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BIPARTITE SETTLEMENT 1966 - The Payment of Gratuity Act, 1972

Respondent was employee of Appellant Bank. While serving in the branch, disciplinary action was initiated. Against him and he was dismissed from service. Order of dismissal has attained finality. Respondent was issued show cause notice as to why gratuity should not be forfeited on account of proved misconduct involving moral turpitude. His explanation was rejected and gratuity was forfeited. On appeal, learned Single Judge held that respondent was entitled to gratuity as there was no financial loss to the Bank. Bank filed intra court appeal which was dismissed holding that forfeiture of gratuity is permissible to the extent of financial loss. Aggrieved, the Bank has filed the present appeal.

The Court examined the issue whether Bank was justified in forfeiting the gratuity particularly when it did not suffer any financial loss.

The Court held that as no loss has been caused to the Bank on account of misconduct of respondent, Bank cannot take recourse to Section 4 (6) of the Act. There is no conviction of respondent for the misconduct, with according to Bank, is an offence involving moral turpitude as no criminal prosecution has been lodged by Bank. In the absence of any loss caused to Bank, even clause 12 (2) of the BPS will not come into play to withhold or forfeit gratuity. Forfeiture of gratuity is not automatic on dismissal from service. It is subject to provisions of section 5 and 4 (6) of the Act. There is no merit in appeal. Appeal dismissed.

-S.C. CLR 2018, Union Bank of India v. C.G. Ajay Babu & Anr


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