Calcutta High Court Sets Aside Forfeiture of Gratuity | Mere Job Hunt with Rival Company Not ‘Moral Turpitude’ Under Payment of Gratuity Act
Sanchayita Lahkar
The High Court of Calcutta Single Bench of Justice Shampa Dutt (Paul) held that gratuity under the Payment of Gratuity Act, 1972 cannot be forfeited in the absence of evidence of misconduct amounting to an offence involving moral turpitude established through lawful proceedings. The Court directed the employer company to release gratuity with accrued interest, setting aside the forfeiture previously imposed. The petition challenging orders of the Controlling and Appellate Authorities was dismissed, and compliance with statutory obligations for gratuity payment was mandated.
The dispute arose from an employment relationship between a private company incorporated under the Companies Act, 1956, and an employee engaged as a technician from 1 August 2012. The company was engaged in the business of manufacturing dielectric film and operated as the sole entity in India within that industry segment. The employment position occupied by the respondent carried responsibilities over confidential processes, technical recipes, and in-house experimentation developed by the company over a number of years.
In July 2022, allegations surfaced that the employee was acting as an intermediary in facilitating arrangements with another enterprise engaged in capacitor film manufacturing. The company asserted that the employee had contravened confidentiality obligations by contacting a rival company with an intention to help establish a competing plant. Following discovery of such actions, a show cause notice dated 21 July 2022 was issued and the employee was suspended from duty pending enquiry.
The employee responded to the notice; however, upon initiation of a domestic enquiry into the charges, he tendered his resignation on 15 August 2022. The resignation was not accepted by the management. The enquiry proceeded without his participation, and on the basis of the report submitted, the employee was terminated from service on 11 October 2022. The termination order was not challenged by the employee.
Subsequently, the employer invoked Section 4(6) of the Payment of Gratuity Act, 1972 to forfeit gratuity. The company cited misconduct of a nature constituting moral turpitude as the reason for forfeiture. It maintained that financial loss was sustained as a result of the employee’s actions, further evidenced by his subsequent engagement with a rival company. On 22 November 2022, gratuity entitlement was formally denied.
On 6 December 2022, the employee applied for gratuity benefits directly to the employer. When the claim was denied, the employee filed an application in Form N before the Controlling Authority on 16 January 2023 under the Payment of Gratuity Act. After hearing both sides, the Controlling Authority on 9 February 2024 ordered payment of gratuity amounting to Rs. 1,37,308 together with 10% annual interest from 11 October 2022, payable within 30 days.
The Controlling Authority held that although a domestic enquiry had been conducted, no First Information Report or criminal complaint was filed, nor was there any conviction. It was observed that the allegations of misconduct described as “serious” by the employer had not been established under law. Accordingly, forfeiture of gratuity was found to be unjustified. The length of service was computed as 10 years, with the last drawn salary at Rs. 23,800 forming the basis of calculation. Interest was directed under Section 7(3A) of the Act owing to delayed payment.
The company appealed. On 30 December 2024, the Appellate Authority upheld the Controlling Authority’s order. Aggrieved, the company filed a writ petition before the Calcutta High Court, challenging both orders.
In the writ proceedings, reference was made to the domestic enquiry report wherein the company alleged that the employee maintained regular contact with a rival company and disclosed sensitive processes. Witnesses from the company claimed to have seen him at a meeting with representatives of the rival enterprise in Durgapur on 17 July 2022. However, the enquiry officer noted that no telephone records or direct evidence substantiated such allegations. Witnesses only observed a brief meeting outside a hotel, after which the parties dispersed.
Despite these limitations, the enquiry officer concluded the employee was guilty of misconduct. Based on this finding, gratuity was forfeited. The central issue before the High Court was whether such forfeiture could be sustained under Section 4(6) of the Payment of Gratuity Act, 1972 without a conviction or substantive proof of misconduct amounting to moral turpitude.
Justice Shampa Dutt (Paul) reviewed statutory provisions, prior judicial pronouncements, and the facts of the case. Key observations included:
“The petitioner in this case, could not prove that any damage or loss to, or destruction of, property belonging to the employer was due to the act of the respondent, which was riotous, disorderly, or involves moral turpitude.”
“Thus looking for another job, even if with a rival company (though, not proved in this case) with better perks and facilities is a basic right and does not constitute moral turpitude as it is not contrary to honesty, modesty or good morals.”
“The said/conduct of the enquiry/disciplinary authority is clearly an abuse of power and totally against the principles of natural justice, there being no independent, specific findings of the disciplinary authority against the petitioner. No reasoning nor the principles of natural justice was followed.”
“The findings of Disciplinary Authority is based on ‘no evidence’ and has been passed without considering the principles of natural justice, which is a clear perverse determination of fact.”
The Court cited the Supreme Court’s ruling in Western Coal Fields Ltd. v. Manohar Govinda Fulzele (2025), which clarified that forfeiture of gratuity does not require a criminal conviction but does require sufficient proof of misconduct amounting to an offence involving moral turpitude. The Court recorded: “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.”
However, in the present case, the Court found absence of credible evidence to establish misconduct of that nature. Witness statements and unsubstantiated claims of meetings with rival companies could not meet even the civil standard of preponderance of probabilities when unsupported by records or corroborative material.
The Court further observed the jurisprudence around proportionality and natural justice, relying on decisions such as State of Rajasthan v. Heem Singh (2020) and B.C. Chaturvedi v. Union of India (1995). It recorded: “The findings of Disciplinary Authority is based on ‘no evidence’ and has been passed without considering the principles of natural justice, which is a clear perverse determination of fact.”
On moral turpitude, reliance was placed on Sushil Kumar Singhal v. Regional Manager Punjab National Bank (2010) wherein moral turpitude was defined as conduct “contrary to justice, honesty, or morality,” involving depravity and wickedness. The Court concluded that even if the employee sought opportunities with a rival company, such action did not amount to moral turpitude.
The Court set aside the order and punishment imposed by the disciplinary authority on grounds that they were perverse and unsupported by evidence. Justice Shampa Dutt (Paul) recorded: “Relying upon the judgment in Western Coal Fields Ltd. vs Manohar Govinda Fulzele, this Court sets aside the order and punishment of the disciplinary authority for the reasons stated above and directs the petitioner to pay the total amount of gratuity along with simple interest @ 8% p.a. with effect from 30th April, 2009 till payment within 60 days from the date of this order.”
The Court also confirmed that the Appellate Authority acted within jurisdiction. It recorded: “The order under challenge thus also requires no interference as the appellate authority has not interfered either with the disciplinary proceeding or the punishment. The appellate authority was clearly within its power under the payment of gratuity to decide the case on merit regarding the entitlement/forfeiture of gratuity.”
Accordingly, the writ petition was dismissed with connected applications disposed of and interim orders vacated. The Court also directed that an urgent certified copy of the judgment be supplied to the parties upon compliance with legal formalities.
Advocates Representing the Parties
For the Petitioners: Mr. Nayan Rakshit, Mr. Nilay Rakshit
For the Respondents: Mr. Atanu Biswas, Mr. Mrinal Saha
For the State: Mr. Avijit Sarkar, Mr. Abdus Salam
Case Title: M/s. Xpro India Limited v. The State of West Bengal & Ors.
Neutral Citation: 2025:CHC-AS:1674
Case Number: WPA 4620 of 2025
Bench: Justice Shampa Dutt (Paul)
