‘No Evidence, No Moral Turpitude’: Calcutta High Court Directs Gratuity Release to Former CMD, Citing Abuse of Disciplinary Power and Collective Responsibility
Safiya Malik
A Single Bench of the Calcutta High Court presided over by Justice Shampa Dutt (Paul) has dismissed a writ petition challenging an appellate authority's order directing payment of gratuity to a former CMD of MSTC Limited. The court found that the disciplinary action taken against the respondent lacked independent evidence and that the respondent's alleged misconduct was part of a collective decision made by a committee.
The petitioner company sought a direction to recall the appellate order dated 30th April 2019 passed under the Payment of Gratuity Act, 1972. The respondent, a former Chairman and Managing Director of the company, had superannuated on 30th April 2009. Prior to his retirement, he was issued a charge sheet dated 20th April 2009 for alleged misconduct relating to recommendations made by a Purchase Committee of which he was a member.
The charges included import of scrap at higher prices compared to contemporaneous private transactions, procurement without demand assessment, and sales against post-dated cheques in violation of company guidelines. The petitioner submitted that the alleged actions resulted in a loss of Rs. 7.44 crores to the company. Disciplinary proceedings were initiated and continued after retirement, in accordance with the Conduct, Discipline and Appeal Rules, 1980 of MSTC Limited.
On 30th April 2013, a penalty order was issued withholding Rs. 10 lakhs from the respondent’s gratuity. The penalty was imposed under Rule 23(d) read with Rule 30A(ii) of the said Rules. A review application submitted by the respondent was rejected by the Disciplinary Authority on 20th March 2014. No legal challenge was initiated against these orders at that time.
On 3rd April 2017, the respondent submitted a claim in Form ‘I’ under the Payment of Gratuity Act. The company rejected the claim on 5th July 2017, stating that the forfeiture was valid in view of the disciplinary penalty. The Controlling Authority, by an order dated 20th February 2018, held that the respondent was not entitled to gratuity due to the penalty already imposed.
In appeal, the Deputy Chief Labour Commissioner (Central) passed an order on 30th April 2019 directing the company to release the gratuity amount with simple interest at 8% per annum from the date of retirement. The said order was received by the petitioner company on or about 31st May 2019. The present writ petition was filed thereafter.
The petitioner submitted that the appellate authority had acted beyond jurisdiction and that the disciplinary proceedings were validly concluded. Reliance was placed on several judgments including State Bank of India & Ors. vs. Ratan Kumar Rabbai & Ors., 2022 SCC OnLine Cal 1218, where it was held that the authority under the Payment of Gratuity Act could not review the order of a disciplinary authority. It was further argued that the gratuity could be forfeited under Section 4(6) of the Payment of Gratuity Act, 1972, in cases of financial loss or moral turpitude.
The petitioner also cited Western Coal Fields Ltd. vs. Manohar Govinda Fulzele, Civil Appeal No. 2608 of 2025, wherein it was recorded that the Disciplinary Authority or Appointing Authority may determine whether misconduct amounts to an offence involving moral turpitude, and may wholly or partially forfeit gratuity without requiring criminal conviction. The petitioner argued that forfeiture was therefore statutorily permissible.
The Court examined the disciplinary record and the findings relied upon by the company. It recorded that “there was only one witness to the said disciplinary proceeding,” and that “the alleged loss admittedly was by reason of recommendations made by the purchase committee... of which the private respondent was one of the members.” It further noted that “the private respondent is thus not alone responsible for the alleged loss... which admittedly was only a recommendation made by a committee thus a collective decision.”
The Court found that the disciplinary authority failed to record specific or independent findings against the respondent and did not assign any reasoning. It recorded: “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.”
It was also observed that “this clearly does not make out a case of moral turpitude,” and that the actions did not meet the statutory threshold for forfeiture under Section 4(6) of the Payment of Gratuity Act. Relying on State of Rajasthan v. Heem Singh, the Court held that a finding based on no evidence constitutes a perverse determination of fact and warrants interference.
The Court recorded that the appellate authority had not interfered with the disciplinary proceedings or the penalty, but had confined its decision to the issue of gratuity under the statute. It held that “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.” It further noted that “the order of the appellate authority is well reasoned and within jurisdiction to the extent of the provisions of the payment of gratuity and is clearly in accordance with law.”
The Court directed the company to release the gratuity amount with interest. It stated: “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 writ petition was dismissed. All connected applications, if any, stood disposed of. Any interim orders were vacated. The Court directed that urgent photostat certified copies of the judgment be supplied to the parties expeditiously upon compliance with necessary formalities.
Advocates Representing the Parties
For the Petitioners: Mr. Soumya Majumder, Senior Advocate; Ms. Noelle Banerjee; Mr. Dipak Dey; Ms. Sucheta Mitra
Case Title: MSTC Ltd. vs. Malay Sengupta & Ors.
Case Number: WPA 15908 of 2019
Bench: Justice Shampa Dutt (Paul)
[Read/Download order]
