A single judge bench of Justice Suraj Govindaraj thus dismissed a petition filed by the Canara Bank questioning the order of Appellate Authority which set aside the order of the Controlling Authority permitting adjustment of gratuity towards loans of the employee.
The bench said,
"Home loan is governed by the agreement of loan. It is for the Bank to act in terms of the said agreement and exercise all rights under the said agreement as against the debtor. The Bank could not have adjusted the same from and out of gratuity amount, which are protected under under Section 7 of The Payment of Gratuity Act, 1972."
Case Details:
One Srimantha D, husband of the respondent joined the service of the petitioner-Bank in 1975 as a Peon and subsequently was promoted as a Clerk in 1987. During his service, Srimantha had availed Housing Loan which was being repaid by him from time to time. In the year 2005, alleging that there is gross misconduct on his part, disciplinary proceedings were taken up. Punishment of compulsory retirement was imposed by the disciplinary authority in 2006.
An application filed by Srimantha for release of the gratuity amount came to be rejected. Hence, he had approached the Controlling Authority for a direction to make payment of the said amounts. The bank contended that there are dues liable to be paid on account of the housing loan and the dues which are due on account of the Staff Welfare Fund. These dues have to be adjusted from and out of the gratuity amount, and as such, no amount is due. The same was accepted by the authority. However, on appeal the finding was set aside and the bank was directed to pay a gratuity amount along with interest
Findings: The bench noted that there is a special treatment for payment of gratuity both under the Payment of Gratuity Act and also under the Code of Civil Procedure, 1908. Gratuity has been given a special protection and special treatment inasmuch as it is made absolutely clear that the gratuity amounts can neither be attached nor can any garnishee order be passed. Referring to Section 7 of the Payment of Gratuity Act, 1972, the bench said, " The protection to gratuity is granted in order to safeguard the financial security of a person at the time of his retirement."
It noted that in the present case, the petitioner-Bank has sought to adjust a sum of Rs.9,85,420.24 towards the housing loan and a sum of Rs.1,29,691/ on account of Staff Welfare Fund liability. The Staff Welfare Fund would come within the domain of the service conditions. However, home loan occupies a completely different position inasmuch as the home loan would be governed by the terms of the loan agreement which is a commercial transaction between the bank and the debtor. Whether the debtor is an employee or not, it is the said terms of the loan which would govern the said relationship.
Noting that there is no demand made for repayment of Housing loan interest by the Bank on the employee and/or after his expiry on his legal heirs/legal heirs/legal representatives, the bench said, "The Bank has unilaterally on the basis of an alleged authorization, determined the amount due on its own and recovered the same from the gratuity amount payable by it." Rejecting the contention of the bank relying on Section 10 of the Act that interest of the Act that interest ought not to be payable on the amount and that the employee could have made an application within a period of 90 days for release of the amount, the bench said,
The compulsory retirement order was under challenge there is no scope for the employee to have made a claim for gratuity, it is only in the year 2017 that upon he attaining the age of superannuation, that application for release of gratuity amount has been filed and consequently, the proceedings before the Labour Court were also withdrawn. Therefore, I am of the considered opinion that there is no delay in filing the application for payment of gratuity amounts."
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