Forfeiting Gratuity A Yr After Compulsory Retirement An Afterthought: Gujarat HC Orders Payment To Ex-Employee Accused Of Causing Monetary Loss To Bank

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The Gujarat High Court recently came to the rescue of a retired Branch Manager, accused by the employer-bank of causing it monetary loss by haphazardly sanctioning loans, and ordered the latter to clear the former's retiral dues.

Justice Biren Vaishnav observed that the order forfeiting the Respondent-employee's gratuity was an "afterthought" as the same was issued only after the penalty of dismissal was modified to compulsory retirement and after the respondent approached the bank seeking payment of gratuity.

[8:58 am, 13/06/2022] Satish Swami  Advocate: Thus, it affirmed the orders of the Controlling Authority and the Appellate Authority which directed the Union Bank of India to pay an amount of INR 9,77,440 as gratuity. It however modified the rate of interest from to% to 8%.

"Reading the timeline would indicate that despite a charge-sheet being issued in the year 2011 and the dismissal order of 2012, it was only after the penalty was modified to that of compulsory retirement in January 2014 and after the respondent approached the bank, did the bank think it fit to invoke the provisions of Section 4(6)(a) of the (Payment of Gratuity) Act."

The brief facts of the case are that the Respondent was working as a Branch Manager with the Petitioner Bank since 1984. However, during the course of employment, the bank issued a charge-sheet levelling certain imputations in the context of disbursement of term loans etc. After a departmental inquiry, the bank imposed a penalty of dismissal in 2012 which was challenged by the Respondent. The Appellate Authority reduced the punishment to compulsory retirement in appeal.

Thereafter, the Respondent complained of non-payment of gratuity as required under Section 7 of the Payment of Gratuity Act, 1972. However, the bank issued a show-cause notice under Section 4(6) of the Payment of Gratuity Act, as to why the gratuity not is forfeited. Pursuant to the response of the Respondent, the amount of gratuity was withheld.

The Controlling Authority held that withholding of the gratuity was in contravention of Section 7 of the Act, and the same was later affirmed by the Appellate Authority.

The Petitioner-bank largely contested that the Respondent had caused a loss of INR 4.36 crores to the bank which was quantified by the competent authority and therefore, it was just and proper to forfeit gratuity.

Per contra, the Respondent supported the order of the Appellate Authority while submitting that there was no quantification of the loss caused to the bank except for a figure of INR 4.36 crores mentioned in the final order. Reliance was placed on UCO Bank and Others vs. Anju Mathur to argue that if there was failure to quantify loss caused to the bank then there was a breach of Sec 4(6)(a) of the Gratuity Act.

The High Court agreed that barring a single line stating the loss of 4.36 crores caused to the bank, there was nothing on record to how the bank had quantified the loss. It further observed that the Appellate Authority had rightly assessed the mindset of the bank, especially when the bank had invoked Sec 4(6)(a) of the Act for more than two and a half years after the Respondent was penalised.