Summary
The Supreme Court held that gratuity can be forfeited under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972 where an employee is terminated for misconduct that constitutes an offence involving moral turpitude, without any criminal conviction; the contrary view in C.G. Ajay Babu was treated as obiter. It upheld total forfeiture for an employee appointed on a forged date-of-birth certificate but limited forfeiture to 25% for conductors who misappropriated meagre fares.
Issues
- Whether forfeiture of gratuity under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972 requires that the offence involving moral turpitude be established by conviction in a criminal court.
- Whether the interpretation of Section 4(6)(b)(ii) in Union Bank of India v. C.G. Ajay Babu binds the Court or requires a reference to a larger bench.
- Whether obtaining appointment by a forged date-of-birth certificate, and misappropriation of fares by conductors, constitute offences involving moral turpitude, and to what extent gratuity should be forfeited in each case.
Provisions considered
- Section 4(6)(b)(ii), Payment of Gratuity Act, 1972Read as permitting forfeiture, wholly or partly, where an employee is terminated for an act constituting an offence involving moral turpitude committed in the course of employment. The Court held the provision does not require a conviction or even a criminal proceeding; the disciplinary or appointing authority must decide whether the proved misconduct would constitute such an offence and the extent of forfeiture, after notice and an opportunity to the employee. (¶¶ 7, 9, 10, 13)
- Section 4(5), Payment of Gratuity Act, 1972Explained that C.G. Ajay Babu had found Section 4, including sub-section (6), inapplicable to bank employees governed by a Bipartite Settlement giving better gratuity terms, so its further interpretation of sub-section (6) was unnecessary to the decision. (¶¶ 5, 9)
- Definition of 'offence', General Clauses Act, 1897Relied on the definition of 'offence' as any act or omission made punishable by law to hold that the term does not import a conviction, which can rest only on evidence in a criminal trial under a higher standard of proof. (¶ 10)
Held
- Section 4(6)(b)(ii) of the Payment of Gratuity Act does not require that misconduct proved in a departmental enquiry be also duly established in a court of law; those words cannot be read into the provision. The statement to the contrary in C.G. Ajay Babu was obiter, since Section 4(6) had been held inapplicable there by virtue of Section 4(5), and so no reference to a larger bench was needed. (¶¶ 6, 9)
- Jaswant Singh Gill v. Bharat Coking Coal Ltd. did not hold that a criminal conviction is a precondition for forfeiture under Section 4(6)(b)(ii), and that decision was in any event overruled on another point by a three-Judge Bench in Mahanadi Coalfields Ltd. v. Rabindranath Choubey. (¶¶ 7, 8)
- Criminal and disciplinary proceedings carry different standards of proof. The authority need only decide whether the misconduct would ordinarily constitute an offence involving moral turpitude, and has discretion to forfeit the whole or part of the gratuity depending on the gravity of the misconduct, after notice and a chance for the employee to make a representation on both aspects. (¶ 10)
- Following Devendra Kumar v. State of Uttaranchal, suppressing the true date of birth by producing a forged certificate to obtain appointment amounts to moral turpitude, and the employer's failure to launch criminal proceedings does not prevent forfeiture; misappropriation of fares by conductors likewise constitutes an offence involving moral turpitude. (¶¶ 11, 12, 13)
- Since an appointment obtained by fraud is itself illegal, the employee cannot claim its fruits by way of gratuity, and forfeiture of the entire gratuity was upheld. For conductors who misappropriated meagre amounts, termination was warranted but the authority should have been more sympathetic on forfeiture, which the Court limited to 25% of the gratuity payable. (¶¶ 14, 15)
Result
Appeals allowed; High Court judgments set aside; forfeiture of entire gratuity of the public sector undertaking's employee upheld; in the conductors' case forfeiture limited to 25% with the balance to be released; parties to bear their own costs.