Conviction Not Necessary for Forfeiture – The Supreme Court overruled the earlier interpretation in C.G. Ajay Babu (2018), holding that Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972, does not require a criminal conviction for forfeiture. If the misconduct constitutes an ‘offence involving moral turpitude’ under a disciplinary inquiry, gratuity can be forfeited. (Para 10)

Fraudulent Appointment Justifies Total Forfeiture – An employee who obtained employment by submitting a fraudulent birth certificate had no right to claim gratuity, as the very foundation of his employment was illegal. The Court relied on Devendra Kumar v. State of Uttaranchal (2013), holding that suppression of material information at the time of appointment itself constitutes moral turpitude. (Para 12, 15)

Misappropriation of Funds Warrants Partial Forfeiture – While misappropriation of even small amounts constitutes serious misconduct, the Court exercised discretion in reducing the forfeiture for MSRTC conductors to 25% of gratuity, considering the minor nature of the amounts involved. (Para 14)

Procedure for Forfeiture – The Court emphasized that before forfeiting gratuity, the appointing authority must issue a notice and allow the employee to present their case. (Para 10)

Appeal by Western Coal Fields Ltd. Allowed – Complete forfeiture of gratuity upheld for an employee who secured employment using a fraudulent birth certificate. Appeal by MSRTC Partially Allowed – Gratuity forfeiture for conductors misappropriating small amounts reduced to 25%, with the balance amount to be released. No Costs Awarded

Major Acts Discussed:

• Constitution of India, 1950 – Article 14 (Right to Equality), Article 311 (Dismissal from Service)
• Payment of Gratuity Act, 1972 – Section 4(6)(b)(ii) (Forfeiture of Gratuity for Moral Turpitude)
• General Clauses Act, 1897 – Definition of ‘Offence’
• Indian Penal Code, 1860 – Relevant provisions on fraud and misappropriation

Subjects:

Forfeiture of Gratuity, Termination for Misconduct, Offence Involving Moral Turpitude, Departmental Inquiry, Moral Turpitude, PSU Employee Misconduct, Fraudulent Appointment, Misappropriation

Issues Raised:

a) Whether forfeiture of gratuity under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972, requires a prior conviction for an offence involving moral turpitude?
b) Whether suppression of material facts at the time of appointment, such as a fraudulent date of birth certificate, constitutes an act involving moral turpitude warranting forfeiture?
c) Whether misappropriation of funds by conductors in public transport services amounts to an offence involving moral turpitude and justifies complete forfeiture?
d) What is the extent to which gratuity can be forfeited for different types of misconduct?

Submissions/Arguments:

• Appellant (Western Coal Fields Ltd. & Maharashtra State Road Transport Corporation – MSRTC)

  • Argued that ‘offence’ under the General Clauses Act does not require a conviction but only proof of conduct punishable under law.
  • Held that fraudulent appointment using false certificates or misappropriation of funds constitutes moral turpitude.
  • Contended that forfeiture of gratuity should be complete, as employment was obtained through fraud or involved financial dishonesty.

• Respondents (Employees)

  • Claimed that gratuity is a statutory right and cannot be denied without criminal conviction.
  • Submitted that termination itself was sufficient punishment, and total forfeiture of gratuity would be excessive.
  • For MSRTC employees, argued that misappropriation involved minor amounts, which should not warrant total forfeiture.