Are provident fund and gratuity under Sections 78 and 79 of the Tamil Nadu Co-operative Societies Act liable to attachment?

The instant Writ Petition has been filed seeking issuance of a Writ of Mandamus, directing the respondents to disburse the retirement benefits, such as gratuity, provident fund, leave encashment, etc., payable to the petitioner.

The learned counsel for the petitioner would submit that the petitioner retired from service on 30.11.2019. In the interregnum, surcharge proceedings were initiated against the petitioner as well as one R.Panneer Selvam. Taking advantage of the pendency of the surcharge proceedings, the respondent/authority has withheld the terminal benefits payable to the petitioner. The learned counsel for the petitioner would further submit that such action on the part of the respondents is contrary to Sections 78 and 79 of the Tamil Nadu Co-operative Societies Act, as well as the judgments of this Court in W.P.No.20180 of 2013 and W.P.No.13285 of 2021. Hence, he prayed for allowing the present Writ Petition.

Per contra, the said contention was stoutly opposed by the learned Government Advocate and would submit that the petitioner had caused a loss of Rs.99,47,019/-. Therefore, if any amount is released to the petitioner, it would become difficult to recover the loss caused by him. He would further submit that an appeal in CMA CS.No.21 of 2021 is pending, challenging the surcharge proceedings, and therefore, until the said appeal reaches its logical conclusion, the petitioner may be directed to deposit the amount, if any, released to him, in a fixed deposit with any one of the Nationalised banks.

I have given my anxious consideration to the submissions made on either side.

The short question that arises for consideration in the present Writ Petition is as to whether the petitioner is entitled to a direction to the respondents to disburse the retirement benefits, such as gratuity, provident fund and leave encashment, etc. In this regard, the learned counsel for the petitioner would draw the attention of this Court to Sections 78 and 79 of the Tamil Nadu Co-operative Societies Act. For ready reference, the relevant provisions are extracted hereunder:

As per the above provisions, the provident fund and gratuity are not liable to attachment or to any other process of any Court or other authority. The learned counsel for the petitioner would also draw the attention of this Court to the judgment of this Court in W.P.No.20180 of 2013, dated 11.04.2022, Poongothai Subramaniam v. The Government of Tamil Nadu, wherein this Court, after referring to the judgment in K.Anbarayan and another v. The Joint Registrar of Co-operative Societies, Namakkal and others, passed in W.P.Nos.27398 and 27399 of 2014, dated 28.10.2014, has held as follows:- “4. The payment of retiral benefits such as gratuity, provident fund and leave encashment is one of right. Unless there is statutory bar, the retired employee cannot be denied of those benefits. Considering the scope and ambit of Section 79 of the Tamil Nadu Cooperative Societies Act, 1983, which deals with the payment of gratuity, this Court in the decision referred supra was pleased to hold as follows: ''5. In my view, the gratuity fund shall be established by the Society, whenever the Payment of Gratuity Act, 1972, is not applicable to the Society, as per Section 79 of the Tamil Nadu Cooperative Societies Act, 1983. Gratuity payable from the said fund is protected under Section 79 of the Act as the gratuity is protected under Section 13 of the Payment of Gratuity Act. Section 79 of the Tamil Nadu Co-operative Societies Act, 1983 is extracted hereunder: "79.Gratuity Fund. - (1) A registered society not being an establishment to which the Payment of Gratuity Act, 1972 (Central Act 39 of 1972) applies, may provide in its by- aws for payment of gratuity to the employees at such rates and on such conditions as may be specified in the bylaws and such society may establish a Gratuity Fund or make other arrangements for the purpose. (2) A Gratuity Fund, if any, established by a registered society under sub-section (1) shall be invested in the financing bank, but shall not (a) be used in the business of the society; (b) form part of the assets of the society; (c) be liable to attachment or be subject to any other process of any Court or other authority.” 6. Section 79(2) of the Tamil Nadu Co-operative Societies Act, 1983, makes it clear that similar protection is given to the gratuity payable to an employee of the Co-operative Society, which is not governed by the Payment of Gratuity Act, as provided under the Payment of Gratuity Act.

In fact, today I have considered Section 13 of the Payment of Gratuity Act, 1972, in W.P.No.27296 of 2013 and I have held that the gratuity amount shall not be denied to an employee, on the ground of pendency of surcharge proceeding. In the similar way, pendency of a criminal proceeding cannot be a reason to deny payment of gratuity, for the service rendered by the employee.

Therefore, the second respondent Society is liable to pay a sum of Rs.4,54,348/- towards the gratuity amount payable to the petitioner, from the gratuity fund. In fact, the audited statement, produced by the learned counsel for the Society, also reflects that the petitioner rendered 36 years of service and he received a sum of Rs.9,470/- as Basic Pay and Rs.12,406/- as Dearness Allowance and a sum of Rs.4,54,348/- is lying in his gratuity fund account.'' 5. The ratio laid down in the said decision is squarely applicable to the facts of the case. Coming to the payment of provident fund, Section 78 of the Enactment deals with the same. A reading of Section 78 of the Act would show that it is pari materia with Section 79. Therefore, the ratio laid down by this Court with respect of the payment of gratuity would apply to the payment of provident fund as well. The payment of earned leave encashment is the duty of the employer to be payable to the employee for the period for which he has worked. Therefore, even the said amount cannot be denied. 6. Furthermore, a mere pendency of the proceedings by itself cannot be a bar. In other words, the proceedings are yet to be concluded against the petitioners. Though the 3rd respondent is not an authority under Article 12, taking into consideration of the public duty imposed upon the said authority, this Court is of the view that the petitioners are entitled to succeed. Furthermore, a duty is also imposed upon respondents 1 and 2 to see to it that the 3rd respondent acts in accordance with law. Accordingly the writ petitions stand allowed. Consequently, the respondents are directed to pay the terminal benefits due to the petitioners within a period of eight weeks from the date of receipt of copy of this order. In view of the facts and circumstances of the case, this Court is not inclined to award any interest on the said terminal benefits payable by the respondents to the petitioners. No costs.” 7. In the instant case, admittedly, the surcharge proceedings have already been challenged before the competent Appellate Tribunal in CMA CS.No.21 of 2021. The question that arises for consideration is whether the pendency of the said appeal would have any impact on the disbursement of the retirement benefits. In view of the judgment of this Court in Poongothai Subramaniam’s case (cited supra), as well as the provisions contained in Sections 78 and 79 of the Tamil Nadu Co-operative Societies Act, the provident fund and gratuity are not liable for attachment by any Court or authority. 8. In view of the above, this Court is of the firm view that withholding the gratuity and provident fund payable to the petitioner is contrary to the aforesaid provisions. Therefore, the respondents are directed to disburse the provident fund and gratuity amounts payable to the petitioner within a period of twelve weeks from the date of receipt of a copy of this order, together with interest at the rate of 6% per annum from the date of retirement till the date of actual disbursement of the said terminal benefits.

With the above directions, this Writ Petition is disposed of. No costs. 13.08.2026 kv