Gratuity Can Be Forfeited If Employee Terminated For Causing Damage To Employer's Property, Forfeiture Not To Exceed Extent Of Loss: Delhi HC

The Delhi High Court has observed that any employer can forfeit the gratuity of an employee if the employee is terminated for any act or omission or negligence causing any damage or loss to the property belonging to the employer. Justice Pratibha M Singh however added that such forfeiture can only be to the extent of the damage or loss caused, and not beyond that.The Court was dealing with two petitions pertaining to disputes between employee and Union Bank of India. In one of the petitions, a chargesheet was issued against the employee alleging that loans were issued by him accommodating certain parties which caused losses to the Bank.In another matter, chargesheet was issued against the employee alleging that he was involved in lending loans in blatant violation of lending norms without completing the requisite formalities, sanctioning higher amounts of loans to borrowers whose earlier loans were either NPA or overdue, which allegedly caused losses to the Bank. Thus, the two aspects to be considered in the cases by Court was, First, whether forfeiture of gratuity is permissible and, if so, in what manner is it to be effected and Secondly, whether long delay in approaching to Controlling Authority can result in rejection of the claim for gratuity.The Court noted that sec. 4 of Payment of Gratuity Act prescribes that gratuity would be payable to every employee on termination of his employment if the employee has rendered continuous service for not less than five years upon superannuation, retirement or resignation or due to death or disablement due to accident or disease. It also noted sec. 4(6)(a) of the Act which provides that the gratuity of an employee, whose services may have been terminated for the reasons as specified therein, can be forfeited to the extent of damage or loss so caused.Accordingly, the Court observed:"Thus, any employer can forfeit the gratuity of an employee if the employee is terminated for any act or omission or negligence causing any damage or loss to the property belonging to the employer. The forfeiture can only be to the extent of the damage or loss caused, and not beyond that."The Court therefore said that in both the petitions, the case of the Bank was that both the employees caused loss to the Bank and hence the gratuity can be forfeited. However, it noted that the case of the employees was that there were three pre-conditions which are imposed by law on the employer that need to be satisfied before gratuity of an employee can be forfeited viz., proper notice of forfeiture has to be issued to the employee, the said notice has to contain the quantification of loss stated to be caused by the wilful omission or negligence of the employee and an opportunity to be heard to be given to the employee. "In the present two petitions, it is worth noting that ld. Counsel for the Bank, during the course of hearing submitted that the Bank is not pressing the ground of forfeiture of gratuity of the employees on account of offence involving moral turpitude. Thus, insofar as the procedure to be followed for forfeiture is concerned, even if this Court does not take into consideration the judgment in Jaswant Singh Gill (supra), a mere reading of the provisions itself shows that the forfeiture can be only to the extent of the damage or loss so caused," the Court said. Thus, the Court was of the view that the Bank would not be entitled to forfeit the entire gratuity amount without quantifying the extent of the damage or loss. It said that the said amount is not a 'quantified amount' under the provision and that it would have to be determined after giving the employee an opportunity as to whether the damage or loss was caused and whether the same has been correctly attributed to the correct employee or not. Noting the two subjective conditions laid down under sec. 4(6)(a) of the Act, the Court said:"If both these conditions are not satisfied, the forfeiture would not be in accordance with law. It is nigh possible that the employee could argue that he was not responsible solely for taking the decision that is attributed to him. There may have to be apportionment of damage or loss. The damage or loss has to be connected with the act, omission or negligence of the employee. The entire damage or loss cannot be attributed to one employee. There cannot be duplication of forfeiture if more than one employee was involved. In view of these subjective conditions, a notice to the employee and a hearing would be required."The Court rejected the stand of the Bank that no prejudice was caused to the employees due to non-issuance of notice and denial of opportunity of being heard. The Court said that payment of gratuity is the normal rule under law and forfeiture is the exception. It also said that in both the cases, the employees were kept in dark as to the forfeiture of their gratuity and that neither proper notice was issued nor was any hearing afforded on the aspect of forfeiture to the employees."In a...

Gratuity Can Be Forfeited If Employee Terminated For Causing Damage To Employer's Property, Forfeiture Not To Exceed Extent Of Loss: Delhi HC

Nupur Thapliyal

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