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SUPREME COURT OF INDIA
KURIAN JOSEPH, SANJAY KISHAN KAUL, JJ.
UNION BANK OF INDIA AND OTHERS – APPELLANT(S)
VERSUS
C.G. AJAY BABU AND ANOTHER – RESPONDENT(S)
CIVIL APPEAL NO. 8251 OF 2018 (Arising out of S.L.P.(Civil) No. 3852/2017)
Decided On : 14-08-2018
(2006) 8 SCC 514; (2013) 3 SCC 472 – Relied upon
(b) Payment of Gratuity Act, 1972 – Section 4(6)(a) – Forfeiture of gratuity on termination – When on account of any act constituting an offence involving moral turpitude – ‘Conduct involving moral turpitude’ and ‘offence constituting moral turpitude’ – Distinction – An act should be punishable to constitute an offence determinable by a court, not the employer – Instantly Bank not filing FIR or complaint – The act of respondent not established as offence – Statute requiring not the proof of misconduct of acts involving moral turpitude – It requires that the acts should constitute an offence involving moral turpitude – Such offence should be duly established in a court of law. (Para 18, 20)
(2007) 1 SCC 663 – Relied upon
(c) Administrative law – Any rule framed by employer cannot prevail over the statute. (Para 21)
Facts of the case:
Whether forfeiture of gratuity, under The Payment of Gratuity Act, 1972, is automatic on dismissal from service, is the issue for consideration in this case.
The High Court has held that it is automatic.
Finding of the Court:
Forfeiture of gratuity is not automatic on dismissal from service; it is subject to sub-Sections (5) and (6) of Section 4 of The Payment of Gratuity Act, 1972.
Result: Appeal dismissed.
JUDGMENT
KURIAN, J.:
Leave granted.
2. Whether forfeiture of gratuity, under The Payment of Gratuity Act, 1972 (hereinafter referred to as ‘the Act’), is automatic on dismissal from service, is the issue for consideration in this case.
3. The respondent was an employee of the appellant-Bank.
While serving as a Branch Manager, disciplinary proceedings were initiated against him on the following charges:
“a) Failure to take all steps to ensure and protect the interest of the Bank.
b) Failure to discharge his duties with utmost devotion, diligence, honesty and integrity.
c) Doing acts unbecoming of an Officer Employee.”
4. On the charges being duly established, the respondent was dismissed from service on 03.06.2004. The order of dismissal has attained finality.
5. In the meanwhile, the respondent was issued a show-cause notice as to why the gratuity should not be forfeited on account of proved misconduct involving moral turpitude. His explanation was rejected and the gratuity was forfeited by order dated 20.04.2004.
The order reads as follows:
“We refer to the show cause notice no. CO:IRD:654 dated 30.01.2004, seeking your explanation as to why the gratuity payable to you should not be forfeited on account proved misconduct against you and the explanation dated 26.02.2004 submitted by you thereto.
The misconduct proved against you amounts to acts involving moral turpitude. In this regards, the explanation submitted by you in terms of your above reference reply is not satisfactory and therefore not acceptable to the bank.
Therefore, in accordance of the provisions of section 4, subsection 6(b)(ii) of the Gratuity Act, 1972 and clause 3 to Schedule “A” of the Banks Gratuity Rules, the Bank has decided to forfeit an amount of Rs. 1,77,900/-from the Gratuity amount payable to you.” (Emphasis supplied)
6. The dismissal and forfeiture were the subject matters of challenge before the High Court leading to the impugned judgment dated 08.01.2016 of the learned Single Judge. The Court did not interfere with the dismissal; however, it was held that the respondent was entitled to gratuity as there was no financial loss caused to the Bank. It was also held that as per the bipartite settlement, forfeiture of gratuity is permissible only in case the misconduct leading to the dismissal has caused financial loss to the Bank and only to that extent.
7. While dismissing the intra-Court appeal, the Division Bench of the High Court took the view that Section 4(6)(a) and (b) have to be read together and only if there is any loss to the Bank on account of the misconduct, then alone, the forfeiture is permissible to the extent of loss. Thus, aggrieved, the appellant is before this Court.
8. Heard the learned Counsel appearing for the Bank and the respondent-employee.
9. Section 4 of the Act, to the extent relevant, reads as follows:
“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 disablement:
Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.
Explanation .— For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disabl
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