The Payment of Gratuity Act, 1972, did not provide for forfeiture of gratuity amount due to employees in any other contingency except the one covered under Section 4(6), viz., recovery of dues from them. Also, the law stipulated that for invoking the forfeiture clause under the law, it was essential there must be a pre- existing condition, namely, termination of service.

Holding this, Mr Justice K. Chandru in the Madurai Bench of the Madras High Court also rejected the contention of the writ petitioner (TN Civil Supplies Corpn Ltd, Chennai) that they were entitled to plead for recovery of dues against short out-turn by the employees. “This stand is fortified by Section 13 of the Act,” the Judge ruled while dismissing the writ petitions challenging the order dated August 24, 2007, of R-2 (Joint Commissioner of Labor, Madurai– the Controlling Authority under the Payment of Gratuity Act).

Mr G. Packirisamy and Mr P. Dakshinamoorthy were working as operators in the petitioner’s modern rice mills and they were permitted to retire on attaining the age of superannuation. Since the amount of gratuity was not paid though they were entitled for the same, they applied to R-1, the Controlling Authority under the Payment of Gratuity Act for the payment.

The petitioner opposed the payment contending that the Corporation was liable to recover the dues for ‘out-turn shortage’.

The Controlling Authority said that the stand of the petitioner was not legally valid. Though Sec 4(6)(b) provided for forfeiture of gratuity, the same could be done only when there was termination of services of the employees.

The Controlling Authority held that the Act did not provide for forfeiture in any other contingency except the one covered under Sec 4(6), and plea of recovery adjusted against short out-turn could not be accepted. Even if the petitioner obtained decree against the employees for loss caused due to short turn-out, even in such cases, Sec 13 was complete safeguard from the attachment of amount payable by way of gratuity.

The Judge held that the contentions of the petitioner could not be accepted. The petitioner had stated that the period of service put in by workmen had been disputed, which dispute was not raised before the Controlling Authority or the Appellate Authority. It was not as if the petitioner had no machinery to recover the amount for short out-turn of rice, as there were other machinery for recovering the amount. On that score, the gratuity payable was not liable for attachment in terms of Sec 13. Even Sec 14 provided over-riding effect over other laws.

Sec 4(6) became operational only under a pre- existing condition, i.e., due to termination on account of his having caused such loss. In the absence of any such action, the petitioner’s defence could not be countenanced by this court, the Judge ruled.

The petitions were, therefore, dismissed.


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September 2021