The Supreme Court interprets forfeiture of gratuity provision to necessitate termination on account of misconduct for an offence involving moral turpitude rather than conviction in a criminal proceeding

The present SLP (C) No. 21957 of 2022 & SLP (C) No. 907 of 2025 were preferred by the appellant i.e. employer against impugned judgements which found forfeiture of gratuity to be not permissible under the provisions of the Payment of gratuity Act, 1972 (“PGA”), the impugned judgements relied on the previous order of the Supreme Court in Union of India and Ors. v. C.G. Ajay Babu (2018) 9 SCC 529.

The brief facts of the case involve the delinquent employee producing a fraudulent date of birth certificate to obtain appointment, the counsel for the employee argued that the gratuity is the fruit of his service which arises from his 22 years of long service to counter this the appellant contended that they would have not obtained the appointment if his actual date of birth had been disclosed at the time of appointment. Such fraudulent practice amounts to misconduct for an offence involving moral turpitude which calls for forfeiture of gratuity.

While delving into the provisions of the PGA, the Supreme Court observed that, sub clause (ii) of Section 4(6)(b) of the PGA enables forfeiture of gratuity, if the employee is terminated for any act which constitutes an offence involving moral turpitude, if the offence is committed in the course of his employment.  An ‘Offence’ as defined in the General Clauses Act,   means   ‘any   act   or   omission   made punishable by any law and does not call for a conviction which definitely can only be on the basis of evidence led in a criminal proceeding.

The standard of proof required in a criminal proceeding is different from a disciplinary proceeding. The former requires a higher standard of proof beyond reasonable doubt while the latter is governed by ‘preponderance of probabilities’. The provision pertaining to forfeiture of gratuity does not speak of a conviction in criminal proceedings for an offence involving moral turpitude, instead it provides for forfeiture in cases where employee is terminated for misconduct, which constitute an offence involving moral turpitude. Hence, the only requirement is for the disciplinary authority to decide as to whether the misconduct could, in  normal circumstances, constitute an offence involving moral turpitude.

Thus, the forfeiture was held to be legal, due to appointment in itself being illegal.