2024 (2) TMI 719 - HC - Indian Laws

Delhi HC rules gratuity forfeiture requires criminal conviction for moral turpitude under Section 4(6)(b)(ii)

Sanjay Kaura And F.G. Runda Versus Air India Limited

Delhi HC set aside orders upholding gratuity forfeiture for terminated employees. Court held that forfeiture under Section 4(6)(b)(ii) of Payment of ... Forfeiture of gratuity - employees have been terminated for an act which constitutes an offence involving moral turpitude - commitment during the course of their employment - requirement of determination by the management that the act for which the services of the employees have been terminated, constitutes an offence involving moral turpitude - HELD THAT:- It has been categorically held by the Hon’ble Supreme Court in Union Bank of India [2018 (8) TMI 934 - SUPREME COURT] that “it is not the conduct of a person involving moral turpitude that is required for forfeiture of gratuity but the conduct or the act should constitute the offence involving moral turpitude.” and that “To be an offence, the act should be made punishable under law. That is absolutely in the realm of criminal law.” What has been highlighted in the above decision after explaining the scope and purview of the phrase ‘offence’ and its meaning within the context of section 4(6)(b)(ii) of the Act, is that “it is not for the Bank to decide whether an offence has been committed. It is for the court.” This emphatic statement on point of law and interpretation by the Hon’ble Supreme Court is binding and fully applicable to the facts of this case - Even though in Union Bank of India, the management had not registered an FIR, the principle laid down therein is on the very interpretation of said provision of section 4(6)(b)(ii) of the Act and would hold ground. This aspect has been reiterated in and applied by a Division Bench of this Court in Rajiv Saxena v. The Chief General Manager & Ors. [2018 (11) TMI 1952 - DELHI HIGH COURT], where gratuity was forfeited by the management pursuant to punishment of compulsory retirement by the disciplinary authority and a registration of a criminal case by the CBI. In fact, in that case a show cause notice specific on the issue of forfeiture of gratuity was issued as well. In the said petition preferred by the worker challenging forfeiture of gratuity, this Court held that the case therein had progressed merely till the stage of filing of charge sheet. Subsequently, it observed that, “The criminal court concerned will hereafter apply its mind to the contents of said charge sheet and pass an order on charge. The progress of the criminal case will depend on whether charges are framed against the Appellant; whether he is sent up for trial on those charges; whether he is convicted for the offences with which he is charged and whether such conviction attains finality. Other courts have also followed Union Bank of India and held that forfeiture of the gratuity would require initiation of criminal proceedings that would have culminated in conviction for an offence. Considering the principles laid down by the Hon’ble Supreme Court, as well as the consistent view taken by various courts including this Court, the submission of the petitioners has to be accepted - No purpose would be served in assessing the other submission relating to the change of the stand of the management from termination due to ‘misconduct’ to termination due to ‘loss of confidence’. In fact, the said alteration from ‘misconduct’ to ‘loss of confidence’ as the final reason for termination further dilutes the stand taken by the respondent-management. The impugned decisions dated 11th October, 2018 passed by the Deputy Chief Labour Commissioner (Central) and the Appellate Authority under the Payment of Gratuity Act, 1972 are set aside - petition allowed. Issues Involved:1. Forfeiture of gratuity without issuing a show cause notice.2. Requirement of conviction for forfeiture of gratuity under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972.3. Change of management's stand from 'misconduct' to 'loss of confidence' for termination.4. Unequal treatment in comparison to a co-delinquent.Issue-wise Summary:1. Forfeiture of gratuity without issuing a show cause notice:The petitioners contended that the respondent-management had not issued any show cause notice for forfeiture of gratuity. The Court noted that while no specific format for such notice is prescribed under the Act, principles of natural justice must be adhered to. The management had sent memoranda proposing dismissal without terminal benefits and gave the petitioners time to respond, which the Court deemed sufficient for compliance with natural justice principles.2. Requirement of conviction for forfeiture of gratuity under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972:The Court emphasized that forfeiture of gratuity under Section 4(6)(b)(ii) requires a conviction for an offence involving moral turpitude. The petitioners had not been convicted, and the charges had not been framed even after two decades. The Court relied on the Supreme Court's ruling in Union Bank of India, which stated that the act should be punishable under law and that it is for the court, not the employer, to decide whether an offence has been committed. Thus, the management's decision to forfeit gratuity was premature and invalid.3. Change of management's stand from 'misconduct' to 'loss of confidence' for termination:The management's shift from 'misconduct' to 'loss of confidence' as the reason for termination further weakened their position. The Court noted that forfeiture of gratuity cannot be premised on termination based on loss of confidence, as it does not align with the statutory requirements for forfeiture under the Act.4. Unequal treatment in comparison to a co-delinquent:The petitioners argued that the management had paid gratuity to the legal representatives of a co-delinquent who was also charge-sheeted. The respondent's counsel clarified that the co-delinquent had expired before any disciplinary action could be taken, hence the payment of gratuity. The Court did not find this argument sufficient to justify the forfeiture of the petitioners' gratuity.Conclusion:The Court set aside the impugned decisions dated 11th October, 2018, passed by the Deputy Chief Labour Commissioner (Central) and the Appellate Authority under the Payment of Gratuity Act, 1972. The writ petitions were allowed, and the petitioners were entitled to their gratuity with interest as directed by the Controlling Authority.