Criminal Conviction Necessary For Forfeiture Of Employee's Gratuity: Delhi High Court

Recently, a Division Bench comprising of Justice Suresh Kumar Kait and Justice Girish Kathpalia considered an appeal pertaining to the issue of alleged "moral turpitude" of an employee of Punjab National Bank (“Bank‟) under the Payment of Gratuity Act, 1972, and also, whether the Bank was justified in forfeiting the gratuity without a criminal conviction. The Division Bench upheld the decision of the Single Judge, emphasizing that for the forfeiture of gratuity under the Payment of Gratuity Act, 1972, a criminal conviction is necessary to establish moral turpitude.

Background facts

The respondent in this case, Mr Niraj Gupta, while working with the appellant i.e., the Bank and was on deputation as MD and CEO of Punjab National Bank International Ltd. (PNBIL). In 2015, a complaint of sexual harassment was lodged against him by a customer service associate at PNBIL. Following an internal investigation, the Internal Complaint Committee (ICC) found the respondent guilty of sexual harassment, leading to his suspension and later dismissal. Based on the ICC's findings, the Bank, in 2016, imposed the punishment of “Dismissal which shall ordinarily be a disqualification for future employment” in terms of Regulation 4(j) of the PNB Officer Employees (Discipline & Appeal) Regulations, 1977.

The respondent preferred an appeal against the dismissal order, which was rejected by the appellate authority, against which the respondent filed a review petition. During the pendency of review petition, the appellant was issued a Show Cause Notice to give reasons as to why on account of his acts amounting to moral turpitude, his gratuity be not forfeited. Finding his reply unsatisfactory, they directed the forfeiture of his gratuity in 2017, citing misconduct involving “moral turpitude” under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972.

Being aggrieved, the respondent preferred Writ Petition before Delhi Court thereby, challenging the punishment imposed upon him by the Disciplinary Authority. During pendency of the aforesaid writ petition, the respondent moved an application before the learned Controlling Authority, Delhi seeking payment of his gratuity. The Controlling Authority allowed the application and directed the appellant to pay his gratuity amounting to Rs.10 Lakhs along with interest.

The appellant appealed under Section 7(7) of the Act before the Appellate Authority which allows “any person aggrieved by an order under sub-section (4) may, within sixty days from the date of the receipt of the order, prefer an appeal to the appropriate Government or such other authority as may be specified by the appropriate Government in this behalf.” While Section 7(4) talks about “disputes as to the amount of gratuity payable to an employee under this Act or as to the admissibility of any claim of.” However, the appellant deposited a sum of Rs.15 Lakhs with the Appellate Authority, as determined by the Controlling Authority. The learned Appellate Authority dismissed the appeal and held that that since the essential conditions as stipulated under Section 4(6)(b)(ii) of the Act are not proved by a Court of competent jurisdiction, the action of the appellant to forfeit the gratuity payable to him, was not justified and is unlawful. Thereby, the learned Appellate Authority upheld the order passed by the learned Controlling Authority and directed to take an appropriate action.

Pursuant to this, the respondent No.2 i.e., The Regional Labour Commissioner (Central) passed an order whereby, the gratuity deposited amounting to Rs.15 Lakhs was directed to be released in favour of the respondent.

Being aggrieved by the Regional Labour Commissioner's order granting the gratuity, the appellant preferred the writ petition before this Court. The appellant submitted before the Single Judge bench of Justice Chandra Dhari Singh that authorities below have erred in law by wrongfully holding that the respondent's act does not amount to 'moral turpitude' considering that the allegation levelled against him have been proved by the ICC as well as the departmental authorities. Their main three grounds were- (a) conviction from criminal court is not mandatory for offence of moral turpitude and sexual harassment enquired into by ICC qualifies for the same; (b) any criminal act causes alarm in society and so any conviction under the criminal law amounts to moral turpitude; and, (c) act in itself may constitute an act of moral turpitude without there being any criminality or any criminal conviction.

Meanwhile, the respondent argued that the impugned order had been passed after taking into consideration the settled position of law and the entire evidence on record. He further stated that no criminal proceedings were ever initiated against him either by the Bank or by the complainant thus, the contention of appellant that his conduct amounts to moral turpitude is not substantiated as a criminal complaint is necessary to bring his case within the ambit of moral turpitude.

Findings of the Court

The Single Bench had noted provision under Regulation 4(j) of Punjab National Bank Officer Employees‟ (Discipline & Appeal) Regulations, 1977 does not mandate that termination of an employee would amount to forfeiture of the gratuity of the accused employee. The Single Bench further observed that in order for an employer to invoke the provisions contained under Section 4(6)(b)(ii) of the Act for forfeiture of gratuity of an employee, the conditions that must be satisfied are “(i) the terminated employee must be convicted for an offence punishable by law for the time being in force and (ii) the said offence must be an offence involving moral turpitude.”

Justice Suresh Kumar Kait and Justice Girish Kathpalia observed that as per Section 4(6) of the Act, “payment of gratuity must be denied to an employee only if his dismissal is on account of an act, wilful omission or negligence committed by the employee and the same causes any damage or any loss, destruction of property belonging to the employer”.

The bench, thus, dismissed the appeal, holding that considering- the absence of an FIR being registered against the respondent, allegations never being proved before the Court of Law, and Section 4(6) of the Act; there is no interference required by the Court and the respondent is liable to receive gratuity.

Appearance:

For Petitioner(s): Mr. Rajat Arora, Advocate.

For Respondent(s): Mr. N.C. Gupta, Advocate for R1. Mr. Farman Ali, SPC with Ms.Usha Jamnal and Mr. Krishan Kumar, Advocates for R2.

Case Title: Punjab National Bank v. Niraj Gupta & Anr.

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