HC Allows Deduction of Penal Rent from Gratuity for Unauthorised Retention of Company Quarter:

HC Allows Deduction of Penal Rent from Gratuity for Unauthorised Retention of Company Quarter The dispute arose after an employee of Eastern Coalfields Limited retired in June 2022 but continued to occupy the company-allotted residential quarter without vacating it. As per company policy and circulars issued by Coal India Limited, employees were required to vacate quarters upon retirement, failing which, penal rent would be charged and adjusted against retirement dues, including gratuity. Since the employer withheld gratuity on this ground, the matter reached the Controlling Authority under the Payment of Gratuity Act, 1972, which directed payment of gratuity amounting to Rs 18.99 lakh. This order was upheld by the Appellate Authority. Aggrieved, the employer approached the High Court challenging both orders. Main Issue: Whether an employer can withhold or adjust gratuity towards penal rent and dues arising from unauthorised occupation of company accommodation after retirement. HC's Order: The High Court allowed the writ petition and set aside the orders of the Controlling Authority and Appellate Authority. It held that dues arising from unauthorised occupation of company accommodation, including penal rent, qualify as recoverable dues and can be adjusted against gratuity. The Court observed that while gratuity is a statutory right, it is not immune from lawful deductions where the employee is liable for dues. The continued unauthorised occupation justified recovery through adjustment of retirement benefits. The Court directed that the deposited gratuity amount be returned to the employer, who is entitled to deduct rent and penal charges. The balance amount, if any, must be paid to the employee within 15 days of vacating the accommodation. To Read Full Judgment, Download PDF Given Below