LPA/693/2013 of DEEPAK SAPRA Vs PUNJAB NATIONAL BANK

*IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of decision: 18.09.2013

+LPA 693/2013

DEEPAK SAPRA..... AppellantThrough : Sh. K.G. Mishra, Advocate.versus

PUNJAB NATIONAL BANK

..... Respondent

Through : Sh. Rajat Arora, Advocate.

HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE NAJMI WAZIRI

MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT)

1.Issue notice. Sh. Rajat Arora, Advocate accepts notice. Withconsent, the appeal is heard finally.

2.The petitioner claims to be aggrieved by an order of the learnedSingle Judge dated 18.07.2013 by which his claim for leaveencashment benefit upon his compulsory retirement – imposed by therespondent bank as penalty was directed to be withheld/forfeited.Both the parties had relied upon Regulation 38 of the Punjab NationalBank Officers’ Service Regulations, 1979, [hereafter referred to as“the 1979 Regulations”], framed in terms of Section 19 (1) of theBanking Companies (Acquisition and Transfer of Undertakings) Act,1970 [hereafter referred to as “the 1970 Act”]. The bank hadcontended, by placing reliance upon the latter part of Regulation 38

that the compulsory retirement imposed as penalty would disqualifyan officer from leave encashment benefits.

3.Learned Single Judge interpreted Regulation 38 of the 1979Regulations in the light of circular issued by the respondent PunjabNational Bank (PNB) on 18.01.2001, in accordance with thedecision/resolution of the Indian Banks’ Association (IBA). Neitherthe circular nor the resolution/decision of IBA have any statutoryforce. On the other hand, Regulation 38 of the 1979 Regulations isstatutory, having been framed after prior consultation and approval ofthe Central Government, under Section 19 of the 1970 Act. LearnedSingle Judge was confronted with two conflicting views – one by thePunjab and Haryana High Court in UCO Bank and Ors. v. AshwaniKumar Sharma [LPA 191/2006, decided on 01.02.2010] in which theHigh Court held that the class of employees imposed with the penaltyof compulsory retirement would nevertheless be entitled to leaveencashment benefits in terms of the bank’s regulations. UCO Bank’sregulations are in pari materia with the PNB. The other view whichfound favour with the learned Single Judge was that of PunjabNational Bank v. Jyotirmay Roy [APO No. 284/2012, decided on17.12.2012]. In that, the Calcutta High Court held as follows:

“8.I am inclined to follow the reasoning given by theDivision Bench of the Calcutta High Court in the case ofJyotirmay Roy (supra) of the respondent-bank itselfbeing relied on behalf of the respondent and the relevantportion of which reads as under:-

“Learned counsel for the Appellant has submitted that inthe case of the Petitioner he was compulsorily retired

and not terminated in service. He took us to Paragraph 7of the Judgment (see page 200) in which the learnedTrial Judge has held that cessation of service on accountof compulsory retirement has not been separatelycategorised to disentitle delinquent officer from gettingLeave Encashment benefits and therefore, in such caseand unless provided in Service Regulations, the Bankwrongly applied the provision relating to Clause 38referred to above thereby depriving the Petitioner fromthe benefits of Leave Encashment. We are of the viewthat the aforesaid interpretation of the learned SingleJudge is not proper. Any wilful act of the employer bywhich the services of an employee is made redundantand/or comes to an end as measure of punishment mustalways be considered to be an order of termination andtherefore an order of compulsory retirement cannot bemade an exception to the aforesaid principle.Thus, in our considered opinion, by making acompulsory retirement to mean ordinary retirementthereby bringing him within the eligibility clause ofCircular No.4 dated 18.1.2001 was not proper at all andwe therefore are of the considered view that such afinding is erroneous. Considering the aforesaid facts andcircumstances we are of the view that the order of thelearned Trial Judge cannot be sustained. We would,however, like to point out that under the Regulations (seepage 155 of the Paper Book) it has been clearlyexplainedthatGratuitymaybepaidincaseoftermination of service but subject to the condition thatthe Officer has put in at least ten years of service in theBank and provided that the termination is not way ofdismissal or removal from service as punishment. Thesaid explanation reads as follows:

“Explanation:We have to clarify that gratuity may bepaid in case of termination of service, subject to thecondition that the officer has put in at least 10 years of

service with the bank and provided that the terminationis not by way of dismissal or removal from service aspunishment.”

Under the circumstances, we are of the view thatthe order of the learned Single Judge cannot besustained. Accordingly, this appeal is allowed and thesaid impugned Judgment/Order dated 3.4.2012 passed inW.P. No. 1562 of 2010 is hereby set aside. There shall beno order as to costs.”

4.Learned counsel for the appellant urges that the learned SingleJudge fell into error in not noticing that the PNB’s circular of18.01.01 issued by the bank was not statutory and could not prevailover the regulations which were framed under Section 19(1) of the1970 Act. It was submitted that the plain language of Regulation 38 ofthe 1979 Regulations made no distinction between the retiring orretired officers from one another. It was emphasized that the firstproviso which enacted that if an officer retired from bank service hewould be entitled to be paid leave encashment in terms of what isprovided, cannot be distinguished, especially if the officer imposedwith the penalty of compulsory retirement is otherwise entitled to allpensionary and terminal benefits such as gratuity, contributoryprovident fund, if any, and pension as applicable etc. In thesecircumstances, it was argued by the learned counsel for the appellantthat the reasoning of the Full Bench of the Punjab and Haryana HighCourt ought to have been adopted. He also relied upon the recentruling of the Supreme Court dated 14.08.2013 in State of Jharkhandand Ors. v. Jitendra Kumar Srivastava and Anr. [Civil Appeal No.

6770/2013]. It was held pertinently therein that the right to receiveleave encashment is vested one which cannot be taken away withoutauthority of law of specific rules.

5.Learned counsel for the respondent bank argued that theimpugned judgment is unexceptionable. He sought to distinguish thejudgment of the Supreme Court in Jitendra Kumar Srivastava (supra),to say that the Court there was concerned with the rules framed underproviso to Article 309 of the Constitution of India and that the Courthad no occasion to deal with or interpret Regulation 38 of the 1979Regulations. It was further argued that the view preferred by thelearned Single Judge is correct since the Regulation 38 of the 1979Regulations itself in the main part provides that all leaves would lapseupon his resignation, retirement, death, discharge, dismissal ortermination. Having regard to the intent and purport of the terms,argued learned counsel, the expression “retirement” had to beinterpreted as one accruing as result of rules, either by exercise ofchoice by the employee to voluntarily retire from the service with allattendant benefits or upon his superannuation and that any other classof retirement, such as compulsory retirement as consequence ofimposition of penalty should be treated as termination.

6.This Court has carefully considered the submissions as well asthe documents on record. Regulation 38 of the 1979 Regulations readsas follows:

“Lapse of leave

Save as provided below, all leave to the credit of anofficer shall lapse on resignation, retirement, death,

discharge, dismissal or termination for any reason.

Provided that where an officer retires from the Bank’sservice, he shall be eligible to be paid sum equivalentto the emoluments of any period not exceeding 240 daysof privilege leave that he had accumulated;

Provided further that where an officer dies while inservice,thereshallbepayabletohislegalrepresentatives, sum equivalent to the emoluments forthe period not exceeding 240 days of privilege leave tohis credit as on the date of his death.Provided also that where an officer resigns from serviceon or after 1[st]April 2001 after giving due notice as insub-regulation (2) of Regulation 20, he may be paid asum equivalent to the emoluments in respect of privilegeleave to the extent of half of such leave to his credit onthe date of cessation of service, subject to maximum of120 days.”

7.As noted previously, the CalcuttaHighCourtwasmuchinfluenced by the enacting part of Regulation 38 of the 1979Regulations. What requires to be noticed, however, is that theregulation opens with the expression “Save as provided below”. Thisin turn means that in the eventualities specifically enumerated, i.e.resignation, retirement, death, discharge, dismissal or any other kindof termination, the leave standing to the credit of an officer is to lapse.This rule is further controlled by three provisos. The most important –and to this Court’s mind, relevant proviso - is the first one. It statesthat, “Provided that where an officer retires from the Bank’s service”,he would be eligible to be paid the extent of accumulated privileged

leave. The second proviso preserves the right of legal representativeof deceased officer to receive such benefit. The third provisoprovides for specific contingency of resignation of employee after01.04.2001 and his entitlement to secure proportionate emoluments inlieu of privileged leave.

8.Thus, in respect of all categories of retirees, the first provisostates that such employees would be eligible to payment of leaveencashment benefits. Advisedly, the regulation which was framedafter prior consultation with and approval of the Central Governmentmade no distinction between one class of retirees and another. Indeedthere is no dispute about the fact that the cessation of service as aresult of retirement can be on the occurrence of three contingencies -attainment of superannuation; option by the employee to voluntarilyretire from the service, and the third, retirement of an employee uponimposition of penalty or exercise by the employer upon impositionof penalty or exercise by the employer of an option to compulsorilyretire the employee on this attaining certain age or having served fora certain number of years, in public interest. The first proviso makesno distinction between one class of retirees and another. In otherwords, each one of them, in terms of Regulation 38 of the 1979Regulations is entitled to leave encashment benefit. In the case ofthose imposed with penalty of compulsory retirement, there is nodispute that pension – as applicable and other terminal benefits aregiven. In these circumstances, to single-out one class of retirees, i.e.those imposed with compulsory retirement and deny them the benefitof leave encashment would be contrary to plain intent of Regulation38 of the 1979 Regulations. This Court is clear that the first part of thelearned Single Judge’s reasoning that he preferred and relied upon thebank’s circular of 18.01.2001 is clearly erroneous. That circular fliesin the face of the first proviso to Regulation 38 of 1979 Regulationsand could not have added words as it sought to, in the presentinstance. Another reason which persuades us to hold as we do, i.e. tosay that compulsory retirees would be entitled to leave encashmentbenefits is that singling-out such class of employees for denial for onespecific type of retirement benefit is also arbitrary and furthers norationale, having regard to the express terms of Regulation 38 of the1979 Regulations.

9.This Court is, therefore, of the opinion that the reasoningembodied in the Full Bench judgment of the Punjab and HaryanaHigh Court in UCO Bank and Ors. v. Anju Mathur [LPA 566/2012,decided on 07.03.2013], which specifically dealt with Regulation 38,is the correct one. The effect and purport of the decision in JitendraKumar Srivastava (supra) is the same with one superadded reasonthat leave encashment benefits are property, being vested rights,which cannot be deprived of without authority of law. The conclusionthat this Court is reaching is identical to that reached by the SupremeCourt, i.e. that in the absence of specific regulation, depriving oneclass of retirees (such as those imposed with penalty of compulsoryretirement)leaveencashmentbenefitsisunwarrantedandunsupported in law.

10.In the light of the above discussion, the appeal has to succeedand is accordingly allowed. The impugned judgment and order of the

learned Single Judge is set aside. The respondent is directed to releaseleave encashment benefits to the appellant within four weeks fromtoday.

S. RAVINDRA BHAT(JUDGE)

SEPTEMBER 18, 2013‘ajk’

NAJMI WAZIRI(JUDGE)