The Supreme Court held that conviction in a criminal proceeding is not a necessary requirement for forfeiture of gratuity, if the misconduct alleged & proved against employee constitutes an offence involving moral turpitude.
The Court upheld the forfeiture of gratuity of the employee while holding that the terminated employee whose employment itself was illegal cannot seek the fruits of his employment by way of gratuity.
The Court examined the issue of forfeiture of gratuity in cases where employees are terminated for misconduct involving moral turpitude. The Appeal was filed by a Public Sector Undertaking (PSU) and the Maharashtra State Road Transport Corporation (MSRTC), challenging the decision wherein it was held that forfeiture of gratuity was not permissible under the Payment of Gratuity Act, 1972 (the Act).
A Bench of Justice Sudhanshu Dhulia and Justice K Vinod Chandran held, “In the present case it has been proved that the petitioner supressed his actual date of birth. The failure of the employer to initiate a criminal proceeding on the fraud employed by way of the the fabricated/forged certificate produced for the purpose of employment, does not militate against the forfeiture. Obviously, as coming out from the provision, no conviction in a criminal proceeding is necessitated, if the misconduct alleged & proved constitutes an offence involving moral turpitude.”
Solicitor General Tushar Mehta and AOR Mayuri Raghuvanshi represented the Appellant, while AOR Pratik R. Bombarde appeared for the Respondent.
The employee was terminated for misconduct after it was found that he obtained employment using a fraudulent date of birth certificate. The disciplinary authority ordered the forfeiture of gratuity. The terminated employee challenged this decision, arguing that gratuity is a statutory right and cannot be forfeited without a criminal conviction.
The Court referred its previous decision in Union Bank of India v. C.G. Ajay Babu (2018), which held that forfeiture under Section 4(6) of the Act requires a conviction by a criminal court for an offence involving moral turpitude.
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However, the Court noted that this interpretation was not derived from the statutory text. Instead, it held that forfeiture can be enforced if the termination is based on misconduct that constitutes an offence involving moral turpitude, without requiring a prior conviction.
The Court also referred to Jaswant Singh Gill v. Bharat Coking Coal Ltd. (2007), which was overruled by a three-judge bench of the Apex Court in Mahanadi Coalfields Ltd. v. Rabindranath Choubey (2020), where it was held that disciplinary proceedings can continue even after an employee’s retirement.
The Court clarified that misconduct constituting an offence involving moral turpitude does not require proof beyond a reasonable doubt, as is necessary in criminal proceedings. Instead, the disciplinary authority has the discretion to determine whether an act qualifies as such an offence based on preponderance of probabilities.
The Bench held, “As far as, the PSU is concerned, we find that the appellant was proceeded against for the misconduct of producing a fraudulent ‘date of birth certificate’ to obtain appointment.”
Consequently, the Court held, “Insofar as the PSU is concerned, the appointment itself was invalid for reason of suppression of the actual date of birth and production of a forged certificate…The appointment itself being illegal, there is no question of the terminated employee seeking fruits of his employment by way of gratuity. We uphold the decision of the PSU forfeiting his entire gratuity.”
Cause Title: Western Coal Fields Ltd. v. Manohar Govinda Fulzele (Neutral Citation: 2025 INSC 233)
Appearance:
Appellant: Solicitor General Tushar Mehta; AOR Mayuri Raghuvanshi and Uddyam Mukherjee; Advocates Vyom Raghuvanshi, Akanksha Rathore, Kinjal Sharma, Swapnil Pattanayak and Agnibha Chatterjee
Respondent: AOR Pratik R. Bombarde and Aaditya Aniruddha Pande; Advocates Devendra Singh, Jitendra Kumar, Rohit Verma, Kirti Anand, Naman Tandon and Siddharth Dharmadhikari
Soruce: verdictum
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