‘Gratuity Not A Charity’: Calcutta High Court Directs FCI To Pay Employee’s Gratuity, Says It Can Only Be Stopped If Employment Terminated

In setting aside the order of the Deputy Chief Labour Commissioner, a single-bench of Justice Shekhar B Saraf held:

The Deputy Chief Labour Commissioner decided upon the issue…depending on the possibility that the petitioner could be found guilty in the pending CBI proceedings. The petitioner has been acquitted of all charges in a criminal case and rest of the CBI cases are pending. Therefore, so long as the aforementioned [cases] are pending, the employer cannot forfeit the payment of gratuity to the petitioner. The Deputy Chief Labour Commissioner did not factor in, this seemingly trivial issue, but the petitioner was never dismissed nor terminated from service [even] the penalty order does not terminate, nor does it dismiss the petitioner from service.

Brief facts

These observations came in a plea by a superannuated employee of FCI challenging the order of the Deputy Chief Labour Commissioner, which denied him payment of his gratuity and requesting for a direction upon his employers to release his dues along with interest.

Petitioner had joined FCI in 1978, and was placed on suspension in 2012 due to audits conducted after a shortage of grains found in some FCI sheds. Such suspension was revoked later that year, and the petitioner was reinstated.

In January 2013, a charge sheet was issued against the petitioner and he was summoned for disciplinary hearings, soon after which he superannuated in November of the same year.

Pursuant to the inquiry in to the petitioner, the FCI issued a punishment against him for a token recovery of Rs 1 lakh “from retiral dues other than gratuity.”

Petitioner contended that he had not received gratuity and approached the Regional Labour Commissioner (Central), Kolkata for a payment of gratuity worth Rs. 10,00,000/-.

The petition was transferred to the Assistant Labour Commissioner who in 2017 directed for a payment of approx. Rs. 3.5 lakh as gratuity to the petitioner.

FCI appealed this order before the Deputy Chief Labour Commissioner and stated that various criminal cases were pending against the petitioner and that he owed Rs 2.5 lakhs himself.

Subsequently, after an elaborate discussion on “moral turpitude” allegedly committed by the petitioner, the Deputy Labour Commissioner set aside the order for payment of gratuity to the petitioner under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972.

A writ petition filed by the petitioner before the Patna High Court was dismissed for want of jurisdiction without going into merits.

Proceedings before the High Court

Petitioner argued that the Deputy Chief Labour Commissioner assumed the petitioner’s guilt and deemed it a case of “moral turpitude” 1972 Act and rejected his claim for gratuity without any basis.

It was argued that the petitioner was never terminated from service and that he had been falsely been accused in the cases that were registered against him, even being acquitted in a criminal proceeding.

Respondents argued that there were multiple criminal proceedings pending against the petitioner, including CBI cases and that an amount of approx. Rs 2.5 lakhs was outstanding against the petitioner for which a demand notice had been served.

Respondents contended that the petitioner did not ‘serve faithfully’ and that it would count as an offence of moral turpitude u/s 4(6) of the 1972 Act.

It was submitted that the proceedings would not be maintainable before the Calcutta High Court since the order of dismissal by the Patna High Court did not grant the petitioner any leave to institute new proceedings out of the same cause of action.

Court’s Observations

In perusing through the decision of the Deputy Chief Labour Commissioner, the Court observed that the authority had “deemed it to be a case involving moral turpitude” which was pending before the relevant Courts.

It was held that the decision taken for denial of gratuity was on the basis that the petitioner could be found guilty in the pending criminal cases against him.

Court observed: The [impugned] order followed a rather drawn-out discussion over “moral turpitude” by citing judgements from a plethora of High Courts of this country. The primary reason for the inapplicability of such judgements is because the judgements cited by the Deputy Chief Labour Commissioner pertain to an employee who was dismissed or terminated from service due to their actions during the course of employment. This Court highlights that the petitioner was never terminated from service.

Finally, in deciding whether the petitioner’s gratuity could be forfeited under Section 4(6) of the 1972 Act, the Court held that such a statutory clause could only be invoked when termination of employment on grounds of such “offences involving moral turpitude” are established in a court of law.”

Accordingly, the respondents were directed to release the petitioner’s gratuity, along with interest in accordance with the earlier orders of the Assistant Labour Commissioner.

Citation: 2023 LiveLaw (Cal) 290

Case: Surendra Prasad v The Union of India & Ors.

Case No: W.P.A.16064 of 2021

Click Here To Read Order