The Madhya Pradesh High Court directed the release of gratuity to the widow of a deceased bank employee who had been terminated from service for alleged misappropriation of funds. The Court held that in the absence of a criminal conviction, gratuity cannot be forfeited under the Payment of Gratuity Act, 1972. It emphasized that forfeiture of gratuity requires a proven offence involving moral turpitude through due judicial process and not merely a departmental finding of misconduct.
The case concerned a bank employee who was dismissed from service for alleged misappropriation of ₹1 lakh from the branch’s cash chest. His departmental appeal was rejected, and shortly thereafter, he passed away. Following his death, his widow applied for the release of gratuity, but the bank denied her claim, citing provisions under Section 4(6)(b) of the Payment of Gratuity Act and its internal service regulations. The bank maintained that since the employee had been dismissed for serious misconduct involving moral turpitude, gratuity stood forfeited.
The Court analyzed Section 4(6)(b) of the Payment of Gratuity Act, which permits forfeiture of gratuity in limited circumstances — when the misconduct results in financial loss to the employer or when the employee is convicted for an offence involving moral turpitude committed during employment. The bench observed that in this case, there was no criminal prosecution or conviction establishing guilt. Therefore, the condition precedent for forfeiture had not been fulfilled. The Court clarified that mere departmental findings of misappropriation or moral turpitude are not sufficient grounds for forfeiting gratuity.
The bench further noted that the Payment of Gratuity Act is a beneficial legislation intended to secure post-retirement financial benefits for employees and their dependents. Any action to deny these benefits must strictly comply with the statutory provisions. The Court also observed that internal service regulations or promotional guidelines of the bank cannot override the statutory mandate of the Act. It was emphasized that gratuity is a statutory right, not a bounty dependent on the employer’s discretion, and can only be withheld in accordance with law.
The Court also took into account that the bank did not prove any actual financial loss and that the disputed amount had already been refunded. Since there was no subsisting liability or criminal conviction, the forfeiture of gratuity was found to be arbitrary and contrary to the Act. Consequently, the High Court directed the bank to release the gratuity amount to the widow within sixty days. The Court also ordered payment of interest at the rate of six percent per annum from the date of the employee’s death until the actual disbursal of gratuity.
In conclusion, the judgment reaffirmed that forfeiture of gratuity cannot be invoked solely on the basis of disciplinary action without a corresponding criminal conviction. The ruling strengthens the protection of employees’ statutory rights and ensures that dependents are not deprived of their rightful benefits due to unproven allegations of misconduct.
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