JASWANT SINGH GILL versus M/S. BHARAT COKING COAL LTD. AND ORS.

Citation: [2006] SUPP. 8 S.C.R. 1064 · Decided: 10-11-2006 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
JASWANT SINGH GILL 
v. 
MIS. BHARAT COKING COAL LTD. AND ORS. 
NOVEMBER I 0, 2006 
B 
[S.B. SINHA AND MARKANDEY KA TJU, JJ.] 
Payment of Gratuity Act, 1972: 
C 
Section 4(6)(a) and (b)-Allegation of shortage of stock-Disciplinary 
proceeding commenced during pendency of which employee retired-
Disciplinary Authority found him guilty-Order of forfeiture of gratuity--
Correctness of-Held: Not correct as the disciplinary authority neither 
terminated him nor quantified the loss or damage caused to employer as 
required under Sections 4(6)(a) and (b)-Coal India Executives' Conduct 
D Discipline and Appeal Rules, 1978-Rules 27, 34.2 and 34.3 
E 
Statutory Right: 
Statutory right accrued cannot be impaired by reason of a rule which· 
does not have the force of the statute. 
Departmental proceedings were commenced against appellant on the 
allegation of shortage of coal, during pend ency of which he was allowed to 
retire. His claim for payment of gratuity under the Payment of Gratuity Act, 
1972 was dismissed. Disciplinary Authority found him guilty and passed order 
of forfeiture of his gratuity. On application filed by the appellant, Assistant 
F Labour Commissioner held that the appellant was not terminated for offence 
mentioned under Section 4(6)(a) and (b) of the Act, hence order of forfeiture 
of gratuity was not tenable. 
On appeal, appellate authority held that the punishment order did not 
G state that the services were terminated nor there is anything about extent/ 
quantification of damage or loss, hence question of forfeiture of gratuity does 
not arise as per Section 4(6). High Court upheld the order of the Appellate 
Authority. 
In appeal to this Court, appellant contended that the provisions of the 
H 
1064 
JASWANT SINGH GILL v. BHARA TCOKING COAL LTD. 
1065 
Payment of Gratuity Act, 1972 shall prevail over the rules framed by Coal A 
India Limited, the holding company of Respondent No. 1, known as Coal India 
Executives' Conduct Discipline and Appeal Rules, 1978. 
Allowing the appeal, the Court 
HELD: 1. The Coal India Executives' Conduct Discipline and Appeal B 
Rules, 1978 framed by Coal India Limited are not statutory rules. They have 
been made by the holding company of Respondent No. 1. The provisions of the 
Payment of Gratuity Act, 1972 therefore, must prevail over said Rules. 
[1071-C) 
2.1. Rule 27 of the Rules provides for recovery from gratuity only to 
the extent of loss caused to the company by negligence or breach of orders or C 
trust. Penalties, however, must be imposed so long an employee remains in 
service. Even if a disciplinary proceeding was initiated prior to the attaining 
of the age of superannuation, in the event, the employee retires from service, 
the question of imposing a major penalty by removal or dismissal from service 
would not arise. Rule 34.2 no doubt provides for continuation of a disciplinary D 
proceeding despite retirement of employee if the same was initiated before 
his retirement but the same would n<'t mean that although he was permitted 
to retire and his services had not been extended for the said purpose, a major 
penalty in terms of Rule 27 can be imposed. [1071-D-E) 
2.2. Power to withhold penalty contained in Rule 34.3 of the Rules must 
be subject to the provisions of the 1972 Act. Gratuity becomes payable as E 
soon as the employee retires. The only condition is rendition of five years 
continuous service. A statutory right accrued, thus, cannot be impaired by 
reason of a rule which does not have the force of a statute. The Rules in any 
event do not provide for withholding of retrial benefits or gratuity. 
[1071-F-G] 
3.1. The 1972 Act is a complete code covering the essential provisions 
of a scheme for a gratuity. It not only creates a right to payment of gratuity 
but also lays down the principles for quantification thereof as also the 
conditions on which he may be denied therefrom. Sub-section (6) of Section 
4 of the Act contains a non-obstante clause vis-a-vis sub-section (1) thereof. 
F 
As by reason thereof, an accrued or vested right is sought to be taken away, G 
the conditions laid down thereunder must be fulfilled. The provisions 
contained therein must, therefore, be scrupulously observed. 
ll071-H; 1072-A-B} 
3.2. Clause (a} of Sub-section (6) of Section 4 of the Act speaks of 
termination of service of an employee for any act, willful. omission or H 
1066 
SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R. 
A negligence causing any damage.

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