The Supreme Court of India, in a landmark ruling, has held that an employee’s gratuity can be forfeited for misconduct involving moral turpitude without requiring a criminal conviction. The judgment was delivered by Justice Sudhanshu Dhulia and Justice K. Vinod Chandran in Civil Appeal No. 2608 of 2025 (Western Coal Fields Ltd. vs. Manohar Govinda Fulzele) along with Civil Appeal Nos. 2609 and 2610 of 2025, involving the Maharashtra State Road Transport Corporation (MSRTC).
Case Background
The appeals arose from disputes regarding the forfeiture of gratuity under the Payment of Gratuity Act, 1972. The primary issue was whether an employer could forfeit gratuity when an employee is dismissed for misconduct involving moral turpitude, even in the absence of a criminal conviction.
In the case of Western Coal Fields Ltd., the respondent Manohar Govinda Fulzele was found to have submitted a fraudulent date of birth certificate at the time of appointment. In the MSRTC cases, the dismissed employees were bus conductors accused of misappropriating collected fares. The respective employers invoked Section 4(6) of the Payment of Gratuity Act, which allows gratuity forfeiture in cases of misconduct constituting an offence involving moral turpitude.
Important Legal Issues
The key legal questions before the court were:
Whether forfeiture of gratuity under Section 4(6)(b)(ii) of the Payment of Gratuity Act requires a criminal conviction.
Whether the employer’s determination of misconduct in a departmental inquiry is sufficient to justify forfeiture.
Representing Western Coal Fields Ltd., Solicitor General Tushar Mehta argued that the fraudulent act of submitting a false birth certificate directly impacted the validity of the employee’s appointment. MSRTC’s counsel, Ms. Mayuri Raghuvanshi, contended that fare misappropriation constituted moral turpitude.
On the other side, Mr. Shivaji M. Jadhav, representing Fulzele, argued that his client had served for over two decades and should not be denied his gratuity for an alleged act at the time of employment. No counsel appeared for the MSRTC respondents despite being served notice.
Observations of the Supreme Court
The Court overruled the reasoning in C.G. Ajay Babu (2018) 9 SCC 529, which suggested that forfeiture of gratuity required a conviction in a court of law. The bench held:
“The requirement of the statute is not the proof of misconduct of acts involving moral turpitude but the act should constitute an offence involving moral turpitude and such offence should be duly established.”
The Court reasoned that a criminal conviction is not a prerequisite for forfeiture. The disciplinary authority’s finding that the misconduct constituted an offence involving moral turpitude was sufficient.
“An ‘Offence’ as defined in the General Clauses Act means ‘any act or omission made punishable by any law for the time being’ and does not call for a conviction; which definitely can only be on the basis of evidence led in a criminal proceeding.”
Decision of the Court
In Western Coal Fields Ltd., the Court upheld the complete forfeiture of gratuity, reasoning that the respondent would not have been appointed if the true date of birth was disclosed. The Court cited Devendra Kumar v. State of Uttaranchal (2013) 9 SCC 363, which held that suppression of material information in obtaining employment is an act of moral turpitude.
In the MSRTC cases, the Court acknowledged that fare misappropriation constituted misconduct involving moral turpitude. However, given that the amounts were minimal, the Court modified the forfeiture, directing the employer to forfeit only 25% of the gratuity instead of the entire amount.
