Gratuity cannot be withheld under Section 4(6) of the Payment of Gratuity Act, 1972 (the “1972 Act”) unless criminal allegations are proved before the court of law

The respondent employee was found guilty of sexual harassment by the Internal Committee (“IC”) and was dismissed from service, following which a show cause notice was issued against him asking him to give reasons as to why on account of his acts of moral turpitude, his gratuity be not forfeited. Finding the employee’s reply to show cause notice unsatisfactory, his gratuity was forfeited citing misconduct involving moral turpitude under Section 4(6) of the 1972 Act which talks about conditions to be satisfied for forfeiture of gratuity.

The respondent employee obtained an order from the Regional Labour Commissioner (Central) directing gratuity with interest to be released in favor of the respondent employee. Aggrieved by this order, the appellant bank approached the Delhi High Court. It was contended by the appellant bank that the acts of respondent employee amounts to moral turpitude and the conviction from criminal court is not mandatory for offence of moral turpitude. It was further contended that sexual harassment enquired by IC qualifies for the same apart from that an act in itself may constitute an act of moral turpitude without there being any criminality or criminal conviction. The respondent employee claimed that there were no criminal proceedings initiated against him by the appellant bank or the complainant thus the contention of the appellant bank is unsustainable. The Division Bench in this CM APPL. 52155-52157/2024 observed that no FIR was registered against the respondent and allegations were never proved before the court of law, additionally to invoke Section 4(6) of the 1972 Act, precondition for forfeiture of gratuity is that the terminated employee must be convicted for an offence punishable by law and the said offence must be an offence involving moral turpitude. Further, payment of gratuity must be denied only if dismissal is on account of an act, willful omission or negligence of employee which causes damage or loss, destruction of property of employer. The Division Bench relying on the observations ordered gratuity to be released.