How Should We Handle Court Summons for Employee's Maintenance Deduction Before Retirement?

Dear Team, We have an employee working in our company who is involved in an ongoing civil case. We are deducting his monthly salary as per the court order and paying this amount to his first wife as a maintenance allowance. This employee is set to retire next month, and his next hearing date, which I have to attend, is before his retirement. The employee has to pay a maintenance allowance of around Rs 2 lakhs.

Please advise if we need to provide a letter to the court stating his retirement, as the employer was summoned by the court for the recovery of this amount.

Please advise.

Regards,
Ranjeet

Without a doubt, you need to inform the court. It seems you don't have any legal department or legal representative in your organization to handle these matters, if I'm not mistaken. Therefore, I advise you to seek legal advice from the lawyer handling this case or any competent lawyer, which is really important for your organization.

Secondly, informing the court about developments on your end related to the employee and the respective court order is not just your responsibility but also a condition. I believe this kind of instruction has been given by the court in the documentation of the order in a clause, which needs to be considered again.

You have not made it clear how you are paying the maintenance amount to his wife. Is it under Section 125 Cr P.C or what? Surely, you should disclose the retirement date and facts to the court.

Dear Anil/KK,

Surely, we have a legal department in our company handling a vast portfolio, which is important for the business. We also have very reputable lawyers working with us. Just as a query before approaching them, I have raised this question. Can you all please let me know exactly what needs to be drafted in a letter to the court, or should we simply state that he will be retiring from the services of the company on [date]? This is for your information. Is there any legal terminology that should be used in it?

Regards,
Ranjeet

Thanks for sharing more information about your query and question. Yes, you just need to write an "FYI" letter stating that the employee is going to retire from the service on [date] by referring to the Civil Case No./Details.

You also need to enclose details of his current emoluments and benefits provided by you, details of the share you are providing to his wife, work period, a copy of the employment letter as supporting documents, and a copy of the court order.

Lastly, please send the same by registered AD so that you can have legal reference proof and documentation to support and favor your case.

Court Appearance and Payment Liability

No need to give a letter to the court. The court will ask him about the non-payment of the maintenance amount during his appearance on the date of the hearing. Your payment liability arises as long as he is in your service.

Regards,

Non-compliance with the Honorable Court's order may result in contempt of court. Therefore, as suggested by Sh. Anil Arora, it is advisable to submit an application to the honorable court before retirement. This application should state the employee's retirement and request the cancellation of orders for payment of maintenance charges to the employee's wife post-retirement.

Thank you.

You have not attached a copy of the injunction order of the court directing you to recover the first wife's maintenance amount from the salary. Does it direct you to recover the full amount of Rs. 2 lakhs by monthly recovery? Is it only by installments or the entire amount irrespective of whether it's from salary or from F & F settlement? Unless you provide the exact text of the directive, we cannot apply our mind.

However, merely giving a letter to the court will not suffice. It should be in the form of a Sworn Affidavit followed by personal appearance through your counsel under a copy to the retiring employee. Probably the court will take on record the facts and position and might modify its impugned order on the plea of the claimant if deemed fit. This is necessary because a speaking order will be necessary for the recovery of sums from the F & F unlike recovery from salary. That too, recovery from PF is practically not possible except when the nomination, if it was registered in her favor, is valid because the employee is still alive who is going to be the surviving claimant/recipient. Your advocate should guide you adequately to avoid inviting a contempt petition against you.

Thank you for your valuable guidance. Firstly, I would like to clarify that initially, the court sent us a notice to recover ₹2,65,000 in one installment only. Later, when we appeared in court, the honorable judge ordered to detach half of the salary and pay the same until the recovery of this amount. Now, the employee will be retiring next month, and more than ₹2 lakh are pending for recovery.

This is the case.

Regards,
Ranjeet

Dear All,

Thanks for your valuable guidance. Firstly, I would like to clarify that at the first instance, the court had sent us a notice to recover ₹2,65,000/- in one installment only. Later on, when we appeared in court, the honorable judge passed the order to detach half of the salary and to pay the same until the recovery of this amount.

Now the employee will be retiring next month, and around more than ₹2 lakh rupees are pending for recovery. This is the case.

That's it, you have to do as I suggested because probably there won’t be a salary to recover any further in the institution. So the only option is his F & F settlement.

Regards,
Ranjeet

Presume that this employee, X, is retiring on June 14. Please prepare a final settlement or determine what his final settlement could be. Inform the court of your total liability towards the employee and request necessary orders on who should be the beneficiary. As there is a court order for you to pay Rs. 2.65 lakhs, you can deposit this employee's final settlement and present it to the court.

His gratuity, PF, and any other benefits should also be presented to the court since there is a directive for you to recover the mentioned Rs. 2.65 lakhs. The employer is not liable for anything beyond what is due to the employee.

Regards.

Dear Sirs,

Some experts and seniors, in their previous comments, have suggested the recovery of an amount of Rs. 2 lakh from the full and final settlement of the retiring employee, including from his Gratuity and Provident Fund. I would like to point out that, in my view, such a recovery is not feasible according to the provisions of the law, as detailed below.

Legal Provisions on Deductions

Section 7(2)(h) of the Payment of Wages Act, 1936, authorizes the employer to deduct amounts from the wages of an employee as per the order of a Court or other competent authority. However, such deductions must not exceed 50% of the employee's wages (Section 7(3)). The scenario is different concerning amounts from Gratuity and Provident Funds.

Protection of Gratuity and Provident Funds

Section 13 of The Payment of Gratuity Act, 1972, prohibits the jurisdiction of any Honorable Court to order an attachment of the gratuity amount due to an employee. Similar provisions exist under section 10 of the Employees' Provident Fund & Miscellaneous Provisions Act, 1952. The situation may vary for other amounts payable at the time of the full and final settlement of the retiring employee.

If an order from the honorable court is issued for the attachment of Gratuity or Provident Fund amounts, it can be challenged in higher courts. In such a case of delay, the retired employee may rightfully demand compound interest from the employer for the delay, as per section 8 of the Gratuity Act, 1972.

Therefore, I kindly request seniors and HR experts to reconsider the issue.

Thank you.

This is to clarify certain opinions in this respect. As an employer, he is duty-bound to obey the orders of the court even if it is related to the F&F settlement. Having said that, courts will not appreciate the stand of the employer raising objections, quoting all case laws which went against recovery/attachment from F&F settlement. The court might direct the employer to deposit the kitty to the respective Appropriate Officials under the Gratuity Act and EPF Act pending disposal of the litigation from the decree holder and the employee. This could be the safest way to avoid all repercussions.

I don't think Hon'ble Civil Courts are not aware of the judgments of higher courts which prohibited recovery from F&F settlement, but still, injunctions are passed. I personally faced such attachment orders despite the fact they are passed relating to "all payments accrued and payable to the employees concerned," which means, without saying, includes F&F also. The surprise is that it included EPF payment also (which was ultimately struck down by the Session court). Moreover, it is needless for employers to go on thankless appeals to the higher courts citing all the landmark judgments by which action the employer may be branded as taking sides with the employee and denying the share of legitimate stakeholders. Therefore, it is necessary to play safe from the employer's point of view.

Your points raised are valid, but these issues should have been addressed before the court when the summons were received. Raising them now, especially when the employee is retiring, is of no use. It is a fact that more than 50% is deducted and paid to the wife through the court. Therefore, after obeying the court order, the employer has very limited scope to change his stance. The employer can raise the issue presented here even now, but what is the use when the employee is retiring? Ultimately, the courts are supreme, and their orders are binding on citizens, including employers. The issue at hand is how to proceed with the court order, not what legal remedies are available. Bringing up remedies at the end is not an issue when the court orders have already been complied with.

Thank you for expressing your views on my remarks from yesterday. As per the facts of the case, the court had ordered recoveries from the wages of the employee. The Honorable court perhaps has not ordered recoveries from the retirement benefits of the employees. The retirement benefits, such as amounts of Gratuity and Provident Funds, are funds and amounts that cannot be attached by any decree or order of the Honorable court.

This is what I have tried to convey regarding the legal position to the HR community participating in this discussion. I am not aware of the defense the affected employee wishes to take in the case. However, if desired, the employer can explain the legal position to the Honorable court on the next date of hearing.

Employee Service and Provident Fund Considerations

How many years of service did the employee put in at your company? Please note that Provident Fund and Gratuity cannot be attached. Hence, as suggested by experienced members here, please submit to the court a worksheet by your company about the probable amount the employee would be getting (by way of his salaries, leave encashment benefits, any contributions by him in the Staff Welfare Fund, bonus) along with your application intimating the court about his retirement date, by referring to the Honorable Court's direction to your company. If his Full and Final (F&F) amount will be more than the recoverable amount as directed by the court, no problem. You can straight away offset this amount and pay the balance to the employee.

Thanks,

R K Nair

Thank you for your valuable guidance. I would like to inform you that the employee has almost completed more than 30 years with the company. Presently, he is on leave on medical grounds. Besides a very small number of leave encashment, there is nothing which the employer has to pay towards the full and final settlement.

Next Steps if Court Orders Deductions

If the court directs us to deduct the amount from PF and gratuity, what is the next course of action that management as well as the employee can take? Surely, we are going to present a letter about his retirement in court.

Regards,
Ranjeet

If his F&F amount is likely to be very low, it is better to send communication to the Court about his retirement and his nominal dues from the company well in advance, and wait for the Court's further orders.

Thanks,

R K Nair

Dear Jeeni, After going through all the posts, my suggestion to you, given the circumstances explained, is as follows:

1. As many friends have suggested, work out all the amounts, including the final settlement such as gratuity, leave encashment, salary, and PF. Determine who has to pay this—are you an exempted establishment maintaining your own PF Trust, or have you been remitting all the PF contributions to the EPFO and distributing the annual statement to the employees? If you don't have your EPF Trust, then PF settlement is not your headache. Also, include bonus and other payments. Submit an affidavit to the court and seek directions from the court.

2. Inform the retiring employee to produce a NOC from the Court or bring the court order vacating/cancelling the injunction/decree. This is necessary because once you pay him fully or partly, recovering any money from him is practically not possible. So, proceed with caution.

3. PF and gratuity cannot be withheld, delayed, or attached, so you have to issue necessary forms for final settlement to him. Collect them duly filled and forward to the concerned authorities, with a remark quoting from the operating portion of the Court orders verbatim. Attach a copy of the court order and state that the matter is sub judice. How about gratuity? Do you pay from your funds or through LIC or other agencies?

Following these steps might help you to avoid overdue interest accruing after one month of his retirement.

Regards,