JUDGEMENT REVIEW: GRATUITY CAN BE FOREFEITED IF IMMORAL PRACTICES CAN BE PROVED WITHOUT CONVICTION

Case Title: Western CoalFields Ltd vs. Manohar Govinda Fulzele
Court: Supreme Court of India
Citation: 2025 INSC 233
Bench: Justice Sudhanshu Dhulia and Justice K. Vinod Chandran
Date of Judgment: February 17, 2025

 

FACTS OF THE CASE

The case addresses removal of a gift when a person’s employment’s been terminated by misconduct, which in this case does not constitute moral turpitude if the person has no prior evidence of their criminal record limiting the High Court’s decision that gratuity could only be forfeited if a criminal conviction was there under the Payment of Gratuity Act, 1972. According to the respondents who included Manohar Govinda Fulzele, fraudulent employment and funds were misused in addition to other acts, for which they were dismissed. The central issue before the court was whether gratuity could be forfeited for moral turpitude without there being a criminal conviction.

 

KEY ISSUES

1. Is Section 4(6) of the Payment of Gratuity Act, 1972, that says the employer can forfeit the gratuity without any finding of criminality is valid?
2. Can a simple act of moral turpitude committed by an employee in the discharge of their duties justify the forfeiture of the total amount of gratuity?
3. Was due process followed by the employer when the amount of gratuity was being forfeited?

LEGAL PROVISIONS INVOLVED

1. Section 4(6) of the Payment of Gratuity Act, 1972 – Permits forfeiture of gratuity in cases of termination due to wilful omission, negligence, or misconduct involving moral turpitude.

 

1. General Clauses Act, 1897 – Defines an offence as any act punishable under the law.
2. Article 136 of the Constitution of India – Special leave to appeal before the Supreme Court.
3. Union Bank of India vs. C.G. Ajay Babu (2018) 9 SCC 529
4. Jaswant Singh Gill vs. Bharat Coking Coal Ltd (2007) 1 SCC 663

 

ARGUMENTS ON BOTH SIDES

Petitioner’s Arguments :

1. Fraudulent Appointment & Misconduct: The employee provided false information by presenting an incorrect date of birth.
2. Moral Turpitude Does not Depend on Conviction: The petitioner continuously stated that a conviction is not necessary to prove moral turpitude under any employment laws.

 

Respondent’s Arguments:

1. Gratuity as a Statutory Right: Refuted the employer’s argument that gratuity cannot be given and stated that the employer deducts the employee’s entitlements.
2. No Criminal Proceedings Initiated: It was said that the employer did not initiate a criminal case which raised doubts about the said misconduct.
3. Due Process Not Followed: Employees were denied the right of appeal and other due process because the hearings were conducted and completed in a very short time of two days.

 

ANALYSIS

The Supreme Court in this case closely investigated and tried to understand whether an employer can take away gratuity only after providing evidence that the employee is guilty of a disciplinary rule. The Court determined that Section 4(6) of the Payment of Gratuity Act does not require a criminal conviction for forfeiture but is based on the condition that the perpetrator’s misconduct should have involved moral turpitude. Regarding the fraudulent appointment in this case the Court invoked the case Devendra Kumar vs. State of Uttaranchal (2013) as precedent, and ruled that in fact, deceit in employment selection occurs if giving false information is regarded as serious enough to get the full forfeiture of gratuity. Even so, in cases of thefts of small amounts of money, the Court used a more lenient punishment by saying that total forfeiture was not the proportionate punishment.

 

JUDGMENT

1. Gratuity can be forfeited for misconduct involving moral turpitude, even without a criminal conviction.
2. Fraudulent appointment justifies complete forfeiture of gratuity.
3. Misappropriation of minor amounts should not lead to total forfeiture of gratuity.
4. Employers must follow due process, including issuing notice to the employee before forfeiture.
5. For PSU employees who committed fraud, complete forfeiture was upheld.
6. For MSRTC conductors, only 25% of gratuity forfeited, with the remaining amount ordered to be released.

 

CONCLUSION

Through this judgment, the important legal issue which talks about the forfeiture of gratuity is addressed and a balance is managed between the rights of employees and the discretion of employers. It can be declared with assurance that the right to gratuity is given and can be forfeited for immoral conduct without the need for any criminal conviction, if the disciplinary proceedings establish unclean practices. The judgment again ensured that the principle of correlating punishment with wrongdoing is separated from the severe fraud cases. This decision provides for the rights of the employers in fraudulent appointing but at the same time the rights of the employees are preserved and they are not wrongfully or overly punished.

 

“PRIME LEGAL is a full-service law firm that has won a National Award and has more

than 20 years of experience in an array of sectors and practice areas. Prime legal falls

into the category of best law firm, best lawyer, best family lawyer, best divorce lawyer,

best divorce law firm, best criminal lawyer, best criminal law firm, best consumer

lawyer, best civil lawyer.”

WRITTEN BY TANMAYEE VELLORE RAGHUNANDAN