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PETITIONER:

THE STATE BANK OF INDIA

Vs.

RESPONDENT:

SHRI A.N. GUPTA ETC.

DATE OF JUDGMENT: 30/09/1997

BENCH:

SUJATA V. MANOHAR, D.P. WADHWA

ACT:

HEADNOTE:

JUDGMENT:

WITH

CIVIL APPEAL No. 9943 OF 1983

J U D G M E N T

D. P. WADHWA

These are two appeals and are directed against the

common judgment dated February 25, 1980 of the Delhi High

Court by which the High Court not only directed that pension

and provident fund be paid to the respondents, who were

working as Assistants, but also awarded damages to them and

against the appellant-Bank for wrongfully withholding these

payments. The operative part of the impugned judgment reads

thus:

"In the result, we direct that the

Bank shall pay within four weeks to

Sarvshri Gupta (respondent in CA

No. 2141/80) and Gulati (respondent

in CA No. 9943/83):

1. the entire pension fund due as

calculated under the Pension and

Guarantee Fund Rules;

2. a sum equivalent to 9% pre annum

by way of damages for wrongfully

withholding the aforesaid amount

from the date of retirement to the

date of actual payment; and

3. the provident fund due along

with interest plus an amount

equivalent 9% per annum by way of

damages from the date of retirement

to the date of payment.

Amounts already paid under our

order of 19th December, 1979, shall

be deducted from the above

payments."

Both Gupta and Gulati had retired from the service of

the Bank after putting varying years of service and claimed

pension and provident fund. These were denied to them by the

Bank on the ground that there were certain lapses on their

part while in service and that under the provisions of the

relevant rules, as applicable, these amounts could be with-

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held. There claims were resisted by the Bank relying on Rule

11 of Rules and Regulations of the Imperial Bank of India

Pension and Guarantee Fund (for short `Pension Rules') and

Rule 20 of the Imperial Bank of India Employee's Provident

Fund Rules. These Rules read as under:

"Rule 11. The retirement of all

officers of the Bank shall be

subject to the sanction of the

Executive Committee of the Central

board. The retirement of all other

employees of the Bank shall be

subject to the sanction of the

Executive Committee or the Local

Board concerned with their

employment. Any Officer or other

employee who shall leave the

service without sanction as

required by this rule shall forfeit

all claim upon the fund for

pension.

Rule 20. When a member resigns or

retires from the service of the

bank he shall, if he has served the

Bank for a period of five years or

more (including service in the

Presidency Banks), be entitled to

receive the balance at his credit

in the fund. Provided that when any

member resigning or retiring from

the service of the Bank is under a

liability incurred by him to the

Bank, the trustees shall,

irrespective of the duration of his

service, pay to the Bank out of the

balance at his credit in the fund

any amount due by him to the Bank

(not exceeding in any case the sums

contributed by the Bank to his

account in the fund and any

interest credited to his account on

the sums so contributed)."

There are separate rules governing the service of

Assistants in the Imperial Bank of India (Service Rules, for

short). Of these Rules, 25 and 26 would be relevant and are

set down as under:

"25. An Assistant may at the

discretion of the Executive

Committee be called upon to retire

from the Bank's service upon

completion of twenty-five years'

service.

26. All Assistants shall retire at

fifty-five years of age or upon the

completion of thirty years' service

whichever occurs first:

Provided that the Executive

Committee may extent the period of

service of an Assistant who has

attained the age of fifty-five

years (fifty-eight years w.e.f.

1.4.1967) or has completed thirty

years' service should such

extension be deemed desirable in

the interests of the Bank.

Note - For the purposes of rules 25

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and 26 service shall count:-

(i) in the case of an Assistant

first engaged by the Bank as a

Probationary Assistant, from the

commencement of his Probationary

service or from the date he

attained the age of twenty-one

years if his probationary service

commenced before such date; and

(ii) in the case of any such

Assistant, from the date of his

confirmation in his first post in

the Bank in whatever capacity it

may have been or from the date he

attained the age of twenty-one

years if he was confirmed in the

Bank's service before attaining

that age."

When special leave was granted by this Court, it was

directed that cost in any event shall be paid by the Bank to

the respondents. There was also ex-parte stay relating to

damages awarded under paras (2) and (3) of the operative

part of the impugned judgment quoted above. It was stated

before us that all the amounts due to respondents towards

their pension and provident fund have since been paid except

the damages as awarded by the impugned judgment which had

been stayed by this Court.

Imperial Bank or India was constituted under the

Imperial Bank of India Act, 1920. Both Gupta and Gulati were

working as Assistants in the Imperial Bank when the

undertaking of the Imperial Bank was transferred to the

State Bank of India, the appellant herein, under the State

of India Act, 1955. All the service regulations which were

applicable to the employees of the Imperial Bank remained

operative when these employees became the employees of the

State Bank of India. Central Board of Directors of the State

Bank were empowered to make regulations after consulting

with the Reserve Bank of India with the previous sanction of

the Central Government. As far as the present two appeals

are concerned, there has not been any change in the Rules

and Regulations relating to the Pension and Guarantee Fund

and the Employees Provident Fund Rules.

To understand the rival contentions, we may note some

of the relevant facts in each of the two appeals.

Respondent Gupta (in CA No. 2141/80) attained the age

of 58 years on August 14, 1972 and retired from the service

of the Bank under Rule 26 of the Service Rules. The Bank

issued him a memorandum to the effect that as he had

attained the age of 58 years, "it was no longer necessary

for him to attend the office from August 14, 1972". There

were certain allegations against Gupta in respect of his

work between February 1968 to July 1970 while he was posted

as Superintendent in the Stationery Department of the Bank.

He was placed under suspension on July 19, 1972. Since there

was no rule to continue with an enquiry after the employee

reached the age of superannuation, Gupta was directed not to

attend the office and, as noted above, he had retired within

a period of less than one month from the date of his

suspension.

The appellant Gulati (in CA 9943/83) attained the age

of 58 years on April 3, 1970. However, the Bank had extended

his service by letter dated September 15, 1969 for two

years, i.e., upto April 3, 1972. This the Bank did relying

on its power under proviso to Rule 26 of the Rules governing

the service of Assistants. Gulati was, however, suspended

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w.e.f. July 27, 1971 and on October 26, 1971 he was served

with a charge-sheet. Though there were no further

proceedings in the matter, Gulati was asked by letter dated

March 22, 1972 that it had been decided by the Bank to

require him to resign and that if he failed to do so, he

would be dismissed from service. Gulati did not resign. He

reiterated the denial of the charges levelled against him

and sought an enquiry. The Bank did not pass any order of

dismissal and rather by letter dated March 13, 1972 gave

opportunity to Gulati to ask for documents, if any, that may

be required by him by April 6, 1972. By April 3, 1972,

Gulati retired from the service of the Bank on completing

the period of two years after the age of 58 years by which

the Bank had chosen to extend his services.

Now, the appellant Gupta after August 14, 1972 and

appellant Gulati after April 3, 1972 requested the Bank to

pay them their pension and provident fund as may be due to

them under the relevant service regulations. Gupta was told

that he had retired from the service of the Bank and the

matter of payment of his retirement benefits was engaging

the attention of the Bank. Though the Bank never turned down

the demand of Gupta to get the benefits as due to him after

his retirement, yet these were not paid to him. He,

therefore, filed a writ petition in the High court which was

allowed by a learned single Judge an the Bank went in

Letters Patent Appeal to the Division Bench of the High

Court. Similarly, in the case of Gulati, various reminders

were sent by him demanding payment of his pensionary

benefits and since there was no response from the Bank,

Gulati also filed a writ petition for a direction to the

Bank to pay him his retirement benefits.

Both the LPA filed by the Bank against the judgment of

the learned single Judge in the case of Gupta and the writ

petition filed by Gulati were heard together by a Division

Bench of the High Court. By the impugned judgment while the

appeal filed by the Bank was dismissed, the writ petition

filed by Gulati was allowed. The Division Bench issued

directions both in the case of Gupta and Gulati which have

been set out above.

It was contended before us by Mr. Sunil Dogra, learned

counsel for the Bank, that the respondents did not have an

automatic right to get full pension on retirement from the

Bank service and as per Rule 11, unless and until the Bank

sanctioned the same, the respondents would not be entitled

to the benefit of pension as a matter of right. It was also

submitted that "sanction to retirement" must be read and

understood as sanction to the service preceding retirement

and under Rule 11, pension could be held to be payable only

when the entire service of the retiring employee was

certified by the sanction of the Executive Committee of the

Central Board of the Bank. The argument was that sanction of

service must be understood in the context of approval of

service and unless, therefore, the employee had conducted

himself properly in the course of his employment in the Bank

and if so held by the Bank, the employee would only then be

entitled to the pension. Similar was the argument by the

Bank regarding payment of provident fund to the retiring

employee. We may note that though the trustees who manage

pension and guarantee fund are common, the pension fund and

guarantee fund are administered separately in two sections.

Under Rule 5-A of the Pension Rules, every employee has to

contribute monthly to the pension section of the fund

certain amount of percentage of his salary. The contribution

so made carry interest at the prescribed rate. Under Rule 6,

the Bank is also to subscribe monthly to the pension section

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of the fund an amount equal to that contributed by the

employee. Under Rule 7, no employee shall have any right of

property in the fund beyond the amount of his contributions

to the pension section of the fund with the interest accrued

thereon. Under Rule 15 of the Employees Provident Fund

Rules, similar contributions are to be made to the fund by

the employee and the Bank which again is to carry interest.

Mr. Chatterjee, learned counsel appearing for the

respondents, submitted that the respondents would be

entitled to full pension as well as provident fund standing

to their credit on their superannuation from the Bank. He

submitted, with reference to various Rules, that it could

not be said that when an employee superannuated, his

retirement benefits could be paid only to him when these

were sanctioned by the Bank after looking into his past

record of service. Reference was made particularly to Rules

10, 14, and 19 of the Pension Rules. Stress was more laid on

Rule 19. We may set out these Rules as under:

"10. An employee dismissed from the

Bank's service for wilful neglect

or fraud shall forfeit all claims

upon the fund for pension.

11. The retirement of all officers

of the Bank shall be subject to the

sanction of the Executive Committee

of the Central board. The

retirement of all other employees

of the Bank shall be subject to the

sanction of the Executive Committee

or the Local Board concerned with

their employment. Any Officer or

other employee who shall leave the

service without sanction as

required by this rule shall forfeit

all claim upon the fund for

pension.

14. If an officer or assistant of

the Bank who is entitled to pension

under these rules wishes to accept

employment in any other bank at any

time or any other commercial

employment within two years from

the date of retirement, he should

obtain the previous sanction of the

Executive Committee of the Central

Board. Should he undertake such

employment without the sanction

required under this rule it shall

be competent for the trustees to

withdraw the pension payable to him

either in whole or in part at their

discretion.

19. (i) An employee retiring from

the Bank's service after having

completed twenty years' service

with the Bank shall be entitled to

pension provided the employee has

attained the age of fifty years if

employed on the staff in India or

the female staff in London or sixty

years if employed on the male staff

in London.

(ii) An employee retiring from the

Bank's service after having

completed twenty years' service on

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the staff in India and/or on the

staff in London shall be entitled

to pension irrespective of the age

he shall have attained if he shall

satisfy the authority competent to

sanction his retirement by approved

medial certificate or otherwise

that he is incapacitated for

further active service.

(Notwithstanding anything to the

contrary in these rules and

regulations the total of such

employee's service whether in India

or London shall count for pension

under this rule.)

(iii) An employee who has attained

the age of fifty-five or who shall

be proved to the satisfaction of

the authority competent to sanction

his retirement to be permanently

incapacitated by bodily or mental

infirmity from further active

service (such infirmity not being

the result of irregular or

intemperate habits) may, at the

discretion of the trustees, be

granted a proportionate pension.

Mr. Dogra referred to a decision of the Andhra Pradesh

High Court in T. Narsiah vs. State of Bank of India & Ors.

[(1978) II LL) 173] which according to him has taken the

view what was being advanced by the Bank. In this judgment

of the Andhra Pradesh High Court as well as of the impugned

judgment of the Delhi High Court there is also reference to

an unreported decision of the Bombay High Court in M/s. J.K.

Kulkarni vs. State Bank of India (Misc. Petition No. 964 of

1977 decided on November 29, 1977) where the learned single

Judge held that Rule 11 applied to all retirements but the

Bank would be entitled to with-hold sanction only in

circumstances similar to Rule 10 and for this bank would be

required to hold a fair and honest enquiry which could be

held even after the employee had retired. It was stated by

the learned Judge that Rule 11 contemplated two different

types of termination of service. He expressed his opinion

thus: "One would be retirement in terms of any of the Rule

either the Service Rules or Pension Rules and the other

would be leaving the service without bothering to obtain

anybody's permission or sanction. It stands to reason that a

person who leaves service without caring to obtain any

sanction under Rule 11, can safely be denied any claim to

pension in terms of the last clause of Rule 11. However,

that clause also covers all cases of retirement where the

retirement is accompanied by the sanction of the Executive

Committee. Here the Executive committee may have discretion

in issuing certificate by looking to the service career of

an employee". Then after discussing Pension Rules and the

Service Rules, the learned Judge concluded as under:

"From that point of view, I am

satisfied that the Bank's proposal

to hold a formal inquiry even after

retirement of the petitioner is

proper. They would of course give

him all reasonable opportunity that

is required in the inquiry of any

domestic Tribunal and observe the

rules of natural justice. They have

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a right to satisfy themselves

regarding the conduct of the

Petitioner while he was in service.

If they are able to reach a firm

decision within the findings which

might fall under Rule 10, the

Committee does seem, in my view, to

have a right to withhold the

sanction. This is all that the

Committee is seeking to do."

While the Delhi High Court expressed its dissent to the

view expressed by Bombay High Court, it was accepted by the

Andhra Pradesh High Court. Andhra Pradesh High Court

decision was rendered by a learned single Judge and we have

been shown an unreported decision of the appellate Bench

against that order wherein view of the learned single Judge

has been upheld.

In the case before the Andhra Pradesh High Court (1978)

Vol. 2 LLJ 173) the petitioner was an officer in the State

Bank. Disciplinary proceedings were initiated against him

but before these could be completed the officer was informed

by the Bank through its letter dated May 5, 1976 that it was

not possible for the Bank to complete the enquiry well in

time before the officer attaining the age of 60 years which

was the date of his superannuation. He was told he would

therefore cease to be in the Bank's service on the date of

his superannuation and he would not be paid any subsistence

allowance with effect from that date. The officer was

treated as having retired and ceasing to be in employment of

the Bank with effect from May 10, 1976. The officer claimed

his Provident Fund and Pension and on Bank's refusal to pay

the same, a writ petition was filed. During the course of

the hearing of the writ petition it was submitted by the

Bank that it had since decided to pay the Provident Fund in

full to the officer and Bank had also no objection to pay

his contribution to the pension and that as far as the

payment of Bank's share in the Pension Fund was concerned,

the officer was not entitled thereto unless and until the

Bank granted the same in accordance with Rule 11 of the

Pension Rules. It was contended before the Andhra Pradesh

High Court by the officer that Rules 11 had no application

in his case and on attaining the age of superannuation he

automatically went out of the service of the Bank. The Bank,

however, relied on Rule 11 to withhold Bank's contribution

to the Pension Fund. The court was of the view that Rule 11

had to be read in its context and consistent with the object

behind the said Rule. It held that Rule applied not only in

the case of the retirement contemplated by Rule 19 but also

to cases of retirement of employees on attaining the age of

superannuation. The court observed that it might happen that

the irregularities of misfeasance of an employee could not

be detected well before his retirement so as to initiate and

complete disciplinary enquiry in the matter and again there

might be a case where disciplinary enquiry was initiated but

could not be completed before the delinquent employee

attained the age of superannuation. The court noted that

there was no provision in the Service Rules of the Bank

providing for extension of service of an employee to enable

the authorities to complete the disciplinary enquiry against

him which power was available under the Government Service

Rules. The court said even if an enquiry was pending against

an employee there was nothing to stop him from retiring on

his attaining the age of superannuation. The enquiry could

not continue after his retirement. The court was, therefore,

of the opinion that it was for that reason that the Bank had

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reserved to itself the power to sanction the pensionary

benefits under Rule 11 and if there was nothing wrong with

the service of an employee throughout, the Bank would

naturally sanction the pension, but if there was sufficient

material disclosing grave irregularities on the part of the

employee, the Bank might be well within its power in

refusing to sanction the pensionary benefits, or in

sanctioning them only partly. The learned single Judge of

the Andhra Pradesh High Court then went on to hold as under:

"Of course, such a decision has to

be arrived at fairly, which

necessarily means after holding an

enquiry, giving a fair opportunity

to the concerned officer to defend

himself against the accusation.

Such an enquiry would not be a

`disciplinary enquiry' within the

ordinary meaning of the term, but

an enquiry confined to the purposes

of the rules, viz., whether the

employee should be granted any

pensionary benefits; and if so, to

what extent? Such an enquiry can

also be made after the retirement

(of an employee; and particularly

in cases of retirement) on

attaining the age of

superannuation, probably such

enquiries will have to be conducted

only after retirement."

The court, therefore, gave direction as to how the

enquiry was to be conducted the officer so as to entitle him

the pensionary benefits if he was exonerated. We are afraid

that this view of the Andhra High Court does not commend to

us. By giving such an interpretation to Rule 11 the Andhra

Pradesh High Court has, in effect, lent validity to

disciplinary proceeding against an employee even after his

superannuation for which no provision existed either in

Pension Rules or in the Service Rules and when the High

Court had itself observed that an enquiry even if initiated

during the service period of the employee could not be

continued after his retirement on superannuation.

Rule 10 of the Pension Rules provides for forfeiture of

all claims for pension if an employee is dismissed from

service of the Bank for wilful neglect or fraud. This rule

specifically provides for forfeiture of the pension. It

could not therefore be said that under Rule 11 again the

pension of an employee could be withheld on these or similar

grounds. In our view last sentence of Rule 11 which says

that an employee who shall leave the service without

sanction of the Executive Committee of the Central Board of

the Bank shall forfeit all claims for pension would not

include the holding of the employee guilty of wilful neglect

or fraud which is envisaged in Rule 10. Rule 11 particularly

the latter portion of this Rule would be applicable where an

employee leaves the service of the Bank before reaching the

age of superannuation or the Bank requires him to retire

before that date on his becoming incapacitated or otherwise.

It cannot be said that an employee retires only on

superannuation and there is no other circumstance under

which an employee can retire. Retirement on superannuation

is not the only mode of retirement known to service

jurisprudence. There can be other types of retirements like

premature retirement, either compulsory or voluntary. It

would be in the case of a premature retirement or any other

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contingency when an employee leaves the service of the Bank

before he superannuates that Rule 11 would become

applicable. Retirement on superannuation is automatic as per

Rule 26 of the Service Rules. No further action on the part

of the Executive Committee of the Central Board of the Bank

would be required in such a case and Rule 11 will not be

applicable.

Right to receive pension is a right to property under

Rule 7 of the Pension Rules when it says that no employee

shall have any right of property in the pension fund beyond

the amount of his contribution to the pension section of the

fund with interest accrued thereon. That being so Rule 11

cannot be interpreted to mean that claim to pension of an

employee on superannuation can be defeated by the Bank by

merely withholding sanction of retirement. For about 8 years

when these two matters were pending in the Delhi High Court

the Bank did not take any decision in terms of Rule 11 to

sanction retirement of the respondents. The Bank never

communicated to the respondents that it had withheld

sanction to their retirement or did not approve their

service. It is only during the course of proceedings in the

High Court that the Bank came up with the plea that it

wanted to have the allegations against the respondents

enquired into. To us the language of the Rule 11 appears

quite explicit. No sanction is required from the Bank to

leave the service on reaching the age of superannuation as

provided in Rule 26 of the Service Rules applicable to

Assistants. Rule 26 of the Service Rules clearly mandates

the retirement of an employee on his attaining the age of

superannuation and there cannot be two opinions on that. We,

therefore, hold that Rule 11 has no application in the case

of the respondents who retired on attaining the age of

superannuation. We cannot agree with the plea of the Bank

that sanctioning of retirement must be understood as

sanctioning of service which in term must be understood as

approval of service. Proceeding in the garb of disciplinary

proceedings cannot be permitted after an employee has ceased

to be in the service of the Bank as Service Rules do not

provide for continuation of disciplinary proceedings after

the date of superannuation. Sanction of the Bank is required

only if the retirement of an employee is by any other method

except superannuation. We do not think that the decision of

the Andhra Pradesh High Court in T. Narsiah vs. State Bank

of India & Ors. and that of the Bombay High Court in M/s.

J.K. Kulkarni vs. State Bank of India have laid down good

law.

Coming to Rule 20 of the Employees' Provident Fund Rule

which we have quoted above, this Rule will become applicable

only if an employee retiring from the service of the Bank is

under a liability incurred by him to the Bank. In that case

trustees administering the Provident Fund can pay to the

Bank out of the balance to the credit of the employee in the

Fund any amount due by him to the Bank. We have not been

told if any liability was incurred by any of the two

respondents and if so what were the amounts. In this view of

the matter we do not think it is necessary for us to go into

the question as to whether the term "liability incurred"

means only such liability as is either not disputed or

established by due process, Can it be said that this term

would also include any liability that may be alleged by the

Bank? In any case the Bank should at least prima facie

established that any liability has been incurred by the

employee for which it can lay claim to the Provident Fund of

the employee. We cannot accept the proposition on behalf of

the Bank that the trustees should be allowed to withhold the

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Provident Fund due till they have had an opportunity to have

established and determined the amount, if any, due from the

respondents to the Bank. We are of the view that the

respondents are entitled to the Provident Fund due to them

in accordance with the Provident Fund Rules as it cannot be

said that they incurred any liability.

By way of interim orders passed by the High Court as

well as by this Court the amounts due towards pension and

provident fund have since been paid to the respondents.

There is no dispute on that. It has, however, urged by Mr.

Dogra, learned counsel for the Bank that the High Court went

wrong in directing payment of a sum equivalent to 9% per

annum by way of damages for wrongly withholding the pension

amount and also the Provident Fund amount. We think it was

not a case where it could be said that the amounts were

wrongly withheld by the Bank and rather decisions of the

Andhra Pradesh High Court and Bombay High Court supported

the view which was advanced by the Bank. Moreover the

Pension Fund and the Provident Fund carry interest and these

amounts with interest have been paid to the respondents. We

would, therefore, delete the award of damages to the

respondents as mentioned in paras 2 and 3 of the operative

portion of the impugned judgment which we have reproduced in

the beginning of this judgment.

To this extend only the appeals are partly allowed

which are otherwise dismissed. As pointed out earlier costs

are nevertheless payable by the Bank to the respondents.