Page 1 “ REPORTABLE”

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.9087 OF 2012

(Arising out of SLP (Civil) No.14570 of 2012)

Y.K. Singla …. Appellant

Versus

Punjab National Bank & Ors. …. Respondents

O R D E R

JAGDISH SINGH KHEHAR, J.

1.Leave granted.

2.The appellant was inducted into the service of the Punjab National

Bank (hereinafter referred to as, the PNB) in the clerical cadre on

19.2.1958. He was successively promoted against the posts of Special

Assistant and Accountant with effect from 23.8.1972 and 26.12.1974. He

also gained further promotions to the cadres of Manager-B Grade and

thereafter, Manager-A Grade with effect from 24.11.1977 and 18.12.1982

respectively. He finally came to be promoted to the post of Chief Manager

with effect from 1.10.1986. Whilst holding the post of Chief Manager, the

appellant retired from service, on attaining the age of superannuation on

31.10.1996.

3.During 1981-1982, when the appellant was posted as Manager at the

Sector 19, Chandigarh Branch of the PNB, he was accused of having

entered into a conspiracy with R.L. Vaid, the then Regional Manager of the

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Page 2 PNB, Chandigarh, and Dr. A.K. Sinha, IAS, the then Secretary, Department

of Town and Country Planning, Haryana and thereby, of fraudulently having

sanctioned a loan of Rs.2,70,000/- to Mrs. Rama Sinha (wife of Dr. A.K.

Sinha, aforementioned). The said loan was granted to Mrs.Rama Sinha,

for construction of a building on a plot in Sector 6, Panchkula. The said

building, after its construction, was leased to the PNB, at an allegedly

exorbitant rent of Rs.4,985/- per month. The loan amount, was to be

adjusted out of the rent account. The PNB was allegedly, not in the need of

the said building, because it was already housed in a building in Sector 17,

Chandigarh, at a nominal rent of Rs.1,650/- per month. The building rented

from Mrs. Rama Sinha was said to have remained unoccupied from

1.5.1982 to 21.1.1987. This factual position, it was alleged, was sufficient

to infer, that the PNB was not in need of the building taken on rent from

Mrs.Rama Sinha. Based on the aforesaid factual position, it was felt, that

the action of the conspirators caused a pecuniary loss of Rs.2,70,000/- to

the PNB. It was also sought to be assumed, that the aforesaid loan and

lease were favours extended to Dr. A.K. Sinha, IAS, through his wife Mrs.

Rama Sinha. Based on the aforesaid allegations, the appellant Y.K.

Singla, the aforesaid R.L. Vaid and Dr. A.K. Sinha, IAS, were charged

under Section 120B of the Indian Penal Code and Section 5(2) read with

Section 13(1)(d) of the Prevention of Corruption Act, 1988.

4.The trial in the above matter was conducted by the Special Judge,

CBI Court, Chandigarh. On the conclusion of the trial, the Special Judge,

CBI Court, Chandigarh arrived at the conclusion, that the prosecution had

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Page 3 failed to produce any evidence on the issue of criminal conspiracy. The

trial Court accordingly, acquitted all the three accused of the charges

framed against them on 31.10.2009, by holding, that the prosecution had

failed to establish the charges beyond a shadow of reasonable doubt.

5. During the subsistence of the aforesaid criminal proceedings, the

appellant Y.K. Singla retired from the employment of the PNB, on having

attained the age of superannuation, on 31.10.1996. On his retirement, on

account of the pendency of the criminal proceedings being conducted

against him, gratuity, leave encashment and commutation of permissible

portion of pension, were withheld. While withholding the aforesaid

monetary benefits, the appellant was informed by the PNB through a

communication dated 13.5.2000, that the eventual release of the aforesaid

retiral benefits, would depend on the outcome of the pending criminal

proceedings.

6.As already noticed above, the appellant was acquitted of the charges

framed against him, by the Special Judge, CBI Court, Chandigarh, on

31.10.2009. Based on his aforesaid acquittal, the appellant addressed a

letter dated 26.11.2009 to the Executive Director of the PNB seeking

release of his gratuity, encashment of privileged leave balance and

commutation of permissible portion of pension. Additionally, he claimed

interest, from the date the aforesaid retiral benefits became due to him, till

the actual payment thereof. It will also be relevant to mention, that by this

time, the appellant was over 73 years old. In its reply dated 5.2.2010, the

PNB informed the appellant, that it had released leave encashment of

Rs.1,28,716.24 on that day itself i.e., on 5.2.2010 itself. The appellant was

3

Page 4 also informed through the aforesaid communication, that a duly sanctioned

gratuity proposal had been sent to the Provident Fund and Pension

Department of the PNB, for disbursement of gratuity. Thereupon, the

appellant actually received the gratuity payable to him, on 12.2.2010.

7.Having received encashment of privileged leave balance, as also,

gratuity in February, 2010, the appellant reiterated his claim for interest, on

account of delayed payment of the aforesaid amounts, through another

letter dated 17.2.2010. In the instant letter, the appellant pointed out, that

he had retired on attaining the age of superannuation on 31.10.1996, and

as such, the PNB had withheld the aforesaid monetary benefits due to him

for a period of more than 13 years up to February, 2010. The appellant’s

request for interest on the aforesaid delayed payments, was responded to

by the PNB through a letter dated 12.3.2010. The appellant was informed,

that he was entitled to interest on account of withholding of his retiral

benefits, only with effect from the date of culmination of the proceedings

pending against him. Having found the appellant entitled to interest with

effect from 31.10.2009 i.e., when the Special Judge, CBI Court,

Chandigarh acquitted him, the PNB released a sum of Rs.1,881/- as

interest towards delayed payment of leave encashment, and another sum

of Rs.3,336/- as interest on account of having withheld his gratuity. The

aforesaid interest, the appellant was informed, had been calculated at the

rate of 5.5%.

8.Dissatisfied with the action of the PNB, in not paying interest to him

from the date the aforesaid retiral benefits became due (on his retirement

on 31.10.1996), till their eventual release (in February, 2010), the appellant

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Page 5 filed Civil Writ Petition no. 6469 of 2010 before the High Court of Punjab &

Haryana at Chandigarh (hereinafter referred to as, the High Court). The

aforesaid Writ Petition came to be allowed on 4.5.2011. While allowing the

Writ Petition filed by the appellant, the High Court directed the PNB to pay

the appellant, interest at the rate of 8% from the date retiral benefits had

became due to the appellant, till the actual payment thereof to him.

9.Dissatisfied with the order dated 4.5.2011, passed by the learned

Single Judge of the High Court, the PNB preferred Letters Patent Appeal

no. 1950 of 2011. The Letters Patent Appeal filed by the PNB was partly

allowed by a Division Bench of the High Court, on 29.11.2011. The

Division Bench of the High Court arrived at the conclusion, that the

appellant was not entitled to any interest on delayed payment of Gratuity.

The award of interest to the appellant for withholding the other retiral

benefits was, however, not interfered with. The decision (dated

29.11.2011) rendered by the Division Bench of the High Court, has been

assailed by the appellant, through the instant appeal.

10.The reasons which prompted the Division Bench of the High Court to

deny interest on the withheld amount of gratuity to the appellant, are

ascertainable from the paragraph 7 of the impugned order, which is being

extracted hereunder:-

“7.On having considered the matter, we are in agreement with

the submission made by the learned counsel appearing for the

appellant-Bank insofar as withholding of gratuity is concerned.

The language of the relevant Rule i.e. Rule 46 of the 1995

Rules is clear and unambiguous. The mandate of the Rule is

such that it operates as a bar insofar as the Bank is

concerned, as regards the release of gratuity to an employee

against whom the departmental or judicial proceedings were

pending on the date such employee attains the age of

superannuation. The Rule stipulates that such withheld

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Page 6 amount of gratuity would become payable only upon

conclusion of the proceedings. Admittedly, judicial

proceedings were pending against the respondent on the date

of his superannuation i.e. 31.10.1996 and concluded only upon

his acquittal vide order dated 31.10.2009. The amount viz.

gratuity has since been released on 13.2.2010 and interest

thereupon has also been paid for the period 31.10.2009 till the

date of payment. We, accordingly, hold that respondent no. 1

is not entitled to any interest for the period 31.10.1996 till the

conclusion of the trial and his acquittal i.e. 31.10.2009 on the

withheld amount of gratuity.”

11.It is apparent from a perusal of the reasoning recorded by the High

Court, that the High Court relied upon Regulation 46 of the Punjab National

Bank (Employees) Pension Regulations, 1995 (hereinafter referred to as,

the 1995 Regulations). Regulation 46 is being extracted hereunder:-

“46.Provisional Pension

(1)An employee who has retired on attaining the age of

superannuation or otherwise and against whom any

departmental or judicial proceedings are instituted or

where departmental proceedings are continued, a

provisional pension, equal to the maximum pension

which would have been admissible to him, would be

allowed subject to adjustment against final retirement

benefits sanctioned to him, upon conclusion of the

proceedings but no recovery shall be made where the

pension finally sanctioned is less than the provisional

pension or the pension is reduced or withheld etc. either

permanently or for a specified period.

(2)In such cases the gratuity shall not be paid to such an

employee until the conclusion of the proceedings

against him. The gratuity shall be paid to him on

conclusion of the proceedings subject to the decision of

the proceedings. Any recoveries to be made from an

employee shall be adjusted against the amount of

gratuity payable.”

(emphasis is ours)

Having perused Regulation 46(2), we are of the view, that the High Court

was fully justified in concluding, that it was open to the PNB not to pay to

the appellant gratuity, till the culmination of the proceedings pending

against him. It is, therefore, apparent, that non-release of gratuity to the

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Page 7 appellant after 31.10.1996 (when the appellant retired from his

employment, with the PNB), till his acquittal by the Special Judge, CBI

Court, Chandigarh, on 31.10.2009, cannot be faulted.

12.The right to withhold gratuity, is an issue separate and distinct, from

the claim of interest, which has been raised by the appellant. The question

that arises for consideration is, whether an employee whose gratuity has

been withheld under Regulation 46(2) of the 1995 Regulations, would he

be entitled to interest on the withheld payment of gratuity, if he is found not

to be at fault? According to the simple logic of the appellant, since his

gratuity was withheld from 1996 (when he retired from service) till 2010

(when gratuity was eventually released to him), i.e., for a period of 14

years, for no fault of his, he is most definitely entitled to interest on the

delayed payment. It is, however, not the simple logic of the appellant,

which will determine the controversy in hand. For, logic gave rise to

diametrically opposite views, one of which was expressed by the Writ

Court, and the other by the Letters Patent Bench. We shall therefore

endeavour to search for a legal answer, to the issue in hand.

13.The 1995, Regulations, are silent on the subject of an employee’s

rights whose gratuity has been withheld, even in circumstances where it

has eventually been concluded, that he was not at fault. This is exactly the

situation in the present controversy, inasmuch as, the appellant’s retiral

benefits including gratuity, were withheld on 31.10.1996 when he retired on

attaining the age of superannuation. The aforesaid withholding, was on

account of a pending criminal proceeding. The said withholding has

appropriately been considered as valid, under Regulation 46(2) of the

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Page 8 1995, Regulation. But the appellant was acquitted from the criminal

prosecution initiated against him on 31.10.2009. As such, it is inevitable to

conclude, that his gratuity was withheld without the appellant being at fault.

It is in the aforesaid background, that we shall venture to determine the

claim of the appellant for interest, despite the PNB having validly withheld

his gratuity under Regulation 46(2) of the 1995, Regulations.

14.Insofar as the issue in hand is concerned, reference needs to be

made to certain provisions of the Payment of Gratuity Act, 1972

(hereinafter referred to as, the Gratuity Act). In our considered view,

Sections 4, 7 and 14 of the Gratuity Act are relevant. Section 4 is being

extracted hereunder:-

“4. Payment of gratuity -

(1)Gratuity shall be payable to an employee on the

termination of his employment after he has

rendered continuous service for not less 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 five years shall not be necessary where

the termination of the employment of any

employee is due to death or disablement:

Provided further that in the case of death of the

employee, gratuity payable to him shall be paid to

his nominee or, if no nomination has been made,

to his heirs, and where any such nominees or

heirs is a minor, the share of such minor, shall be

deposited with the controlling authority who shall

invest the same for the benefit of such minor in

such bank or other financial institution, as may be

prescribed, until such minor attains majority.

Explanation - For the purposes of this section,

disablement means such disablement as

incapacitates an employee for the work which he

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Page 9 was capable of performing before the accident or

disease resulting in such disablement.

(2)For every completed year of service or part

thereof in excess of six months, the employer

shall pay gratuity to an employee at the rate of

fifteen days' wages based on the rate of wages

last drawn by the employee concerned:

Provided that in the case of a piece-rated

employee, daily wages shall be computed on the

average of the total wages received by him for a

period of three months immediately preceding the

termination of his employment, and, for this

purpose, the wages paid for any overtime work

shall not be taken into account:

Provided further that in the case of an employee

who is employed in a seasonal establishment and

who is not so employed throughout the year, the

employer shall pay the gratuity at the rate of

seven days' wages for each season.

Explanation.-- In the case of a monthly rated

employee, the fifteen days' wages shall be

calculated by dividing the monthly rate of wages

last drawn by him by twenty-six and multiplying

the quotient by fifteen.

(3) The amount of gratuity payable to an employee

shall not exceed one lakh rupees.

(4) For the purpose of computing the gratuity payable

to an employee who is employed, after his

disablement, on reduced wages, his wages for the

period preceding his disablement shall be taken

to be the wages received by him during that

period, and his wages for the period subsequent

to his disablement shall be taken to be the wages

as so reduced.

(5) Nothing in this section shall affect the right of an

employee receive better terms of gratuity under

any award or agreement or contract with the

employer.

(6) Notwithstanding anything contained in sub-

section (1), -

(a)the gratuity of an employee, whose services

have been terminated for any act, wilful

omission or negligence causing any

damage or loss to, or destruction of,

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Page 10 property belonging to the employer, shall

be forfeited to the extent of the damage or

loss so caused;

(b) the gratuity payable to an employee may be

wholly or partially forfeited -

(i)if the services of such employee have

been terminated for his riotous or

disorderly conduct or any other act

violence on his part, or

(ii) if the services of such employee have

been terminated for any act which

constitutes an offence involving moral

turpitude, provided that such offence

is committed by him in the course of

his employment.”

(emphasis is ours)

It is not a matter of dispute, that the appellant was entitled to gratuity when

he retired on attaining the age of superannuation on 31.10.1996. The

quantification of the appellant’s gratuity by the PNB is not in dispute. As

such, sub-sections (1) to (4) of section 4 of the Gratuity Act are clearly not

relevant to the present controversy. Only sub-section (5) of section 4 is

relevant in so far as the present case is concerned. Likewise, since the

appellant has not been found to be at any fault, sub-section (6) of section 4

is also not attracted in this case.

15.Sub-Section (5) of section 4 of the Gratuity Act permits an employee

to be regulated for purpose of gratuity, under an alternative

provision/arrangement (award or agreement or contract), other than the

Gratuity Act. In such an eventuality, sub-section (5) aforesaid, assures the

concerned employee, “…to receive better terms of gratuity under any

award or agreement or contract with the employer…” Since the appellant’s

claim for gratuity is regulated, under the 1995, Regulations, it is evident,

that his claim for gratuity is liable to be determined by ensuring his right to

better terms than those contemplated under the Gratuity Act. In the instant

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Page 11 process of consideration, the aforesaid conclusion, namely, that an

employee who receives gratuity under a provision, other than the Gratuity

Act, would be entitled to better terms of gratuity, will constitute one of the

foundational basis, of determination. Having examined section 4 of the

Gratuity Act, we may unhesitatingly record, that none of the other sub-

sections of section 4 of the Gratuity Act, as well as, the other provisions of

the Gratuity Act, have the effect of negating the conclusion drawn

hereinabove.

16.For the determination of the present controversy, it is also relevant to

take into consideration Section 7 of the Gratuity Act, which is being

extracted hereunder:-

“7.Determination of the amount of gratuity.-

(1)A person who is eligible for payment of gratuity under

this Act or any person authorized, in writing, to act on his

behalf shall send a written application to the employer,

within such time and in such form, as may be

prescribed, for payment of such gratuity.

(2) As soon as gratuity becomes payable, the employer

shall, whether an application referred to in sub-section

(1) has been made or not, determine the amount of

gratuity and give notice in writing to the person to whom

the gratuity is payable and also to the controlling

authority specifying the amount of gratuity so

determined.

(3) The employee shall arrange to pay the amount of

gratuity, within thirty days from the date it becomes

payable to the person to whom the gratuity is payable.

(3A)If the amount of gratuity payable under sub-Section (3)

is not paid by the employer within the period specified in

sub-Section (3), the employer shall pay, from the date

on which the gratuity becomes payable to the date on

which it is paid, simple interest at such rate, not

exceeding the rate notified by the Central Government

from time to time for repayment of long-term deposits,

as that Government may, by notification specify:

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Page 12 Provided that no such interest shall be payable if the

delay in the payment is due to the fault of the employee

and the employer has obtained permission in writing

from the controlling authority for the delayed payment on

this ground.

(4) (a) If there is any dispute as to the amount of gratuity

payable to an employee under this Act or as to the

admissibility of any claim of, or in relation to, an

employee for payment of gratuity, or as to the person

entitled to receive the gratuity, the employer shall

deposit with the controlling authority such amount as he

admits to be payable by him as gratuity.

(b) Where there is a dispute with regard to any matter

specified in clause (a), the employer or employee or any

other person raising the dispute may make an

application to the controlling authority for deciding the

dispute.

(c) The controlling authority shall, after due inquiry and

after giving the parties to the dispute a reasonable

opportunity of being heard, determine the matter or

matters in dispute and if, as a result of such inquiry any

amount is found to be payable to the employee, the

controlling authority shall direct the employer to pay

such amount or, as the case may be, such amount as

reduced by the amount already deposited by the

employer.

(d) The controlling authority shall pay the amount

deposited including the excess amount, if any,

deposited by the employer, to the person entitled

thereto.

(d) as soon as may be after a deposit is made under

clause (a), the controlling authority shall pay the amount

of the deposit-

(i)to the applicant where he is the employee;

or

(ii) where the applicant is not the employee, to

the nominee or, as the case may be, the

guardian of such nominee or heir of the

employee if the controlling authority is

satisfied that there is no dispute as to the

right of the applicant to receive the amount

of gratuity.

(5) For the purpose of conducting an inquiry under sub-

section (4), the controlling authority shall have the same

powers as are vested in a court, while trying a suit,

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Page 13 under the Code of Civil Procedure, 1908, (5 of 1908) in

respect of the following matters, namely :-

(a) enforcing the attendance of any person or

examining him on oath;

(b)requiring the discovery and production of

documents;

(c) receiving evidence on affidavits;

(d) issuing commission for the examination of

witnesses.

(6) Any inquiry under this section shall be a judicial

proceeding within the meaning of sections 193 and 228,

and for the purpose of section 196, of the Indian Penal

Code (45 of 1860).

(7) Any person aggrieved by an order under sub-section (4)

may, within sixty days from the date of the receipt of the

order, prefer an appeal to the appropriate Government

or such other authority as may be specified by the

appropriate Government in this behalf:

Provided that the appropriate Government or the

appellate authority, as the case may be, may, if it is

satisfied that the appellant was prevented by sufficient

cause from preferring the appeal within the said period

of sixty days, extend the said period by a further period

of sixty days:

Provided further that no appeal by an employer shall be

admitted unless at the time of preferring the appeal, the

appellant either produces a certificate of the controlling

authority to the effect that the appellant has deposited

with him an amount equal to the amount of gratuity

required to be deposited under sub-Section (4), or

deposits with the appellate authority such amount.

(8) The appropriate Government or the appellate authority,

as the case may be, may, after giving the parties to the

appeal a reasonable opportunity of being heard,

confirm, modify or reverse the decision of the controlling

authority.”

(emphasis

is ours)

A perusal of sub-Section (2) of Section 7 reveals, that it is the onerous

responsibility of the employer, to determine the amount of gratuity payable

to a retiring employee. Sub-Section (3) of Section 7 enjoins a further

responsibility on the employer, to disburse the amount of gratuity payable

to an employee, within 30 days from the date it becomes payable. Since

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Page 14 the appellant had attained the age of superannuation on 31.10.1996, it is

apparent, that gratuity had become payable to him on 31.10.1996.

Accordingly, the same ought to have been calculated in terms of sub-

Section (2) of Section 7 of the Gratuity Act, and should have been

dispersed to the appellant by 30.11.1996 in terms of sub-Section (3) of

Section 7 of the Gratuity Act.

17.Sub-Section (3A) of Section 7 of the Gratuity Act is the most relevant

provision for the determination of the present controversy. A perusal of the

sub-Section (3A) leaves no room for any doubt, that in case gratuity is not

released to an employee within 30 days from the date the same become

payable under sub-Section (3) of Section 7, the employee in question

would be entitled to “…simple interest at such rate, not exceeding the rate

notified by the Central Government from time to time for repayment of long

term loans, as the Government may, by notification specify…” There is,

however, one exception to the payment of interest envisaged under sub-

Section (3) of Section 7 of the Gratuity Act. The aforesaid exception is

provided for in the proviso under sub-Section (3A) of Section 7. A perusal

of the said proviso reveals, that no interest would be payable “…if the delay

in the payment is due to the fault of the employee, and the employer has

obtained permission in writing from the controlling authority for the delayed

payment on this ground…” The exception contemplated in the proviso

under sub-Section (3A) of Section 7 of the Gratuity Act, incorporates two

ingredients. Where the two ingredients contemplated in the proviso under

sub-Section (3A) are fulfilled, the concerned employee can be denied

interest despite delayed payment of gratuity. Having carefully examined

the proviso under sub-Section (3A) of Section 7 of the Gratuity Act, we are

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Page 15 of the view, that the first ingredient is, that payment of gratuity to the

employee was delayed because of some fault of the employee himself.

The second ingredient is, that the controlling authority should have

approved, such withholding of gratuity (of the concerned employee) on the

basis of the alleged fault of the employee himself. None of the other sub-

sections of Section 7 of the Gratuity Act, would have the effect of negating

the conclusion drawn hereinabove.

18.Insofar as the present controversy is concerned, the appellant was

accused of having entered into a conspiracy with a bank employee superior

to him, so as to extend unauthorized benefits to a member of the Indian

Administrative Services belonging to the Haryana Cadre. Based on the

aforesaid alleged fault of the appellant, the PNB, by an order dated

13.5.2000, informed the appellant, that the release of certain retiral benefits

including gratuity was being withheld, because of pending of criminal

proceedings against him. The appellant was also informed, through the

aforesaid communication, that release of his retiral benefits including

gratuity, would depend on the outcome of the pending criminal

proceedings. It is, therefore apparent, that the second ingredient

expressed in the proviso under sub-Section (3A) of Section 7 of the

Gratuity Act was clearly satisfied, when the competent authority approved

the action of withholding the appellant’s gratuity. The instant conclusion is

inevitable, because it is not the case of the appellant, that the

communication dated 13.5.2000, by which his gratuity was withheld, had

not been issued at the instance of the concerned controlling authority. The

only question which, therefore, arises for consideration is, whether the first

ingredient (culled out above) for the applicability, of the proviso under sub-

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Page 16 Section (3A) of Section 7 of the Gratuity Act, can be stated to have been

satisfied, in the facts and circumstances of the instant case. If it can be

concluded, that the aforesaid ingredient is also satisfied, the appellant

would have no right to claim interest, despite delayed release of gratuity.

Our determination of the first ingredient is, as follows. We are of the

considered view, that consequent upon the acquittal of the appellant by the

Special Judge, CBI Court, Chandigarh, it would be erroneous to conclude,

that the gratuity payable to the appellant on attaining the age of

superannuation i.e., on 31.10.1996, was withheld on account of some fault

of the appellant himself. We may hasten to add, if the appellant had been

convicted by the Special Judge, CBI Court, Chandigarh, then the first

ingredient would also be deemed to have been satisfied. Conversely,

because the appellant has been acquitted, he cannot be held to be at fault.

Accordingly it emerges, that the “fault” ingredient of the employee himself,

for denial of gratuity when it became due, remains unsubstantiated. Since

one of the two salient ingredients of the proviso under sub-Section (3A) of

Section 7 of the Gratuity Act is clearly not satisfied in the present case, we

are of the view, that the appellant cannot be denied interest under the

proviso to section 7(3A) of the Gratuity Act. Accordingly, the appellant has

to be awarded interest under section 7(3A) of the Gratuity Act. Therefore, if

the provisions of the Gratuity Act are applicable to the appellant, he would

most definitely be entitled to interest under sub-Section (3A) of Section 7 of

the Gratuity Act, on account of delayed payment of gratuity.

19.The most important question which arises for our consideration is,

whether the provisions of the Gratuity Act can be extended to the appellant,

so as to award him interest under sub-Section (3A) of Section 7 of the

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Page 17 Gratuity Act. Insofar as the instant aspect of the matter is concerned, it

was the vehement contention of the learned counsel appearing on behalf of

the appellant, that the provisions of the Gratuity Act are extendable to the

appellant, and as such, he would be entitled to disbursement of interest

under Section 7(3A) thereof. The plea at the behest of the PNB, however,

was to the contrary. The contention of the learned counsel representing the

PNB was, that the PNB having adopted the 1995, Regulations, the claim of

the appellant could only be determined under the provisions of the said

Regulations. It was pointed out, that denial of payment of gratuity in the

present case, was valid and justified under Regulation 46(2) of the 1995

Regulations. Furthermore, it was pointed out, that the 1995 Regulations,

did not make any provision for the award of interest in case of delayed

payment of gratuity. Therefore, since gratuity had legitimately been

withheld, under the provisions of the 1995, Regulations, and the payment of

gratuity to the appellant is not regulated under the Gratuity Act, there was

no question of payment of interest to the appellant. It was submitted that

the appellant’s gratuity had been withheld during the pendency of criminal

proceedings initiated against him, his entitlement to gratuity stood extended

to such time as the said criminal proceedings were eventually disposed of.

Thus viewed, the entitlement to gratuity stood extended to 31.10.2009 (i.e.,

the date of the disposal of the proceedings pending against him). In this

behalf, it was also pointed out, that as soon as the criminal proceedings

pending against the appellant, concluded in his favour, the PNB released

all the appellant’s retiral benefits, including gratuity. The documents

available on the record of the case reveal, that gratuity was released to the

appellant on 12.2.2010. As such, the delay in release of gratuity, if at all,

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Page 18 was only from 31.10.2009 to 12.2.2010. For the aforesaid delayed

payment of gratuity, the appellant was admittedly awarded interest

quantified at Rs.3,336/- (calculated at the rate of 5.5%).

20.In order to determine which of the two provisions (the Gratuity Act, or

the 1995, Regulations) would be applicable for determining the claim of the

appellant, it is also essential to refer to Section 14 of the Gratuity Act,

which is being extracted hereunder:-

“14.Act to override other enactments, etc. – The provisions of

this Act or any rule made thereunder shall have effect

notwithstanding anything inconsistent therewith contained in

any enactment other than this Act or in any instrument or

contract having effect by virtue of any enactment other than

this Act.”

(emphasis is ours)

A perusal of Section 14 leaves no room for any doubt, that a superior

status has been vested in the provisions of the Gratuity Act, vis-à-vis, any

other enactment (including any other instrument or contract) inconsistent

therewith. Therefore, insofar as the entitlement of an employee to gratuity

is concerned, it is apparent that in cases where gratuity of an employee is

not regulated under the provisions of the Gratuity Act, the legislature having

vested superiority to the provisions of the Gratuity Act over all other

provisions/enactments (including any instrument or contract having the

force of law), the provisions of the Gratuity Act cannot be ignored. The

term “instrument” and the phrase “instrument or contract having the force of

law” shall most definitely be deemed to include the 1995 Regulations,

which regulate the payment of gratuity to the appellant.

21.Based on the conclusions drawn hereinabove, we shall endeavour to

determine the present controversy. First and foremost, we have concluded

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Page 19 on the basis of Section 4 of the Gratuity Act, that an employee has the right

to make a choice of being governed by some alternative

provision/instrument, other than the Gratuity Act, for drawing the benefit of

gratuity. If an employee makes such a choice, he is provided with a

statutory protection, namely, that the concerned employee would be

entitled to receive better terms of gratuity under the said

provision/instrument, in comparison to his entitlement under the Gratuity

Act. This protection has been provided through Section 4 (5) of the

Gratuity Act. Furthermore, from the mandate of Section 14 of the Gratuity

Act, it is imperative to further conclude, that the provisions of the Gratuity

Act would have overriding effect, with reference to any inconsistency

therewith in any other provision or instrument. Thus viewed, even if the

provisions of the 1995, Regulations, had debarred payment of interest on

account of delayed payment of gratuity, the same would have been

inconsequential. The benefit of interest enuring to an employee, as has

been contemplated under section 7(3A) of the Gratuity Act, cannot be

denied to an employee, whose gratuity is regulated by some

provision/instrument other than the Gratuity Act. This is so because, the

terms of payment of gratuity under the alternative instrument has to ensure

better terms, than the ones provided under the Gratuity Act. The effect

would be the same, when the concerned provision is silent on the issue.

This is so, because the instant situation is not worse than the one

discussed above, where there is a provision expressly debarring payment

of interest in the manner contemplated under Section 7(3A) of the Gratuity

Act. Therefore, even though the 1995, Regulations, are silent on the issue

of payment of interest, the appellant would still be entitled to the benefit of

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Page 20 Section 7(3A) of the Gratuity Act. If such benefit is not extended to the

appellant, the protection contemplated under section 4(5) of the Gratuity

Act would stand defeated. Likewise, even the mandate contained in

section 14 of the Gratuity Act, deliberated in detail hereinabove, would

stand negated. We, therefore, have no hesitation in concluding, that even

though the provisions of the 1995, Regulations, are silent on the issue of

payment of interest, the least that the appellant would be entitled to, are

terms equal to the benefits envisaged under the Gratuity Act. Under the

Gratuity Act, the appellant would be entitled to interest, on account of

delayed payment of gratuity (as has already been concluded above). We

therefore hold, that the appellant herein is entitled to interest on account of

delayed payment, in consonance with sub-Section (3A) of Section 7 of the

Gratuity Act. We, accordingly, direct the PNB to pay to the appellant,

interest at “…the rate notified by the Central Government for repayment of

long term deposits…”. In case no such notification has been issued, we

are of the view, that the appellant would be entitled to interest, as was

awarded to him by the learned Single Judge of the High Court vide order

dated 4.5.2011, i.e., interest at the rate of 8%. The PNB is directed, to pay

the aforesaid interest to the appellant, within one month of the appellant’s

furnishing to the PNB a certified copy of the instant order. The appellant

shall also be entitled to costs quantified at Rs.50,000/-, for having had to

incur expenses before the Writ Court, before the Division Bench, and finally

before this Court. The aforesaid costs shall also be disbursed to the

appellant within the time indicated hereinabove.

22.Disposed of in the aforesaid terms.

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Page 21 …………………………… .J.

(B.S. Chauhan)

…………………………….J.

(Jagdish Singh Khehar)

New Delhi;

December 14, 2012.

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