Calcutta High Court says rent for overstaying can be deducted from gratuity

Justice Shampa Dutt ordered the company to deduct rent from the employee’s gratuity for overstaying in official quarters post-retirement.

“If such conduct is tolerated/indulged, it will only encourage others to act in such manner, leading to a situation where quarters cannot be provided to employees who are in service and entitled to such facility,” the Calcutta High Court said in its April 1 order. 

‘Pay the rental dues’

• The Calcutta High Court noted that the employee superannuated on January 31, 2025, and was served with a notice to vacate the official quarter occupied by her, which has not been done till date.
• It held that rent due and penal rent constitute government dues, and therefore, the employer is entitled to deduct such dues from retirement benefits, including gratuity.
• The employee inducted as a licensee has admittedly overstayed after their licence expired on superannuation. 
• The Calcutta High Court directed that the deposited gratuity amount of Rs 18.99 lakh be returned to the company, which is at liberty to deduct rent and penal charges from the gratuity until the employee vacates the accommodation.
• The high court directed that once the employee vacates the accommodation, the total dues be deducted from the gratuity and the balance (if any) be paid to them within 15 days. 

‘35 years of service, quarter, gratuity’

The employee was employed with the said company on January 15, 1987, and got superannuated with effect from June 30, 2022. The employee was serving as a compounder at the time of their superannuation in the medical department in the district of Paschim Bardhaman. 

The government employee was allotted a residential quarter, Sarkar Para, in the district of Paschim Bardhaman by the company during their service tenure, and it was claimed that the said quarter is still in their possession and has not yet vacated the quarter till date.

It was also claimed that the employee was informed of the date of their superannuation by a retirement notice to hand over the company’s quarter under their occupation to the company on the date of their superannuation.

The employee was also informed that if they fail to do so, they would be liable to pay penal rent and such penal rent would be deducted from the retirement benefits, and further payment of their gratuity, thereby indicating that the gratuity would be paid only after the said quarter was vacated by them.

By a circular issued by Coal India Limited on November 11, 2021, it was directed that all its subsidiaries, including the said company, take measures for vacation of quarters after retirement of the employees, including charging of penal rent from the concerned retired employee for unauthorised occupation of the quarter after retirement and withholding of the retiral benefits until quarter is vacated by the concerned employee. 

However, the employee has not allegedly vacated and handed over the quarter to the said company and is still illegally occupying the same and is using water and electricity thereat at the cost and expenses of the said company.

As the company withheld gratuity on this ground, the employee approached the controlling authority under the Payment of Gratuity Act, 1972, which directed payment of gratuity amounting to Rs 18.99 lakh.

The company challenged this before the appellate authority, which upheld the direction to release gratuity and aggrieved by these orders, the company approached the Calcutta High Court.