Criminal Conviction Not Necessary For Gratuity Forfeiture: Supreme Court

SC Rules Gratuity Can Be Forfeited for Moral Turpitude Without Criminal Conviction

 

In a significant ruling, the Supreme Court of India has held that an employee’s gratuity can be forfeited for misconduct involving moral turpitude without the need for a criminal conviction. The judgment, delivered by Justices Sudhanshu Dhulia and K. Vinod Chandran in Western Coal Fields Ltd. vs. Manohar Govinda Fulzele and related cases, clarifies the scope of Section 4(6) of the Payment of Gratuity Act, 1972.

 

Case Background

 

The dispute arose over whether an employer could withhold gratuity when an employee was dismissed for misconduct.

 

In Western Coal Fields Ltd., the respondent Manohar Govinda Fulzele had submitted a fraudulent birth certificate at the time of his appointment.

 

In MSRTC's cases, bus conductors were dismissed for misappropriating collected fares.

 

 

The employers argued that these acts involved moral turpitude, justifying gratuity forfeiture under the law.

 

Key Legal Issue

 

The Court examined whether:

 

1. A criminal conviction was necessary for gratuity forfeiture.

 

 

2. A departmental inquiry was enough to establish misconduct involving moral turpitude.

 

 

 

Supreme Court's Observations & Ruling

 

The Court overruled the 2018 precedent (C.G. Ajay Babu) and held that a criminal conviction is not required.

 

"The statute does not require proof of misconduct, but the act must constitute an offence involving moral turpitude."

 

It clarified that an offence, as per the General Clauses Act, is an act made punishable by law—not necessarily proven in a court of law.

 

 

Final Decision

 

Western Coal Fields Ltd.: Complete forfeiture of gratuity upheld, as fraudulent appointment invalidates employment from the start.

 

MSRTC Cases: While fare misappropriation was deemed misconduct involving moral turpitude, the Court reduced the forfeiture to 25% given the small amounts involved.

 

 

This ruling sets a crucial precedent, reinforcing employers' rights to deny gratuity in cases of serious misconduct, even without a formal criminal conviction.


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