Gratuity cannot be withheld without termination of service as per the Payment of Gratuity Act.

JUDGMENT

P.V.BALAKRISHNAN,J This intra-court appeal is filed by respondents 2 and 3 in WP(C) No.3611 of 2023, challenging the judgment dated 07.07.2025, passed by the learned Single Judge, allowing the writ petition filed by the first respondent herein.

2. The first respondent herein/writ petitioner entered the service of the appellants, as Salesman on 5.5.1987 and while working as Internal Auditor, retired on 31.10.2018. While so, the Joint Registrar of the Co-operative Societies issued an order of enquiry under Section 65 of the Kerala Co-operative Societies Act (hereinafter referred to as 'the Act' for short) on 20.7.2017 and the report was filed on 17.7.2018. Thereafter, the Joint Registrar issued a proceeding under Section 68 (1) of the Act on 8.11.2018 and a report was filed on 30.8.2019. On that basis, the first respondent was issued Ext.P1 notice dated 31.12.2019, by the Joint Registrar, stating that a loss of Rs.7,28,95,121/- has been caused to the Society by him and the other managing committee members by sanctioning and disbursing loans to various persons without submitting sufficient security and he submitted Ext.P2 explanation. While so, since the 1^st respondent did not receive the retirement benefits, he filed Ext.P3 representation dated 16.5.2019 before the part-time Administrator and Ext.P4 representation before the Joint Registrar. But the Joint Registrar issued Ext.P5 communication stating that the amount can be disbursed only after the completion of the (1) proceedings. Aggrieved by Ext.P5, the first respondent filed W.P.(C)No.2139/2020 and this court disposed of the same as per Ext.P6 judgment, directing the bank to consider the question of disbursement of gratuity within a time frame. But the same was again rejected by Ext.P8, dated 20.7.2022. It is challenging Ext.P8 order, the first respondent filed the afore writ petition.

3. The learned Single Judge after considering the materialas on record and hearing both sides, by judgment dated 7.7.2025 allowed the writ petition and directed the appellants to release the gratuity amount payable to the first respondent, with statutory interest.

4. Heard Adv.P.U.Shailajan, the learned counsel appearing for the appellants and Adv. T.R.Harikumar, represented by Adv.Arjun Raghavan, the learned counsel appearing for the first respondent.

5. The learned counsel for the appellants contended that the learned single judge has, without appreciating the facts of the case in a proper perspective, wrongly allowed the writ petition. He submitted that there is a specific finding against the first respondent that he has misappropriated an amount of Rs.1,81,39,099/- and that even though an order was issued by the Joint Registrar under Section 66(B) of the Act to suspend the first respondent with immediate effect, the Board of Directors in collusion with the first respondent, did not comply with the order or take disciplinary action against him. He further submitted that the afore act of the first respondent and the Board of Directors, is nothing but fraud to defeat the ends of justice and since fraud nullifies all acts, the 1^st respondent is not entitled to the benefits as sought for. He further contended that, if the first respondent was suspended and disciplinary action taken timely, it would have ended in his termination, disentitling him for gratuity.

6. Per contra, the learned counsel for the first respondent supported the impugned judgment and contended that there are no grounds to interfere with the same. He submitted that the first respondent was neither suspended nor had any disciplinary proceedings initiated against him and he had retired from service on 31.10.