Case Note & Summary
The petitioner, Bank of India, challenged the orders of the controlling authority dated 30 June 2004 and the appellate authority dated 4 September 2006 under the Payment of Gratuity Act, 1972, directing it to pay gratuity of Rs.1,15,869 with interest to the respondent, R.V. Deshmukh, a former bank clerk. The respondent was terminated on 28 September 2001 after a departmental enquiry found him guilty of misappropriating Rs.20,000. He had over 24 years of service. On 6 March 2003, he applied to the controlling authority for gratuity of Rs.2,07,295.20. The bank contested, arguing that the Act was not applicable due to its own BOI Gratuity Fund Rules, 1975, under which the respondent was entitled to Rs.97,650 (which the bank did not dispute), and alternatively, that under Section 4(6)(b)(ii) of the Act, the gratuity was forfeitable because the termination was for an act constituting an offence involving moral turpitude. The controlling authority and appellate authority rejected the bank's forfeiture claim and directed payment. The High Court examined the meaning of 'offence involving moral turpitude' and held that misappropriation of funds by a bank employee, being dishonest and contrary to accepted standards of morality, falls within that definition. The court noted that the respondent's act of misappropriation was an offence under the Indian Penal Code and involved moral turpitude. Therefore, the bank was entitled to forfeit the entire gratuity under Section 4(6)(b)(ii). The court set aside the impugned orders and dismissed the respondent's claim for gratuity beyond the amount already offered by the bank under its own rules.
Headnote
A) Gratuity - Forfeiture - Section 4(6)(b)(ii) Payment of Gratuity Act, 1972 - Termination for Misappropriation - The court considered whether the bank could forfeit gratuity of an employee terminated for misappropriation of Rs.20,000. The court held that misappropriation of funds by a bank employee constitutes an offence involving moral turpitude, and therefore the employer is entitled to forfeit the entire gratuity under Section 4(6)(b)(ii) of the Act. The orders of the controlling authority and appellate authority directing payment of gratuity were set aside. (Paras 1-16)
Issue of Consideration
Whether the forfeiture of gratuity under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972 is justified when an employee is terminated for misappropriation of funds, which constitutes an offence involving moral turpitude.
Final Decision
The High Court allowed the writ petition, set aside the orders of the controlling authority and appellate authority, and held that the bank was entitled to forfeit the entire gratuity under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972. The respondent's claim for gratuity beyond the amount offered under the bank's own rules was dismissed.
Law Points
- Payment of Gratuity Act
- 1972
- Section 4(6)(b)(ii)
- forfeiture of gratuity
- moral turpitude
- misappropriation
- termination for misconduct
Case Details
2014 LawText (BOM) (09) 114
WRIT PETITION NO. 802 OF 2007
Mr. R.S. Pai with Mr. Anand Pai and Mr. Hemant Telkar i/b M/s Haresh Mehta & Co. for petitioner. Mr. Mahesh Londhe i/b M/s. Sanjay Udeshi & Co. for the Respondent.
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Writ petition challenging orders of controlling authority and appellate authority under Payment of Gratuity Act, 1972 directing payment of gratuity.
Remedy Sought
Petitioner bank sought to quash orders directing payment of gratuity to respondent and to uphold forfeiture of gratuity.
Filing Reason
Bank challenged the orders of controlling authority and appellate authority which directed payment of gratuity despite termination for misappropriation.
Previous Decisions
Controlling authority order dated 30 June 2004 and appellate authority order dated 4 September 2006 directed payment of gratuity of Rs.1,15,869 with interest.
Issues
Whether the Payment of Gratuity Act, 1972 applies when the bank has its own gratuity rules.
Whether the bank was entitled to forfeit gratuity under Section 4(6)(b)(ii) for termination due to misappropriation constituting an offence involving moral turpitude.
Submissions/Arguments
Petitioner argued that the Act was not applicable due to BOI Gratuity Fund Rules, 1975, and alternatively, that gratuity was forfeitable under Section 4(6)(b)(ii) as termination was for an act involving moral turpitude.
Respondent argued that the Act applied and that misappropriation did not constitute an offence involving moral turpitude, thus gratuity could not be forfeited.
Ratio Decidendi
Misappropriation of funds by a bank employee constitutes an offence involving moral turpitude, and therefore, under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972, the employer is entitled to forfeit the entire gratuity payable to the employee upon termination for such an act.
Judgment Excerpts
The petitioner bank questions the orders dated 30 June 2004 made by the controlling authority, under the Payment of Gratuity Act, 1972 (said Act) and the order dated 4 September 2006 made by the appellate authority under the said Act, both of which, in effect, direct the petitioner bank to pay the respondent gratuity in an amount of Rs.1,15,869/ together with simple interest at the rate of 8% per annum from 28 September 2001, till date of payment.
The petitioner bank, contested the aforesaid claim, primarily on two grounds: (i) That Payment of Gratuity Act, 1972 was not applicable, as the petitioner bank had its own BOI Gratuity Fund Rules, 1975... (ii) Assuming that the Payment of Gratuity Act, 1972, is applicable, then in terms of Section 4(6)(b)(ii) thereof, the petitioner bank was entitled to forfeit the entire gratuity payable to the respondent, as the services of respondents had been terminated for an act committed by him in the course of his employment, which act, clearly constituted an offence involving moral turpitude.
Procedural History
The respondent was terminated on 28 September 2001. On 6 March 2003, he applied to the controlling authority for gratuity. The controlling authority ordered payment on 30 June 2004. The bank appealed to the appellate authority, which dismissed the appeal on 4 September 2006. The bank then filed the present writ petition on 12 February 2007. The High Court reserved judgment on 8 August 2014 and pronounced on 18 September 2014.
Acts & Sections
- Payment of Gratuity Act, 1972: Section 4(6)(b)(ii)
