FORFEITURE OF GRATUITY WOULD REQUIRE INITIATION OF CRIMINAL PROCEEDINGS THAT WOULD CULMINATE IN CONVICTION FOR AN ‘OFFENCE’

[Mr. M. GOVINDARAJAN]

In SANJAY KAURA AND F.G. RUNDA VERSUS AIR INDIA LIMITED - 2024 (2) TMI 719 - DELHI HIGH COURT, the petitioners were the employees of Air India Limited, the respondent in this case.  The petitioners were dismissed for serious allegations of misconduct.  Due to this effect the gratuity was forfeited.  Against this decision of the management the petitioners filed a petition before the Controlling Authority who allowed the payment of gratuity.  The company filed appeal against this order of Controlling Authority.  The appellate authority allowed the appeal. 

Therefore writ petition was filed by the petitioners challenging the order of Appellate Authority before Delhi High Court.  The High Court heard the submissions made by the parties to the present writ petition.  The High Court decided the issue to be decided in this petition.  The issue relates to forfeiture of gratuity in circumstances where employees have been terminated for an act which constitutes an offence involving moral turpitude, having committed the same during the course of their employment.

The main allegation against the petitioners is unauthorized appropriation of stock of CVDs from the stores and using them in a conspiracy and in connivance with the other persons for illegal and unjust enrichment. The enquiry was conducted by the company.  Reasonable opportunity of being heard was granted to the petitioners.  The Enquiry Officer submitted his report to the management which analyzed and concurred with the findings of the Enquiry Officer.  The Disciplinary Authority dismissed the petitioners from services of the company with immediate effect and without any terminal benefits.  A show cause notice was issued to the petitioners which notified the petitioners that the Disciplinary Authority had proposed the punishment of dismissal from services with immediate effect without terminal benefits and time of 7 days was given to them to show cause as to why the punishment proposed not be imposed on them.

The High Court observed that a First Information Report was lodged by the CBI in 2000. A charge sheet was also filed subsequently. It is another matter that charges have not been framed for the last two decades in the proceedings arising out of the said FIR and charge sheet.  This, however, cannot be a reason to contend, at this stage, that the petitioners will possibly be convicted for the offences charged.  The High Court opined that it is up to the State/petitioners to seek whatever remedies are at their disposal to complaint of and assail this long delay in consideration of the charge sheet and completion of the criminal procedure in accordance with law and before the Court of competent jurisdiction. It is up to the criminal court to apply its mind on the charge sheet, decided whether or not to frame charges and as to whether the petitioners have to be sent for trial and finally whether they will be convicted or not.

The High Court framed the issue to be decided in this case is whether the petitioners, not being convicted at the stage, permit the management to invoke section 4(6)(b)(ii) of the Payment of Gratuity Act for forfeiture of gratuity. In essence it involves determination by the management that the Act, for which the services of the employees have been terminated, constitutes an offence involving moral turpitude. 

The High Court observed that the Courts held that forfeiture of the gratuity would require initiation of criminal proceedings that would have culminated in conviction of an offence.  The High Court relied on the judgment of High Court, Bombay in WESTERN COAL FIELDS LIMITED, VERSUS THE PRESIDING OFFICER, APPELLATE AUTHORITY UNDER THE PAYMENT OF GRATUITY ACT, 1972 & DY. CHIEF LABOUR COMMISSIONER (C) , NAGPUR. - 2020 (1) TMI 1671 - BOMBAY HIGH COURT.  In this case it was held that for an employer to deprive and employee of gratuity under Section 4(6)(b)(ii) of the said Act, would necessarily require the initiation of criminal proceedings that would culminate in conviction for an offence.  The employer could then come to a conclusion that such an offence does involve moral turpitude and then forfeit the gratuity of an employee. This is because the said provision has to be interpreted strictly as it has the consequence of depriving an employee of gratuity for which he would otherwise be eligible, based on long years of continuous service.

In view of the above decision the High Court accepted the contentions of the petitioners. The stress laid by the respondent management that the seriousness of the offence entails a stricter view and ought to lead the forfeiture of gratuity cannot be countenanced, simply since whatever the situation, due process of law cannot be circumvented.  The issue relating to the dismissal of the petitioners forms a separate litigation stream. Therefore the High Court set aside the impugned decisions passed by the Deputy Chief Labor Commissioner (Central) and the Appellate Authority.