The case involves a dispute between Punjab National Bank (PNB) and an appellant who was compulsorily retired as a Senior Manager. The appellant initially filed a writ petition in the High Court to claim terminal benefits such as provident fund, gratuity, and pension. The bank contested this by citing a Credit Guarantee Fund Trust Scheme for Micro & Small Enterprises. Subsequently, a departmental inquiry was conducted, leading to the appellant’s compulsory retirement.

The appellant’s writ petition didn’t challenge the retirement itself but sought benefits. The High Court partially granted the writ, ordering the release of employer’s contribution to the provident fund, gratuity with interest, and leave encashment. However, it denied the benefit of gratuity forfeiture.

On appeal, the Division Bench upheld the leave encashment but revoked the grant of provident fund and gratuity, arguing that the appellant had caused a loss to the bank.

The case hinged on whether the bank’s contribution to the provident fund and gratuity should be withheld due to the appellant’s compulsory retirement. It was argued that Rule 13 of the PNB Employees’ Provident Fund Trust Rules allowed the bank to recover losses, damages, and liabilities incurred due to dishonest acts from the bank’s contribution. However, the charges against the appellant didn’t specify loss caused to the bank.

Regarding gratuity, the appellant argued that Regulation 4 of the PNB Officer Employees’ (Discipline and Appeal) Regulations clarified that dismissal or removal from service wouldn’t result in gratuity forfeiture. Compulsory retirement, not being a punishment, shouldn’t lead to gratuity forfeiture.

The bank contended that compulsory retirement differed from normal retirement, justifying withholding gratuity and provident fund contributions.

Ultimately, the court considered relevant provisions, circulars, and past judgments. It concluded that the bank’s contribution to the provident fund shouldn’t be forfeited, as no loss was proven. Regarding gratuity, it affirmed that the appellant’s compulsory retirement didn’t warrant forfeiture. The judgment aligned with the Gratuity Act and the bank’s circular, which didn’t specify forfeiture in the case of compulsory retirement.

The court upheld the findings of the learned Single Judge and allowed the appellant’s claim for the withheld benefits.

decided by the Supreme Court of India on Nov 6, 2023


Sanjiv Narang Adv. is an Advocate on Record in the Supreme Court of India. His qualifications include an LLB from University of Delhi and a Masters degree in Personnel Management from Panjab University,Chandigarh.In his more than 3 decades of experience, he has practiced law at the District, High Court and Supreme Court levels.He also has more than a decade of experience in the field of Management. He is the author of two books namely Laws for Women in India and Innovation, Why What and How.