Supreme Court: Gratuity money can be withheld for recovery of dues

Supreme Court: Gratuity money can be withheld for recovery of dues

The Supreme Court of India (SC) has held that gratuity money of an employee can be withheld and forfeited for recovery of dues such as overstaying in official accommodation

M/s Steel Authority of India (petitioner) filed a Special Leave Petition (SLP) before the SC against Raghbendra Singh and others (respondents) against the order of the High Court (HC). It was claimed that the employee had the right to retain the quarter and he did not vacate the quarter that resulted in proceedings under the Public Premise (Eviction of Unauthorized Occupants) Act, 1971 which culminated against the employee and had attained finality.

The petitioner raised the plea that the employee occupied the quarter beyond the specified period and hence the penal rent would be the natural consequence that can be adjusted against the dues payable, including gratuity.

The matter was listed before a Division Bench of the HC in 2017 that ruled against confiscating the gratuity of an employee on account of overstaying in official quarters after his retirement. The Bench had ordered the immediate release of his gratuity and held only normal and not penal rent should be charged for the period overstayed.

The SLP was filed against the said order and it was listed before the bench comprising of Justice Sanjay K Kaul, Justice Dinesh Maheshwari, and Justice Hrishikesh Roy. The judgment was delivered on 15 December 2020.

The SC has observed, "The principles of penal rent being charged as we are of the view that if an employee occupies a quarter beyond the specified period, the penal rent would be the natural consequence and such penal rent can be adjusted against the dues payable including gratuity. This is so given of the judgment in Secretary, ONGC Ltd. v. V.U. Warrier - (2005) 5 SCC 245 and the reliance placed by the HC in the impugned judgment on the case of Ram Naresh Singh v. Bokaro Steel Plant [Civil Appeal No.4740/2007] dated 31.03.2017 is misplaced as is not even a judgment but an order in the given facts of the case".

The SC concluded, "There is no prohibition against recovering dues including penal rent, the rent with the penalty for overstaying in official accommodation from an employee's gratuity."

The SC has set aside the order of the HC partly and held gratuity money of an employee can be withheld and forfeited in case of recovery of dues such as overstaying in official accommodation. However, the SC did not interfere with the monetary aspect of the order passed by the HC.