The Delhi High Court has asserted that no legal right can be derived from an act that is not in consonance with the law. Since the initial mutual exchange of the railway quarter was unauthorized and contrary to prescribed rules, any subsequent claim for regularization based on this act is invalid.
The Court held that while gratuity is a statutory and earned benefit, it is legally permissible for an employer to deduct and adjust lawful dues, such as penal rent and other charges arising from the unauthorized occupation of official accommodation post-retirement, from the gratuity payable to the employee. This is especially true when the employee has executed a declaration explicitly permitting such a deduction.
The High Court therefore upheld the Central Administrative Tribunal (CAT) Order, which rejected the petitioners’ claim for regularization and sharing of the railway quarter, finding that the occupation was unauthorized. The Court also upheld the Tribunal’s order which justified the adjustment of penal rent and other dues from Petitioner No. 2’s gratuity.
The Division Bench comprising Justice Navin Chawla and Justice Madhu Jain observed that the foundational act of the mutual exchange of the quarter was contrary to Railway instructions, as it was not approved by a competent authority. The communication from the Senior Section Engineer was deemed insufficient to authorize such an inter-zonal transfer, as it merely recorded a mutual understanding.
The Bench noted that a formal application for sharing the accommodation was submitted shortly before Petitioner No. 2’s retirement, which did not meet the mandatory conditions under the Railway Board’s Master Circular No. 49. The Bench also found that the discontinuance of HRA for Petitioner No. 1 did not, by itself, legitimize the occupation or prove co-residency for the required period.
The Bench further observed that Petitioner No. 2 had executed a declaration knowingly and voluntarily agreeing to the withholding of her gratuity for unauthorized retention of the quarter, and she never challenged this declaration. The Bench also clarified that the principle against withholding gratuity for want of an NOC does not apply where there is a substantive liability for penal rent due to unauthorized occupation.
Accordingly, the Bench affirmed that an employer is permitted by law to adjust lawful dues, including penal rent, against the gratuity payable to an employee.
Briefly, the case involves two petitioners: U.K. Sharma (Petitioner No. 2), a retired Assistant Nursing Officer of the Northern Railway, and her son, Mr. Amit Sharma (Petitioner No. 1), also a Northern Railway employee. In 1993, Petitioner No. 2 was allotted Railway Quarter in Basant Lane, New Delhi. Later, she mutually exchanged this quarter for another Quarter, with another employee, S.P. Singh. The petitioners claimed this exchange was approved by the Senior Section Engineer, while the respondents contended it was unauthorized as the quarters belonged to different railway pools and lacked approval from the competent authority.
Later, the Petitioner No. 1 began residing with his mother, and his House Rent Allowance (HRA) was stopped from December 2004. Shortly before her retirement, Petitioner No. 2 applied to regularise the quarter in her son’s name. She also signed a declaration agreeing that her gratuity could be withheld if she retained the accommodation unauthorisedly post-retirement. The request for regularisation was however, rejected, on grounds of an invalid allotment and unapproved exchange. Ultimately, the respondents adjusted the alleged dues for damages, rent, and electricity from Petitioner No. 2’s gratuity.
Appearances:
Advocates M. K. Bhardwaj, Priyanka M. Bhardwaj, and Praveen Kumar Kaushik, for the Petitioner
Advocates Piyush Beriwal, Ruchita Srivastava, Neha, Bhagvan Swarup Shukla, and Ashutosh Pathak, for the Respondent
