Case Note & Summary
The petitioner, H. Jayarama Shetty, joined the respondent Sangli Bank Ltd. on 28 May 1991. On 3 May 1994, a show cause notice was issued regarding irregularities in a constituent's account from 1984 when the petitioner was at the Bangalore branch. The petitioner replied on 24 June 1994, but no chargesheet or disciplinary proceedings followed. On 12 May 1995, he was transferred from Belgaum, Karnataka to the head office at Sangli, Maharashtra, and relieved on 3 June 1995. He resigned on 17 September 1995, which was accepted. On 7 August 1997, the bank informed him that his terminal benefits, including gratuity of Rs.1,06,440, were adjusted against alleged dues from the 1984 irregularities. After representations on 5 September 1997, 29 January 1998, and 21 November 1998 went unanswered, the petitioner filed an application before the Controlling Authority under the Payment of Gratuity Act, 1972 on 15 February 1999. The Controlling Authority allowed the claim, but the Central Regional Labour Commissioner, acting as Appellate Authority, reversed the order on three grounds: lack of jurisdiction as the petitioner was posted in Karnataka, the claim was barred by limitation, and forfeiture of gratuity was justified. The High Court held that the Appellate Authority erred on all three counts. The court found that the employer's registered office was at Sangli, Maharashtra, giving the Maharashtra authority jurisdiction. The claim was not barred by limitation as the application was made within a reasonable time after the employer's refusal. Most importantly, the forfeiture of gratuity under Section 4(6) of the Act requires that the employee's services be terminated for an act of wilful omission or negligence causing damage to the employer's property. Since the petitioner resigned, there was no termination for misconduct, and no damage was proved. The court allowed the petition, set aside the Appellate Authority's order, and restored the Controlling Authority's order directing payment of gratuity with interest.
Headnote
A) Payment of Gratuity Act - Forfeiture of Gratuity - Section 4(6) - Resignation not amounting to misconduct causing damage - Gratuity cannot be forfeited unless the employee's termination is for an act of wilful omission or negligence causing damage to the employer's property. Resignation does not fall under the grounds for forfeiture under Section 4(6). (Paras 5-7) B) Payment of Gratuity Act - Limitation - Section 7(2) - Claim for gratuity not barred by limitation if application is made within reasonable time after denial - The Controlling Authority can condone delay. The claim was made within a reasonable period after the employer's refusal. (Paras 8-9) C) Payment of Gratuity Act - Jurisdiction - Section 3 - Controlling Authority having jurisdiction over the area where the employer's registered office is situated can entertain the application - The employer's registered office was at Sangli, Maharashtra, hence the authority in Maharashtra had jurisdiction. (Para 10)
Issue of Consideration
Whether the forfeiture of gratuity was justified under Section 4(6) of the Payment of Gratuity Act, 1972, and whether the claim was barred by limitation and jurisdiction.
Final Decision
The High Court allowed the writ petition, set aside the order of the Appellate Authority dated 30th September 2004, and restored the order of the Controlling Authority dated 31st January 2003 directing the respondent to pay the petitioner gratuity with interest at 10% per annum from the date of application until payment.
Law Points
- Gratuity is a statutory right
- forfeiture only for misconduct causing damage
- limitation period for gratuity claim
- jurisdiction of controlling authority based on employer's registered office
