In a significant ruling, the Karnataka High Court has established that employers cannot forfeit an employee’s gratuity without first initiating recovery proceedings. This decision came to light following Justice Suraj Govindaraj’s dismissal of a plea from the Central Warehousing Corporation, which sought to withhold gratuity payments to its dismissed employee, G C Bhat, citing misappropriation charges.
The court’s intervention was required after the Controlling Authority ordered the corporation to disburse Rs 7,88,165 in gratuity to Bhat, in addition to 10 percent interest accruing since December 12, 2013. The corporation contended that Bhat’s dismissal was justified due to his involvement in activities that allegedly caused a substantial financial loss of Rs 1.71 crore. However, it failed to initiate formal recovery procedures against him.
Delving into the specifics, the High Court noted that while Bhat’s gratuity was withheld, no actual steps were taken to recover the claimed losses. The bench highlighted that dismissal or suspension should not automatically entitle an employer to withhold dues and emphasized the necessity of conducting proper legal proceedings for recovery if losses are to be recouped.
Justice Govindaraj’s ruling stressed that the employer should have commenced recovery actions, allowing the accused employee a fair chance to defend themselves. He criticized the corporation’s laxity in initiating recovery processes, describing it as an oversight by its officials. The verdict reaffirmed that without formal recovery proceedings, any claims of losses remain unproven and cannot justify the forfeiture of gratuity.
