Calcutta High Court Ruling on Gratuity Act
The Calcutta High Court held last week that service regulations of a public sector bank will override the provisions of the Payment of Gratuity Act. The court set aside the decision to the contrary of the controlling authority under the Act in its judgment, United Bank of India vs North India. An employee was terminated for sanctioning loans that violated norms and caused losses to the tune of ₹26 crore. His services were terminated, and gratuity was forfeited, though the disciplinary proceedings continued. The bank's view was that under the service regulations, the employer would be entitled to forfeit the damage suffered out of the amounts payable towards gratuity.
The labour commissioner and the controlling authority under the Act ruled that gratuity cannot be denied as the main Act will prevail over the regulations. They maintained that the statute was beneficial legislation, and therefore, any regulation inconsistent with the object of the Act was not valid. The high court ruled that they were wrong. It explained that according to the 1970 law taking over and establishing the public sector bank, the regulations were specifically framed by the Board of Directors. "It is a special piece of subordinate legislation which, because of their very special nature, must give pre-eminence and precedence over the general principle or any general provision of law covering the same field. All that the court is required to find is that in such a situation, the subordinate legislation is not overreaching or overstepping the principal Act."
Source:
New employer to pay PF penalty | Business Standard Opinion
The Calcutta High Court held last week that service regulations of a public sector bank will override the provisions of the Payment of Gratuity Act. The court set aside the decision to the contrary of the controlling authority under the Act in its judgment, United Bank of India vs North India. An employee was terminated for sanctioning loans that violated norms and caused losses to the tune of ₹26 crore. His services were terminated, and gratuity was forfeited, though the disciplinary proceedings continued. The bank's view was that under the service regulations, the employer would be entitled to forfeit the damage suffered out of the amounts payable towards gratuity.
The labour commissioner and the controlling authority under the Act ruled that gratuity cannot be denied as the main Act will prevail over the regulations. They maintained that the statute was beneficial legislation, and therefore, any regulation inconsistent with the object of the Act was not valid. The high court ruled that they were wrong. It explained that according to the 1970 law taking over and establishing the public sector bank, the regulations were specifically framed by the Board of Directors. "It is a special piece of subordinate legislation which, because of their very special nature, must give pre-eminence and precedence over the general principle or any general provision of law covering the same field. All that the court is required to find is that in such a situation, the subordinate legislation is not overreaching or overstepping the principal Act."
Source:
New employer to pay PF penalty | Business Standard Opinion