On a packed afternoon in Court at the Calcutta High Court, the Division Bench quietly but firmly settled a long-running dispute over gratuity, discipline, and the powers of public sector employers. Allowing MSTC Limited’s intra-court appeal, the Bench overturned a Single Judge ruling that had favoured a former Chairman and Managing Director, holding that company disciplinary rules would prevail in the present case.
Background
The case arose from disciplinary proceedings initiated against Malay Sengupta, a presidential appointee who served as Chairman-cum-Managing Director of MSTC Limited. Just days before his retirement in April 2009, charge-sheets were issued alleging negligence that caused financial loss to the company. Acting on instructions from the Ministry, MSTC withheld his gratuity pending the outcome.
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After the inquiry concluded in 2013, the disciplinary authority ordered recovery of ₹10 lakh from the gratuity amount under MSTC’s Conduct, Discipline and Appeal (CDA) Rules. Sengupta’s review failed, but years later he approached gratuity authorities under the Payment of Gratuity Act, 1972. While the Controlling Authority rejected his claim, the Appellate Authority allowed it with interest, a decision later upheld by a Single Judge in March 2025.
That is what brought the matter before the Division Bench.
Court’s Observations
Hearing detailed arguments, the Bench examined whether the Payment of Gratuity Act could override MSTC’s CDA Rules. The judges noted that Rule 30A of the CDA Rules expressly allows disciplinary proceedings to continue after retirement and permits recovery of proven financial loss from gratuity.
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Referring to the Supreme Court’s ruling in Mahanadi Coalfields Ltd. v. Rabindranath Choubey, the Bench pointed out that service rules governing disciplinary action are not diluted merely because an employee has superannuated. “The bench observed, ‘The gratuity statute deals with payment, not with the employer’s authority to conclude disciplinary proceedings or impose penalties under applicable service rules.’”
The court was also critical of the Single Judge’s reliance on an earlier Supreme Court judgment that now stands overruled. It said the writ court had gone beyond its brief by examining the merits of the disciplinary inquiry, something not open in gratuity proceedings.
On the argument that Sengupta, as CMD, was not an “employee” under the Gratuity Act, the Bench did not find it necessary to dwell at length, noting that even otherwise, the CDA Rules had binding force and were never challenged.
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Decision
In the result, the Division Bench allowed MSTC’s appeal, set aside the Single Judge’s judgment and the Appellate Authority’s order directing payment of gratuity with interest, and restored the Controlling Authority’s decision rejecting the gratuity claim. The court upheld MSTC’s right to recover the quantified loss from gratuity under its CDA Rules and disposed of the appeal accordingly.
Case Title: MSTC Limited vs. Malay Sengupta and Others
Case No.: FMA 959 of 2025 (with CAN 01 of 2025), arising out of WPA 15908 of 2019
Case Type: Intra-Court Appeal (Service / Gratuity Matter)
Decision Date: 10 December 2025
