Forfeiture of gratuity is not automatic on dismissal from service, is subject to Section 4(5) & (6) of Payment of Gratuity Act: SC

Supreme Court: Kurian Joseph, J. delivered the judgment for himself and Sanjay Kishan Kaul, J. wherein it was held that forfeiture of gratuity, under the Payment of Gratuity Act, 1972 is not automatic on dismissal from service.

The respondent, an employee of the appellant bank, was dismissed on account of proved misconduct involving moral turpitude Consequently, the respondent was issued a show-cause notice as to why the gratuity amount payable to him should not be forfeited. Subsequently, an explanation of the respondent was rejected and the gratuity was forfeited. The respondent challenged the said forfeiture before the Kerala High Court which held that the gratuity was payable. Aggrieved thus, the appellant filed the instant appeal.

The question that arose for consideration before the Supreme Court was ‘whether forfeiture of gratuity is automatic on dismissal form service?’ The Supreme Court referred to Section 4 of the Act along with its earlier judgments in Beed District Central Coop. Bank Ltd. v. State of Maharashtra, (2006) 8 SCC 514; Y.K. Singla v. PNB, (2013) 3 SCC 472 and Jaswant Singh Gill v. Bharat Coking Coal Ltd., (2007) 1 SCC 663. The Court observed that forfeiture of gratuity, either wholly and partially is permissible under  Section 6(b)(ii) only in the event that termination is on the account of riotous or disorderly conduct or any other act of violence or on account of an act constituting an offence involving moral turpitude, when he is convicted. In the present case, there was no conviction of the respondent for the misconduct which according to the bank was offence involving moral turpitude. The Court finally observed that forfeiture of gratuity is not automatic on dismissal from service, it is subject to sub-sections (5) and (6) of Section 4 of Payment of Gratuity Act. The Court found that the there was no infirmity in the order impugned. Thus, the appeal was dismissed holding it to be sans merit. [Union Bank of India v. C.G. Ajay Babu,2018 SCC OnLine SC 962, dated 14-08-2018]

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