SC Rules Gratuity Can Be Forfeited Without Criminal Conviction in Cases of Misconduct Involving Moral Turpitude

Post By 24law
February 23, 2025

Isabella Mariam

In a significant ruling, the Supreme Court of India has held the forfeiture of gratuity of an employee whose misconduct involved moral turpitude, even in the absence of a criminal conviction. The case revolved around the issue of whether an employee’s gratuity, which is considered a statutory right, could be forfeited if the termination was due to fraudulent activities, without a criminal conviction being obtained.

Background of the Case

The case was brought before the Supreme Court by a Public Sector Undertaking (PSU), Western Coalfields Ltd., and the Maharashtra State Road Transport Corporation (MSRTC), which challenged a decision that stated gratuity could not be forfeited under the Payment of Gratuity Act, 1972 (the Act) without a conviction. The case arose after an employee, Manohar Govinda Fulzele, was terminated from his position for obtaining employment through a fraudulent date of birth certificate. The disciplinary authority in the case ordered the forfeiture of his gratuity, arguing that the employee had falsified documents to gain employment.

The terminated employee contested this decision, claiming that gratuity was a statutory entitlement that could not be forfeited without a criminal conviction. He argued that, in the absence of a criminal case and conviction, his gratuity should not be withheld.

Court’s Analysis and Reasoning

A Bench of Justices Sudhanshu Dhulia and K. Vinod Chandran deliberated on the matter and ruled in favor of the PSU, stating that the forfeiture of gratuity does not require a criminal conviction. The Court clarified that if an employee’s misconduct, such as falsifying documents, qualifies as an offence involving moral turpitude, then forfeiting gratuity is permissible under the Act, even without a criminal conviction.

The Court’s decision hinged on the interpretation of Section 4(6) of the Payment of Gratuity Act, which allows employers to forfeit gratuity in certain circumstances involving misconduct. While earlier decisions, such as in Union Bank of India v. C.G. Ajay Babu (2018), had indicated that a criminal conviction was necessary for forfeiture, the Supreme Court noted that such a requirement was not explicitly stated in the statutory text. As a result, the Court held that it was not necessary to obtain a conviction in a criminal court to enforce the forfeiture of gratuity if the employee’s actions were found to involve moral turpitude.

The Court also referred to past rulings, such as the Jaswant Singh Gill v. Bharat Coking Coal Ltd. (2007) case, which was overruled in Mahanadi Coalfields Ltd. v. Rabindranath Choubey (2020). These rulings reinforced the notion that disciplinary actions can be pursued even after retirement, and that misconduct leading to the forfeiture of benefits can be decided by preponderance of probabilities, rather than the higher burden of proof required in criminal trials.

Conclusion

The Court concluded that the termination of the employee was valid, given that the employee had falsified his birth certificate to secure his appointment. Since his appointment itself was deemed illegal, the employee was not entitled to claim gratuity, and the PSU’s decision to forfeit it was upheld.