SAIL Can Withhold Gratuity for Non-Vacation of Quarters

Case Details: Management of Steel Authority of India vs. Shambhu Prasad Singh [2026] 184 taxmann.com 407 (SC)

Judiciary and Counsel Details

S.V.N. Bhatti & Pankaj Mithal, JJ.
Ashok Anand, Anshul Rai, AORs, Moni Cinmoy, Rakesh Kumar Singh, Mallika Ranjan & Raunaq Singh, Advs. for the Appellant.
Chandan Kumar, Anshuman Siddharth Nayak, Ashok Anand, AORs, N. S. Dalal, Devesh Pratap Singh, Rahul Kulhare, Baibhaw Gahlaut, Krishan Mourya, Divya Prakash Arya, Ratnadeep Raha, Mrs Garima Yadav, Seemab Qayyum, Kumar Shivam, Moni Cinmoy, Rakesh Kumar Singh, Somanatha Padhan, Akash Kakade, Kameshwar Gumber, Ajay Gupta & Mukul Dev Mishra, Advs. for the Respondent.

Facts of the Case

In the instant case, the respondent was allotted a staff quarter, and through representations made between 11-9-2007 and 20-9-2010, the ex-employees, including the respondent, requested that the management allow retention of the allotted quarter beyond the permissible period under the rules of retention. The management, instead of accepting the request to retain the allotted quarter post-retirement, issued notices calling upon the ex-employees to vacate and hand over possession to the management.

The respondent filed a writ petition challenging the notice of eviction, which was dismissed. The said writ petition was dismissed on 28-7-2016, following the order dated 24-1-2014 passed by the Division Bench of the High Court.

On 15-12-2020, in S.L.P. (C) No. 11025 of 2020, the Supreme Court took a different view and observed that regulating the discretion of management to adjust the penal rent payable from the gratuity was misplaced.

The management, relying on the order dated 15-12-2020, preferred civil review before the Division Bench to review the order dated 20-1-2020. Through the impugned order, the civil review petitions have been dismissed.

It was noted that under rule 3.2.1(c) of the SAIL Gratuity Rules, 1978, management is expressly empowered to withhold the gratuity amount payable to an ex-employee, or his nominee/legal heirs in the event of death, for non-compliance with SAIL’s rules, including non-vacation of management’s accommodation.

Further, it was noted that no interest shall be payable on the gratuity amount so withheld during the period of unauthorised occupation.

Supreme Court Held

The Supreme Court observed that where an ex-employee failed to vacate staff quarters allotted to them during their service, and thus, retained the said quarters beyond the permissible period under the SAIL’s policy, management was entitled to withhold their gratuity amount payable to them for non-compliance with the company’s rules.

The Supreme Court held that a reasonable sum of Rs. 1,000 per month was to be fixed as rent for the retention period beyond the grace period permissible under the SAIL’s policy. Further, no interest was to be paid on the gratuity amount so withheld during the period of unauthorised occupation.