Gratuity is a statutory right that cannot be withheld or adjusted against employer claims or dues, except under the specific conditions prescribed in S. 4(6) of the Payment of Gratuity Act, 1972.

THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 10.06.2026, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

JUDGMENT

Dated this the 10th day of June, 2026

Petitioner has approached this Court seeking a direction to the respondents to release the portion of gratuity of Rs. 1,56,463/- withheld from the gratuity of the petitioner with statutory interest within a time limit to be fixed by this Court. Petitioner has also sought a direction to the respondents to pay statutory interest on the amount of gratuity of an amount of Rs. 3,32,580/- paid to the petitioner as mandated under Section 7 (3A) of the Payment of Gratuity Act, 1972, since the payment was made only as per Ext.P6 on 24.03.2025, though the petitioner had retired from service on 30.07.2020.

2. The contention raised by the petitioner is that the recovery if any, made on the gratuity payable to the petitioner is absolutely impermissible since going by Section 4(6) of the Payment of Gratuity Act, the gratuity could be withheld only in three circumstances mentioned therein, which are not available in the facts and circumstances of the present case. Petitioner, relying on the judgment of this Court in State Farms Corporation of India Ltd. v. P.D. Mathai & Others [2008 (1) KHC 403], submits that no deduction whatsoever can be made by the employer from the gratuity due to an employee, except as specifically provided for in the Payment of Gratuity Act. This Court further held that if the amount of gratuity payable to the employee is not paid by the employer within the stipulated period, the employer is liable to pay interest on the same. Paragraphs 7, 8 and 10 of the said judgment read as follows:-

“7. I am further supported in this view by two single bench decisions and a division bench decision of this Court. In Rajendra Pai v. Canara Bank (1998 (1) KLT SN 33 page 38) a learned single judge held thus:

"Even under the Payment of Gratuity Act, the gratuity can be withheld only under the circumstances mentioned in S.4(6) of the Act. It contemplates three circumstances mentioned in S.4(6)(a) and S.4(6) (b)(i) and (ii). Under S.4(6) (a), if the act or wilful omission for which the service of the employee is terminated has caused damage or loss, then the gratuity shall be forfeited to the extent of the damage or loss so caused. The other circumstances are when the services of the employee have been terminated for his riotous or disorderly conduct and if the services of the employee have been terminated for any moral turpitude. Clause (b) does not apply to the facts of the case. Under Clause (a) gratuity can be withheld if the act for which the services are terminated has resulted in loss to the Bank. Here the amount is withheld as damages for occupying the quarters of the Bank. This is not in any way connected with the conduct for which the petitioner's services were terminated. Hence, that amount cannot be withheld from the gratuity of the petitioner."

In Travancore Plywood Industries Ltd. v. Regional Joint Labour Commissioner, (1996 (1) KLT 330) another learned single judge held thus:

"That apart, the main question is whether the petitioner company will be justified in withholding the gratuity amount due to the third respondent on the specious plea that the third respondent failed to surrender that land which is in occupation by him. The eligibility of the third respondent's gratuity has to be decided on the basis of the provisions contained in the Act, under which the amount by way of gratuity due to an employee cannot be withheld otherwise then by fulfilling the conditions contained in Ss.4(6), 13 and 14 of the Act. Under the Act, the employer is entitled to withhold the gratuity of an employee only if the termination of the employee is under S.4(6) of the Act. Here, the employer has no case that the employer has terminated the service of the employee on any of the grounds mentioned in S.4(6) of the Act. The petitioner-company therefore, is not entitled to withhold t