Whether, in the absence of any provision in the Pension Rules, the State Government can withhold a part of pension and/or gratuity during the pendency of departmental/criminal proceeding;

Gratuity and Pension are statutory dues of an employee that he amasses and earns over the long tenure of his association with the employer. They exist to secure the future of the employee and/or his family after he leaves the organization for whatever reason.

In State of Jharkhand and Ors. Vs. Jitendra Kumar Srivastava and Anr. [AIR2013SC3383], the Respondent was working in the Department of Animal Husbandry and Fisheries. In 1996, two cases were registered against him under various Sections of the Indian Penal Code as well as Prevention of Corruption Act, alleging serious financial irregularities. While proceedings were still pending, on attaining the age of superannuation, the Respondent retired from the post of Artificial Insemination Officer, in 2002. The Appellant employer sanctioned the release and payment of General Provident Fund and 90 percent provisional pension to the Respondent. Remaining 10 percent pension and salary of his suspension period (30.1.2002 to 30.8.2002) was withheld pending outcome of the criminal cases/departmental inquiry against him. He was also not paid leave encashment and gratuity. Feeling aggrieved, the Respondent preferred Writ Petition before the High Court of Jharkhand after which it filed Intra Court Appeal before the Division Bench. The Hon’ble Supreme Court, in this matter, opined that Rule 43(b) of the Bihar Pension Rules, as applicable to the State of Jharkhand, made it abundantly clear that even after the conclusion of the departmental inquiry, it is permissible for the Government to withhold pension etc. ONLY when a finding is recorded either in departmental inquiry or judicial proceedings that the employee had committed grave misconduct in the discharge of his duty while in his office. There is no provision in the rules for withholding of the pension/gratuity when such departmental proceedings or judicial proceedings are still pending. The Hon’ble Court further opined that the right of the Petitioner to receive pension was ‘property’ under Article 31(1) of the Constitution and by a mere executive order, the State had no power to withhold the same. Similarly, the said claim was also ‘property’ under Article 19(1) (f) and it was not saved by Sub-article (5) of Article 19. Gratuity and Pension are not bounties, they are hard earned benefits which accrue to an employee and is in the nature of ‘property’. This right to property cannot be taken away without the due process of law as per the provisions of Article 300A of the Constitution of India.
Therefore, the Hon’ble Supreme Court stated that the action of the employer in this case was nothing but an attempt to take away a part of pension or gratuity or even leave encashment without any statutory provision and under the umbrage of administrative instruction and the same could not be countenanced.

Recently, the Madras High Court in A.Kannan vs Joint Registrar of Co-op Societies Villupuram Region, Villupuram & Anr, [(2015)IIILLJ214Mad] made few observations on the payment of gratuity to an employee of a co-operative society. The Petitioner, an assistant in the Respondent co-operative bank, was suspended from service on certain grounds and the date of superannuation was 31.13.2011 and was not allowed to retire from service nor paid gratuity as per the Tamil Nadu Co-operative Societies Act (the Act). He therefore filed the writ petition seeking direction to disburse gratuity with interest. The facts indicate that the Petitioner was relived from service and was not paid gratuity as provided for under Sec79 of the Act. The court observed that the petitioner was not settled on gratuity despite having reached the age of superannuation and rendering 15 years of service. The service was non-pensionable, as he was not a government servant but industry workmen. The court found that nonpayment of gratuity to a workman who is not pensionable is a violation of Art 21 of the Constitution. Keeping in mind the maintainability of writ petitions under Art 226 to enforce fundamental rights, the court rejected Respondents plea requesting the petitioner to approach the relevant authority under the Tamil Nadu Shops and Establishments Act for payment of gratuity. The court also observed that when a criminal or surcharge proceeding is pending against the employee of the co-operative society , that cannot be ground to deprive gratuity in view of Sec 14 of Payment Of Gratuity Act, unless the workman is dismissed and there is an order of forfeiture of gratuity passed under the Payment Of Gratuity Act. The employer cannot deny paying the employee the gratuity amount. The court also observed that none of the amounts that the petitioner was entitled to such as gratuity, provident fund and leave encashment was paid to him. Hence the writ was allowed directing the respondent to pay gratuity and leave encashment.