LI Network
Published on: November 10, 2023 at 11:40 IST
The Supreme Court has ruled in favor of an employee, directing the Punjab National Bank (PNB) to release the provident fund (PF) and gratuity due to him, despite his compulsory retirement.
The Court’s decision rested on the interpretation of the Punjab National Bank (Officers’) Service Regulations, 1979, which stipulated that the bank could only withhold the PF if the employee’s actions caused a demonstrable loss to the institution.
In this case, the bank failed to substantiate the alleged loss and denied the employee a fair hearing.
The Court noted that the Board of Directors had not given the appellant an opportunity to defend himself regarding the allegations of causing a loss to the bank before passing a resolution to deduct the bank’s contribution from the appellant’s provident fund account.
Regarding the issue of gratuity, the Court considered the provisions of the 1979 Regulations and the Gratuity Act, placing emphasis on the judgment in the YK Singhla Punjab National Bank case (2013) 3 SCC 472, which held that the Gratuity Act supersedes all regulations.
The Court also pointed out that the bank’s circular only excluded gratuity for dismissal or removal and did not include it as a penalty for compulsory retirement.
The Court clarified that the appellant was entitled to gratuity under the 1979 Regulations, as indicated in the circular’s explanation.
The case involved the appellant’s compulsory retirement as a Senior Manager at the Punjab National Bank following a finding of guilt by the disciplinary authority in 2010. Consequently, the appellant was denied various benefits, including leave encashment, the employer’s PF contribution, gratuity, and pension.
The appellant filed a writ petition before the High Court, primarily seeking terminal benefits, without challenging his compulsory retirement. However, the Board of Directors passed a resolution in 2010, denying the employer’s contribution to the provident fund.
The Single Judge of the High Court directed the bank to pay PF, gratuity, and leave encashment, but the appellant did not receive pension benefits due to his in-service status when the pension scheme transitioned.
The Division Bench of the High Court set aside the provident fund (Bank’s contribution) and gratuity on the grounds that the appellant had caused a loss to the bank through his actions. Dissatisfied with this decision, the appellant approached the Supreme Court.
The Supreme Court found that the bank had failed to prove any loss caused by the appellant and had denied the appellant a fair hearing. It also noted that the judgment in the UCO Bank case emphasized the necessity of providing a fair hearing and proving actual losses before forfeiting gratuity.
The Court concluded that the appellant’s appeal should be allowed, affirming the findings of the Single Judge and overturning the Division Bench’s judgment.
This verdict reaffirms the principle that employers must prove actual losses caused by an employee’s actions before withholding provident fund and gratuity. It underscores the importance of a fair hearing in such cases and emphasizes the primacy of the Gratuity Act over other regulations.
