# CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS LIMITED v. SRI RABINDRANATH CHOUBEY

- **Citation:** [2020] 8 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 2020-05-27
- **Case number:** Civil Appeal No. 9693 of 2013
- **Bench:** Arun Mishra, M. R. Shah, Ajay Rastogi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/chairman-cum-managing-director-mahanadi-coalfields-limited-v-sri-rabindranath-34848
- **Pages:** 88

## Headnote

Service Law: Disciplinary proceeding - Superannuation -
Payment of gratuity/Dismissal from service - Whether it is
permissible for the employer to withhold the payment of gratuity of
the employee even after his superannuation from service because
of the pendency of the disciplinary proceedings against him and
where departmental enquiry had been instituted against an employee
while he was in service and continued after he attained the age of
superannuation whether the punishment of dismissal can be imposed
on being found guilty of misconduct in view of the provisions in
r.34.2 of the Conduct, Discipline & Appeal Rules of 1978 made by
the employer - Held: Per M.R.Shah, J. (for himself and Arun
Mishra, J.) - An employer has a right to withhold the gratuity during
the pendency of the disciplinary proceedings, and the disciplinary
authority has powers to impose the penalty of dismissal/major penalty
upon the employee even after his attaining the age of
superannuation, as the disciplinary proceedings were initiated while
the employee was in service - The Payment of Gratuity Act, 1972
govern the conditions concerning payment of gratuity - It cannot
control and provide with respect to an employer's right to hold a
departmental inquiry after retirement, and there is no provision
prescribing what kind of punishment can be imposed in the
departmental inquiry if it is continued after attaining the age of
superannuation - The relevant rules would govern such matters -
Since no statutory provisions of the Payment of Gratuity Act, 1972
come in the way of the CDA Rules to continue the inquiry after
superannuation of the employee in case it was instituted while he
was in service and his deemed continuance in service; thus, no
fetter is caused upon operation of Rule 34.2 providing for a
continuation of the inquiry and deemed continuation of the employee
in service after the age of superannuation - At the conclusion of
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such disciplinary proceedings any of the penalty provided under
Rule 27 of the CDA Rules can be imposed by the authority including
the order of dismissal and apart from that in case pecuniary loss
had been caused that can be recovered -Per Ajay Rastogi, J. (Partly
dissenting): After conclusion of the disciplinary inquiry, if an
employee/delinquent is held guilty, indeed a penalty can be inflicted
upon him who stood retired from service and what should be the
nature of penalty would always depend on the relevant scheme of
Rules and on the facts and circumstances of each case, but either
of the substantive penalties specified under Rule 27 of the Rules,
1978 including dismissal from service are not open to be inflicted
on conclusion of the disciplinary proceedings and the punishment
of forfeiture of gratuity commensurate with the nature of guilt may
be inflicted upon a delinquent employee provided under Rule 34.3
of Rules, 1978 read with sub-section (6) of s.4 of the Act, 1972 -
Payment of Gratuity Act, 1972.
Disposing of the appeal, the Court
HELD:
PER M. R. SHAH, J. (FOR HIMSELF AND ARUN
MISHRA, J.)
1.1 Indisputably, the respondent was governed by the CDA
Rules. Therefore, Rules 34.2 and 34.3 of the CDA Rules shall be
applicable and the respondent-employee shall be governed by
the said provisions. Rule 34 permits the management to withhold
the gratuity during the pendency of the disciplinary proceedings.
Rule 34.2 permits the disciplinary proceedings to be continued
and concluded even after the employee has attained the age of
superannuation, provided the disciplinary proceedings are
instituted while the employee was in service. It also further
provides that such disciplinary proceedings shall be deemed to
be the proceedings and shall be continued and concluded by the
authority by which it was commenced in the same manner as if
the employee had continued in service. Therefore, as such, on a
fair reading of Rule 34.2 of the CDA Rules, an employee shall be
deemed to be continu

## Text

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[2020] 8 S.C.R. 1
1
CHAIRMAN-CUM-MANAGING DIRECTOR,
MAHANADI COALFIELDS LIMITED
v.
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 is
permissible for the employer to withhold the payment of gratuity of
the employee even after his superannuation from service because
of the pendency of the disciplinary proceedings against him and
where departmental enquiry had been instituted against an employee
while he was in service and continued after he attained the age of
superannuation whether the punishment of dismissal can be imposed
on being found guilty of misconduct in view of the provisions in
r.34.2 of the Conduct, Discipline & Appeal Rules of 1978 made by
the employer - Held: Per M.R.Shah, J. (for himself and Arun
Mishra, J.) - An employer has a right to withhold the gratuity during
the pendency of the disciplinary proceedings, and the disciplinary
authority has powers to impose the penalty of dismissal/major penalty
upon the employee even after his attaining the age of
superannuation, as the disciplinary proceedings were initiated while
the employee was in service - The Payment of Gratuity Act, 1972
govern the conditions concerning payment of gratuity - It cannot
control and provide with respect to an employer's right to hold a
departmental inquiry after retirement, and there is no provision
prescribing what kind of punishment can be imposed in the
departmental inquiry if it is continued after attaining the age of
superannuation - The relevant rules would govern such matters -
Since no statutory provisions of the Payment of Gratuity Act, 1972
come in the way of the CDA Rules to continue the inquiry after
superannuation of the employee in case it was instituted while he
was in service and his deemed continuance in service; thus, no
fetter is caused upon operation of Rule 34.2 providing for a
continuation of the inquiry and deemed continuation of the employee
in service after the age of superannuation - At the conclusion of
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such disciplinary proceedings any of the penalty provided under
Rule 27 of the CDA Rules can be imposed by the authority including
the order of dismissal and apart from that in case pecuniary loss
had been caused that can be recovered -Per Ajay Rastogi, J. (Partly
dissenting): After conclusion of the disciplinary inquiry, if an
employee/delinquent is held guilty, indeed a penalty can be inflicted
upon him who stood retired from service and what should be the
nature of penalty would always depend on the relevant scheme of
Rules and on the facts and circumstances of each case, but either
of the substantive penalties specified under Rule 27 of the Rules,
1978 including dismissal from service are not open to be inflicted
on conclusion of the disciplinary proceedings and the punishment
of forfeiture of gratuity commensurate with the nature of guilt may
be inflicted upon a delinquent employee provided under Rule 34.3
of Rules, 1978 read with sub-section (6) of s.4 of the Act, 1972 -
Payment of Gratuity Act, 1972.
Disposing of the appeal, the Court
HELD:
PER M. R. SHAH, J. (FOR HIMSELF AND ARUN
MISHRA, J.)
1.1 Indisputably, the respondent was governed by the CDA
Rules. Therefore, Rules 34.2 and 34.3 of the CDA Rules shall be
applicable and the respondent-employee shall be governed by
the said provisions. Rule 34 permits the management to withhold
the gratuity during the pendency of the disciplinary proceedings.
Rule 34.2 permits the disciplinary proceedings to be continued
and concluded even after the employee has attained the age of
superannuation, provided the disciplinary proceedings are
instituted while the employee was in service. It also further
provides that such disciplinary proceedings shall be deemed to
be the proceedings and shall be continued and concluded by the
authority by which it was commenced in the same manner as if
the employee had continued in service. Therefore, as such, on a
fair reading of Rule 34.2 of the CDA Rules, an employee shall be
deemed to be continued in service, after he attains the age of
superannuation/retired, for the limited purpose of continuing and
concluding the disciplinary proceedings which were instituted
while the employee was in service. Therefore, at the conclusion
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of such disciplinary proceedings any of the penalty provided under
Rule 27 of the CDA Rules can be imposed by the authority
including the order of dismissal. If the submission on behalf of
the employee that after the employee has attained the age of
superannuation and/or he has retired from service, despite Rule
34.2, no order of penalty of dismissal can be passed is accepted,
in that case, it will be frustrating permitting the authority to
continue and conclude the disciplinary proceedings after
retirement. [Para 7][25-E-H; 26-A-C]
State Bank of India v. Ram Lal Bhaskar (2011) 10 SCC
249 : [2011] 12 SCR 1036 - referred to.
1.2 Once it is held that a major penalty which includes the
dismissal from service can be imposed, even after the employee
has attained the age of superannuation and/or was permitted to
retire on attaining the age of superannuation, provided the
disciplinary proceedings were initiated while the employee was
in service, sub-section 6 of Section 4 of the Payment of Gratuity
Act shall be attracted and the amount of gratuity can be withheld
till the disciplinary proceedings are concluded. Even otherwise,
Rule 34.3 of the CDA Rules permits withholding of the gratuity
amount during the pendency of the disciplinary proceedings, for
ordering recovering from gratuity of the whole or part of any
pecuniary loss caused to the company if have been guilty of
offences/misconduct as mentioned in sub-section 6 of Section 4
of the Payment of Gratuity Act, 1972 or to have caused pecuniary
loss to the company by misconduct or negligence, during his
service. It further makes clear that Rule 34.3 for withholding of
such a gratuity would be subject to the provisions of Section 7(3)
and 7(3A) of the Payment of Gratuity Act, 1972 in the event of
delayed payment in the case of an employee who is fully
exonerated. Rule 34.3 of the CDA Rules is in consonance with
sub-section 6 of Section 4 of the Payment of Gratuity Act and
there is no inconsistency between sub-section 6 of Section 4 of
the 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. Ram
Niwas Bansal (Dead) Thr. LRs. (2014) 12 SCC 106 :
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS
LTD. v. SRI RABINDRANATH CHOUBEY
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[2014] 3 SCR 984; R. Jeevaratnam v. The State of
Madras AIR 1966 SC 951 : [1966] 2 SCR 204; Ramesh
Chandra Sharma v. Punjab National Bank & Anr.
(2007) 9 SCC 15 : [2007] 7 SCR 585; Union of India
v. Ajoy Kumar Patnaik (1995) 6 SCC 442 : [1995] 3
Suppl. SCR 449; UCO Bank v. Rajinder Lal Capoor
(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 of
Maharashtra v. M.H. Mazumdar (1988) 2 SCC 52 :
[1988] 3 SCR 31; State of West Bengal & Ors. v. Pronab
Chakraborty (2015) 2 SCC 496 : [2014] 11 SCR 76;
State Bank of India v. A.N. Gupta & Ors. (1997) 8 SCC
60 : [1997] 4 Suppl. SCR 383; Takhatray Shivadattray
Mankad 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 :
[2009] 9 SCR 695; State Bank of India v. Ram Lal
Bhaskar (2011) 10 SCC 249 : [2011] 12 SCR 1036referred to.
2.1 Section 4(1) provides that gratuity shall be payable to
an employee on termination of his employment after he has
rendered continuous service for not less than five years, on his
superannuation, or retirement or resignation, or his death or
disablement due to accident or disease. Section 4(6) contains a
non-obstante clause to sub-section 1. In case service of the
employee have been terminated for wilful omission or negligence
causing any damage or loss to, or destruction of property
belonging to the employer, gratuity shall be forfeited to the extent
of 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 or
partially forfeited under the provisions of section 4(6)(b), in case
termination of services was based upon disorderly conduct or
act of violence on his part or offence involving moral turpitude
committed during the course of employment. Thus, it is apparent
that not only damage or loss can be recovered, but gratuity can
be wholly or partially withheld in case services are terminated
for the reasons specified in section 4(6)(b). The Payment of
Gratuity Act, 1972, makes no provision with respect to
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departmental inquiries. Since no statutory provisions of the
Payment of Gratuity Act, 1972 come in the way of the CDA Rules
to continue the inquiry after superannuation of the employee in
case it was instituted while he was in service and his deemed
continuance in service; thus, no fetter is caused upon operation
of Rule 34.2 providing for a continuation of the inquiry and
deemed continuation of the employee in service after the age of
superannuation.[Paras 10.16-10.18][53-G-H; 54-A-F]
2.2 The provisions of Section 4(6) of the Act of 1972 prevail
over Section 4(1) as provisions of Section 4(6) contain nonobstante clause as to Section 4(1). It would prevail over the
provisions made in Section 4(1) and gratuity would not become
payable mandatorily as provided in Section 4(1). Section 4(6)(a)
and (b) both provide for recovery of loss caused or forfeiture
wholly or partially in the case of termination of services. In case
after superannuation of employee there cannot be any dismissal
i.e., termination of services as contemplated in Section 4(6), then
there can be no recovery of pecuniary loss caused by employee
or forfeiture of gratuity wholly or partially as that can only be
done in the event of termination of services on charges found
established. Such an interpretation would render continuance of
inquiry otiose and would defeat the public policy and the
provisions of Act of 1972. The recovery of loss or forfeiture is
one of the punishments which depends on exigency of termination
by way of dismissal as mandated 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 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 of
employment after five years by way of superannuation, retirement
or resignation or on his death or disablement due to accident or
disease' that is in a normal course. It does not deal with a situation
where departmental inquiry is instituted and continued and
completed after the age of superannuation and termination of
employment had not taken place on completion of the age of
superannuation as there is a deemed continuation of the
employment for the purpose of holding an inquiry and passing
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS
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the appropriate punishment order after the conclusion of the
departmental inquiry on the basis of misconduct if any found
established. Provisions of section 4(1) do not impinge upon the
continuation of inquiry. Section 4(6) prevails on it. The Payment
of Gratuity Act, 1972 govern the conditions concerning payment
of gratuity. It cannot control and provide with respect to an
employer's right to hold a departmental inquiry after retirement,
and there is no provision prescribing what kind of punishment
can be imposed in the departmental inquiry if it is continued after
attaining the age of superannuation. The relevant rules would
govern such matters. In case the Payment of Gratuity Act, 1972,
is interpreted to interdict the departmental inquiry after the age
of superannuation and to deal with the nature of punishment to
be imposed, it would be taken as a case of over-inclusion in the
Act which deals exclusively with the payment of gratuity.
[Para 10.20][55-C-G]
2.4 The punishment which is prescribed under Rule 27 of
the CDA Rules, minor as well as major, both can be imposed.
Apart from that, recovery can also be made of the pecuniary loss
caused as provided in Rule 34.3 of the CDA Rules, which takes
care of the provision under sub-section (6) of Section 4 of the
Payment of Gratuity Act, 1972. The recovery is in addition to a
punishment that can be imposed after attaining the age of
superannuation. The legal fiction provided in Rules 34.2 of the
CDA Rules of deemed continuation in service has to be given
full effect. [Para 10.21][55-G-H; 56-A]
M. Ramanatha Pillai v. The State of Kerala & Ors.
(1973) 2 SCC 650; Jagdish Mitter v. Union of India
AIR 1964 SC 449; P. Balakotaiah v. Union of India
AIR 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 Handloom
Corpn. Ltd. & Anr. (1987) Suppl. SCC 739 : [1988] 1
SCR 501; Registrar General, High Court of Gujarat &
Anr. v. Jayshree Chamanlal Buddhbhatti (2013) 16 SCC
59 : [2013] 11 SCR 395; Dinesh Chandra Sangma v.
State of Assam and Ors. (1977) 4 SCC 441 : [1978] 1
SCR 607; Workers Employed in Hirakud Dam v. State
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of Orissa & Ors. (1971) 1 SCC 583 : [1971] 3 SCR
646; Satish Chandra Anand v. Union of India AIR 1953
SC 250 : [1953] SCR 655; State Bank of India v. The
Workmen of State Bank of India & Ors. (1991) 1 SCC
13 : [1990] 1 Suppl. SCR 11 - referred to.
3.1 It is a settled proposition of law that in case of termination
of service there is a distinction as to whether it is a simpliciter
termination or a punitive dismissal and this court can lift the veil
to find out the real nature of termination. Section 4(1) deals with
normal superannuation and does not cover the cases where the
departmental inquiry is pending, or dismissal had been ordered.
It did not interdict the departmental inquiry if it was initiated
while the employee was in service and continued after
superannuation as if the employee continued in service. Section
4 of the Payment of Gratuity Act, 1972 contains no bar, and
purposive construction has to be made of the provisions
contained in section 4(1). Section 4(6) provides where particular
misconduct is found established, how gratuity to be dealt with,
but provisions cause no fetter on the power of an employer to
impose a punishment of dismissal. It makes no provision in
particular with respect to the departmental inquiry but rather
buttresses the power of an employer to forfeit gratuity wholly or
partially or to recover loss provided in Section 4(6). Neither the
provisions in section 4(1) nor section 4(6) of the Payment of
Gratuity Act create embargo on the departmental inquiry and its
continuance 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. Padma
Ram Borah AIR 1965 SC 473; State of Punjab v. Khemi
Ram (1969) 3 SCC 28 : [1970] 2 SCR 657 - held
inapplicable.
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.
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS
LTD. v. SRI RABINDRANATH CHOUBEY
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Anant R. Kulkarni v. Y.P. Education Society & Ors.
(2013) 6 SCC 515 : [2013] 6 SCR 1124; Noida
Entrepreneurs Association v. Noida & Ors. (2011) 6
SCC 508 : [2011] 8 SCR 25; B.T. Krishnamurthy v. Sri
Basaveswara Education Society (2013) 4 SCC 490 :
[1982] 1 SCR 759; Paramjit Singh v. Director of
Schools (Public Instructions), (2010) 14 SCC 416; State
of U.P. v. Ram Vinai Sinha (2010) 15 SCC 305;
Jaswantsingh Pratapsingh Jadeja v. Rajkot Municipal
Corpn. (2007) 10 SCC 71 : [2007] 10 SCR 112; State
of Punjab v. Rajesh Kumar (2006) 12 SCC 418 : [2006]
9 Suppl. SCR 208; Jai Singh v. Union of India (2006)
9 SCC 717 : [2006] 4 Suppl. SCR 734; State of Madhya
Pradesh and Anr. v. Kumari Nivedita Jain and Ors,
(1981) 4 SCC 296 : [1982] 1 SCR 759; State of Andhra
Pradesh and Anr. v. Lavu Narendranath and Ors. etc.
AIR 1971 SC 2560 : [1971] 3 SCR 699; Distt. Registrar,
Palghat and Ors. v. M.B. Koyakutty and Ors. (1979) 2
SCC 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) 3
SCC 675 : [1986] 3 SCR 230; U.P. State Sugar
Corporation 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 outcome
of the inquiry, such as concerning the period during which inquiry
remained pending. It would be against the public policy to permit
an employee to go scot-free after collecting various service
benefits to which he would not be entitled, and the event of
superannuation cannot come to his rescue and would amount to
condonation of guilt. Because of the legal fiction provided under
the rules, it can be completed in the same manner as if the
employee had remained in service after superannuation, and
appropriate punishment can be imposed. An inquiry can be
continued as provided under the relevant service rules as it is
not provided in the Payment of Gratuity Act, 1972 that inquiry
shall come to an end as soon as the employee attains the age of
superannuation. The Act does not deal with the matter of
disciplinary inquiry, it contemplates recovery from or forfeiture
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of gratuity wholly or partially as per misconduct committed and
does not deal with punishments to be imposed and does not
supersede the Rules 34.2 and 34.3 of the CDA Rules. The mandate
of 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 any
dismissal after superannuation, intendment of the provisions of
Section 4(6) would be defeated. The provisions of section 4(1)
and 4(6) of Payment of Gratuity Act, 1972 have to be given
purposive interpretation, and no way interdict holding of the
departmental inquiry and punishment to be imposed is not the
subject matter dealt with under the Act. Thus considering the
provisions of Rules 34.2 and 34.3 of the CDA Rules, the inquiry
can be continued given the deeming fiction in the same manner
as if the employee had continued in service and appropriate
punishment, including that of dismissal can be imposed apart from
the forfeiture of the gratuity wholly or partially including the
recovery of the pecuniary loss as the case may be. [Para 10.31
and 10.32][73-G-H; 74-A-F]
PER AJAY RASTOGI, J. (PARTLY DISSENTING):
1. Retiral benefits are earned by an employee for a long
and meritorious service rendered by him/her and it is not paid
gratuitously or merely as a matter of boon, it is paid to him/her
for dedicated and devoted work. The Act, 1972 also acknowledges
under sub-section (6) of Section 4 to forfeit it to the extent
pecuniary loss so caused from the amount of gratuity payable to
the employee. [Para 12][80-D-E]
2. The purpose of holding an inquiry against a delinquent is
not only with a view to establish the charge levelled against him
or to impose a penalty, but is also conducted with the object of
such an inquiry recording the truth of the matter, and in that sense,
the outcome of an inquiry may either not establishing or
vindicating his stand, hence result in his exoneration. Therefore,
there should be a fair action on the part of the authority concerned
in holding disciplinary inquiry for the misconduct, if any, being
committed by an employee in discharge of his duties even if
retired from service during pendency of disciplinary proceedings
after adopting the procedure prescribed under the relevant
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS
LTD. v. SRI RABINDRANATH CHOUBEY
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disciplinary rules alike Rules, 1978 in the instant case and indeed
the scheme of Rules, 1978 is neither in derogation nor in
contravention to the scheme of the Act, 1972. It is also well settled
that the competence of an authority to hold an enquiry or to
continue enquiry against an employee who has retired from
service depends upon the scheme of rules and the terms and
conditions of service of the employee are the determining factors
as to whether and in what manner the disciplinary enquiry can be
held against an employee who stood retired or superannuated
from service. [Paras 14, 15][81-F-H; 82-A-B]
3. Those who were the serving employees, if held guilty on
conclusion of the disciplinary proceedings, minor/major penalties
as referred to under Rule 27 could be inflicted by the disciplinary
authority after recording good and sufficient reason
commensurate with the nature of misconduct and in the case of
an employee who stood retired/superannuated from service
pending disciplinary proceedings, the disciplinary authority has
a right to withhold the payment of gratuity pending disciplinary
inquiry and if found guilty in the inquiry for the offences/
misconduct as indicated in sub-section (6) of Section 4 of Act
1972, can be recovered from his gratuity payable under Section
4 of the Act, 1972. At the same time, if he is exonerated by the
disciplinary authority after retirement/superannuation from
service, he shall be entitled for payment of gratuity along with
interest for the delay in payment in terms of Section 7(3) and
Section 7(3A) of Act, 1972. [Para 16][82-B-D]
4. Where the disciplinary proceedings are instituted while
the employee was in service but retired thereafter during its
pendency, under the special procedure provided under Rule 34.2
of the Rules, 1978, the authority is empowered to continue and
conclude the disciplinary inquiry in the same manner as if the
employee had continued in service by deeming fiction, however,
the relationship of employer and employee shall not be severed
until conclusion of the disciplinary enquiry but may withhold
payment of gratuity in terms of Rule 34.3 pending disciplinary
inquiry and in furtherance thereof if later held guilty, the
competent authority to the extent pecuniary loss has been caused
for the misconduct, negligence in the discharge of duties order
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for recovery from gratuity either be forfeited in the whole or in
part, to the extent pecuniary loss has been caused to the company
for the offences/misconduct as a measure of penalty in terms of
Rule 34.3 of the Rules read with sub-section (6) of Section 4 of
the Act, 1972. [Para 17][82-E-G]
5.1 Gratuity became payable to an employee under Section
4(1) of the Act, 1972 on termination of his employment after he
rendered a minimum qualifying service and termination of his
employment is either can be on his superannuation or retirement
or resignation or death or disablement due to accident or disease
or any other cause may be. The word '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 of relationship of
employer and employee and sub-section (6) of Section 4 being
couched with a non-obstante clause empowered the authority in
case the delinquent employee held guilty of wilful omission or
negligence causing any damage or loss or destruction to the
property of the company during the course of employment as a
measure of penalty gratuity may be forfeited wholly or partially to
the extent misconduct found proved. [Para 19][83-B-D]
5.2 The term 'termination' may not be understood with the
penalty of dismissal or removal from service specified under Rule
27 of Rules, 1978. The expressions in the schedule of substantive
penalties under Rule 27 of the Rules, 1978 refers to various
penalties including reduction in rank, compulsory retirement,
dismissal, removal, etc. and could possibly be inflicted on the
serving employee and indeed cannot be effected with
retrospective effect on the delinquent employee who stood retired
from service. [Para 20][83-E-F]
5.3 Many a times 'termination' and 'dismissal' are held to
be synonymous but the difference between 'termination' and
'dismissal' is that dismissal could be on account of misconduct
with loss of future employment involving dishonesty or criminality
and penal in character but that is not in the case of termination.
The "termination" as per Black's Law Dictionary is the complete
severance of relationship of employer and employee which in the
instant case could be saved during pendency of the disciplinary
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proceedings in view of Rule 34.2 of the Rules, 1978 which clearly
envisaged that disciplinary proceedings, if instituted while the
employee was in service, shall be deemed to be pending and
shall be continued and concluded by the authority by which it was
commenced in the same manner as if the employee had continued
in service and by legal fiction, the relationship of employer and
employee shall be deemed to continue for the limited purposes
of conclusion of the disciplinary proceedings and the delinquent
employee becomes qualified to claim gratuity subject to the
outcome of the disciplinary proceedings in terms of Rule 34.3 of
the Rules, 1978 read with sub-section (6) of Section 4 of the Act,
1972. [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 of
India v. Ram Lal Bhaskar and Another (2011) 10 SCC
249 : [2011] 12 SCR 1036; State of Maharashtra v.
M.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; UCO
Bank and Ors. v. Rajinder Lal Capoor (2007) 6 SCC
694 : [2007] 7 SCR 543 - referred to.
7. The substantive penalties provided under the schedule
of penalties referred to under Rule 27 could be inflicted on a
delinquent employee while he is in service but in case where the
delinquent employee stood retired or superannuated from service
pending disciplinary inquiry, at least either of the substantive
penalties provided under Rule 27 are not available to the
disciplinary authority to be inflicted with retrospective effect but
at the same time punishment of forfeiture of gratuity if held guilty
for misconduct or negligence to the extent damage or pecuniary
loss has been caused to the employer can be inflicted upon the
delinquent in terms of Rule 34.3 of Rules 1978 read with subsection (6) of Section 4 of the Act, 1972 and in case the delinquent
employee stands exonerated he became entitled for gratuity for
the delay in payment in terms of Sections 7(3) and 7(3A) of Act,
1972 and as a matter of caution, it should not be pre-supposed
that where the disciplinary inquiry remain pending and could not
be concluded while the delinquent employee was in service in
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due course of time, he shall be held guilty and punished under
the scheme of Rules, 1978. [Para 27][87-B-E]
Case Law Reference
PER M. R. SHAH, J. (FOR HIMSELF AND ARUN
MISHRA, J.)
[2011] 12 SCR 1036
referred to
Para 8
[1990] 3 SCR 697
referred to
Para 10.3
[2014] 3 SCR 984
referred to
Para 10.4
[1966] 2 SCR 204
referred to
Para 10.4
[2007] 7 SCR 585
referred to
Para 10.6
[1995] 3 Suppl. SCR 449
referred to
Para 10.7
[2008] 5 SCR 775
referred to
Para 10.8
[2009] 11 SCR 455
referred to
Para 10.9
[1988] 3 SCR 31
referred to
Para 10.10
[2014] 11 SCR 76
referred to
Para 10.11
[1997] 4 Suppl. SCR 383
referred to
Para 10.12
[1989] 3 SCR 214
referred to
Para 10.13
[2009] 9 SCR 695
referred to
Para 10.14
[2011] 12 SCR 1036
referred to
Para 10.15
(1973) 2 SCC 650
referred to
Para 10.22
AIR 1964 SC 449
referred to
Para 10.22 (a)
[1958] SCR 1052
referred to
Para 10.22 (b)
[1955] 1 SCR 26
referred to
Para 10.22 (c)
[1988] 1 SCR 501
referred to
Para 10.22 (c)
[2013] 11 SCR 395
referred to
Para 10.22 (d)
[1978] 1 SCR 607
referred to
Para 10.22 (e)
[1971] 3 SCR 646
referred to
Para 10.22 (e)
[1953] SCR 655
referred to
Para (10.22) (f)
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[1990] 1 Suppl. SCR 11
referred to
Para 10.22 (g)
[1982] 1 SCR 759
referred to
Para 10.23
(2010) 14 SCC 416
referred to
Para 10.23
(2010) 15 SCC 305
referred to
Para 10.23
[2007] 10 SCR 112
referred to
Para 10.23
[2006] 9 Suppl. SCR 208
referred to
Para 10.23
[2006] 4 Suppl. SCR 734
referred to
Para 10.23
[1982] 1 SCR 759
referred to
Para 10.25
[1971] 3 SCR 699
referred to
Para 10.25
[1979] 3 SCR 242
referred to
Para 10.25
[1985] 2 Suppl. SCR 131
referred to
Para 10.25
(2018) 14 SCC 98
held inapplicable
Para 10.26
[2006] 8 Suppl. SCR 1064
overruled
Para 10.27
[2013] 6 SCR 1124
referred to
Para 10.28
[2011] 8 SCR 25
referred to
Para 10.28 (a)
AIR 1965 SC 473
held inapplicable
Para 10.28 (a)
[1970] 2 SCR 657
held inapplicable
Para 10.28 (b)
[1986] 3 SCR 230
referred to.
Para 10.28 (c)
[1999] 2 SCR 354
distinguished
Para 10.28 (d)
[2008] 1 SCR 887
referred to
Para 10.28 (e)
PER AJAY RASTOGI, J:
[2006] 8 Suppl. SCR 1064
referred to
Para 5
[2011] 12 SCR 1036
referred to
Para 5
[1988] 3 SCR 31
referred to
Para 22
[2018] 2 SCR 636
referred to
Para 23
(2018) 14 SCC 98
referred to
Para 24
[2007] 7 SCR 543
referred to
Para 25
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9693
of 2013.
From the Judgment and Order dated 17.07.2013 of the High Court
of 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. Preeti
Singh, Ajit Pudussery, Ajit Singh Verma, Vijayan K., Saurabh Mishra,
Rahul Baid, Arun Verma, Romy Chacko, Chandan Kumar Mandal, Shakti
Chand 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 for
consideration of this Court are, (i) as to whether is it permissible in law
for the appellant (employer) to withhold the payment of gratuity of the
respondent (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 an
employee while he was in service and continued after he attained the
age of superannuation, whether the punishment of dismissal can be
imposed on being found guilty of misconduct in view of the provisions
made in Rule 34.2 of the CDA Rules of 1978?
2. While considering the issues involved, the facts in nutshell are
required 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 area
under Mahanadi Coalfields Limited, the appellant herein (hereinafter
referred to as the "employer"). That the employer Mahanadi Coalfield
Limited has made the Conduct, Discipline & Appeal Rules, 1978
(hereinafter referred to as the "CDA Rules"). That these Rules are
applicable to all the employees of the appellant company. Rule 27 of the
CDA Rules mentions the authorities who are empowered to impose
various punishments which are specified in column 3 of the schedule
attached to the CDA Rules. Rule 29 of the CDA Rules enlists the
procedure 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
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for special procedure in certain cases and which permits continuance of
disciplinary proceedings even after the final retirement of an employee,
provided the disciplinary proceedings are instituted while the employee
was in service whether before his retirement or during his re-employment.
It further provides that such disciplinary proceedings shall be continued
and concluded by the authority by which it was commenced in the same
manner as if the employee had continued in service. Rule 34.3 provides
for withholding the payment of gratuity during the pendency of the
disciplinary proceedings and it further permits for ordering the recovery
from gratuity of the whole or part of any pecuniary loss caused to the
company, if have been guilty of offences/misconduct as mentioned in
sub-section (6) of Section 4 of the Payment of Gratuity Act, 1972 or to
have caused pecuniary loss to the company by misconduct or negligence,
during his service. The relevant Rules of the CDA Rules shall be discussed
in detail hereinbelow.
2.1 While the respondent-employee was in service and posted as
Chief General Manager, he was served with the chargesheet dated
1.10.2007. There was very serious allegation of misconduct alleging
dishonestly causing coal stock shortages amounting to Rs.31.65 crores
and thereby causing substantial loss to the employer. The employee was
thereafter suspended from service on 09.02.2008 under Rule 24.1 of the
CDA Rules, pending departmental enquiry against him. This suspension
however was revoked from 27.02.2009 without prejudice to the
departmental enquiry. On completion of 60 years of age, the respondentemployee was superannuated with effect from 31.07.2010. However,
at the time of superannuation, the departmental enquiry which was
initiated against the employee remained pending. Therefore, the appellant
- employer withheld the gratuity due and payable to the respondentemployee. The respondent herein submitted an application dated
21.09.2010 to the Director (Personnel) for payment of gratuity. On the
same date, he also submitted an application before the Controlling Authority
under the Payment of Gratuity Act for payment of gratuity. Notice was
issued to the appellant to appear. The appellant appeared and stated that
the payment of gratuity was withheld due to the reason that the disciplinary
proceedings are pending against him. The Controlling Authority held that
in that view of the matter, the claim of the respondent was pre-mature.
The respondent-employee challenged the order by filing the writ
petition. The learned Single Judge dismissed the writ petition holding
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that in view of the existence of an appellate forum against the order
passed by the Controlling Authority, the respondent may file an appeal
before the Appellate Authority. However, instead of filing an appeal before
the Appellate Authority, the respondent-employee then filed Intra Court
Writ Appeal before the Division Bench of the High Court. The Division
Bench 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 of
Jaswant Singh Gill v. Bharat Coking Coal Ltd., reported in (2007)
1 SCC 663, the High Court ruled that the disciplinary proceedings against
the respondent were initiated prior to the age of superannuation. However,
the respondent retired from service on superannuation and hence the
question of imposing a major penalty of removal from service would not
arise. The Division Bench of the High Court has further held that the
power to withhold payment of gratuity as contained in Rule 34(3) of the
CDA Rules shall be subject to the provisions of the Payment of Gratuity
Act, 1972. The Division Bench of the High Court has further held that
the statutory right accrued to the respondent to get gratuity cannot be
impaired by reason of the Rules framed by the Coal India Limited which
do not have the force of a statute. Consequently, direction is given to the
appellant-employer to release the amount of gratuity payable to the
respondent-employee. Hence, the present appeal.
3. Shri Mahabir Singh, learned Senior Advocate appearing on
behalf of the appellant-employer has vehemently submitted that in the
facts and circumstances of the case and in view of the specific provisions
under 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 Senior
Advocate appearing on behalf of the employer that Rule 34.2 of the
CDA Rules authorises and/or permits the authority to continue the
disciplinary proceedings, if instituted while the employee was in service,
even after the final retirement of the employee and such disciplinary
proceedings shall be deemed to be the proceedings and shall be continued
and concluded by the authority by which it was commenced in the same
manner as if the employee had continued in service. It is submitted that
therefore even a major penalty of dismissal can be imposed on conclusion
of departmental proceedings even after the final retirement of the
employee, if the departmental proceedings are instituted while the
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employee was in service. It is submitted that the afore-stated Rule 34.2
of the CDA Rules has not been properly appreciated and/or considered
by this Court in the case of Jaswant Singh Gill (supra). It is submitted
that in the said decision, this Court has proceeded on the footing that
after the final retirement of the employee, a penalty of removal or dismissal
is not permissible. It is submitted that the aforesaid is just contrary to
Rule 34.2 of the CDA Rules.
3.2 It is further submitted by Shri Mahabir Singh, learned Senior
Advocate appearing on behalf of the employer that even otherwise Rule
34.3 authorises and/or permits the disciplinary authority to withhold the
payment of gratuity, or order the recovery from gratuity of the whole or
part of any pecuniary loss caused to the company if such an employee
has been guilty of offences/misconduct as mentioned in sub-section (6)
of Section 4 of the Payment of Gratuity Act, 1972 or to have caused
pecuniary loss to the company by misconduct or negligence, during his
service. It is submitted that Rule 34.3 of the CDA Rules is in conformity
and/or in consonance with sub-section (6) of Section 4 of the Payment
of Gratuity Act, 1972 and there is no conflict between the two.
3.3 Learned Senior Advocate appearing on behalf of the appellant
has heavily relied upon the decision of this Court in the case of State
Bank of India v. Ram Lal Bhaskar, reported in (2011) 10 SCC 249.
It is submitted that while considering the parimateriaprovisions under
the State Bank of India Officers' Service Rules, 1992, namely, Rule
19(3), this Court has confirmed the order of dismissal of an employee
which was passed after his retirement. It is submitted that in the said
decision, this Court distinguished another judgment of this Court in the
case of UCO Bank v. Rajinder Lal Capoor, reported in (2007) 6
SCC 694 on the ground that in the said case the delinquent officer had
already been superannuated and the chargesheet was served upon him
after his retirement.