Holding

Regulation 5 of the ONGC (Death, Retirement and Terminal Gratuity) Regulations, 1969 validly empowers the Commission to recover dues, including penal rent for unauthorized occupation, from the gratuity payable to a retired officer, making the deduction lawful.

Summary

The case concerned V.U. Warrier, a former "gold‑collar" officer of the Oil and Natural Gas Commission (ONGC), who after retirement failed to vacate a residential quarter allotted to him and was charged penal rent. ONGC deducted Rs.53,632 of the penal rent from the gratuity payable to Warrier under the ONGC (Death, Retirement and Terminal Gratuity) Regulations, 1969. Warrier challenged the deduction before the Bombay High Court, which held that gratuity could not be set‑off and ordered payment of the full amount with interest. ONGC appealed to the Supreme Court, arguing that Regulation 5 expressly authorises recovery of dues from gratuity without the employee’s consent and that the Payment of Gratuity Act, 1972 did not apply to Warrier. The Supreme Court held that the statutory regulations were valid, that the Commission could lawfully recover the penal charges from the gratuity, and that the High Court’s exercise of jurisdiction under Article 226 was unwarranted. Consequently, the Supreme Court set aside the High Court order and dismissed Warrier’s petition.

Issues considered

The legality of deducting penal charges for unauthorized occupation of a residential quarter from gratuity payable under the ONGC (Death, Retirement and Terminal Gratuity) Regulations, 1969.
Whether Regulation 5 of the 1969 Regulations authorises recovery of dues from gratuity without the employee’s consent.
Whether the Payment of Gratuity Act, 1972 (specifically the definition of "employee" in Section 2(e)) applied to the respondent, who earned a salary above Rs.2,500 per month.
Whether the Bombay High Court’s intervention under Article 226 of the Constitution was justified in the facts of the case.

Legislation cited

Constitution of Indias. Article 226
Oil and Natural Gas Commission Act, 1959s. 32(1)
Payment of Gratuity Act, 1972s. Section 2(e)
Public Premises (Eviction of Unauthorised Occupants) Act, 1971

Subjects

gratuityunauthorised occupationpenal rentdeduction from gratuitystatutory regulationsArticle 226Oil and Natural Gas Commissionemployee benefitsgold‑collar employeehigh court jurisdiction

Judgment

A SECRETARY, O.N.G.C. LTD. AND ANR.
v.
V.U. WARRIER

APRIL 20, 2005

B [RUMA PAL AND C.K. THAKKER, JJ.]

Service Law :

Gratuity-Withholding of-Respondent-officer unauthorizedly occupied
C residential quarter allotted to him even after his retirement-Penal charges
payable by him for such unauthorized occupation-Appel/ant-employer
deducted amount towards such charges from gratuity payable to respondent-
emp/oyee-Validity of-Held, valid--Jn exercise of Regulation 5 of the 1969
Regulations, Appellant could recover its dues from any officer without his
consent from gratuity-In the facts and circumstances, the action cannot be
D said to be arbitrary, unlawful or unreasonable-High Court e"ed in interfering
under Art. 226 of the Constitution-Oil and Natural Gas Commission (Death,
Retirement and Terminal Gratuity) Regulations, 1969-Regulation 5-Payment
ofGratuity Act, 1972-&ction 2(e)-Constitution ofIndia, 1950-Article 226-
Ambit and scope of
E
Respondent-officer unauthorizedly occupied residential quarter
allotted to him even after his retirement. Penal charges were payable by
him for such unauthorized occupation. Appellant-employer deducted
amount towards such charges from gratuity payable to respondent-
employee. The question which arose for consideration in the present
F appeals is whether such action on part of Appellant-employer is valid.

Allowing the appeals, the Court

HELD : 1.1. Pensionary benefits, such as gratuity, cannot be said to
be 'bounty'. Gratuity is earned by an employee for long and meritorious
G service rendered by him. Ordinarily, therefore, payment of benefit of
gratuity cannot be with held by an employer. (706-D)

1.2. In the instant case, however, in exercise of statutory powers
under Section 32(1) of the Oil and Natural Gas Commission Act, 1959,
the Oil and Natural Gas Commissfon (Death, Retirement and Terminal
H 696
SECRETARY, O.N.G.C. LTD. v. V.U. WARRIER 697
Gratuity) Regulations, 1969 have been framed by the Appellant- A
Commission. Regulation 5 makes it clear that the Commission has right
to effect recovery of its dues from any officer without his consent from
gratuity. It cannot be said that the Commission had no right to withhold
gratuity by deducting the amount which is found 'due' to Commission
and payable by the respondent-employee towards penal charges for B
unauthorized occupation of the residential quarter allotted to him.
[706-E; 707-A-C-D]

Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi and Anr.,
11975) 1 sec 421, followed.
Garment Cleaning Works v. Its Workmen, 11962) 1 SCR 711; Calcutta C
Insurance Co. Ltd. v. Their Workmen, 11967) 2 SCR 596; Jarnail Singh v.
Secretary, Ministry of Home Affairs and Ors., [1993) 1 SCC 47 and Wazir
Chand v. Union of India and Ors., 12001) 6 SCC 596, relied on.

R. Kapur v. Director of Jnspection(Painting & Publication) Income
Tax and Anr., [1994) 6 SCC 589 and Gorakhpur University and Anr. v. D
Sh.'/la Prasad Nagendra (Dr.) and Ors., 12001) 6 SCC 591, distinguished.

O.P. Bhandari v. Indian Tourism Development Corporation ltd and
Ors., [1986) 4 SCC 337 and State of Kera/av. M Padmanabhan Nair,
[1985) 1 sec 429, referred to
E
2. Clause (e) of Section 2 of the Payment of Gratuity Act defined
"em:>loyee", from which it is clear that a person can be said to be an
"employee" if his wages did not exceed Rs.2500 per month. According to
the Commission, the salary of the respondl.!nt was more than Rs.2500
and hence, he could not be held "employee" covered by the definition.
Though the definition "employee" was no doubt amended subsequently F
and the provision as to amount of wages had been deleted, but the
amendment was made in 1994 and was not retrospective in nature and
thus was not applicable in the case of the respondent who retired in 1990.
1707-E-G-H, 708-Al

Union of India v. All India Services Pensioners' Association and Anr., G
11988) 2 sec 580, relied on.

3.1. The matter can be considered from another angle also. It is
well-settled that the jurisdiction of the High Court under Article 126 (){
the Constitution is equitable and discretionary. The power under that H
698 SUPREME COURT REPORTS [2005) 3 S.C.R.

. A Article can be exercised by the High Court "to reach injustice wherever
it is found". The facts of the present case did not deserve interference by
the High Court in exercise of equitable jurisdiction under Article 226 of
the Constitution. (710-C; 711-C)

3.2. The respondent was a responsible officer holding the post of
B Additional Director (Finance & Accounts). He was, thus, "gold collar"
employee of the Commission. In the capacity of employee of the
Commission, he was allotted a residential quarter. He reached the age of
superannuation and retired after office hours of February 28, 1990. He
was, therefore, required to vacate the quarter allotted to him by the
C Commission. The Commission, as per its policy, granted four months'
time to vacate. He, however, failed to do so. His prayer for continuing_ to
occupy the quarter was duly considered and rejected on relevant and
germane grounds. The residential accommodation constructed by him by
taking loan at the concessional rate from the Commission was leased to
Commission, but the possession of that quarter was restored to him taking
D into account the fact that he had retired and now he will have to vacate
the quarter allotted .to him by t,he Commission. In spite of that, he
continued to occupy the quarter ignoring the warning by the Commission
that if he did not vacate latest by June 30, 1990, penal rent would be
charged from him. Considering all these facts, ·the High Court was wholly
E unjustified in exercising extraordinary and equitable jurisdiction in favour
of the respondent. It cannot be said that the action of the Commission
.
~

i
was arbitrary, unlawful or unreasonable. (711-C-F; 707-C)

G. Veerappa Pillai, Proprietor, Sathi Vilas Bus Service, Porayar, Tanjore
District, Madras v. Raman & Raman Ltd, Kumbakonam, Tanjore District
p amd Ors., (1952) SCR 583 and Sangram Singh v. Election Commissioner,
Kotah and Anr., [1955) 2 SCR 1, relied on. ...

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2766-2767
of 2005.

G From the Judgment and Order dated 15.2.2003 of the Bombay High
Court in W.P. No. 3947/94 and R.P.S. No. 33103 of 2003.

B. Datta, Additional Solicitor General, S. Borthakur and Sunil Kumar
Jain with him for the Appellants.

H Ashwani Kumar for the Respondent.
SECRETARY, O.N.G.C.LTD. v. V.U. WARRIER [THAKKER, J.) 699
The Judgment of the Court was delivered by A
C.K. THAKKER, J. Leave granted.

The present appeals are directed against the judgment and order passed
by the High Court of Judicature at Bombay dated February 15, 2003 in Writ
Petition No. 3947o(1994 and also against an order dated January 14, 2004 B
-· passed in Civil Application No. 63 of 2003.

To understand the controversy raised in the appeals, relevant facts in
. brief may be stated

The respondent herein - petitioner before the High Court - was in C
service of Oil and Natural Gas Commission, ("Commission" for short)
appellant herein. He was holding the post of Additional Director (Finance
and Accounts) prior to his retirement. As an employee of the Commission,
he was allotted quarter on December l 0, 1982. He retired from service on
reaching the age of superannuation with effect from February 28, 1990. It is
the case of the appellant that after the retirement, an employee has to vacate D
the residential accommodation given to him by the Commission. The
respondent, therefore, was informed by the Commission that he had to vacate
the quarter. It was the policy of the Commission to grant four months' time
to retain a quarter by an employee after his retirement. Accordingly, the
respondent was asked to handover vacant and peaceful possession of the E
quarter to the Commission latest by 30th June, 1990. It is an admitted fact
that the respondent did not vacate the quarter. It has come on record that he
made representations to permit him to continue to occupy the quarter but
those representations were rejected. Since the respondent did not vacate the
quarter, proceedings were also initiated by the Commission under the Public
Premises (Eviction of Unauthorised Occupants) Act, 1971. In those F
proceedings, an undertaking was given by the respondent that he would
vacate the quarter latest by May 30, 199 l. Pursuant to the said undertaking,
the respondent vacated the quarter on May 16, 1991. Eviction proceedings
were then dropped.

The respondent claimed an amount of gratuity payable to him. According
G
to the respondent, he was entitled to Rs. one lakh towards payment of gratuity.
The Commission, however, deducted an amount of Rs.53,632 towards
unauthorized occupation charges of official accommodation from July 0 I,
1990 to May 15,.1991 at the rate of Rs.5,100 being 75 per cent of the basic
pay of Rs.6,800 per month. According to the respondent, it was not open to H
700 SUPREME COURT REPORTS [2005] 3 S.C.R.

A the Commission to deduct any amount payable to him towards gratuity. He,
therefore, approached the High Court of Judicature at Bombay challenging
the action. He prayed for quashing of an order of appropriation of Rs.53,632
as unauthorized occupation charges of official accommodation from July,
1990 to May, 1991 at the rate of Rs.5, I 00 by permanently restraining the
B Commission from recovering the said amount. A prayer was also made to
direct the Commission to pay the amount of gratuity with interest.
.__;:-
An affidavit in reply was filed by the Commission. In the counter, the
Senior Deputy Director (Personnel and Administration), stated that the
Commission was a statutory Corporation establisl..!d in 1960 under the Oil
C and Natural Gas Commission Act, I959. The said Act was repealed by the
Oil and Natural Gas Commission (Transfer of Undertaking and Repeal) Act,
I 993. It was stated that the respondent (petitioner before the High Court), .,.
had concealed several material facts. He was working as Additional Director
and retired at the age of 58 years on sµperannuation after office hours on
February 28, I 990. As Additional Director, he belonged to "gold collar"
D class of employee as observed by this Court in O.P. Bhandari v. Indian
Tourism Development Corporation Ltd and Ors., [1986] 4 SCC 337. In the
capacity of an employee of the Commission and for efficiently discharging
his duties, he Wl!S allotted accommodation in Building No. D/63, Vidya Vihar,
ONGC Colony, Chittaranjan Nagar, Bombay vide allotment letter dated
E December IO, 1982. The said accommodation was on certain terms and
conditions.

Clauses 11 and 12 read as under-

F
"Cl. I I If the employee to whom a residence is allotted retires or
resigns or i~ ~ismissed or removed from service, the allotment shall
- I

~
be cancelled with effect from two months after the date of his
retirement, and one month after the date of.his resignation, dismissal,
or removal as the case may be, or with effect from any date after such
dismissal or removal or retirement on which the residence is vacated,
whichever is earlier."
G Cl.12 After cancellation of the allotment, if the premises are not
vacated, the occupation thereof shall be considered unauthorized, and
the ex-allottee shall be liable to pay liquidated damages for occupation
of the premises either twice of the standard rent or at the rate of the
rent as may be determined by the Commission from time to time."
H
SECRETARY, O.N.G.C. LTD. v. V.U. WARRIER [THAKKER, J.J 701

It was also stated by the deponent that the Commission had issued A
Allotment of Residences Instructions, 1970. Clause 14( 1) of 1970-lnstructions
reads as under-

"After cancellation of the allotment, if the premises are not vacated,
the occupation thereof shall be considered unauthorized and the ex-
allottee shall be liable to pay liquidated damages for occupation of B
.-- the premises either at the rate of twice of the standard rent or at the
rate of the rent as may be determined by the Commission from time
to time."

On retirement from the service of the Commission, the respondent was
entitled to the following benefits : c
"(i) Provident Fund Full Paid

(ii) TTA Advance for settling
at Home Town Rs.17,000
D
(iii) Leave encashment 253 days Rs.49,083

(iv) Gratuity payable under the
Commission's Death-Cum-
Retirement payment of Gratuity
Regulations 1969, as amended
E
from time to time. Rs. l ,00,000
According to the Commission the gratuity payable on the retirement of
respondent had been paid and appropriated as under :
Total amount of Gratuity payable under F
the 1969 Regulations as amended : Rs. l ,00,000

Less Appropriations

(i) Outstanding House Building
Advance/Loan as on 28/2/ 1990 Rs.(-)23,000 G

(ii) Cumulative overdue interesi: at 6%
p.a. as on 28.2.90 Rs.(-)27,744

Net amount payable Rs.49,256 H
702 SUPREME COURT REPORTS [2005] 3 S.C.R.

A (iii) Permissive occupation of staff Rs. 820
accommodation from 1/3/1990
to 30/6/1990 @ Rs.205 p.m. i.e.
205 x 4
(iv) Unauthorised occupancy Rs.53,632
B from 117/90 to 16/5/91
@ Rs.5100 p.m. (being 75% of
the basic pay of Rs.6800 p.m.) Rs.53,632 (-) Rs.54,452
Deficit amount Recoverable (-) Rs.5,196
The Commission was paying 30 per cent basic pay as HRA to those
C employees who could not be allotted accommodation by the Commission at
selected centres like Delhi, Bombay, etc., but used to recover only 7 Y:z per
cent basic pay as HRA from the employees on allotment of accommodation.
In the event of unauthorized occupation of staff accommodation, liquidated
damages are recoverable as double the rent i.e. 37- Y:z x 2 = 75% of basic pay
till the accommodation is vacated by the incumbent. A copy of the office
D order dated January 30, 1990 was also annexed to the affidavit in reply. It
was submitted that though the respondent retired on February 28, 1990 and
was allowed four months' time to occupy the quarter as per the policy of the
Commission, he failed to vacate the quarter. His prayer for retention of
quarter was considered by the Commission but in view of non-availability of
E quarters to several other employees, the prayer was rejected and the respondent
was asked to vacate it. He was also informed that in case, he would not
vacate the quarter, penal rent at the rate of 75% of basic salary would be
recovered from him. In spite of such communications and letters, the
respondent failed to vacate the quarter. The Commission was required to
initiate eviction proceedings and only thereafter an undertaking was filed and
F possession of qm•••er was given back to Commission. In the circumstances,
the Commission was within its power to deduct the amount recoverable from
the respondent towards unauthorized occupation of residential quarter from
July 1, 1990 till May 15, 1991 and the employee had no reason to make
grievance against it.

G It was also the case of the Commission that the respondent was not
covered by Payment of Gratuity Act, 1972 as amended from time to time.
Statutory regulations framed by the Commission are more liberal and beneficial
than the provisions of the Payment of Gratuity Act. It was further stated that
the respondent had constructed a flat bearing No. B-209, Dewan Mansion,
H Plot No. 29136, Vasai, Bombay by taking concessional loan at the rate of 6%
SECRETARY, O.N.G.C. LTD. v. V.U. WARRIER [THAKKER, J.] 703
per annum from the Commission. The said quarter was leased by him to the A
Commission at the rate of Rs.880 per month. In view of the retirement of the
respondent on February 28, 1990 and i11 view of the fact that he had to vacate
the residential quarter of the Commission, possession of the quarter that
belonged to the respondent and let out to the Commission was given back to
him on June 3, 1990. For four months from March l, to June 30, 1990, the B
respondent was charged nominal rent of Rs.205 per month. Since the
respondent did not vacate the quarter, the impugned action of charging penal
rent was taken and the amount was appropriated from gratuity benefits payable
to the resjlO'ldent. The said action was legal and valid. It was further stated
that there was a list of senior officers waiting for years for allotment of staff
accommodation in Bombay. The Commission was paying 30 per cent of C
basic pay as HRA to twelve officers for non-allotment of residential quarter.
Particulars thereof had also been annexed to the affidavit in reply.

At the time of hearing of the petition, an advocate appeared for the
respondent (petitioner before the High Court). None, however, appeared for
the Commission. According to the High Court, the legal position was no D
more res integra that pension and gratuity were rights accrued in favour of
employees on their retirement. Those benefits, therefore, could not be withheld
even if an employee unauthorisedly occupied accommodation and was,
therefore, liable to pay damages or penal rent under the relevant rules. The
. only remedy available to the employer was to take appropriate action but the E
amount of pensionary benefit could not be set off against the so-called dues
for unauthorized occupation. The Court also referred to State of Kera/a v. M
Padmanabhan Nair, (1985] l SCC 429, R. Kapur v. Director of Inspector
(Painting & Publication) Income Tax and Anr., [1994) 6 SCC 589 and
Gorakhpur University and Ors. v. Shi/la Prasad Nagendra (Dr.) and Ors.,
c20011 6 sec 591. F
The writ petition was accordingly allowed and the following directions
were issued by the Court;

"(a) It is declared that appropriation of a sum of Rs.53,637 towards
unauthorized occupancy of the official accommodation by the G
petitionerfrom lstJuly l990to 16thMay, 1991 attherateofRs.5100
per month was illegaU. However, this will not preclude the Respondents
from proceeding against the petitioner for recovery of due amount of
unauthorized occupancy of the official quarter for the period from 1st
July 1990 to 16th May, 1991 in accordance with law.
H
704 SUPREME COURT REPORTS [2005] 3 S.C.R.

A (b) The Petitioner is entitled to payment of Rs.49,924 towards gratuity
under the relevant Regulations along with interest at the rate of 6%
per annum from 1st March 1990 until payment is made. We grant
time of two months to Respondent for making the aforesaid payment
to the petitioner.

B (c) Since the respondent have not chosen to appear today at the time
of hearing of Writ Petition, we direct the parties to bear costs."

According to the Commission, it was not aware of the decision of the
High Court dated 15th February, 2003, since none appeared on behalf of the
Commission in the High Court at the time of hearing of the petition and the
C decision was ex parte. It, therefore, made necessary enquiry. As soon as it
came to know about the decision of the High Court, it addressed a letter
dated May 22, 2003, to the advocate appearing for the Commission and
asked him under what circumstances he could not attend the matter which
came to be decided ex parte against the Commission. The advocate vide his
D letter dated May 24, 2003 informed the appellant that he had been advised
to take rest-as he was suffering from Filariasis. According to the appellant,
thus, absence of the advocate appearing for the Commission was neither
intentional nor deliberate but due to his ill health. The appellant thereafter
applied for certified copy of the judgment which was sent to Head Office,
Dehradun. Relevant papers were then colle.cted from the office of the
E advocate. After getting approval from the Head Office, new advocate was
appointed on August 11, 2003, who was asked to file Review Petition which
was filed on De~ember 12, 2003. There·was thus d~lay of 116 days in filing
the review petition. The Division Bench rejected the Review Petition
observing that there was. no explanation for the period from May 24, 2003
F to September 6, 2003. In the opinion of the Court, there was no cause much
less sufficient cause for condonation of delay. The review application was,
therefore, rejected.

On March 29, 2004, this Court issued notice on the Special Leave
Petition as well as on the prayer of interim relief. On-October 25, 2004, an
G order was passed to place the matter for final disposal on.~ny miscellaneous
day. The matter was accordingly placed for hearing on January 31, 2005 and
r.emained part heard. On February 4, 2005, the matter was heard and the
learned counsel for the parties completed their arguments .
•..
The learned counsel for the appellant contended that the High Court
H was ,;:learly wrong in allowing the petition and in directing the Commission
SECRETARY, O.N.G.C. LTD. v. V.U. WARRIER [THAKKER, .I.] 705

to pay the amount of gratuity to the respondent with interest at the rate of 6% A
per annum. According to the counsel, it was perfectly within the powers of
the Commission to deduct the amount of liquidated damages towards
unauthorized occupation of quarter by the respondent. Such action cannot be
said illegal, unlawful or otherwise improper. The Commission is a statutory
Corporation established by an Act of Parliament and in exercise of statutory B
powers it has framed regulations. Those regulations, therefore, are statutory
in character, they are having force of law and are enforceable. It was also
submitted that the provisions of Payment of Gratuity Act would not apply to
the res!1ondent. The counsel urged that sufficient quarters are not available to
the Commission in cities like Delhi and Bombay. If the employees who had
been allotted quarters do not vacate even after their retirement, it would C
create serious problems to the Commission as well as its employees. In the
instant case, admittedly the respondent retired on February 28, 1990. He was
allowed four months' time up to June 30, 1990 to vacate the quarter. His
prayer for retention of quarter was duly considered and rejected expressly
infonning him that in view of several officers waiting for quarters it would
not be possible to accede to the request and he must vacate the quarter by D
June 30, 1990. He was specifically intimated that in case he did not vacate
the accommodation within the stipulated time, penal rent would be charged
from him. He ignored all those letters and continued to occupy the quarter.
So much so that eviction proceedings had to be initiated against him. It was
only thereafter that the respondent gave an undertaking and vacated the quarter. E
The counsel also submitted that the respondent applied for loan for residential
accommodation at concessional rate which was given to him. He had
constructed a house. He let that house to the Commission at the rate of
Rs.880 per month as against Rs.205 per month which he was paying towards
rent. Considering the fact that the respondent had retired on February 28,
1990 and was to vacate t~e quarter allotted to him by the Commission by F
June 30, 1990, the possession of the quarter belonged to the respondent and
let out to the Commission was given back to. him on June 3, 1990. In spite
of that, the respondent did not vacate the quarter. In the circumstances, the
High Court was wholly wrong in granting relief to the respondent. The High
Court was also wrong in not reviewing the order passed ex parte observing G
that no 'sufficient cause' had been made out for condonation of delay. It was,
therefore, submitted that the appeal deserves to be allowed by quashing and
setting aside the order of the High Court and by upholding the order passed
by the Commission.

The learned counsel for the respondent, on the other hand, supported H
706 SUPREME COURT REPORTS (2005] J S.C.R.

A the order passed by the High Court. He submitted that as rightly held by the
High Court, pensionary and retrial benefits are the "right accrued" in favour
of an employee and not in the nature of "bounty". It was, therefore, not open
to the Commission to withhold any amount payable to the employee from
gratuity and other terminal benefits. The point is covered by several decisions
B of this Court. Following those decisions, an order was passed which deserves
no interference. It was also submitted that the High Court has granted liberty
to the Commission by reserving right to the Commission to take appropriate
proceedings in accordance with law to recover the amount of unauthorized
occupation charges from the respondent. So far as review is concerned, the
counsel submitted that according to the High Court there was no sufficient
C cause for recalling/reviewing the order passed ex parte and even that order
also cannot be said to be illegal. He, therefore, prayed for dismissal of appeals.

Having heard the learned counsel for the parties, in our opinion, the
appeals deserve to be allowed. It is no doubt true that pensionary benefits,
such as gratuity, cannot be said to be 'bounty'. Ordinarily, therefore, payment
D of benefit of gratuity cannot be withheld by an employer. In the instant case,
however, it is the specific case of the Commission that the Commission is
having a statutory status. In exercise of statutory powers under Section 32(1)
ofthe Act, regulations known as the Oil and Natural Gas Commission (Death,
Retirement and Terminal Gratuity) Regulations, 1969 have been framed by
E the Commission. In Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi
and Anr., [1975] 1 SCC 421 the Constitution Bench of this Court held that
regulations framed by the Commission under Section 32 of the Oil and Natural
Gas Commission Act 1959 are statutory in nature and they are enforceable
in a court of law. They provide for eligibility of grant of gratuity, extent of
gratuity, etc:
F
Regulation 5 deals with recovery of dues of the Commission and reads
thus:

"Recovery of Dues :

The appointing authority, or any other authority empowered by the
G
Commission in this behalf shall have the right to make recovery of
Commission's dues before the payment of the death-cum retirement
gratuity due in respect of an officer even without obtaining his consent
or without obtaining the consent of the members of his family in the
case of the deceased officer, as the case may be."
H
SECRETARY. O.N.G.C. LTD. v. V.U. WARRIER [THAKKER, J.] 707

The above regulation leaves no room of doubt that the Commission has A
right to effect recovery of its dues from any officer without his consent from
gratuity. In the present case admittedly the respondent retired after office
hours of February 28, 1990. According to the Commission, he could be
allowed four months' time to occupy the quarter which was granted to him.
His prayer for extension was considered and rejected stating that it would not B
be possible for the Commission to accept the prayer in view of several
officers waiting for quarters. He was also informed that if he would not
vacate the quarter, penal rent as per the policy of the Commission would be
recovered from him. But the respondent did not vacate the quarter. It was
only after eviction proceedings were initiated that he vacated the quarter on
May 16, 1991. In the circumstances, in our opinion, it cannot be said that the C
action of the Commission was arbitrary, unlawful or unreasonable. It also
cannot be said that the Commission had no right to withhold gratuity by
deducting the amount which is found 'due' to .Commission and payable by
the respondent towards penal charges for unauthorized occupation of the
quarter for the period between July I, 1990 and May 15, 1991.
D
So far as the Payment of Gratuity Act is concerned, according to the
appellant, the said Act was not applicable to the respondent. We are concerned
with the position as in 1990. Clause (e) of Section 2 of the Act defined
"employee". The said definition read as under :

"S 2(e) - 'employee' means any persons (other than an apprentice) E
employed on wages, not exceeding two thousand five hundred rupees
per mensem, in any estabHshment, factory, mine, oilfield, plantation,
port, railway company or shop, to do any skilled, semi-skilled, or
unskilled, manual, supervisory, technical or clerical work, whether
> the terms of such employment are express or implied, but does not F
include any such person who is employed in a managerial or
administrative capacity, or who holds a civil post under the Central
Government or a State Government, or who is subject to the Air
Force Act, 1950, the Army Act 1950, or the Navy Act, 1957."

(emphasis supplied) G
From the above definition, it is clear that a person can be said to be an
"employee" if his wages did not exceed two thousand five hundred rupees
per month. According to the Commission, the salary of the respondent was
Rs.6800 approximately which was more than Rs.2500 and hence, he could
not be held "employee" covered by the definition. The definition of II
708 SUPREME COURT REPORTS (2005] 3 S.C.R.

A "employee" was no doubt amended subsequently and the provision as to
amount of wages had been deleted. But the amendment was made in 1994
and was not retrospective in nature and thus was not applicable in the case
of the respondent who retired in 1990.

As held by this Court in Union ofIndia v. All India Services Pensioners'
B Association and Anr., (1988] 2 sec 580, an incumbent is entitled to those
benefits as he could claim on the date of retirement. He could not claim any
benefit prior to his appointment or subsequent to his retirement.

It is well settled that gratuity is earned by an employee for long and
C meritorious service rendered by him. Gratuity is not paid to the employee
gratuitously or merely as a matter of boon. It is paid to him for the service
rendered by him to the employer [vide Garment Cleaning Works v. Its
·Workmen, (1962] I SCR 711]. In Calcutta Insurance Co. Ltd v. Their
Workmen, (1967] 2 SCR 596, after considering earlier decisions, this Court
observed that "long and meritorious service" must mean Jong and unbroken
D period of service meritorious to the end. As the period of service must be
unbroken, so must the continuity of meritorious service be a condition for
entitling the workman to gratuity. Ifa workman commits such misconduct as
causes financial loss to his employer, the employer would under the general
law have a right of action against the employee for the loss caused and
making a provision for withholding payment of gratuity where such Joss
E caused to the employer does not seem to aid to the harmonious employment
of labourers or workmen. The Court proceeded to state that the misconduct
may be such as to undermine the discipline' in the workers - a case in which
it would be extremely difficult to assess the financial loss to the employer.

F In Jarnail Singh v. Secretary, Ministry ofHome Affairs and Ors, (1993]
SCC 47, this Court had an occasion to consider the provisions of the
Central Civil Services (Pension) Rules, 1972 . .The definition of "pension"
included gratuity under Rule 3 .. Rule 9 conferred on the President right to
withhold or withdraw pension in certain circumstances. The order was passed
against the appellant withholding pension and the entire amount of death-
G cum- retirement gratuity otherwise admissible to him. The direction was
given on serious irregularities found to have been committed by the appellant.
The appellant challenged that order unsuccessfully before the Central
Administrative Tribunal. He, therefore, approached this Court. His contention
was .that an amount of gratuity could not have been withheld. Negativing the
H contention, the Court held that the power to withhold gratuity was conferred
SECRETARY, O.N.G.C. LTD. v. V.U. WARRIER [THAKKER, J.] 709

on the President under the relevant rules and hence, such action could not be A
said to be illegal. According to the Court, there could be adjustment of
Government dues against the amount of death-cum-retirement gratuity payable
to Government servant.

The ratio in R.Kapoor, in our opinion, does not help the respondent as
in that case, the claim for damages for unauthorized occupation against the B
appellant-retired employee was "pending" and the proceedings were not finally
disposed of. In the present case, the facts clearly reveal that the last day of
lawful occupation of quarter by the respondent was June 30, 1990 and before
that date, the appellant Commission had informed the respondent that his
prayer for extension or retention of quarter had not been accepted and he C
should vacate by June 30, 1990. If he would not vacate the quarter, penal rent
would be recovered from him. He did not challenge the action of not extending
the period nor the recovery of penal rent. He, therefore, cannot make grievance
against the action of the Commission.

Similar is the case of Gorakhpur University. There retrial benefits were D
withheld to adjust amount due from the employee but "disputed" by him.
This Court noted that the employee was keeping a quarter allotted to him and
continued to occupy after retir~ment. It was, inter alia, observed by this
Court that after the employee retired, his request and application as per practice
for allotment of quarters in the name of his son who was also ~n employee
in the University remained pending and no orders were passed thereon. E
Moreover, there were resolutions of the University to waive penal rent and
such benefits were granted to other employees, but different treatment was
shown to him which constituted "hostile discrimination" and the act was thus
· 'unreasonable'. Though the employee retired in 1990 and continued to keep
the quarter up to 1996, the University did not choose to take any action to F
evict him. On the contrary, it acquiesced in his occupation "by accepting

•
I
regularly the normal rent''. Thus, there was lack of bonafides on the part of
the University.

In Wazir Chand v. Union of India and Ors., [2001] 6 SCC 596, a
retired employee continuously kept the quarter occupied unauthorisedly. He G
was charged penal rent in accordance with rules and after adjustment of dues,
balance amount of gratuity was paid to him. He contended that it was bounden
duty of the Government not to withhold the gratuity amount. The Court,
however, dismissed the appeal observing that it was "unable to accept" the
prayer of the appellant. The Court observed that the appellant having H
710 SUPREME COURT REPORTS [2005) 3 S.C.R.

A unauthorisedly kept the government quarter was liable to pay penal rent in
accordance with rules and there was no illegality in adjusting those dues
against death-cum-retirement benefits.

Wazir Chand was considered in Gorakhpur University but the Court
stated that it was not clear from the facts whether the person was allowed to
B retain the accommodation on receipt of normal rent as in the University case.

The matter can be considered from another angle also. It is well-settled
--
that the jurisdiction of the High Court under Article 226 of the Constitution
is equitable and discretionary. The power under that Article can be exercised
C by the High Court "to reach injustice wherever it is found". Before more than
fifty years, in G. Veerappa Pillai, Proprietor, Sathi Vilas Bus Service, Porayar,
Tanjore District, Madras v. Raman & Raman Ltd, Kumbakonam, Tanjore
District and Ors., [1952] SCR 583, the Constitution Bench of this Court
speaking through Chandrasekhara Aiyer, J., observed that the writs referred
D to in Article 226 of the Constitution are obviously intended to enable the
High Court to issue them "in grave cases where the subordinate tribunals or
bodies or officers act wholly without jurisdiction, or in excess of it, or in
violation of the principles of natural justice, ~r refuse to exercise a jurisdiction
vested in them, or there is an error apparent on the face of the record, and
such act, omission, error, or excess has resulted in manifest injustice."
E
(emphasis supplied)

Similarly, in the leading case of Sangram Singh v. Election
Commissioner, Kotah & Anr., [1955] 2 SCR I, dealing with the ambit and
scope of powers of High Courts under Article 226 of the Constitution, Bose,
F J., stated-

"That, however, is not to say that the jurisdiction will be exercised
whenever there is an error of law. The High Courts do not, and
should not, act as Courts of appeal under Art. 226. Their powers are
purely discretionary and though no limits can be placed upon that
G discretion it must be exercised along recognized lines and not
arbitrarily; and one of the limitations imposed by the Courts on
themselves is that they will not exercise jurisdiction in this class of
cases unless substantial injustice has ensued, or is likely to ensue.
They will not allow themselves to be turned into Courts of appeal or
H revision to set right mere errors of law which do not occasion injustice
SECRETARY, O.N.G.C. LTD. v. V.U. WARRIER [RUMA PAL, J.] 711

in a broad and general sense, for, though no legislature can impose A
.limitations on these constitutional powers it is a sound exercise of
discretion to bear in mind the policy ofthe legislature to have disputes
about these special rights decided as speedily as may be. Therefore,
writ petitions should not be lightly entertained in this class of case."

(emphasis supplied)- B

The above principle has been reiterated and followed by this Court in
several subsequent cases.

As already adverted to by us hereinabove, the facts of the present case
~--
did not deserve interference by the High Court in exercise of equitable C
jurisdiction under Article 226 of the Constitution. The respondent-petitioner
before the High Court-, was a responsible officer holding the post of Additional
Director (Finance & Accounts). He was, thus, "gold collar" employee of the
Commission. In the capacity of employee of the Commission, he was allotted
a residential quarter. He reached the age of superannuation and retired after D
office hours of February 28, 1990. He was, therefore, required to vacate the
quarter allotted to him by the Commission. The Commission, as per its policy,
granted four months' time to vacate. He, however, failed to do so. His prayer
for continuing to occupy the quarter was duly considered and rejected on
relevant and germane grounds. The residential accommodation constructed
by him by taking loan at the concessional rate from the Commission was E
leased to Commission, but the possession of that quarter was restored to him
taking into account the fact that he had retired and now he will have to vacate
the quarter allotted to him by the Commission. In spite of that, he continued
to occupy the quarter ignoring the warning by the Commission that if he
would not vacate latest by June 30, 1990, penal rent would be charged from
him. In our judgment, considering all these facts, the High Court was wholly F
unjustified in exercising extraordinary and equitable jurisdiction in favour of
the petitioner - respondent herein - and on that ground also, the order passed
by the High Court deserves to be set aside.

For the foregoing reasons, the appeals deserve to be allowed and are G
accordingly allowed. The order passed by the High Court is set aside and the
petition filed by the respondent-petitioner .is ordered to be dismissed. In the
facts and circumstances, however, there shall be no order as to costs.

8.8.8. Appeals allowed.