Bank Employees’ Gratuity Can’t Be Adjusted Against Their Outstanding Loan: Karnataka High Court
Contents News/Article Date: 26th October 2022
Relating to which Act: The Payment of Gratuity Act, 1972
Applicable to which State: All States and Union Territories
Type: Karnataka High Court Judgement – A single judge bench of Justice Suraj Govindaraj thus dismissed a petition filed by the Canara Bank questioning the order of Appellate Authority which
Pertains to Title: M/S CANARA BANK v. M SHANTHA KUMARI
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In this instance, the Karnataka High Court has held that the gratuity amount payable to a bank employee cannot be adjusted by the bank with his outstanding loan amount.
The bench said, “Home loan is governed by the agreement of loan. It is for the Bank to act in terms of the said agreement and exercise all rights under
Case Title: M/S CANARA BANK v. M SHANTHA KUMARI
Case No: WRIT PETITION NO. 11463 OF 2020
Citation: 2022 Live Law (kar) 414
Date of Order: 13TH DAY OF SEPTEMBER 2022
Subject: Bank Employees’ Gratuity Can’t Be Adjusted Against Their Outstanding Loan: Karnataka High Court
For greater details, appended below is the complete news item
Karnataka HC Rules That Bank Employees’ Gratuity Can’t Be Adjusted Against Their Outstanding Loan
Karnataka HC: Bank employees’ gratuity can’t be adjusted against their outstanding loan
The single judge bench of Justice Suraj Govindaraj dismissed a petition filed by the Canara Bank and held that the gratuity amount payable to an employee cannot be adjusted by the bank with his outstanding loan amount.
In the case, M/S Canara Bank vs. M. Shantha Kumari, the husband of the respondent in the case, joined Canara Bank in 1975 as a peon and was later promoted as a clerk in 1987.
He availed a Housing Loan which was being repaid from time to time. In 2005, disciplinary proceedings were taken up against him with allegations of gross misconduct. Punishment of compulsory retirement was imposed in 2006.
He filed an application for the release of the gratuity amount, which was rejected. He approached the Controlling Authority to seek directions to make the payments. The bank stated that there were dues to be received for the Housing loan as well as on account of the Staff Welfare Fund. Hence, these dues need to be adjusted against the gratuity amount.
The bench noted that there is a special treatment for payment of gratuity, both under the Payment of Gratuity Act and also under the Code of Civil Procedure, 1908. As per them, the gratuity was given special protection and the gratuity amount cannot be attached.
The court took notice of the petition, where-in the bank sought to adjust a sum of around Rs. 9.85 lakhs towards a housing loan and Rs. 1.29 lakhs on account of Staff Welfare Fund liability. It observed that while the Staff Welfare Fund comes within the domain of the service conditions, the home loan is a different proposition. The terms of the loan agreement, which is a commercial transaction between the bank and the debtor, govern the home loan. This is irrespective of whether the debtor is an employee of the bank.
The court also noted that the employee made the claim for gratuity only in 2017 i.e., after attaining the age of superannuation.
The court directed the bank to comply with the earlier order of the appellate authority and proceeded to dismiss the petition by the bank.