Payment Of Gratuity Act | Conviction In Criminal Case Not Required For Gratuity Forfeiture, Dismissal For Moral Turpitude Enough : Supreme Court

The Supreme Court today (February 17) ruled that a criminal conviction is not required for gratuity forfeiture under the Payment of Gratuity Act, 1972. Gratuity can be forfeited if the employee's misconduct itself constitutes an offence involving moral turpitude.

The Court clarified the law laid down in the case of Union Bank of India and Ors. vs. C.G. Ajay Babu (2018), stating that the observation made in CG Ajay Babu's case that the forfeiture of gratuity is permissible only upon the criminal conviction was an obiter remark having no binding effect.

A bench of Justices Sudhanshu Dhulia and K. Vinod Chandran considered whether gratuity can be forfeited when employment is terminated due to misconduct constituting an offence involving moral turpitude, even without a criminal conviction or proceeding.

Answering affirmatively, the judgment authored by Justice Chandran interpreted sub-clause (ii) of Section 4(6)(b) which enables forfeiture of gratuity, wholly or partially if the delinquent employee is terminated for any act which constitutes an offence involving moral turpitude if the offence is committed in the course of his employment.

Interpreting the term 'offence' under the provision, the Court observed:

“An 'Offence' as defined in the General Clauses Act, means 'any act or omission made punishable by any law for the time being' and does not call for a conviction; which definitely can only be on the basis of evidence led in a criminal proceeding. The standard of proof required in a criminal proceeding is quite different from that required in a disciplinary proceeding; the former being regulated by a higher standard of 'proof beyond reasonable doubt' while the latter governed by 'preponderance of probabilities'.”

The Court said that the Gratuity Act allows forfeiture of gratuity for misconduct constituting an offence involving moral turpitude, without requiring a criminal conviction.

“The provision of forfeiture of gratuity under the Act does not speak of a conviction in a criminal proceeding, for an offence involving moral turpitude. On the contrary, the Act provides for such forfeiture; in cases where the delinquent employee is terminated for a misconduct, which constitutes an offence involving moral turpitude.”, the court observed

“Hence, the only requirement is for the Disciplinary Authority or the Appointing Authority to decide as to whether the misconduct could, in normal circumstances, constitute an offence involving moral turpitude, with a further discretion conferred on the authority forfeiting gratuity, to decide whether the forfeiture should be of the whole or only a part of the gratuity payable, which would depend on the gravity of the misconduct.”, the court added.

“In the present case it has been proved that the petitioner supressed his actual date of birth. The failure of the employer to initiate a criminal proceeding on the fraud employed by way of the fabricated/forged certificate produced for the purpose of employment, does not militate against the forfeiture. Obviously, as coming out from the provision, no conviction in a criminal proceeding is necessitated, if the misconduct alleged & proved constitutes an offence involving moral turpitude. The very same reasoning applies in the appeals by the MSRTC were the delinquent employees, conductors in the stage carriages operated by the MSRTC were found to have indulged in misappropriation of fares collected from passengers. Misappropriation definitely is an act constituting an offence involving moral turpitude.”, the Court held.

In terms of the aforesaid, the Court allowed the appeal.

Case Title: Western Coal Fields Ltd. versus Manohar Govinda Fulzele

Citation : 2025 LiveLaw (SC) 216

Click here to read/download the order

Appearance:

For Petitioner(s) : Ms. Mayuri Raghuvanshi, AOR Mr. Vyom Raghuvanshi, Adv. Ms. Akanksha Rathore, Adv. Ms. Kinjal Sharma, Adv. Mr. Tushar Mehta, Solicitor General Mr. Uddyam Mukherjee, AOR Mr. Swapnil Pattanayak, Adv. Mr. Agnibha Chatterjee, Adv.

For Respondent(s) : Mr. Pratik R. Bombarde, AOR Mr. Devendra Singh, Adv. Mr. Jitendra Kumar, Adv. Mr. Rohit Verma, Adv. Ms. Kirti Anand, Adv. Mr. Naman Tandon, Adv. Mr. Siddharth Dharmadhikari, Adv. Mr. Aaditya Aniruddha Pande, AOR