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Gratuity Can't Be Forfeited Unless Termination Order Is Issued: Reiterates Bombay HC [Read Judgment]

7 Aug 2019 1:22 PM GMT
Gratuity Cant Be Forfeited Unless Termination Order Is Issued: Reiterates Bombay HC [Read Judgment]
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Directing the employer to pay gratuity to an employee, the Bombay High Court has reiterated that gratuity of an employee cannot be forfeited under Section 4(6)(b) of the Payment of Gratuity Act, 1972 (the Act), unless his services were terminated.


The writ petition was filed by an employee of the Maharashtra State Road Transport Corporation (Respondent), who was a conductor in one of its buses. The Petitioner was served with a show cause notice dated 07/07/2003 by the department, proposing punishment of dismissal on account of misconduct. This notice was stayed by an order of the high court, directing the Respondent to maintain status quo of the Petitioner's employment. Subsequently, the Respondent served an order dated 16/12/2011 (the said order) on the Petitioner under Section 4(6)(b) of the Act, forfeiting his gratuity. Consequently, the writ was filed, challenging the said order.

Petitioner's Contentions

The Petitioner claimed that the notice dated 07/07/2003 which was served on him proposing his dismissal was not taken to its logical end in view of status quo order passed by the high court. Thus the Petitioner was never terminated from his services and rather, he superannuated on 31/12/2011. He contended that an order under Section 4(6)(b) of the Act, forfeiting gratuity of the petitioner could not be passed unless he was terminated from services and as such the said order, passed by the Respondent, was illegal and ultra vires.

He further contended that the aforementioned provision was not attracted in his case as no allegation of causing any damage or loss because of wilful omission or negligence was made against him. He relied on the ruling of Apex Court in Union Bank of India & Ors. v. C. G. Ajay Babu & Ors., (2018) 9 SCC 529, wherein it was held that forfeiture of gratuity was permissible only in case of alleged termination for misconduct of constituting offence involving moral turpitude and after the conviction for such offence which alleged to have been committed during the course of employment.

Respondent's Contentions

The Respondent party argued that the Petitioner was found guilty in inquiry and only a formality of issuing termination order was remaining. It requested the court to consider issuance of termination order as symbolic event in light of the judgment of the Apex Court in Divisional Personnel Officer, Southern Railway & Anr. v. T. R. Chellappan, AIR 1975 SC 2216.

It was also submitted that the termination order was not served on the Petitioner because of pendency of the petition in which the interim order of status quo as regards employment was passed. The petition had been withdrawn by the Petitioner rendering the Respondent incapable of serving order of termination.


The court refused to agree with the Respondent's arguments and held that order of termination was never served on the petitioner and as such, his termination was never effected from the service. Thus, the very requirement of Section 4(6)(b) of the Act was not satisfied.

Justice Nitin W. Sambre referred to the Apex Court's verdict in Jaswant Singh Gill v. Bharat Cooking Coal Ltd. & Ors., (2007) 1 SCC 663, wherein it was held that for invoking provisions of Section 4(6), it was imperative that termination order had been served on the workman.

The court also opined that the Respondent had never objected to withdrawal of the petition in which the interim order of status quo as regards employment was passed nor did it insist for permission to serve the order of termination during pendency of the petition and the same could not be used as defence at this stage.

Finally, the said order was set aside and the court directed the Respondent to release gratuity of the Petitioner with statutory interest thereof.

Arguments for the Petitioner were advanced by Advocate Vaibhav R. Gaikwad and for the Respondent by Advocate G. S. Hegade. 

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