Forfeiture Of Gratuity Not Automatic On Dismissal From Service, Show Cause Notice To Affected Party Must: Chhattisgarh High Court

The bench was dealing with a writ petition filed by one Siyaram Basanti, who was dismissed after 33 years of service in Gramin Bank, after departmental enquiry for misconduct. He sought release of his provident fund amount, gratuity amount and leave encashment.

While the Bank conceded that Petitioner is entitled to get provident fund subject to submission of form before the appropriate office, it refused to release gratuity and leave encashment. The bank cited Regulation 72 of Chhattisgarh Rajya Gramin Bank (Officers and Employees) Service Regulation, 2013 and said that since Petitioner's service was terminated by way of punishment, he is not entitled to get gratuity.

The Petitioner on the other hand argued that there shall be no forfeiture of gratuity on dismissal on account of misconduct except in cases where such misconduct causes financial loss to the bank and in that case to that extent only. However, financial loss was not the case with him.

At the outset, the High Court agreed with the Petitioner's contention that forfeiture under 2013 Regulation can only be for the reason and to the extent permissible by the proviso to regulation 72(2). However it is not the case of respondent Bank that dismissal of petitioner was on account of misconduct which caused financial loss to the bank. Therefore, it held that the forfeiture/denial of petitioner's gratuity under 2013 Regulation would not be permissible in law.

It then noted that Payment of Gratuity Act, 1972 provides complete mechanism which relates to gratuity. Even the 2013 Regulation prescribe that eligibility of an employee for payment of gratuity is governed as per the provisions of Payment of Gratuity Act, 1972.

In this light it observed that the question for determination in the facts of the present case is as to whether Petitioner is entitled to payment of gratuity, particularly when there is no order of forfeiture of the gratuity.

Answering the above question in affirmative, the single bench observed,

"…It is apparent that forfeiture of gratuity is not automatic on dismissal from service and it is subject to Section 5(6) of the Act of 1972. From the return and document annexed with the return it is quite vivid that before taking decision not to release gratuity show cause notice has also not been issued to the petitioner which is also violation of Section 4(6)(a) of Payment of Gratuity Act."

It added, "employer cannot forfeit the amount of gratuity without following the principles of natural justice and without determining the extent of damages or loss caused to the employer."

Finally, the Court noted that there is no prohibition for releasing the leave encashment of privileged leaves as reflected from dismissal order.

"Regulation 45 clearly provides that leave encashment and gratuity can be withheld till completion of disciplinary proceeding and thereafter release of benefit shall be as per the final order of the competent authority. The regulations framed by the Bank is statutory in nature and binding upon the bank as well as upon the petitioner," it said.

Accordingly, the petition was allowed.

Case Title: Siyaram Basanti v Chhattisgarh Rajya Gramin Bank & Ors.

Citation: 2022 LiveLaw (Chh) 77