Holding

The employer may withhold gratuity during the pendency of disciplinary proceedings and may impose dismissal after superannuation, as authorized by Rule 34.2 and Rule 34.3 of the CDA Rules, without conflict from the Payment of Gratuity Act, 1972.

Summary

The appellant, Mahanadi Coalfields Ltd., sought to withhold the gratuity of its former employee, Sri Rabindranath Choubey, who had superannuated while a disciplinary inquiry was pending, and to impose dismissal after the inquiry concluded. The respondent argued that gratuity becomes payable on superannuation and that dismissal cannot be ordered after retirement. The Supreme Court examined the Conduct, Discipline & Appeal (CDA) Rules 1978, particularly Rules 34.2 and 34.3, and held that they permit the employer to retain the employee in a deemed‑service status for the purpose of completing the inquiry, to withhold gratuity during the pendency of the proceedings, and to impose any penalty under Rule 27, including dismissal, even after superannuation. The Court further ruled that the Payment of Gratuity Act, 1972 does not bar these powers and that its Section 4(6) supports forfeiture of gratuity where dismissal is imposed. Consequently, the High Court’s order directing payment of gratuity was set aside and the disciplinary proceedings were ordered to be concluded.

Issues considered

Whether an employer may withhold gratuity after an employee's superannuation when disciplinary proceedings are pending.
Whether dismissal can be imposed on an employee who has retired, where the disciplinary inquiry was instituted while he was in service.

Legislation cited

Payment of Gratuity Act, 1972s. 4(1), s. 4(6), s. 7(3), s. 7(3A)

Subjects

gratuitydisciplinary inquirysuperannuationwithholding gratuitydismissal after retirementlegal fictionCDA Rules 1978service law

Judgment

[2020] 8 S.C.R. 1 1

CHAIRMAN-CUM-MANAGING DIRECTOR, A
MAHANADI COALFIELDS LIMITED
v.
SRI RABINDRANATH CHOUBEY
(Civil Appeal No. 9693 of 2013)
MAY 27, 2020 B
[ARUN MISHRA, M. R. SHAH AND AJAY RASTOGI, JJ.]
Service Law: Disciplinary proceeding – Superannuation –
Payment of gratuity/Dismissal from service – Whether it is
permissible for the employer to withhold the payment of gratuity of
the employee even after his superannuation from service because C
of the pendency of the disciplinary proceedings against him and
where departmental enquiry had been instituted against an employee
while he was in service and continued after he attained the age of
superannuation whether the punishment of dismissal can be imposed
on being found guilty of misconduct in view of the provisions in D
r.34.2 of the Conduct, Discipline & Appeal Rules of 1978 made by
the employer – Held: Per M.R.Shah, J. (for himself and Arun
Mishra, J.) – An employer has a right to withhold the gratuity during
the pendency of the disciplinary proceedings, and the disciplinary
authority has powers to impose the penalty of dismissal/major penalty
upon the employee even after his attaining the age of E
superannuation, as the disciplinary proceedings were initiated while
the employee was in service – The Payment of Gratuity Act, 1972
govern the conditions concerning payment of gratuity – It cannot
control and provide with respect to an employer’s right to hold a
departmental inquiry after retirement, and there is no provision F
prescribing what kind of punishment can be imposed in the
departmental inquiry if it is continued after attaining the age of
superannuation – The relevant rules would govern such matters –
Since no statutory provisions of the Payment of Gratuity Act, 1972
come in the way of the CDA Rules to continue the inquiry after
superannuation of the employee in case it was instituted while he G
was in service and his deemed continuance in service; thus, no
fetter is caused upon operation of Rule 34.2 providing for a
continuation of the inquiry and deemed continuation of the employee
in service after the age of superannuation – At the conclusion of
H
1
2 SUPREME COURT REPORTS [2020] 8 S.C.R.

A such disciplinary proceedings any of the penalty provided under
Rule 27 of the CDA Rules can be imposed by the authority including
the order of dismissal and apart from that in case pecuniary loss
had been caused that can be recovered –Per Ajay Rastogi, J. (Partly
dissenting): After conclusion of the disciplinary inquiry, if an
employee/delinquent is held guilty, indeed a penalty can be inflicted
B
upon him who stood retired from service and what should be the
nature of penalty would always depend on the relevant scheme of
Rules and on the facts and circumstances of each case, but either
of the substantive penalties specified under Rule 27 of the Rules,
1978 including dismissal from service are not open to be inflicted
C on conclusion of the disciplinary proceedings and the punishment
of forfeiture of gratuity commensurate with the nature of guilt may
be inflicted upon a delinquent employee provided under Rule 34.3
of Rules, 1978 read with sub-section (6) of s.4 of the Act, 1972 –
Payment of Gratuity Act, 1972.
D Disposing of the appeal, the Court
HELD:
PER M. R. SHAH, J. (FOR HIMSELF AND ARUN
MISHRA, J.)

E 1.1 Indisputably, the respondent was governed by the CDA
Rules. Therefore, Rules 34.2 and 34.3 of the CDA Rules shall be
applicable and the respondent-employee shall be governed by
the said provisions. Rule 34 permits the management to withhold
the gratuity during the pendency of the disciplinary proceedings.
Rule 34.2 permits the disciplinary proceedings to be continued
F and concluded even after the employee has attained the age of
superannuation, provided the disciplinary proceedings are
instituted while the employee was in service. It also further
provides that such disciplinary proceedings shall be deemed to
be the proceedings and shall be continued and concluded by the
G authority by which it was commenced in the same manner as if
the employee had continued in service. Therefore, as such, on a
fair reading of Rule 34.2 of the CDA Rules, an employee shall be
deemed to be continued in service, after he attains the age of
superannuation/retired, for the limited purpose of continuing and
concluding the disciplinary proceedings which were instituted
H while the employee was in service. Therefore, at the conclusion
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 3
LTD. v. SRI RABINDRANATH CHOUBEY

of such disciplinary proceedings any of the penalty provided under A
Rule 27 of the CDA Rules can be imposed by the authority
including the order of dismissal. If the submission on behalf of
the employee that after the employee has attained the age of
superannuation and/or he has retired from service, despite Rule
34.2, no order of penalty of dismissal can be passed is accepted,
B
in that case, it will be frustrating permitting the authority to
continue and conclude the disciplinary proceedings after
retirement. [Para 7][25-E-H; 26-A-C]
State Bank of India v. Ram Lal Bhaskar (2011) 10 SCC
249 : [2011] 12 SCR 1036 – referred to.
C
1.2 Once it is held that a major penalty which includes the
dismissal from service can be imposed, even after the employee
has attained the age of superannuation and/or was permitted to
retire on attaining the age of superannuation, provided the
disciplinary proceedings were initiated while the employee was
in service, sub-section 6 of Section 4 of the Payment of Gratuity D
Act shall be attracted and the amount of gratuity can be withheld
till the disciplinary proceedings are concluded. Even otherwise,
Rule 34.3 of the CDA Rules permits withholding of the gratuity
amount during the pendency of the disciplinary proceedings, for
ordering recovering from gratuity of the whole or part of any E
pecuniary loss caused to the company if have been guilty of
offences/misconduct as mentioned in sub-section 6 of Section 4
of the Payment of Gratuity Act, 1972 or to have caused pecuniary
loss to the company by misconduct or negligence, during his
service. It further makes clear that Rule 34.3 for withholding of
such a gratuity would be subject to the provisions of Section 7(3) F
and 7(3A) of the Payment of Gratuity Act, 1972 in the event of
delayed payment in the case of an employee who is fully
exonerated. Rule 34.3 of the CDA Rules is in consonance with
sub-section 6 of Section 4 of the Payment of Gratuity Act and
there is no inconsistency between sub-section 6 of Section 4 of G
the Payment of Gratuity Act and Rule 34.3 of the CDA Rules.
[Paras 9, 9.1][274-E-H; 28-A-B]
D.V. Kapoor v. Union of India (1990) 4 SCC 314 :
[1990] 3 SCR 697; State Bank of Patiala & Anr. v. Ram
Niwas Bansal (Dead) Thr. LRs. (2014) 12 SCC 106 : H
4 SUPREME COURT REPORTS [2020] 8 S.C.R.

A [2014] 3 SCR 984; R. Jeevaratnam v. The State of
Madras AIR 1966 SC 951 : [1966] 2 SCR 204; Ramesh
Chandra Sharma v. Punjab National Bank & Anr.
(2007) 9 SCC 15 : [2007] 7 SCR 585; Union of India
v. Ajoy Kumar Patnaik (1995) 6 SCC 442 : [1995] 3
Suppl. SCR 449; UCO Bank v. Rajinder Lal Capoor
B
(2008) 5 SCC 257 : [2008] 5 SCR 775;
V. Padmanabham v. Government of Andhra Pradesh &
Ors. (2009) 15 SCC 537 : [2009] 11 SCR 455; State of
Maharashtra v. M.H. Mazumdar (1988) 2 SCC 52 :
[1988] 3 SCR 31; State of West Bengal & Ors. v. Pronab
C Chakraborty (2015) 2 SCC 496 : [2014] 11 SCR 76;
State Bank of India v. A.N. Gupta & Ors. (1997) 8 SCC
60 : [1997] 4 Suppl. SCR 383; Takhatray Shivadattray
Mankad v. State of Gujarat (1989) Suppl. 2 SCC 110 :
[1989] 3 SCR 214; The Secretary, Forest Department
& Ors. v. Abdur Rasul Chowdhury (2009) 7 SCC 305 :
D
[2009] 9 SCR 695; State Bank of India v. Ram Lal
Bhaskar (2011) 10 SCC 249 : [2011] 12 SCR 1036–
referred to.
2.1 Section 4(1) provides that gratuity shall be payable to
an employee on termination of his employment after he has
E rendered continuous service for not less than five years, on his
superannuation, or retirement or resignation, or his death or
disablement due to accident or disease. Section 4(6) contains a
non-obstante clause to sub-section 1. In case service of the
employee have been terminated for wilful omission or negligence
F causing any damage or loss to, or destruction of property
belonging to the employer, gratuity shall be forfeited to the extent
of the damage or loss so caused as provided under section 4(6)(a).
Even in the absence of loss or damage, gratuity can be wholly or
partially forfeited under the provisions of section 4(6)(b), in case
termination of services was based upon disorderly conduct or
G act of violence on his part or offence involving moral turpitude
committed during the course of employment. Thus, it is apparent
that not only damage or loss can be recovered, but gratuity can
be wholly or partially withheld in case services are terminated
for the reasons specified in section 4(6)(b). The Payment of
H Gratuity Act, 1972, makes no provision w ith respect to
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 5
LTD. v. SRI RABINDRANATH CHOUBEY

departmental inquiries. Since no statutory provisions of the A
Payment of Gratuity Act, 1972 come in the way of the CDA Rules
to continue the inquiry after superannuation of the employee in
case it was instituted while he was in service and his deemed
continuance in service; thus, no fetter is caused upon operation
of Rule 34.2 providing for a continuation of the inquiry and
B
deemed continuation of the employee in service after the age of
superannuation.[Paras 10.16-10.18][53-G-H; 54-A-F]
2.2 The provisions of Section 4(6) of the Act of 1972 prevail
over Section 4(1) as provisions of Section 4(6) contain non-
obstante clause as to Section 4(1). It would prevail over the
provisions made in Section 4(1) and gratuity would not become C
payable mandatorily as provided in Section 4(1). Section 4(6)(a)
and (b) both provide for recovery of loss caused or forfeiture
wholly or partially in the case of termination of services. In case
after superannuation of employee there cannot be any dismissal
i.e., termination of services as contemplated in Section 4(6), then D
there can be no recovery of pecuniary loss caused by employee
or forfeiture of gratuity wholly or partially as that can only be
done in the event of termination of services on charges found
established. Such an interpretation would render continuance of
inquiry otiose and would defeat the public policy and the
provisions of Act of 1972. The recovery of loss or forfeiture is E
one of the punishments which depends on exigency of termination
by way of dismissal as mandated by Section 4(6). To give effect to
the provisions of the Act, the punishment of dismissal can be
imposed in view of Rule 34.2, otherwise it would defeat the
intendment of provisions contained in Section 4(6)(a) and 4(6)(b) F
of the Act of 1972. [Para 10.19][54-F-H; 55-A-C]
2.3 Section 4(1) used the expression ‘termination of
employment after five years by way of superannuation, retirement
or resignation or on his death or disablement due to accident or
disease’ that is in a normal course. It does not deal with a situation G
where departmental inquiry is instituted and continued and
completed after the age of superannuation and termination of
employment had not taken place on completion of the age of
superannuation as there is a deemed continuation of the
employment for the purpose of holding an inquiry and passing
H
6 SUPREME COURT REPORTS [2020] 8 S.C.R.

A the appropriate punishment order after the conclusion of the
departmental inquiry on the basis of misconduct if any found
established. Provisions of section 4(1) do not impinge upon the
continuation of inquiry. Section 4(6) prevails on it. The Payment
of Gratuity Act, 1972 govern the conditions concerning payment
of gratuity. It cannot control and provide with respect to an
B
employer’s right to hold a departmental inquiry after retirement,
and there is no provision prescribing what kind of punishment
can be imposed in the departmental inquiry if it is continued after
attaining the age of superannuation. The relevant rules would
govern such matters. In case the Payment of Gratuity Act, 1972,
C is interpreted to interdict the departmental inquiry after the age
of superannuation and to deal with the nature of punishment to
be imposed, it would be taken as a case of over-inclusion in the
Act which deals exclusively with the payment of gratuity.
[Para 10.20][55-C-G]
D 2.4 The punishment which is prescribed under Rule 27 of
the CDA Rules, minor as well as major, both can be imposed.
Apart from that, recovery can also be made of the pecuniary loss
caused as provided in Rule 34.3 of the CDA Rules, which takes
care of the provision under sub-section (6) of Section 4 of the
Payment of Gratuity Act, 1972. The recovery is in addition to a
E punishment that can be imposed after attaining the age of
superannuation. The legal fiction provided in Rules 34.2 of the
CDA Rules of deemed continuation in service has to be given
full effect. [Para 10.21][55-G-H; 56-A]
M. Ramanatha Pillai v. The State of Kerala & Ors.
F (1973) 2 SCC 650; Jagdish Mitter v. Union of India
AIR 1964 SC 449; P. Balakotaiah v. Union of India
AIR 1958 SC 232 : [1958] SCR 1052; Shyam Lal v.
State of Uttar Pradesh & Ors. AIR 1954 SC 369 : [1955]
1 SCR 26; Ravindra Kumar Misra v. UP State Handloom
G Corpn. Ltd. & Anr. (1987) Suppl. SCC 739 : [1988] 1
SCR 501; Registrar General, High Court of Gujarat &
Anr. v. Jayshree Chamanlal Buddhbhatti (2013) 16 SCC
59 : [2013] 11 SCR 395; Dinesh Chandra Sangma v.
State of Assam and Ors. (1977) 4 SCC 441 : [1978] 1
SCR 607; Workers Employed in Hirakud Dam v. State
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 7
LTD. v. SRI RABINDRANATH CHOUBEY

of Orissa & Ors. (1971) 1 SCC 583 : [1971] 3 SCR A
646; Satish Chandra Anand v. Union of India AIR 1953
SC 250 : [1953] SCR 655; State Bank of India v. The
Workmen of State Bank of India & Ors. (1991) 1 SCC
13 : [1990] 1 Suppl. SCR 11 – referred to.
3.1 It is a settled proposition of law that in case of termination B
of service there is a distinction as to whether it is a simpliciter
termination or a punitive dismissal and this court can lift the veil
to find out the real nature of termination. Section 4(1) deals with
normal superannuation and does not cover the cases where the
departmental inquiry is pending, or dismissal had been ordered.
It did not interdict the departmental inquiry if it was initiated C
while the employee was in service and continued after
superannuation as if the employee continued in service. Section
4 of the Payment of Gratuity Act, 1972 contains no bar, and
purposive construction has to be made of the provisions
contained in section 4(1). Section 4(6) provides where particular D
misconduct is found established, how gratuity to be dealt with,
but provisions cause no fetter on the power of an employer to
impose a punishment of dismissal. It makes no provision in
particular with respect to the departmental inquiry but rather
buttresses the power of an employer to forfeit gratuity wholly or
partially or to recover loss provided in Section 4(6). Neither the E
provisions in section 4(1) nor section 4(6) of the Payment of
Gratuity Act create embargo on the departmental inquiry and its
continuance after superannuation. [Paras 10.23, 10.25][63-C-D;
64-C-F]
UCO Bank & Ors. v. Prabhakar Sadashiv Karvade F
(2018) 14 SCC 98; State of Assam & Ors. v. Padma
Ram Borah AIR 1965 SC 473; State of Punjab v. Khemi
Ram (1969) 3 SCC 28 : [1970] 2 SCR 657 – held
inapplicable.
Bhagirathi Jena v. Board of Directors, O.S.F.C. & Ors. G
(1999) 3 SCC 666 : [1999] 2 SCR 354 – distinguished.
Jaswant Singh Gill v. Bharat Coking Coal Ltd. (2007)
1 SCC 663 : [2006] 8 Suppl. SCR 1064 – overruled.

H
8 SUPREME COURT REPORTS [2020] 8 S.C.R.

A Anant R. Kulkarni v. Y.P. Education Society & Ors.
(2013) 6 SCC 515 : [2013] 6 SCR 1124; Noida
Entrepreneurs Association v. Noida & Ors. (2011) 6
SCC 508 : [2011] 8 SCR 25; B.T. Krishnamurthy v. Sri
Basaveswara Education Society (2013) 4 SCC 490 :
[1982] 1 SCR 759; Paramjit Singh v. Director of
B
Schools (Public Instructions), (2010) 14 SCC 416; State
of U.P. v. Ram Vinai Sinha (2010) 15 SCC 305;
Jaswantsingh Pratapsingh Jadeja v. Rajkot Municipal
Corpn. (2007) 10 SCC 71 : [2007] 10 SCR 112; State
of Punjab v. Rajesh Kumar (2006) 12 SCC 418 : [2006]
C 9 Suppl. SCR 208; Jai Singh v. Union of India (2006)
9 SCC 717 : [2006] 4 Suppl. SCR 734; State of Madhya
Pradesh and Anr. v. Kumari Nivedita Jain and Ors,
(1981) 4 SCC 296 : [1982] 1 SCR 759; State of Andhra
Pradesh and Anr. v. Lavu Narendranath and Ors. etc.
AIR 1971 SC 2560 : [1971] 3 SCR 699; Distt. Registrar,
D
Palghat and Ors. v. M.B. Koyakutty and Ors. (1979) 2
SCC 150 : [1979] 3 SCR 242; Union of India and Anr.
v. Tulsiram Patel AIR 1985 SC 1416 : [1985] 2 Suppl.
SCR 131; Kirti Bhusan Singh v. State of Bihar (1986) 3
SCC 675 : [1986] 3 SCR 230; U.P. State Sugar
E Corporation Ltd. & Ors. v. Kamal Swaroop Tandon
(2008) 2 SCC 41 : [2008] 1 SCR 887 – referred to.
3.2 Several service benefits would depend upon the outcome
of the inquiry, such as concerning the period during which inquiry
remained pending. It would be against the public policy to permit
F an employee to go scot-free after collecting various service
benefits to which he would not be entitled, and the event of
superannuation cannot come to his rescue and would amount to
condonation of guilt. Because of the legal fiction provided under
the rules, it can be completed in the same manner as if the
employee had remained in service after superannuation, and
G appropriate punishment can be imposed. An inquiry can be
continued as provided under the relevant service rules as it is
not provided in the Payment of Gratuity Act, 1972 that inquiry
shall come to an end as soon as the employee attains the age of
superannuation. The Act does not deal with the matter of
H disciplinary inquiry, it contemplates recovery from or forfeiture
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 9
LTD. v. SRI RABINDRANATH CHOUBEY

of gratuity wholly or partially as per misconduct committed and A
does not deal with punishments to be imposed and does not
supersede the Rules 34.2 and 34.3 of the CDA Rules. The mandate
of Section 4(6) of recovery of loss provided under Section 4(6)(a)
and forfeiture of gratuity wholly or partially under Section 4(6)(b)
is furthered by the Rules 34.2 and 34.3. If there cannot be any
B
dismissal after superannuation, intendment of the provisions of
Section 4(6) would be defeated. The provisions of section 4(1)
and 4(6) of Payment of Gratuity Act, 1972 have to be given
purposive interpretation, and no way interdict holding of the
departmental inquiry and punishment to be imposed is not the
subject matter dealt with under the Act. Thus considering the C
provisions of Rules 34.2 and 34.3 of the CDA Rules, the inquiry
can be continued given the deeming fiction in the same manner
as if the employee had continued in service and appropriate
punishment, including that of dismissal can be imposed apart from
the forfeiture of the gratuity wholly or partially including the
D
recovery of the pecuniary loss as the case may be. [Para 10.31
and 10.32][73-G-H; 74-A-F]
PER AJAY RASTOGI, J. (PARTLY DISSENTING):
1. Retiral benefits are earned by an employee for a long
and meritorious service rendered by him/her and it is not paid E
gratuitously or merely as a matter of boon, it is paid to him/her
for dedicated and devoted work. The Act, 1972 also acknowledges
under sub-section (6) of Section 4 to forfeit it to the extent
pecuniary loss so caused from the amount of gratuity payable to
the employee. [Para 12][80-D-E]
F
2. The purpose of holding an inquiry against a delinquent is
not only with a view to establish the charge levelled against him
or to impose a penalty, but is also conducted with the object of
such an inquiry recording the truth of the matter, and in that sense,
the outcome of an inquiry may either not establishing or
vindicating his stand, hence result in his exoneration. Therefore, G
there should be a fair action on the part of the authority concerned
in holding disciplinary inquiry for the misconduct, if any, being
committed by an employee in discharge of his duties even if
retired from service during pendency of disciplinary proceedings
after adopting the procedure prescribed under the relevant H
10 SUPREME COURT REPORTS [2020] 8 S.C.R.

A disciplinary rules alike Rules, 1978 in the instant case and indeed
the scheme of Rules, 1978 is neither in derogation nor in
contravention to the scheme of the Act, 1972. It is also well settled
that the competence of an authority to hold an enquiry or to
continue enquiry against an employee who has retired from
service depends upon the scheme of rules and the terms and
B
conditions of service of the employee are the determining factors
as to whether and in what manner the disciplinary enquiry can be
held against an employee who stood retired or superannuated
from service. [Paras 14, 15][81-F-H; 82-A-B]
3. Those who were the serving employees, if held guilty on
C conclusion of the disciplinary proceedings, minor/major penalties
as referred to under Rule 27 could be inflicted by the disciplinary
authority after recording good and sufficient reason
commensurate with the nature of misconduct and in the case of
an employee who stood retired/superannuated from service
D pending disciplinary proceedings, the disciplinary authority has
a right to withhold the payment of gratuity pending disciplinary
inquiry and if found guilty in the inquiry for the offences/
misconduct as indicated in sub-section (6) of Section 4 of Act
1972, can be recovered from his gratuity payable under Section
4 of the Act, 1972. At the same time, if he is exonerated by the
E disciplinary authority after retirement/superannuation from
service, he shall be entitled for payment of gratuity along with
interest for the delay in payment in terms of Section 7(3) and
Section 7(3A) of Act, 1972. [Para 16][82-B-D]
4. Where the disciplinary proceedings are instituted while
F the employee was in service but retired thereafter during its
pendency, under the special procedure provided under Rule 34.2
of the Rules, 1978, the authority is empowered to continue and
conclude the disciplinary inquiry in the same manner as if the
employee had continued in service by deeming fiction, however,
G the relationship of employer and employee shall not be severed
until conclusion of the disciplinary enquiry but may withhold
payment of gratuity in terms of Rule 34.3 pending disciplinary
inquiry and in furtherance thereof if later held guilty, the
competent authority to the extent pecuniary loss has been caused
for the misconduct, negligence in the discharge of duties order
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 11
LTD. v. SRI RABINDRANATH CHOUBEY

for recovery from gratuity either be forfeited in the whole or in A
part, to the extent pecuniary loss has been caused to the company
for the offences/misconduct as a measure of penalty in terms of
Rule 34.3 of the Rules read with sub-section (6) of Section 4 of
the Act, 1972. [Para 17][82-E-G]
5.1 Gratuity became payable to an employee under Section B
4(1) of the Act, 1972 on termination of his employment after he
rendered a minimum qualifying service and termination of his
employment is either can be on his superannuation or retirement
or resignation or death or disablement due to accident or disease
or any other cause may be. The word ‘termination’ referred to
under sub-section (1) or under sub-section (6) of Section 4 of the C
Act, 1972 is in reference to the severance of relationship of
employer and employee and sub-section (6) of Section 4 being
couched with a non-obstante clause empowered the authority in
case the delinquent employee held guilty of wilful omission or
negligence causing any damage or loss or destruction to the D
property of the company during the course of employment as a
measure of penalty gratuity may be forfeited wholly or partially to
the extent misconduct found proved. [Para 19][83-B-D]
5.2 The term ‘termination’ may not be understood with the
penalty of dismissal or removal from service specified under Rule E
27 of Rules, 1978. The expressions in the schedule of substantive
penalties under Rule 27 of the Rules, 1978 refers to various
penalties including reduction in rank, compulsory retirement,
dismissal, removal, etc. and could possibly be inflicted on the
serving employee and indeed cannot be effected with
retrospective effect on the delinquent employee who stood retired F
from service. [Para 20][83-E-F]
5.3 Many a times ‘termination’ and ‘dismissal’ are held to
be synonymous but the difference between ‘termination’ and
‘dismissal’ is that dismissal could be on account of misconduct
with loss of future employment involving dishonesty or criminality G
and penal in character but that is not in the case of termination.
The “termination” as per Black’s Law Dictionary is the complete
severance of relationship of employer and employee which in the
instant case could be saved during pendency of the disciplinary
H
12 SUPREME COURT REPORTS [2020] 8 S.C.R.

A proceedings in view of Rule 34.2 of the Rules, 1978 which clearly
envisaged that disciplinary proceedings, if instituted while the
employee was in service, shall be deemed to be pending and
shall be continued and concluded by the authority by which it was
commenced in the same manner as if the employee had continued
in service and by legal fiction, the relationship of employer and
B
employee shall be deemed to continue for the limited purposes
of conclusion of the disciplinary proceedings and the delinquent
employee becomes qualified to claim gratuity subject to the
outcome of the disciplinary proceedings in terms of Rule 34.3 of
the Rules, 1978 read with sub-section (6) of Section 4 of the Act,
C 1972. [Para 21][83-G-H; 84-A-C]
Jaswant Singh Gill v. Bharat Coking Coal Ltd. (2007)
1 SCC 663 : [2006] 8 Suppl. SCR 1064; State Bank of
India v. Ram Lal Bhaskar and Another (2011) 10 SCC
249 : [2011] 12 SCR 1036; State of Maharashtra v.
D M.H. Mazumdar (1988) 2 SCC 52 : [1988] 3 SCR 31;
UCO Bank & Ors. v. Rajendra Shankar Shukla (2018)
14 SCC 92 : [2018] 2 SCR 636; UCO Bank and Ors. v.
Prabhakar Sadashiv Karvade (2018) 14 SCC 98; UCO
Bank and Ors. v. Rajinder Lal Capoor (2007) 6 SCC
694 : [2007] 7 SCR 543 – referred to.
E
7. The substantive penalties provided under the schedule
of penalties referred to under Rule 27 could be inflicted on a
delinquent employee while he is in service but in case where the
delinquent employee stood retired or superannuated from service
pending disciplinary inquiry, at least either of the substantive
F penalties provided under Rule 27 are not available to the
disciplinary authority to be inflicted with retrospective effect but
at the same time punishment of forfeiture of gratuity if held guilty
for misconduct or negligence to the extent damage or pecuniary
loss has been caused to the employer can be inflicted upon the
G delinquent in terms of Rule 34.3 of Rules 1978 read with sub-
section (6) of Section 4 of the Act, 1972 and in case the delinquent
employee stands exonerated he became entitled for gratuity for
the delay in payment in terms of Sections 7(3) and 7(3A) of Act,
1972 and as a matter of caution, it should not be pre-supposed
that where the disciplinary inquiry remain pending and could not
H be concluded while the delinquent employee was in service in
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 13
LTD. v. SRI RABINDRANATH CHOUBEY

due course of time, he shall be held guilty and punished under A
the scheme of Rules, 1978. [Para 27][87-B-E]
Case Law Reference
PER M. R. SHAH, J. (FOR HIMSELF AND ARUN
MISHRA, J.)
B
[2011] 12 SCR 1036 referred to Para 8
[1990] 3 SCR 697 referred to Para 10.3
[2014] 3 SCR 984 referred to Para 10.4
[1966] 2 SCR 204 referred to Para 10.4
C
[2007] 7 SCR 585 referred to Para 10.6
[1995] 3 Suppl. SCR 449 referred to Para 10.7
[2008] 5 SCR 775 referred to Para 10.8
[2009] 11 SCR 455 referred to Para 10.9 D
[1988] 3 SCR 31 referred to Para 10.10
[2014] 11 SCR 76 referred to Para 10.11
[1997] 4 Suppl. SCR 383 referred to Para 10.12
[1989] 3 SCR 214 referred to Para 10.13 E
[2009] 9 SCR 695 referred to Para 10.14
[2011] 12 SCR 1036 referred to Para 10.15
(1973) 2 SCC 650 referred to Para 10.22
AIR 1964 SC 449 referred to Para 10.22 (a) F
[1958] SCR 1052 referred to Para 10.22 (b)
[1955] 1 SCR 26 referred to Para 10.22 (c)
[1988] 1 SCR 501 referred to Para 10.22 (c)
G
[2013] 11 SCR 395 referred to Para 10.22 (d)
[1978] 1 SCR 607 referred to Para 10.22 (e)
[1971] 3 SCR 646 referred to Para 10.22 (e)
[1953] SCR 655 referred to Para (10.22) (f)
H
14 SUPREME COURT REPORTS [2020] 8 S.C.R.

A [1990] 1 Suppl. SCR 11 referred to Para 10.22 (g)
[1982] 1 SCR 759 referred to Para 10.23
(2010) 14 SCC 416 referred to Para 10.23
(2010) 15 SCC 305 referred to Para 10.23
B [2007] 10 SCR 112 referred to Para 10.23
[2006] 9 Suppl. SCR 208 referred to Para 10.23
[2006] 4 Suppl. SCR 734 referred to Para 10.23
[1982] 1 SCR 759 referred to Para 10.25
C
[1971] 3 SCR 699 referred to Para 10.25
[1979] 3 SCR 242 referred to Para 10.25
[1985] 2 Suppl. SCR 131 referred to Para 10.25
(2018) 14 SCC 98 held inapplicable Para 10.26
D
[2006] 8 Suppl. SCR 1064 overruled Para 10.27
[2013] 6 SCR 1124 referred to Para 10.28
[2011] 8 SCR 25 referred to Para 10.28 (a)
AIR 1965 SC 473 held inapplicable Para 10.28 (a)
E
[1970] 2 SCR 657 held inapplicable Para 10.28 (b)
[1986] 3 SCR 230 referred to. Para 10.28 (c)
[1999] 2 SCR 354 distinguished Para 10.28 (d)

F [2008] 1 SCR 887 referred to Para 10.28 (e)
PER AJAY RASTOGI, J:
[2006] 8 Suppl. SCR 1064 referred to Para 5
[2011] 12 SCR 1036 referred to Para 5
G [1988] 3 SCR 31 referred to Para 22
[2018] 2 SCR 636 referred to Para 23
(2018) 14 SCC 98 referred to Para 24
[2007] 7 SCR 543 referred to Para 25
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 15
LTD. v. SRI RABINDRANATH CHOUBEY

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9693 A
of 2013.
From the Judgment and Order dated 17.07.2013 of the High Court
of Orissa, Cuttack in W.A. No. 115 of 2012.
Mahabir Singh, Anukul Chandra Pradhan, Sr. Advs., Gp. Capt.
B
Karan Singh Bhati, Gagan Deep Sharma, Amit K. Nain, Ms. Preeti
Singh, Ajit Pudussery, Ajit Singh Verma, Vijayan K., Saurabh Mishra,
Rahul Baid, Arun Verma, Romy Chacko, Chandan Kumar Mandal, Shakti
Chand Jaidwal, Advs. for the appearing parties.
The Judgment of the Court was delivered by
C
M. R. SHAH, J.
1. The short but interesting questions of law which fell for
consideration of this Court are, (i) as to whether is it permissible in law
for the appellant (employer) to withhold the payment of gratuity of the
respondent (employee), even after his superannuation from service, D
because of the pendency of the disciplinary proceedings against him?,
and (ii) where the departmental enquiry had been instituted against an
employee while he was in service and continued after he attained the
age of superannuation, whether the punishment of dismissal can be
imposed on being found guilty of misconduct in view of the provisions
made in Rule 34.2 of the CDA Rules of 1978? E
2. While considering the issues involved, the facts in nutshell are
required to be considered, which are as under:
The respondent herein (hereinafter referred to as the “employee”)
was posted as Chief General Manager (Production) at Rajmahal area
F
under Mahanadi Coalfields Limited, the appellant herein (hereinafter
referred to as the “employer”). That the employer Mahanadi Coalfield
Limited has made the Conduct, Discipline & Appeal Rules, 1978
(hereinafter referred to as the “CDA Rules”). That these Rules are
applicable to all the employees of the appellant company. Rule 27 of the
CDA Rules mentions the authorities who are empowered to impose G
various punishments which are specified in column 3 of the schedule
attached to the CDA Rules. Rule 29 of the CDA Rules enlists the
procedure for imposing major penalties for misconduct and misbehaviour.
Rule 30 of the CDA Rules provides for action on the Inquiry Report.
Rule 34 of the CDA Rules, which is relevant for our purpose, provides
H
16 SUPREME COURT REPORTS [2020] 8 S.C.R.

A for special procedure in certain cases and which permits continuance of
disciplinary proceedings even after the final retirement of an employee,
provided the disciplinary proceedings are instituted while the employee
was in service whether before his retirement or during his re-employment.
It further provides that such disciplinary proceedings shall be continued
and concluded by the authority by which it was commenced in the same
B
manner as if the employee had continued in service. Rule 34.3 provides
for withholding the payment of gratuity during the pendency of the
disciplinary proceedings and it further permits for ordering the recovery
from gratuity of the whole or part of any pecuniary loss caused to the
company, if have been guilty of offences/misconduct as mentioned in
C sub-section (6) of Section 4 of the Payment of Gratuity Act, 1972 or to
have caused pecuniary loss to the company by misconduct or negligence,
during his service. The relevant Rules of the CDA Rules shall be discussed
in detail hereinbelow.
2.1 While the respondent-employee was in service and posted as
D Chief General Manager, he was served with the chargesheet dated
1.10.2007. There was very serious allegation of misconduct alleging
dishonestly causing coal stock shortages amounting to Rs.31.65 crores
and thereby causing substantial loss to the employer. The employee was
thereafter suspended from service on 09.02.2008 under Rule 24.1 of the
CDA Rules, pending departmental enquiry against him. This suspension
E however was revoked from 27.02.2009 without prejudice to the
departmental enquiry. On completion of 60 years of age, the respondent-
employee was superannuated with effect from 31.07.2010. However,
at the time of superannuation, the departmental enquiry which was
initiated against the employee remained pending. Therefore, the appellant
F – employer withheld the gratuity due and payable to the respondent-
employee. The respondent herein submitted an application dated
21.09.2010 to the Director (Personnel) for payment of gratuity. On the
same date, he also submitted an application before the Controlling Authority
under the Payment of Gratuity Act for payment of gratuity. Notice was
issued to the appellant to appear. The appellant appeared and stated that
G the payment of gratuity was withheld due to the reason that the disciplinary
proceedings are pending against him. The Controlling Authority held that
in that view of the matter, the claim of the respondent was pre-mature.
The respondent-employee challenged the order by filing the writ
petition. The learned Single Judge dismissed the writ petition holding
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 17
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

that in view of the existence of an appellate forum against the order A
passed by the Controlling Authority, the respondent may file an appeal
before the Appellate Authority. However, instead of filing an appeal before
the Appellate Authority, the respondent-employee then filed Intra Court
Writ Appeal before the Division Bench of the High Court. The Division
Bench of the High Court has held that the writ petition was maintainable.
B
On merits and relying upon the decision of this Court in the case of
Jaswant Singh Gill v. Bharat Coking Coal Ltd., reported in (2007)
1 SCC 663, the High Court ruled that the disciplinary proceedings against
the respondent were initiated prior to the age of superannuation. However,
the respondent retired from service on superannuation and hence the
question of imposing a major penalty of removal from service would not C
arise. The Division Bench of the High Court has further held that the
power to withhold payment of gratuity as contained in Rule 34(3) of the
CDA Rules shall be subject to the provisions of the Payment of Gratuity
Act, 1972. The Division Bench of the High Court has further held that
the statutory right accrued to the respondent to get gratuity cannot be
D
impaired by reason of the Rules framed by the Coal India Limited which
do not have the force of a statute. Consequently, direction is given to the
appellant-employer to release the amount of gratuity payable to the
respondent-employee. Hence, the present appeal.
3. Shri Mahabir Singh, learned Senior Advocate appearing on
behalf of the appellant-employer has vehemently submitted that in the E
facts and circumstances of the case and in view of the specific provisions
under the CDA Rules, namely, Rules 34.2 and 34.3 of the CDA Rules,
the decision of this Court in the case of Jaswant Singh Gill (supra)
shall not be applicable.
3.1 It is further submitted by Shri Mahabir Singh, learned Senior F
Advocate appearing on behalf of the employer that Rule 34.2 of the
CDA Rules authorises and/or permits the authority to continue the
disciplinary proceedings, if instituted while the employee was in service,
even after the final retirement of the employee and such disciplinary
proceedings shall be deemed to be the proceedings and shall be continued G
and concluded by the authority by which it was commenced in the same
manner as if the employee had continued in service. It is submitted that
therefore even a major penalty of dismissal can be imposed on conclusion
of departmental proceedings even after the final retirement of the
employee, if the departmental proceedings are instituted while the
H
18 SUPREME COURT REPORTS [2020] 8 S.C.R.

A employee was in service. It is submitted that the afore-stated Rule 34.2
of the CDA Rules has not been properly appreciated and/or considered
by this Court in the case of Jaswant Singh Gill (supra). It is submitted
that in the said decision, this Court has proceeded on the footing that
after the final retirement of the employee, a penalty of removal or dismissal
is not permissible. It is submitted that the aforesaid is just contrary to
B
Rule 34.2 of the CDA Rules.
3.2 It is further submitted by Shri Mahabir Singh, learned Senior
Advocate appearing on behalf of the employer that even otherwise Rule
34.3 authorises and/or permits the disciplinary authority to withhold the
payment of gratuity, or order the recovery from gratuity of the whole or
C part of any pecuniary loss caused to the company if such an employee
has been guilty of offences/misconduct as mentioned in sub-section (6)
of Section 4 of the Payment of Gratuity Act, 1972 or to have caused
pecuniary loss to the company by misconduct or negligence, during his
service. It is submitted that Rule 34.3 of the CDA Rules is in conformity
D and/or in consonance with sub-section (6) of Section 4 of the Payment
of Gratuity Act, 1972 and there is no conflict between the two.
3.3 Learned Senior Advocate appearing on behalf of the appellant
has heavily relied upon the decision of this Court in the case of State
Bank of India v. Ram Lal Bhaskar, reported in (2011) 10 SCC 249.
E It is submitted that while considering the parimateriaprovisions under
the State Bank of India Officers’ Service Rules, 1992, namely, Rule
19(3), this Court has confirmed the order of dismissal of an employee
which was passed after his retirement. It is submitted that in the said
decision, this Court distinguished another judgment of this Court in the
case of UCO Bank v. Rajinder Lal Capoor, reported in (2007) 6
F SCC 694 on the ground that in the said case the delinquent officer had
already been superannuated and the chargesheet was served upon him
after his retirement. It is submitted that thereafter this Court has further
held that if the chargesheet is served before the retirement, enquiry can
continue even after the retirement as per Rule 19(3) of the State Bank
G of India Officers’ Rules, 1992. It is submitted that therefore this Court in
the case of Ram Lal Bhaskar (supra) specifically held that if the rules
permit, enquiry can continue even after the retirement of the employee.
It is submitted that in the present case Rule 34.3 of the CDA Rules
permits the enquiry to continue even after the retirement of the employee.
It is submitted that the said decision is by a three Judge Bench, however,
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 19
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

decision in the case of Jaswant Singh Gill (supra) is by a two Judge A
Bench.
3.4 It is further submitted by Shri Mahabir Singh, learned Senior
Advocate appearing on behalf of the employer that therefore when Rule
34 of the CDA Rules permits continuation of the departmental enquiry
even after the retirement of an employee and such a retired employee is B
deemed to be in service and on conclusion of the departmental enquiry
initiated while the employee was in service, penalty of dismissal is
permissible, the employer will get the right to forfeit the payment of
gratuity of such an employee as provided under Section 4(1) and 4(6) of
the Payment of Gratuity Act, 1972 and even under Rule 34.3 of the
CDA Rules. C

3.5 Making the above submissions and relying upon the decision
of this Court in the case of Ram Lal Bhaskar (supra) and relying upon
Rule 34.2 and 34.3 of the CDA Rules, it is prayed to allow the present
appeal and quash and set aside the impugned judgment and order passed
by the Division Bench of the High Court. D

4. The present appeal is vehemently opposed by Shri Anukul
Chandra Pradhan, learned Senior Advocate appearing on behalf of the
respondent-employee. It is submitted by the learned Senior Advocate
that two issues are referred to be considered by a larger Bench, namely,
(1) Whether the Authority/Employer has power to dismiss/terminate an E
employee (respondent herein) even after retirement from service, if
departmental disciplinary proceedings are initiated during his employment/
service; and (2) Whether the employer is empowered with authority to
withhold the payment of gratuity during pendency of disciplinary
proceedings. F
4.1 It is vehemently submitted by the learned Senior Advocate
appearing on behalf of the employee that so far as issue No.1 is
concerned, Rule 27 provides the nature of penalties. Rule 27.1(i)
prescribes minor penalties, such as, withholding increment and promotion
including recovery of any pecuniary loss caused to the company for G
misconduct, whereas the major penalties are prescribed under Rule
27.1(iii), such as, reduction to a lower grade, compulsory retirement,
removal and dismissal from service. It is submitted that on simple reading
of Rule 27.1(iii), it can be said un-mistakenly that the four major penalties
can be imposed so long as an employee remains in employment. It is
submitted that there was no order issued to the respondent with regard H
20 SUPREME COURT REPORTS [2020] 8 S.C.R.

A to extension of his employment/service or re-employment for certain
period. It is submitted that Rule 34.2 provides only the disciplinary
proceedings will be deemed to be continued and concluded as if he was
in service. It is submitted that hence the termination/dismissal cannot be
passed after the retirement of an employee. It is submitted that while
there is no service/re-employment, there arises no question of removal
B
or dismissal from service.
4.2 Now so far as issue no.2, namely, whether the employer is
empowered with authority to withhold the payment of gratuity during
pendency of disciplinary proceedings is concerned, it is vehemently
submitted by the learned Senior Advocate appearing on behalf of the
C respondent that as per mandate of Section 4(1) of the Payment of Gratuity
Act, 1972, gratuity becomes payable as soon as the employee retires
subject to the condition that the employee shall have five years continuous
service.
4.3 It is further submitted by the learned Senior Advocate appearing
D on behalf of the employee that in terms of clauses (a) or (b) of sub-
section 6 of Section 4 of the Payment of Gratuity Act, 1972, the exercise
of power to forfeit the gratuity amount of an employee is available when
the authority satisfies the pre-condition that the service of the employee
has already been terminated for any act, omission or negligence causing
E any damage or loss or destruction of property belong to an employer. It
is submitted that therefore “termination from service” is sine qua non
and basic requirement for invoking power under Sections 4(6)(a) or 4(6)(b)
of the Payment of Gratuity Act.
4.4 It is further submitted by the learned Senior Advocate appearing
F on behalf of the employee that as per Section 4(1) of the Payment of
Gratuity Act, gratuity shall be payable to the employee on the termination
of his employment if he has rendered continuous service for not less
than five years. It is submitted that termination of employment may take
place on (i) on his superannuation; or (ii) on his retirement or resignation;
or (iii) on his death or disability due to accident or disease. It is submitted
G that in the present case the respondent was terminated by superannuation
and therefore the respondent shall be entitled to the amount of gratuity
under Section 4(1) of the Payment of Gratuity Act, 1972.
4.5 It is further submitted by the learned Senior Advocate appearing
on behalf of the employee that when there arises no question for dismissal
H or removal from service after the employee has retired on attaining the
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 21
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

age of superannuation, the appellant cannot withheld the amount of A
gratuity in exercise of powers under Rule 34 of the CDA Rules being
inconsistent with the Payment of Gratuity Act.
4.6 Learned Senior Advocate appearing on behalf of the employee
has heavily relied upon the decision of this Court in the case of Jaswant
Singh Gill (Supra). It is vehemently submitted that in the case of Jaswant B
Singh Gill (supra), this Court has considered the very provisions of the
CDA Rules and has categorically observed and held that if an employee
is permitted to retire, thereafter a penalty of dismissal/removal from
service cannot be imposed, may be the departmental proceedings were
initiated prior to his retirement. It is submitted that therefore the decision
of this Court in the case of Jaswant Singh Gill (supra) shall be applicable C
to the facts of the case on hand with full force.
4.7 Now so far as the reliance placed upon the decision of this
Court in the case of Ram Lal Bhaskar (supra), relied upon by the
learned Senior Advocate appearing on behalf of the appellant is concerned,
it is vehemently submitted by the learned Senior Advocate appearing on D
behalf of the employee that the said decision shall not be applicable to
the facts of the case on hand as in the said decision, this Court neither
discussed nor expressed as to whether the authority is empowered to
dismiss or remove the employee from service after retirement. It is
submitted that in the said decision, this Court has only stated that the E
employee shall be deemed to be in service only for the purpose of
continuation and conclusion of the disciplinary proceedings if the memo
of charges has been served before retirement as provided under Rule
19(3) of the State Bank of India Officers’ Service Rules, 1992. It is
submitted that therefore the said decision shall not be applicable to the
facts of the case on hand. It is however submitted that in the case of F
Jaswant Singh Gill (supra), this Court has specifically held with reasons
that the major penalties like dismissal or removal from service must be
imposed so long as the employee remains in service, even if the
disciplinary proceedings were initiated prior to attaining the age of
superannuation. G
4.8 It is further submitted by the learned Senior Advocate appearing
on behalf of the employee that even otherwise in view of Section 14 of
the Payment of Gratuity Act, 1972, the provisions of Gratuity Act shall
override other enactments and therefore Rule 34.2 and Rule 34.3 of the
CDA Rules shall be un-enforceable and ineffective in the eyes of law as H
22 SUPREME COURT REPORTS [2020] 8 S.C.R.

A the same shall be inconsistent with the provisions of Payment of Gratuity
Act, more particularly Sections 4, 7, 13 and 14 of the Payment of Gratuity
Act.
4.9 It is further submitted by the learned Senior Advocate appearing
on behalf of the employee that the preamble of the Payment of Gratuity
B Act clearly indicates the legislative intention that the payment of gratuity
is to provide socio-economic justice and secure economic protection in
the retired life when mental and physical fitness is deteriorated due to
ageing process. It is submitted that Section 13 of the Payment of Gratuity
Act gives total immunity to gratuity from attachment which is payable at
the time of retirement. It is submitted therefore that the right to gratuity
C is a statutory right which cannot be withheld under any circumstances,
other than those guidelines enumerated under Section 4(6) of the Payment
of Gratuity Act, 1972.
4.10 Making the above submissions and heavily relied upon the
decision of this Court in the case of Jaswant Singh Gill (supra), it is
D prayed to dismiss the present appeal and answer the reference in favour
of the respondent.
5. We have heard the learned counsel appearing for the respective
parties at length.

E 5.1 The first question which is posed for the consideration of this
Court is, whether is it permissible in law for the appellant-employer to
withhold the payment of amount of gratuity payable to the respondent-
employee, even after his superannuation from service, because of the
pendency of the disciplinary proceedings against him? The second question
which is posed for the consideration of this Court is, where departmental
F enquiry had been instituted against an employee while he was in service
and continued after he attained the age of superannuation, whether the
punishment of dismissal can be imposed on being found guilty of
misconduct in view of the provisions made in Rule 34.2 of the CDA
Rules?
G 5.2 It is not in dispute that a chargesheet came to be served upon
the respondent-employee much before he attained the age of
superannuation, i.e., on 1.10.2007. That while the disciplinary proceedings
were pending, the respondent-employee attained the age of
superannuation on 31.07.2010. In view of the pendency of the disciplinary
proceedings, the appellant-employer withheld the payment of gratuity.
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 23
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

It is the case on behalf of the respondent-employee that as the respondent A
employee was permitted to retire and at the time when he attained the
age of superannuation, there was no order of termination on the basis of
the departmental enquiry or conviction in a criminal case and therefore
considering Section 4 of the Payment of Gratuity Act, the respondent-
employee shall be entitled to the amount of gratuity. It is also the case on
B
behalf of the respondent-employee that even considering clause (b) of
sub-section 6 of Section 4 of the Payment of Gratuity Act, the gratuity
payable to the respondent-employee may be wholly or partially forfeited
if the services of such employee have been terminated for his riotous or
disorderly conduct or his services have been terminated for any act
which constitutes an offence involving moral turpitude, provided that C
such offence is committed by him during the course of his employment.
Relying upon the decision of this Court in the case of Jaswant Singh
Gill (supra), it is the case on behalf of the respondent-employee that as
held by this Court in the said decision that once an employee is permitted
to retire on attaining the age of superannuation, no order of dismissal
D
subsequently can be passed though the disciplinary proceedings are
permitted to be continued under the CDA Rules and therefore once the
order of dismissal is not permissible, Section 4 of the Payment of Gratuity
Act shall be attracted and therefore the respondent-employee shall be
entitled to the amount of gratuity. On the other hand, as observed
hereinabove, it is the case on behalf of the appellant-employer that Rule E
34 permits the management to withhold the gratuity during the pendency
of the disciplinary proceedings. It is submitted that Rule 34.2 of the
CDA Rules permits the disciplinary proceedings, if instituted while the
employee was in service, after the final retirement of the employee and
such disciplinary proceedings shall be deemed to be proceedings and
F
shall be continued and concluded by the authority by which it was
commenced in the same manner as if the employee had continued in
service. It is submitted therefore that for the purpose of continuing and
concluding the disciplinary proceedings, such an employee shall be
deemed to be in service and therefore even after the employee had
attained the age of superannuation, such an employee can be dismissed G
from service, provided the disciplinary proceedings are instituted while
the employee was in service.
6. While considering the issues involved in the present appeal, the
relevant provisions of the CDA Rules and Section 4 of the Payment of
Gratuity Act are required to be referred to and considered, which are as H
under:
24 SUPREME COURT REPORTS [2020] 8 S.C.R.

A “34.2 Disciplinary proceeding, if instituted while the employee was
in service whether before his retirement or during his reemployment
shall, after the final retirement of the employee, be deemed to be
proceeding and shall be continued and concluded by the authority
by which it was commenced in the same manner as if the employee
had continued in service.
B
34.3 During the pendency of the disciplinary proceedings, the
Disciplinary Authority may withhold payment of gratuity, for
ordering the recovering from gratuity of the whole or part of any
pecuniary loss caused to the company if have been guilty of
offences/ misconduct as mentioned in Sub-section (6) of Section
C 4 of the payment of gratuity act, 1972 or to have caused pecuniary
loss to the company by misconduct or negligence, during his service
including service rendered on deputation or on re-employment
after retirement. However, the provisions of Section 7(3) and
7(3A) of the Payment of Gratuity Act 1972 should be kept in
D view in the event of delayed payment in the case the employee is
fully exonerated.”
Section 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
E 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:
F
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 hi m shall be paid to his nominee or, if no nomination
G 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.
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 25
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

Explanation.—For the purposes of this section, disablement means A
such disablement as incapacitates an employee for the work which
he was capable of performing before the accident or disease
resulting in such disablement.
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxx
(6) Notwithstanding anything contained in sub-section (1),— B

(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; C

(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 of violence on his D
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.”
E
7. Indisputably, the respondent was governed by the CDA Rules.
Therefore, Rules 34.2 and 34.3 of the CDA Rules shall be applicable
and the respondent-employee shall be governed by the said provisions.
Rule 34 permits the management to withhold the gratuity during the
pendency of the disciplinary proceedings. Rule 34.2 permits the disciplinary
F
proceedings to be continued and concluded even after the employee has
attained the age of superannuation, provided the disciplinary proceedings
are instituted while the employee was in service. It also further provides
that such disciplinary proceedings shall be deemed to be the proceedings
and shall be continued and concluded by the authority by which it was
commenced in the same manner as if the employee had continued in G
service. Therefore, as such, on a fair reading of Rule 34.2 of the CDA
Rules, an employee shall be deemed to be continued in service, after he
attains the age of superannuation/retired, for the limited purpose of
continuing and concluding the disciplinary proceedings which were
instituted while the employee was in service. Therefore, at the conclusion
H
26 SUPREME COURT REPORTS [2020] 8 S.C.R.

A of such disciplinary proceedings any of the penalty provided under Rule
27 of the CDA Rules can be imposed by the authority including the
order of dismissal. If the submission on behalf of the employee that after
the employee has attained the age of superannuation and/or he has retired
from service, despite Rule 34.2, no order of penalty of dismissal can be
passed is accepted, in that case, it will be frustrating permitting the
B
authority to continue and conclude the disciplinary proceedings after
retirement. If the order of dismissal cannot be passed after the employee
has retired and/or has attained the age of superannuation in the disciplinary
proceedings which were instituted while the employee was in service, in
that case, there shall not be any fruitful purpose to continue and conclude
C the disciplinary proceedings in the same manner as if the employee had
continued in service.
8. It is true that while considering the very provisions of the CDA
Rules, namely, Rule 34.2 and Rule 34.3 of the CDA Rules, this Court in
the case of Jaswant Singh Gill (supra) has observed and held that
D once the employee is permitted to retire on attaining the age of
superannuation, thereafter no order of dismissal can be passed. However,
for the reasons stated hereinabove, we are not in agreement with the
view taken by this Court in the case of Jaswant Singh Gill (supra). As
observed hereinabove, if no major penalty is permissible after retirement,
even in a case where the disciplinary proceedings were instituted while
E the employee was in service, in that case, Rule 34.2 would become
otiose and shall be meaningless. On the contrary, there is a decision of
three Judge Bench of this Court in the case of Ram Lal Bhaskar (supra)
taking just a contrary view. In the case of Ram Lal Bhaskar (supra),
Rule 19(3) of the State Bank of India Officers Service Rules, 1992
F came up for consideration which was parimateria with Rule 34.2 of the
CDA Rules. The said Rule 19(3) of the State Bank of India Officers
Service Rules, 1992 also permits the disciplinary proceedings to continue
even after the retirement of an employee if those were instituted when
the delinquent employee was in service. In that case, chargesheet was
served upon the respondent before his retirement. The proceedings
G continued after his retirement and were conducted in accordance with
the relevant rules where charges were proved. Punishment of dismissal
was imposed. The High Court allowed the petition and quashed the order
of dismissal. This Court reversed the said decision of the High Court. In
the said decision, it was specifically observed by this Court while
H considering the parimateria provisions that in case disciplinary
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 27
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

proceedings under the relevant rules of service have been initiated against A
an officer before he ceased to be in the bank’s service by the operation
of, or by virtue of, any of the rules or the provisions of the Rules, the
disciplinary proceedings may, at the discretion of the Managing Director,
be continued and concluded by the authority by whom the proceedings
were initiated in the manner provided for in the Rules as if the officer
B
continues to be in service, so however, that he shall be deemed to be in
service only for the purpose of the continuance and conclusion of such
proceedings. In the said decision, this Court also took note of another
decision of this Court in the case of Rajinder Lal Capoor (supra) and
it is observed even in the said decision that the UCO Bank Officer
Employees’ Service Regulations, 1979 which were also parimateria to C
the SBI Rules as well as the CDA Rules, could be invoked only when
the disciplinary proceedings had been initiated prior to the delinquent
officer ceased to be in service. It is to be noted that Jaswant Singh Gill
(supra) was a judgment delivered by a two Judge Bench and the judgment
in the case of Ram Lal Bhaskar (supra) is a judgment delivered by a
D
three Judge Bench. Under the circumstances and even otherwise for
the reasons stated above and in view of Rule 34.2 of the CDA Rules,
even a retired employee who was permitted to retire on attaining the
age of superannuation can be subjected to major penalty, provided the
disciplinary proceedings were initiated while the employee was in service.
9. Once it is held that a major penalty which includes the dismissal E
from service can be imposed, even after the employee has attained the
age of superannuation and/or was permitted to retire on attaining the
age of superannuation, provided the disciplinary proceedings were initiated
while the employee was in service, sub-section 6 of Section 4 of the
Payment of Gratuity Act shall be attracted and the amount of gratuity F
can be withheld till the disciplinary proceedings are concluded.
9.1 Even otherwise, Rule 34.3 of the CDA Rules permits
withholding of the gratuity amount during the pendency of the disciplinary
proceedings, for ordering recovering from gratuity of the whole or part
of any pecuniary loss caused to the company if have been guilty of G
offences/misconduct as mentioned in sub-section 6 of Section 4 of the
Payment of Gratuity Act, 1972 or to have caused pecuniary loss to the
company by misconduct or negligence, during his service. It further makes
clear that Rule 34.3 for withholding of such a gratuity would be subject
to the provisions of Section 7(3) and 7(3A) of the Payment of Gratuity
H
28 SUPREME COURT REPORTS [2020] 8 S.C.R.

A Act, 1972 in the event of delayed payment in the case of an employee
who is fully exonerated. Rule 34.3 of the CDA Rules is in consonance
with sub-section 6 of Section 4 of the Payment of Gratuity Act and there
is no inconsistency between sub-section 6 of Section 4 of the Payment
of Gratuity Act and Rule 34.3 of the CDA Rules. Therefore Section 14
of the Act which has been relied upon shall not be applicable as there is
B
no inconsistency between the two provisions.
9.2 It is required to be noted that in the present case the disciplinary
proceedings were initiated against the respondent-employee for very
serious allegations of misconduct alleging dishonestly causing coal stock
shortages amounting to Rs.31.65 crores and thereby causing substantial
C loss to the employer. Therefore, if such a charge is proved and punishment
of dismissal is given thereon, the provisions of sub-section 6 of Section 4
of the Payment of Gratuity Act would be attracted and it would be within
the discretion of the appellant-employer to forfeit the gratuity payable to
the respondent. Therefore, the appellant-employer has a right to withhold
D the payment of gratuity during the pendency of the disciplinary
proceedings.
10. The second question for consideration is where departmental
inquiry had been instituted against an employee while he was in service
and continued after he attained the age of superannuation, whether the
E punishment of dismissal can be imposed on being found guilty of
misconduct in view of the provisions made in Rule 34.2 of the CDA
Rules.
10.1 Rule 34 (2) of the CDA Rules provides in case disciplinary
proceeding, if instituted while the employee was in service whether before
F his retirement or during his re-employment, such proceedings shall be
continued and concluded by the authority by which it was commenced
in the same manner as if an employee had continued in service. There is
a deemed fiction created by the rule concerning the continuance of
employee in service during the departmental proceeding. The legal fictionis
required to be given a logical effect.
G
10.2 Rule 34.3 of the CDA Rules provides for withholding the
payment of gratuity during the pendency of the disciplinary proceedings
and provides for recovery from gratuity of the whole or part of any
pecuniary loss caused to the employer in case of misconduct as provided
in section 4(6)(a) of the Payment of Gratuity Act, 1972. The gratuity
H can be wholly or partially forfeited as provided in section 4(6)(b) in case
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 29
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

he is found guilty, and services are terminated for disorderly misconduct A
or act of violence or offence involving moral turpitude committed during
the course of employment.
10.3 The question of the effect of deemed fiction of continuance
of employee in service after the employee had attained the age of
superannuation was considered in D.V. Kapoor v. Union of India, (1990) B
4 SCC 314. Rule 9(2) of the Civil Services Pension Rules, 1972, came
up for consideration. The rule provided that the departmental proceedings
instituted while the employee was in service shall be deemed to be
continued in service, the said rule was similar to Rule 34(2) of the CDA
Rules. It was held that the departmental inquiry should be continued and
concluded by the authority in the same manner as if the government C
employee had remained in service. The only condition provided in the
proviso to the rule was that a report to be submitted to the President. It
was held:
“2. The contention of Mr. Kapoor, learned counsel for the appellant
is that the appellant having been allowed to retire voluntarily the D
authorities are devoid of jurisdiction to impose the penalty of
withholding gratuity and pension as a measure of punishment and
the proceedings stand abated. We find no substance in the
contention. Rule 9(2) of the Rules provided that the departmental
proceedings if instituted while the government servant was in E
service whether before his retirement or during his re-employment,
shall, after the final retirement of the government servant, be
deemed to be proceedings under this rule and shall be continued
and concluded by the authority by which they were commenced
in the same manner as if the government servant had continued in
service. Therefore, merely because the appellant was allowed to F
retire, the government is not lacking jurisdiction or power to
continue the proceedings already initiated to the logical conclusion
thereto. The disciplinary proceedings initiated under the Conduct
Rules must be deemed to be proceedings under the rules and
shall be continued and concluded by the authorities by which the G
proceedings have been commenced in the same manner as if the
government servant had continued in service. The only inhibition
thereafter is as provided in the proviso namely “provided that
where the departmental proceedings are instituted by an authority
subordinate to the President, that authority shall submit a report
H
30 SUPREME COURT REPORTS [2020] 8 S.C.R.

A recording its findings to the President”. That has been done in this
case and the President passed the impugned order. Accordingly,
we hold that the proceedings are valid in law and they are not
abated consequent to voluntary retirement of the appellant and
the order was passed by the competent authority, i.e. the President
of India.”
B
(emphasis supplied)
10.4 In State Bank of Patiala &Anr. v. Ram Niwas Bansal
(Dead) Thr. Lrs. (2014) 12 SCC 106, a similar question came up for
consideration. A departmental inquiry was initiated while the employee
C was in service. The relevant service Regulation 19.2 applicable to the
employee of the bank was similar to Rule 34.2 of the CDA Rules. This
Court held that departmental proceedings had been initiated against an
officer during the period when he was in service, the said proceedings
could continue even after his retirement. It was further held that the
concept of deemed continuance in service of the officer would have full
D play and, therefore, the order of removal could have been passed after
finalization of the departmental proceeding. Still, removal order could
not have been passed retrospectively. However, that would not invalidate
the order of dismissal, but the order of dismissal would have prospective
effect as held in R. Jeevaratnam v. the State of Madras, AIR 1966 SC
E 951. The relevant portion of State Bank of Patiala (supra) is extracted
hereunder:
“31. In the case at hand, the said stage is over. The Full Bench on
the earlier occasion had already rendered a verdict that serious
prejudice had been caused and, accordingly, had directed for
F reinstatement. The said direction, if understood and appreciated
on the principles stated in B. Karunakar1, is a direction for
reinstatement for the purpose of holding a fresh enquiry from the
stage of furnishing the report and no more. In the case at hand,
the direction for reinstatement was stayed by this Court. The Bank
proceeded to comply with the order of the High Court from the
G stage of reply of enquiry. The High Court by the impugned order2
had directed payment of back wages to the delinquent officer
from the date of dismissal till passing of the appropriate order in
the disciplinary proceeding/superannuation of the petitioner therein
1
Ecil v. B. Karunakar, (1993) 4 SCC 727.
H 2
Ram Niwas Bansal v. State Bank of Patiala, (2002) 2 SLR 375 (P&H).
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 31
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

whichever is earlier. The Bank has passed an order of dismissal A
on 22-11-2001 with effect from 23-4-1985. The said order, as we
perceive, is not in accord with the principle laid down by the
Constitution Bench decision in B. Karunakar, for it has been
stated there that in case of non-furnishing of an enquiry report the
Court can deal with it and pass an appropriate order or set aside
B
the punishment and direct reinstatement for continuance of the
departmental proceedings from that stage. In the case at hand, in
the earlier round the punishment was set aside and direction for
reinstatement was passed. Thus, on the face of the said order it is
absolutely inexplicable and unacceptable that the Bank in 2001
can pass an order with effect from 23-4-1985 which would amount C
to annulment of the judgment3 of the earlier Full Bench. As has
been held by the High Court in the impugned judgment that when
on the date of non-furnishing of the enquiry report the delinquent
officer was admittedly not under suspension, but was in service
and, therefore, he would continue in service till he is dismissed
D
from service in accordance with law or superannuated in
conformity with the Regulations. How far the said direction is
justified or not or how that should be construed, we shall deal with
while addressing the other points but as far as the order of removal
being made retrospectively operational, there can be no trace of
doubt that it cannot be made retrospective.” E
32. Presently, we shall proceed to deal with the issue of
superannuation as envisaged under the Regulations. Regulation
19(1) deals with superannuation of an employee. The relevant
part of Regulation 19(1) is as follows:
“19. Age of retirement.—(1) An officer shall retire from the F
service of the Bank on attaining the age of fifty-eight years or
upon the completion of thirty years’ service whichever occurs
first:
Provided that the competent authority may, at its
discretion, extend the period of service of an officer who has G
attained the age of fifty-eight years or has completed thirty
years’ service as the case may be, should such extension be
deemed desirable in the interest of the Bank:

3
Ram Niwas Bansal v. State Bank of Patiala, (1998) 4 SLR 711. H
32 SUPREME COURT REPORTS [2020] 8 S.C.R.

A Provided further that an officer who had joined the
service of the Bank either as an officer or otherwise on or
after 19-7-1969 and attained the age of 58 years shall not be
granted any further extension in service:
Provided further that an officer may, at the discretion of
B the Executive Committee, be retired from the Bank’s service
after he has attained 50 years of age or has completed 25
years’ service as the case may be, by giving him three months’
notice in writing or pay in lieu thereof:”
35. At this juncture, it is noteworthy to refer to Regulation 19(2)
C of the Regulations. It reads as follows:
“19. (2) In case disciplinary proceedings under the
relevant regulations of service have been initiated against an
officer before he ceases to be in the Bank’s service by the
operation of, or by virtue of any of the said Regulations or the
D provisions of these Regulations the disciplinary proceedings
may, at the discretion of the Managing Director, be continued
and concluded by the authority by which the proceedings were
initiated in the manner provided for in the said Regulations as
if the officer continues to be in service, so however, that he
shall be deemed to be in service only for the purpose of the
E continuance and conclusion of such proceedings.
Explanation.—An officer will retire on the last day of
the month in which he completes the stipulated service or age
of retirement.”

F The aforesaid Regulation, as it seems to us, deals with a
different situation altogether. It clearly lays down that if the
disciplinary proceedings have been initiated against an officer
during the period when he is in service, the said proceedings can
continue even after his retirement at the discretion of the Managing
Director and for the said limited purpose the officer shall be deemed
G to be in service.
41. In the case at hand, the disciplinary proceeding was initiated
against the delinquent officer while he was in service. The first
order of dismissal was passed on 23-4-1985. The said order of
punishment was set aside by the High Court and the officer
H concerned was directed to be reinstated for the limited purpose
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 33
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

i.e. supply of enquiry report and to proceed in the disciplinary A
proceeding from that stage. The said order was not interfered
with by this Court. The Bank continued the proceeding. Needless
to emphasise, the said continuance was in pursuance of the order
of the Court. Under these circumstances, it has to be accepted
that the concept of deemed continuance in service of the officer
B
would have full play and, therefore, an order of removal could
have been passed after finalisation of the departmental proceeding
on 22-11-2001. We have already held that the said order would
not have been made retrospectively operative, but that will not
invalidate the order of dismissal but it would only have prospective
effect as has been held in R. Jeevaratnam4. C
42. Having said that, it becomes necessary to determine the date
of retirement and thereafter delve into how the period from the
date of first removal and date of retirement would be treated. We
may hasten to add that for the purpose of deemed continuance
the delinquent officer would not be entitled to get any benefit for D
the simple reason i.e. the continuance is only for finalisation of
the disciplinary proceedings, as directed by the Full Bench of the
High Court. Hence, the effect and impact of Regulation 19(1) of
the Regulations comes into full play. On a seemly construction of
the first proviso we are of the considered view that it requires an
affirmative act by the competent authority, for it is an exercise of E
power of discretion and further the said discretion has to be
exercised where the grant of extension is deemed desirable in the
interest of the Bank. The submission of Mr Patwalia to the effect
that there should have been an intimation by the employer Bank is
founded on the finding recorded by the High Court in the impugned F
order5 that no order had been brought on record to show that the
delinquent officer had retired. As the facts would reveal, in the
year 1992 the officer concerned stood removed from service and
at that juncture to expect the Bank in law to intimate him about
his date of superannuation or to pass an order would be an incorrect
assumption. The conclusion which appears logical and acceptable G
is that unless an extension is granted by a positive or an affirmative
act by the competent authority, an officer of the Bank retires on
attaining the age of 58 years or upon the completion of 30 years
of service, whichever occurs first.
4
R. Jeevaratnam v. State of Madras, AIR 1966 SC 951. H
34 SUPREME COURT REPORTS [2020] 8 S.C.R.

A 43. In this regard the pronouncement in C.L. Verma v. State of
M.P.5 is apt to refer. In the said case the effect of Rule 29 of the
Madhya Pradesh State Municipal Service (Executive) Rules, 1973
fell for interpretation. In the said Rule it was provided that a
member of the service shall attain the age of superannuation on
the date he completes his 58 years of age. The proviso to the said
B
Rule stipulated that the State Government may allow a member
of the service to continue in employment in the interest of Municipal
Council or in public interest and, however, no member of service
shall continue in service after he attains the age of 60 years. The
appellant therein had attained the age of 58 years two days prior
C to the order of dismissal. The Court opined that the tenor of the
proviso clearly indicates that it is intended to cover specific cases
and individual employees. Be it noted, on behalf of the Government
a notification was issued by the Department concerned. The Court
opined that the said circular was not issued under the proviso to
Rule 29 but was administrative in character and that on the face
D
of mandate in Rule 29 the administrative order could not operate.
The Court further ruled that as the appellant therein had attained
the age of superannuation prior to the date of passing the order of
dismissal, the Government had no right to deal with him in its
disciplinary jurisdiction available in regard to employees.
E 44. We have referred to this decision in C.L. Verma case30 to
highlight that the Regulation herein also is couched in similar
language and, therefore, the first proviso would have full play and
it should be apposite to conclude that the delinquent officer stood
superannuated on completion of 30 years of service on 25-2-1992.
F It is because the conditions stipulated under the first proviso to
the said Regulation deal with a conditional situation to cover certain
categories of cases and require an affirmative act and in the
absence of that it is difficult to hold that the delinquent officer did
not retire on completion of thirty years of service.”
G (emphasis supplied)
10.5 It depends upon the rules in a case where a departmental
inquiry was instituted while the employee was in service, proceedings
had been continued, under the Rule what kind of punishment can be
imposed after the employee had attained the age of superannuation.
H 5
1989 Supp (2) SCC 437.
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 35
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

10.6 In Ramesh Chandra Sharma v. Punjab National Bank & A
Anr. (2007) 9 SCC 15, a similar question arose for consideration. The
employee was dismissed from service after superannuation. The High
Court set aside the order on the ground that after superannuation, the
disciplinary inquiry could not have been continued, and punishment of
dismissal could not have been imposed. This Court set aside the order of
B
the High Court, allowed the appeal filed by the bank and dismissed the
appeal filed by the employee, and held that order of dismissal could be
passed in view of the rule in question. It was held that it depends upon
the terms and conditions of the service of the employee by which he
was governed. It was also observed that after attaining the age of
superannuation, the question of imposition of dismissal of the employee C
from service would not ordinarily arise. At the same time, it was held
that the imposition of such a punishment would not be impermissible in
law. The legal fiction created by the rule concerning the continuance of
employee on a deemed basis in service has to be given full effect. In
case the order of dismissal from service was passed, the employee would
D
not be entitled to the pensionary benefit. It was also held that if the
employee is removed or dismissed from service under Regulation 4 of
the (Discipline and Appeal) Regulations, the Bank need not take recourse
to Regulation 48 of the Pension Regulations as Regulation 22 thereof
would be attracted. Rule 43 of the Pension Regulation provided for
withholding or withdrawal of the pension. Regulation 48 provided for E
recovery of pecuniary loss caused to the bank. In the case of deemed
continuation, regulation 48 was held to be inapplicable. The relevant
portion is extracted hereunder:
“13. The question as to whether a departmental proceeding can
continue despite the delinquent officer’s reaching the age of F
superannuation would depend upon the applicability of the extant
rules. It may be true that the question of imposition of dismissal of
the delinquent officer from service when he has already reached
the age of superannuation would not ordinarily arise. However, as
the consequences of such an order are provided for in the service
rules, in our opinion, it would not be correct to contend that G
imposition of such a punishment would be wholly impermissible in
law.
15. The question, we may notice, came up for consideration before
this Court in State of U.P. v. BrahmDatt Sharma6 wherein this
6
(1987) 2 SCC 179 H
36 SUPREME COURT REPORTS [2020] 8 S.C.R.

A Court while interpreting Regulation 470 of the Civil Services
Regulations in State of U.P. v. Harihar Bhole Nath7 held as
under: (BrahmDatt Sharma case (supra), SCC p. 186, para 8)
“8. A plain reading of the regulation indicates that full pension
is not awarded as a matter of course to a government servant on
B his retirement instead; it is awarded to him if his satisfactory service
is approved. If the service of a government servant has not been
thoroughly satisfactory the authority competent to sanction the
pension is empowered to make such reduction in the amount of
pension as it may think proper. Proviso to the regulation lays down
that no order regarding reduction in the amount of pension shall
C be made without the approval of the appointing authority. Though
the Regulations do not expressly provide for affording opportunity
to the government servant before order for the reduction in the
pension is issued, but the principles of natural justice ordain that
opportunity of hearing must be afforded to the government servant
D before any order is passed. Article 311(2) is not attracted,
nonetheless the government servant is entitled to opportunity of
hearing as the order of reduction in pension affects his right to
receive full pension. It is no more in dispute that pension is not
bounty; instead it is a right to property earned by the government
servant on his rendering satisfactory service to the State.”
E
16. The question, thus, as to whether continuation of a disciplinary
proceeding would be permissible or the employer will have to
take recourse only to the pension rules, in our opinion, would depend
upon the terms and conditions of the services of the employee
and the power of the disciplinary authority conferred by reason of
F a statute or statutory rules.
17. We have noticed hereinbefore that the Bank has made
Regulations which are statutory in nature. Regulation 20(3)(iii)
of the said Regulations reads thus:
“20. (3)(iii) The officer against whom disciplinary proceedings
G
have been initiated will cease to be in service on the date of
superannuation but the disciplinary proceedings will continue
as if he was in service until the proceedings are concluded and
final order is passed in respect thereof. The officer concerned
7
H (2006) 13 SCC 460
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 37
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

will not receive any pay and/or allowance after the date of A
superannuation. He will also not be entitled for the payment of
retirement benefits till the proceedings are completed and final
order is passed thereon except his own contribution to CPF.”
The said Regulation clearly envisages continuation of a
disciplinary proceeding despite the officer ceasing to be in service B
on the date of superannuation. For the said purpose a legal fiction
has been created providing that the delinquent officer would be
deemed to be in service until the proceedings are concluded and
final order is passed thereon. The said Regulation being statutory
in nature should be given full effect.
C
18. The effect of a legal fiction is well known. When a legal
fiction is created under a statute, it must be given its full effect, as
has been observed in East End Dwellings Co. Ltd. v. Finsbury
Borough Council8 as under: (All ER p. 599 B-D)
If you are bidden to treat an imaginary state of affairs as D
real, you must surely, unless prohibited from doing so, also imagine
as real the consequences and incidents which, if the putative state
of affairs had in fact existed, must inevitably have flowed from or
accompanied it. One of these in this case is emancipation from
the 1939 level of rents. The statute says that you must imagine a
certain state of affairs; it does not say that having done so, you E
must cause or permit your imagination to boggle when it comes to
the inevitable corollaries of that state of affairs.
22. We are, therefore, of the opinion that it was permissible for
the Bank to continue with the disciplinary proceedings relying on
or on the basis of Regulation 20(3)(iii) of the Punjab National F
Bank (Officers) Service Regulations, 1979.
23. It is true that the disciplinary authority in its order while imposing
punishment observed that the terminal dues of the appellant were
to be settled. It was merely an observation to take care of a
contingency which might arise. No positive direction was issued G
in that behalf and, thus, no legal right thereby was created in favour
of the appellant to obtain the retiral benefits. What it meant thereby
was that the law would take its own course.

8
1952 AC 109 : (1951) 2 All ER 587 (HL) H
38 SUPREME COURT REPORTS [2020] 8 S.C.R.

A 25. Indisputably as a consequence of the order imposing the
punishment of dismissal from service the appellant would not have
qualified for the pensionary benefits. Our attention, however, has
been drawn by Mr Saxena to Regulations 43 and 48 to contend
that even for the purpose of withholding pension, a specific order
in that behalf by a competent authority was required to be passed.
B
The Pension Regulations are meant to be applicable where pension
is required to be paid. It also provides for recovery of pecuniary
loss caused to the Bank from the pensionary benefits of the
employee. Regulations 43 and 48 of the Pension Regulations are
as under:
C “43. Withholding or withdrawal of pension.—The
competent authority may, by order in writing, withhold or
withdraw a pension or a part thereof, whether permanently or
for a specified period, if the pensioner is convicted of a serious
crime or criminal breach of trust or forgery of (sic or) acting
D fraudulently or is found guilty of grave misconduct.
Provided that where a part of pension is withheld or
withdrawn, the amount of such pension shall not be reduced
below the minimum pension per mensem payable under these
Regulations.
E * * *
48. Recovery of pecuniary loss caused to the Bank.—
(1) The competent authority may withhold or withdraw a
pension or a part thereof, whether permanently or for a
specified period and order recovery from pension of the whole
F or part of any pecuniary loss caused to the Bank if in any
departmental or judicial proceedings the pensioner is found guilty
of grave misconduct or negligence or criminal breach of trust
or forgery or acts done fraudulently during the period of his
service:
G Provided that the Board shall be consulted before any
final orders are passed;
Provided further that departmental proceedings, if
instituted while the employee was in service, shall, after the
retirement of the employee, be deemed to be proceedings under
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 39
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

these Regulations and shall be continued and concluded by the A
authority by which they were commenced in the same manner
as if the employee had continued in service;
(2) No departmental proceedings, if not instituted while
the employee was in service, shall be instituted in respect of
an event which took place more than four years before such B
institution:
Provided that the disciplinary proceedings so instituted
shall be in accordance with the procedure applicable to
disciplinary proceedings in relation to the employee during the
period of his service. C
(3) Where the competent authority orders recovery of
pecuniary loss from the pension, the recovery shall not ordinarily
be made at a rate exceeding one-third of the pension admissible
on the date of retirement of the employee:
Provided that where a part of pension is withheld or D
withdrawn, the amount of pension drawn by a pensioner shall
not be less than the minimum pension payable under these
Regulations.”
27. Regulation 48 empowers the Bank to recover
pecuniary loss caused to it from the pensionary benefits. E
Regulation 20(3)(iii) of the (Discipline and Appeal) Regulations
must be read in conjunction with the Pension Regulations.
Where the employees are pension optees, Regulation 48(1)
shall apply. In any event, if an officer is removed or dismissed
from service under Regulation 4 of the (Discipline and Appeal) F
Regulations, the Bank need not take recourse to Regulation 48
of the Pension Regulations as Regulation 22 thereof would be
attracted.”
(emphasis supplied)
10.7 An inquiry has to be taken to a logical end. In Union of G
India v. Ajoy Kumar Patnaik (1995) 6 SCC 442, the question of
continuance of departmental inquiry after retirement from service on
attaining the age of superannuation came up for consideration. It was
opined that it would not be a ground to close the departmental inquiry
without making any finding on merits; otherwise, in all cases, it would
H
40 SUPREME COURT REPORTS [2020] 8 S.C.R.

A cause grave damage to public justice, and the employee would get away
with pending proceedings. An employee cannot get rid of pending
departmental proceedings by efflux of time. It was held:
“10. Since the competent authorities at different levels had
considered the material and ultimately had decided to compulsorily
B retire the respondent from service, it cannot be said that it is an
arbitrary decision. It is true that pending the proceedings the
respondent has already retired from service on attaining the age
of superannuation, but that would not provide a ground to dispose
of this matter without giving any finding on the action taken by the
competent authority. Otherwise, in all cases it would cause grave
C damage to public justice. The employee would get away with it
due to pending proceedings. Therefore, it needs to be considered
and decision rendered thereon whether the action taken by the
Government or the competent authority is valid in law. In that
perspective, mere retirement of the officer by efflux of time pending
proceedings would not be a ground to close the matter.”
D
(emphasis supplied)
10.8 In Rajinder Lal Capoor (supra), it was held that when
disciplinary proceedings had been initiated before employee attained the
age of superannuation, the rule provided for deemed legal fiction of
E continuance of employee ‘as if he was in service’, till finalization of such
proceedings, the employee would be deemed to be in service although
he has attained the age of superannuation. It was held:
“21. The aforementioned Regulation, however, could be invoked
only when the disciplinary proceedings had clearly been initiated
prior to the respondent’s ceasing to be in service. The terminologies
F
used therein are of seminal importance. Only when a disciplinary
proceeding has been initiated against an officer of the bank despite
his attaining the age of superannuation, can the disciplinary
proceeding be allowed on the basis of the legal fiction created
thereunder i.e. continue ‘as if he was in service’. Thus, only when
G a valid departmental proceeding is initiated by reason of the legal
fiction raised in terms of the said provision, the delinquent officer
would be deemed to be in service although he has reached his
age of superannuation. The departmental proceeding, it is trite
law, is not initiated merely by issuance of a show-cause notice. It
is initiated only when a charge-sheet is issued….”
H
(emphasis supplied)
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 41
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

A review was filed; the same was dismissed in UCO Bank v. A
Rajinder Lal Capoor, (2008) 5 SCC 257. It is clear that when an
employee is deemed to be in service, the punishment as prescribed under
the Rules can be imposed.
10.9 In V. Padmanabham v. Government of Andhra Pradesh
& Ors. (2009) 15 SCC 537, Rule 9 of the Andhra Pradesh Pension B
Code provided that if the departmental inquiry is instituted when
Government servant was in service, it could continue, and as a rule
provided for the continuance of such an inquiry only for recovery of the
amount from the pension and gratuity. It was held that the continuation
of the departmental proceedings was not illegal. The Pension Code raises
a legal fiction and proceedings would be deemed to have continued. It C
was opined:
“10. It has not been disputed before us that in terms of Rule 9(2)
of the Andhra Pradesh Pension Code the disciplinary proceedings
initiated against the appellant could continue. Rule 9(2)(a) reads
as under: D
“9. Right of Government to withhold or withdraw
pension.—(1) * * *
(2)(a) The departmental proceedings referred to in sub-
rule (1), if instituted while the government servant was in service
whether before his retirement or during his re-employment, E
shall after the final retirement of the government servant, be
deemed to be proceedings under this rule and shall be continued
and concluded by the authority by which they were commenced
in the same manner as if the government servant had continued
in service:
F
Provided that where the departmental proceedings are
instituted by an authority subordinate to the State Government,
that authority shall submit a report recording its findings to the
State Government.”
Indisputably, therefore, the departmental proceedings which have
G
been pending against the appellant do not suffer from any legal
infirmity and in law would be deemed to have been continuing.
11. In State of U.P. v. Harihar Bholenath9 this Court stated:
(SCC p. 465, para 10)
9
(2006) 13 SCC 460 H
42 SUPREME COURT REPORTS [2020] 8 S.C.R.

A “10. A departmental proceeding can be initiated for recovery
of amount suffered by the State exchequer owing to the acts of
omission or commission of a delinquent employee in three different
situations:
(i) when a disciplinary proceeding is initiated and concluded
B against a delinquent employee before he reaches his age of
superannuation;
(ii) when a proceeding is initiated before the delinquent
officer reached his age of superannuation but the same has not
been concluded and despite the superannuation of the employee,
C an order of recovery of the amount from the pension and gratuity
is passed; and
(iii) an enquiry is initiated after the delinquent employee
reaches his age of superannuation.”
13. Mr Rama Krishna Reddy, however, would urge that having
D regard to the fact that the departmental proceedings were initiated
in the year 1992-1993, this Court should not direct continuation of
the departmental proceedings any further. Strong reliance in this
behalf has been placed on M.V. Bijlani v. Union of India10.
14. We have noticed heretobeforethat continuation of the
E departmental proceedings is not illegal. The Pension Code raises
a legal fiction in terms whereof the departmental proceedings
would be deemed to have continued. The Tribunal has passed an
order in favour of the appellant on technical grounds. The High
Court, therefore, in our opinion, cannot be said to have committed
F any illegality in passing the impugned judgment.”
It is apparent that what kind of punishment can be imposed would
depend upon the relevant service rule as in the aforesaid case, the
relevant service Rule 9 provided deemed continuance of the employee
in service for the purpose of withholding or withdrawal of pension.
G 10.10 In State of Maharashtra v. M.H. Mazumdar (1988) 2
SCC 52, Rules 188 and 189 of Bombay Civil Services Rules came up
for consideration. The rules provided for withholding or withdrawing of
a pension or any part of it. In terms of the rule, it was held that in case
the pensioner was found guilty of grave misconduct while he was in
10
H (2006) 5 SCC 88
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 43
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

service, the grant of pension and its continuation would depend upon the A
outcome of the inquiry. The proceeding under the relevant rule was not
for the imposition of the penalty of dismissal etc. but for the purpose of
withdrawal or withholding of the pension provided under the rules 188
and 189. This Court opined thus:
“5. The aforesaid two rules empower Government to reduce or B
withdraw a pension. Rule 189 contemplates withholding or
withdrawing of a pension or any part of it if the pensioner is found
guilty of grave misconduct while he was in service or after the
completion of his service. Grant of pension and its continuance to
a government servant depend upon the good conduct of the
government servant. Rendering satisfactory service maintaining C
good conduct is a necessary condition for the grant and
continuance of pension. Rule 189 expressly confers power on the
Government to withhold or withdraw any part of the pension
payable to a government servant for misconduct which he may
have committed while in service. This rule further provides that D
before any order reducing or withdrawing any part of the pension
is made by the competent authority the pensioner must be given
opportunity of defence in accordance with the procedure specified
in Note I to Rule 33 of the Bombay Civil Services Conduct,
Discipline and Appeal Rules. The State Government’s power to
reduce or withhold pension by taking proceedings against a E
government servant even after his retirement is expressly
preserved by the aforesaid rules. The validity of the rules was not
challenged either before the High Court or before this Court. In
this view, the Government has power to reduce the amount of
pension payable to the respondent. In M. Narasimhachar v. State F
of Mysore11 and State of Uttar Pradesh v. BrahmDatt Sharma12
similar rules authorising the Government to withhold or reduce
the pension granted to the government servant were interpreted
and this Court held that merely because a government servant
retired from service on attaining the age of superannuation he
could not escape the liability for misconduct and negligence or G
financial irregularities which he may have committed during the
period of his service and the Government was entitled to withhold
or reduce the pension granted to a government servant.
11
AIR 1960 SC 247
12
(1987) 2 SCC 179 H
44 SUPREME COURT REPORTS [2020] 8 S.C.R.

A 6. The High Court in our view committed serious error in holding
that the State Government had no authority to initiate any
proceedings against the respondent. In B.J. Shelat v. State of
Gujarat13 disciplinary proceedings had been initiated against the
government servant for purposes of awarding punishment to him
after he had retired from service. The ratio of that decision is not
B
applicable to the instant case as in the present case the purpose
of the enquiry was not to inflict any punishment; instead the
proceedings were initiated for determining the respondent’s
pension. The proceedings were taken in accordance with Rules
188 and 189 of the Rules. It appears that the attention of the High
C Court was not drawn to these rules.”
(emphasis supplied)
10.11 In State of West Bengal & Ors. v. Pronab Chakraborty
(2015) 2 SCC 496, right of the Governor to withhold the pension in certain
circumstances under rule 10 of the West Bengal Services (Death-cum-
D Retirement Benefit) Rules, 1971 came up for consideration. Rule 10(1)
provides for two kinds of punishments. Firstly, the right of withholding or
withdrawal of pension. Secondly, the right to order the recovery from
the pension of the whole or part of any pecuniary loss caused to the
Government. It was held that the employee could be proceeded against
E after the date of his retirement on account of grave misconduct or
negligence. Even in the absence of any pecuniary loss caused to the
Government, it is open to the employer to continue the departmental
proceedings after the employee has retired from service. It was observed:
4. The State of West Bengal has assailed the order passed by the
F High Court on 22-12-201014 by asserting that Rule 10 of the 1971
Rules had been incorrectly interpreted by the High Court.
Therefore, the solitary issue that arises for our consideration in
the present appeal is the interpretation of Rule 10 of the 1971
Rules. Rule 10(1) aforementioned is extracted hereunder:

G “10. Right of the Governor to withhold pension in certain
cases.—(1) The Governor reserves to himself the right of
withholding or withdrawing a pension or any part of it whether
permanently or for a specified period, and the right of ordering
13
(1978) 2 SCC 202
14
Pranob Chakraborty v. State of W.B., W.P. ST No. 497 of 2010, order dated 22.12.2010
H (Cal.)
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 45
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

the recovery from a pension of the whole or part of any pecuniary A
loss caused to Government, if the pensioner is found in a
departmental or judicial proceeding to have been guilty of grave
misconduct or negligence, during the period of his service, including
service rendered on re-employment after retirement:
Provided that— B
(a) such departmental proceeding if instituted while the
officer was in service, whether before his retirement or
during his re-employment, shall after the final retirement of
the office, be deemed to be a proceeding under this article
and shall be continued and concluded by the authority by C
which it was commenced in the same manner as if the
officer had continued in service;
(b) such departmental proceedings, if not instituted while
the office was in service, whether before his retirement or
during his re-employment— D
(i) shall not be instituted save with the sanction of the
Governor;
(ii) shall not be in respect of any event which took place
more than four years before such institution; and
E
(iii) shall be conducted by such authority and in such place
as the Governor may direct and in accordance with the
procedure applicable to departmental proceedings in which
an order of dismissal from service could be made in relation
to the officer during his service;
F
(c) no such judicial proceeding, if not instituted while the
officer was in service, whether before his retirement or
during his re-employment shall be instituted in respect of a
cause of action which arose or an event which took place
more than four years before such institution; …”
A perusal of Rule 10(1) extracted hereinabove reveals, that two G
different kinds of punishments are contemplated thereunder. Firstly,
“… the right of withholding or withdrawing a pension …” which
the delinquent employee is entitled to, permanently or for a specified
period. And secondly, “… the right of ordering the recovery from
a pension of the whole or part of any pecuniary loss caused to the H
46 SUPREME COURT REPORTS [2020] 8 S.C.R.

A Government …”. The above two punishments can be inflicted on
a delinquent, even after he retires on attaining the age of
superannuation, provided he is found guilty of "… grave misconduct
or negligence …” during the period of his service.
5. It is therefore apparent, that it is not only for pecuniary loss
B caused to the Government that proceedings can continue after
the date of superannuation. An employee can be proceeded against,
after the date of his retirement, on account of “… grave
misconduct or negligence …”. Therefore/, even in the absence
of any pecuniary loss caused to the Government, it is open to the
employer to continue the departmental proceedings after the
C employee has retired from service. Obviously, if such grave
misconduct or negligence entails pecuniary loss to the Government,
the loss can also be ordered to be recovered from the employee
concerned. It was therefore not right for the High Court, while
interpreting Rule 10(1) of the 1971 Rules to conclude that
D proceedings after the date of superannuation could continue only
when the charges entailed pecuniary loss to the Government.”
(emphasis supplied)
10.12 In State Bank of India v. A.N. Gupta & Ors. (1997) 8
SCC 60, it was observed that unless the service rules provide for
E continuance of disciplinary proceedings after the date of superannuation,
the pension cannot be withheld when no decision was taken for eight
years the proceedings were quashed. The relevant portion is quoted
hereunder:
16. Right to receive pension is a right to property under Rule 7 of
F the Pension Rules when it says that no employee shall have any
right of property in the pension fund beyond the amount of his
contribution to the pension section of the fund with interest accrued
thereon. That being so Rule 11 cannot be interpreted to mean that
claim to pension of an employee on superannuation can be defeated
G by the Bank by merely withholding sanction of retirement. For
about 8 years when these two matters were pending in the Delhi
High Court the Bank did not take any decision in terms of Rule 11
to sanction retirement of the respondents. The Bank never
communicated to the respondents that it had withheld sanction to
their retirement or did not approve their service. It is only during
H the course of proceedings in the High Court that the Bank came
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 47
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

up with the plea that it wanted to have the allegations against the A
respondents enquired into. To us the language of Rule 11 appears
quite explicit. No sanction is required from the Bank to leave the
service on reaching the age of superannuation as provided in Rule
26 of the Service Rules applicable to Assistants. Rule 26 of the
Service Rules clearly mandates the retirement of an employee on
B
his attaining the age of superannuation and there cannot be two
opinions on that. We, therefore, hold that Rule 11 has no application
in the case of the respondents who retired on attaining the age of
superannuation. We cannot agree with the plea of the Bank that
sanctioning of retirement must be understood as sanctioning of
service which in terms must be understood as approval of service. C
Proceeding in the garb of disciplinary proceedings cannot be
permitted after an employee has ceased to be in the service of
the Bank as Service Rules do not provide for continuation of
disciplinary proceedings after the date of superannuation. Sanction
of the Bank is required only if the retirement of an employee is by
D
any other method except superannuation. We do not think that
the decision of the Andhra Pradesh High Court in T. Narasiah v.
State Bank of India15 and that of the Bombay High Court in J.K.
Kulkarni v. State Bank of India16 have laid down good law.
(emphasis supplied)
E
10.13 In Takhatray Shivadattray Mankad v. State of Gujarat
(1989) Supp. 2 SCC 110, the question of departmental inquiry instituted
before retirement and its continuation after the age of superannuation
was considered. It was held that proceedings could be continued under
the relevant rules, and as provided, the order could have been passed
with respect to pension and gratuity. The proceedings did not become F
infructuous. The order passed by the Government to withhold pension
and gratuity was upheld. What is of significance is that proceedings do
not lapse, and punishment, as may be considered appropriate, can be
imposed in terms of the rules. The relevant portion is extracted hereunder:
“25. An examination of Rule 188 shows that the Government G
may reduce the amount of pension of a government servant as it
may think fit if the service of the government servant has not
been thoroughly satisfactory. As per Rule 189 the government
15
(1978) 2 LLJ 173
16
MP No. 964 of 1977 decided on 29-11-1977 H
48 SUPREME COURT REPORTS [2020] 8 S.C.R.

A may withhold or withdraw a pension or part of it if the petitioner is
convicted of serious crime or found to have been guilty of
misconduct during or after the completion of service provided
that before any order to this effect is issued, the procedure referred
to the Bombay Civil Services (Conduct, Discipline and Appeal)
Rules are followed. These rules, thus, have expressly preserved
B
the State Government’s power to reduce or withhold pension by
taking proceedings against a government servant even after his
retirement. The validity of these rules has not been challenged.
These two rules came for interpretation before this Court in State
of Maharashtra v. M.H. Mazumdar17 and this Court expressed
C its view with reference to these rules as follows: (SCC pp. 55-56,
para 5)
“The aforesaid two rules empower Government to
reduce or withdraw a pension. Rule 189 contemplates
withholding or withdrawing of a pension or any part of it if the
D pensioner is found guilty of grave misconduct while he was in
service or after the completion of his service. Grant of pension
and its continuance to a government servant depend upon the
good conduct of the government servant. Rendering
satisfactory service maintaining good conduct is a necessary
condition for the grant and continuance of pension. Rule 189
E expressly confers power on the government to withhold or
withdraw any part of the pension payable to a government
servant for misconduct which he may have committed while
in service. This rule further provides that before any order
reducing or withdrawing any part of the pension is made by
F the competent authority the pensioner must be given opportunity
of defence in accordance with the procedure specified in Note
I to Rule 33 of the Bombay Civil Services (Conduct, Discipline
and Appeal) Rules. The State Government’s power to reduce
or withhold pension by taking proceedings against a government
servant even after his retirement is expressly preserved by the
G aforesaid rules. The validity of the rules was not challenged
either before the High Court or before this Court. In this view,
the Government has power to reduce the amount of pension
payable to the respondent. In M. Narasimhachar v. State of

17
H (1988) 2 SCC 52
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 49
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

Mysore18 and State of Uttar Pradesh v. Brahm Datt Sharma19 A
similar rules authorising the Government to withhold or reduce
the pension granted to the government servant were interpreted
and this Court held that merely because a government servant
retired from service on attaining the age of superannuation he
could not escape the liability for misconduct and negligence or
B
financial irregularities which he may have committed during
the period of his service and the Government was entitled to
withhold or reduce the pension granted to a government
servant.”
In compliance with the principle of natural justice requiring an
opportunity of hearing to be afforded to a government servant C
before an order affecting his right is passed and in accordance
with the procedure specified in Note I to Rule 33 of the Bombay
Civil Services (Conduct, Discipline and Appeal) Rules a show-
cause notice as pointed out earlier had been issued to the appellant
on 17-7-1971 calling upon him to show-cause within 30 days from D
the date of the receipt of the notice as to why the proposed
reduction should not be made in the pension and death-cum-
retirement gratuity. But the appellant failed to avail that opportunity
to disprove the allegations and satisfy his appointing authority that
he rendered satisfactory service throughout. It was in those
circumstances the appointing authority taking into consideration E
the serious allegations levelled against him in the disciplinary
proceedings had thought it fit to impose reduction in the pension
and gratuity in accordance with Rules 188 and 189 of the Bombay
Rules on the ground that the appellant had not rendered satisfactory
service. The appellant is not entitled to take advantage of clause F
(b)(ii) of the proviso to Section 189-A of the Bombay Rules since
the proceedings had been instituted long before his retirement.
Further as per clause (a) of the said proviso, the proceedings
already instituted while the government servant was in service
could be continued and concluded even after his retirement. Hence
for the reasons stated above the impugned order dated 15-11- G
1977 reducing the pension and gratuity cannot be said to contravene
the Bombay Rules.

18
(1960) 1 SCR 981
19
(1987) 2 SCC 179 H
50 SUPREME COURT REPORTS [2020] 8 S.C.R.

A 26. At the risk of repetition, we may point out that three
departmental proceedings containing serious allegations of
misconduct were instituted against the appellant of which one
was instituted even before he was compulsorily retired on 12-1-
1961 and other two proceedings were instituted in the year 1963
that is much earlier to the appellant attaining the age of
B
superannuation on 14-1-1964. These departmental proceedings
are stated to have become infructuous consequent upon the
retirement of the appellant on attaining the age of superannuation.
To the show-cause notice dated 17-7-1971 proposing to inflict
reduction in pension and gratuity the appellant, instead of giving a
C proper reply, disproving the charges and satisfying the appointing
authority that he rendered satisfactory service throughout had
delayed the matter for over a period of six years. It was in that
situation that the impugned order dated 15-11-1977 happened to
be passed.
D 27. The learned counsel for the appellant strenuously contended
that after the disciplinary inquiries had been dropped on the ground
that they had become infructuous, the Government was not right
and justified in reducing the pension and gratuity on the same
charges which were the subject-matter of the enquiries. This
argument of the learned counsel, in our opinion, does not merit
E consideration because the charges against the appellant were not
made use of for awarding any punishment after his retirement
from service but only for determining the quantum of the
appellant’s pension in accordance with the rules relating to the
payment of pension and gratuity. In this connection it would be
F apposite to refer the observation of the Supreme Court in State of
Uttar Pradesh v. Brahm Datt Sharma which we quote below:
(SCC p. 184, para 5)
“If disciplinary proceedings against an employee of the
government are initiated in respect of misconduct committed
G by him and if he retires from service on attaining the age of
superannuation, before the completion of the proceedings it is
open to the State Government to direct deduction in his pension
on the proof of the allegations made against him. If the charges
are not established during the disciplinary proceedings or if the
disciplinary proceedings are quashed it is not permissible to
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 51
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

the State Government to direct reduction in the pension on the A
same allegations, but if the disciplinary proceedings could not
be completed and if the charges of serious allegations are
established, which may have bearing on the question of
rendering efficient and satisfactory service, it would be open
to the Government to take proceedings against the government
B
servant in accordance with rules for the deduction of pension
and gratuity.”
10.14 In The Secretary, Forest Department & Ors. v. Abdur
Rasul Chowdhury (2009) 7 SCC 305, it was held that the employer
could proceed with the departmental inquiry though the Government
servant has retired from service for imposing ‘punishment’ contemplated C
under the rules. It was held:
“13. Rule 10 of the Rules speaks of the right of the Governor to
withhold pension in certain cases. Rule 10(1) says that the
Governor reserves to himself the right of withholding or
withdrawing pension or any part of it whether permanently or for D
a specified period and the right of ordering the recovery from
pension of the whole or the part of any pecuniary loss caused to
the Government, if the pensioner is found in a departmental or
judicial proceedings to have been guilty of grave misconduct or
negligence during the period of service, including service rendered E
on re-employment after retirement. Proviso appended to the Rules
specifically provides that the resort to sub-rule (1) to Rule 10 can
be made only apart from others, that the departmental proceedings
had been instituted while the officer was in service.
15. In the present case, while the delinquent employee was in F
service, the departmental enquiry proceedings had been instituted
by the employer by issuing the charge memo and the proceedings
could not be completed before the government servant retired
from service on attaining the age of superannuation and in view
of Rule 10(1) of the 1971 Rules, the employer can proceed with
the departmental enquiry proceedings though the government G
servant has retired from service for imposing only punishment
contemplated under the Rules.”
10.15 In Ram Lal Bhaskar (supra), the employee was in service
when the inquiry was initiated. He was dismissed from service after
H
52 SUPREME COURT REPORTS [2020] 8 S.C.R.

A attaining the age of superannuation. This court considered the argument
that the order of the appellate authority was illegal and without jurisdiction.
The Rules provided that disciplinary proceedings could be continued in
the same manner as if the officer continued to be in service. Thus, it
was held that the employee was deemed to be in service for the
continuance of proceedings. No merit was found in the submission that
B
inquiry and order of dismissal passed after superannuation was illegal
and without jurisdiction. The relevant discussion is extracted hereunder:
“8. The learned counsel for Respondent 1, on the other hand,
supported the impugned order of the High Court and submitted
that there is no infirmity in the impugned order of the High Court.
C He further submitted that in any case Respondent 1 had retired
from service on 31-1-2000, and though the charge-sheet was
served on him on 22-12-1999 when he was still in service, the
enquiry report was served on him by letter dated 28-9-2000 and
he was dismissed from service on 15-5-2001 after he had retired
D from service. He submitted that after the retirement of Respondent
1, the appellant had no jurisdiction to continue with the enquiry
against Respondent 1. In support of this contention, he cited the
decision of this Court in UCO Bank v. Rajinder Lal Capoor20.
9. We have perused the decision of this Court in UCO Bank v.
E Rajinder Lal Capoor and we find that in the facts of that case
the delinquent officer had already superannuated on 1-11-1996
and the charge-sheet was issued after his superannuation on
13-11-1998 and this Court held that the delinquent officer having
been allowed to superannuate, the charge-sheet, the enquiry report
and the orders of the disciplinary authority and the appellate
F authority must be held to be illegal and without jurisdiction. In the
facts of the present case, on the other hand, we find that the
charge-sheet was issued on 22-12-1999 when Respondent was
in service and there were clear provisions in Rule 19(3) of the
State Bank of India Officers Service Rules, 1992, that in case
G disciplinary proceedings under the relevant rules of service have
been initiated against an officer before he ceased to be in the
bank’s service by the operation of, or by virtue of, any of the rules
or the provisions of the Rules, the disciplinary proceedings may,
at the discretion of the Managing Director, be continued and
20
H (2007) 6 SCC 694
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 53
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

concluded by the authority by whom the proceedings were initiated A
in the manner provided for in the Rules as if the officer continues
to be in service, so however, that he shall be deemed to be in
service only for the purpose of the continuance and conclusion of
such proceedings.
10. We may mention here that a similar provision was also relied B
on behalf of UCO Bank in UCO Bank v. Rajinder Lal Capoor
(supra) in Regulation 20(3)(iii) of the UCO Bank Officer
Employees’ Service Regulations, 1979, but this Court held that
the aforesaid regulation could be invoked only when the disciplinary
proceedings had been initiated prior to the delinquent officer ceased
to be in service. Thus, the aforesaid decision of this Court in UCO C
Bank v. Rajinder Lal Capoor (supra) does not support
Respondent 1 and there is no merit in the contention of the counsel
for Respondent 1 that the enquiry and the order of dismissal were
illegal and without jurisdiction.”
(emphasis supplied) D

In the instant case, Rule 34.2 of the CDA Rules holds the field
and is binding, in the absence of any statutory interdiction made by any
other provision regarding continuance of the inquiry and for taking it to a
logical end in terms of the deemed continuation of the employee in service.
Decision of this Court in the case of Ram Lal Bhaskar (supra) is by a E
three Judge Bench, which is binding.
10.16 The reliance placed on the provision contained in section
4(6) of the Payment of Gratuity Act, 1972, is devoid of substance. The
Act is to provide for a scheme for payment of gratuity to the employees.
Section 2(A) of the Act specifies the continuous service and what would F
amount to interruption and exclusion therefrom. An employee in
continuous service, within the meaning of section 2(A)(1), for one year
or six months, as provided, shall be deemed to be in continuous service.
Section 3 deals with the appointment of the Controlling Authority. Section
4 deals with the payment of gratuity. Section 4(1) provides that gratuity G
shall be payable to an employee on the termination of his employment
after he has rendered continuous service for not less than five years, on
his superannuation, or retirement or resignation, or his death or
disablement due to accident or disease. Five years of continuous service
shall not be necessary in case a person ceased to be in service due to
death or disability. Section 4(2) provides for entitlement of gratuity for H
54 SUPREME COURT REPORTS [2020] 8 S.C.R.

A every completed year of service or part thereof, in excess of six months,
the employer shall pay gratuity at the rate of fifteen days’ wages based
on the rate of wages last drawn by the employee concerned. Section
4(5) provides that nothing in this section shall affect the right of an
employee to receive better terms of gratuity under any award or
agreement or contract with the employer. What is ensured under the
B
Act is the minimum amount of gratuity.
10.17 Section 4 provides for payment of gratuity. Section 4(6)
contains a non-obstante clause to sub-section 1. In case of service of
the employee have been terminated for wilful omission or negligence
causing any damage or loss to, or destruction of, property belonging to
C the employer, gratuity shall be forfeited to the extent of the damage or
loss so caused as provided under section 4(6)(a). Even in the absence of
loss or damage, gratuity can be wholly or partially forfeited under the
provisions of section 4(6)(b), in case termination of services was based
upon disorderly conduct or act of violence on his part or offence involving
D moral turpitude committed during the course of employment. Thus, it is
apparent that not only damage or loss can be recovered, but gratuity can
be wholly or partially withheld in case services are terminated for the
reasons specified in section 4(6)(b).
10.18 The Payment of Gratuity Act, 1972, makes no provision
E with respect to departmental inquiries. Since no statutory provisions of
the Payment of Gratuity Act, 1972 come in the way of the CDA Rules
to continue the inquiry after superannuation of the employee in case it
was instituted while he was in service and his deemed continuance in
service; thus, no fetteris caused upon operation of Rule 34.2 providing
for a continuation of the inquiry and deemed continuation of the employee
F in service after the age of superannuation.
10.19 The provisions of Section 4(6) of the Act of 1972 prevail
over Section 4(1) as provisions of Section 4(6) contain non-obstante
clause as to Section 4(1). It would prevail over the provisions made in
Section 4(1) and gratuity would not become payable mandatorily as
G provided in Section 4(1). The provisions of Section 4(6) provide recovery
or forfeiture where services of employee have been terminated for the
reasons prescribed in Section 4(6)(a) and 4(6)(b). Section 4(6)(a) and
(b) both provide for recovery of loss caused or forfeiture wholly or partially
in the case of termination of services. In case after superannuation of
H employee there cannot be any dismissal i.e., termination of services as
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 55
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

contemplated in Section 4(6), then there can be no recovery of pecuniary A
loss caused by employee or forfeiture of gratuity wholly or partially as
that can only be done in the event of termination of services on charges
found established. Such an interpretation would render continuance of
inquiry otiose and would defeat the public policy and the provisions of
Act of 1972. The recovery of loss or forfeiture is one of the punishments
B
which depends on exigency of termination by way of dismissal as
mandated by Section 4(6). To give effect to the provisions of the Act,
the punishment of dismissal can be imposed in view of Rule 34.2,
otherwise it would defeat the intendment of provisions contained in Section
4(6)(a) and 4(6)(b) of the Act of 1972.
10.20 Section 4(1) used the expression ‘termination of employment C
after five years by way of superannuation, retirement or resignation or
on his death or disablement due to accident or disease’ that is in a normal
course. It does not deal with a situation where departmental inquiry is
instituted and continued and completed after the age of superannuation
and termination of employment had not taken place on completion of the D
age of superannuation as there is a deemed continuation of the
employment for the purpose of holding an inquiry and passing the
appropriate punishment order after the conclusion of the departmental
inquiry on the basis of misconduct if any found established. Provisions
of section 4(1) do not impinge upon the continuation of inquiry. Section
4(6) prevails on it. The Payment of Gratuity Act, 1972, can govern the E
conditions concerning payment of gratuity. It cannot control and provide
with respect to an employer’s right to hold a departmental inquiry after
retirement, and there is no provision prescribing what kind of punishment
can be imposed in the departmental inquiry if it is continued after attaining
the age of superannuation. The relevant rules would govern such matters. F
In case the Payment of Gratuity Act, 1972, is interpreted to interdict the
departmental inquiry after the age of superannuation and to deal with
the nature of punishment to be imposed, it would be taken as a case of
over-inclusion in the Act which deals exclusively with the payment of
gratuity.
G
10.21 In view of the various decisions of this Court and considering
the provisions in rules in question, it is apparent that the punishment
which is prescribed under Rule 27 of the CDA Rules, minor as well as
major, both can be imposed. Apart from that, recovery can also be made
of the pecuniary loss caused as provided in Rule 34.3 of the CDA Rules,
H
56 SUPREME COURT REPORTS [2020] 8 S.C.R.

A which takes care of the provision under sub-section (6) of Section 4 of
the Payment of Gratuity Act, 1972. The recovery is in addition to a
punishment that can be imposed after attaining the age of superannuation.
The legal fiction provided in Rules 34.2 of the CDA Rules of deemed
continuation in service has to be given full effect.
B 10.22 The expression used in section 4(1) “termination” does not
include “dismissal.” The Constitution Bench considered the difference
between the termination and dismissal in M. Ramanatha Pillai v. The
State of Kerala & Ors. (1973) 2 SCC 650 wherein the following
observations were made as to the distinction between the terms dismissal
and termination considering the provisions of Article 311 of the
C Constitution. It was observed:
“19. When Article 311 states that no person shall be dismissed,
removed or reduced in rank until he has been given a reasonable
opportunity of showing cause against the action proposed to be
taken in regard to him it affords a protection and security of
D government service. Article 311 applies to all government servants
holding permanent, temporary or officiating post. The protection
afforded by Article 311 is however limited to the imposition of
three major penalties. These are dismissal, removal or reduction
in rank. The words “dismissed”, “removed” and “reduced in rank”
E are technical words. Both in the case of removal or dismissal
there is a stigma. It also involves loss of benefit. There may also
be an element of personal blame worthiness of the government
servant. Reduction in rank is also a punishment. The expression
“rank” in Article 311(2) has reference to a person’s classification
and not to his particular place in the same cadre in the hierarchy
F of the service to which he belongs. Merely sending back a servant
to his substantive post has been held not to be a reduction in rank
as a punishment since he had no legal right to continue in officiating
post. The striking out of a name from the panel has been held to
affect future rights of promotion and to be a reduction in rank.”
G (a) Dismissal by way of punishment, termination of employment
by means of exigencies provided in section 240 of the Government of
India Act was considered in Jagdish Mitter v. Union of India AIR
1964 SC 449. It was held:
8. Having regard to the legislative history of the provisions
H contained in Article 311, the words “dismissed”, “removed” and
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 57
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

“reduced in rank” as used in Article 311(1), have attained the A
significance of terms of Article. As has been observed by Das,
C.J. in Parshotam Lal Dhingra v. Union of India21, “both at the
date of the commencement of the 1935 Act and of our Constitution
the words ‘dismissed’, ‘removed’ and ‘reduced in rank’ as used
in the service rules, were well understood as signifying or denoting
B
the three major punishments which could be inflicted on
government servants. The protection given by the rules to the
Government servants against dismissal, removal or reduction in
rank, which could not be enforced by action, was incorporated in
sub-section (1) and (2) of Section 240 to give them a statutory
protection by indicating a procedure which had to be followed C
before the punishments of dismissal, removal or reduction in rank
could be imposed on them and which could be enforced in law.
These protections have now been incorporated in Article 311 of
our Constitution”. It is thus clear that every order terminating the
services of a public servant who is either a temporary servant, or
D
a probationer, will not amount to dismissal or removal from service
within the meaning of Article 311. It is only when the termination
of the public servant’s services can be shown to have been ordered
by way of punishment that it can be characterised either as
dismissal or removal from service.
(b) Similarly, in P. Balakotaiah v. Union of India, AIR 1958 SC E
232 the provisions of Article 311 came up for consideration, the distinction
between the dismissal and termination was discussed thus:
“(18)(IIc) It is then contended that the procedure prescribed by
the Security Rules for the hearing of the charges does not satisfy
the requirements of Article 311, and that they are, in consequence, F
void. But Article 311 has application only when there is an order
of dismissal or removal, and the question is whether an order
terminating the services of the employees under Rule 3 can be
said to be an order dismissing or removing them. Now, this Court
has held in a series of decisions that it is not every termination of G
the services of an employee that falls within the operation of Article
311, and that it is only when the order is by way of punishment
that it is one of dismissal or removal under that Article. Vide Satish

21
1958 SCR 828 at pp.856-857 H
58 SUPREME COURT REPORTS [2020] 8 S.C.R.

A Chandra Anand v. Union of India22, Shyam Lal v. State of Uttar
Pradesh and the Union of India 23 , State of Bombay v.
Saubhagchand M. Doshi24 and Parshotam Lal Dhingra v. Union
of India25. The question as to what would amount to punishment
for purposes of Article 311 was also fully considered in Parshotam
Lal Dhingra case. It was therein held that if a person had a right
B
to continue in office either under the service rules or under a
special agreement, a premature termination of his services would
be a punishment. And, likewise, if the order would result in loss of
benefits already earned and accrued, that would also be
punishment. In the present case, the terms of employment provide
C for the services being terminated on a proper notice, and so, no
question of premature termination arises. Rule 7 of the Security
Rules preserves the rights of the employee to all the benefits of
pension, gratuities and the like, to which they would be entitled
under the rules. Thus, there is no forfeiture of benefits already
acquired. It was stated for the appellants that a person who was
D
discharged under the rules was not eligible for re-employment,
and that that was punishment. But the appellants are unable to
point to any rule imposing that disability. The order terminating
the services under Rule 3 of the Security Rules stands on the
same footing as an order of discharge under Rule 148, and it is
E neither one of dismissal nor of removal within the meaning of
Article 311.”
(emphasis supplied)
(c) In Shyam Lal v. State of Uttar Pradesh & Ors., AIR 1954
SC 369, it was held that every termination is not dismissal or removal. In
F Ravindra Kumar Misra v. UP State Handloom Corpn. Ltd. &Anr.
1987 Supp. SCC 739, the distinction between termination simpliciter and
punitive dismissal was considered, and it was observed:
“6. As we have already observed, though the provisions of
Article 311(2) of the Constitution do not apply, the Service
G Rules which are almost at par make the decisions of this Court
relevant in disposing of the present appeal. In several
22
(1953) SCR 655
23
(1955) 1 SCR 26
24
CA No.182 of 1955
H 25
CA No.65 of 1957
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 59
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

authoritative pronouncements of this Court, the concept of A
“motive” and “foundation” has been brought in for finding out
the effect of the order of termination. If the delinquency of the
officer in temporary service is taken as the operating motive in
terminating the service, the order is not considered as punitive
while if the order of termination is founded upon it, the
B
termination is considered to be a punitive action. This is so on
account of the fact that it is necessary for every employer to
assess the service of the temporary incumbent in order to find
out as for whether he should be confirmed in his appointment
or his services should be terminated. It may also be necessary
to find out whether the officer should be tried for some more C
time on temporary basis. Since both in regard to a temporary
employee or an officiating employee in a higher post such an
assessment would be necessary merely because the appropriate
authority proceeds to make an assessment and leaves a record
of its views the same would not be available to be utilised to
D
make the order of termination following such assessment
punitive in character. In a large democracy as ours,
administration is bound to be impersonal and in regard to public
officers whether in government or public corporations,
assessments have got to be in writing for purposes of record.
We do not think there is any justification in the contention of E
the appellant that once such an assessment is recorded, the
order of termination made soon thereafter must take the punitive
character.”
(d) In Registrar General, High Court of Gujarat &Anr. v.
Jayshree Chamanlal Buddhbhatti (2013) 16 SCC 59, termination F
was held to be dismissal. The relevant portion is extracted
hereunder:
“25. The respondent relied upon the law laid down from Parshotam
Lal Dhingra v. Union of India onwards. In that case it was held
by the Constitution Bench that: (AIR p. 49, para 28) G
“28. … if the Government has, by contract or under the rules,
the right to terminate the employment without going through
the procedure prescribed for inflicting the punishment of
dismissal or removal or reduction in rank, the Government may,
nevertheless, choose to punish the servant and if the termination H
60 SUPREME COURT REPORTS [2020] 8 S.C.R.

A of service is sought to be founded on misconduct, negligence,
inefficiency or other disqualification, then it is a punishment
and the requirements of Article 311 must be complied with.”
26. The next judgment cited is one of three Judges of this Court in
State of Bihar v. Shiva Bhikshuk Mishra6 wherein it was observed
B as follows: (SCC p. 875, para 5)
“5. … So far as we are aware no such rigid principle has ever
been laid down by this Court that one has only to look to the
order and if it does not contain any imputation of misconduct
or words attaching a stigma to the character or reputation of a
C government officer it must be held to have been made in the
ordinary course of administrative routine and the court is
debarred from looking at all the attendant circumstances to
discover whether the order had been made by way of
punishment.”
D 27. These judgments have been followed by a Bench of seven
Judges in Samsher Singh v. State of Punjab, where this Court
was concerned with the termination of the services of a
probationary judicial officer on the basis of a vigilance inquiry,
which was conducted by the State Government on the request of
the High Court. The Court held the termination to be bad, and
E while doing so laid down the law in this behalf in no uncertain
terms in paras 63 to 66 (of the SCC report) which read as follows:
(SCC pp. 851-52)
“63. No abstract proposition can be laid down that where the
services of a probationer are terminated without saying anything
F more in the order of termination than that the services are
terminated it can never amount to a punishment in the facts
and circumstances of the case. If a probationer is discharged
on the ground of misconduct, or inefficiency or for similar reason
without a proper enquiry and without his getting a reasonable
G opportunity of showing cause against his discharge it may in a
given case amount to removal from service within the meaning
of Article 311(2) of the Constitution.
64. Before a probationer is confirmed the authority concerned
is under an obligation to consider whether the work of the
probationer is satisfactory or whether he is suitable for the
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 61
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

post. In the absence of any rules governing a probationer in A
this respect the authority may come to the conclusion that on
account of inadequacy for the job or for any temperamental or
other object not involving moral turpitude the probationer is
unsuitable for the job and hence must be discharged. No
punishment is involved in this. The authority may in some cases
B
be of the view that the conduct of the probationer may result
in dismissal or removal on an inquiry. But in those cases the
authority may not hold an inquiry and may simply discharge
the probationer with a view to giving him a chance to make
good in other walks of life without a stigma at the time of
termination of probation. If, on the other hand, the probationer C
is faced with an enquiry on charges of misconduct or
inefficiency or corruption, and if his services are terminated
without following the provisions of Article 311(2) he can claim
protection. In State of Bihar v. Gopi Kishore Prasad8 it was
said that if the Government proceeded against the probationer
D
in the direct way without casting any aspersion on his honesty
or competence, his discharge would not have the effect of
removal by way of punishment. Instead of taking the easy
course, the Government chose the more difficult one of starting
proceedings against him and branding him as a dishonest and
incompetent officer. E
65. The fact of holding an enquiry is not always conclusive.
What is decisive is whether the order is really by way of
punishment (see State of Orissa v. Ram Narayan Das9). If
there is an enquiry the facts and circumstances of the case
will be looked into in order to find out whether the order is one F
of dismissal in substance (see Madan Gopal v. State of
Punjab10). In R.C. Lacy v. State of Bihar11 it was held that
an order of reversion passed following an enquiry into the
conduct of the probationer in the circumstances of that case
was in the nature of preliminary inquiry to enable the
Government to decide whether disciplinary action should be G
taken. A probationer whose terms of service provided that it
could be terminated without any notice and without any cause
being assigned could not claim the protection of Article 311(2)
(see Ranendra Chandra Banerjee v. Union of India12). A
preliminary inquiry to satisfy that there was reason to dispense H
62 SUPREME COURT REPORTS [2020] 8 S.C.R.

A with the services of a temporary employee has been held not
to attract Article 311 (see Champaklal Chimanlal Shah v. Union
of India13). On the other hand, a statement in the order of
termination that the temporary servant is undesirable has been
held to import an element of punishment (see Jagdish Mitter v.
Union of India14).
B
66. If the facts and circumstances of the case indicate that the
substance of the order is that the termination is by way of
punishment then a probationer is entitled to attract Article 311.
The substance of the order and not the form would be decisive
(see K.H. Phadnis v. State of Maharashtra15).”
C
(e) In Dinesh Chandra Sangma v. State of Assam and Ors.,
(1977) 4 SCC 441, it was held that compulsory retirement is not a dismissal
or removal. In Workers Employed in Hirakud Dam v. State of Orissa
& Ors. (1971) 1 SCC 583, it was held:
D “15. The question that arises for consideration is about the
connotation of the expression “dismissed” used in para 11. The
contention of Mr Ramamurthy that the expression “dismissed”
has reference only to termination of the services of an employee
as and by way of punishment is largely based upon the provisions
contained in the Government of India Act and in Article 311 of the
E Constitution. Based upon those provisions Mr Ramamurthy claims
that the expression “dismissal” is a technical word used in cases
in which a person’s services are terminated by way of punishment.
Quite naturally he relied upon the Service Rules where the word
“dismissal” has been used to denote a major punishment inflicted
F upon an employee for misconduct. Mr Ramamurthy, no doubt, is
well-founded in his contention that the word “dismissal” used in
the Government of India Act as also in the Constitution and the
Service Rules has been interpreted to mean termination of a
person’s service by way of punishment.”

G (f) In Satish Chandra Anand v. Union of India AIR 1953 SCC
250 it was held that termination by notice is not dismissal or removal. It
was held:
“8. Taking Article 14 first, it must be shown that the petitioner has
been discriminated against in the exercise or enjoyment of some
legal right which is open to others who are similarly situated. The
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 63
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

rights which he says have been infringed are those conferred by A
Article 311. He says he has either been dismissed or removed
from service without the safeguards which that Article confers.
In our opinion, Article 311 has no application because this is neither
a dismissal nor a removal from service, nor is it a reduction in
rank. It is an ordinary case of a contract being terminated by
B
notice under one of its clauses.”
(g) Similarly, in State Bank of India v. The Workmen of State
Bank of India & Ors. (1991) 1 SCC 13 retrenchment under section
25F was held not to be dismissal.
10.23 It is a settled proposition of law that in case of termination C
of service there is a distinction as to whether it is a simpliciter termination
or a punitive dismissal and this court can lift the veil and find out the real
nature of termination whether it is simpliciter termination or punitive
dismissal as held in B.T. Krishnamurthy v. Sri Basaveswara Education
Society (2013) 4 SCC 490, Paramjit Singh v. Director of Schools
(Public Instructions), (2010) 14 SCC 416, State of U.P. v. Ram Vinai D
Sinha, (2010) 15 SCC 305, Jaswantsingh Pratapsingh Jadeja v.
Rajkot Municipal Corpn. (2007) 10 SCC 71, The State of Punjab v.
Rajesh Kumar (2006) 12 SCC 418, Jai Singh v. Union of India (2006)
9 SCC 717.
10.24 In the case of dismissal by way of punishment, gratuity is E
not payable because of special provisions made in the Working Journalists
Act was held by this Court in P. Rajan Sandhi v. Union of India &Anr.
(2010) 10 SCC 338. The relevant portion is extracted hereunder:
“11. It may be seen that there is a difference between the provisions
for denial of gratuity in the Payment of Gratuity Act and in the F
Working Journalists Act. Under the Working Journalists Act
gratuity can be denied if the service is terminated as a punishment
inflicted by way of disciplinary act, as has been done in the instant
case. We are of the opinion that Section 5 of the Working
Journalists Act being a special law will prevail over Section 4(6) G
of the Payment of Gratuity Act which is a general law. Section 5
of the Working Journalists Act is only for working journalists,
whereas the Payment of Gratuity Act is available to all employees
who are covered by that Act and is not limited to working
journalists. Hence, the Working Journalists Act is a special law,
whereas the Payment of Gratuity Act is a general law. It is well H
64 SUPREME COURT REPORTS [2020] 8 S.C.R.

A settled that special law will prevail over the general law, vide G.P.
Singh’s Principles of Statutory Interpretation, 9th Edn., 2004, pp.
133 and 134.
12. The special law i.e. Section 5(1)(a)(i) of the Working Journalists
Act, does not require any allegation or proof of any damage or
B loss to, or destruction of, property, etc. as is required under the
general law i.e. the Payment of Gratuity Act. All that is required
under the Working Journalists Act is that the termination should
be as a punishment inflicted by way of disciplinary action, which
is the position in the case at hand. Thus, if the service of an
employee has been terminated by way of disciplinary action under
C the Working Journalists Act, he is not entitled to gratuity.”
10.25 Section 4(1) deals with normal superannuation and does
not cover the cases where the departmental inquiry is pending, or dismissal
had been ordered. It did not interdict the departmental inquiry if it was
initiated while the employee was in service and continued after
D superannuation as if the employee continued in service. Section 4 of the
Payment of Gratuity Act, 1972 contains no bar, and purposive construction
has to be made of the provisions contained in section 4(1). Section 4(6)
provides where particular misconduct is found established, how gratuity
to be dealt with, but provisions cause no fetteron the power of an employer
E to impose a punishment of dismissal. It makes no provision in particular
with respect to the departmental inquiry but rather buttressesthe power
of an employer to forfeit gratuity wholly or partially or to recover loss
provided in Section 4(6). Neither the provisions in section 4(1) nor section
4(6) of the Payment of Gratuity Act create embargo on the departmental
inquiry and its continuance after superannuation. Thus, provisions of
F Rule 34.2 of the CDA Rules would prevail. Even the executive instruction
can hold the field in the absence of statutory rules and are equally binding
as laid down in State of Madhya Pradesh and Anr. v. Kumari Nivedita
Jain and Ors., (1981) 4 SCC 296, State of Andhra Pradesh and Anr.
v. Lavu Narendranath and Ors. etc., AIR 1971 SC 2560, Distt.
G Registrar, Palghat and Ors. v. M.B. Koyakutty and Ors., (1979) 2
SCC 150, Union of India and Anr. v. Tulsiram Patel, AIR 1985 SC
1416. This Court held that only when statutory provision is otherwise,
executive instructions cannot prevail. In our opinion, no dint is caused by
the Payment of Gratuity Act, 1972, and the efficacy of Rules is not
adversely affected on the proper interpretation of Section 4(1) and 4(6)
H of the Act of 1972.
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 65
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

10.26 In UCO Bank & Ors. v. Rajendra Shankar Shukla, (2018) A
14 SCC 92 this court did not interfere on the ground that there was an
enormous delay of about seven years in issuing a charge sheet. Efficiency
bar was permitted to be crossed during that period, and the employee
was not paid the subsistence allowance or pension during the pendency
of the disciplinary inquiry. It was observed that the employee was entitled
B
to subsistence allowance during the inquiry. The decision of UCO Bank
& Ors. v. Prabhakar Sadashiv Karvade (2018) 14 SCC 98 was
referred. An observation was made that punishment of dismissal could
not have been imposed after superannuation, but the same could not be
said to be the ratio of the decision. It was mainly for the reasons
mentioned by this court concerning delay, non-payment of subsistence C
allowance and the employee was deprived of meaningful participation
under the departmental inquiry. After giving the aforesaid findings, it
was not necessary to go into the aforesaid question. Thus, the opinion
expressed as to the punishment of dismissal could not be said to be the
ratio of the decision. The reliance was placed on UCO Bank &Ors. v.
D
Prabhakar Sadashiv Karvade (supra). Though the decision of UCO
Bank v. Rajinder Lal Capoor (supra) was referred to by this court, but
it did not consider the effect of deeming fiction of continuance of inquiry
and continuance of the employee in the service as pointed out above in
the various decisions and it relied upon Regulation 48 providing for
pecuniary loss caused to the bank. Whereas in Ramesh Chandra E
Sharma v. Punjab National Bank & Anr. (supra) it was held to the
contrary that once the inquiry is initiated under Regulation 4 of the
(Discipline & Appeal) Regulations, Regulation 48 of the Pension
Regulations had no application, and order of dismissal was upheld. The
decision in Ramesh Chandra Sharma v. Punjab National Bank &
F
Anr. (supra) and other decisions which were binding upon the Division
Bench were not considered. In the absence of consideration of the said
decision and other decisions mentioned above in which it was held that
legal fiction of deemed continuation has to be taken to a logical conclusion
consequently, the observation made that after superannuation punishment
of dismissal cannot be imposed in UCO Bank & Ors. v. Rajendra G
Shankar Shukla (supra), was not the ratio of decision, and the opinion
expressed on the strength of the said decision in UCO Bank v.
Prabhakar Sadashiv Karvade (supra) suffers from infirmity and cannot
prevail.
H
66 SUPREME COURT REPORTS [2020] 8 S.C.R.

A 10.27 In Jaswant Singh Gill v. Bharat Coking Coal Ltd. (2007)
1 SCC 663, it was held that the provisions of section 4(6) of the Payment
of Gratuity Act, 1972 would prevail over the non-statutory Bharat Coking
Coal Ltd. - a subsidiary of Coal India Ltd. Rules 34.2 and 34.3 and
provisions of Payment of Gratuity Act, 1972, were considered. It was
held that even if the disciplinary inquiry was initiated before attaining the
B
age of superannuation, if the employee attains the age of superannuation,
the question of imposing a major penalty by removal or dismissal from
service would not arise. Once the employee had retired and his services
had not been extended for the purpose of imposing punishment, a major
penalty could not be imposed. It was also held that the rule framed by
C Coal India Ltd. are non-statutory rules, and in view of the provisions of
the Payment of Gratuity Act, 1972, they cannot prevail. In the said case,
the order of dismissal was passed after the age of superannuation. It
was found that misconduct did not cover the grounds mentioned in section
4(6)(a) for recovery of the loss, nor it was the case of misconduct in
which gratuity could have been withheld wholly or partially in the
D
exigencies as provided in section 4(6)(b). We find it difficult to agree
with the said decision as Rules hold the field and are not repugnant to
provisions of the Payment of Gratuity Act, 1972. This Court held that
Rules could not hold the field as they were not statutory; thus, the effect
of the rule providing of deeming legal fiction as if he had continued in the
E service notwithstanding crossing the age of superannuation was not
considered. Apart from that, the validity of Rules 34.2 or 34.3 could not
have been decided as it was not in question in the said case. The
Controlling Authority and the Appellate Authority ordered the payment
of gratuity. The main ground employed was that in the order passed by
the departmental authority, the quantum of damage or loss caused was
F
not indicated, and it was not the case covered by Section 4(6)(a) and
4(6)(b). A writ petition filed by the employer was dismissed. However,
the Intra Court Appeal was allowed, and it was opined that the Controlling
Authority could not have gone into the validity of the dismissal order and
forfeiture of the gratuity since it was not an appellate authority of
G disciplinary authority imposing the punishment of dismissal. Thus, the
jurisdictional scope in the Jaswant Singh Gill case (supra) was limited.
We are unable to agree with the decision rendered in Jaswant Singh
Gill case (supra) inter alia for the following reasons:
(i) The order of termination was not questioned, nor the
H authority under the Payment of Gratuity Act, 1972, had
jurisdiction to deal with it.
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 67
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

(ii) The validity or enforceability and vires of service Rules A
34.2 and 34.3 were not questioned
(iii) The Controlling Authority under the Payment of Gratuity
Act, 1972, had no jurisdiction to go into the legality of order
of the disciplinary authority.
(iv) The scope of the case before this Court was confined to B
validity of order of Controlling Authority and to questions
which could have been dealt with by Controlling Authority.
(v) No fetter is caused on the efficacy of the Rules by Section
4(1) and 4(6) of the Payment of Gratuity Act, 1972. The
Rules need not be statutory to have efficacy as they are C
not repugnant to the Payment of Gratuity Act, 1972. This
Court did not consider the scope of provisions of the Gratuity
Act and provisions of Rule 34.2, providing legal fiction of
employee deemed to be in service even after
superannuation. D
(vi) The Controlling Authority had no jurisdiction to deal with
Rules 34.2 and 34.3 or to pronounce upon validity thereof
or of dismissal. Thus, the observations made, traveling
beyond the scope of the proceedings, cannot be said to be
binding and cannot constitute the ratio with respect to E
continuance of departmental inquiry after superannuation
and what kind of punishment can be imposed by an employer.
The jurisdiction of authority was only to consider payment
of gratuity under Section 4(6) of the Payment of Gratuity
Act, 1972.
F
Thus, we overrule the decision in Jaswant Singh Gill (supra).
10.28 This court in Anant R. Kulkarni v. Y.P. Education Society
& Ors. (2013) 6 SCC 515 considering the decision in Noida
Entrepreneurs Association v. Noida & Ors. (2011) 6 SCC 508 held
that inquiry against an employee who had retired depends upon the nature
G
of the statutory rule, which governs the terms and conditions of his service.
A general observation was made that services cannot be terminated
after the age of superannuation. The relevant portion is extracted
hereunder:
“24. Thus, it is evident from the above, that the relevant rules
governing the service conditions of an employee are the H
68 SUPREME COURT REPORTS [2020] 8 S.C.R.

A determining factors as to whether and in what manner the domestic
enquiry can be held against an employee who stood retired after
reaching the age of superannuation. Generally, if the enquiry has
been initiated while the delinquent employee was in service, it
would continue even after his retirement, but nature of punishment
would change. The punishment of dismissal/removal from service
B
would not be imposed.”
(a) In the aforesaid decision, reference was made to State of
Assam & Ors. v. Padma Ram Borah AIR 1965 SC 473, in which it was
opined that it was not possible to continue with the inquiry unless the
service was continued by issuing a notification before 31st March 1961.
C Following observations were made in State of Assam v. Padma Ram
Borah (supra):
“11. Let us proceed on the footing, as urged by learned counsel
for the appellant, that the order dated December 22, 1960 itself
amounts to an order retaining the respondent in service till
D departmental proceedings to be drawn up against him are finalised.
We shall also assume that the finalisation of the departmental
proceedings mentioned in the order is a public ground on which
the respondent could be retained in service. As the order was
passed by the State Government itself, no question of taking its
E sanction arises and we think that the High Court was wrong in
holding that the absence of sanction from the State Government
made the order bad. Therefore, the effect of the order dated
December 22, 1960 was two-fold: firstly, it placed the respondent
under suspension and secondly, it retained the respondent in service
till departmental proceedings against him were finalised. We treat
F the order as an order under Fundamental Rule 56 which order
having been made before January 1, 1961, the date of respondent’s
retirement, cannot be bad on the ground of retrospectivity. Then,
we come to the order dated January 6, 1961. That order obviously
modified the earlier order of December 22, 1960 inasmuch as it
G fixed a period of three months from January 1, 1961 or till the
disposal of the departmental proceedings, whichever is earlier,
for retaining the respondent in service. The period of three months
fixed by this order expired on March 31, 1961. Thus the effect of
the order of January 6, 1961 was that the service of the respondent
would come to an end on March 31, 1961 unless the departmental
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 69
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

proceedings were disposed of at a date earlier than March 31, A
1961. It is admitted that the departmental proceedings were not
concluded before March 31, 1961. The clear effect of the order
of January 6, 1961 therefore was that the service of the respondent
came to an end on March 31, 1961. This was so not because
retirement was automatic but because the State Government had
B
itself fixed the date up to which the service of the respondent
would be retained. The State Government made no further order
before March 31, 1961, but about a month or so after passed an
order on May 9, 1961 extending the service of the respondent for
a further period of three months with effect from April 1, 1961.
We do not think that the State Government had any jurisdiction to C
pass such an order on May 9, 1961. According to the earlier order
of the State Government itself, the service of the respondent had
come to an end on March 31, 1961. The State Government could
not by unilateral action create a fresh contract of service to take
effect from April 1, 1961. If the State Government wished to
D
continue the service of the respondent for a further period, the
State Government should have issued a notification before March
31, 1961. In Rangachari v. Secretary of State for India2 Their
Lordships of the Privy Council were dealing with a case in which
a Sub-Inspector of police was charged with certain irregular and
improper conduct in the execution of his duties. After the Sub- E
Inspector had retired on invalid pension and his pension had been
paid for three months, the matter was re-opened and an order
was made removing the Sub-Inspector from service as from the
date on which he was invalided. Lord Roche speaking for the
Board said:
F
“It seems to require no demonstration that an order purporting
to remove the appellant from the service at a time when, as
Their Lordships hold, he had for some months duly and properly
ceased to be in the service, was a mere nullity and cannot be
sustained.”
G
The decision is of no avail, in view of the rule in question, which
provides for legal fiction with respect to continuance in service, and it
has to be given full effect to the ratio of decision negatethe submission
of the employee.

H
70 SUPREME COURT REPORTS [2020] 8 S.C.R.

A (b) The decision in State of Punjab v. Khemi Ram (1969) 3 SCC
28 was also referred to in Anant R. Kulkarni (supra) in which it was
observed that though the disciplinary inquiry has to be concluded before
the date of retirement, once the employee is permitted to retire. In case
inquiry was to be continued, he has to be suspended and retained in
service till such inquiry is completed and the final order is passed. The
B
relevant portion of observations made in Khemi Ram (supra) is extracted
hereunder:
“12. There can be no doubt that if disciplinary action is sought to
be taken against a government servant it must be done before he
retires as provided by the said rule. If a disciplinary enquiry cannot
C be concluded before the date of such retirement, the course open
to the Government is to pass an order of suspension and refuse to
permit the concerned public servant to retire and retain him in
service till such enquiry is completed and a final order is passed
therein. That such a course was adopted by the Punjab Government
D by passing the order of suspension on July 31, 1958 cannot be
gainsaid. That fact is clearly demonstrated by the telegram, Ex.
P-1, which was in fact despatched to the respondent on July 31,
1958 by the Secretary, Cooperative Societies to the Punjab
Government, informing the respondent that he was placed under
suspension with effect from August 2, 1958. As the telegram
E shows, it was sent to his home address at Village Batahar, Post
office Haripur, as the respondent had already by that time
proceeded on leave sanctioned by the Himachal Pradesh
Administration. Ex. R-1 is the memorandum, also dated July 31,
1958, by which the Punjab Government passed the said order of
F suspension and further ordered not to permit the respondent to
retire on August 4, 1958. That exhibit shows that a copy of that
memorandum was forwarded to the respondent at his said address
at village Batahar, Post-Office Haripur. Lastly, there is Annexure
H to the respondent’s petition which consists of an express
telegram, dated August 2, 1958 and a letter of the same date in
G confirmation thereof informing the respondent that he was placed
under suspension with effect from that date. Both the telegram
and the letter in confirmation were despatched at the address
given by the respondent i.e. at his Village Batahar, Post Office
Haripur. These documents, therefore, clearly demonstrate that
H the order of suspension was passed on July 31, 1958 i.e. before
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 71
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

the date of his retirement and had passed from the hands of the A
Punjab Government as a result of their having been transmitted to
the respondent. The position, therefore, was not as if the order
passed by the Punjab Government suspending the respondent from
service remained with the Government or that it could have,
therefore, changed its mind about it or modified it. Since the
B
respondent had been granted leave and had in fact proceeded on
such leave, this was also not a case where, despite the order of
suspension, he could have transacted any act or passed any order
in his capacity as the Assistant Registrar.”
The aforesaid decision does not buttress the case of the employee
rather defeats. It was held by this court in Khemi Ram (supra) that C
employee has to be continued in service till such inquiry is completed
and final order is passed. That is precisely done by the deeming fiction in
the instant matter.
(c) In Anant R. Kulkarni (supra) the decision in Kirti Bhusan
Singh v. State of Bihar (1986) 3 SCC 675 was also considered in which D
it was observed:
“6. The expression “compulsory retirement” found in Rule 73(f)
of the Bihar Service Code refers to retirement of a government
servant on his attaining the age of superannuation. This is not a
case in which the appellant had been permitted to retire from E
service on the ground that he had attained the age of
superannuation. No order asking the appellant to continue in service
before he had attained the age of superannuation for the purpose
of concluding a departmental inquiry instituted against him had
also been passed by the competent authority. On the other hand F
the appellant had been permitted to retire from service on invalid
pension on medical grounds even before he had attained the age
of superannuation. Rule 73(f) of the Bihar Service Code is clearly
inapplicable to the case of the appellant. No other provision which
enabled the State Government or the competent authority to revoke
an order of retirement on invalid pension is brought to our notice. G
The order of retirement on medical grounds having thus become
effective and final it was not open to the competent authority to
proceed with the disciplinary proceedings and to pass an order of
punishment. We are of the view that in the absence of such a
provision which entitled the State Government to revoke an order H
72 SUPREME COURT REPORTS [2020] 8 S.C.R.

A of retirement on medical grounds which had become effective
and final, the order dated October 5, 1963 passed by the State
Government revoking the order of retirement should be held as
having been passed without the authority of law and is liable to be
set aside. It, therefore, follows that the order of dismissal passed
thereafter was also a nullity.”
B
(emphasis supplied)
The question in the aforesaid case was with respect to the
revocation of the order of retirement passed on medical grounds. That
does not impinge upon Rule 34.2 due to the operation of which
C superannuation would not be effective.
(d) The decision in Bhagirathi Jena v. Board of Directors,
O.S.F.C. & Ors. (1999) 3 SCC 666 was also referred to in which it was
held:
7. In view of the absence of such a provision in the abovesaid
D regulations, it must be held that the Corporation had no legal
authority to make any reduction in the retiral benefits of the
appellant. There is also no provision for conducting a disciplinary
enquiry after retirement of the appellant and nor any provision
stating that in case misconduct is established, a deduction could
E be made from retiral benefits. Once the appellant had retired from
service on 30-6-1995, there was no authority vested in the
Corporation for continuing the departmental enquiry even for the
purpose of imposing any reduction in the retiral benefits payable
to the appellant. In the absence of such an authority, it must be
held that the enquiry had lapsed and the appellant was entitled to
F full retiral benefits on retirement.
As there was no provision for conducting a disciplinary inquiry
after retirement and that in case misconduct was established, a deduction
could be made from the retiral benefits. Thus, it was held that retiral
benefits could not have been deducted and became payable. The rule
G was different.
(e) In Anant R. Kulkarni (supra), the decision in U.P. State Sugar
Corporation Ltd. & Ors. v. Kamal Swaroop Tandon (2008) 2 SCC
41 was also considered in which the proceedings were initiated after
retirement in which it was held that in case of retirement, master and
H servant relationship continue for grant of retiral benefits. Proceedings
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 73
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

for recovery of financial loss from an employee was permissible even A
after his retirement. The case relates to the departmental inquiry to be
instituted post-retirement for the financial loss caused during the course
of employment. The question of dismissal did not arise as the inquiry
was instituted after retirement. There cannot be any quarrel that it would
depend upon the relevant rule.
B
10.29 On the basis of the abovementioned decisions in the State
of Assam & Ors. v. Padma Ram Borah, State of Punjab v. Khemi
Ram, Bhagirathi Jena v. Board of Directors, O.S.F.C. &Ors., Kirti
Bhusan Singh v. State of Bihar, U.P. State Sugar Corporation Ltd.
&Ors. v. Kamal Swaroop Tandon (supra) this court in Anant R.
Kulkarni (supra) opined that relevant rules governing the service C
conditions of an employee are the determining factor as to whether or
not the domestic inquiry can be held against an employee who stood
retired after reaching the age of superannuation. To this extent, there is
no problem caused by the aforesaid decision. However, this court made
a general observation that if the inquiry had been initiated while the D
delinquent employee was in service, it would continue even after his
retirement, but the nature of punishment would change. The punishment
of dismissal, removal from service would not be imposed. The general
observation made cannot come in the way of a specific rule and decision
cannot be said to be of universal application and cannot be said to be
binding in a case the rules provide legal fiction and continuance of E
employee in the service as if he had continued in service.
10.30 In view of the various decisions,it is apparent that under
Rule 34.2 of the CDA Rules inquiry can be held in the same manner as
if the employee had continued in service and the appropriate major and
minor punishment commensurate to guilt can be imposed including F
dismissal as provided in Rule 27 of the CDA Rules and apart from that
in case pecuniary loss had been caused that can be recovered. Gratuity
can be forfeited wholly or partially.
10.31 Several service benefits would depend upon the outcome
of the inquiry, such as concerning the period during which inquiry remained G
pending. It would be against the public policy to permit an employee to
go scot-free after collecting various service benefits to which he would
not be entitled, and the event of superannuation cannot come to his rescue
and would amount to condonation of guilt. Because of the legal fiction
provided under the rules, it can be completed in the same manner as if H
74 SUPREME COURT REPORTS [2020] 8 S.C.R.

A the employee had remained in service after superannuation, and
appropriate punishment can be imposed. Various provisions of the Gratuity
Act discussed above do not come in the way of departmental inquiry
and as provided in Section 4(6) and Rule 34.3 in case of dismissal gratuity
can be forfeited wholly or partially, and the loss can also be recovered.
An inquiry can be continued as provided under the relevant service rules
B
as it is not provided in the Payment of Gratuity Act, 1972 that inquiry
shall come to an end as soon as the employee attains the age of
superannuation. We reiterate that the Act does not deal with the matter
of disciplinary inquiry, it contemplates recovery from or forfeiture of
gratuity wholly or partially as per misconduct committed and does not
C deal with punishments to be imposed and does not supersede the Rules
34.2 and 34.3 of the CDA Rules. The mandate of Section 4(6) of recovery
of loss provided under Section 4(6)(a) and forfeiture of gratuity wholly
or partially under Section 4(6)(b) is furthered by the Rules 34.2 and
34.3. If there cannot be any dismissal after superannuation, intendment
of the provisions of Section 4(6) would be defeated. The provisions of
D
section 4(1) and 4(6) of Payment of Gratuity Act, 1972 have to be given
purposive interpretation, and no way interdict holding of the departmental
inquiry and punishment to be imposed is not the subject matter dealt with
under the Act.
10.32 Thus considering the provisions of Rules 34.2 and 34.3 of
E the CDA Rules, the inquiry can be continued given the deeming fiction
in the same manner as if the employee had continued in service and
appropriate punishment, including that of dismissal can be imposed apart
from the forfeiture of the gratuity wholly or partially including the recovery
of the pecuniary loss as the case may be.
F 11. In view of the above and for the reasons stated above and in
view of the decision of three Judge Bench of this Court in Ram Lal
Bhaskar (supra) and our conclusions as above, it is observed and held
that (1) the appellant – employer has a right to withhold the gratuity
during the pendency of the disciplinary proceedings, and (2) the
G disciplinary authority has powers to impose the penalty of dismissal/
major penalty upon the respondent even after his attaining the age of
superannuation, as the disciplinary proceedings were initiated while the
employee was in service.
Under the circumstances, the impugned judgment and order passed
H by the High Court cannot be sustained and the same deserves to be
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 75
LTD. v. SRI RABINDRANATH CHOUBEY [M. R. SHAH, J.]

quashed and set aside and is accordingly hereby quashed and set aside A
and the order passed by the Controlling Authority is hereby restored.
However, the appellant-employer is hereby directed to conclude the
disciplinary proceedings at the earliest and within a period of four months
from today and pass appropriate order in accordance with law and on
merits and thereafter necessary consequences as per Section 4 of the
B
Payment of Gratuity Act, 1972, more particularly Sub-section (6) of
Section 4 of the Gratuity Act and Rule 34.3 of the CDA Rules shall
follow. The present appeal is accordingly allowed. However, in the facts
and circumstances of the case, there shall be no order as to costs.

C
RASTOGI, J.
1. I had the privilege of going through the elaborate judgment
proposed by my brother Shah, J. Two legal questions have been raised
for our consideration (i) whether it is permissible in law for the employer
to withhold the payment of gratuity to the employee after retirement D
from service on account of pendency of the disciplinary proceedings
against him and (ii) whether it is permissible for the disciplinary authority
to impose penalty of dismissal after the employee stood retired from
service.
2. While I entirely agree with a view on question no. (i) that in E
view of rule 34.3 of the Coal India Executives’ Conduct Discipline and
Appeal Rules, 1978 (hereinafter being referred to as “Rules 1978”), it is
permissible for the employer to withhold gratuity even after retirement/
superannuation during pendency of the disciplinary proceedings.
However, unable to persuade myself on question (ii).
F
3. The facts giving rise to the controversy have been set out at
great length in the judgment of my erudite brother Shah J. I, therefore,
do not consider it necessary to recapitulate the same once again except
to the extent it may be necessary in the case of this judgment to do so.
4. Before adverting to the factual matrix, it may be relevant to
G
take note of the scheme of Rules, 1978.
5. The Scheme of Rules, 1978 with which we are presently
concerned was earlier examined by a two Judge Bench of this Court in
the case of Jaswant Singh Gill Vs. Bharat Coking Coal Ltd. & Ors. 1.
1
2007 (1) SCC 663 H
76 SUPREME COURT REPORTS [2020] 8 S.C.R.

A The view expressed by the two Judge Bench of this Court came up for
consideration in the instant case before another two Judge Bench of this
Court and this Court was of the view that in Jaswant Singh Gill (supra),
the issue of permissibility of penalty of dismissal or removal from service
on a retired employee was neither raised nor any direct discussion has
been followed thereupon and taking note of the stated pari materia Rule
B
19(3) of the State Bank of India Officers Service Rules, 1992 examined
by the three Judge Bench of this Court in State Bank of India Vs. Ram
Lal Bhaskar and Another2 and keeping in view the discussion in the
case of Jaswant Singh Gill (supra), the two Judge Bench of this Court
was of the view that the question as to whether the disciplinary authority
C has necessary powers to impose penalty of dismissal or removal to an
employee after retirement from service requires to be examined by a
larger Bench of this Court by its judgment dated 29th October, 2013
which has been placed before us for consideration.
6. The facts in brief to be culled out are that the first respondent
D was working as a Chief General Manager (Production) since
17th February, 2006 and while he was in service for the alleged misconduct
which he had committed in discharge of his duties, he was served with a
memo along with article of charges on 1st October, 2007. There could
not be any restraint over passing of the age factor of the delinquent and
on attaining the age of superannuation, he stood retired from service on
E 31st July, 2010. It revealed from the record that inquiry officer had
submitted a report of inquiry to the disciplinary authority on 25th March,
2009 but what further action has been taken by the authority thereafter
is not made known to this Court. A presumption has to be drawn that
fate of disciplinary inquiry is still pending with the competent authority
F for taking its decision as per the procedure prescribed under the scheme
of Rules, 1978.
7. The appellant Mahanadi Coalfields Limited is a subsidary
company of Coal India Limited, a Government owned company registered
under the Companies Act and is a State within the meaning of Article 12
G of the Constitution and amenable to the writ jurisdiction under Article
226 of the Constitution of India. For maintaining discipline in service,
with the approval of the Board of Directors of Coal India Limited(CAL)
in its meeting held on 24th February, 1978, framed these rules called
Coal India Executive Conduct, Discipline and Appeal Rules, 1978 and is
2
H 2011 (10) SCC 249
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 77
LTD. v. SRI RABINDRANATH CHOUBEY [RASTOGI, J.]

applicable to all employees holding posts in the executive cadre scales A
of pay of Coal India Limited and its subsidiary companies and to such
other employees as may be notified from time to time has a binding
force and is indeed not in derogation to the provisions of the Payment of
Gratuity Act, 1972 (hereinafter being referred to as Act, 1972).
8. The scheme of Rules, 1978 not only defines the duties and B
obligations of the executives and employees but to the extent illustrates
any act or omission or commission which shall be treated as misconduct
under Chapter II and any misconduct, if committed by an employee, in
discharge of his official duties, the disciplinary action could be initiated
against an employee for the stated misconduct while he is in service as
provided under Chapter IV of the scheme of Rules, 1978. C

9. The Scheme of Rules, 1978 further provides a procedure which
has to be followed for imposing minor/major penalties under Rule 29 and
Rule 31 of the Rules. That apart, a special procedure has been provided
in certain cases notwithstanding the regular procedure contained in Rules
29, 30 or 31 of the said rules, the authority may impose any of the penalties D
specified in Rule 27 in the circumstances as referred to under clause (i)
to (iii) of Rule 34.1 of the rules. It will be apposite to take note of the
term ‘employee’ and Rule 27(nature of penalties) and Rule 34.1, 34.2
and 34.3 relevant for the purpose ad infra:-
“3(f) ‘Employee’ means an officer holding a post in the executive E
cadre scales of pay or any other person notified by the Company,
if such officer or person is employed on a whole time basis by the
Company provided that such persons on deputation to the Company
shall continue to be governed by these rules or the rules applicable
to them in their parent organizations, as may be settled at the time F
of finalization of their terms and conditions of deputation.
27.0 NATURE OF PENALTIES
27.1 The following penalties may, for good and sufficient reasons,
be imposed on an employee for misconduct, viz. :
G
(i) Minor Penalties
(a) Censure;
(b) Withholding increment, with or without cumulative effect;
(c) Withholding promotion; and
H
78 SUPREME COURT REPORTS [2020] 8 S.C.R.

A (d) Recovering from pay of the whole of or part of any pecuniary
loss caused to the Company by negligence or breach of orders
or trust (Rule 27.1 (i) (d) amended vide CIL OM No. CIL/
C-5A (vi)/ 50774/CDA/184 dated 23.11.05)
(ii) Major Penalties
B (a) Reduction to a lower grade or post or stage in a time scale;
Note :
The Authority ordering the reduction shall state the period for
which it is effective and whether, on the expiry of that period, it
C will operate to postpone future increments or, to affect the
employee’s seniority and if so, to what extent.
(b) Compulsory retirement;
(c) Removal from service; and
(d) Dismissal.
D
Note 1
Removal from service will not be a disqualification for future
employment in Coal India Limited and its Subsidiary Companies
while dismissal disqualifies a person for future employment.
E 34.0 Special procedure in certain cases
34.1 Notwithstanding anything contained in rule 29 or 30 or 31
the Disciplinary Authority may impose any of the penalties
specified in rule 27 in any of the following circumstances :

F (i) where the employee has been convicted on a criminal
charge, or on the strength of facts or conclusions arrived at
by a judicial trial; or
(ii) where the Disciplinary Authority is satisfied for reasons
to be recorded by it in writing that it is not reasonably
practicable to hold an inquiry in the manner provided in these
G
rules; or
(iii) where the Disciplinary Authority is satisfied that in the
interest of the security of the Company, it is not expedient
to hold any inquiry in the manner provided in these rules.
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 79
LTD. v. SRI RABINDRANATH CHOUBEY [RASTOGI, J.]

Provided that the employee may be given an opportunity of A
making a representation to the penalty proposed to be
imposed before any order is made under clause (i) above.\
34.2 Disciplinary proceeding, if instituted while the employee was
in service whether before his retirement or during his re-
employment shall, after the final retirement of the employee, B
be deemed to be proceeding and shall be continued and
concluded by the authority by which it was commenced in
the same manner as if the employee had continued in service.
34.3 During the pendency of the disciplinary proceedings, the
Disciplinary Authority may withhold payment of gratuity, C
for ordering the recovery from gratuity of the whole or part
of any pecuniary loss caused to the company if have been
guilty of offences/misconduct as mentioned in Sub-Section
(6) of Section 4 of the Payment of Gratuity Act, 1972 or to
have caused pecuniary loss to the company by misconduct
or negligence, during his service including service rendered D
on deputation or on re-employment after retirement.
However, the provisions of Section 7(3) and 7(3A) of the
Payment of Gratuity Act, 1972 should be kept in view in the
event of delayed payment, in the case the employee is fully
exonerated.” E
(Emphasis supplied)
10. Under the scheme of Rules 1978, apart from the procedure
which has to be followed for imposing minor/major penalties after holding
a procedure prescribed under Rule 29 or 31 of the scheme of Rules,
special procedure has been provided under Rule 34 for meeting out certain F
exigencies. Rule 34.1 is couched with a non-obstante clause which could
be invoked in the special circumstances indicated under clauses (i) to
(iii) notwithstanding a procedure for holding a disciplinary inquiry provided
under Rule 29 or 31 of the Rules while inflicting penalties specified under
Rule 27 of the Rules. At the same time, for the delinquent employee G
who stood retired from service pending disciplinary enquiry, a special
procedure has been provided under Rule 34.2 to continue and conclude
such disciplinary proceedings in the same manner as if the delinquent
employee had deemed to be continued in service for all practical purposes
and with the aid of Rule 34.3 which cannot exist without Rule 34.2, the
H
80 SUPREME COURT REPORTS [2020] 8 S.C.R.

A authority competent may withhold the payment of gratuity during
pendency of the disciplinary proceedings and order for recovery from
gratuity of the whole or part of the pecuniary loss caused to the company,
if the delinquent employee is later held to be guilty of offences/misconduct
or it has caused any pecuniary loss to the company by misconduct or
negligence during discharge of official duties as a measure of penalty
B
mentioned under Rule 34.3 of the Rules, 1978 or under sub-section (6)
of Section 4 of the Act, 1972. At the same time, if the delinquent employee
is exonerated in the disciplinary inquiry, he will be entitled for the gratuity
in the event of delayed payment in terms of Section 7(3) and 7(3A) of
Act, 1972.
C 11. The Division Bench of the High Court in LPA placing reliance
on the judgment of this Court in Jaswant Singh Gill (supra) directed
the appellants pending disciplinary proceedings to release the amount of
gratuity payable to the respondent under the impugned judgment.
12. It is well settled that retiral benefits are earned by an employee
D for a long and meritorious service rendered by him/her and it is not paid
gratuitously or merely as a matter of boon, it is paid to him/her for
dedicated and devoted work. The Act, 1972 also acknowledges under
sub-section (6) of Section 4 to forfeit it to the extent pecuniary loss so
caused from the amount of gratuity payable to the employee.
E 13. Sub-sections (1) and (6) of Section 4 of the Act, 1972 relevant
for the purpose are ad infra:-
“4. Payment of gratuity. –
(1) Gratuity shall be payable to an employee
F on
the termination of his employment after he
has rendered continuous service for
not
G 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:
H
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 81
LTD. v. SRI RABINDRANATH CHOUBEY [RASTOGI, J.]

Provided that the completion of continuous service of five A
years shall not be necessary where the termination of the
employment of any employee is due to death or disablement:
(2) …..
(3) …..
B
(4) …..
(5) …..
(6) Notwithstanding anything contained insub-section (1),-
(a) the gratuity of an employee, whose services have been C
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 D
partially forfeited]-
(i) if the services of such employee have been terminated
for his riotous or disorderly conduct or any other act of
violence on his part, or
(ii) if the services of such employee have been terminated E
for any act which constitutes an offence involving moral
turpitude, provided that such offence is committed by him
in the course of his employment.”
14. The purpose of holding an inquiry against a delinquent is not
only with a view to establish the charge levelled against him or to impose F
a penalty, but is also conducted with the object of such an inquiry
recording the truth of the matter, and in that sense, the outcome of an
inquiry may either not establishing or vindicating his stand, hence result
in his exoneration. Therefore, what is required is that there should be a
fair action on the part of the authority concerned in holding disciplinary
G
inquiry for the misconduct, if any, being committed by an employee in
discharge of his duties even if retired from service during pendency of
disciplinary proceedings after adopting the procedure prescribed under
the relevant disciplinary rules alike Rules, 1978 in the instant case and
indeed the scheme of Rules, 1978 with which we are concerned is neither
in derogation nor in contravention to the scheme of the Act, 1972. H
82 SUPREME COURT REPORTS [2020] 8 S.C.R.

A 15. It is also well settled that the competence of an authority to
hold an enquiry or to continue enquiry against an employee who has
retired from service depends upon the scheme of rules and the terms
and conditions of service of the employee are the determining factors as
to whether and in what manner the disciplinary enquiry can be held
against an employee who stood retired or superannuated from service.
B
16. To clarify it further that those who were the serving employees,
if held guilty on conclusion of the disciplinary proceedings, minor/major
penalties as referred to under Rule 27 could be inflicted by the disciplinary
authority after recording good and sufficient reason commensurate with
the nature of misconduct and in the case of an employee who stood
C retired/superannuated from service pending disciplinary proceedings, the
disciplinary authority has a right to withhold the payment of gratuity
pending disciplinary inquiry and if found guilty in the inquiry for the
offences/misconduct as indicated in sub-section (6) of Section 4 of Act
1972, can be recovered from his gratuity payable under Section 4 of the
D Act, 1972. At the same time, if he is exonerated by the disciplinary
authority after retirement/superannuation from service, he shall be entitled
for payment of gratuity along with interest for the delay in payment in
terms of Section 7(3) and Section 7(3A) of Act, 1972.
17. Thus, according to me, where the disciplinary proceedings
E are instituted while the employee was in service but retired thereafter
during its pendency, under the special procedure provided under Rule
34.2 of the Rules, 1978 the authority is empowered to continue and
conclude the disciplinary inquiry in the same manner as if the employee
had continued in service by deeming fiction, however, the relationship of
employer and employee shall not be severed until conclusion of the
F disciplinary enquiry but may withhold payment of gratuity in terms of
Rule 34.3 pending disciplinary inquiry and in furtherance thereof if later
held guilty, the competent authority to the extent pecuniary loss has been
caused for the misconduct, negligence in the discharge of duties order
for recovery from gratuity either be forfeited in the whole or in part, to
G the extent pecuniary loss has been caused to the company for the
offences/misconduct as a measure of penalty in terms of Rule 34.3 of
the Rules read with sub-section (6) of Section 4 of the Act, 1972.
18. The emphasis of the learned counsel for the respondent taking
note of the view expressed by this Court in Jaswant Singh Gill (supra)
H is that gratuity can be withheld under sub-section (6) of Section 4 of the
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 83
LTD. v. SRI RABINDRANATH CHOUBEY [RASTOGI, J.]

Act, 1972, if the service of an employee is terminated for the alleged A
misconduct or negligence which has been committed by him during
discharge of his official duties. But after retirement from service since
there cannot be any punishment of dismissal from service with
retrospective effect, the authority is not competent to withhold gratuity
under the guise of non-statutory rules, 1978.
B
19. In my considered view, the submission is misplaced for the
reason that gratuity became payable to an employee under Section 4(1)
of the Act, 1972 on termination of his employment after he rendered a
minimum qualifying service and termination of his employment is either
can be on his superannuation or retirement or resignation or death or
disablement due to accident or disease or any other cause may be. The C
word ‘termination’ referred to under sub-section (1) or under sub-section
(6) of Section 4 of the Act, 1972 is in reference to the severance of
relationship of employer and employee and sub-section (6) of Section 4
being couched with a non-obstante clause empowered the authority in
case the delinquent employee held guilty of wilful omission or negligence D
causing any damage or loss or destruction to the property of the company
during the course of employment as a measure of penalty gratuity may
be forfeited wholly or partially to the extent misconduct found proved.
20. The term ‘termination’ may not be understood with the penalty
of dismissal or removal from service specified under Rule 27 of Rules, E
1978. To make it further clear, the expressions in the schedule of
substantive penalties under Rule 27 of the Rules, 1978 refers to various
penalties including reduction in rank, compulsory retirement, dismissal,
removal, etc. and could possibly be inflicted on the serving employee
and indeed cannot be effected with retrospective effect on the delinquent
employee who stood retired from service. The term ‘termination’ as F
referred to under sub-section (6) of Section 4 of the Act is a technical
word used in cases where the relationship of employer and employee is
severed on account of stated misconduct stands proved although
connotations are different.
21. Many a times ‘termination’ and ‘dismissal’ are held to be G
synonymous but the difference between ‘termination’ and ‘dismissal’ is
that dismissal could be on account of misconduct with loss of future
employment involving dishonesty or criminality and penal in character
but that is not in the case of termination. The “termination” as per Black’s
Law Dictionary is the complete severance of relationship of employer H
84 SUPREME COURT REPORTS [2020] 8 S.C.R.

A and employee which in the instant case could be saved during pendency
of the disciplinary proceedings in view of Rule 34.2 of the Rules, 1978
which clearly envisaged that disciplinary proceedings, if instituted while
the employee was in service, shall be deemed to be pending and shall be
continued and concluded by the authority by which it was commenced
in the same manner as if the employee had continued in service and by
B
legal fiction, the relationship of employer and employee shall be deemed
to continue for the limited purposes of conclusion of the disciplinary
proceedings and the delinquent employee becomes qualified to claim
gratuity subject to the outcome of the disciplinary proceedings in terms
of Rule 34.3 of the Rules, 1978 read with sub-section (6) of Section 4 of
C the Act, 1972.
22. The three Judge Bench of this Court in State of Maharashtra
Vs. M.H. Mazumdar3 taking note of the pari materia rule 188 and 189
of the Bombay Civil Services Conduct, Discipline and Appeal Rules and
relying on earlier precedents held in paragraph 5 as under:-
D “5. The aforesaid two rules empower Government to reduce or
withdraw a pension. Rule 189 contemplates withholding or
withdrawing of a pension or any part of it if the pensioner is found
guilty of grave misconduct while he was in service or after the
completion of his service. Grant of pension and its continuance to
E a government servant depend upon the good conduct of the
government servant. Rendering satisfactory service maintaining
good conduct is a necessary condition for the grant and
continuance of pension. Rule 189 expressly confers power on the
Government to withhold or withdraw any part of the pension
payable to a government servant for misconduct which he may
F have committed while in service. This rule further provides that
before any order reducing or withdrawing any part of the pension
is made by the competent authority the pensioner must be given
opportunity of defence in accordance with the procedure specified
in Note I to Rule 33 of the Bombay Civil Services Conduct,
G Discipline and Appeal Rules. The State Government’s power to
reduce or withhold pension by taking proceedings against a
government servant even after his retirement is expressly
preserved by the aforesaid rules. The validity of the rules was not
challenged either before the High Court or before this Court. In
3
H 1988(2) SCC 52
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 85
LTD. v. SRI RABINDRANATH CHOUBEY [RASTOGI, J.]

this view, the Government has power to reduce the amount of A
pension payable to the respondent. In M. Narasimhachar v. State
of Mysore [AIR 1960 SC 247 : (1960) 1 SCR 981] and State of
Uttar Pradesh v. Brahm Datt Sharma [(1987) 2 SCC 179] similar
rules authorising the Government to withhold or reduce the pension
granted to the government servant were interpreted and this Court
B
held that merely because a government servant retired from service
on attaining the age of superannuation he could not escape the
liability for misconduct and negligence or financial irregularities
which he may have committed during the period of his service
and the Government was entitled to withhold or reduce the pension
granted to a government servant.” C
23. It is supported by the judgment of this Court in the recent
judgment in UCO Bank & Ors. Vs. Rajendra Shankar Shukla4 wherein
it was held as under:-
“Under the circumstances, we have no hesitation in dismissing
the appeal filed by the Bank also on the ground that the punishment D
of dismissal could not have been imposed on Shukla after his
superannuation.”
(Emphasis supplied)
24. The exposition of law is further supported in UCO Bank and E
Ors. Vs. Prabhakar Sadashiv Karvade5 as under:-
“The sum and substance of these Regulations is that even though
a departmental inquiry instituted against an officer employee before
his retirement can continue even after his retirement, none of the
substantive penalties specified in Regulation 4 of 1979 Regulations, F
which include dismissal from service, can be imposed on an officer
employee after his retirement on attaining the age of
superannuation. Therefore, we have no hesitation to hold that order
dated 12.10.2004 passed by the disciplinary authority dismissing
the respondent from service, who had superannuated on 31.12.1993
was ex facie illegal and without jurisdiction and the High Court G
did not commit any error by setting aside the same.”
(Emphasis supplied)

4
2018(14) SCC 92
5
2018(14) SCC 98 H
86 SUPREME COURT REPORTS [2020] 8 S.C.R.

A 25. The two Judge Bench of this Court in UCO Bank and Ors.
Vs. Rajinder Lal Capoor6 on which the reliance has been placed by
the respondent employee was a case where the explanation was called
for by the delinquent employee in reference to the alleged misconduct
which he had committed in discharge of his official duties but charge-
sheet was indubitably issued after he stood retired from service. The
B
question which arose for consideration was as to whether mere
explanation which was called for from the delinquent would be considered
to be the initiation of the disciplinary proceedings or it can be said to be
initiated only when the charge-sheet is issued in terms of Regulation
20(3)(iii) of the UCO Bank Officer Employees Service Regulations,
C 1979 and this Court after examining the scheme of Rules, 1979 held that
domestic inquiry can be said to be initiated only when the charge-sheet
is issued to the delinquent and since the charge-sheet was issued after
retirement from service this Court held that the disciplinary proceedings
initiated against the delinquent became vitiated in law and consequently
set aside the disciplinary proceedings initiated against the retired personnel.
D
26. The judgment in Ram Lal Bhaskar and Anr. (supra) on which
reliance was placed to refer the matter may not be of any assistance in
the instant facts of the case for the reason that it was a case where a
substantial question raised before this Court for consideration was as to
whether the High Court was justified in reappreciating with the finding
E of the disciplinary authority which was supported by a cogent evidence
while inflicting penalty of dismissal from service within its limited scope
of judicial review under Article 226 of the Constitution. At this stage, a
passing reference was made by learned counsel for the delinquent
employee that as he stood retired from service pending disciplinary enquiry,
F there could not be an order of dismissal from service. This Court taking
note of Rule 19(3) of the State Bank of India Officers Service Rules,
1992, in para 9 of the judgment observed that in case the disciplinary
proceedings were initiated against an officer before he ceased to be in
service, the disciplinary authority vest at its discretion to continue and
conclude the disciplinary proceedings in the manner as if the officer
G continues to be in service but what nature of substantive penalty could
be inflicted upon the retired delinquent employee remain unanswered.
In the instant case, the specific question has been raised for determination
as to whether dismissal or any other substantive penalties provided under
Rule 27 of the scheme of Rules, 1978 could be open to be inflicted to the
H 6
2007(6) SCC 694
CHAIRMAN-CUM-MANAGING DIRECTOR, MAHANADI COALFIELDS 87
LTD. v. SRI RABINDRANATH CHOUBEY [RASTOGI, J.]

delinquent employee after he stood retired from service which was A
primarily not considered by this Court in Ram Lal Bhaskar and Anr.
referred to supra.
27. Taking note of the exposition of law which has been noticed
and of the scheme of Rules, 1978, which indubitably has a binding force
and are not a subject matter under challenge and are neither in derogation B
nor in contravention to the scheme of Payment of Gratuity Act, 1972. I
have no hesitation in holding that the substantive penalties provided under
the schedule of penalties referred to under Rule 27 could be inflicted on
a delinquent employee while he is in service but in case where the
delinquent employee stood retired or superannuated from service pending
disciplinary inquiry, at least either of the substantive penalties provided C
under Rule 27 are not available to the disciplinary authority to be inflicted
with retrospective effect but at the same time punishment of forfeiture
of gratuity if held guilty for misconduct or negligence to the extent damage
or pecuniary loss has been caused to the employer can be inflicted upon
the delinquent in terms of Rule 34.3 of Rules 1978 read with sub-section D
(6) of Section 4 of the Act, 1972 and in case the delinquent employee
stands exonerated he became entitled for gratuity for the delay in payment
in terms of Sections 7(3) and 7(3A) of Act, 1972 and as a matter of
caution, it should not be pre-supposed that where the disciplinary inquiry
remain pending and could not be concluded while the delinquent employee
was in service in due course of time, he shall be held guilty and punished E
under the scheme of Rules, 1978.
28. To sum up, my conclusion to the question is as under:-
Que. 1-Whether it is permissible in law for the employer to withhold
the payment of gratuity even after the employee has attained his F
superannuation from service because of the pendency of disciplinary
proceedings against him?
Ans. I am in agreement with the view expressed by brother Justice
Shah that in view of Rule 34.3 of the Rules, 1978, the employer has a
right to withhold gratuity during pendency of the disciplinary proceedings. G
Que. 2- Whether the penalty of dismissal could be imposed after
the employee stood retired from service?
Ans. In my considered view, after conclusion of the disciplinary
inquiry, if held guilty, indeed a penalty can be inflicted upon an employee/
delinquent who stood retired from service and what should be the nature H
88 SUPREME COURT REPORTS [2020] 8 S.C.R.

A of penalty is always depend on the relevant scheme of Rules and on the
facts and circumstances of each case, but either of the substantive
penalties specified under Rule 27 of the Rules, 1978 including dismissal
from service are not open to be inflicted on conclusion of the disciplinary
proceedings and the punishment of forfeiture of gratuity commensurate
with the nature of guilt may be inflicted upon a delinquent employee
B
provided under Rule 34.3 of Rules, 1978 read with sub-section (6) of
Section 4 of the Act, 1972.
29. To conclude, the impugned judgment of the High Court dated
th
17 July, 2013 is not sustainable and deserves to be set aside and the
disciplinary authority may proceed and conclude the pending disciplinary
C proceedings expeditiously and take a final decision in accordance with
the scheme of Rules, 1978 read with sub-section (6) of Section 4 of the
Payment of Gratuity Act, 1972.
30. The appeal is accordingly disposed of.
D
Devika Gujral Appeal disposed of.

E

F

G

H