Forfeiture of gratuity for misconduct involving moral turpitude is permissible without a criminal conviction, emphasizing the discretion of the appointing authority in determining the extent of forfeiture.

JUDGMENT :

K. VINOD CHANDRAN, J.

1. Leave granted.

2. The question raised in the above cases is the permissibility of forfeiture of gratuity, in the event of termination of service on misconduct, which can be categorised as an act constituting an offence involving moral turpitude; without there being any conviction in a criminal case or even a criminal proceeding having been initiated.

3. The appellant in one of the appeals is a Public Sector Undertaking¹ [For brevity ‘PSU’] on whose behalf learned Solicitor General Mr. Tushar Mehta appears. The other appeals are by the Maharashtra State Road Transport Corporation² [For brevity ‘MSRTC’] for whom Ms. Mayuri Raghuvanshi, learned Standing Counsel appears. Impugned judgments found the forfeiture of gratuity to be not permissible under the Payment of Gratuity Act, 1972 (the Act) relying on the decision of this Court in Union Bank of India and Others vs. C.G. Ajay Babu, (2018) 9 SCC 529. On behalf of the contesting respondent in the appeal filed by the PSU, Mr. Shivaji M. Jadhav appears to defend the reasoning in the judgment and none appears for the respondent in the appeals filed by the MSRTC; though served with notice.

4. Before we look into the facts of the separate cases, we have to dwell upon the law as declared in C.G. Ajay Babu³ [(2018) 9 SCC 529]. C.G. Ajay Babu (supra) was a case in which a delinquent employee, while working as Branch Manager in a Bank was dismissed from service pursuant to allegations of misconduct being proved against him in a departmental proceeding. The misconducts alleged and proved were the failure to take steps to ensure and protect the interests of the Bank, failure to discharge duties with utmost devotion, diligence and honesty and for acts unbecoming of an Officer employee. Further show cause notice was issued threatening forfeiture of gratuity, on the ground that the misconducts proved, amounts to acts involving moral turpitude. The challenge made against the dismissal before the High Court failed, but the forfeiture was held to be bad. The forfeiture was upset, on the finding that, there was no allegation of financial loss caused to the bank; which was the only ground on which gratuity could be forfeited as per the Bipartite Settlement regulating the conduct and behaviour of the employees of the Bank; including disbursal of gratuity.

5. A Division Bench of this Court found that sub­section (5) of Section 4 of the Act is a non-obstante clause which does not affect the right of an employee to receive better terms of gratuity, under any award, agreement or contract with the employer. While sub­section (5) made inapplicable the other provisions of Section 4, sub­section (6); which deals with forfeiture of gratuity, despite being a non obstante provision made inapplicable only the provisions of sub­section (1); which created the statutory right for gratuity on an employee, limited for the purposes of forfeiture. It was held that, insofar as the delinquent employee having been in the service of a bank, which service is regulated by the Bipartite Settlement, which also contains provisions for payment of gratuity and its forfeiture, sub­section (6) of Section 4 of the Act is inapplicable to the employees of the bank. The Settlement providing for better terms of gratuity also provided for its forfeiture when the misconduct results in financial losses to the bank and only to the extent of the loss; while specifically prohibiting forfeiture of gratuity for dismissal on any other ground. The order of the High Court was upheld finding that the forfeiture; in the teeth of the provisions of the Bipartite Settlement, could not have been carried out by the bank.

6. Having held the forfeiture to be bad, the Bench also looked at the provision for forfeiture under Section 4(6) of