Case Note & Summary
The petitioner, Laxman Balu Deualkar, was an ex-employee of the Kolhapur District Central Co-op. Bank Ltd. He was chargesheeted for misappropriation of funds and, after a departmental enquiry, his services were terminated on 6 July 1996. He filed a complaint of unfair labour practice, which was dismissed by the Labour Court. Subsequently, he applied for gratuity under the Payment of Gratuity Act, 1972. During the pendency of his application, the bank issued a show cause notice for forfeiture of gratuity and, by notice dated 28 August 2008, forfeited the gratuity under Section 4(6)(b)(ii) of the Act. The Controlling Authority allowed the petitioner's application and directed payment of Rs.1,05,404/- with interest. However, the Appellate Authority reversed this order, upholding the forfeiture. The petitioner challenged the Appellate Authority's order in a writ petition before the Bombay High Court, which was dismissed. The petitioner then filed a review petition. The main legal issue was whether forfeiture of gratuity under Section 4(6)(b)(ii) requires proof of loss caused by the employee's misconduct. The petitioner argued that the forfeiture was invalid as no loss was proved. The respondent contended that termination for misappropriation justified forfeiture. The court analyzed Section 4(6)(b)(ii) and held that forfeiture requires that the employee's misconduct caused loss to the employer. Since the original order had overlooked this requirement, the court allowed the review petition, set aside the earlier order, and directed the bank to pay gratuity with interest.
Headnote
A) Payment of Gratuity Act, 1972 - Section 4(6)(b)(ii) - Forfeiture of Gratuity - Misconduct - Loss - The forfeiture of gratuity under Section 4(6)(b)(ii) requires that the employee's misconduct caused loss to the employer. Mere termination for misconduct, without proof of loss, does not justify forfeiture. The court held that the Appellate Authority and the High Court had erred in upholding forfeiture without considering whether any loss was caused to the bank. (Paras 4-6) B) Review Petition - Error Apparent on Face of Record - The review petition was allowed because the original order disposing of the writ petition had overlooked the requirement of loss under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972. The court found that the forfeiture order was based solely on the fact of termination for misconduct, which was insufficient. (Paras 5-6)
Issue of Consideration
Whether the forfeiture of gratuity under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972 is justified when the employee was terminated for misappropriation of funds but no loss was proved?
Final Decision
Review petition allowed. The order dated 8 November 2019 dismissing the writ petition is set aside. The writ petition is allowed. The order of the Appellate Authority is quashed and set aside. The respondent-bank is directed to pay the gratuity amount of Rs.1,05,404/- with interest at 10% per annum from the date it became due until payment.
Law Points
- Gratuity forfeiture under Section 4(6)(b)(ii) of Payment of Gratuity Act
- 1972 requires proof of loss caused by the employee's misconduct
- termination for misconduct alone does not justify forfeiture
- review petition allowed when original order overlooked relevant provisions
