Gratuity forfeiture limits under the Payment of Gratuity Act: dismissal alone does not defeat gratuity rights.

Gratuity under the Payment of Gratuity Act, 1972 cannot be automatically forfeited merely because an employee is dismissed for misconduct. Section 4(6) allows forfeiture only to the extent of actual financial loss caused to the employer, or where the employee's act amounts to an offence involving moral turpitude committed in the course of employment. A settlement or service rule preserving gratuity benefits cannot be overridden by a contrary employer practice, and mere allegations of misconduct or moral turpitude are insufficient without proof of loss or a conviction. In the absence of either condition, gratuity remains payable.

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Issues: Whether gratuity could be forfeited automatically on dismissal from service under the Payment of Gratuity Act, 1972, and whether forfeiture was permissible in the absence of financial loss to the employer or a conviction for an offence involving moral turpitude.

Analysis: Section 4(5) of the Payment of Gratuity Act, 1972 preserves better terms of gratuity under an award, agreement or contract, and such protection extends to all contractual terms relating to gratuity. Section 4(6)(a) permits forfeiture only to the extent of damage or loss caused to the employer, while Section 4(6)(b)(ii) permits forfeiture only where the employee's act constitutes an offence involving moral turpitude committed in the course of employment. The employer's settlement provided that gratuity would not be forfeited on dismissal for misconduct except to the extent of financial loss, and no such loss was established. Mere disciplinary misconduct or an allegation of moral turpitude, without an established offence and conviction by a competent court, is insufficient to justify forfeiture. The employer's own rules cannot override the Act.

Conclusion: Gratuity is not automatically forfeited on dismissal from service. In the absence of financial loss or conviction for an offence involving moral turpitude, forfeiture was impermissible and the employee remained entitled to gratuity under the settlement and the Act.

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