Section 4 of the Gratuity Act, that an employee has the right to make a choice of being governed by some alternative provision/instrument, other than the Gratuity Act, for drawing the benefit of gratuity. If an employee makes such a choice, he is provided with a statutory protection, namely, that the concerned employee would be entitled to receive better terms of gratuity under the said provision/instrument, in comparison to his entitlement under the Gratuity Act. This protection has been provided through Section 4 (5) of the Gratuity Act. Furthermore, from the mandate of Section 14 of the Gratuity Act, it is imperative to further conclude, that the provisions of the Gratuity Act would have overriding effect, with reference to any inconsistency therewith in any other provision or instrument. Thus viewed, even if the provisions of the 1995, Regulations, had debarred payment of interest on account of delayed payment of gratuity, the same would have been inconsequential. The benefit of interest enuring to an employee, as has been contemplated under section 7(3A) of the Gratuity Act, cannot be denied to an employee, whose gratuity is regulated by some provision/instrument other than the Gratuity Act. This is so because, the terms of payment of gratuity under the alternative instrument has to ensure better terms, than the ones provided under the Gratuity Act. The effect would be the same, when the concerned provision is silent on the issue. This is so, because the instant situation is not worse than the one discussed above, where there is a provision expressly debarring payment of interest in the manner contemplated under Section 7(3A) of the Gratuity Act. Therefore, even though the 1995, Regulations, are silent on the issue of payment of interest, the appellant would still be entitled to the benefit of Section 7(3A) of the Gratuity Act. If such benefit is not extended to the appellant, the protection contemplated under section 4(5) of the Gratuity Act would stand defeated. Likewise, even the mandate contained in section 14 of the Gratuity Act, deliberated in detail hereinabove, would stand negated. We, therefore, have no hesitation in concluding, that even though the provisions of the 1995, Regulations, are silent on the issue of payment of interest, the least that the appellant would be entitled to, are terms equal to the benefits envisaged under the Gratuity Act. Under the Gratuity Act, the appellant would be entitled to interest, on account of delayed payment of gratuity (as has already been concluded above). We therefore hold, that the appellant herein is entitled to interest on account of delayed payment, in consonance with sub-Section (3A) of Section 7 of the Gratuity Act. We, accordingly, direct the PNB to pay to the appellant, interest at “…the rate notified by the Central Government for repayment of long term deposits…”. In case no such notification has been issued, we are of the view, that the appellant would be entitled to interest, as was awarded to him by the learned Single Judge of the High Court vide order dated 4.5.2011, i.e., interest at the rate of 8%. The PNB is directed, to pay the aforesaid interest to the appellant, within one month of the appellant’s furnishing to the PNB a certified copy of the instant order. The appellant shall also be entitled to costs quantified at Rs.50,000/-, for having had to incur expenses before the Writ Court, before the Division Bench, and finally before this Court. The aforesaid costs shall also be disbursed to the appellant within the time indicated hereinabove.

                                                                “REPORTABLE”

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO.9087  OF 2012
                (Arising out of SLP (Civil) No.14570 of 2012)


Y.K. Singla                                        …. Appellant

                                   Versus

Punjab National Bank & Ors.                        …. Respondents


                                  O R D E R


JAGDISH SINGH KHEHAR, J.

1.    Leave granted.

2.    The appellant was inducted into the service  of  the  Punjab  National
Bank (hereinafter referred  to  as,  the  PNB)  in  the  clerical  cadre  on
19.2.1958.  He was  successively  promoted  against  the  posts  of  Special
Assistant and Accountant with effect  from  23.8.1972  and  26.12.1974.   He
also gained  further  promotions  to  the  cadres  of  Manager-B  Grade  and
thereafter, Manager-A Grade  with  effect  from  24.11.1977  and  18.12.1982
respectively.  He finally came to be promoted to the post of  Chief  Manager
with effect from 1.10.1986.  Whilst holding the post of Chief  Manager,  the
appellant retired from service, on attaining the age  of  superannuation  on
31.10.1996.

3.    During 1981-1982, when the appellant was  posted  as  Manager  at  the
Sector 19, Chandigarh Branch of the PNB, he was accused  of  having  entered
into a conspiracy with R.L. Vaid, the then  Regional  Manager  of  the  PNB,
Chandigarh, and Dr. A.K. Sinha, IAS, the then Secretary, Department of  Town
and  Country  Planning,  Haryana  and  thereby,   of   fraudulently   having
sanctioned a loan of Rs.2,70,000/- to Mrs. Rama  Sinha  (wife  of  Dr.  A.K.
Sinha, aforementioned).  The said loan was granted to  Mrs.Rama  Sinha,  for
construction of a building on a plot  in  Sector  6,  Panchkula.   The  said
building, after its construction, was leased to the  PNB,  at  an  allegedly
exorbitant rent of Rs.4,985/-  per  month.   The  loan  amount,  was  to  be
adjusted out of the rent account.  The PNB was allegedly, not  in  the  need
of the said building, because it was already housed in a building in  Sector
17, Chandigarh, at a nominal rent of Rs.1,650/-  per  month.   The  building
rented from Mrs. Rama Sinha was  said  to  have   remained  unoccupied  from
1.5.1982  to  21.1.1987.   This  factual  position,  it  was  alleged,   was
sufficient to infer, that the PNB was not in need of the building  taken  on
rent from Mrs.Rama Sinha.  Based on the aforesaid factual position,  it  was
felt, that the action  of  the  conspirators  caused  a  pecuniary  loss  of
Rs.2,70,000/- to the PNB.  It was  also  sought  to  be  assumed,  that  the
aforesaid loan and lease were favours  extended  to  Dr.  A.K.  Sinha,  IAS,
through his wife Mrs. Rama Sinha.  Based on the aforesaid  allegations,  the
appellant Y.K. Singla, the aforesaid R.L. Vaid  and  Dr.  A.K.  Sinha,  IAS,
were charged under Section 120B of the Indian Penal Code  and  Section  5(2)
read with Section 13(1)(d) of the Prevention of Corruption Act, 1988.



4.    The trial in the above matter was conducted by the Special Judge,  CBI
Court, Chandigarh.  On the conclusion of the trial, the Special  Judge,  CBI
Court, Chandigarh arrived  at  the  conclusion,  that  the  prosecution  had
failed to produce any evidence on the issue  of  criminal  conspiracy.   The
trial Court accordingly, acquitted all the  three  accused  of  the  charges
framed against them on 31.10.2009, by  holding,  that  the  prosecution  had
failed to establish the charges beyond a shadow of reasonable doubt.

5.     During the subsistence of the  aforesaid  criminal  proceedings,  the
appellant Y.K. Singla retired from the employment  of  the  PNB,  on  having
attained the age of superannuation, on 31.10.1996.  On  his  retirement,  on
account of the pendency of the criminal proceedings being conducted  against
him, gratuity, leave encashment and commutation of  permissible  portion  of
pension,   were  withheld.   While  withholding   the   aforesaid   monetary
benefits, the appellant was informed by  the  PNB  through  a  communication
dated  13.5.2000,  that  the  eventual  release  of  the  aforesaid  retiral
benefits, would depend on the outcome of the pending criminal proceedings.

6.    As already noticed above, the appellant was acquitted of  the  charges
framed against  him,  by  the  Special  Judge,  CBI  Court,  Chandigarh,  on
31.10.2009.  Based on his aforesaid acquittal,  the  appellant  addressed  a
letter dated 26.11.2009  to  the  Executive  Director  of  the  PNB  seeking
release  of  his  gratuity,  encashment  of  privileged  leave  balance  and
commutation of permissible portion of  pension.   Additionally,  he  claimed
interest, from the date the aforesaid retiral benefits became  due  to  him,
till the actual payment thereof.  It will also be relevant to mention,  that
by this time, the appellant was over 73  years  old.   In  its  reply  dated
5.2.2010, the PNB  informed  the  appellant,  that  it  had  released  leave
encashment of Rs.1,28,716.24 on that day itself i.e.,  on  5.2.2010  itself.
The appellant was also informed through the aforesaid communication, that  a
duly sanctioned gratuity proposal had been sent to the  Provident  Fund  and
Pension Department of the PNB, for  disbursement  of  gratuity.   Thereupon,
the appellant actually received the gratuity payable to him, on 12.2.2010.

7.    Having received encashment  of  privileged  leave  balance,  as  also,
gratuity  in  February,  2010,  the  appellant  reiterated  his  claim   for
interest, on account of delayed payment of the  aforesaid  amounts,  through
another letter dated  17.2.2010.   In  the  instant  letter,  the  appellant
pointed out, that he had retired on attaining the age of  superannuation  on
31.10.1996, and as  such,  the  PNB  had  withheld  the  aforesaid  monetary
benefits due to him for a period of more  than  13  years  up  to  February,
2010.  The  appellant’s  request  for  interest  on  the  aforesaid  delayed
payments, was responded to by the PNB  through  a  letter  dated  12.3.2010.
The appellant was informed, that he was entitled to interest on  account  of
withholding of his retiral benefits, only  with  effect  from  the  date  of
culmination of the  proceedings  pending  against  him.   Having  found  the
appellant entitled to interest with effect from 31.10.2009  i.e.,  when  the
Special Judge, CBI Court, Chandigarh acquitted him, the PNB released  a  sum
of Rs.1,881/- as interest towards delayed payment of leave  encashment,  and
another sum of Rs.3,336/- as interest on  account  of  having  withheld  his
gratuity.  The aforesaid interest, the  appellant  was  informed,  had  been
calculated at the rate of 5.5%.

8.    Dissatisfied with the action of the PNB, in  not  paying  interest  to
him from the  date  the  aforesaid  retiral  benefits  became  due  (on  his
retirement on 31.10.1996), till their eventual release (in February,  2010),
the appellant filed Civil Writ Petition no. 6469 of  2010  before  the  High
Court of Punjab & Haryana at Chandigarh (hereinafter  referred  to  as,  the
High Court).  The aforesaid Writ Petition came to be  allowed  on  4.5.2011.
While allowing the Writ Petition filed by  the  appellant,  the  High  Court
directed the PNB to pay the appellant, interest at the rate of 8%  from  the
date retiral benefits had became due  to  the  appellant,  till  the  actual
payment thereof to him.

9.    Dissatisfied with the order dated  4.5.2011,  passed  by  the  learned
Single Judge of the High Court, the PNB preferred Letters Patent Appeal  no.
1950 of 2011.  The Letters  Patent  Appeal  filed  by  the  PNB  was  partly
allowed by a Division Bench of the High Court, on 29.11.2011.  The  Division
Bench of the High Court arrived at the conclusion, that  the  appellant  was
not entitled to any interest on delayed payment of Gratuity.   The award  of
interest to the appellant for withholding the other  retiral  benefits  was,
however, not interfered with.  The decision (dated 29.11.2011)  rendered  by
the Division Bench of the High Court, has been assailed  by  the  appellant,
through the instant appeal.

10.   The reasons which prompted the Division Bench of  the  High  Court  to
deny interest on the withheld amount  of  gratuity  to  the  appellant,  are
ascertainable from the paragraph 7 of the impugned  order,  which  is  being
extracted hereunder:-

      “7.   On having considered the matter, we are in  agreement  with  the
           submission  made  by  the  learned  counsel  appearing  for  the
           appellant-Bank insofar as withholding of gratuity is  concerned.
           The language of the relevant Rule i.e. Rule 46 of the 1995 Rules
           is clear and unambiguous.  The mandate of the Rule is such  that
           it operates as a bar  insofar  as  the  Bank  is  concerned,  as
           regards the release of gratuity to an employee against whom  the
           departmental or judicial proceedings were pending  on  the  date
           such employee attains  the  age  of  superannuation.   The  Rule
           stipulates that such withheld amount of  gratuity  would  become
           payable only upon conclusion of  the  proceedings.   Admittedly,
           judicial proceedings were pending against the respondent on  the
           date of his superannuation i.e. 31.10.1996  and  concluded  only
           upon his acquittal vide order dated 31.10.2009.  The amount viz.
           gratuity has since  been  released  on  13.2.2010  and  interest
           thereupon has also been paid for the period 31.10.2009 till  the
           date of payment.  We, accordingly, hold that respondent no. 1 is
           not entitled to any interest for the period 31.10.1996 till  the
           conclusion of the trial and his acquittal i.e. 31.10.2009 on the
           withheld amount of gratuity.”

11.   It is apparent from a perusal of the reasoning recorded  by  the  High
Court, that the High Court relied upon Regulation 46 of the Punjab  National
Bank (Employees) Pension Regulations, 1995 (hereinafter referred to as,  the
1995 Regulations).  Regulation 46 is being extracted hereunder:-

      “46.  Provisional Pension
           (1)   An employee who  has  retired  on  attaining  the  age  of
                 superannuation  or   otherwise   and   against   whom   any
                 departmental or  judicial  proceedings  are  instituted  or
                 where departmental proceedings are continued, a provisional
                 pension, equal to the maximum pension which would have been
                 admissible to him, would be allowed subject  to  adjustment
                 against final retirement benefits sanctioned to  him,  upon
                 conclusion of the proceedings but no recovery shall be made
                 where the pension  finally  sanctioned  is  less  than  the
                 provisional pension or the pension is reduced  or  withheld
                 etc. either permanently or for a specified period.

           (2)   In such cases the gratuity shall not be paid  to  such  an
                 employee until the conclusion of  the  proceedings  against
                 him.  The gratuity shall be paid to him  on  conclusion  of
                 the proceedings subject to the decision of the proceedings.
                  Any recoveries to  be  made  from  an  employee  shall  be
                 adjusted against the amount of gratuity payable.”
                                                   (emphasis is ours)

Having perused Regulation 46(2), we are of the view,  that  the  High  Court
was fully justified in concluding, that it was open to the PNB  not  to  pay
to the appellant gratuity, till the culmination of the  proceedings  pending
against him.  It is, therefore, apparent, that non-release  of  gratuity  to
the  appellant  after  31.10.1996  (when  the  appellant  retired  from  his
employment, with the PNB), till his acquittal  by  the  Special  Judge,  CBI
Court, Chandigarh, on 31.10.2009, cannot be faulted.

12.   The right to withhold gratuity, is an  issue  separate  and  distinct,
from the claim of interest, which has been raised  by  the  appellant.   The
question that  arises  for  consideration  is,  whether  an  employee  whose
gratuity has been withheld under Regulation 46(2) of the  1995  Regulations,
would he be entitled to interest on the withheld payment of gratuity, if  he
is found not to  be  at  fault?   According  to  the  simple  logic  of  the
appellant, since his gratuity was withheld from 1996 (when he  retired  from
service) till 2010 (when gratuity was eventually  released  to  him),  i.e.,
for a period of 14 years, for  no  fault  of  his,  he  is  most  definitely
entitled to interest on the delayed  payment.   It  is,  however,   not  the
simple logic of the appellant,  which  will  determine  the  controversy  in
hand.  For, logic gave rise to diametrically opposite views,  one  of  which
was expressed by the Writ Court, and the other by the Letters Patent  Bench.
 We shall therefore endeavour to search for a legal answer, to the issue  in
hand.

13.   The 1995, Regulations, are silent on  the  subject  of  an  employee’s
rights whose gratuity has been withheld, even in circumstances where it  has
eventually been concluded, that he was not at fault.  This  is  exactly  the
situation in the present controversy, inasmuch as, the  appellant’s  retiral
benefits including gratuity, were withheld on 31.10.1996 when he retired  on
attaining the age of superannuation.   The  aforesaid  withholding,  was  on
account  of  a  pending  criminal  proceeding.  The  said  withholding   has
appropriately been considered as valid, under Regulation 46(2) of the  1995,
Regulation.  But the appellant was acquitted from the  criminal  prosecution
initiated  against  him  on  31.10.2009.   As  such,  it  is  inevitable  to
conclude, that his gratuity was withheld  without  the  appellant  being  at
fault.  It is  in  the  aforesaid  background,  that  we  shall  venture  to
determine the claim of the appellant for interest, despite  the  PNB  having
validly  withheld  his  gratuity  under  Regulation  46(2)  of   the   1995,
Regulations.

14.   Insofar as the issue in hand is concerned, reference needs to be  made
to certain provisions of the Payment  of  Gratuity  Act,  1972  (hereinafter
referred to as, the Gratuity Act).  In our considered view,  Sections  4,  7
and 14 of the Gratuity Act are  relevant.   Section  4  is  being  extracted
hereunder:-
      “4.   Payment of gratuity -

                 (1)   Gratuity shall be  payable  to  an  employee  on  the
                       termination of his employment after he  has  rendered
                       continuous service for not less than five years,--

                       (a)   on his superannuation, or
                       (b)   on his retirement or resignation, or
                       (c)   on his death or disablement due to accident  or
                            disease:

                       Provided that the completion of continuous service of
                       five  years  shall  not  be   necessary   where   the
                       termination of the employment of any employee is  due
                       to death or disablement:


                       Provided further that in the case  of  death  of  the
                       employee, gratuity payable to him shall  be  paid  to
                       his nominee or, if no nomination has  been  made,  to
                       his heirs, and where any such nominees or heirs is  a
                       minor, the share of such minor,  shall  be  deposited
                       with the controlling authority who shall  invest  the
                       same for the benefit of such minor in  such  bank  or
                       other financial institution, as  may  be  prescribed,
                       until such minor attains majority.


                       Explanation -  For  the  purposes  of  this  section,
                       disablement means such disablement  as  incapacitates
                       an employee for the work  which  he  was  capable  of
                       performing before the accident or  disease  resulting
                       in such disablement.


                 (2)   For every completed year of service or  part  thereof
                       in excess of  six  months,  the  employer  shall  pay
                       gratuity to an employee at the rate of fifteen  days'
                       wages based on the rate of wages last  drawn  by  the
                       employee concerned:


                       Provided that in the case of a piece-rated  employee,
                       daily wages shall be computed on the average  of  the
                       total wages received by him for  a  period  of  three
                       months immediately preceding the termination  of  his
                       employment, and, for this purpose, the wages paid for
                       any overtime work shall not be taken into account:


                       Provided further that in the case of an employee  who
                       is employed in a seasonal establishment  and  who  is
                       not so employed throughout  the  year,  the  employer
                       shall pay the gratuity at the  rate  of  seven  days'
                       wages for each season.


                       Explanation.--  In  the  case  of  a  monthly   rated
                       employee, the fifteen days' wages shall be calculated
                       by dividing the monthly rate of wages last  drawn  by
                       him by twenty-six and  multiplying  the  quotient  by
                       fifteen.

                 (3)   The amount of gratuity payable to an  employee  shall
                       not exceed one lakh rupees.

                 (4)   For the purpose of computing the gratuity payable  to
                       an employee who is employed, after  his  disablement,
                       on reduced wages, his wages for the period  preceding
                       his disablement  shall  be  taken  to  be  the  wages
                       received by him during that period, and his wages for
                       the period subsequent to  his  disablement  shall  be
                       taken to be the wages as so reduced.

                 (5)   Nothing in this section shall affect the right of  an
                       employee receive better terms of gratuity  under  any
                       award or agreement or contract with the employer.

                 (6)   Notwithstanding anything contained  in  sub-  section
                       (1), -

                       (a)   the gratuity of  an  employee,  whose  services
                            have  been  terminated  for  any  act,   wilful
                            omission or negligence causing  any  damage  or
                            loss to, or destruction of, property  belonging
                            to the employer,  shall  be  forfeited  to  the
                            extent of the damage or loss so caused;
                       (b)   the gratuity payable  to  an  employee  may  be
                            wholly or partially forfeited -

                            (i)   if the services  of  such  employee  have
                                  been  terminated  for   his   riotous   or
                                  disorderly  conduct  or  any   other   act
                                  violence on his part, or

                            (ii)  if the services  of  such  employee  have
                                  been  terminated   for   any   act   which
                                  constitutes  an  offence  involving  moral
                                  turpitude, provided that such  offence  is
                                  committed by him  in  the  course  of  his
                                  employment.”
                                                   (emphasis is ours)

It is not a matter of dispute, that the appellant was entitled  to  gratuity
when he retired on attaining the age of superannuation on  31.10.1996.   The
quantification of the appellant’s gratuity by the PNB  is  not  in  dispute.
As such, sub-sections (1) to (4) of  section  4  of  the  Gratuity  Act  are
clearly not relevant to the present controversy.  Only  sub-section  (5)  of
section 4  is  relevant  in  so  far  as  the  present  case  is  concerned.
Likewise, since the appellant has not been found to be at  any  fault,  sub-
section (6) of section 4 is also not attracted in this case.

15.   Sub-Section (5) of section 4 of the Gratuity Act permits  an  employee
to  be  regulated  for   purpose   of   gratuity,   under   an   alternative
provision/arrangement (award or  agreement  or  contract),  other  than  the
Gratuity Act.  In such an eventuality, sub-section  (5)  aforesaid,  assures
the concerned employee, “…to receive better  terms  of  gratuity  under  any
award or agreement or contract with the employer…”   Since  the  appellant’s
claim for  gratuity  is  regulated,  under  the  1995,  Regulations,  it  is
evident, that his claim for gratuity is liable to be determined by  ensuring
his right to better terms than those contemplated under  the  Gratuity  Act.
In the instant process of consideration, the aforesaid  conclusion,  namely,
that an employee who receives gratuity under a  provision,  other  than  the
Gratuity  Act,  would  be  entitled  to  better  terms  of  gratuity,   will
constitute  one  of  the  foundational  basis,  of  determination.    Having
examined section 4 of the Gratuity Act, we may unhesitatingly  record,  that
none of the other sub-sections of section 4 of the  Gratuity  Act,  as  well
as, the other provisions of the Gratuity Act, have the  effect  of  negating
the conclusion drawn hereinabove.

16.   For the determination of the present controversy, it is also  relevant
to take into consideration Section 7 of the Gratuity  Act,  which  is  being
extracted hereunder:-
      “7.   Determination of the amount of gratuity.-
           (1)   A person who is eligible for  payment  of  gratuity  under
                 this Act or any person authorized, in writing,  to  act  on
                 his  behalf  shall  send  a  written  application  to   the
                 employer, within such time and in  such  form,  as  may  be
                 prescribed, for payment of such gratuity.
           (2)   As soon as gratuity becomes payable, the  employer  shall,
                 whether an application referred to in sub-section  (1)  has
                 been made or not, determine the amount of gratuity and give
                 notice in writing to the person to  whom  the  gratuity  is
                 payable and also to the  controlling  authority  specifying
                 the amount of gratuity so determined.
           (3)   The employee shall arrange to pay the amount of  gratuity,
                 within thirty days from the date it becomes payable to  the
                 person to whom the gratuity is payable.
           (3A)  If the amount of gratuity payable under sub-Section (3) is
                 not paid by the employer within the period specified in sub-
                 Section (3), the employer shall pay, from the date on which
                 the gratuity becomes payable to the date  on  which  it  is
                 paid, simple interest at such rate, not exceeding the  rate
                 notified by the Central Government from time  to  time  for
                 repayment of long-term deposits, as that Government may, by
                 notification specify:


                 Provided that no such interest shall  be  payable  if  the
                 delay in the payment is due to the fault  of  the  employee
                 and the employer has obtained permission  in  writing  from
                 the controlling authority for the delayed payment  on  this
                 ground.
           (4)   (a) If there is any dispute as to the amount  of  gratuity
                 payable to  an  employee  under  this  Act  or  as  to  the
                 admissibility of any  claim  of,  or  in  relation  to,  an
                 employee for payment of  gratuity,  or  as  to  the  person
                 entitled  to  receive  the  gratuity,  the  employer  shall
                 deposit with the controlling authority such  amount  as  he
                 admits to be payable by him as gratuity.
                 (b) Where there is a dispute  with  regard  to  any  matter
                 specified in clause (a), the employer or  employee  or  any
                 other person raising the dispute may make an application to
                 the controlling authority for deciding the dispute.
                 (c) The controlling authority shall, after due inquiry  and
                 after giving  the  parties  to  the  dispute  a  reasonable
                 opportunity of being heard, determine the matter or matters
                 in dispute and if, as a result of such inquiry  any  amount
                 is found to be payable to  the  employee,  the  controlling
                 authority shall direct the employer to pay such amount  or,
                 as the case may be, such amount as reduced  by  the  amount
                 already deposited by the employer.
                 (d)  The  controlling  authority  shall  pay   the   amount
                 deposited including the excess amount, if any, deposited by
                 the employer, to the person entitled thereto.
                 (d) as soon as may be after a deposit is made under  clause
                 (a), the controlling authority shall pay the amount of  the
                 deposit-
                       (i)   to the applicant where he is the employee; or
                       (ii)  where the applicant is not the employee, to the
                            nominee or, as the case may be, the guardian of
                            such nominee or heir of  the  employee  if  the
                            controlling authority is satisfied  that  there
                            is no dispute as to the right of the  applicant
                            to receive the amount of gratuity.
           (5)   For the purpose of conducting an inquiry under sub-section
                 (4), the controlling authority shall have the  same  powers
                 as are vested in a court, while trying a  suit,  under  the
                 Code of Civil Procedure, 1908, (5 of 1908)  in  respect  of
                 the following matters, namely :-
                 (a)   enforcing the attendance of any person  or  examining
                       him on oath;
                 (b)   requiring the discovery and production of documents;
                 (c)   receiving evidence on affidavits;
                 (d)   issuing commission for the examination of witnesses.
           (6)   Any  inquiry  under  this  section  shall  be  a  judicial
                 proceeding within the meaning of sections 193 and 228,  and
                 for the purpose of section 196, of the  Indian  Penal  Code
                 (45 of 1860).
           (7)   Any person aggrieved by an  order  under  sub-section  (4)
                 may, within sixty days from the date of the receipt of  the
                 order, prefer an appeal to the  appropriate  Government  or
                 such other authority as may be specified by the appropriate
                 Government in this behalf:
                 Provided that the appropriate Government or  the  appellate
                 authority, as the case may be, may, if it is satisfied that
                 the  appellant  was  prevented  by  sufficient  cause  from
                 preferring the appeal within the said period of sixty days,
                 extend the said period by a further period of sixty days:
                 Provided further that no appeal by  an  employer  shall  be
                 admitted unless at the time of preferring the  appeal,  the
                 appellant either produces a certificate of the  controlling
                 authority to the effect that the  appellant  has  deposited
                 with him an amount equal to the amount of gratuity required
                 to be deposited under sub-Section (4), or deposits with the
                 appellate authority such amount.

           (8)   The appropriate Government or the appellate authority,  as
                 the case may be, may,  after  giving  the  parties  to  the
                 appeal a reasonable opportunity of  being  heard,  confirm,
                 modify  or  reverse  the  decision   of   the   controlling
                 authority.”
                                        (emphasis is ours)

A perusal of sub-Section (2) of Section 7 reveals, that it  is  the  onerous
responsibility of the employer, to determine the amount of gratuity  payable
to a retiring employee.  Sub-Section (3) of  Section  7  enjoins  a  further
responsibility on the employer, to disburse the amount of  gratuity  payable
to an employee, within 30 days from the date it becomes payable.  Since  the
appellant had attained the  age  of  superannuation  on  31.10.1996,  it  is
apparent,  that  gratuity  had  become  payable  to   him   on   31.10.1996.
Accordingly, the same ought to have been calculated in terms of  sub-Section
(2) of Section 7 of the Gratuity Act, and should have been dispersed to  the
appellant by 30.11.1996 in terms of sub-Section (3)  of  Section  7  of  the
Gratuity Act.

17.   Sub-Section (3A) of  Section  7  of  the  Gratuity  Act  is  the  most
relevant provision for the determination  of  the  present  controversy.   A
perusal of the sub-Section (3A) leaves no room for any doubt, that  in  case
gratuity is not released to an employee within 30 days  from  the  date  the
same become payable under sub-Section (3) of  Section  7,  the  employee  in
question would be entitled to “…simple interest at such rate, not  exceeding
the rate notified by the Central Government from time to time for  repayment
of long term loans, as the Government may, by notification specify…”   There
is, however, one exception to the payment of interest envisaged  under  sub-
Section (3) of Section 7 of the Gratuity Act.  The  aforesaid  exception  is
provided for in the proviso under sub-Section (3A) of Section 7.  A  perusal
of the said proviso reveals, that no interest  would  be  payable  “…if  the
delay in the payment is due to the fault of the employee, and  the  employer
has obtained permission in writing from the controlling  authority  for  the
delayed payment on this ground…”  The exception contemplated in the  proviso
under sub-Section (3A) of Section 7 of the Gratuity  Act,  incorporates  two
ingredients.  Where the two ingredients contemplated in  the  proviso  under
sub-Section (3A)  are  fulfilled,  the  concerned  employee  can  be  denied
interest despite delayed payment of  gratuity.   Having  carefully  examined
the proviso under sub-Section (3A) of Section 7 of the Gratuity Act, we  are
of the view, that the first ingredient is, that payment of gratuity  to  the
employee was delayed because of some fault of  the  employee  himself.   The
second ingredient is, that the controlling authority should  have  approved,
such withholding of gratuity (of the concerned employee)  on  the  basis  of
the alleged fault of the employee himself.  None of the  other  sub-sections
of Section 7 of the Gratuity Act, would have  the  effect  of  negating  the
conclusion drawn hereinabove.

18.   Insofar as the present controversy is  concerned,  the  appellant  was
accused of having entered into a conspiracy with a  bank  employee  superior
to him, so as to extend unauthorized benefits to  a  member  of  the  Indian
Administrative Services belonging  to  the  Haryana  Cadre.   Based  on  the
aforesaid alleged fault of  the  appellant,  the  PNB,  by  an  order  dated
13.5.2000, informed the appellant,  that  the  release  of  certain  retiral
benefits including gratuity  was  being  withheld,  because  of  pending  of
criminal proceedings against him.  The appellant was also informed,  through
the aforesaid communication, that release of his retiral benefits  including
gratuity, would depend on the outcome of the pending  criminal  proceedings.
It is, therefore apparent, that  the  second  ingredient  expressed  in  the
proviso under sub-Section (3A) of Section 7 of the Gratuity Act was  clearly
satisfied, when the competent authority approved the action  of  withholding
the appellant’s gratuity.  The instant conclusion is inevitable, because  it
is not the case of the appellant, that the  communication  dated  13.5.2000,
by which his gratuity was withheld, had not been issued at the  instance  of
the concerned controlling authority.  The only  question  which,  therefore,
arises for consideration  is,  whether  the  first  ingredient  (culled  out
above) for the applicability, of  the  proviso  under  sub-Section  (3A)  of
Section 7 of the Gratuity Act, can be stated to have been satisfied, in  the
facts and circumstances of the instant case.  If it can be  concluded,  that
the aforesaid ingredient is also satisfied,  the  appellant  would  have  no
right  to  claim  interest,  despite  delayed  release  of   gratuity.   Our
determination of the first  ingredient  is,  as  follows.   We  are  of  the
considered view, that consequent upon the acquittal of the appellant by  the
Special Judge, CBI Court, Chandigarh, it would  be  erroneous  to  conclude,
that the  gratuity  payable  to  the  appellant  on  attaining  the  age  of
superannuation i.e., on 31.10.1996, was withheld on account  of  some  fault
of the appellant himself.  We may hasten to add, if the appellant  had  been
convicted by the Special  Judge,  CBI  Court,  Chandigarh,  then  the  first
ingredient would  also  be  deemed  to  have  been  satisfied.   Conversely,
because the appellant has been acquitted, he cannot be held to be at  fault.
 Accordingly it  emerges,  that  the  “fault”  ingredient  of  the  employee
himself,  for   denial   of   gratuity   when   it   became   due,   remains
unsubstantiated.  Since one of the two salient ingredients  of  the  proviso
under sub-Section (3A) of Section 7 of  the  Gratuity  Act  is  clearly  not
satisfied in the present case, we  are  of  the  view,  that  the  appellant
cannot be denied  interest  under  the  proviso  to  section  7(3A)  of  the
Gratuity Act.  Accordingly, the appellant has to be awarded  interest  under
section 7(3A) of the Gratuity Act.  Therefore,  if  the  provisions  of  the
Gratuity Act are applicable to the appellant, he would  most  definitely  be
entitled to interest under sub-Section (3A) of Section  7  of  the  Gratuity
Act, on account of delayed payment of gratuity.

19.   The most important question which arises  for  our  consideration  is,
whether  the  provisions  of  the  Gratuity  Act  can  be  extended  to  the
appellant, so as to award him interest under sub-Section (3A) of  Section  7
of the Gratuity Act.  Insofar  as  the  instant  aspect  of  the  matter  is
concerned, it was the vehement contention of the learned  counsel  appearing
on behalf of the appellant, that the provisions  of  the  Gratuity  Act  are
extendable  to  the  appellant,  and  as  such,  he  would  be  entitled  to
disbursement of interest under Section  7(3A)  thereof.   The  plea  at  the
behest of the PNB, however, was to the  contrary.   The  contention  of  the
learned counsel representing the PNB was, that the PNB  having  adopted  the
1995, Regulations, the claim of  the  appellant  could  only  be  determined
under the provisions of the said Regulations.   It  was  pointed  out,  that
denial of payment of gratuity in the present case, was valid  and  justified
under Regulation  46(2)  of  the  1995  Regulations.   Furthermore,  it  was
pointed out, that the 1995 Regulations, did not make any provision  for  the
award of interest in case of delayed payment of gratuity.  Therefore,  since
gratuity had legitimately been withheld, under the provisions of  the  1995,
Regulations, and the payment of gratuity to the appellant is  not  regulated
under the Gratuity Act, there was no question of payment of interest to  the
appellant.   It  was  submitted  that  the  appellant’s  gratuity  had  been
withheld during the pendency of criminal proceedings initiated against  him,
his entitlement to  gratuity  stood  extended  to  such  time  as  the  said
criminal  proceedings  were  eventually  disposed  of.   Thus  viewed,   the
entitlement to gratuity stood extended to 31.10.2009 (i.e., the date of  the
disposal of the proceedings pending against him).  In this  behalf,  it  was
also pointed out, that as soon as the criminal proceedings  pending  against
the  appellant,  concluded  in  his  favour,  the  PNB  released   all   the
appellant’s retiral benefits, including gratuity.  The  documents  available
on the record of  the  case  reveal,  that  gratuity  was  released  to  the
appellant on 12.2.2010.  As such, the delay in release of  gratuity,  if  at
all, was only from 31.10.2009  to  12.2.2010.   For  the  aforesaid  delayed
payment  of  gratuity,  the  appellant  was  admittedly   awarded   interest
quantified at Rs.3,336/- (calculated at the rate of 5.5%).

20.   In order to determine which of the two provisions (the  Gratuity  Act,
or the 1995, Regulations) would be applicable for determining the  claim  of
the appellant, it is also essential to refer to Section 14 of  the  Gratuity
Act, which is being extracted hereunder:-


      “14.  Act to override other enactments, etc. – The provisions of  this
           Act  or   any   rule   made   thereunder   shall   have   effect
           notwithstanding anything inconsistent therewith contained in any
           enactment other than this Act or in any instrument  or  contract
           having effect by virtue of any enactment other than this Act.”
                                                   (emphasis is ours)

A perusal of Section 14 leaves no  room  for  any  doubt,  that  a  superior
status has been vested in the provisions of  the  Gratuity  Act,  vis-à-vis,
any  other  enactment  (including  any   other   instrument   or   contract)
inconsistent  therewith.   Therefore,  insofar  as  the  entitlement  of  an
employee to gratuity is concerned,  it  is  apparent  that  in  cases  where
gratuity of an employee  is  not  regulated  under  the  provisions  of  the
Gratuity Act, the legislature having vested superiority  to  the  provisions
of the Gratuity Act over  all  other  provisions/enactments  (including  any
instrument or contract having the force  of  law),  the  provisions  of  the
Gratuity Act cannot be  ignored.   The  term  “instrument”  and  the  phrase
“instrument or contract having the force of law” shall  most  definitely  be
deemed to include the  1995  Regulations,  which  regulate  the  payment  of
gratuity to the appellant.

21.   Based on the conclusions drawn  hereinabove,  we  shall  endeavour  to
determine the present controversy.  First and foremost,  we  have  concluded
on the basis of
Section 4 of the Gratuity Act,
that  an  employee  has  the
right  to  make  a  choice   of   being   governed   by   some   alternative
provision/instrument, other than the Gratuity Act, for drawing  the  benefit
of gratuity.  
If an employee makes such a choice,  he  is  provided  with  a
statutory protection, namely, that the concerned employee would be  entitled
to receive better terms of gratuity under the said provision/instrument,  in
comparison to his entitlement under the Gratuity Act.  
This  protection  has
been provided through Section 4 (5) of the Gratuity Act.  
Furthermore,  from
the mandate of Section 14 of the Gratuity Act, it is imperative  to  further
conclude, that the provisions of the  Gratuity  Act  would  have  overriding
effect,  with  reference  to  any  inconsistency  therewith  in  any   other
provision or instrument.  
Thus viewed, even if the provisions of  the  1995,
Regulations, had debarred payment of interest on account of delayed  payment
of gratuity, the same  would  have  been  inconsequential.  The  benefit  of
interest enuring to an employee, as has  been   contemplated  under  section
7(3A) of the Gratuity Act, cannot be denied to an employee,  whose  gratuity
is regulated by some provision/instrument other than the Gratuity Act.  
This
is so because, the terms  of  payment  of  gratuity  under  the  alternative
instrument has to ensure better terms, than  the  ones  provided  under  the
Gratuity Act. 
The effect would be the same, when the concerned provision  is
silent on the issue. This is so, because the instant situation is not  worse
than  the  one  discussed  above,  where  there  is  a  provision  expressly
debarring payment of interest  in  the  manner  contemplated  under  Section
7(3A) of the Gratuity Act. 
Therefore, even  though  the  1995,  Regulations,
are silent on the issue of payment of interest, the  appellant  would  still
be entitled to the benefit of Section 7(3A) of the Gratuity Act.    If  such
benefit is not extended to the appellant, the protection contemplated  under
section 4(5) of the Gratuity Act would stand defeated. 
 Likewise,  even  the
mandate contained in section 14 of the Gratuity Act, deliberated  in  detail
hereinabove, would stand negated.  
We,  therefore,  have  no  hesitation  in
concluding, that even though the provisions of the  1995,  Regulations,  are
silent on the issue of payment of interest, the  least  that  the  appellant
would be entitled to, are terms equal to the benefits  envisaged  under  the
Gratuity Act.  
Under the Gratuity Act, the appellant would  be  entitled  to
interest, on account of delayed payment of gratuity  (as  has  already  been
concluded above).  We therefore hold, that the appellant herein is  entitled
to interest on account of delayed payment, in  consonance  with  sub-Section
(3A) of Section 7 of the Gratuity Act.  We, accordingly, direct the  PNB  to
pay to the appellant,  interest  at  “…the  rate  notified  by  the  Central
Government  for  repayment  of  long  term  deposits…”.   In  case  no  such
notification has been issued, we are of the view, that the  appellant  would
be entitled to interest, as was awarded to him by the learned  Single  Judge
of the High Court vide order dated 4.5.2011, i.e., interest at the  rate  of
8%.  
The PNB is directed, to pay the aforesaid interest  to  the  appellant,
within one month of the appellant’s  furnishing to the PNB a certified  copy
of the instant order.   The  appellant  shall  also  be  entitled  to  costs
quantified at Rs.50,000/-, for having had to incur expenses before the  Writ
Court, before the Division  Bench,  and  finally  before  this  Court.   The
aforesaid costs shall also be disbursed to the  appellant  within  the  time
indicated hereinabove.

22.   Disposed of in the aforesaid terms.


                                           …………………………….J.
                                            (B.S. Chauhan)


                                            …………………………….J.
                                            (Jagdish Singh Khehar)
New Delhi;
December 14, 2012.
-----------------------
21

Pradip Kumar claiming the relief of reinstatement and for the grant of consequential benefits including full back wages. Although, the High Court had allowed the writ petition of the respondent only on the ground that there had been a violation of Rule 9(2), we have come to a conclusion that the order of discharge was vitiated being colourable exercise of power, stigmatic and punitive in nature and such order cannot be sustained in law. In our opinion, the order of discharge is arbitrary and therefore violates Article 14 of the Constitution. Consequently, we hold that the appellant - Pradip Kumar is entitled to be reinstated in service. He shall be entitled to full back wages during the period he has been compelled to remain out of service. Union of India is directed to release all consequential benefits to the said Pradip Kumar within a period of two months of the receipt of a certified copy of this order.

                           IN THE SUPREME COURT OF INDIA
                           CIVIL APPELLATE JURISDICTION




                      CIVIL APPEAL NO.   9082   OF   2012
                  (Arising out of S.L.P.[C] 27821 of 2012)


           Pradip                                                     Kumar
                    … Appellant


           VERSUS


           Union           of           India           and            Ors.
           … Respondents


                                    WITH


                      CIVIL APPEAL NO.   9089    OF   2012
                 (Arising out of S.L.P.[C] No.34671 of 2012)










                               J U D G M E N T




SURINDER SINGH NIJJAR,J.



1.    Leave granted in both the special leave petitions.

2.    By this common order, we propose  to  dispose  of  the  aforesaid  two
appeals as they are both directed against the  same  judgment  delivered  by
the High Court of Delhi in Writ Petition [C] No.98 of 2011 decided  on  27th
July, 2012.  Appeal arising out of Special Leave Petition No.34671  of  2012
has been filed by the Union of India challenging  the  judgment  on  various
legal grounds.  By the aforesaid judgment the High Court has set  aside  the
order passed by the Central Administrative  Tribunal  [hereinafter  referred
to as the “CAT’] Principal Bench, New Delhi, dismissing OA No.3544  of  2009
on 9th December, 2010 whereby the respondent was  discharged  from  service.
Appeal arising out of Special Leave  Petition  No.27821  of  2012  has  been
filed by Pradip Kumar challenging the judgment of the High Court, in so  far
as the said judgment limits the relief granted to him only to the extent  of
quashing of the order passed by the CAT and the order dated  20th  November,
2009, whereby he was discharged from service as  Member  [Judicial]  in  the
Customs Excise and Service Tax Appellate Tribunal [“the CESTAT”].

3.    We will firstly take up the Civil Appeal No………. of  2012  arising  out
of Special Leave Petition No.34671 of 2012, filed by  Union  of  India,  for
consideration.

4.    The respondent was a practising Advocate in the  Calcutta  High  Court
as well as before the CESTAT for over twenty years mainly dealing  with  the
customs, excise and service tax matters.  On 22nd April,  2006  he  appeared
for an interview before the Selection  Committee  for  the  post  of  Member
[Judicial] in CESTAT.  On being duly selected, he assumed charge  as  Member
[Judicial] in the CESTAT on 22nd November, 2006.  Service conditions of  the
Member of the CESTAT are governed  by  Customs,  Excise  and  [Service  Tax]
Appellate Tribunal Members [Recruitment and  Conditions  of  Service]  Rules
1987 [hereinafter referred to  as  the  “Rules”].  The  controversy  in  the
present proceedings is limited to the interpretation of Rule 8  and  Rule  9
[2] of the aforesaid Rules.  The said Rules are as under:
                 “Rule 8. Probation –  [1]   Every  person  appointed  as  a
                 member shall be on probation for a period of one year.


                 [2]   The Central  Government  may  extend  the  period  of
                 probation for a further period of one year  at  a  time  so
                 that the period of probation in aggregate  may  not  exceed
                 three years.


                 [3]   A member may be discharged from service at  any  time
                 during the period of probation without  assigning  him  any
                 reason.


                 Rule 9. Reversion or termination of the service of members.
                 – [1]  In case of a person appointed as a  technical  or  a
                 judicial member from any post under the Union or  a  State,
                 unless such a person is confirmed, the  Central  Government
                 may at any time revert  him  to  his  parent  post  without
                 assigning any reason, after giving him one  month’s  notice
                 of such reversion and in case a  technical  or  a  judicial
                 member wishes to revert to his parent  post,  he  shall  be
                 required  to  give  one  month’s  notice  to  the   Central
                 Government:


                 Provided that in case such technical or judicial member has
                 already superannuated according to the  relevant  rules  of
                 his parent post, the appointment may be terminated  by  the
                 Central Government at any time without assigning any reason
                 after giving him one month’s notice of such termination and
                 in case such technical or judicial member wishes to resign,
                 he shall be required to give  one  month’s  notice  to  the
                 Central Government.


                 [2]   In case of a person appointed as  a  judicial  member
                 directly  from  the  Bar,  unless  he  is  confirmed,   the
                 appointment may be terminated by the Central Government  at
                 any time without assigning any reason after giving him  one
                 month’s  notice  of  such  termination  and  in  case  such
                 judicial member wishes to resign, he shall be  required  to
                 give one month’s notice to the Central Government.”




5.    Under the aforesaid Rules, Member of the CESTAT is put  on  probation
for a period of one year [Rule 8(1)]. Furthermore,  under  Rule  8(2),  the
period of probation may be extended for a further period of one year  at  a
time. However, the total period of probation  cannot  exceed  three  years.
Under Rule 8(3) a Member may be discharged from service at any time  during
the period of probation without assigning any reason.  This  rule  makes  a
general provision regulating the period of probation of  members  Technical
or Judicial, irrespective of their source of recruitment.  Rule 9  (1)  and
(2), on the other hand, deals with Technical or Judicial Members, recruited
from two different sources.  Rule 9(1) deals with members,  who  have  been
appointed whilst already in the service of the Central Government.   In the
case of such Members a provision is made in Rule 9(1) to enable the Central
Government to revert him to his parent post without assigning  any  reason,
unless such a person is confirmed.  Such Member  can  be  reverted  to  his
parent post after giving one month’s notice of such reversion.  If  such  a
Member wishes to revert to his parent post, he  is  required  to  give  one
month’s notice to the Central Government.  Under the proviso,  services  of
such member can  be  terminated  by  giving  one  month’s  notice,  without
assigning any reason, if he has already superannuated  under  the  relevant
rules of his parent post.  Such member has a corresponding right to  resign
by giving one month’s notice.  We are, however, concerned  only  with  Rule
9(2) which provides that in the case of  a  person  appointed  as  Judicial
Member directly from the Bar, unless he is confirmed, his  appointment  may
be terminated by the Central Government at any time without  assigning  any
reason after giving him one month’s notice.  Similarly in case the Judicial
Member wishes to resign, he is required to give one month’s notice  to  the
Central Government.  Rule 8 clearly operates within the period of the three
years, during which a member can be continued  on  probation.    Rule  9(2)
would apply only in cases where the Judicial Member is still not  confirmed
even after the maximum period of three  years,  on  probation.   Rule  9(2)
would have no application  within  the  period  of  three  years.   Rule  8
provides for discharge of probationer.  Rule 9(2) talks of  termination  of
service.  In such circumstances, it provides that notice of one month shall
be given before termination.  But this procedure  would  become  applicable
only if the Judicial Member has been in service for three  years  or  more.
Otherwise, provision of one month notice would have been  made  in  Rule  8
itself.  Rationale underlying the provision in Rule 9(1) is to  enable  the
member recruited from a Central Government  post  to  be  reverted  to  his
parent post.  To put Judicial member recruited directly from the Bar at par
with those recruited from Central Government posts, the necessary provision
of one month notice has been made in Rule 9(2).  No such  notice  would  be
required if the Judicial Member is discharged  within  a  period  of  three
years, if not confirmed.

6.    Keeping in view the aforesaid interpretation of Rules 8  and  9,  let
us now examine the facts.  It appears that no order extending the period of
probation of the respondent was passed at the end of the  mandatory  period
of  probation                          on  21st  November,  2007  or   soon
thereafter.   The  respondent,  therefore,  continued  to  work  as  Member
[Judicial].  However, he  received  an  order  dated  19th  November,  2009
extending his period of probation; first upto 21st November, 2008 and  then
upto 21st November, 2009.  Receipt of the letter dated 19th November,  2009
resulted in the respondent tendering  his  resignation  from  the  post  of
Member [Judicial] CESTAT                on 20th November,  2009.   On  that
very date an order was issued whereby the respondent  was  discharged  from
service on the post  of  Member  [Judicial]  CESTAT.   The  said  order  is
reproduced below:
                 “F.No.26/8/2006-Ad.IC.
                 Government of India
                 Ministry of Finance
                 Department of Revenue
                 New Delhi the 20th Nov. 2009


                 ORDER NO.5 OF 2009


                 In pursuance of  rule  8(3)  of  the  Customs,  Excise  and
                 Service Tax Appellate  Tribunal  Members  (Recruitment  and
                 Conditions of Service) Rules  1987,  the  President  hereby
                 discharges forthwith Sh. P.K.  Das,  Member  (Judicial)  in
                 Customs  Excise  &  Service  Tax  Appellate  Tribunal  from
                 service.


                 2.  By order and in the name of the President.


                                                                        Sd/-
                                                            ( Victor James )
                                       Under Secretary to the Govt. of India


                 To,


                 Sh. P.K. Das, Member (Judicial)
                 CESTAT, West Block No.2
                 R.K. Puram, New Delhi


                 Copy to:


                 1.    President, Customs, Excise &  Service  Tax  Appellate
                       Tribunal, New Delhi.
                 2.    Registrar, Customs Excise  &  Service  Tax  Appellate
                       Tribunal, New Delhi.
                 3.    Establishment  Officer,  Department  of  Personnel  &
                       Training North Block.
                 4.    Pay and Accounts Officer, Department of Revenue
                 5.    Notification Folder
                                                                        Sd/-
                                                            ( Victor James )
                                      Under Secretary to the Govt. of India”


It  appears  that  thereafter  by  letter  dated  23rd  October,  2009   the
respondent withdrew his resignation under Rule 9(2), which was  well  within
the prescribed period of one month.

7.    During the period of his  service  the  respondent  had  served  under
three Presidents, CESTAT, namely, Justice Abichandanani,  Justice  S.N.  Jha
and Justice R.M. Khandparkar.  It is the case  of  the  respondent  that  he
never received any adverse comments from any of the  Presidents  during  his
tenure of service as a Member [Judicial], CESTAT.  In  fact,  he  was  given
the annual increments in the years 2007 and 2008.  Since,  he  had  received
no adverse reports, the respondent assumed that he  would  be  confirmed  on
the post of Member [Judicial] CESTAT.  But to his utter  shock  and  dismay,
he received the  order  dated                   19th  November,  2009  which
extended his period of probation; first upto 21st November,  2008  and  then
further upto                    21st November,  2009.   It  is  further  the
case of the respondent, on the basis of the information obtained  under  the
Right  to   Information   Act   2005,   that   there   is   a   note   dated
        26th November, 2007 in File  No.27/22/2005-AD.IC  in  which  it  has
been  mentioned  that  the  action  for  initiation  of   the   process   of
confirmation of the respondent, which was due on 22nd November, 2007,  would
be initiated in a new file.  There is further noting on 23rd  January,  2008
calling for the ACRs of the respondent and two other Members. On  6th  June,
2008        Justice S.N. Jha, President, CESTAT,  wrote  to  the  Secretary,
Department of Revenue, requesting him to take steps for the confirmation  of
some of the Members of the CESTAT including the respondent.   The  Vigilance
Cell had also conveyed its clearance from its own angle, in so  far  as  the
respondent was concerned.

8.    However, the circumstances did a complete  about  turn  when,  like  a
bolt out of the blue, on 14th September, 2009,  the  respondent  received  a
note from the President of the CESTAT  annexing  therewith  a  copy  of  the
complaint from the members of the Bar about an incident  which  was  alleged
to have occurred in the  respondent’s  Court  on  9th  September,  2009  and
requesting for a report about the incident.  The  President  of  the  CESTAT
prepared a report on 18th  November,  2009  regarding  the  incident,  which
inter alia, contained the following observations regarding  the  conduct  of
the respondent:
                 “15.  It must be noted that whenever any act of misbehavior
                 on the part of the parties or their  representatives  takes
                 place in the court, it is  essentially  for  the  Presiding
                 Officer to administer proper control and to try  to  defuse
                 the tension if any caused on that count and not  to  retire
                 immediately to the chamber.  Abstaining from and abandoning
                 the court in such a situation and leaving it open and  free
                 for all court result is  encouraging  indiscipline  in  the
                 court.  Merely because some of the representatives  of  the
                 parties start raising voice or make allegations against the
                 Bench,  it  would  not  be  proper  to  abandon  the  court
                 functioning and to retire to chamber.  Rather the Presiding
                 Officer has to try to control  such  situation  by  use  of
                 administrative acumen.  In the case in hand, there does not
                 appear any efforts made by the Presiding  Officer  in  that
                 regard.”


The respondent  claims  that  his  services  were  terminated  as  a  direct
consequence of the complaint made by the representatives of the Bar and  the
report of the President, CESTAT.

9.    Aggrieved by the aforesaid order, the respondent challenged  the  same
before the CAT by way of OA No.3544 of 2009 on 7th December, 2009.   On  9th
December, 2009, the OA was dismissed by  the  CAT.   The  CAT  rejected  the
submission that the respondent was deemed to be  confirmed  upon  completion
of one year period of probation.  In  any  event  it  seems  respondent  had
dropped  the  contention  regarding  the  deemed  confirmation  after   some
arguments initially and upon considering the  judgment  of  the  CAT  in  OA
No.1895 of 2009 – Dr.  Vineet  Sodhi  Vs  Union  of  India  decided  on  6th
December, 2010.  CAT also rejected the submission  of  the  respondent  that
the order of discharge from service was punitive in nature.  It was held  by
CAT that even though report had been received  from  the  President,  CESTAT
regarding the complaint made by the  Members  of  the  Bar,  ultimately  the
discharge of the respondent was on the basis of  his  unsuitability  of  the
job and unsatisfactory performance of duty.  It was  also  observed  by  the
CAT that there was no full scale formal inquiry, but only  facts  have  been
brought to the notice of the competent authority  about  the  unsatisfactory
performance  of  the  respondent.  With  these  observations,  the  OA   was
dismissed.

10.   The respondent being aggrieved challenged the order  before  the  High
Court of Delhi by way of Writ Petition [C] No.98 of 2011.   The  High  Court
allowed the writ petition only on the interpretation of Rule 8(3)  and  Rule
9(2) of the Rules, although the respondent had raised four  specific  points
for the consideration of the High Court.  It was submitted  that  the  order
of discharge could not be sustained as  it  had  been  passed  in  arbitrary
exercise of power.  It was said to be a product of malice in law.   Secondly
it was submitted that the discharge order was punitive  in  nature  inasmuch
as it was stigmatic and, therefore, it  was  essential  that  inquiry  under
Article 311(2) of the Constitution of India ought to  have  been  conducted.
Thirdly, it was submitted that the relevant rules  and  in  this  case  Rule
9(2) of the said Rules, requires giving  of  one  month’s  notice  prior  to
termination. That notice  was  admittedly  not  given  and,  therefore,  the
termination was bad.  Fourthly, it was submitted that by virtue  of  Rule  8
of the Rules the respondent could be deemed  to  have  been  confirmed.  The
High Court on interpretation of Rules 8 and 9 of the  Rules  has  held  that
since the respondent had completed more than three years service and he  was
a Judicial Member, under Rule 9(2) his  services  could  not  be  terminated
without  serving  upon  him  one  month’s  notice.    In   our   view,   the
interpretation given by the High Court on     Rule 9(2) is not correct.   In
the case of Judicial Member directly recruited from the Bar,  the  procedure
prescribed under Rule 9(2) is required to be followed only  if  such  member
without being confirmed continues for three years or more.

11.   Nonetheless the  order  of  discharge  cannot  be  upheld,  as  it  is
stigmatic and punitive in nature. It is  a  matter  of  record  that  during
three years  of  service  no  order  was  issued  extending  the  period  of
probation of the respondent. He completed the mandatory period of  probation
on 21st November, 2007, therefore, it was  expected  of  the  department  to
take a decision about the performance of the respondent within a  reasonable
period from the expiry of one year.  It is also a matter of record that  the
respondent continued in service without receiving  any  formal  or  informal
notice about the defects in his work or any deficiency in  his  performance.
This Court, in the case of  Sumati  P.  Shere  Dr.  Vs.  Union  of  India  &
Ors.[1], emphasised the importance of timely communication  of  defects  and
deficiencies in performance to a probationer, so  that  he  could  make  the
necessary  efforts  to  improve  his   work.    Non-communication   of   his
deficiencies in work would render any movement order of such an employee  on
the ground of unsuitability arbitrary. In Paragraph 5 of  the  judgment,  it
is observed:-
                 “5. We must emphasise that in the  relationship  of  master
                 and servant there is a moral obligation to act  fairly.  An
                 informal, if not formal, give-and-take, on  the  assessment
                 of work of the  employee  should  be  there.  The  employee
                 should be  made  aware  of  the  defect  in  his  work  and
                 deficiency in his  performance.  Defects  or  deficiencies;
                 indifference or indiscretion may be with  the  employee  by
                 inadvertence  and  not  by  incapacity  to   work.   Timely
                 communication of the assessment of work in such  cases  may
                 put the employee on  the  right  track.  Without  any  such
                 communication, in our opinion, it  would  be  arbitrary  to
                 give a movement order to the  employee  on  the  ground  of
                 unsuitability.”


In our opinion, the aforesaid observations  are  fully  applicable  in  the
facts and circumstances of this case.

12.   It is also a matter of record that the procedure for confirmation  of
the respondent had been initiated on               26th November, 2007.  It
is also not disputed that vigilance report for his  confirmation  had  also
been received.  Therefore, it is difficult  to  accept  the  submission  of
learned counsel  for  the  Union  of  India,  that  the  discharge  of  the
respondent is not founded on the complaint made by some of  the  advocates.
The report prepared by  the  President,  CESTAT  on  18th  November,  2009,
clearly indicated that the only reason for issuing the order  of  discharge
was contained in the  aforesaid  report.   In  our  opinion  the  order  of
discharge passed by the Union of India was clearly vitiated  by  the  legal
malice.  It was clearly founded upon the report submitted by the President,
CESTAT.  In our opinion the controversy herein is  squarely  covered  by  a
number of earlier judgments of this Court, which have been  considered  and
reaffirmed in the case of Union of India and Ors. Vs. Mahaveer  C.  Singhvi
[2].  Considering the similar circumstances this Court observed as follows:
                 “25.  In the facts of the case the High Court came  to  the
                 conclusion that a one-sided inquiry had been  conducted  at
                 different levels.  Opinions  were  expressed  and  definite
                 conclusions relating to the respondent’s  culpability  were
                 reached by key officials who had  convinced  themselves  in
                 that  regard.   The  impugned  decision  to  discharge  the
                 respondent from service was not  based  on  mere  suspicion
                 alone.  However, it was all done behind  the  back  of  the
                 respondent and accordingly the alleged misconduct for which
                 the services of the respondent were brought to and end  was
                 not merely the motive for the said decision but was clearly
                 the foundation of the same.”




           13.   In our opinion, there is clearly a live nexus between  the
           decision  to  discharge  the   respondent   vide   order   dated
                    19th November, 2009;  the  disturbance  caused  by  the
           members of the Bar in  the  Court  of  the  respondent  and  his
           leaving the Bench and retiring to his Chamber.   The  report  of
           the President leaves no manner of doubt that the respondent  had
           been condemned unheard on the basis of  the  aforesaid  incident
           and the report of the  Chairman,  CESTAT  dated  18th  November,
           2009.  The order of discharge, being based upon  the  report  of
           the President, is clearly stigmatic  and  could  not  have  been
           passed without giving an opportunity to the respondent  to  meet
           the allegations  contained  in  the  report  of  the  President,
           CESTAT.  We may notice here the observations made by this  court
           in the case of Mahaveer C. Singhvi [supra]:


                 “46.  As has been held in some of the  cases  cited  before
                 us, if a finding against a probationer is arrived at behind
                 his back on the basis of the  enquiry  conducted  into  the
                 allegations made against him/her and if the same formed the
                 foundation of the order of discharge, the same would be bad
                 and liable to be set aside.   On  the  other  hand,  if  no
                 enquiry was held or contemplated and the  allegations  were
                 merely a motive for the passing of an order of discharge of
                 a probationer without giving him a hearing, the same  would
                 be valid.  However, the latter view is not attracted to the
                 facts of this case.”




14.   This apart, we are also of the opinion that the  order  of  discharge
has been passed in order to avoid  the  procedure  of  giving  one  month’s
notice as required  under  Rule  9(2).   The  aforesaid  Rule  has  made  a
distinction between the members of the  CESTAT  who  were  working  in  the
Central Government prior to their recruitment as Members of the CESTAT  and
the Judicial Member directly recruited  from  the  Bar.   In  the  case  of
members recruited from the various services of the  Central  Government,  a
provision has been made for their reversion to the parent  department.   In
their case a provision has also been made for them to be  reverted  to  the
parent department without assigning any reason.  However, the same can only
be upon giving one  month’s  notice.   In  the  case  of  Judicial  Member,
directly recruited, it has been specifically provided [Rule 9(2)] that upon
completion of three years if the Judicial Member has  not  been  confirmed,
his services can only be terminated upon being given  one  month’s  notice.
To avoid this provision, an  order  was  passed  on  19th  November,  2009,
extending the respondent’s period of probation from 21st November, 2007  to
21st November, 2008 and further upto 21st November, 2009.  This was clearly
done with an oblique motive of issuing the order of discharge on  the  very
next day, i.e., 20th November, 2009.  The action of the Union of  India  is
undoubtedly a colourable exercise of power.  The order of discharge  is  in
utter violation of Article 14 of the Constitution of India,  rendering  the
same void.  In view of the above, we have no hesitation in holding that the
special leave petition No. 34671 of 2012 filed by the  Union  of  India  is
wholly devoid of merit and has to be dismissed.

15.   This now brings us  to  the  appeal  arising  out  of  Special  Leave
Petition No. 27821 of 2012 filed by Pradip Kumar  claiming  the  relief  of
reinstatement and for the grant of consequential  benefits  including  full
back wages.  Although, the High Court had allowed the writ petition of  the
respondent only on the ground that there had been a violation of Rule 9(2),
we have come to a conclusion that the order of discharge was vitiated being
colourable exercise of power, stigmatic and punitive  in  nature  and  such
order cannot be sustained in law.  In our opinion, the order  of  discharge
is arbitrary  and  therefore  violates  Article  14  of  the  Constitution.
Consequently, we hold that the appellant - Pradip Kumar is entitled  to  be
reinstated in service.  He shall be entitled to full back wages during  the
period he has been compelled to remain out of service.  Union of  India  is
directed to release all consequential benefits to  the  said  Pradip  Kumar
within a period of two months of the receipt of a certified  copy  of  this
order.

16.   With these observations, the appeal filed by  Union  of  India  being
Civil Appeal No.  9089  of 2012 arising out of Special Leave  Petition  [C]
No. 34671 of 2012 is dismissed and Civil Appeal No. 9082  of  2012  arising
out of Special Leave Petition [C] No. 27821 of 2012  filed  by  the  Pradip
Kumar is allowed.


                                                          .….………………………...CJI
                                                             [ALTAMAS KABIR]




                                                             ….……………………………J.
                                                     [SURINDER SINGH NIJJAR]




                                                              …….…………………………J
                                                            [J. CHELAMESWAR]

New Delhi;
December 14, 2012.




















































ITEM NO.1A               COURT NO.12             SECTION XIV
(For Judgment)
            S U P R E M E   C O U R T   O F   I N D I A
                         RECORD OF PROCEEDINGS

                       CIVIL APPEAL NO. 9082  OF 2012
                      (Arising out of SLP(C) No.27821/2012)

PRADIP KUMAR                                Appellant(s)

                 VERSUS

UNION OF INDIA & ORS.                       Respondent(s)
                                    WITH

                       CIVIL APPEAL NO. 9089  OF 2012
                      (Arising out of SLP(C) No.34671/2012)


Date: 14/12/2012  These matters were called on for
                    pronouncement of judgment today.



For Petitioner(s)      Mr. Nikhil Jain,Adv.


For Respondent(s)      Mr. B. Krishna Prasad,Adv.


                  Hon'ble Mr. Justice Surinder Singh Nijjar  pronounced  the
      Judgment of the Bench comprising  of  Hon'ble  the  Chief  Justice  of
      India, Hon'ble Mr. Justice  Surinder  Singh  Nijjar  and  Hon'ble  Mr.
      Justice J. Chelameswar.
                  Leave granted in both the petitions.
                  Civil Appeal No.9089 arising out of  SLP(C)  No.34671/2012
      is dismissed and Civil  Appeal  No.9082/2012  arising  out  of  SLP(C)
      No.27821/2012 is allowed in terms of the signed judgment.


     (A.S. BISHT)                          (INDU BALA KAPUR)
     COURT MASTER                          COURT MASTER


             (Signed reportable judgment is placed on the file)
                           -----------------------
[1]    (1989) 3 SCC 311
[2]     [2010] 8 SCC 220

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