CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS LIMITED versus SRI RABINDRANATH CHOUBEY

CHAIRMAN-CUM-MANAGING DIRECTOR,MAHANADI COALFIELDS LIMITED

SRI RABINDRANATH CHOUBEY

(Civil Appeal No. 9693 of 2013)

MAY 27, 2020

[ARUN MISHRA, M. R. SHAH AND AJAY RASTOGI, JJ.]

Service Law: Disciplinary proceeding – Superannuation –Payment of gratuity/Dismissal from service – Whether it ispermissible for the employer to withhold the payment of gratuity ofthe employee even after his superannuation from service becauseof the pendency of the disciplinary proceedings against him andwhere departmental enquiry had been instituted against an employeewhile he was in service and continued after he attained the age ofsuperannuation whether the punishment of dismissal can be imposedon being found guilty of misconduct in view of the provisions inr.34.2 of the Conduct, Discipline & Appeal Rules of 1978 made bythe employer – Held: Per M.R.Shah, J. (for himself and ArunMishra, J.) – An employer has right to withhold the gratuity duringthe pendency of the disciplinary proceedings, and the disciplinaryauthority has powers to impose the penalty of dismissal/major penaltyupon the employee even after his attaining the age ofsuperannuation, as the disciplinary proceedings were initiated whilethe employee was in service – The Payment of Gratuity Act, 1972govern the conditions concerning payment of gratuity – It cannotcontrol and provide with respect to an employer’s right to hold adepartmental inquiry after retirement, and there is no provisionprescribing what kind of punishment can be imposed in thedepartmental inquiry if it is continued after attaining the age ofsuperannuation – The relevant rules would govern such matters –Since no statutory provisions of the Payment of Gratuity Act, 1972come in the way of the CDA Rules to continue the inquiry aftersuperannuation of the employee in case it was instituted while hewas in service and his deemed continuance in service; thus, nofetter is caused upon operation of Rule 34.2 providing for acontinuation of the inquiry and deemed continuation of the employeein service after the age of superannuation – At the conclusion of

Asuch disciplinary proceedings any of the penalty provided underRule 27 of the CDA Rules can be imposed by the authority includingthe order of dismissal and apart from that in case pecuniary losshad been caused that can be recovered –Per Ajay Rastogi, J. (Partlydissenting): After conclusion of the disciplinary inquiry, if anemployee/delinquent is held guilty, indeed penalty can be inflictedBupon him who stood retired from service and what should be thenature of penalty would always depend on the relevant scheme ofRules and on the facts and circumstances of each case, but eitherof the substantive penalties specified under Rule 27 of the Rules,1978 including dismissal from service are not open to be inflictedCon conclusion of the disciplinary proceedings and the punishmentof forfeiture of gratuity commensurate with the nature of guilt maybe inflicted upon delinquent employee provided under Rule 34.3of Rules, 1978 read with sub-section (6) of s.4 of the Act, 1972 –Payment of Gratuity Act, 1972.

DDisposing of the appeal, the CourtHELD:

PER M. R. SHAH, J. (FOR HIMSELF AND ARUNMISHRA, J.)E1.1 Indisputably, the respondent was governed by the CDARules. Therefore, Rules 34.2 and 34.3 of the CDA Rules shall beapplicable and the respondent-employee shall be governed bythe said provisions. Rule 34 permits the management to withholdthe gratuity during the pendency of the disciplinary proceedings.Rule 34.2 permits the disciplinary proceedings to be continuedFand concluded even after the employee has attained the age ofsuperannuation, provided the disciplinary proceedings areinstituted while the employee was in service. It also furtherprovides that such disciplinary proceedings shall be deemed tobe the proceedings and shall be continued and concluded by theGauthority by which it was commenced in the same manner as ifthe employee had continued in service. Therefore, as such, on afair reading of Rule 34.2 of the CDA Rules, an employee shall bedeemed to be continued in service, after he attains the age ofsuperannuation/retired, for the limited purpose of continuing andconcluding the disciplinary proceedings which were institutedHwhile the employee was in service. Therefore, at the conclusion

of such disciplinary proceedings any of the penalty provided underRule 27 of the CDA Rules can be imposed by the authorityincluding the order of dismissal. If the submission on behalf ofthe employee that after the employee has attained the age ofsuperannuation and/or he has retired from service, despite Rule34.2, no order of penalty of dismissal can be passed is accepted,in that case, it will be frustrating permitting the authority tocontinue and conclude the disciplinary proceedings afterretirement. [Para 7][25-E-H; 26-A-C]

State Bank of India v. Ram Lal Bhaskar (2011) 10 SCC249 : [2011] 12 SCR 1036 – referred to.

1.2 Once it is held that major penalty which includes thedismissal from service can be imposed, even after the employeehas attained the age of superannuation and/or was permitted toretire on attaining the age of superannuation, provided thedisciplinary proceedings were initiated while the employee wasin service, sub-section 6 of Section 4 of the Payment of GratuityAct shall be attracted and the amount of gratuity can be withheldtill the disciplinary proceedings are concluded. Even otherwise,Rule 34.3 of the CDA Rules permits withholding of the gratuityamount during the pendency of the disciplinary proceedings, forordering recovering from gratuity of the whole or part of anypecuniary loss caused to the company if have been guilty ofoffences/misconduct as mentioned in sub-section 6 of Section 4of the Payment of Gratuity Act, 1972 or to have caused pecuniaryloss to the company by misconduct or negligence, during hisservice. It further makes clear that Rule 34.3 for withholding ofsuch gratuity would be subject to the provisions of Section 7(3)and 7(3A) of the Payment of Gratuity Act, 1972 in the event ofdelayed payment in the case of an employee who is fullyexonerated. Rule 34.3 of the CDA Rules is in consonance withsub-section 6 of Section 4 of the Payment of Gratuity Act andthere is no inconsistency between sub-section 6 of Section 4 ofthe Payment of Gratuity Act and Rule 34.3 of the CDA Rules.[Paras 9, 9.1][274-E-H; 28-A-B]

D.V. Kapoor v. Union of India (1990) 4 SCC 314 :[1990] 3 SCR 697; State Bank of Patiala & Anr. v. RamNiwas Bansal (Dead) Thr. LRs. (2014) 12 SCC 106 :

4SUPREME COURT REPORTS

A[2014] 3 SCR 984; R. Jeevaratnam v. The State ofMadras AIR 1966 SC 951 : [1966] 2 SCR 204; RameshChandra Sharma v. Punjab National Bank & Anr.(2007) 9 SCC 15 : [2007] 7 SCR 585; Union of Indiav. Ajoy Kumar Patnaik (1995) 6 SCC 442 : [1995] 3Suppl. SCR 449; UCO Bank v. Rajinder Lal CapoorB(2008) 5 SCC 257 : [2008] 5 SCR 775;V. Padmanabham v. Government of Andhra Pradesh &Ors. (2009) 15 SCC 537 : [2009] 11 SCR 455; State ofMaharashtra v. M.H. Mazumdar (1988) 2 SCC 52 :[1988] 3 SCR 31; State of West Bengal & Ors. v. PronabCChakraborty (2015) 2 SCC 496 : [2014] 11 SCR 76;State Bank of India v. A.N. Gupta & Ors. (1997) 8 SCC60 : [1997] 4 Suppl. SCR 383; Takhatray ShivadattrayMankad v. State of Gujarat (1989) Suppl. 2 SCC 110 :[1989] 3 SCR 214; The Secretary, Forest Department& Ors. v. Abdur Rasul Chowdhury (2009) 7 SCC 305 :D[2009] 9 SCR 695; State Bank of India v. Ram LalBhaskar (2011) 10 SCC 249 : [2011] 12 SCR 1036–referred to.

2.1 Section 4(1) provides that gratuity shall be payable toan employee on termination of his employment after he hasErendered continuous service for not less than five years, on hissuperannuation, or retirement or resignation, or his death ordisablement due to accident or disease. Section 4(6) contains anon-obstante clause to sub-section 1. In case service of theemployee have been terminated for wilful omission or negligenceFcausing any damage or loss to, or destruction of propertybelonging to the employer, gratuity shall be forfeited to the extentof the damage or loss so caused as provided under section 4(6)(a).Even in the absence of loss or damage, gratuity can be wholly orpartially forfeited under the provisions of section 4(6)(b), in case

termination of services was based upon disorderly conduct orGact of violence on his part or offence involving moral turpitudecommitted during the course of employment. Thus, it is apparentthat not only damage or loss can be recovered, but gratuity canbe wholly or partially withheld in case services are terminatedfor the reasons specified in section 4(6)(b). The Payment ofHGratuity Act, 1972, makes no provision with respect to

departmental inquiries. Since no statutory provisions of thePayment of Gratuity Act, 1972 come in the way of the CDA Rulesto continue the inquiry after superannuation of the employee incase it was instituted while he was in service and his deemedcontinuance in service; thus, no fetter is caused upon operationof Rule 34.2 providing for continuation of the inquiry anddeemed continuation of the employee in service after the age ofsuperannuation.[Paras 10.16-10.18][53-G-H; 54-A-F]

2.2 The provisions of Section 4(6) of the Act of 1972 prevailover Section 4(1) as provisions of Section 4(6) contain non-obstante clause as to Section 4(1). It would prevail over theprovisions made in Section 4(1) and gratuity would not becomepayable mandatorily as provided in Section 4(1). Section 4(6)(a)and (b) both provide for recovery of loss caused or forfeiturewholly or partially in the case of termination of services. In caseafter superannuation of employee there cannot be any dismissali.e., termination of services as contemplated in Section 4(6), thenthere can be no recovery of pecuniary loss caused by employeeor forfeiture of gratuity wholly or partially as that can only bedone in the event of termination of services on charges foundestablished. Such an interpretation would render continuance ofinquiry otiose and would defeat the public policy and theprovisions of Act of 1972. The recovery of loss or forfeiture isone of the punishments which depends on exigency of terminationby way of dismissal as mandated by Section 4(6). To give effect tothe provisions of the Act, the punishment of dismissal can beimposed in view of Rule 34.2, otherwise it would defeat theintendment of provisions contained in Section 4(6)(a) and 4(6)(b)of the Act of 1972. [Para 10.19][54-F-H; 55-A-C]

2.3 Section 4(1) used the expression ‘termination ofemployment after five years by way of superannuation, retirementor resignation or on his death or disablement due to accident ordisease’ that is in normal course. It does not deal with situationwhere departmental inquiry is instituted and continued andcompleted after the age of superannuation and termination ofemployment had not taken place on completion of the age ofsuperannuation as there is deemed continuation of theemployment for the purpose of holding an inquiry and passing

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Athe appropriate punishment order after the conclusion of thedepartmental inquiry on the basis of misconduct if any foundestablished. Provisions of section 4(1) do not impinge upon thecontinuation of inquiry. Section 4(6) prevails on it. The Paymentof Gratuity Act, 1972 govern the conditions concerning paymentof gratuity. It cannot control and provide with respect to anBemployer’s right to hold departmental inquiry after retirement,and there is no provision prescribing what kind of punishmentcan be imposed in the departmental inquiry if it is continued afterattaining the age of superannuation. The relevant rules wouldgovern such matters. In case the Payment of Gratuity Act, 1972,Cis interpreted to interdict the departmental inquiry after the ageof superannuation and to deal with the nature of punishment tobe imposed, it would be taken as case of over-inclusion in theAct which deals exclusively with the payment of gratuity.[Para 10.20][55-C-G]

D2.4 The punishment which is prescribed under Rule 27 ofthe CDA Rules, minor as well as major, both can be imposed.Apart from that, recovery can also be made of the pecuniary losscaused as provided in Rule 34.3 of the CDA Rules, which takescare of the provision under sub-section (6) of Section 4 of thePayment of Gratuity Act, 1972. The recovery is in addition to aEpunishment that can be imposed after attaining the age ofsuperannuation. The legal fiction provided in Rules 34.2 of theCDA Rules of deemed continuation in service has to be givenfull effect. [Para 10.21][55-G-H; 56-A]

M. Ramanatha Pillai v. The State of Kerala & Ors.F(1973) 2 SCC 650; Jagdish Mitter v. Union of IndiaAIR 1964 SC 449; P. Balakotaiah v. Union of IndiaAIR 1958 SC 232 : [1958] SCR 1052; Shyam Lal v.State of Uttar Pradesh & Ors. AIR 1954 SC 369 : [1955]1 SCR 26; Ravindra Kumar Misra v. UP State HandloomGCorpn. Ltd. & Anr. (1987) Suppl. SCC 739 : [1988] 1SCR 501; Registrar General, High Court of Gujarat &Anr. v. Jayshree Chamanlal Buddhbhatti (2013) 16 SCC59 : [2013] 11 SCR 395; Dinesh Chandra Sangma v.State of Assam and Ors. (1977) 4 SCC 441 : [1978] 1SCR 607; Workers Employed in Hirakud Dam v. State

of Orissa & Ors. (1971) 1 SCC 583 : [1971] 3 SCR646; Satish Chandra Anand v. Union of India AIR 1953SC 250 : [1953] SCR 655; State Bank of India v. TheWorkmen of State Bank of India & Ors. (1991) 1 SCC13 : [1990] 1 Suppl. SCR 11 – referred to.

3.1 It is settled proposition of law that in case of terminationof service there is distinction as to whether it is simplicitertermination or punitive dismissal and this court can lift the veilto find out the real nature of termination. Section 4(1) deals withnormal superannuation and does not cover the cases where thedepartmental inquiry is pending, or dismissal had been ordered.It did not interdict the departmental inquiry if it was initiatedwhile the employee was in service and continued aftersuperannuation as if the employee continued in service. Section4 of the Payment of Gratuity Act, 1972 contains no bar, andpurposive construction has to be made of the provisionscontained in section 4(1). Section 4(6) provides where particularmisconduct is found established, how gratuity to be dealt with,but provisions cause no fetter on the power of an employer toimpose punishment of dismissal. It makes no provision inparticular with respect to the departmental inquiry but ratherbuttresses the power of an employer to forfeit gratuity wholly orpartially or to recover loss provided in Section 4(6). Neither theprovisions in section 4(1) nor section 4(6) of the Payment ofGratuity Act create embargo on the departmental inquiry and itscontinuance after superannuation. [Paras 10.23, 10.25][63-C-D;64-C-F]

UCO Bank & Ors. v. Prabhakar Sadashiv Karvade(2018) 14 SCC 98; State of Assam & Ors. v. PadmaRam Borah AIR 1965 SC 473; State of Punjab v. KhemiRam (1969) 3 SCC 28 : [1970] 2 SCR 657 – heldinapplicable.

Bhagirathi Jena v. Board of Directors, O.S.F.C. & Ors.(1999) 3 SCC 666 : [1999] 2 SCR 354 – distinguished.

Jaswant Singh Gill v. Bharat Coking Coal Ltd. (2007)1 SCC 663 : [2006] 8 Suppl. SCR 1064 – overruled.

AAnant R. Kulkarni v. Y.P. Education Society & Ors.(2013) 6 SCC 515 : [2013] 6 SCR 1124; NoidaEntrepreneurs Association v. Noida & Ors. (2011) 6SCC 508 : [2011] 8 SCR 25; B.T. Krishnamurthy v. SriBasaveswara Education Society (2013) 4 SCC 490 :[1982] 1 SCR 759; Paramjit Singh v. Director ofBSchools (Public Instructions), (2010) 14 SCC 416; Stateof U.P. v. Ram Vinai Sinha (2010) 15 SCC 305;Jaswantsingh Pratapsingh Jadeja v. Rajkot MunicipalCorpn. (2007) 10 SCC 71 : [2007] 10 SCR 112; Stateof Punjab v. Rajesh Kumar (2006) 12 SCC 418 : [2006]C9 Suppl. SCR 208; Jai Singh v. Union of India (2006)9 SCC 717 : [2006] 4 Suppl. SCR 734; State of MadhyaPradesh and Anr. v. Kumari Nivedita Jain and Ors,(1981) 4 SCC 296 : [1982] 1 SCR 759; State of AndhraPradesh and Anr. v. Lavu Narendranath and Ors. etc.AIR 1971 SC 2560 : [1971] 3 SCR 699; Distt. Registrar,DPalghat and Ors. v. M.B. Koyakutty and Ors. (1979) 2SCC 150 : [1979] 3 SCR 242; Union of India and Anr.v. Tulsiram Patel AIR 1985 SC 1416 : [1985] 2 Suppl.SCR 131; Kirti Bhusan Singh v. State of Bihar (1986) 3SCC 675 : [1986] 3 SCR 230; U.P. State SugarECorporation Ltd. & Ors. v. Kamal Swaroop Tandon(2008) 2 SCC 41 : [2008] 1 SCR 887 – referred to.3.2 Several service benefits would depend upon the outcomeof the inquiry, such as concerning the period during which inquiryremained pending. It would be against the public policy to permitFan employee to go scot-free after collecting various servicebenefits to which he would not be entitled, and the event ofsuperannuation cannot come to his rescue and would amount tocondonation of guilt. Because of the legal fiction provided underthe rules, it can be completed in the same manner as if the

employee had remained in service after superannuation, andGappropriate punishment can be imposed. An inquiry can becontinued as provided under the relevant service rules as it isnot provided in the Payment of Gratuity Act, 1972 that inquiryshall come to an end as soon as the employee attains the age ofsuperannuation. The Act does not deal with the matter ofHdisciplinary inquiry, it contemplates recovery from or forfeiture

of gratuity wholly or partially as per misconduct committed anddoes not deal with punishments to be imposed and does notsupersede the Rules 34.2 and 34.3 of the CDA Rules. The mandateof Section 4(6) of recovery of loss provided under Section 4(6)(a)and forfeiture of gratuity wholly or partially under Section 4(6)(b)is furthered by the Rules 34.2 and 34.3. If there cannot be anydismissal after superannuation, intendment of the provisions ofSection 4(6) would be defeated. The provisions of section 4(1)and 4(6) of Payment of Gratuity Act, 1972 have to be givenpurposive interpretation, and no way interdict holding of thedepartmental inquiry and punishment to be imposed is not thesubject matter dealt with under the Act. Thus considering theprovisions of Rules 34.2 and 34.3 of the CDA Rules, the inquirycan be continued given the deeming fiction in the same manneras if the employee had continued in service and appropriatepunishment, including that of dismissal can be imposed apart fromthe forfeiture of the gratuity wholly or partially including therecovery of the pecuniary loss as the case may be. [Para 10.31and 10.32][73-G-H; 74-A-F]

PER AJAY RASTOGI, J. (PARTLY DISSENTING):

1. Retiral benefits are earned by an employee for longand meritorious service rendered by him/her and it is not paidgratuitously or merely as matter of boon, it is paid to him/herfor dedicated and devoted work. The Act, 1972 also acknowledgesunder sub-section (6) of Section 4 to forfeit it to the extentpecuniary loss so caused from the amount of gratuity payable tothe employee. [Para 12][80-D-E]

2. The purpose of holding an inquiry against delinquent isnot only with view to establish the charge levelled against himor to impose penalty, but is also conducted with the object ofsuch an inquiry recording the truth of the matter, and in that sense,the outcome of an inquiry may either not establishing orvindicating his stand, hence result in his exoneration. Therefore,there should be fair action on the part of the authority concernedin holding disciplinary inquiry for the misconduct, if any, beingcommitted by an employee in discharge of his duties even ifretired from service during pendency of disciplinary proceedingsafter adopting the procedure prescribed under the relevant

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Adisciplinary rules alike Rules, 1978 in the instant case and indeedthe scheme of Rules, 1978 is neither in derogation nor incontravention to the scheme of the Act, 1972. It is also well settledthat the competence of an authority to hold an enquiry or tocontinue enquiry against an employee who has retired fromservice depends upon the scheme of rules and the terms andBconditions of service of the employee are the determining factorsas to whether and in what manner the disciplinary enquiry can beheld against an employee who stood retired or superannuatedfrom service. [Paras 14, 15][81-F-H; 82-A-B]3. Those who were the serving employees, if held guilty onCconclusion of the disciplinary proceedings, minor/major penaltiesas referred to under Rule 27 could be inflicted by the disciplinaryauthority after recording good and sufficient reasoncommensurate with the nature of misconduct and in the case ofan employee who stood retired/superannuated from serviceDpending disciplinary proceedings, the disciplinary authority hasa right to withhold the payment of gratuity pending disciplinaryinquiry and if found guilty in the inquiry for the offences/misconduct as indicated in sub-section (6) of Section 4 of Act1972, can be recovered from his gratuity payable under Section4 of the Act, 1972. At the same time, if he is exonerated by theEdisciplinary authority after retirement/superannuation fromservice, he shall be entitled for payment of gratuity along withinterest for the delay in payment in terms of Section 7(3) andSection 7(3A) of Act, 1972. [Para 16][82-B-D]

4. Where the disciplinary proceedings are instituted whileFthe employee was in service but retired thereafter during itspendency, under the special procedure provided under Rule 34.2of the Rules, 1978, the authority is empowered to continue andconclude the disciplinary inquiry in the same manner as if theemployee had continued in service by deeming fiction, however,Gthe relationship of employer and employee shall not be severeduntil conclusion of the disciplinary enquiry but may withholdpayment of gratuity in terms of Rule 34.3 pending disciplinaryinquiry and in furtherance thereof if later held guilty, thecompetent authority to the extent pecuniary loss has been causedfor the misconduct, negligence in the discharge of duties orderH

for recovery from gratuity either be forfeited in the whole or inpart, to the extent pecuniary loss has been caused to the companyfor the offences/misconduct as measure of penalty in terms ofRule 34.3 of the Rules read with sub-section (6) of Section 4 ofthe Act, 1972. [Para 17][82-E-G]

5.1 Gratuity became payable to an employee under Section4(1) of the Act, 1972 on termination of his employment after herendered minimum qualifying service and termination of hisemployment is either can be on his superannuation or retirementor resignation or death or disablement due to accident or diseaseor any other cause may be. The word ‘termination’ referred tounder sub-section (1) or under sub-section (6) of Section 4 of theAct, 1972 is in reference to the severance of relationship ofemployer and employee and sub-section (6) of Section 4 beingcouched with non-obstante clause empowered the authority incase the delinquent employee held guilty of wilful omission ornegligence causing any damage or loss or destruction to theproperty of the company during the course of employment as ameasure of penalty gratuity may be forfeited wholly or partially tothe extent misconduct found proved. [Para 19][83-B-D]

5.2 The term ‘termination’ may not be understood with thepenalty of dismissal or removal from service specified under Rule27 of Rules, 1978. The expressions in the schedule of substantivepenalties under Rule 27 of the Rules, 1978 refers to variouspenalties including reduction in rank, compulsory retirement,dismissal, removal, etc. and could possibly be inflicted on theserving employee and indeed cannot be effected withretrospective effect on the delinquent employee who stood retiredfrom service. [Para 20][83-E-F]

5.3 Many times ‘termination’ and ‘dismissal’ are held tobe synonymous but the difference between ‘termination’ and‘dismissal’ is that dismissal could be on account of misconductwith loss of future employment involving dishonesty or criminalityand penal in character but that is not in the case of termination.The “termination” as per Black’s Law Dictionary is the completeseverance of relationship of employer and employee which in theinstant case could be saved during pendency of the disciplinary

Aproceedings in view of Rule 34.2 of the Rules, 1978 which clearlyenvisaged that disciplinary proceedings, if instituted while theemployee was in service, shall be deemed to be pending andshall be continued and concluded by the authority by which it wascommenced in the same manner as if the employee had continuedin service and by legal fiction, the relationship of employer andBemployee shall be deemed to continue for the limited purposesof conclusion of the disciplinary proceedings and the delinquentemployee becomes qualified to claim gratuity subject to theoutcome of the disciplinary proceedings in terms of Rule 34.3 ofthe Rules, 1978 read with sub-section (6) of Section 4 of the Act,C1972. [Para 21][83-G-H; 84-A-C]

Jaswant Singh Gill v. Bharat Coking Coal Ltd. (2007)1 SCC 663 : [2006] 8 Suppl. SCR 1064; State Bank ofIndia v. Ram Lal Bhaskar and Another (2011) 10 SCC249 : [2011] 12 SCR 1036; State of Maharashtra v.DM.H. Mazumdar (1988) 2 SCC 52 : [1988] 3 SCR 31;UCO Bank & Ors. v. Rajendra Shankar Shukla (2018)14 SCC 92 : [2018] 2 SCR 636; UCO Bank and Ors. v.Prabhakar Sadashiv Karvade (2018) 14 SCC 98; UCOBank and Ors. v. Rajinder Lal Capoor (2007) 6 SCC694 : [2007] 7 SCR 543 – referred to.E7. The substantive penalties provided under the scheduleof penalties referred to under Rule 27 could be inflicted on adelinquent employee while he is in service but in case where thedelinquent employee stood retired or superannuated from servicepending disciplinary inquiry, at least either of the substantiveFpenalties provided under Rule 27 are not available to thedisciplinary authority to be inflicted with retrospective effect butat the same time punishment of forfeiture of gratuity if held guiltyfor misconduct or negligence to the extent damage or pecuniaryloss has been caused to the employer can be inflicted upon theGdelinquent in terms of Rule 34.3 of Rules 1978 read with sub-section (6) of Section 4 of the Act, 1972 and in case the delinquentemployee stands exonerated he became entitled for gratuity forthe delay in payment in terms of Sections 7(3) and 7(3A) of Act,1972 and as matter of caution, it should not be pre-supposedthat where the disciplinary inquiry remain pending and could notHbe concluded while the delinquent employee was in service in

due course of time, he shall be held guilty and punished underthe scheme of Rules, 1978. [Para 27][87-B-E]

Case Law Reference

PER M. R. SHAH, J. (FOR HIMSELFAND ARUN

14SUPREME COURT REPORTS

CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDSLTD. v. SRI RABINDRANATH CHOUBEY

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9693of 2013.

From the Judgment and Order dated 17.07.2013 of the High Courtof Orissa, Cuttack in W.A. No. 115 of 2012.

Mahabir Singh, Anukul Chandra Pradhan, Sr. Advs., Gp. Capt.Karan Singh Bhati, Gagan Deep Sharma, Amit K. Nain, Ms. PreetiSingh, Ajit Pudussery, Ajit Singh Verma, Vijayan K., Saurabh Mishra,Rahul Baid, Arun Verma, Romy Chacko, Chandan Kumar Mandal, ShaktiChand Jaidwal, Advs. for the appearing parties.

The Judgment of the Court was delivered by

M. R. SHAH, J.

1. The short but interesting questions of law which fell forconsideration of this Court are, (i) as to whether is it permissible in lawfor the appellant (employer) to withhold the payment of gratuity of therespondent (employee), even after his superannuation from service,because of the pendency of the disciplinary proceedings against him?,and (ii) where the departmental enquiry had been instituted against anemployee while he was in service and continued after he attained theage of superannuation, whether the punishment of dismissal can beimposed on being found guilty of misconduct in view of the provisionsmade in Rule 34.2 of the CDA Rules of 1978?

2. While considering the issues involved, the facts in nutshell arerequired to be considered, which are as under:

The respondent herein (hereinafter referred to as the “employee”)was posted as Chief General Manager (Production) at Rajmahal areaunder Mahanadi Coalfields Limited, the appellant herein (hereinafterreferred to as the “employer”). That the employer Mahanadi CoalfieldLimited has made the Conduct, Discipline & Appeal Rules, 1978(hereinafter referred to as the “CDA Rules”). That these Rules areapplicable to all the employees of the appellant company. Rule 27 of theCDA Rules mentions the authorities who are empowered to imposevarious punishments which are specified in column 3 of the scheduleattached to the CDA Rules. Rule 29 of the CDA Rules enlists theprocedure for imposing major penalties for misconduct and misbehaviour.Rule 30 of the CDA Rules provides for action on the Inquiry Report.Rule 34 of the CDA Rules, which is relevant for our purpose, provides

Afor special procedure in certain cases and which permits continuance ofdisciplinary proceedings even after the final retirement of an employee,provided the disciplinary proceedings are instituted while the employeewas in service whether before his retirement or during his re-employment.It further provides that such disciplinary proceedings shall be continuedand concluded by the authority by which it was commenced in the sameBmanner as if the employee had continued in service. Rule 34.3 providesfor withholding the payment of gratuity during the pendency of thedisciplinary proceedings and it further permits for ordering the recoveryfrom gratuity of the whole or part of any pecuniary loss caused to thecompany, if have been guilty of offences/misconduct as mentioned inCsub-section (6) of Section 4 of the Payment of Gratuity Act, 1972 or tohave caused pecuniary loss to the company by misconduct or negligence,during his service. The relevant Rules of the CDA Rules shall be discussedin detail hereinbelow.

2.1 While the respondent-employee was in service and posted as

DChief General Manager, he was served with the chargesheet dated1.10.2007. There was very serious allegation of misconduct allegingdishonestly causing coal stock shortages amounting to Rs.31.65 croresand thereby causing substantial loss to the employer. The employee wasthereafter suspended from service on 09.02.2008 under Rule 24.1 of theCDA Rules, pending departmental enquiry against him. This suspensionEhowever was revoked from 27.02.2009 without prejudice to thedepartmental enquiry. On completion of 60 years of age, the respondent-employee was superannuated with effect from 31.07.2010. However,at the time of superannuation, the departmental enquiry which wasinitiated against the employee remained pending. Therefore, the appellantF– employer withheld the gratuity due and payable to the respondent-employee. The respondent herein submitted an application dated21.09.2010 to the Director (Personnel) for payment of gratuity. On thesame date, he also submitted an application before the Controlling Authorityunder the Payment of Gratuity Act for payment of gratuity. Notice was

issued to the appellant to appear. The appellant appeared and stated thatGthe payment of gratuity was withheld due to the reason that the disciplinaryproceedings are pending against him. The Controlling Authority held thatin that view of the matter, the claim of the respondent was pre-mature.The respondent-employee challenged the order by filing the writpetition. The learned Single Judge dismissed the writ petition holdingH

that in view of the existence of an appellate forum against the orderpassed by the Controlling Authority, the respondent may file an appealbefore the Appellate Authority. However, instead of filing an appeal beforethe Appellate Authority, the respondent-employee then filed Intra CourtWrit Appeal before the Division Bench of the High Court. The DivisionBench of the High Court has held that the writ petition was maintainable.On merits and relying upon the decision of this Court in the case ofJaswant Singh Gill v. Bharat Coking Coal Ltd., reported in (2007)1 SCC 663, the High Court ruled that the disciplinary proceedings againstthe respondent were initiated prior to the age of superannuation. However,the respondent retired from service on superannuation and hence thequestion of imposing major penalty of removal from service would notarise. The Division Bench of the High Court has further held that thepower to withhold payment of gratuity as contained in Rule 34(3) of theCDA Rules shall be subject to the provisions of the Payment of GratuityAct, 1972. The Division Bench of the High Court has further held thatthe statutory right accrued to the respondent to get gratuity cannot beimpaired by reason of the Rules framed by the Coal India Limited whichdo not have the force of statute. Consequently, direction is given to theappellant-employer to release the amount of gratuity payable to therespondent-employee. Hence, the present appeal.

3. Shri Mahabir Singh, learned Senior Advocate appearing onbehalf of the appellant-employer has vehemently submitted that in thefacts and circumstances of the case and in view of the specific provisionsunder the CDA Rules, namely, Rules 34.2 and 34.3 of the CDA Rules,the decision of this Court in the case of Jaswant Singh Gill (supra)shall not be applicable.

3.1 It is further submitted by Shri Mahabir Singh, learned SeniorAdvocate appearing on behalf of the employer that Rule 34.2 of theCDA Rules authorises and/or permits the authority to continue thedisciplinary proceedings, if instituted while the employee was in service,even after the final retirement of the employee and such disciplinaryproceedings shall be deemed to be the proceedings and shall be continuedand concluded by the authority by which it was commenced in the samemanner as if the employee had continued in service. It is submitted thattherefore even major penalty of dismissal can be imposed on conclusionof departmental proceedings even after the final retirement of theemployee, if the departmental proceedings are instituted while the

Aemployee was in service. It is submitted that the afore-stated Rule 34.2of the CDA Rules has not been properly appreciated and/or consideredby this Court in the case of Jaswant Singh Gill (supra). It is submittedthat in the said decision, this Court has proceeded on the footing thatafter the final retirement of the employee, penalty of removal or dismissalis not permissible. It is submitted that the aforesaid is just contrary toBRule 34.2 of the CDA Rules.

3.2 It is further submitted by Shri Mahabir Singh, learned SeniorAdvocate appearing on behalf of the employer that even otherwise Rule34.3 authorises and/or permits the disciplinary authority to withhold thepayment of gratuity, or order the recovery from gratuity of the whole orCpart of any pecuniary loss caused to the company if such an employeehas been guilty of offences/misconduct as mentioned in sub-section (6)of Section 4 of the Payment of Gratuity Act, 1972 or to have causedpecuniary loss to the company by misconduct or negligence, during hisservice. It is submitted that Rule 34.3 of the CDA Rules is in conformityDand/or in consonance with sub-section (6) of Section 4 of the Paymentof Gratuity Act, 1972 and there is no conflict between the two.

3.3 Learned Senior Advocate appearing on behalf of the appellanthas heavily relied upon the decision of this Court in the case of StateBank of India v. Ram Lal Bhaskar, reported in (2011) 10 SCC 249.EIt is submitted that while considering the parimateriaprovisions underthe State Bank of India Officers’ Service Rules, 1992, namely, Rule19(3), this Court has confirmed the order of dismissal of an employeewhich was passed after his retirement. It is submitted that in the saiddecision, this Court distinguished another judgment of this Court in thecase of UCO Bank v. Rajinder Lal Capoor, reported in (2007) 6FSCC 694 on the ground that in the said case the delinquent officer hadalready been superannuated and the chargesheet was served upon himafter his retirement. It is submitted that thereafter this Court has furtherheld that if the chargesheet is served before the retirement, enquiry cancontinue even after the retirement as per Rule 19(3) of the State BankGof India Officers’ Rules, 1992. It is submitted that therefore this Court inthe case of Ram Lal Bhaskar (supra) specifically held that if the rulespermit, enquiry can continue even after the retirement of the employee.It is submitted that in the present case Rule 34.3 of the CDA Rulespermits the enquiry to continue even after the retirement of the employee.It is submitted that the said decision is by three Judge Bench, however,H

decision in the case of Jaswant Singh Gill (supra) is by two JudgeBench.

3.4 It is further submitted by Shri Mahabir Singh, learned SeniorAdvocate appearing on behalf of the employer that therefore when Rule34 of the CDA Rules permits continuation of the departmental enquiryeven after the retirement of an employee and such retired employee isdeemed to be in service and on conclusion of the departmental enquiryinitiated while the employee was in service, penalty of dismissal ispermissible, the employer will get the right to forfeit the payment ofgratuity of such an employee as provided under Section 4(1) and 4(6) ofthe Payment of Gratuity Act, 1972 and even under Rule 34.3 of theCDA Rules.

3.5 Making the above submissions and relying upon the decisionof this Court in the case of Ram Lal Bhaskar (supra) and relying uponRule 34.2 and 34.3 of the CDA Rules, it is prayed to allow the presentappeal and quash and set aside the impugned judgment and order passedby the Division Bench of the High Court.

4. The present appeal is vehemently opposed by Shri AnukulChandra Pradhan, learned Senior Advocate appearing on behalf of therespondent-employee. It is submitted by the learned Senior Advocatethat two issues are referred to be considered by larger Bench, namely,(1) Whether the Authority/Employer has power to dismiss/terminate anemployee (respondent herein) even after retirement from service, ifdepartmental disciplinary proceedings are initiated during his employment/service; and (2) Whether the employer is empowered with authority towithhold the payment of gratuity during pendency of disciplinaryproceedings.

4.1 It is vehemently submitted by the learned Senior Advocateappearing on behalf of the employee that so far as issue No.1 isconcerned, Rule 27 provides the nature of penalties. Rule 27.1(i)prescribes minor penalties, such as, withholding increment and promotionincluding recovery of any pecuniary loss caused to the company formisconduct, whereas the major penalties are prescribed under Rule27.1(iii), such as, reduction to lower grade, compulsory retirement,removal and dismissal from service. It is submitted that on simple readingof Rule 27.1(iii), it can be said un-mistakenly that the four major penaltiescan be imposed so long as an employee remains in employment. It issubmitted that there was no order issued to the respondent with regard

Ato extension of his employment/service or re-employment for certainperiod. It is submitted that Rule 34.2 provides only the disciplinaryproceedings will be deemed to be continued and concluded as if he wasin service. It is submitted that hence the termination/dismissal cannot bepassed after the retirement of an employee. It is submitted that whilethere is no service/re-employment, there arises no question of removalBor dismissal from service.

4.2 Now so far as issue no.2, namely, whether the employer isempowered with authority to withhold the payment of gratuity duringpendency of disciplinary proceedings is concerned, it is vehementlysubmitted by the learned Senior Advocate appearing on behalf of theCrespondent that as per mandate of Section 4(1) of the Payment of GratuityAct, 1972, gratuity becomes payable as soon as the employee retiressubject to the condition that the employee shall have five years continuousservice.

4.3 It is further submitted by the learned Senior Advocate appearingDon behalf of the employee that in terms of clauses (a) or (b) of sub-section 6 of Section 4 of the Payment of Gratuity Act, 1972, the exerciseof power to forfeit the gratuity amount of an employee is available whenthe authority satisfies the pre-condition that the service of the employeehas already been terminated for any act, omission or negligence causingEany damage or loss or destruction of property belong to an employer. Itis submitted that therefore “termination from service” is sine qua nonand basic requirement for invoking power under Sections 4(6)(a) or 4(6)(b)of the Payment of Gratuity Act.

4.4 It is further submitted by the learned Senior Advocate appearingFon behalf of the employee that as per Section 4(1) of the Payment ofGratuity Act, gratuity shall be payable to the employee on the terminationof his employment if he has rendered continuous service for not lessthan five years. It is submitted that termination of employment may takeplace on (i) on his superannuation; or (ii) on his retirement or resignation;or (iii) on his death or disability due to accident or disease. It is submittedGthat in the present case the respondent was terminated by superannuationand therefore the respondent shall be entitled to the amount of gratuityunder Section 4(1) of the Payment of Gratuity Act, 1972.4.5 It is further submitted by the learned Senior Advocate appearingon behalf of the employee that when there arises no question for dismissalHor removal from service after the employee has retired on attaining the

age of superannuation, the appellant cannot withheld the amount ofgratuity in exercise of powers under Rule 34 of the CDA Rules beinginconsistent with the Payment of Gratuity Act.

4.6 Learned Senior Advocate appearing on behalf of the employeehas heavily relied upon the decision of this Court in the case of JaswantSingh Gill (Supra). It is vehemently submitted that in the case of JaswantSingh Gill (supra), this Court has considered the very provisions of theCDA Rules and has categorically observed and held that if an employeeis permitted to retire, thereafter penalty of dismissal/removal fromservice cannot be imposed, may be the departmental proceedings wereinitiated prior to his retirement. It is submitted that therefore the decisionof this Court in the case of Jaswant Singh Gill (supra) shall be applicableto the facts of the case on hand with full force.

4.7 Now so far as the reliance placed upon the decision of thisCourt in the case of Ram Lal Bhaskar (supra), relied upon by thelearned Senior Advocate appearing on behalf of the appellant is concerned,it is vehemently submitted by the learned Senior Advocate appearing onbehalf of the employee that the said decision shall not be applicable tothe facts of the case on hand as in the said decision, this Court neitherdiscussed nor expressed as to whether the authority is empowered todismiss or remove the employee from service after retirement. It issubmitted that in the said decision, this Court has only stated that theemployee shall be deemed to be in service only for the purpose ofcontinuation and conclusion of the disciplinary proceedings if the memoof charges has been served before retirement as provided under Rule19(3) of the State Bank of India Officers’ Service Rules, 1992. It issubmitted that therefore the said decision shall not be applicable to thefacts of the case on hand. It is however submitted that in the case ofJaswant Singh Gill (supra), this Court has specifically held with reasonsthat the major penalties like dismissal or removal from service must beimposed so long as the employee remains in service, even if thedisciplinary proceedings were initiated prior to attaining the age ofsuperannuation.

4.8 It is further submitted by the learned Senior Advocate appearingon behalf of the employee that even otherwise in view of Section 14 ofthe Payment of Gratuity Act, 1972, the provisions of Gratuity Act shalloverride other enactments and therefore Rule 34.2 and Rule 34.3 of theCDA Rules shall be un-enforceable and ineffective in the eyes of law as

Athe same shall be inconsistent with the provisions of Payment of GratuityAct, more particularly Sections 4, 7, 13 and 14 of the Payment of GratuityAct.

4.9 It is further submitted by the learned Senior Advocate appearingon behalf of the employee that the preamble of the Payment of GratuityBAct clearly indicates the legislative intention that the payment of gratuityis to provide socio-economic justice and secure economic protection inthe retired life when mental and physical fitness is deteriorated due toageing process. It is submitted that Section 13 of the Payment of GratuityAct gives total immunity to gratuity from attachment which is payable atthe time of retirement. It is submitted therefore that the right to gratuityCis statutory right which cannot be withheld under any circumstances,other than those guidelines enumerated under Section 4(6) of the Paymentof Gratuity Act, 1972.

4.10 Making the above submissions and heavily relied upon thedecision of this Court in the case of Jaswant Singh Gill (supra), it isDprayed to dismiss the present appeal and answer the reference in favourof the respondent.

5. We have heard the learned counsel appearing for the respectiveparties at length.E5.1 The first question which is posed for the consideration of thisCourt is, whether is it permissible in law for the appellant-employer towithhold the payment of amount of gratuity payable to the respondent-employee, even after his superannuation from service, because of thependency of the disciplinary proceedings against him? The second questionwhich is posed for the consideration of this Court is, where departmentalFenquiry had been instituted against an employee while he was in serviceand continued after he attained the age of superannuation, whether thepunishment of dismissal can be imposed on being found guilty ofmisconduct in view of the provisions made in Rule 34.2 of the CDARules?G5.2 It is not in dispute that chargesheet came to be served uponthe respondent-employee much before he attained the age ofsuperannuation, i.e., on 1.10.2007. That while the disciplinary proceedingswere pending, the respondent-employee attained the age ofsuperannuation on 31.07.2010. In view of the pendency of the disciplinaryproceedings, the appellant-employer withheld the payment of gratuity.H

It is the case on behalf of the respondent-employee that as the respondentemployee was permitted to retire and at the time when he attained theage of superannuation, there was no order of termination on the basis ofthe departmental enquiry or conviction in criminal case and thereforeconsidering Section 4 of the Payment of Gratuity Act, the respondent-employee shall be entitled to the amount of gratuity. It is also the case onbehalf of the respondent-employee that even considering clause (b) ofsub-section 6 of Section 4 of the Payment of Gratuity Act, the gratuitypayable to the respondent-employee may be wholly or partially forfeitedif the services of such employee have been terminated for his riotous ordisorderly conduct or his services have been terminated for any actwhich constitutes an offence involving moral turpitude, provided thatsuch offence is committed by him during the course of his employment.Relying upon the decision of this Court in the case of Jaswant SinghGill (supra), it is the case on behalf of the respondent-employee that asheld by this Court in the said decision that once an employee is permittedto retire on attaining the age of superannuation, no order of dismissalsubsequently can be passed though the disciplinary proceedings arepermitted to be continued under the CDA Rules and therefore once theorder of dismissal is not permissible, Section 4 of the Payment of GratuityAct shall be attracted and therefore the respondent-employee shall beentitled to the amount of gratuity. On the other hand, as observedhereinabove, it is the case on behalf of the appellant-employer that Rule34 permits the management to withhold the gratuity during the pendencyof the disciplinary proceedings. It is submitted that Rule 34.2 of theCDA Rules permits the disciplinary proceedings, if instituted while theemployee was in service, after the final retirement of the employee andsuch disciplinary proceedings shall be deemed to be proceedings andshall be continued and concluded by the authority by which it wascommenced in the same manner as if the employee had continued inservice. It is submitted therefore that for the purpose of continuing andconcluding the disciplinary proceedings, such an employee shall bedeemed to be in service and therefore even after the employee hadattained the age of superannuation, such an employee can be dismissedfrom service, provided the disciplinary proceedings are instituted whilethe employee was in service.6. While considering the issues involved in the present appeal, therelevant provisions of the CDA Rules and Section 4 of the Payment ofGratuity Act are required to be referred to and considered, which are asunder:

“34.2 Disciplinary proceeding, if instituted while the employee wasin service whether before his retirement or during his reemploymentshall, after the final retirement of the employee, be deemed to beproceeding and shall be continued and concluded by the authorityby which it was commenced in the same manner as if the employeehad continued in service.

34.3 During the pendency of the disciplinary proceedings, theDisciplinary Authority may withhold payment of gratuity, forordering the recovering from gratuity of the whole or part of anypecuniary loss caused to the company if have been guilty ofoffences/ misconduct as mentioned in Sub-section (6) of SectionC4 of the payment of gratuity act, 1972 or to have caused pecuniaryloss to the company by misconduct or negligence, during his serviceincluding service rendered on deputation or on re-employmentafter retirement. However, the provisions of Section 7(3) and7(3A) of the Payment of Gratuity Act 1972 should be kept inDview in the event of delayed payment in the case the employee isfully exonerated.”

Section 4 - Payment of gratuity

(1) Gratuity shall be payable to an employee on the termination ofhis employment after he has rendered continuous service for notEless 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:

FProvided that the completion of continuous service of five yearsshall not be necessary where the termination of the employmentof any employee is due to death or disablement:

Provided further that in the case of death of the employee, gratuitypayable to hi m shall be paid to his nominee or, if no nominationGhas been made, to his heirs, and where any such nominees orheirs is minor, the share of such minor, shall be deposited withthe controlling authority who shall invest the same for the benefitof such minor in such bank or other financial institution, as may beprescribed, until such minor attains majority.

Explanation.—For the purposes of this section, disablement meanssuch disablement as incapacitates an employee for the work whichhe was capable of performing before the accident or diseaseresulting in such disablement.

Xxxxxxxxxxxxxxxxxxxxxxxxxxxxx

(6) Notwithstanding anything contained in sub-section (1),—

(a) the gratuity of an employee, whose services have beenterminated for any act, wilful omission or negligence causing anydamage or loss to, or destruction of, property belonging to theemployer’ shall be forfeited to the extent of the damage or loss socaused;

(b) the gratuity payable to an employee may be wholly or partiallyforfeited]—

(i) if the services of such employee have been terminated for hisriotous or disorderly conduct or any other act of violence on hispart, or

(ii) if the services of such employee have been terminated for anyact which constitutes an offence involving moral turpitude, providedthat such offence is committed by him in the course of hisemployment.”

7. Indisputably, the respondent was governed by the CDA Rules.Therefore, Rules 34.2 and 34.3 of the CDA Rules shall be applicableand the respondent-employee shall be governed by the said provisions.Rule 34 permits the management to withhold the gratuity during thependency of the disciplinary proceedings. Rule 34.2 permits the disciplinaryproceedings to be continued and concluded even after the employee hasattained the age of superannuation, provided the disciplinary proceedingsare instituted while the employee was in service. It also further providesthat such disciplinary proceedings shall be deemed to be the proceedingsand shall be continued and concluded by the authority by which it wascommenced in the same manner as if the employee had continued inservice. Therefore, as such, on fair reading of Rule 34.2 of the CDARules, an employee shall be deemed to be continued in service, after heattains the age of superannuation/retired, for the limited purpose ofcontinuing and concluding the disciplinary proceedings which wereinstituted while the employee was in service. Therefore, at the conclusion

Aof such disciplinary proceedings any of the penalty provided under Rule27 of the CDA Rules can be imposed by the authority including theorder of dismissal. If the submission on behalf of the employee that afterthe employee has attained the age of superannuation and/or he has retiredfrom service, despite Rule 34.2, no order of penalty of dismissal can bepassed is accepted, in that case, it will be frustrating permitting theBauthority to continue and conclude the disciplinary proceedings afterretirement. If the order of dismissal cannot be passed after the employeehas retired and/or has attained the age of superannuation in the disciplinaryproceedings which were instituted while the employee was in service, inthat case, there shall not be any fruitful purpose to continue and concludeCthe disciplinary proceedings in the same manner as if the employee hadcontinued in service.

8. It is true that while considering the very provisions of the CDARules, namely, Rule 34.2 and Rule 34.3 of the CDA Rules, this Court inthe case of Jaswant Singh Gill (supra) has observed and held thatDonce the employee is permitted to retire on attaining the age ofsuperannuation, thereafter no order of dismissal can be passed. However,for the reasons stated hereinabove, we are not in agreement with theview taken by this Court in the case of Jaswant Singh Gill (supra). Asobserved hereinabove, if no major penalty is permissible after retirement,even in case where the disciplinary proceedings were instituted whileEthe employee was in service, in that case, Rule 34.2 would becomeotiose and shall be meaningless. On the contrary, there is decision ofthree Judge Bench of this Court in the case of Ram Lal Bhaskar (supra)taking just contrary view. In the case of Ram Lal Bhaskar (supra),Rule 19(3) of the State Bank of India Officers Service Rules, 1992

Fcame up for consideration which was parimateria with Rule 34.2 of theCDA Rules. The said Rule 19(3) of the State Bank of India OfficersService Rules, 1992 also permits the disciplinary proceedings to continueeven after the retirement of an employee if those were instituted whenthe delinquent employee was in service. In that case, chargesheet was

served upon the respondent before his retirement. The proceedingsGcontinued after his retirement and were conducted in accordance withthe relevant rules where charges were proved. Punishment of dismissalwas imposed. The High Court allowed the petition and quashed the orderof dismissal. This Court reversed the said decision of the High Court. Inthe said decision, it was specifically observed by this Court whileHconsidering the parimateria provisions that in case disciplinary

proceedings under the relevant rules of service have been initiated againstan officer before he ceased to be in the bank’s service by the operationof, or by virtue of, any of the rules or the provisions of the Rules, thedisciplinary proceedings may, at the discretion of the Managing Director,be continued and concluded by the authority by whom the proceedingswere initiated in the manner provided for in the Rules as if the officercontinues to be in service, so however, that he shall be deemed to be inservice only for the purpose of the continuance and conclusion of suchproceedings. In the said decision, this Court also took note of anotherdecision of this Court in the case of Rajinder Lal Capoor (supra) andit is observed even in the said decision that the UCO Bank OfficerEmployees’ Service Regulations, 1979 which were also parimateria tothe SBI Rules as well as the CDA Rules, could be invoked only whenthe disciplinary proceedings had been initiated prior to the delinquentofficer ceased to be in service. It is to be noted that Jaswant Singh Gill(supra) was judgment delivered by two Judge Bench and the judgmentin the case of Ram Lal Bhaskar (supra) is judgment delivered by athree Judge Bench. Under the circumstances and even otherwise forthe reasons stated above and in view of Rule 34.2 of the CDA Rules,even retired employee who was permitted to retire on attaining theage of superannuation can be subjected to major penalty, provided thedisciplinary proceedings were initiated while the employee was in service.

9. Once it is held that major penalty which includes the dismissalfrom service can be imposed, even after the employee has attained theage of superannuation and/or was permitted to retire on attaining theage of superannuation, provided the disciplinary proceedings were initiatedwhile the employee was in service, sub-section 6 of Section 4 of thePayment of Gratuity Act shall be attracted and the amount of gratuitycan be withheld till the disciplinary proceedings are concluded.

9.1 Even otherwise, Rule 34.3 of the CDA Rules permitswithholding of the gratuity amount during the pendency of the disciplinaryproceedings, for ordering recovering from gratuity of the whole or partof any pecuniary loss caused to the company if have been guilty ofoffences/misconduct as mentioned in sub-section 6 of Section 4 of thePayment of Gratuity Act, 1972 or to have caused pecuniary loss to thecompany by misconduct or negligence, during his service. It further makesclear that Rule 34.3 for withholding of such gratuity would be subjectto the provisions of Section 7(3) and 7(3A) of the Payment of Gratuity

AAct, 1972 in the event of delayed payment in the case of an employeewho is fully exonerated. Rule 34.3 of the CDA Rules is in consonancewith sub-section 6 of Section 4 of the Payment of Gratuity Act and thereis no inconsistency between sub-section 6 of Section 4 of the Paymentof Gratuity Act and Rule 34.3 of the CDA Rules. Therefore Section 14of the Act which has been relied upon shall not be applicable as there isBno inconsistency between the two provisions.

9.2 It is required to be noted that in the present case the disciplinaryproceedings were initiated against the respondent-employee for veryserious allegations of misconduct alleging dishonestly causing coal stockshortages amounting to Rs.31.65 crores and thereby causing substantialCloss to the employer. Therefore, if such charge is proved and punishmentof dismissal is given thereon, the provisions of sub-section 6 of Section 4of the Payment of Gratuity Act would be attracted and it would be withinthe discretion of the appellant-employer to forfeit the gratuity payable tothe respondent. Therefore, the appellant-employer has right to withholdDthe payment of gratuity during the pendency of the disciplinaryproceedings.

10. The second question for consideration is where departmentalinquiry had been instituted against an employee while he was in serviceand continued after he attained the age of superannuation, whether theEpunishment of dismissal can be imposed on being found guilty ofmisconduct in view of the provisions made in Rule 34.2 of the CDARules.

10.1 Rule 34 (2) of the CDA Rules provides in case disciplinaryproceeding, if instituted while the employee was in service whether beforeFhis retirement or during his re-employment, such proceedings shall becontinued and concluded by the authority by which it was commencedin the same manner as if an employee had continued in service. There isa deemed fiction created by the rule concerning the continuance ofemployee in service during the departmental proceeding. The legal fictionisrequired to be given logical effect.G

10.2 Rule 34.3 of the CDA Rules provides for withholding thepayment of gratuity during the pendency of the disciplinary proceedingsand provides for recovery from gratuity of the whole or part of anypecuniary loss caused to the employer in case of misconduct as providedin section 4(6)(a) of the Payment of Gratuity Act, 1972. The gratuityHcan be wholly or partially forfeited as provided in section 4(6)(b) in case

he is found guilty, and services are terminated for disorderly misconductor act of violence or offence involving moral turpitude committed duringthe course of employment.

10.3 The question of the effect of deemed fiction of continuanceof employee in service after the employee had attained the age ofsuperannuation was considered in D.V. Kapoor v. Union of India, (1990)4 SCC 314. Rule 9(2) of the Civil Services Pension Rules, 1972, cameup for consideration. The rule provided that the departmental proceedingsinstituted while the employee was in service shall be deemed to becontinued in service, the said rule was similar to Rule 34(2) of the CDARules. It was held that the departmental inquiry should be continued andconcluded by the authority in the same manner as if the governmentemployee had remained in service. The only condition provided in theproviso to the rule was that report to be submitted to the President. Itwas held:“2. The contention of Mr. Kapoor, learned counsel for the appellantis that the appellant having been allowed to retire voluntarily theauthorities are devoid of jurisdiction to impose the penalty ofwithholding gratuity and pension as measure of punishment andthe proceedings stand abated. We find no substance in thecontention. Rule 9(2) of the Rules provided that the departmentalproceedings if instituted while the government servant was in-service whether before his retirement or during his reemployment,shall, after the final retirement of the government servant, bedeemed to be proceedings under this rule and shall be continuedand concluded by the authority by which they were commencedin the same manner as if the government servant had continued inservice. Therefore, merely because the appellant was allowed toretire, the government is not lacking jurisdiction or power tocontinue the proceedings already initiated to the logical conclusionthereto. The disciplinary proceedings initiated under the ConductRules must be deemed to be proceedings under the rules andshall be continued and concluded by the authorities by which theproceedings have been commenced in the same manner as if thegovernment servant had continued in service. The only inhibitionthereafter is as provided in the proviso namely “provided thatwhere the departmental proceedings are instituted by an authoritysubordinate to the President, that authority shall submit report

Arecording its findings to the President”. That has been done in thiscase and the President passed the impugned order. Accordingly,we hold that the proceedings are valid in law and they are notabated consequent to voluntary retirement of the appellant andthe order was passed by the competent authority, i.e. the Presidentof India.”B

(emphasis supplied)

10.4 In State Bank of Patiala &Anr. v. Ram Niwas Bansal(Dead) Thr. Lrs. (2014) 12 SCC 106, similar question came up forconsideration. departmental inquiry was initiated while the employeeCwas in service. The relevant service Regulation 19.2 applicable to theemployee of the bank was similar to Rule 34.2 of the CDA Rules. ThisCourt held that departmental proceedings had been initiated against anofficer during the period when he was in service, the said proceedingscould continue even after his retirement. It was further held that theconcept of deemed continuance in service of the officer would have fullDplay and, therefore, the order of removal could have been passed afterfinalization of the departmental proceeding. Still, removal order couldnot have been passed retrospectively. However, that would not invalidatethe order of dismissal, but the order of dismissal would have prospectiveeffect as held in R. Jeevaratnam v. the State of Madras, AIR 1966 SCE951. The relevant portion of State Bank of Patiala (supra) is extractedhereunder:

“31. In the case at hand, the said stage is over. The Full Bench onthe earlier occasion had already rendered verdict that seriousprejudice had been caused and, accordingly, had directed forFreinstatement. The said direction, if understood and appreciatedon the principles stated in B. Karunakar[1], is direction forreinstatement for the purpose of holding fresh enquiry from thestage of furnishing the report and no more. In the case at hand,the direction for reinstatement was stayed by this Court. The Bankproceeded to comply with the order of the High Court from theGstage of reply of enquiry. The High Court by the impugned order[2]had directed payment of back wages to the delinquent officerfrom the date of dismissal till passing of the appropriate order inthe disciplinary proceeding/superannuation of the petitioner therein

1 Ecil v. B. Karunakar, (1993) 4 SCC 727.H2 Ram Niwas Bansal v. State Bank of Patiala, (2002) 2 SLR 375 (P&H).

whichever is earlier. The Bank has passed an order of dismissalon 22-11-2001 with effect from 23-4-1985. The said order, as weperceive, is not in accord with the principle laid down by theConstitution Bench decision in B. Karunakar, for it has beenstated there that in case of non-furnishing of an enquiry report theCourt can deal with it and pass an appropriate order or set asidethe punishment and direct reinstatement for continuance of thedepartmental proceedings from that stage. In the case at hand, inthe earlier round the punishment was set aside and direction forreinstatement was passed. Thus, on the face of the said order it isabsolutely inexplicable and unacceptable that the Bank in 2001can pass an order with effect from 23-4-1985 which would amountto annulment of the judgment[3] of the earlier Full Bench. As hasbeen held by the High Court in the impugned judgment that whenon the date of non-furnishing of the enquiry report the delinquentofficer was admittedly not under suspension, but was in serviceand, therefore, he would continue in service till he is dismissedfrom service in accordance with law or superannuated inconformity with the Regulations. How far the said direction isjustified or not or how that should be construed, we shall deal withwhile addressing the other points but as far as the order of removalbeing made retrospectively operational, there can be no trace ofdoubt that it cannot be made retrospective.”

32. Presently, we shall proceed to deal with the issue ofsuperannuation as envisaged under the Regulations. Regulation19(1) deals with superannuation of an employee. The relevantpart of Regulation 19(1) is as follows:

“19. Age of retirement.—(1) An officer shall retire from theservice of the Bank on attaining the age of fifty-eight years orupon the completion of thirty years’ service whichever occursfirst:

Provided that the competent authority may, at itsdiscretion, extend the period of service of an officer who hasattained the age of fifty-eight years or has completed thirtyyears’ service as the case may be, should such extension bedeemed desirable in the interest of the Bank:

ABC

Provided further that an officer who had joined theservice of the Bank either as an officer or otherwise on orafter 19-7-1969 and attained the age of 58 years shall not begranted any further extension in service:

Provided further that an officer may, at the discretion ofthe Executive Committee, be retired from the Bank’s serviceafter he has attained 50 years of age or has completed 25years’ service as the case may be, by giving him three months’notice in writing or pay in lieu thereof:”

35. At this juncture, it is noteworthy to refer to Regulation 19(2)of the Regulations. It reads as follows:

“19. (2) In case disciplinary proceedings under therelevant regulations of service have been initiated against anofficer before he ceases to be in the Bank’s service by theoperation of, or by virtue of any of the said Regulations or theprovisions of these Regulations the disciplinary proceedingsmay, at the discretion of the Managing Director, be continuedand concluded by the authority by which the proceedings wereinitiated in the manner provided for in the said Regulations asif the officer continues to be in service, so however, that heshall be deemed to be in service only for the purpose of thecontinuance and conclusion of such proceedings.

Explanation.—An officer will retire on the last day ofthe month in which he completes the stipulated service or ageof retirement.”

The aforesaid Regulation, as it seems to us, deals with adifferent situation altogether. It clearly lays down that if thedisciplinary proceedings have been initiated against an officerduring the period when he is in service, the said proceedings cancontinue even after his retirement at the discretion of the ManagingDirector and for the said limited purpose the officer shall be deemedto be in service.

41. In the case at hand, the disciplinary proceeding was initiatedagainst the delinquent officer while he was in service. The firstorder of dismissal was passed on 23-4-1985. The said order ofpunishment was set aside by the High Court and the officerconcerned was directed to be reinstated for the limited purpose

i.e. supply of enquiry report and to proceed in the disciplinaryproceeding from that stage. The said order was not interferedwith by this Court. The Bank continued the proceeding. Needlessto emphasise, the said continuance was in pursuance of the orderof the Court. Under these circumstances, it has to be acceptedthat the concept of deemed continuance in service of the officerwould have full play and, therefore, an order of removal couldhave been passed after finalisation of the departmental proceedingon 22-11-2001. We have already held that the said order wouldnot have been made retrospectively operative, but that will notinvalidate the order of dismissal but it would only have prospective4effect as has been held in R. Jeevaratnam.

42. Having said that, it becomes necessary to determine the dateof retirement and thereafter delve into how the period from thedate of first removal and date of retirement would be treated. Wemay hasten to add that for the purpose of deemed continuancethe delinquent officer would not be entitled to get any benefit forthe simple reason i.e. the continuance is only for finalisation ofthe disciplinary proceedings, as directed by the Full Bench of theHigh Court. Hence, the effect and impact of Regulation 19(1) ofthe Regulations comes into full play. On seemly construction ofthe first proviso we are of the considered view that it requires anaffirmative act by the competent authority, for it is an exercise ofpower of discretion and further the said discretion has to beexercised where the grant of extension is deemed desirable in theinterest of the Bank. The submission of Mr Patwalia to the effectthat there should have been an intimation by the employer Bank isfounded on the finding recorded by the High Court in the impugnedorder5 that no order had been brought on record to show that thedelinquent officer had retired. As the facts would reveal, in theyear 1992 the officer concerned stood removed from service andat that juncture to expect the Bank in law to intimate him abouthis date of superannuation or to pass an order would be an incorrectassumption. The conclusion which appears logical and acceptableis that unless an extension is granted by positive or an affirmativeact by the competent authority, an officer of the Bank retires onattaining the age of 58 years or upon the completion of 30 years

of service, whichever occurs first.

43. In this regard the pronouncement in C.L. Verma v. State ofM.P.[5] is apt to refer. In the said case the effect of Rule 29 of theMadhya Pradesh State Municipal Service (Executive) Rules, 1973fell for interpretation. In the said Rule it was provided that amember of the service shall attain the age of superannuation onthe date he completes his 58 years of age. The proviso to the saidRule stipulated that the State Government may allow memberof the service to continue in employment in the interest of MunicipalCouncil or in public interest and, however, no member of serviceshall continue in service after he attains the age of 60 years. Theappellant therein had attained the age of 58 years two days priorto the order of dismissal. The Court opined that the tenor of theproviso clearly indicates that it is intended to cover specific casesand individual employees. Be it noted, on behalf of the Governmenta notification was issued by the Department concerned. The Courtopined that the said circular was not issued under the proviso toRule 29 but was administrative in character and that on the faceof mandate in Rule 29 the administrative order could not operate.The Court further ruled that as the appellant therein had attainedthe age of superannuation prior to the date of passing the order ofdismissal, the Government had no right to deal with him in itsdisciplinary jurisdiction available in regard to employees.

44. We have referred to this decision in C.L. Verma case30 tohighlight that the Regulation herein also is couched in similarlanguage and, therefore, the first proviso would have full play andit should be apposite to conclude that the delinquent officer stoodsuperannuated on completion of 30 years of service on 25-2-1992.

It is because the conditions stipulated under the first proviso tothe said Regulation deal with conditional situation to cover certaincategories of cases and require an affirmative act and in theabsence of that it is difficult to hold that the delinquent officer didnot retire on completion of thirty years of service.”

(emphasis supplied)

10.5 It depends upon the rules in case where departmentalinquiry was instituted while the employee was in service, proceedingshad been continued, under the Rule what kind of punishment can beimposed after the employee had attained the age of superannuation.

10.6 In Ramesh Chandra Sharma v. Punjab National Bank &Anr. (2007) 9 SCC 15, similar question arose for consideration. Theemployee was dismissed from service after superannuation. The HighCourt set aside the order on the ground that after superannuation, thedisciplinary inquiry could not have been continued, and punishment ofdismissal could not have been imposed. This Court set aside the order ofthe High Court, allowed the appeal filed by the bank and dismissed theappeal filed by the employee, and held that order of dismissal could bepassed in view of the rule in question. It was held that it depends uponthe terms and conditions of the service of the employee by which hewas governed. It was also observed that after attaining the age ofsuperannuation, the question of imposition of dismissal of the employeefrom service would not ordinarily arise. At the same time, it was heldthat the imposition of such punishment would not be impermissible inlaw. The legal fiction created by the rule concerning the continuance ofemployee on deemed basis in service has to be given full effect. Incase the order of dismissal from service was passed, the employee wouldnot be entitled to the pensionary benefit. It was also held that if theemployee is removed or dismissed from service under Regulation 4 ofthe (Discipline and Appeal) Regulations, the Bank need not take recourseto Regulation 48 of the Pension Regulations as Regulation 22 thereofwould be attracted. Rule 43 of the Pension Regulation provided forwithholding or withdrawal of the pension. Regulation 48 provided forrecovery of pecuniary loss caused to the bank. In the case of deemedcontinuation, regulation 48 was held to be inapplicable. The relevantportion is extracted hereunder:

“13. The question as to whether departmental proceeding cancontinue despite the delinquent officer’s reaching the age ofsuperannuation would depend upon the applicability of the extantrules. It may be true that the question of imposition of dismissal ofthe delinquent officer from service when he has already reachedthe age of superannuation would not ordinarily arise. However, asthe consequences of such an order are provided for in the servicerules, in our opinion, it would not be correct to contend thatimposition of such punishment would be wholly impermissible inlaw.

15. The question, we may notice, came up for consideration beforethis Court in State of U.P. v. BrahmDatt Sharma[6] wherein this6 (1987) 2 SCC 179

ABC

Court while interpreting Regulation 470 of the Civil ServicesRegulations in State of U.P. v. Harihar Bhole Nath[7] held asunder: (BrahmDatt Sharma case (supra), SCC p. 186, para 8)

“8. plain reading of the regulation indicates that full pensionis not awarded as matter of course to government servant onhis retirement instead; it is awarded to him if his satisfactory serviceis approved. If the service of government servant has not beenthoroughly satisfactory the authority competent to sanction thepension is empowered to make such reduction in the amount ofpension as it may think proper. Proviso to the regulation lays downthat no order regarding reduction in the amount of pension shallbe made without the approval of the appointing authority. Thoughthe Regulations do not expressly provide for affording opportunityto the government servant before order for the reduction in thepension is issued, but the principles of natural justice ordain thatopportunity of hearing must be afforded to the government servantbefore any order is passed. Article 311(2) is not attracted,nonetheless the government servant is entitled to opportunity ofhearing as the order of reduction in pension affects his right toreceive full pension. It is no more in dispute that pension is notbounty; instead it is right to property earned by the governmentservant on his rendering satisfactory service to the State.”

16. The question, thus, as to whether continuation of disciplinaryproceeding would be permissible or the employer will have totake recourse only to the pension rules, in our opinion, would dependupon the terms and conditions of the services of the employeeand the power of the disciplinary authority conferred by reason ofFa statute or statutory rules.

17. We have noticed hereinbefore that the Bank has madeRegulations which are statutory in nature. Regulation 20(3)(iii)of the said Regulations reads thus:

“20. (3)(iii) The officer against whom disciplinary proceedingshave been initiated will cease to be in service on the date ofsuperannuation but the disciplinary proceedings will continueas if he was in service until the proceedings are concluded andfinal order is passed in respect thereof. The officer concerned

H7 (2006) 13 SCC 460

will not receive any pay and/or allowance after the date ofsuperannuation. He will also not be entitled for the payment ofretirement benefits till the proceedings are completed and finalorder is passed thereon except his own contribution to CPF.”

The said Regulation clearly envisages continuation of adisciplinary proceeding despite the officer ceasing to be in serviceon the date of superannuation. For the said purpose legal fictionhas been created providing that the delinquent officer would bedeemed to be in service until the proceedings are concluded andfinal order is passed thereon. The said Regulation being statutoryin nature should be given full effect.

18.The effect of legal fiction is well known. When legalfiction is created under statute, it must be given its full effect, ashas been observed in East End Dwellings Co. Ltd. v. Finsbury8-Borough Council as under: (All ER p. 599 BD)

If you are bidden to treat an imaginary state of affairs asreal, you must surely, unless prohibited from doing so, also imagineas real the consequences and incidents which, if the putative stateof affairs had in fact existed, must inevitably have flowed from oraccompanied it. One of these in this case is emancipation fromthe 1939 level of rents. The statute says that you must imagine acertain state of affairs; it does not say that having done so, youmust cause or permit your imagination to boggle when it comes tothe inevitable corollaries of that state of affairs.22. We are, therefore, of the opinion that it was permissible forthe Bank to continue with the disciplinary proceedings relying onor on the basis of Regulation 20(3)(iii) of the Punjab NationalBank (Officers) Service Regulations, 1979.

23. It is true that the disciplinary authority in its order while imposingpunishment observed that the terminal dues of the appellant wereto be settled. It was merely an observation to take care of acontingency which might arise. No positive direction was issuedin that behalf and, thus, no legal right thereby was created in favourof the appellant to obtain the retiral benefits. What it meant therebywas that the law would take its own course.

25. Indisputably as consequence of the order imposing thepunishment of dismissal from service the appellant would not havequalified for the pensionary benefits. Our attention, however, hasbeen drawn by Mr Saxena to Regulations 43 and 48 to contendthat even for the purpose of withholding pension, specific orderin that behalf by competent authority was required to be passed.The Pension Regulations are meant to be applicable where pensionis required to be paid.It also provides for recovery of pecuniaryloss caused to the Bank from the pensionary benefits of theemployee. Regulations 43 and 48 of the Pension Regulations areas under:

“43. Withholding or withdrawal of pension.—Thecompetent authority may, by order in writing, withhold orwithdraw pension or part thereof, whether permanently orfor specified period, if the pensioner is convicted of seriouscrime or criminal breach of trust or forgery of (sic or) actingfraudulently or is found guilty of grave misconduct.

Provided that where part of pension is withheld orwithdrawn, the amount of such pension shall not be reducedbelow the minimum pension per mensem payable under theseRegulations.

48. Recovery of pecuniary loss caused to the Bank.—(1) The competent authority may withhold or withdraw apension or part thereof, whether permanently or for aspecified period and order recovery from pension of the wholeor part of any pecuniary loss caused to the Bank if in anydepartmental or judicial proceedings the pensioner is found guiltyof grave misconduct or negligence or criminal breach of trustor forgery or acts done fraudulently during the period of hisservice:

Provided that the Board shall be consulted before anyfinal orders are passed;

Provided further that departmental proceedings, ifinstituted while the employee was in service, shall, after theretirement of the employee, be deemed to be proceedings under

these Regulations and shall be continued and concluded by theauthority by which they were commenced in the same manneras if the employee had continued in service;

(2) No departmental proceedings, if not instituted whilethe employee was in service, shall be instituted in respect ofan event which took place more than four years before suchinstitution:

Provided that the disciplinary proceedings so institutedshall be in accordance with the procedure applicable todisciplinary proceedings in relation to the employee during theperiod of his service.

(3) Where the competent authority orders recovery ofpecuniary loss from the pension, the recovery shall not ordinarilybe made at rate exceeding one-third of the pension admissibleon the date of retirement of the employee:

Provided that where part of pension is withheld orwithdrawn, the amount of pension drawn by pensioner shallnot be less than the minimum pension payable under theseRegulations.”

27. Regulation 48 empowers the Bank to recoverpecuniary loss caused to it from the pensionary benefits.Regulation 20(3)(iii) of the (Discipline and Appeal) Regulationsmust be read in conjunction with the Pension Regulations.Where the employees are pension optees, Regulation 48(1)shall apply. In any event, if an officer is removed or dismissedfrom service under Regulation 4 of the (Discipline and Appeal)Regulations, the Bank need not take recourse to Regulation 48of the Pension Regulations as Regulation 22 thereof would beattracted.”

(emphasis supplied)

10.7 An inquiry has to be taken to logical end. In Union ofIndia v. Ajoy Kumar Patnaik (1995) 6 SCC 442, the question ofcontinuance of departmental inquiry after retirement from service onattaining the age of superannuation came up for consideration. It wasopined that it would not be ground to close the departmental inquirywithout making any finding on merits; otherwise, in all cases, it would

Acause grave damage to public justice, and the employee would get awaywith pending proceedings. An employee cannot get rid of pendingdepartmental proceedings by efflux of time. It was held:

“10. Since the competent authorities at different levels hadconsidered the material and ultimately had decided to compulsorilyBretire the respondent from service, it cannot be said that it is anarbitrary decision. It is true that pending the proceedings therespondent has already retired from service on attaining the ageof superannuation, but that would not provide ground to disposeof this matter without giving any finding on the action taken by thecompetent authority. Otherwise, in all cases it would cause graveCdamage to public justice. The employee would get away with itdue to pending proceedings. Therefore, it needs to be consideredand decision rendered thereon whether the action taken by theGovernment or the competent authority is valid in law. In thatperspective, mere retirement of the officer by efflux of time pendingproceedings would not be ground to close the matter.”D

(emphasis supplied)

10.8 In Rajinder Lal Capoor (supra), it was held that whendisciplinary proceedings had been initiated before employee attained theage of superannuation, the rule provided for deemed legal fiction ofEcontinuance of employee ‘as if he was in service’, till finalization of suchproceedings, the employee would be deemed to be in service althoughhe has attained the age of superannuation. It was held:

“21. The aforementioned Regulation, however, could be invokedonly when the disciplinary proceedings had clearly been initiatedprior to the respondent’s ceasing to be in service. The terminologiesFused therein are of seminal importance. Only when disciplinaryproceeding has been initiated against an officer of the bank despitehis attaining the age of superannuation, can the disciplinaryproceeding be allowed on the basis of the legal fiction createdthereunder i.e. continue ‘as if he was in service’. Thus, only whenGa valid departmental proceeding is initiated by reason of the legalfiction raised in terms of the said provision, the delinquent officerwould be deemed to be in service although he has reached hisage of superannuation.The departmental proceeding, it is tritelaw, is not initiated merely by issuance of show-cause notice. Itis initiated only when charge-sheet is issued….”

(emphasis supplied)

review was filed; the same was dismissed in UCO Bank v.Rajinder Lal Capoor, (2008) 5 SCC 257. It is clear that when anemployee is deemed to be in service, the punishment as prescribed underthe Rules can be imposed.

10.9 In V. Padmanabham v. Government of Andhra Pradesh& Ors. (2009) 15 SCC 537, Rule 9 of the Andhra Pradesh PensionCode provided that if the departmental inquiry is instituted whenGovernment servant was in service, it could continue, and as ruleprovided for the continuance of such an inquiry only for recovery of theamount from the pension and gratuity. It was held that the continuationof the departmental proceedings was not illegal. The Pension Code raisesa legal fiction and proceedings would be deemed to have continued. Itwas opined:

“10. It has not been disputed before us that in terms of Rule 9(2)of the Andhra Pradesh Pension Code the disciplinary proceedingsinitiated against the appellant could continue. Rule 9(2)(a) readsas under:

“9. Right of Government to withhold or withdrawpension.—(1) ***

(2)(a) The departmental proceedings referred to in sub-rule (1), if instituted while the government servant was in servicewhether before his retirement or during his re-employment,shall after the final retirement of the government servant, bedeemed to be proceedings under this rule and shall be continuedand concluded by the authority by which they were commencedin the same manner as if the government servant had continuedin service:

Provided that where the departmental proceedings areinstituted by an authority subordinate to the State Government,that authority shall submit report recording its findings to theState Government.”

Indisputably, therefore, the departmental proceedings which havebeen pending against the appellant do not suffer from any legalinfirmity and in law would be deemed to have been continuing.

11. In State of U.P. v. Harihar Bholenath[9] this Court stated:(SCC p. 465, para 10)

“10. departmental proceeding can be initiated for recoveryof amount suffered by the State exchequer owing to the acts ofomission or commission of delinquent employee in three differentsituations:

(i) when disciplinary proceeding is initiated and concludedBagainst delinquent employee before he reaches his age ofsuperannuation;

(ii) when proceeding is initiated before the delinquentofficer reached his age of superannuation but the same has notbeen concluded and despite the superannuation of the employee,Can order of recovery of the amount from the pension and gratuityis passed; and

(iii) an enquiry is initiated after the delinquent employeereaches his age of superannuation.”

13. Mr Rama Krishna Reddy, however, would urge that havingDregard to the fact that the departmental proceedings were initiatedin the year 1992-1993, this Court should not direct continuation ofthe departmental proceedings any further. Strong reliance in thisbehalf has been placed on M.V. Bijlani v. Union of India[10].

14. We have noticed heretobeforethat continuation of theEdepartmental proceedings is not illegal. The Pension Code raisesa legal fiction in terms whereof the departmental proceedingswould be deemed to have continued. The Tribunal has passed anorder in favour of the appellant on technical grounds. The HighCourt, therefore, in our opinion, cannot be said to have committedany illegality in passing the impugned judgment.”F

It is apparent that what kind of punishment can be imposed woulddepend upon the relevant service rule as in the aforesaid case, therelevant service Rule 9 provided deemed continuance of the employeein service for the purpose of withholding or withdrawal of pension.

G10.10 In State of Maharashtra v. M.H. Mazumdar (1988) 2SCC 52, Rules 188 and 189 of Bombay Civil Services Rules came upfor consideration. The rules provided for withholding or withdrawing ofa pension or any part of it. In terms of the rule, it was held that in casethe pensioner was found guilty of grave misconduct while he was in

H10 (2006) 5 SCC 88

service, the grant of pension and its continuation would depend upon theoutcome of the inquiry. The proceeding under the relevant rule was notfor the imposition of the penalty of dismissal etc. but for the purpose ofwithdrawal or withholding of the pension provided under the rules 188and 189. This Court opined thus:

“5. The aforesaid two rules empower Government to reduce orwithdraw pension. Rule 189 contemplates withholding orwithdrawing of pension or any part of it if the pensioner is foundguilty of grave misconduct while he was in service or after thecompletion of his service. Grant of pension and its continuance toa government servant depend upon the good conduct of thegovernment servant. Rendering satisfactory service maintaininggood conduct is necessary condition for the grant andcontinuance of pension. Rule 189 expressly confers power on theGovernment to withhold or withdraw any part of the pensionpayable to government servant for misconduct which he mayhave committed while in service. This rule further provides thatbefore any order reducing or withdrawing any part of the pensionis made by the competent authority the pensioner must be givenopportunity of defence in accordance with the procedure specifiedin Note I to Rule 33 of the Bombay Civil Services Conduct,Discipline and Appeal Rules. The State Government’s power toreduce or withhold pension by taking proceedings against agovernment servant even after his retirement is expresslypreserved by the aforesaid rules. The validity of the rules was notchallenged either before the High Court or before this Court. Inthis view, the Government has power to reduce the amount ofpension payable to the respondent. In M. Narasimhachar v. Stateof Mysore[11] and State of Uttar Pradesh v. BrahmDatt Sharma[12]similar rules authorising the Government to withhold or reducethe pension granted to the government servant were interpretedand this Court held that merely because government servantretired from service on attaining the age of superannuation hecould not escape the liability for misconduct and negligence orfinancial irregularities which he may have committed during theperiod of his service and the Government was entitled to withholdor reduce the pension granted to government servant.

11AIR 1960 SC 247

12 (1987) 2 SCC 179

A6. The High Court in our view committed serious error in holdingthat the State Government had no authority to initiate anyproceedings against the respondent. In B.J. Shelat v. State ofGujarat[13] disciplinary proceedings had been initiated against thegovernment servant for purposes of awarding punishment to himafter he had retired from service. The ratio of that decision is notBapplicable to the instant case as in the present case the purposeof the enquiry was not to inflict any punishment; instead theproceedings were initiated for determining the respondent’spension. The proceedings were taken in accordance with Rules188 and 189 of the Rules. It appears that the attention of the HighCCourt was not drawn to these rules.”

(emphasis supplied)

10.11 In State of West Bengal & Ors. v. Pronab Chakraborty(2015) 2 SCC 496, right of the Governor to withhold the pension in certaincircumstances under rule 10 of the West Bengal Services (Death-cum-DRetirement Benefit) Rules, 1971 came up for consideration. Rule 10(1)provides for two kinds of punishments. Firstly, the right of withholding orwithdrawal of pension. Secondly, the right to order the recovery fromthe pension of the whole or part of any pecuniary loss caused to theGovernment. It was held that the employee could be proceeded againstEafter the date of his retirement on account of grave misconduct ornegligence. Even in the absence of any pecuniary loss caused to theGovernment, it is open to the employer to continue the departmentalproceedings after the employee has retired from service. It was observed:

4. The State of West Bengal has assailed the order passed by theFHigh Court on 22-12-2010[14] by asserting that Rule 10 of the 1971Rules had been incorrectly interpreted by the High Court.Therefore, the solitary issue that arises for our consideration inthe present appeal is the interpretation of Rule 10 of the 1971Rules. Rule 10(1) aforementioned is extracted hereunder:

G“10. Right of the Governor to withhold pension in certaincases.—(1) The Governor reserves to himself the right ofwithholding or withdrawing pension or any part of it whetherpermanently or for specified period, and the right of ordering

13 (1978) 2 SCC 20214 Pranob Chakraborty v. State of W.B., W.P. ST No. 497 of 2010, order dated 22.12.2010H(Cal.)

the recovery from pension of the whole or part of any pecuniaryloss caused to Government, if the pensioner is found in adepartmental or judicial proceeding to have been guilty of gravemisconduct or negligence, during the period of his service, includingservice rendered on re-employment after retirement:

Provided that—

(a) such departmental proceeding if instituted while theofficer was in service, whether before his retirement orduring his re-employment, shall after the final retirement ofthe office, be deemed to be proceeding under this articleand shall be continued and concluded by the authority bywhich it was commenced in the same manner as if theofficer had continued in service;

(b) such departmental proceedings, if not instituted whilethe office was in service, whether before his retirement orduring his re-employment—

(i) shall not be instituted save with the sanction of theGovernor;

(ii) shall not be in respect of any event which took placemore than four years before such institution; and

(iii) shall be conducted by such authority and in such placeas the Governor may direct and in accordance with theprocedure applicable to departmental proceedings in whichan order of dismissal from service could be made in relationto the officer during his service;

(c) no such judicial proceeding, if not instituted while theofficer was in service, whether before his retirement orduring his re-employment shall be instituted in respect of acause of action which arose or an event which took placemore than four years before such institution; …”

perusal of Rule 10(1) extracted hereinabove reveals, that twodifferent kinds of punishments are contemplated thereunder. Firstly,“… the right of withholding or withdrawing pension …” whichthe delinquent employee is entitled to, permanently or for specifiedperiod. And secondly, “… the right of ordering the recovery froma pension of the whole or part of any pecuniary loss caused to the

AGovernment …”. The above two punishments can be inflicted ona delinquent, even after he retires on attaining the age ofsuperannuation, provided he is found guilty of "… grave misconductor negligence …” during the period of his service.

5. It is therefore apparent, that it is not only for pecuniary lossBcaused to the Government that proceedings can continue afterthe date of superannuation. An employee can be proceeded against,after the date of his retirement, on account of “… gravemisconduct or negligence …”. Therefore/, even in the absenceof any pecuniary loss caused to the Government, it is open to theemployer to continue the departmental proceedings after theCemployee has retired from service.Obviously, if such gravemisconduct or negligence entails pecuniary loss to the Government,the loss can also be ordered to be recovered from the employeeconcerned. It was therefore not right for the High Court, whileinterpreting Rule 10(1) of the 1971 Rules to conclude thatDproceedings after the date of superannuation could continue onlywhen the charges entailed pecuniary loss to the Government.”

(emphasis supplied)

10.12 In State Bank of India v. A.N. Gupta & Ors. (1997) 8SCC 60, it was observed that unless the service rules provide forEcontinuance of disciplinary proceedings after the date of superannuation,the pension cannot be withheld when no decision was taken for eightyears the proceedings were quashed. The relevant portion is quotedhereunder:

16. Right to receive pension is right to property under Rule 7 ofFthe Pension Rules when it says that no employee shall have anyright of property in the pension fund beyond the amount of hiscontribution to the pension section of the fund with interest accruedthereon. That being so Rule 11 cannot be interpreted to mean thatclaim to pension of an employee on superannuation can be defeatedGby the Bank by merely withholding sanction of retirement. Forabout 8 years when these two matters were pending in the DelhiHigh Court the Bank did not take any decision in terms of Rule 11to sanction retirement of the respondents. The Bank nevercommunicated to the respondents that it had withheld sanction totheir retirement or did not approve their service. It is only duringHthe course of proceedings in the High Court that the Bank came

up with the plea that it wanted to have the allegations against therespondents enquired into. To us the language of Rule 11 appearsquite explicit. No sanction is required from the Bank to leave theservice on reaching the age of superannuation as provided in Rule26 of the Service Rules applicable to Assistants. Rule 26 of theService Rules clearly mandates the retirement of an employee onhis attaining the age of superannuation and there cannot be twoopinions on that. We, therefore, hold that Rule 11 has no applicationin the case of the respondents who retired on attaining the age ofsuperannuation. We cannot agree with the plea of the Bank thatsanctioning of retirement must be understood as sanctioning ofservice which in terms must be understood as approval of service.Proceeding in the garb of disciplinary proceedings cannot bepermitted after an employee has ceased to be in the service ofthe Bank as Service Rules do not provide for continuation ofdisciplinary proceedings after the date of superannuation.Sanctionof the Bank is required only if the retirement of an employee is byany other method except superannuation. We do not think thatthe decision of the Andhra Pradesh High Court in T. Narasiah v.State Bank of India[15] and that of the Bombay High Court in J.K.Kulkarni v. State Bank of India[16] have laid down good law.

(emphasis supplied)

10.13 In Takhatray Shivadattray Mankad v. State of Gujarat(1989) Supp. 2 SCC 110, the question of departmental inquiry institutedbefore retirement and its continuation after the age of superannuationwas considered. It was held that proceedings could be continued underthe relevant rules, and as provided, the order could have been passedwith respect to pension and gratuity. The proceedings did not becomeinfructuous. The order passed by the Government to withhold pensionand gratuity was upheld. What is of significance is that proceedings donot lapse, and punishment, as may be considered appropriate, can beimposed in terms of the rules. The relevant portion is extracted hereunder:

“25. An examination of Rule 188 shows that the Governmentmay reduce the amount of pension of government servant as itmay think fit if the service of the government servant has notbeen thoroughly satisfactory. As per Rule 189 the government

15 (1978) 2 LLJ 173

16 MP No. 964 of 1977 decided on 29-11-1977

may withhold or withdraw pension or part of it if the petitioner isconvicted of serious crime or found to have been guilty ofmisconduct during or after the completion of service providedthat before any order to this effect is issued, the procedure referredto the Bombay Civil Services (Conduct, Discipline and Appeal)Rules are followed. These rules, thus, have expressly preservedthe State Government’s power to reduce or withhold pension bytaking proceedings against government servant even after hisretirement. The validity of these rules has not been challenged.These two rules came for interpretation before this Court in Stateof Maharashtra v. M.H. Mazumdar[17] and this Court expressedits view with reference to these rules as follows: (SCC pp. 55-56,para 5)

“The aforesaid two rules empower Government toreduce or withdraw pension. Rule 189 contemplateswithholding or withdrawing of pension or any part of it if thepensioner is found guilty of grave misconduct while he was inservice or after the completion of his service. Grant of pensionand its continuance to government servant depend upon thegood conduct of the government servant. Renderingsatisfactory service maintaining good conduct is necessarycondition for the grant and continuance of pension. Rule 189

expressly confers power on the government to withhold orwithdraw any part of the pension payable to governmentservant for misconduct which he may have committed whilein service. This rule further provides that before any orderreducing or withdrawing any part of the pension is made by

the competent authority the pensioner must be given opportunityof defence in accordance with the procedure specified in NoteI to Rule 33 of the Bombay Civil Services (Conduct, Disciplineand Appeal) Rules. The State Government’s power to reduceor withhold pension by taking proceedings against governmentservant even after his retirement is expressly preserved by theaforesaid rules. The validity of the rules was not challengedeither before the High Court or before this Court. In this view,the Government has power to reduce the amount of pensionpayable to the respondent. In M. Narasimhachar v. State of

Mysore[18] and State of Uttar Pradesh v. Brahm Datt Sharma[19]similar rules authorising the Government to withhold or reducethe pension granted to the government servant were interpretedand this Court held that merely because government servantretired from service on attaining the age of superannuation hecould not escape the liability for misconduct and negligence orfinancial irregularities which he may have committed duringthe period of his service and the Government was entitled towithhold or reduce the pension granted to governmentservant.”In compliance with the principle of natural justice requiring anopportunity of hearing to be afforded to government servantbefore an order affecting his right is passed and in accordancewith the procedure specified in Note I to Rule 33 of the BombayCivil Services (Conduct, Discipline and Appeal) Rules show-cause notice as pointed out earlier had been issued to the appellanton 17-7-1971 calling upon him to show-cause within 30 days fromthe date of the receipt of the notice as to why the proposedreduction should not be made in the pension and death-cum-retirement gratuity. But the appellant failed to avail that opportunityto disprove the allegations and satisfy his appointing authority thathe rendered satisfactory service throughout. It was in thosecircumstances the appointing authority taking into considerationthe serious allegations levelled against him in the disciplinaryproceedings had thought it fit to impose reduction in the pensionand gratuity in accordance with Rules 188 and 189 of the BombayRules on the ground that the appellant had not rendered satisfactoryservice. The appellant is not entitled to take advantage of clause(b)(ii) of the proviso to Section 189-A of the Bombay Rules sincethe proceedings had been instituted long before his retirement.Further as per clause (a) of the said proviso, the proceedingsalready instituted while the government servant was in servicecould be continued and concluded even after his retirement. Hencefor the reasons stated above the impugned order dated 15-11-1977 reducing the pension and gratuity cannot be said to contravenethe Bombay Rules.

19 (1987) 2 SCC 179

26. At the risk of repetition, we may point out that threedepartmental proceedings containing serious allegations ofmisconduct were instituted against the appellant of which onewas instituted even before he was compulsorily retired on 12-1-1961 and other two proceedings were instituted in the year 1963that is much earlier to the appellant attaining the age ofsuperannuation on 14-1-1964. These departmental proceedingsare stated to have become infructuous consequent upon theretirement of the appellant on attaining the age of superannuation.To the show-cause notice dated 17-7-1971 proposing to inflictreduction in pension and gratuity the appellant, instead of giving aproper reply, disproving the charges and satisfying the appointingauthority that he rendered satisfactory service throughout haddelayed the matter for over period of six years. It was in thatsituation that the impugned order dated 15-11-1977 happened tobe passed.

27. The learned counsel for the appellant strenuously contendedthat after the disciplinary inquiries had been dropped on the groundthat they had become infructuous, the Government was not rightand justified in reducing the pension and gratuity on the samecharges which were the subject-matter of the enquiries. Thisargument of the learned counsel, in our opinion, does not meritconsideration because the charges against the appellant were notmade use of for awarding any punishment after his retirementfrom service but only for determining the quantum of theappellant’s pension in accordance with the rules relating to thepayment of pension and gratuity. In this connection it would beapposite to refer the observation of the Supreme Court in State ofUttar Pradesh v. Brahm Datt Sharma which we quote below:(SCC p. 184, para 5)

“If disciplinary proceedings against an employee of thegovernment are initiated in respect of misconduct committedby him and if he retires from service on attaining the age ofsuperannuation, before the completion of the proceedings it isopen to the State Government to direct deduction in his pensionon the proof of the allegations made against him. If the chargesare not established during the disciplinary proceedings or if thedisciplinary proceedings are quashed it is not permissible to

the State Government to direct reduction in the pension on thesame allegations, but if the disciplinary proceedings could notbe completed and if the charges of serious allegations areestablished, which may have bearing on the question ofrendering efficient and satisfactory service, it would be opento the Government to take proceedings against the governmentservant in accordance with rules for the deduction of pensionand gratuity.”

10.14 In The Secretary, Forest Department & Ors. v. AbdurRasul Chowdhury (2009) 7 SCC 305, it was held that the employercould proceed with the departmental inquiry though the Governmentservant has retired from service for imposing ‘punishment’ contemplatedunder the rules. It was held:

“13. Rule 10 of the Rules speaks of the right of the Governor towithhold pension in certain cases. Rule 10(1) says that theGovernor reserves to himself the right of withholding orwithdrawing pension or any part of it whether permanently or fora specified period and the right of ordering the recovery frompension of the whole or the part of any pecuniary loss caused tothe Government, if the pensioner is found in departmental orjudicial proceedings to have been guilty of grave misconduct ornegligence during the period of service, including service renderedon re-employment after retirement. Proviso appended to the Rulesspecifically provides that the resort to sub-rule (1) to Rule 10 canbe made only apart from others, that the departmental proceedingshad been instituted while the officer was in service.

15. In the present case, while the delinquent employee was inservice, the departmental enquiry proceedings had been institutedby the employer by issuing the charge memo and the proceedingscould not be completed before the government servant retiredfrom service on attaining the age of superannuation and in viewof Rule 10(1) of the 1971 Rules, the employer can proceed withthe departmental enquiry proceedings though the governmentservant has retired from service for imposing only punishmentcontemplated under the Rules.”

10.15 In Ram Lal Bhaskar (supra), the employee was in servicewhen the inquiry was initiated. He was dismissed from service after

ABC

Aattaining the age of superannuation. This court considered the argumentthat the order of the appellate authority was illegal and without jurisdiction.The Rules provided that disciplinary proceedings could be continued inthe same manner as if the officer continued to be in service. Thus, itwas held that the employee was deemed to be in service for thecontinuance of proceedings. No merit was found in the submission thatBinquiry and order of dismissal passed after superannuation was illegaland without jurisdiction. The relevant discussion is extracted hereunder:

“8. The learned counsel for Respondent 1, on the other hand,supported the impugned order of the High Court and submittedthat there is no infirmity in the impugned order of the High Court.CHe further submitted that in any case Respondent 1 had retiredfrom service on 31-1-2000, and though the charge-sheet wasserved on him on 22-12-1999 when he was still in service, theenquiry report was served on him by letter dated 28-9-2000 andhe was dismissed from service on 15-5-2001 after he had retiredDfrom service. He submitted that after the retirement of Respondent1, the appellant had no jurisdiction to continue with the enquiryagainst Respondent 1. In support of this contention, he cited thedecision of this Court in UCO Bank v. Rajinder Lal Capoor[20].9. We have perused the decision of this Court in UCO Bank v.ERajinder Lal Capoor and we find that in the facts of that casethe delinquent officer had already superannuated on 1-11-1996and the charge-sheet was issued after his superannuation on13-11-1998 and this Court held that the delinquent officer havingbeen allowed to superannuate, the charge-sheet, the enquiry reportand the orders of the disciplinary authority and the appellateFauthority must be held to be illegal and without jurisdiction. In thefacts of the present case, on the other hand, we find that thecharge-sheet was issued on 22-12-1999 when Respondent wasin service and there were clear provisions in Rule 19(3) of theState Bank of India Officers Service Rules, 1992, that in caseGdisciplinary proceedings under the relevant rules of service havebeen initiated against an officer before he ceased to be in thebank’s service by the operation of, or by virtue of, any of the rulesor the provisions of the Rules, the disciplinary proceedings may,at the discretion of the Managing Director, be continued and

concluded by the authority by whom the proceedings were initiatedin the manner provided for in the Rules as if the officer continuesto be in service, so however, that he shall be deemed to be inservice only for the purpose of the continuance and conclusion ofsuch proceedings.

10. We may mention here that similar provision was also reliedon behalf of UCO Bank in UCO Bank v. Rajinder Lal Capoor(supra) in Regulation 20(3)(iii) of the UCO Bank OfficerEmployees’ Service Regulations, 1979, but this Court held thatthe aforesaid regulation could be invoked only when the disciplinaryproceedings had been initiated prior to the delinquent officer ceasedto be in service. Thus, the aforesaid decision of this Court in UCOBank v. Rajinder Lal Capoor (supra) does not supportRespondent 1 and there is no merit in the contention of the counselfor Respondent 1 that the enquiry and the order of dismissal were”illegal and without jurisdiction.

(emphasis supplied)

In the instant case, Rule 34.2 of the CDA Rules holds the fieldand is binding, in the absence of any statutory interdiction made by anyother provision regarding continuance of the inquiry and for taking it to alogical end in terms of the deemed continuation of the employee in service.Decision of this Court in the case of Ram Lal Bhaskar (supra) is by athree Judge Bench, which is binding.

10.16 The reliance placed on the provision contained in section4(6) of the Payment of Gratuity Act, 1972, is devoid of substance. TheAct is to provide for scheme for payment of gratuity to the employees.Section 2(A) of the Act specifies the continuous service and what wouldamount to interruption and exclusion therefrom. An employee incontinuous service, within the meaning of section 2(A)(1), for one yearor six months, as provided, shall be deemed to be in continuous service.Section 3 deals with the appointment of the Controlling Authority. Section4 deals with the payment of gratuity. Section 4(1) provides that gratuityshall be payable to an employee on the termination of his employmentafter he has rendered continuous service for not less than five years, onhis superannuation, or retirement or resignation, or his death ordisablement due to accident or disease. Five years of continuous serviceshall not be necessary in case person ceased to be in service due todeath or disability. Section 4(2) provides for entitlement of gratuity for

Aevery completed year of service or part thereof, in excess of six months,the employer shall pay gratuity at the rate of fifteen days’ wages basedon the rate of wages last drawn by the employee concerned. Section4(5) provides that nothing in this section shall affect the right of anemployee to receive better terms of gratuity under any award oragreement or contract with the employer. What is ensured under theBAct is the minimum amount of gratuity.

10.17 Section 4 provides for payment of gratuity. Section 4(6)contains non-obstante clause to sub-section 1. In case of service ofthe employee have been terminated for wilful omission or negligencecausing any damage or loss to, or destruction of, property belonging toCthe employer, gratuity shall be forfeited to the extent of the damage orloss so caused as provided under section 4(6)(a). Even in the absence ofloss or damage, gratuity can be wholly or partially forfeited under theprovisions of section 4(6)(b), in case termination of services was basedupon disorderly conduct or act of violence on his part or offence involvingDmoral turpitude committed during the course of employment. Thus, it isapparent that not only damage or loss can be recovered, but gratuity canbe wholly or partially withheld in case services are terminated for thereasons specified in section 4(6)(b).

10.18 The Payment of Gratuity Act, 1972, makes no provisionEwith respect to departmental inquiries. Since no statutory provisions ofthe Payment of Gratuity Act, 1972 come in the way of the CDA Rulesto continue the inquiry after superannuation of the employee in case itwas instituted while he was in service and his deemed continuance inservice; thus, no fetteris caused upon operation of Rule 34.2 providingfor continuation of the inquiry and deemed continuation of the employeeFin service after the age of superannuation.

10.19 The provisions of Section 4(6) of the Act of 1972 prevailover Section 4(1) as provisions of Section 4(6) contain non-obstanteclause as to Section 4(1). It would prevail over the provisions made inSection 4(1) and gratuity would not become payable mandatorily asGprovided in Section 4(1). The provisions of Section 4(6) provide recoveryor forfeiture where services of employee have been terminated for thereasons prescribed in Section 4(6)(a) and 4(6)(b). Section 4(6)(a) and(b) both provide for recovery of loss caused or forfeiture wholly or partiallyin the case of termination of services. In case after superannuation ofHemployee there cannot be any dismissal i.e., termination of services as

contemplated in Section 4(6), then there can be no recovery of pecuniaryloss caused by employee or forfeiture of gratuity wholly or partially asthat can only be done in the event of termination of services on chargesfound established. Such an interpretation would render continuance ofinquiry otiose and would defeat the public policy and the provisions ofAct of 1972. The recovery of loss or forfeiture is one of the punishmentswhich depends on exigency of termination by way of dismissal asmandated by Section 4(6). To give effect to the provisions of the Act,the punishment of dismissal can be imposed in view of Rule 34.2,otherwise it would defeat the intendment of provisions contained in Section4(6)(a) and 4(6)(b) of the Act of 1972.10.20 Section 4(1) used the expression ‘termination of employmentafter five years by way of superannuation, retirement or resignation oron his death or disablement due to accident or disease’ that is in normalcourse. It does not deal with situation where departmental inquiry isinstituted and continued and completed after the age of superannuationand termination of employment had not taken place on completion of theage of superannuation as there is deemed continuation of theemployment for the purpose of holding an inquiry and passing theappropriate punishment order after the conclusion of the departmentalinquiry on the basis of misconduct if any found established. Provisionsof section 4(1) do not impinge upon the continuation of inquiry. Section4(6) prevails on it. The Payment of Gratuity Act, 1972, can govern theconditions concerning payment of gratuity. It cannot control and providewith respect to an employer’s right to hold departmental inquiry afterretirement, and there is no provision prescribing what kind of punishmentcan be imposed in the departmental inquiry if it is continued after attainingthe age of superannuation. The relevant rules would govern such matters.In case the Payment of Gratuity Act, 1972, is interpreted to interdict thedepartmental inquiry after the age of superannuation and to deal withthe nature of punishment to be imposed, it would be taken as case ofover-inclusion in the Act which deals exclusively with the payment ofgratuity.

10.21 In view of the various decisions of this Court and consideringthe provisions in rules in question, it is apparent that the punishmentwhich is prescribed under Rule 27 of the CDA Rules, minor as well asmajor, both can be imposed. Apart from that, recovery can also be madeof the pecuniary loss caused as provided in Rule 34.3 of the CDA Rules,

Awhich takes care of the provision under sub-section (6) of Section 4 ofthe Payment of Gratuity Act, 1972. The recovery is in addition to apunishment that can be imposed after attaining the age of superannuation.The legal fiction provided in Rules 34.2 of the CDA Rules of deemedcontinuation in service has to be given full effect.

B10.22 The expression used in section 4(1) “termination” does notinclude “dismissal.” The Constitution Bench considered the differencebetween the termination and dismissal in M. Ramanatha Pillai v. TheState of Kerala & Ors. (1973) 2 SCC 650 wherein the followingobservations were made as to the distinction between the terms dismissaland termination considering the provisions of Article 311 of theCConstitution. It was observed:

“19. When Article 311 states that no person shall be dismissed,removed or reduced in rank until he has been given reasonableopportunity of showing cause against the action proposed to betaken in regard to him it affords protection and security ofDgovernment service. Article 311 applies to all government servantsholding permanent, temporary or officiating post. The protectionafforded by Article 311 is however limited to the imposition ofthree major penalties. These are dismissal, removal or reductionin rank. The words “dismissed”, “removed” and “reduced in rank”Eare technical words. Both in the case of removal or dismissalthere is stigma. It also involves loss of benefit. There may alsobe an element of personal blame worthiness of the governmentservant. Reduction in rank is also punishment. The expression“rank” in Article 311(2) has reference to person’s classificationand not to his particular place in the same cadre in the hierarchyFof the service to which he belongs. Merely sending back servantto his substantive post has been held not to be reduction in rankas punishment since he had no legal right to continue in officiatingpost. The striking out of name from the panel has been held toaffect future rights of promotion and to be reduction in rank.”G(a) Dismissal by way of punishment, termination of employmentby means of exigencies provided in section 240 of the Government ofIndia Act was considered in Jagdish Mitter v. Union of India AIR1964 SC 449. It was held:

8. Having regard to the legislative history of the provisionsHcontained in Article 311, the words “dismissed”, “removed” and

“reduced in rank” as used in Article 311(1), have attained thesignificance of terms of Article. As has been observed by Das,C.J. in Parshotam Lal Dhingra v. Union of India[21], “both at thedate of the commencement of the 1935 Act and of our Constitutionthe words ‘dismissed’, ‘removed’ and ‘reduced in rank’ as usedin the service rules, were well understood as signifying or denotingthe three major punishments which could be inflicted ongovernment servants. The protection given by the rules to theGovernment servants against dismissal, removal or reduction inrank, which could not be enforced by action, was incorporated insub-section (1) and (2) of Section 240 to give them statutoryprotection by indicating procedure which had to be followedbefore the punishments of dismissal, removal or reduction in rankcould be imposed on them and which could be enforced in law.These protections have now been incorporated in Article 311 ofour Constitution”. It is thus clear that every order terminating theservices of public servant who is either temporary servant, ora probationer, will not amount to dismissal or removal from servicewithin the meaning of Article 311. It is only when the terminationof the public servant’s services can be shown to have been orderedby way of punishment that it can be characterised either asdismissal or removal from service.

(b) Similarly, in P. Balakotaiah v. Union of India, AIR 1958 SC232 the provisions of Article 311 came up for consideration, the distinctionbetween the dismissal and termination was discussed thus:

“(18)(IIc) It is then contended that the procedure prescribed bythe Security Rules for the hearing of the charges does not satisfythe requirements of Article 311, and that they are, in consequence,void. But Article 311 has application only when there is an orderof dismissal or removal, and the question is whether an orderterminating the services of the employees under Rule 3 can besaid to be an order dismissing or removing them. Now, this Courthas held in series of decisions that it is not every termination ofthe services of an employee that falls within the operation of Article311, and that it is only when the order is by way of punishmentthat it is one of dismissal or removal under that Article.Vide Satish

AChandra Anand v. Union of India[22], Shyam Lal v. State of UttarPradesh and the Union of India[23], State of Bombay v.Saubhagchand M. Doshi[24] and Parshotam Lal Dhingra v. Unionof India[25]. The question as to what would amount to punishmentfor purposes of Article 311 was also fully considered in ParshotamLal Dhingra case. It was therein held that if person had rightBto continue in office either under the service rules or under aspecial agreement, premature termination of his services wouldbe punishment. And, likewise, if the order would result in loss ofbenefits already earned and accrued, that would also bepunishment. In the present case, the terms of employment provideCfor the services being terminated on proper notice, and so, noquestion of premature termination arises. Rule 7 of the SecurityRules preserves the rights of the employee to all the benefits ofpension, gratuities and the like, to which they would be entitledunder the rules. Thus, there is no forfeiture of benefits alreadyacquired. It was stated for the appellants that person who wasDdischarged under the rules was not eligible for re-employment,and that that was punishment. But the appellants are unable topoint to any rule imposing that disability. The order terminatingthe services under Rule 3 of the Security Rules stands on thesame footing as an order of discharge under Rule 148, and it isEneither one of dismissal nor of removal within the meaning ofArticle 311.”

(emphasis supplied)

(c) In Shyam Lal v. State of Uttar Pradesh & Ors., AIR 1954SC 369, it was held that every termination is not dismissal or removal. InFRavindra Kumar Misra v. UP State Handloom Corpn. Ltd. &Anr.1987 Supp. SCC 739, the distinction between termination simpliciter andpunitive dismissal was considered, and it was observed:

“6. As we have already observed, though the provisions ofArticle 311(2) of the Constitution do not apply, the ServiceGRules which are almost at par make the decisions of this Courtrelevant in disposing of the present appeal. In several

22 (1953) SCR 65523 (1955) 1 SCR 2624 CA No.182 of 1955H25 CA No.65 of 1957

authoritative pronouncements of this Court, the concept of“motive” and “foundation” has been brought in for finding outthe effect of the order of termination. If the delinquency of theofficer in temporary service is taken as the operating motive interminating the service, the order is not considered as punitivewhile if the order of termination is founded upon it, thetermination is considered to be punitive action. This is so onaccount of the fact that it is necessary for every employer toassess the service of the temporary incumbent in order to findout as for whether he should be confirmed in his appointmentor his services should be terminated. It may also be necessaryto find out whether the officer should be tried for some moretime on temporary basis. Since both in regard to temporaryemployee or an officiating employee in higher post such anassessment would be necessary merely because the appropriateauthority proceeds to make an assessment and leaves recordof its views the same would not be available to be utilised tomake the order of termination following such assessmentpunitive in character. In large democracy as ours,administration is bound to be impersonal and in regard to publicofficers whether in government or public corporations,assessments have got to be in writing for purposes of record.We do not think there is any justification in the contention ofthe appellant that once such an assessment is recorded, theorder of termination made soon thereafter must take the punitivecharacter.”

(d) In Registrar General, High Court of Gujarat &Anr. v.Jayshree Chamanlal Buddhbhatti (2013) 16 SCC 59, terminationwas held to be dismissal. The relevant portion is extractedhereunder:

“25. The respondent relied upon the law laid down from ParshotamLal Dhingra v. Union of India onwards. In that case it was heldby the Constitution Bench that: (AIR p. 49, para 28)

“28. … if the Government has, by contract or under the rules,the right to terminate the employment without going throughthe procedure prescribed for inflicting the punishment ofdismissal or removal or reduction in rank, the Government may,nevertheless, choose to punish the servant and if the termination

ABC

of service is sought to be founded on misconduct, negligence,inefficiency or other disqualification, then it is punishmentand the requirements of Article 311 must be complied with.”

26. The next judgment cited is one of three Judges of this Court inState of Bihar v. Shiva Bhikshuk Mishra[6] wherein it was observedas follows: (SCC p. 875, para 5)

“5. … So far as we are aware no such rigid principle has everbeen laid down by this Court that one has only to look to theorder and if it does not contain any imputation of misconductor words attaching stigma to the character or reputation of agovernment officer it must be held to have been made in theordinary course of administrative routine and the court isdebarred from looking at all the attendant circumstances todiscover whether the order had been made by way of

punishment.”

27. These judgments have been followed by Bench of sevenJudges in Samsher Singh v. State of Punjab, where this Courtwas concerned with the termination of the services of aprobationary judicial officer on the basis of vigilance inquiry,which was conducted by the State Government on the request ofthe High Court. The Court held the termination to be bad, andwhile doing so laid down the law in this behalf in no uncertainterms in paras 63 to 66 (of the SCC report) which read as follows:(SCC pp. 851-52)

“63. No abstract proposition can be laid down that where theservices of probationer are terminated without saying anythingmore in the order of termination than that the services areterminated it can never amount to punishment in the factsand circumstances of the case. If probationer is dischargedon the ground of misconduct, or inefficiency or for similar reasonwithout proper enquiry and without his getting reasonableopportunity of showing cause against his discharge it may in agiven case amount to removal from service within the meaningof Article 311(2) of the Constitution.

64. Before probationer is confirmed the authority concernedis under an obligation to consider whether the work of theprobationer is satisfactory or whether he is suitable for the

post. In the absence of any rules governing probationer inthis respect the authority may come to the conclusion that onaccount of inadequacy for the job or for any temperamental orother object not involving moral turpitude the probationer isunsuitable for the job and hence must be discharged. Nopunishment is involved in this. The authority may in some casesbe of the view that the conduct of the probationer may resultin dismissal or removal on an inquiry. But in those cases theauthority may not hold an inquiry and may simply dischargethe probationer with view to giving him chance to makegood in other walks of life without stigma at the time oftermination of probation. If, on the other hand, the probationeris faced with an enquiry on charges of misconduct orinefficiency or corruption, and if his services are terminatedwithout following the provisions of Article 311(2) he can claimprotection. In State of Bihar v. Gopi Kishore Prasad8 it wassaid that if the Government proceeded against the probationerin the direct way without casting any aspersion on his honestyor competence, his discharge would not have the effect ofremoval by way of punishment. Instead of taking the easycourse, the Government chose the more difficult one of startingproceedings against him and branding him as dishonest andincompetent officer.

65. The fact of holding an enquiry is not always conclusive.What is decisive is whether the order is really by way ofpunishment (see State of Orissa v. Ram Narayan Das9). Ifthere is an enquiry the facts and circumstances of the casewill be looked into in order to find out whether the order is oneof dismissal in substance (see Madan Gopal v. State ofPunjab10). In R.C. Lacy v. State of Bihar11 it was held thatan order of reversion passed following an enquiry into theconduct of the probationer in the circumstances of that case

was in the nature of preliminary inquiry to enable theGovernment to decide whether disciplinary action should betaken. probationer whose terms of service provided that itcould be terminated without any notice and without any causebeing assigned could not claim the protection of Article 311(2)(see Ranendra Chandra Banerjee v. Union of India12). Apreliminary inquiry to satisfy that there was reason to dispense

ABC

with the services of temporary employee has been held notto attract Article 311 (see Champaklal Chimanlal Shah v. Unionof India13). On the other hand, statement in the order oftermination that the temporary servant is undesirable has beenheld to import an element of punishment (see Jagdish Mitter v.Union of India14).

66. If the facts and circumstances of the case indicate that thesubstance of the order is that the termination is by way ofpunishment then probationer is entitled to attract Article 311.The substance of the order and not the form would be decisive(see K.H. Phadnis v. State of Maharashtra15).”

(e) In Dinesh Chandra Sangma v. State of Assam and Ors.,(1977) 4 SCC 441, it was held that compulsory retirement is not dismissalor removal. In Workers Employed in Hirakud Dam v. State of Orissa& Ors. (1971) 1 SCC 583, it was held:

D“15. The question that arises for consideration is about theconnotation of the expression “dismissed” used in para 11. Thecontention of Mr Ramamurthy that the expression “dismissed”has reference only to termination of the services of an employeeas and by way of punishment is largely based upon the provisionscontained in the Government of India Act and in Article 311 of theEConstitution. Based upon those provisions Mr Ramamurthy claimsthat the expression “dismissal” is technical word used in casesin which person’s services are terminated by way of punishment.Quite naturally he relied upon the Service Rules where the word“dismissal” has been used to denote major punishment inflictedFupon an employee for misconduct. Mr Ramamurthy, no doubt, iswell-founded in his contention that the word “dismissal” used inthe Government of India Act as also in the Constitution and theService Rules has been interpreted to mean termination of aperson’s service by way of punishment.”

G(f) In Satish Chandra Anand v. Union of India AIR 1953 SCC250 it was held that termination by notice is not dismissal or removal. Itwas held:

“8. Taking Article 14 first, it must be shown that the petitioner hasbeen discriminated against in the exercise or enjoyment of somelegal right which is open to others who are similarly situated. TheH

rights which he says have been infringed are those conferred byArticle 311. He says he has either been dismissed or removedfrom service without the safeguards which that Article confers.In our opinion, Article 311 has no application because this is neithera dismissal nor removal from service, nor is it reduction inrank. It is an ordinary case of contract being terminated bynotice under one of its clauses.”

(g) Similarly, in State Bank of India v. The Workmen of StateBank of India & Ors. (1991) 1 SCC 13 retrenchment under section25F was held not to be dismissal.

10.23 It is settled proposition of law that in case of terminationof service there is distinction as to whether it is simpliciter terminationor punitive dismissal and this court can lift the veil and find out the realnature of termination whether it is simpliciter termination or punitivedismissal as held in B.T. Krishnamurthy v. Sri Basaveswara EducationSociety (2013) 4 SCC 490, Paramjit Singh v. Director of Schools(Public Instructions), (2010) 14 SCC 416, State of U.P. v. Ram VinaiSinha, (2010) 15 SCC 305, Jaswantsingh Pratapsingh Jadeja v.Rajkot Municipal Corpn. (2007) 10 SCC 71, The State of Punjab v.Rajesh Kumar (2006) 12 SCC 418, Jai Singh v. Union of India (2006)9 SCC 717.

10.24 In the case of dismissal by way of punishment, gratuity isnot payable because of special provisions made in the Working JournalistsAct was held by this Court in P. Rajan Sandhi v. Union of India &Anr.(2010) 10 SCC 338. The relevant portion is extracted hereunder:

“11. It may be seen that there is difference between the provisionsfor denial of gratuity in the Payment of Gratuity Act and in theWorking Journalists Act. Under the Working Journalists Actgratuity can be denied if the service is terminated as punishmentinflicted by way of disciplinary act, as has been done in the instantcase. We are of the opinion that Section 5 of the WorkingJournalists Act being special law will prevail over Section 4(6)of the Payment of Gratuity Act which is general law. Section 5of the Working Journalists Act is only for working journalists,whereas the Payment of Gratuity Act is available to all employeeswho are covered by that Act and is not limited to workingjournalists. Hence, the Working Journalists Act is special law,whereas the Payment of Gratuity Act is general law. It is well

[2020] 8 S.C.R.

Asettled that special law will prevail over the general law, vide G.P.Singh’s Principles of Statutory Interpretation, 9th Edn., 2004, pp.133 and 134.

12. The special law i.e. Section 5(1)(a)(i) of the Working JournalistsAct, does not require any allegation or proof of any damage orBloss to, or destruction of, property, etc. as is required under thegeneral law i.e. the Payment of Gratuity Act. All that is requiredunder the Working Journalists Act is that the termination shouldbe as punishment inflicted by way of disciplinary action, whichis the position in the case at hand. Thus, if the service of anemployee has been terminated by way of disciplinary action underCthe Working Journalists Act, he is not entitled to gratuity.”

10.25 Section 4(1) deals with normal superannuation and doesnot cover the cases where the departmental inquiry is pending, or dismissalhad been ordered. It did not interdict the departmental inquiry if it wasinitiated while the employee was in service and continued afterDsuperannuation as if the employee continued in service. Section 4 of thePayment of Gratuity Act, 1972 contains no bar, and purposive constructionhas to be made of the provisions contained in section 4(1). Section 4(6)provides where particular misconduct is found established, how gratuityto be dealt with, but provisions cause no fetteron the power of an employerEto impose punishment of dismissal. It makes no provision in particularwith respect to the departmental inquiry but rather buttressesthe powerof an employer to forfeit gratuity wholly or partially or to recover lossprovided in Section 4(6). Neither the provisions in section 4(1) nor section4(6) of the Payment of Gratuity Act create embargo on the departmentalinquiry and its continuance after superannuation. Thus, provisions ofFRule 34.2 of the CDA Rules would prevail. Even the executive instructioncan hold the field in the absence of statutory rules and are equally bindingas laid down in State of Madhya Pradesh and Anr. v. Kumari NiveditaJain and Ors., (1981) 4 SCC 296, State of Andhra Pradesh and Anr.v. Lavu Narendranath and Ors. etc., AIR 1971 SC 2560, Distt.GRegistrar, Palghat and Ors. v. M.B. Koyakutty and Ors., (1979) 2SCC 150, Union of India and Anr. v. Tulsiram Patel, AIR 1985 SC1416. This Court held that only when statutory provision is otherwise,executive instructions cannot prevail. In our opinion, no dint is caused bythe Payment of Gratuity Act, 1972, and the efficacy of Rules is notadversely affected on the proper interpretation of Section 4(1) and 4(6)Hof the Act of 1972.10.26 In UCO Bank & Ors. v. Rajendra Shankar Shukla, (2018)14 SCC 92 this court did not interfere on the ground that there was anenormous delay of about seven years in issuing charge sheet. Efficiencybar was permitted to be crossed during that period, and the employeewas not paid the subsistence allowance or pension during the pendencyof the disciplinary inquiry. It was observed that the employee was entitledto subsistence allowance during the inquiry. The decision of UCO Bank& Ors. v. Prabhakar Sadashiv Karvade (2018) 14 SCC 98 wasreferred. An observation was made that punishment of dismissal couldnot have been imposed after superannuation, but the same could not besaid to be the ratio of the decision. It was mainly for the reasonsmentioned by this court concerning delay, non-payment of subsistenceallowance and the employee was deprived of meaningful participationunder the departmental inquiry. After giving the aforesaid findings, itwas not necessary to go into the aforesaid question. Thus, the opinionexpressed as to the punishment of dismissal could not be said to be theratio of the decision. The reliance was placed on UCO Bank &Ors. v.Prabhakar Sadashiv Karvade (supra). Though the decision of UCOBank v. Rajinder Lal Capoor (supra) was referred to by this court, butit did not consider the effect of deeming fiction of continuance of inquiryand continuance of the employee in the service as pointed out above inthe various decisions and it relied upon Regulation 48 providing forpecuniary loss caused to the bank. Whereas in Ramesh ChandraSharma v. Punjab National Bank & Anr. (supra) it was held to thecontrary that once the inquiry is initiated under Regulation 4 of the(Discipline & Appeal) Regulations, Regulation 48 of the PensionRegulations had no application, and order of dismissal was upheld. Thedecision in Ramesh Chandra Sharma v. Punjab National Bank &Anr. (supra) and other decisions which were binding upon the DivisionBench were not considered. In the absence of consideration of the saiddecision and other decisions mentioned above in which it was held thatlegal fiction of deemed continuation has to be taken to logical conclusionconsequently, the observation made that after superannuation punishmentof dismissal cannot be imposed in UCO Bank & Ors. v. RajendraShankar Shukla (supra), was not the ratio of decision, and the opinionexpressed on the strength of the said decision in UCO Bank v.Prabhakar Sadashiv Karvade (supra) suffers from infirmity and cannotprevail.

A10.27 In Jaswant Singh Gill v. Bharat Coking Coal Ltd. (2007)1 SCC 663, it was held that the provisions of section 4(6) of the Paymentof Gratuity Act, 1972 would prevail over the non-statutory Bharat CokingCoal Ltd. - subsidiary of Coal India Ltd. Rules 34.2 and 34.3 andprovisions of Payment of Gratuity Act, 1972, were considered. It washeld that even if the disciplinary inquiry was initiated before attaining theBage of superannuation, if the employee attains the age of superannuation,the question of imposing major penalty by removal or dismissal fromservice would not arise. Once the employee had retired and his serviceshad not been extended for the purpose of imposing punishment, majorpenalty could not be imposed. It was also held that the rule framed byCCoal India Ltd. are non-statutory rules, and in view of the provisions ofthe Payment of Gratuity Act, 1972, they cannot prevail. In the said case,the order of dismissal was passed after the age of superannuation. Itwas found that misconduct did not cover the grounds mentioned in section4(6)(a) for recovery of the loss, nor it was the case of misconduct inwhich gratuity could have been withheld wholly or partially in theDexigencies as provided in section 4(6)(b). We find it difficult to agreewith the said decision as Rules hold the field and are not repugnant toprovisions of the Payment of Gratuity Act, 1972. This Court held thatRules could not hold the field as they were not statutory; thus, the effectof the rule providing of deeming legal fiction as if he had continued in theEservice notwithstanding crossing the age of superannuation was notconsidered. Apart from that, the validity of Rules 34.2 or 34.3 could nothave been decided as it was not in question in the said case. TheControlling Authority and the Appellate Authority ordered the paymentof gratuity. The main ground employed was that in the order passed bythe departmental authority, the quantum of damage or loss caused wasFnot indicated, and it was not the case covered by Section 4(6)(a) and4(6)(b). writ petition filed by the employer was dismissed. However,the Intra Court Appeal was allowed, and it was opined that the ControllingAuthority could not have gone into the validity of the dismissal order andforfeiture of the gratuity since it was not an appellate authority ofGdisciplinary authority imposing the punishment of dismissal. Thus, thejurisdictional scope in the Jaswant Singh Gill case (supra) was limited.We are unable to agree with the decision rendered in Jaswant SinghGill case (supra) inter alia for the following reasons:

(i)The order of termination was not questioned, nor theHauthority under the Payment of Gratuity Act, 1972, hadjurisdiction to deal with it.

(ii)The validity or enforceability and vires of service RulesA34.2 and 34.3 were not questioned

(iii)The Controlling Authority under the Payment of GratuityAct, 1972, had no jurisdiction to go into the legality of orderof the disciplinary authority.

(iv)The scope of the case before this Court was confined tovalidity of order of Controlling Authority and to questionswhich could have been dealt with by Controlling Authority.

(v)No fetter is caused on the efficacy of the Rules by Section4(1) and 4(6) of the Payment of Gratuity Act, 1972. TheCRules need not be statutory to have efficacy as they arenot repugnant to the Payment of Gratuity Act, 1972. ThisCourt did not consider the scope of provisions of the GratuityAct and provisions of Rule 34.2, providing legal fiction ofemployee deemed to be in service even aftersuperannuation.D

(vi)The Controlling Authority had no jurisdiction to deal withRules 34.2 and 34.3 or to pronounce upon validity thereofor of dismissal. Thus, the observations made, travelingbeyond the scope of the proceedings, cannot be said to bebinding and cannot constitute the ratio with respect tocontinuance of departmental inquiry after superannuationand what kind of punishment can be imposed by an employer.The jurisdiction of authority was only to consider paymentof gratuity under Section 4(6) of the Payment of GratuityAct, 1972.

Thus, we overrule the decision in Jaswant Singh Gill (supra).

10.28 This court in Anant R. Kulkarni v. Y.P. Education Society& Ors. (2013) 6 SCC 515 considering the decision in NoidaEntrepreneurs Association v. Noida & Ors. (2011) 6 SCC 508 heldthat inquiry against an employee who had retired depends upon the natureof the statutory rule, which governs the terms and conditions of his service.A general observation was made that services cannot be terminatedafter the age of superannuation. The relevant portion is extractedhereunder:

“24. Thus, it is evident from the above, that the relevant rulesgoverning the service conditions of an employee are the

Adetermining factors as to whether and in what manner the domesticenquiry can be held against an employee who stood retired afterreaching the age of superannuation. Generally, if the enquiry hasbeen initiated while the delinquent employee was in service, itwould continue even after his retirement, but nature of punishmentwould change. The punishment of dismissal/removal from serviceBwould not be imposed.”

(a) In the aforesaid decision, reference was made to State ofAssam & Ors. v. Padma Ram Borah AIR 1965 SC 473, in which it wasopined that it was not possible to continue with the inquiry unless theservice was continued by issuing notification before 31st March 1961.CFollowing observations were made in State of Assam v. Padma RamBorah (supra):

“11. Let us proceed on the footing, as urged by learned counselfor the appellant, that the order dated December 22, 1960 itselfamounts to an order retaining the respondent in service tillDdepartmental proceedings to be drawn up against him are finalised.We shall also assume that the finalisation of the departmentalproceedings mentioned in the order is public ground on whichthe respondent could be retained in service. As the order waspassed by the State Government itself, no question of taking itsEsanction arises and we think that the High Court was wrong inholding that the absence of sanction from the State Governmentmade the order bad. Therefore, the effect of the order datedDecember 22, 1960 was two-fold: firstly, it placed the respondentunder suspension and secondly, it retained the respondent in servicetill departmental proceedings against him were finalised. We treatFthe order as an order under Fundamental Rule 56 which orderhaving been made before January 1, 1961, the date of respondent’sretirement, cannot be bad on the ground of retrospectivity. Then,we come to the order dated January 6, 1961. That order obviouslymodified the earlier order of December 22, 1960 inasmuch as itGfixed period of three months from January 1, 1961 or till thedisposal of the departmental proceedings, whichever is earlier,for retaining the respondent in service. The period of three monthsfixed by this order expired on March 31, 1961. Thus the effect ofthe order of January 6, 1961 was that the service of the respondentwould come to an end on March 31, 1961 unless the departmental

proceedings were disposed of at date earlier than March 31,1961. It is admitted that the departmental proceedings were notconcluded before March 31, 1961. The clear effect of the orderof January 6, 1961 therefore was that the service of the respondentcame to an end on March 31, 1961. This was so not becauseretirement was automatic but because the State Government haditself fixed the date up to which the service of the respondentwould be retained. The State Government made no further orderbefore March 31, 1961, but about month or so after passed anorder on May 9, 1961 extending the service of the respondent fora further period of three months with effect from April 1, 1961.We do not think that the State Government had any jurisdiction topass such an order on May 9, 1961. According to the earlier orderof the State Government itself, the service of the respondent hadcome to an end on March 31, 1961. The State Government couldnot by unilateral action create fresh contract of service to takeeffect from April 1, 1961. If the State Government wished tocontinue the service of the respondent for further period, theState Government should have issued notification before March31, 1961. In Rangachari v. Secretary of State for India[2] TheirLordships of the Privy Council were dealing with case in whicha Sub-Inspector of police was charged with certain irregular andimproper conduct in the execution of his duties. After the Sub-Inspector had retired on invalid pension and his pension had beenpaid for three months, the matter was re-opened and an orderwas made removing the Sub-Inspector from service as from thedate on which he was invalided. Lord Roche speaking for theBoard said:

“It seems to require no demonstration that an order purportingto remove the appellant from the service at time when, asTheir Lordships hold, he had for some months duly and properlyceased to be in the service, was mere nullity and cannot besustained.”

The decision is of no avail, in view of the rule in question, whichprovides for legal fiction with respect to continuance in service, and ithas to be given full effect to the ratio of decision negatethe submissionof the employee.

ABCDE

A(b) The decision in State of Punjab v. Khemi Ram (1969) 3 SCC28 was also referred to in Anant R. Kulkarni (supra) in which it wasobserved that though the disciplinary inquiry has to be concluded beforethe date of retirement, once the employee is permitted to retire. In caseinquiry was to be continued, he has to be suspended and retained inservice till such inquiry is completed and the final order is passed. TheBrelevant portion of observations made in Khemi Ram (supra) is extractedhereunder:

“12. There can be no doubt that if disciplinary action is sought tobe taken against government servant it must be done before heretires as provided by the said rule. If disciplinary enquiry cannotbe concluded before the date of such retirement, the course opento the Government is to pass an order of suspension and refuse topermit the concerned public servant to retire and retain him inservice till such enquiry is completed and final order is passedtherein. That such course was adopted by the Punjab Governmentby passing the order of suspension on July 31, 1958 cannot begainsaid. That fact is clearly demonstrated by the telegram, Ex.P-1, which was in fact despatched to the respondent on July 31,1958 by the Secretary, Cooperative Societies to the PunjabGovernment, informing the respondent that he was placed undersuspension with effect from August 2, 1958. As the telegramshows, it was sent to his home address at Village Batahar, Postoffice Haripur, as the respondent had already by that timeproceeded on leave sanctioned by the Himachal PradeshAdministration. Ex. R-1 is the memorandum, also dated July 31,1958, by which the Punjab Government passed the said order ofsuspension and further ordered not to permit the respondent toretire on August 4, 1958. That exhibit shows that copy of thatmemorandum was forwarded to the respondent at his said addressat village Batahar, Post-Office Haripur. Lastly, there is AnnexureH to the respondent’s petition which consists of an expresstelegram, dated August 2, 1958 and letter of the same date inconfirmation thereof informing the respondent that he was placedunder suspension with effect from that date. Both the telegramand the letter in confirmation were despatched at the addressgiven by the respondent i.e. at his Village Batahar, Post OfficeHaripur. These documents, therefore, clearly demonstrate thatthe order of suspension was passed on July 31, 1958 i.e. before

the date of his retirement and had passed from the hands of thePunjab Government as result of their having been transmitted tothe respondent. The position, therefore, was not as if the orderpassed by the Punjab Government suspending the respondent fromservice remained with the Government or that it could have,therefore, changed its mind about it or modified it. Since therespondent had been granted leave and had in fact proceeded onsuch leave, this was also not case where, despite the order ofsuspension, he could have transacted any act or passed any orderin his capacity as the Assistant Registrar.”

The aforesaid decision does not buttress the case of the employeerather defeats. It was held by this court in Khemi Ram (supra) thatemployee has to be continued in service till such inquiry is completedand final order is passed. That is precisely done by the deeming fiction inthe instant matter.

(c) In Anant R. Kulkarni (supra) the decision in Kirti BhusanSingh v. State of Bihar (1986) 3 SCC 675 was also considered in whichit was observed:

“6. The expression “compulsory retirement” found in Rule 73(f)of the Bihar Service Code refers to retirement of governmentservant on his attaining the age of superannuation. This is not acase in which the appellant had been permitted to retire fromservice on the ground that he had attained the age ofsuperannuation. No order asking the appellant to continue in servicebefore he had attained the age of superannuation for the purposeof concluding departmental inquiry instituted against him hadalso been passed by the competent authority. On the other handthe appellant had been permitted to retire from service on invalidpension on medical grounds even before he had attained the ageof superannuation. Rule 73(f) of the Bihar Service Code is clearlyinapplicable to the case of the appellant. No other provision whichenabled the State Government or the competent authority to revokean order of retirement on invalid pension is brought to our notice.The order of retirement on medical grounds having thus becomeeffective and final it was not open to the competent authority toproceed with the disciplinary proceedings and to pass an order ofpunishment.We are of the view that in the absence of such aprovision which entitled the State Government to revoke an order

Aof retirement on medical grounds which had become effectiveand final, the order dated October 5, 1963 passed by the StateGovernment revoking the order of retirement should be held ashaving been passed without the authority of law and is liable to beset aside. It, therefore, follows that the order of dismissal passedthereafter was also nullity.”B

(emphasis supplied)

The question in the aforesaid case was with respect to therevocation of the order of retirement passed on medical grounds. Thatdoes not impinge upon Rule 34.2 due to the operation of whichCsuperannuation would not be effective.

(d) The decision in Bhagirathi Jena v. Board of Directors,O.S.F.C. & Ors. (1999) 3 SCC 666 was also referred to in which it washeld:

7. In view of the absence of such provision in the abovesaidDregulations, it must be held that the Corporation had no legalauthority to make any reduction in the retiral benefits of theappellant. There is also no provision for conducting disciplinaryenquiry after retirement of the appellant and nor any provisionstating that in case misconduct is established, deduction couldEbe made from retiral benefits. Once the appellant had retired fromservice on 30-6-1995, there was no authority vested in theCorporation for continuing the departmental enquiry even for thepurpose of imposing any reduction in the retiral benefits payableto the appellant. In the absence of such an authority, it must beheld that the enquiry had lapsed and the appellant was entitled toFfull retiral benefits on retirement.

As there was no provision for conducting disciplinary inquiryafter retirement and that in case misconduct was established, deductioncould be made from the retiral benefits. Thus, it was held that retiralbenefits could not have been deducted and became payable. The ruleGwas different.

(e) In Anant R. Kulkarni (supra), the decision in U.P. State SugarCorporation Ltd. & Ors. v. Kamal Swaroop Tandon (2008) 2 SCC41 was also considered in which the proceedings were initiated afterretirement in which it was held that in case of retirement, master andHservant relationship continue for grant of retiral benefits. Proceedings

for recovery of financial loss from an employee was permissible evenafter his retirement. The case relates to the departmental inquiry to beinstituted post-retirement for the financial loss caused during the courseof employment. The question of dismissal did not arise as the inquirywas instituted after retirement. There cannot be any quarrel that it woulddepend upon the relevant rule.

10.29 On the basis of the abovementioned decisions in the Stateof Assam & Ors. v. Padma Ram Borah, State of Punjab v. KhemiRam, Bhagirathi Jena v. Board of Directors, O.S.F.C. &Ors., KirtiBhusan Singh v. State of Bihar, U.P. State Sugar Corporation Ltd.&Ors. v. Kamal Swaroop Tandon (supra) this court in Anant R.Kulkarni (supra) opined that relevant rules governing the serviceconditions of an employee are the determining factor as to whether ornot the domestic inquiry can be held against an employee who stoodretired after reaching the age of superannuation. To this extent, there isno problem caused by the aforesaid decision. However, this court madea general observation that if the inquiry had been initiated while thedelinquent employee was in service, it would continue even after hisretirement, but the nature of punishment would change. The punishmentof dismissal, removal from service would not be imposed. The generalobservation made cannot come in the way of specific rule and decisioncannot be said to be of universal application and cannot be said to bebinding in case the rules provide legal fiction and continuance ofemployee in the service as if he had continued in service.

10.30 In view of the various decisions,it is apparent that underRule 34.2 of the CDA Rules inquiry can be held in the same manner asif the employee had continued in service and the appropriate major andminor punishment commensurate to guilt can be imposed includingdismissal as provided in Rule 27 of the CDA Rules and apart from thatin case pecuniary loss had been caused that can be recovered. Gratuitycan be forfeited wholly or partially.

10.31 Several service benefits would depend upon the outcomeof the inquiry, such as concerning the period during which inquiry remainedpending. It would be against the public policy to permit an employee togo scot-free after collecting various service benefits to which he wouldnot be entitled, and the event of superannuation cannot come to his rescueand would amount to condonation of guilt. Because of the legal fictionprovided under the rules, it can be completed in the same manner as if

Athe employee had remained in service after superannuation, andappropriate punishment can be imposed. Various provisions of the GratuityAct discussed above do not come in the way of departmental inquiryand as provided in Section 4(6) and Rule 34.3 in case of dismissal gratuitycan be forfeited wholly or partially, and the loss can also be recovered.An inquiry can be continued as provided under the relevant service rulesBas it is not provided in the Payment of Gratuity Act, 1972 that inquiryshall come to an end as soon as the employee attains the age ofsuperannuation. We reiterate that the Act does not deal with the matterof disciplinary inquiry, it contemplates recovery from or forfeiture ofgratuity wholly or partially as per misconduct committed and does notCdeal with punishments to be imposed and does not supersede the Rules34.2 and 34.3 of the CDA Rules. The mandate of Section 4(6) of recoveryof loss provided under Section 4(6)(a) and forfeiture of gratuity whollyor partially under Section 4(6)(b) is furthered by the Rules 34.2 and34.3. If there cannot be any dismissal after superannuation, intendmentof the provisions of Section 4(6) would be defeated. The provisions ofDsection 4(1) and 4(6) of Payment of Gratuity Act, 1972 have to be givenpurposive interpretation, and no way interdict holding of the departmentalinquiry and punishment to be imposed is not the subject matter dealt withunder the Act.

10.32 Thus considering the provisions of Rules 34.2 and 34.3 ofEthe CDA Rules, the inquiry can be continued given the deeming fictionin the same manner as if the employee had continued in service andappropriate punishment, including that of dismissal can be imposed apartfrom the forfeiture of the gratuity wholly or partially including the recoveryof the pecuniary loss as the case may be.F

11. In view of the above and for the reasons stated above and inview of the decision of three Judge Bench of this Court in Ram LalBhaskar (supra) and our conclusions as above, it is observed and heldthat (1) the appellant – employer has right to withhold the gratuityduring the pendency of the disciplinary proceedings, and (2) theGdisciplinary authority has powers to impose the penalty of dismissal/major penalty upon the respondent even after his attaining the age ofsuperannuation, as the disciplinary proceedings were initiated while theemployee was in service.

Under the circumstances, the impugned judgment and order passedHby the High Court cannot be sustained and the same deserves to be

quashed and set aside and is accordingly hereby quashed and set asideand the order passed by the Controlling Authority is hereby restored.However, the appellant-employer is hereby directed to conclude thedisciplinary proceedings at the earliest and within period of four monthsfrom today and pass appropriate order in accordance with law and onmerits and thereafter necessary consequences as per Section 4 of thePayment of Gratuity Act, 1972, more particularly Sub-section (6) ofSection 4 of the Gratuity Act and Rule 34.3 of the CDA Rules shallfollow. The present appeal is accordingly allowed. However, in the factsand circumstances of the case, there shall be no order as to costs.

RASTOGI, J.

1. I had the privilege of going through the elaborate judgmentproposed by my brother Shah, J. Two legal questions have been raisedfor our consideration (i) whether it is permissible in law for the employerto withhold the payment of gratuity to the employee after retirementfrom service on account of pendency of the disciplinary proceedingsagainst him and (ii) whether it is permissible for the disciplinary authorityto impose penalty of dismissal after the employee stood retired fromservice.

2. While I entirely agree with view on question no. (i) that inview of rule 34.3 of the Coal India Executives’ Conduct Discipline andAppeal Rules, 1978 (hereinafter being referred to as “Rules 1978”), it ispermissible for the employer to withhold gratuity even after retirement/superannuation during pendency of the disciplinary proceedings.However, unable to persuade myself on question (ii).

3. The facts giving rise to the controversy have been set out atgreat length in the judgment of my erudite brother Shah J. I, therefore,do not consider it necessary to recapitulate the same once again exceptto the extent it may be necessary in the case of this judgment to do so.

4. Before adverting to the factual matrix, it may be relevant totake note of the scheme of Rules, 1978.

5. The Scheme of Rules, 1978 with which we are presentlyconcerned was earlier examined by two Judge Bench of this Court in1the case of Jaswant Singh Gill Vs. Bharat Coking Coal Ltd. & Ors..

1 2007 (1) SCC 663

AThe view expressed by the two Judge Bench of this Court came up forconsideration in the instant case before another two Judge Bench of thisCourt and this Court was of the view that inJaswant Singh Gill(supra),the issue of permissibility of penalty of dismissal or removal from serviceon retired employee was neither raised nor any direct discussion hasbeen followed thereupon and taking note of the stated pari materia RuleB19(3) of the State Bank of India Officers Service Rules, 1992 examinedby the three Judge Bench of this Court inState Bank of India Vs. RamLal Bhaskar and Another2 and keeping in view the discussion in thecase of Jaswant Singh Gill(supra), the two Judge Bench of this Courtwas of the view that the question as to whether the disciplinary authorityChas necessary powers to impose penalty of dismissal or removal to anemployee after retirement from service requires to be examined by alarger Bench of this Court by its judgment dated 29[th] October, 2013which has been placed before us for consideration.

6. The facts in brief to be culled out are that the first respondentDwas working as Chief General Manager (Production) since17[th] February, 2006 and while he was in service for the alleged misconductwhich he had committed in discharge of his duties, he was served with amemo along with article of charges on 1[st] October, 2007. There couldnot be any restraint over passing of the age factor of the delinquent andon attaining the age of superannuation, he stood retired from service onE31[st] July, 2010. It revealed from the record that inquiry officer hadsubmitted report of inquiry to the disciplinary authority on 25[th] March,2009 but what further action has been taken by the authority thereafteris not made known to this Court. presumption has to be drawn thatfate of disciplinary inquiry is still pending with the competent authority

Ffor taking its decision as per the procedure prescribed under the schemeof Rules, 1978.

7. The appellant Mahanadi Coalfields Limited is subsidarycompany of Coal India Limited, Government owned company registeredunder the Companies Act and is State within the meaning of Article 12Gof the Constitution and amenable to the writ jurisdiction under Article226 of the Constitution of India. For maintaining discipline in service,with the approval of the Board of Directors of Coal India Limited(CAL)in its meeting held on 24[th] February, 1978, framed these rules calledCoal India Executive Conduct, Discipline and Appeal Rules, 1978 and isapplicable to all employees holding posts in the executive cadre scalesof pay of Coal India Limited and its subsidiary companies and to suchother employees as may be notified from time to time has bindingforce and is indeed not in derogation to the provisions of the Payment ofGratuity Act, 1972 (hereinafter being referred to as Act, 1972).

8. The scheme of Rules, 1978 not only defines the duties andobligations of the executives and employees but to the extent illustratesany act or omission or commission which shall be treated as misconductunder Chapter II and any misconduct, if committed by an employee, indischarge of his official duties, the disciplinary action could be initiatedagainst an employee for the stated misconduct while he is in service asprovided under Chapter IV of the scheme of Rules, 1978.

9. The Scheme of Rules, 1978 further provides procedure whichhas to be followed for imposing minor/major penalties under Rule 29 andRule 31 of the Rules. That apart, special procedure has been providedin certain cases notwithstanding the regular procedure contained in Rules29, 30 or 31 of the said rules, the authority may impose any of the penaltiesspecified in Rule 27 in the circumstances as referred to under clause (i)to (iii) of Rule 34.1 of the rules. It will be apposite to take note of theterm ‘employee’ and Rule 27(nature of penalties) and Rule 34.1, 34.2and 34.3 relevant for the purpose ad infra:-

“3(f) ‘Employee’ means an officer holding post in the executivecadre scales of pay or any other person notified by the Company,if such officer or person is employed on whole time basis by theCompany provided that such persons on deputation to the Companyshall continue to be governed by these rules or the rules applicableto them in their parent organizations, as may be settled at the timeof finalization of their terms and conditions of deputation.

27.0 NATURE OF PENALTIES

27.1 The following penalties may, for good and sufficient reasons,be imposed on an employee for misconduct, viz. :

(i)Minor Penalties

(a)Censure;

(b)Withholding increment, with or without cumulative effect;

(c)Withholding promotion; and

A(d)Recovering from pay of the whole of or part of any pecuniaryloss caused to the Company by negligence or breach of ordersor trust (Rule 27.1 (i) (d) amended vide CIL OM No. CIL/C-5A (vi)/ 50774/CDA/184 dated 23.11.05)

(ii)Major PenaltiesB

(a)Reduction to lower grade or post or stage in time scale;

Note :

The Authority ordering the reduction shall state the period forwhich it is effective and whether, on the expiry of that period, itCwill operate to postpone future increments or, to affect theemployee’s seniority and if so, to what extent.

(b)Compulsory retirement;

(c)Removal from service; and

(d)Dismissal.

Note 1

Removal from service will not be disqualification for futureemployment in Coal India Limited and its Subsidiary Companieswhile dismissal disqualifies person for future employment.

E34.0 Special procedure in certain cases

34.1 Notwithstanding anything contained in rule 29 or 30 or 31the Disciplinary Authority may impose any of the penaltiesspecified in rule 27 in any of the following circumstances :

(i) where the employee has been convicted on criminalcharge, or on the strength of facts or conclusions arrived atby judicial trial; or

(ii) where the Disciplinary Authority is satisfied for reasonsto be recorded by it in writing that it is not reasonablypracticable to hold an inquiry in the manner provided in theserules; or

(iii) where the Disciplinary Authority is satisfied that in theinterest of the security of the Company, it is not expedientto hold any inquiry in the manner provided in these rules.

Provided that the employee may be given an opportunity ofmaking representation to the penalty proposed to beimposed before any order is made under clause (i) above.\

34.2 Disciplinary proceeding, if instituted while the employee wasin service whether before his retirement or during his re-employment shall, after the final retirement of the employee,be deemed to be proceeding and shall be continued andconcluded by the authority by which it was commenced inthe same manner as if the employee had continued in service.

34.3 During the pendency of the disciplinary proceedings, theDisciplinary Authority may withhold payment of gratuity,for ordering the recovery from gratuity of the whole or partof any pecuniary loss caused to the company if have beenguilty of offences/misconduct as mentioned in Sub-Section(6) of Section 4 of the Payment of Gratuity Act, 1972 or tohave caused pecuniary loss to the company by misconductor negligence, during his service including service renderedon deputation or on re-employment after retirement.However, the provisions of Section 7(3) and 7(3A) of thePayment of Gratuity Act, 1972 should be kept in view in theevent of delayed payment, in the case the employee is fullyexonerated.”

(Emphasis supplied)

10. Under the scheme of Rules 1978, apart from the procedurewhich has to be followed for imposing minor/major penalties after holdinga procedure prescribed under Rule 29 or 31 of the scheme of Rules,special procedure has been provided under Rule 34 for meeting out certainexigencies. Rule 34.1 is couched with non-obstante clause which couldbe invoked in the special circumstances indicated under clauses (i) to(iii) notwithstanding procedure for holding disciplinary inquiry providedunder Rule 29 or 31 of the Rules while inflicting penalties specified underRule 27 of the Rules. At the same time, for the delinquent employeewho stood retired from service pending disciplinary enquiry, specialprocedure has been provided under Rule 34.2 to continue and concludesuch disciplinary proceedings in the same manner as if the delinquentemployee had deemed to be continued in service for all practical purposesand with the aid of Rule 34.3 which cannot exist without Rule 34.2, the

Aauthority competent may withhold the payment of gratuity duringpendency of the disciplinary proceedings and order for recovery fromgratuity of the whole or part of the pecuniary loss caused to the company,if the delinquent employee is later held to be guilty of offences/misconductor it has caused any pecuniary loss to the company by misconduct ornegligence during discharge of official duties as measure of penaltyBmentioned under Rule 34.3 of the Rules, 1978 or under sub-section (6)of Section 4 of the Act, 1972. At the same time, if the delinquent employeeis exonerated in the disciplinary inquiry, he will be entitled for the gratuityin the event of delayed payment in terms of Section 7(3) and 7(3A) ofAct, 1972.

11. The Division Bench of the High Court in LPA placing relianceon the judgment of this Court in Jaswant Singh Gill(supra) directedthe appellants pending disciplinary proceedings to release the amount ofgratuity payable to the respondent under the impugned judgment.

12. It is well settled that retiral benefits are earned by an employeeDfor long and meritorious service rendered by him/her and it is not paidgratuitously or merely as matter of boon, it is paid to him/her fordedicated and devoted work. The Act, 1972 also acknowledges undersub-section (6) of Section 4 to forfeit it to the extent pecuniary loss socaused from the amount of gratuity payable to the employee.

E13. Sub-sections (1) and (6) of Section 4 of the Act, 1972 relevantfor the purpose are ad infra:-

“4. Payment of gratuity. –

(1) Gratuity shall be payable to an employee

Fon

the termination of his employment after he

has rendered continuous service for

notGless 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:

Provided that the completion of continuous service of fiveyears shall not be necessary where the termination of theemployment of any employee is due to death or disablement:

(2) …..

(3) …..

(4) …..

(5) …..

(6) Notwithstanding anything contained insub-section (1),-

(a) the gratuity of an employee, whose services have beenterminated for any act, wilful omission or negligencecausing any damage or loss to, or destruction of, propertybelonging to the employer, shall be forfeited to the extentof the damage or loss so caused;

(b) the gratuity payable to an employee [may be wholly orpartially forfeited]-

(i)if the services of such employee have been terminatedfor his riotous or disorderly conduct or any other act ofviolence on his part, or

(ii) if the services of such employee have been terminatedfor any act which constitutes an offence involving moralturpitude, provided that such offence is committed by himin the course of his employment.”

14. The purpose of holding an inquiry against delinquent is notonly with view to establish the charge levelled against him or to imposea penalty, but is also conducted with the object of such an inquiryrecording the truth of the matter, and in that sense, the outcome of aninquiry may either not establishing or vindicating his stand, hence resultin his exoneration. Therefore, what is required is that there should be afair action on the part of the authority concerned in holding disciplinaryinquiry for the misconduct, if any, being committed by an employee indischarge of his duties even if retired from service during pendency ofdisciplinary proceedings after adopting the procedure prescribed underthe relevant disciplinary rules alike Rules, 1978 in the instant case andindeed the scheme of Rules, 1978 with which we are concerned is neitherin derogation nor in contravention to the scheme of the Act, 1972.

A15. It is also well settled that the competence of an authority tohold an enquiry or to continue enquiry against an employee who hasretired from service depends upon the scheme of rules and the termsand conditions of service of the employee are the determining factors asto whether and in what manner the disciplinary enquiry can be heldagainst an employee who stood retired or superannuated from service.B

16. To clarify it further that those who were the serving employees,if held guilty on conclusion of the disciplinary proceedings, minor/majorpenalties as referred to under Rule 27 could be inflicted by the disciplinaryauthority after recording good and sufficient reason commensurate withthe nature of misconduct and in the case of an employee who stoodCretired/superannuated from service pending disciplinary proceedings, thedisciplinary authority has right to withhold the payment of gratuitypending disciplinary inquiry and if found guilty in the inquiry for theoffences/misconduct as indicated in sub-section (6) of Section 4 of Act1972, can be recovered from his gratuity payable under Section 4 of theDAct, 1972. At the same time, if he is exonerated by the disciplinaryauthority after retirement/superannuation from service, he shall be entitledfor payment of gratuity along with interest for the delay in payment interms of Section 7(3) and Section 7(3A) of Act, 1972.17. Thus, according to me, where the disciplinary proceedingsEare instituted while the employee was in service but retired thereafterduring its pendency, under the special procedure provided under Rule34.2 of the Rules, 1978 the authority is empowered to continue andconclude the disciplinary inquiry in the same manner as if the employeehad continued in service by deeming fiction, however, the relationship ofemployer and employee shall not be severed until conclusion of theFdisciplinary enquiry but may withhold payment of gratuity in terms ofRule 34.3 pending disciplinary inquiry and in furtherance thereof if laterheld guilty, the competent authority to the extent pecuniary loss has beencaused for the misconduct, negligence in the discharge of duties orderfor recovery from gratuity either be forfeited in the whole or in part, toGthe extent pecuniary loss has been caused to the company for theoffences/misconduct as measure of penalty in terms of Rule 34.3 ofthe Rules read with sub-section (6) of Section 4 of the Act, 1972.

18. The emphasis of the learned counsel for the respondent takingnote of the view expressed by this Court inJaswant Singh Gill(supra)His that gratuity can be withheld under sub-section (6) of Section 4 of the

Act, 1972, if the service of an employee is terminated for the allegedmisconduct or negligence which has been committed by him duringdischarge of his official duties. But after retirement from service sincethere cannot be any punishment of dismissal from service withretrospective effect, the authority is not competent to withhold gratuityunder the guise of non-statutory rules, 1978.

19. In my considered view, the submission is misplaced for thereason that gratuity became payable to an employee under Section 4(1)of the Act, 1972 on termination of his employment after he rendered aminimum qualifying service and termination of his employment is eithercan be on his superannuation or retirement or resignation or death ordisablement due to accident or disease or any other cause may be. Theword ‘termination’ referred to under sub-section (1) or under sub-section(6) of Section 4 of the Act, 1972 is in reference to the severance ofrelationship of employer and employee and sub-section (6) of Section 4being couched with non-obstante clause empowered the authority incase the delinquent employee held guilty of wilful omission or negligencecausing any damage or loss or destruction to the property of the companyduring the course of employment as measure of penalty gratuity maybe forfeited wholly or partially to the extent misconduct found proved.

20. The term ‘termination’ may not be understood with the penaltyof dismissal or removal from service specified under Rule 27 of Rules,1978. To make it further clear, the expressions in the schedule ofsubstantive penalties under Rule 27 of the Rules, 1978 refers to variouspenalties including reduction in rank, compulsory retirement, dismissal,removal, etc. and could possibly be inflicted on the serving employeeand indeed cannot be effected with retrospective effect on the delinquentemployee who stood retired from service. The term ‘termination’ asreferred to under sub-section (6) of Section 4 of the Act is technicalword used in cases where the relationship of employer and employee issevered on account of stated misconduct stands proved althoughconnotations are different.

21. Many times ‘termination’ and ‘dismissal’ are held to besynonymous but the difference between ‘termination’ and ‘dismissal’ isthat dismissal could be on account of misconduct with loss of futureemployment involving dishonesty or criminality and penal in characterbut that is not in the case of termination. The “termination” as per Black’sLaw Dictionary is the complete severance of relationship of employer

Aand employee which in the instant case could be saved during pendencyof the disciplinary proceedings in view of Rule 34.2 of the Rules, 1978which clearly envisaged that disciplinary proceedings, if instituted whilethe employee was in service, shall be deemed to be pending and shall becontinued and concluded by the authority by which it was commencedin the same manner as if the employee had continued in service and byBlegal fiction, the relationship of employer and employee shall be deemedto continue for the limited purposes of conclusion of the disciplinaryproceedings and the delinquent employee becomes qualified to claimgratuity subject to the outcome of the disciplinary proceedings in termsof Rule 34.3 of the Rules, 1978 read with sub-section (6) of Section 4 of

Cthe Act, 1972.

22. The three Judge Bench of this Court inState of MaharashtraVs. M.H. Mazumdar3 taking note of the pari materia rule 188 and 189of the Bombay Civil Services Conduct, Discipline and Appeal Rules andrelying on earlier precedents held in paragraph 5 as under:-

D“5. The aforesaid two rules empower Government to reduce orwithdraw pension. Rule 189 contemplates withholding orwithdrawing of pension or any part of it if the pensioner is foundguilty of grave misconduct while he was in service or after thecompletion of his service. Grant of pension and its continuance toEa government servant depend upon the good conduct of thegovernment servant. Rendering satisfactory service maintaininggood conduct is necessary condition for the grant andcontinuance of pension. Rule 189 expressly confers power on theGovernment to withhold or withdraw any part of the pensionpayable to government servant for misconduct which he mayFhave committed while in service. This rule further provides thatbefore any order reducing or withdrawing any part of the pensionis made by the competent authority the pensioner must be givenopportunity of defence in accordance with the procedure specifiedin Note I to Rule 33 of the Bombay Civil Services Conduct,GDiscipline and Appeal Rules. The State Government’s power toreduce or withhold pension by taking proceedings against agovernment servant even after his retirement is expresslypreserved by the aforesaid rules. The validity of the rules was notchallenged either before the High Court or before this Court. In

this view, the Government has power to reduce the amount ofpension payable to the respondent. In M. Narasimhachar v. Stateof Mysore [AIR 1960 SC 247 : (1960) 1 SCR 981] and State ofUttar Pradesh v. Brahm Datt Sharma [(1987) 2 SCC 179] similarrules authorising the Government to withhold or reduce the pensiongranted to the government servant were interpreted and this Courtheld that merely because government servant retired from serviceon attaining the age of superannuation he could not escape theliability for misconduct and negligence or financial irregularitieswhich he may have committed during the period of his serviceand the Government was entitled to withhold or reduce the pensiongranted to government servant.”

23. It is supported by the judgment of this Court in the recentjudgment inUCO Bank & Ors.Vs. Rajendra Shankar Shukla4 whereinit was held as under:-

“Under the circumstances, we have no hesitation in dismissingthe appeal filed by the Bank also on the ground that the punishmentof dismissal could not have been imposed on Shukla after his”superannuation.

(Emphasis supplied)

24. The exposition of law is further supported inUCO Bank andOrs. Vs. Prabhakar Sadashiv Karvade5 as under:-

“The sum and substance of these Regulations is that even thougha departmental inquiry instituted against an officer employee beforehis retirement can continue even after his retirement, none of thesubstantive penalties specified in Regulation 4 of 1979 Regulations,which include dismissal from service, can be imposed on an officeremployee after his retirement on attaining the age ofsuperannuation. Therefore, we have no hesitation to hold that orderdated 12.10.2004 passed by the disciplinary authority dismissingthe respondent from service, who had superannuated on 31.12.1993was ex facie illegal and without jurisdiction and the High Courtdid not commit any error by setting aside the same.”

(Emphasis supplied)

4 2018(14) SCC 92

5 2018(14) SCC 98

A25. The two Judge Bench of this Court in UCO Bank and Ors.Vs. Rajinder Lal Capoor6 on which the reliance has been placed bythe respondent employee was case where the explanation was calledfor by the delinquent employee in reference to the alleged misconductwhich he had committed in discharge of his official duties but charge-sheet was indubitably issued after he stood retired from service. TheBquestion which arose for consideration was as to whether mereexplanation which was called for from the delinquent would be consideredto be the initiation of the disciplinary proceedings or it can be said to beinitiated only when the charge-sheet is issued in terms of Regulation20(3)(iii) of the UCO Bank Officer Employees Service Regulations,C1979 and this Court after examining the scheme of Rules, 1979 held thatdomestic inquiry can be said to be initiated only when the charge-sheetis issued to the delinquent and since the charge-sheet was issued afterretirement from service this Court held that the disciplinary proceedingsinitiated against the delinquent became vitiated in law and consequentlyset aside the disciplinary proceedings initiated against the retired personnel.D

26. The judgment inRam Lal Bhaskar and Anr.(supra) on whichreliance was placed to refer the matter may not be of any assistance inthe instant facts of the case for the reason that it was case where asubstantial question raised before this Court for consideration was as towhether the High Court was justified in reappreciating with the findingEof the disciplinary authority which was supported by cogent evidencewhile inflicting penalty of dismissal from service within its limited scopeof judicial review under Article 226 of the Constitution. At this stage, apassing reference was made by learned counsel for the delinquentemployee that as he stood retired from service pending disciplinary enquiry,Fthere could not be an order of dismissal from service. This Court takingnote of Rule 19(3) of the State Bank of India Officers Service Rules,1992, in para 9 of the judgment observed that in case the disciplinaryproceedings were initiated against an officer before he ceased to be inservice, the disciplinary authority vest at its discretion to continue andconclude the disciplinary proceedings in the manner as if the officerGcontinues to be in service but what nature of substantive penalty couldbe inflicted upon the retired delinquent employee remain unanswered.In the instant case, the specific question has been raised for determinationas to whether dismissal or any other substantive penalties provided underRule 27 of the scheme of Rules, 1978 could be open to be inflicted to theH6 2007(6) SCC 694delinquent employee after he stood retired from service which wasprimarily not considered by this Court in Ram Lal Bhaskar and Anr.referred to supra.

27. Taking note of the exposition of law which has been noticedand of the scheme of Rules, 1978, which indubitably has binding forceand are not subject matter under challenge and are neither in derogationnor in contravention to the scheme of Payment of Gratuity Act, 1972. Ihave no hesitation in holding that the substantive penalties provided underthe schedule of penalties referred to under Rule 27 could be inflicted ona delinquent employee while he is in service but in case where thedelinquent employee stood retired or superannuated from service pendingdisciplinary inquiry, at least either of the substantive penalties providedunder Rule 27 are not available to the disciplinary authority to be inflictedwith retrospective effect but at the same time punishment of forfeitureof gratuity if held guilty for misconduct or negligence to the extent damageor pecuniary loss has been caused to the employer can be inflicted uponthe delinquent in terms of Rule 34.3 of Rules 1978 read with sub-section(6) of Section 4 of the Act, 1972 and in case the delinquent employeestands exonerated he became entitled for gratuity for the delay in paymentin terms of Sections 7(3) and 7(3A) of Act, 1972 and as matter ofcaution, it should not be pre-supposed that where the disciplinary inquiryremain pending and could not be concluded while the delinquent employeewas in service in due course of time, he shall be held guilty and punishedunder the scheme of Rules, 1978.

28. To sum up, my conclusion to the question is as under:-

Que. 1-Whether it is permissible in law for the employer to withholdthe payment of gratuity even after the employee has attained hissuperannuation from service because of the pendency of disciplinaryproceedings against him?

Ans. I am in agreement with the view expressed by brother JusticeShah that in view of Rule 34.3 of the Rules, 1978, the employer has aright to withhold gratuity during pendency of the disciplinary proceedings.

Que. 2- Whether the penalty of dismissal could be imposed afterthe employee stood retired from service?

Ans. In my considered view, after conclusion of the disciplinaryinquiry, if held guilty, indeed penalty can be inflicted upon an employee/delinquent who stood retired from service and what should be the nature

Aof penalty is always depend on the relevant scheme of Rules and on thefacts and circumstances of each case, but either of the substantivepenalties specified under Rule 27 of the Rules, 1978 including dismissalfrom service are not open to be inflicted on conclusion of the disciplinaryproceedings and the punishment of forfeiture of gratuity commensuratewith the nature of guilt may be inflicted upon delinquent employeeBprovided under Rule 34.3 of Rules, 1978 read with sub-section (6) ofSection 4 of the Act, 1972.

29. To conclude, the impugned judgment of the High Court dated17[th] July, 2013 is not sustainable and deserves to be set aside and thedisciplinary authority may proceed and conclude the pending disciplinaryCproceedings expeditiously and take final decision in accordance withthe scheme of Rules, 1978 read with sub-section (6) of Section 4 of thePayment of Gratuity Act, 1972.

30. The appeal is accordingly disposed of.

Devika Gujral

Appeal disposed of.