An employer's right to forfeit an employee's gratuity under Section 4(6)(a) of the Payment of Gratuity Act, 1972, is limited to the extent of the damage or loss caused by the employee's act, omission, or negligence. The employer must prove the extent of such loss or damage and provide the employee with an opportunity to explain why their gratuity should not be forfeited.

S.K. Dubey, J.

1. By this petition under Articles 226/227 of the Constitution of India, the petitioner has challenged the order (Annexure P-5) of the Controlling Authority under Payment of Gratuity Act, 1972 (for short the 'Act') directing the petitioners to pay the amount of gratuity of Rs. 8,625/-to respondent No. 4 earned by him during the period of his employment. This order was confirmed by the Appellate Authority under the Act, vide order dated September 6, 1991 (Annexure P-6) passed in Gratuity Appeal No. 6/BPL/90.

2. Facts giving rise to the petition are thus - The petitioner is an Engineering Industry engaged in manufacturing and sale of insulated material, Fibre Glass Engineering components etc. Respondent No. 4 was employed as a workman, who vide order dated August 2, 1986, was dismissed, after holding a domestic enquiry from service on a charge of misconduct under Clause 12(1)(m) of the Statutory Standing Orders, framed under M.P. Industrial Employment (Standing Orders) Act, 1961. Against the order of said dismissal the respondent No. 4 raised an industrial dispute which was referred for adjudication of Labour Court No. 2 at Bhopal, which is still awaiting its final award. During the pendency of the dispute, respondent No. 4 filed an application under Section 7 of the Act, before the controlling Authority for a direction to petitioner to make the payment of gratuity. The petitioner contested the application on the grounds, that the application is barred by time, the order of termination has not attained finality as the dispute relating to termination is sub-judice, before the Labour Court, the petitioner was guilty of causing loss and damages because of his act of wilful slowing down in performance of his work of the undertaking. After enquiry, the Controlling Authority, vide order dated June 12, 1990 (Annexure 9-4) directed the petitioner to make the payment of gratuity amounting to Rs. 8625/-. Aggrieved of that the petitioner preferred an appeal which was dismissed by Appellate Authority, vide order (Annexure P-6).

3. Shri Vijay Gupta, learned counsel for the petitioner, mainly contended that as the service of respondent No. 4 was terminated for causing loss and damage, which was in lacs of rupees, hence, in view of Clause (a)-of Sub-section (6) of Section 4 of the Act, his gratuity was forfeited, to which the respondent No. 4 is not entitled, because of his act of misconduct.

4. Shri R.K. Gupta, who appeared as amicus curaie submitted that no opportunity was given to the employee before forfeiting the gratuity to the extent of loss and damage caused by the employee due to the alleged misconduct committed by him. The petitioner has not proved the extent of loss or damage suffered by the petitioner, nor it is reflected in the order of termination (Annexure P-1). The amount of gratuity of an employee, under Clause (a) of Sub-section (6) of Section 4 of the Act, can only be forfeited to the extent of damage or loss so caused, because of an act of wilful omission or negligence causing any damage to the employer, reliance was placed on a decision of Karnataka High Court in case of Bharat Gold Mines v. The Regional Labour Commissioner 1986 Lab I.C. 1976.

5. As the petitioner has forfeited the gratuity under Clause (a) of Sub-section (6) of Section 4 of the Act, it would be appropriate to refer Section 4 of the Act which reads thus:

"4. Payment of gratuity - (1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years:-

(a) on his superannuation, or

(b) On his retirement or resignation, or

(c) On his death or disablement due to accident or disease;

Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablements:

Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominees