2026 Supreme(Cal) 93

IN THE HIGH COURT AT CALCUTTA
SHAMPADUTT (PAUL), J.
Union Bank of India – Petitioner 
Versus
The Appellate Authority Under the Payment of Gratuity Act, 1972 & Ors. – Respondents
WPA 19728 of 2024
Decided On : 14-05-2026 

Forfeiture of gratuity requires precise quantification of financial loss during disciplinary proceedings. Statutory provisions governing gratuity override internal regulations. An employer cannot belatedly quantify losses to justify forfeiture, and authorities under the Act lack jurisdiction to interfere with the validity of the domestic disciplinary inquiry process itself.

Headnote:(A) Payment of Gratuity Act, 1972 - Section 4(6) - Forfeiture of gratuity - Misconduct causing financial loss - Employer seeking to forfeit gratuity by quantifying loss at a post-termination stage - Whether permissible - The Act provides for forfeiture of gratuity to the extent of damage or loss sustained due to an employee's willful omission or negligence - Such forfeiture necessitates that the financial loss be specifically quantified and put to the employee’s notice during the disciplinary proceedings - Failure to do so renders the attempt to forfeit gratuity post-dismissal an afterthought and unsustainable in law. (Paras 55, 56, 66)

(B) Service Law - Disciplinary Proceedings - Scope of review by statutory authorities - Whether authorities under the Act possess jurisdiction to sit in judgment over inquiry findings - The disciplinary process and findings of an employer regarding misconduct remain within the domain of the authority conducting the inquiry - Statutory forums adjudicating claims under the Act do not possess the jurisdiction to review or set aside the validity of the domestic inquiry or the resulting termination, but must restrict their findings to the eligibility and payment of statutory terminal benefits. (Paras 66, 68, 69)

Facts of the case:
An employee was dismissed from service following a disciplinary inquiry for gross negligence and irregularities that allegedly caused financial loss. The employer subsequently initiated proceedings to forfeit the gratuity citing internal regulations, although the specific financial loss was never quantified or put to the employee during the original disciplinary inquiry. The employee approached statutory authorities for release of gratuity, which ruled in his favor, prompting the employer to challenge the orders, citing both the merits of the forfeiture and the legal status of the internal regulations.

Findings of Court:
The court observed that the Act holds overriding effect over internal organizational regulations concerning gratuity. It ruled that while the employer is entitled to forfeit gratuity to the extent of loss, the failure to quantify such loss during the disciplinary process violates principles of fairness. Furthermore, the court held that the statutory authorities erred by adjudicating upon the validity of the disciplinary inquiry proceedings themselves, as that fell outside their jurisdictional scope.

Issues: The main issues were whether gratuity can be forfeited in the absence of valid and timely quantification of financial loss, and whether statutory authorities under the Act possess the power to review the validity of an employer's domestic disciplinary inquiry.

Ratio Decidendi: Forfeiture under the Act is permissible only to the extent of loss caused, necessitating quantification during the disciplinary process. As the loss was not quantified initially, the employer cannot retrospectively claim forfeiture. Additionally, authorities under the Act lack the jurisdiction to interfere with the integrity of the disciplinary inquiry process, which remains the domain of the employer.

Result: The writ application was dismissed; the court upheld the release of gratuity but set aside the findings of the authorities regarding the validity of the disciplinary inquiry.