JUDGMENT DATED 25/05/2020 IN WPC NO. 10215/2020. EXHIBIT P3 A TRUE COPY OF THE LETTER DATED 25/05/2020 OF THE JOINT REGISTRAR. EXHIBIT P4 A TRUE COPY OF THE AUDIT CERTIFICATE OF THE YEAR 2018-2019. EXHIBIT P5 A TRUE COPY OF THE AUDIT CERTIFICATE OF THE YEAR 2019-2020. EXHIBIT P6 A TRUE COPY OF THE REPORT OF THE CHARTERED ACCOUNTANT DATED 15.07.20. EXHIBIT P7 A TRUE COPY OF THE PRINT OUT OF THE AMOUNT PAID BY THE LIC DATED 7.05.2020 WITH STATEMENT OF ACCOUNTS. EXHIBIT P8 A TRUE COPY OF THE JUDGMENT REPORTED IN 2014 (2) KLJ 707. EXHIBIT P9 A TRUE COPY OF THE JUDGMENT AS REPORTED IN 2018 (3) KLT 347.