Supreme Court of India· 17 February 2025

Is misappropriation of meagre amounts by an employee an offence involving moral turpitude under the Payment of Gratuity Act, 1972, and does the smallness of the amount matter?

Western Coal Fields Ltd. v. Manohar Govinda Fulzele & Anr.

CIVIL APPEAL NO.2608 of 2025 · CIVIL APPEAL NO.2608 of 2025
Coram: K. Vinod Chandran; Sudhanshu Dhulia

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Answer

Misappropriation is an act constituting an offence involving moral turpitude, and even minimal amounts misappropriated constitute a misconduct warranting termination. The smallness of the sum goes only to the extent of forfeiture, where a more sympathetic approach may be called for.

Headnote

Payment of Gratuity Act, 1972 — s.4(5) — s.4(6)(b)(ii) — General Clauses Act — Forfeiture of gratuity — Offence involving moral turpitude — Conviction not required — Departmental enquiry — Extent of forfeiture — Payment of Gratuity Act, 1972 — s.4(6)(b)(ii) — Forfeiture needs no conviction — Held: Section 4(6)(b)(ii) requires only that the act for which the employee is terminated constitutes an offence involving moral turpitude. The words "duly established in a Court of Law" cannot be supplied to the provision, and the contrary interpretation was obiter. (¶9) General Clauses Act — Offence — Standard of proof in a departmental enquiry — Held further: An offence is any act or omission made punishable by law and does not call for a conviction. A departmental enquiry proceeds on preponderance of probabilities, not on proof beyond reasonable doubt. (¶10) Payment of Gratuity Act, 1972 — s.4(6) — Notice before forfeiture — Held further: The Disciplinary or Appointing Authority must decide whether the misconduct constitutes such an offence. Notice must issue to the terminated employee, who may represent on that question and on the extent of forfeiture, which turns on the gravity of the misconduct. (¶10) Payment of Gratuity Act, 1972 — s.4(6)(b)(ii) — Suppression of date of birth — Extent of forfeiture — Held further: An appointment obtained by suppressing the actual date of birth is itself illegal, and forfeiture of the entire gratuity was upheld. Where conductors misappropriated meagre amounts, forfeiture is confined to 25%; appeals allowed with that modification. (¶13, 15)

In the Court's own words

Paragraph 13In the present case it has been proved that the petitioner supressed his actual date of birth. The failure of the employer to initiate a criminal proceeding on the fraud employed by way of the the fabricated/forged certificate produced for the purpose of employment, does not militate against the forfeiture. Obviously, as coming out from the provision, no conviction in a criminal proceeding is necessitated, if the misconduct alleged & proved constitutes an offence involving moral turpitude. The very same reasoning applies in the appeals by the MSRTC were the delinquent employees, conductors in the stage carriages operated by the MSRTC were found to have indulged in misappropriation of fares collected from passengers. Misappropriation definitely is an act constituting an offence involving moral turpitude.

Paragraph 15The appointment itself being illegal, there is no question of the terminated employee seeking fruits of his employment by way of gratuity. We uphold the decision of the PSU forfeiting his entire gratuity. However, in the case of conductors (Civil Appeal No._____________ @SLP (C) No.21957 of 2022), we see that the act alleged and proved is of misappropriation of meagre amounts. It is trite that even if minimal amounts are misappropriated it would constitute a misconduct warranting termination, as held by this Court. However, on the question of forfeiture of gratuity, we are of the opinion that the Appointing Authority should have taken a more sympathetic approach. We do not propose to send back the matter for fresh consideration but direct the Appointing Authority to limit the forfeiture to 25% of the gratuity payable and release the balance amounts to the respondent employees.

Acts & Sections

s.4(6)(b)(ii) Payment of Gratuity Act, 1972s.4(5) Payment of Gratuity Act, 1972s.4(1) Payment of Gratuity Act, 1972General Clauses Act, 1897

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Also decided in this judgment

Under the Payment of Gratuity Act, 1972, must an offence involving moral turpitude be established by conviction in a criminal court before gratuity is forfeited under Section 4(6)(b)(ii)?What is the status of the observation in Union Bank of India v. C.G. Ajay Babu that an offence involving moral turpitude must be duly established in a Court of Law before gratuity is forfeited under the Payment of Gratuity Act, 1972?How does the meaning of offence in the General Clauses Act bear on forfeiture of gratuity under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972?What standard of proof distinguishes a disciplinary proceeding from a criminal proceeding when gratuity is forfeited under the Payment of Gratuity Act, 1972?What procedure must precede forfeiture of gratuity under Section 4(6) of the Payment of Gratuity Act, 1972?Does the authority forfeiting gratuity under the Payment of Gratuity Act, 1972 have a discretion as to whether the forfeiture is whole or partial?Does suppression of material information at the time of appointment amount to moral turpitude for the purposes of forfeiture of gratuity?Does an employer's failure to initiate a criminal proceeding on the fraud defeat forfeiture of gratuity under the Payment of Gratuity Act, 1972?

Plain-language answer prepared by the LexStreak Editorial Desk — verify against the judgment. Source: Supreme Court of India. Corrections