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Jyotirmay Ray vs The Field General Manager, Punjab National Bank & Ors.

Civil Appeal · 2023 INSC 979Decided 6 Nov 2023
Civil Appeal No. 6611 of 2015
J.K. Maheshwari · K.V. Viswanathan

Background

The appellant, a bank Senior Manager, was compulsorily retired after a departmental inquiry into alleged irregularities in sanctioning loans. He did not challenge the retirement itself but sought his terminal benefits (leave encashment, the bank's contribution to his provident fund, and gratuity) which the bank withheld, citing an alleged loss of Rs.77.59 lakh caused by his conduct. A single judge of the High Court ordered payment of the provident fund contribution and gratuity with interest, but a Division Bench on appeal reversed this and upheld the forfeiture.

Decision Breakdown

The Supreme Court found that neither the chargesheet nor the enquiry report ever alleged or quantified any actual loss to the bank: the Board of Directors' resolution claiming a Rs.77.59 lakh loss was passed unilaterally, after the retirement order, and without giving the appellant any hearing, so it could not justify forfeiting the provident fund contribution under Rule 13 of the PF Trust Rules. On gratuity, the Court held that the Payment of Gratuity Act, 1972 overrides inconsistent service regulations, and under both the Act and the bank's own Circular No. 1563, gratuity can be withheld only for proven, quantified loss or for termination due to riotous conduct or a criminal offence involving moral turpitude: none of which applied to a compulsory retirement of this kind. It therefore restored the single judge's order directing payment of both the provident fund contribution and gratuity.

Lesson Learnt

An employer cannot withhold an employee's provident fund or gratuity based on a vague, unquantified, or after-the-fact claim of financial loss: the loss must be specifically alleged, proven, and put to the employee for a hearing, and gratuity in particular is protected by a statute that overrides conflicting service rules unless it falls within the Act's own narrow forfeiture grounds.

Official source (sci.gov.in)View Judgment (PDF)

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