Statutory gratuity rights prevail over non-statutory service rules, and forfeiture requires strict compliance with mandatory conditions.

The Payment of Gratuity Act, 1972 was treated as a beneficial welfare statute creating a statutory vested right to gratuity, and its scheme for payment and forfeiture prevailed over non-statutory service rules; the employer could not curtail gratuity by relying on the Coal India Executives' Conduct Discipline and Appeal Rules, 1978. Gratuity could be forfeited only on strict compliance with Section 4(6), including termination of service for the specified misconduct and, where applicable, quantification of loss or damage caused; because those statutory preconditions were not met, forfeiture was impermissible. The refusal to deny gratuity was therefore upheld, and the employee remained entitled to gratuity with consequential reliefs.

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Issues: (i) whether the Payment of Gratuity Act, 1972 prevailed over the Coal India Executives' Conduct Discipline and Appeal Rules, 1978 for regulating payment and forfeiture of gratuity; (ii) whether forfeiture of gratuity was permissible in the absence of termination of service and satisfaction of the conditions in Section 4(6) of the Payment of Gratuity Act, 1972.

Issue (i): Whether the Payment of Gratuity Act, 1972 prevailed over the Coal India Executives' Conduct Discipline and Appeal Rules, 1978 for regulating payment and forfeiture of gratuity.

Analysis: The Act was held to be a beneficial welfare statute creating a statutory right to gratuity and laying down a complete scheme for its payment, quantification, and forfeiture. The service rules relied upon by the employer were not statutory in character, and a non-statutory rule could not override or curtail the vested right created by the Act. Any power to withhold or recover gratuity under the service rules had to yield to the statutory conditions and limitations contained in the Act.

Conclusion: The Act prevailed over the service rules, and the employer could not deny gratuity by relying on non-statutory rules.

Issue (ii): Whether forfeiture of gratuity was permissible in the absence of termination of service and satisfaction of the conditions in Section 4(6) of the Payment of Gratuity Act, 1972.

Analysis: Section 4(6) permits forfeiture only where the employee's services have been terminated for the specified misconduct, and in clause (a) forfeiture is limited to the extent of the damage or loss caused. The disciplinary order did not quantify the loss or damage, nor did it establish termination of service for the statutory grounds required by Section 4(6)(a) or Section 4(6)(b). The statutory preconditions for forfeiture, therefore, were not fulfilled, and the controlling authority acted within jurisdiction in refusing forfeiture under the Act.

Conclusion: Forfeiture of gratuity was not permissible, as the statutory conditions under Section 4(6) were not satisfied.

Final Conclusion: The order denying gratuity was unsustainable in law, and the appellant remained entitled to gratuity with consequential reliefs.

Ratio Decidendi: Gratuity under the Payment of Gratuity Act, 1972 is a statutory vested right that can be forfeited only in strict compliance with Section 4(6), and a non-statutory service rule cannot enlarge or override those statutory conditions.

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