2025 INSC 233
SUPREME COURT OF INDIA
(HON’BLE
SUDHANSHU DHULIA, J. AND HON’BLE K. VINOD CHANDRAN, JJ.)
WESTERN COAL FIELDS
LIMITED
Petitioner
VERSUS
MANOHAR GOVINDA
FULZELE
Respondent
Civil
Appeal No.2608 of 2025 (@ Special Leave Petition (C) No.10088 of 2020) WITH Civil
Appeal No.2609 of 2025 (@ Special Leave Petition (C) No.21957 of 2022) Civil
Appeal No.2610 of 2025 (@ Special Leave Petition (C) No.1907 of 2025-Decided on
17-02-2025
Labour Law, Gratuity
Payment of Gratuity
Act, 1972, Section 4(6) – Gratuity - Forfeiture - Termination on
misconduct - Permissibility of
forfeiture of gratuity, in the event of termination of service on misconduct,
which can be categorised as an act constituting an offence involving moral
turpitude; without there being any conviction in a criminal case or even a
criminal proceeding having been initiated - 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 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 appointment itself being illegal,
there is no question of the terminated employee seeking fruits of his
employment by way of gratuity - Decision of the PSU forfeiting his entire
gratuity upheld.
(Para
13 to 15)
JUDGMENT
K. Vinod Chandran, J.
:- Leave
granted.
2.
The question raised in the above cases is the permissibility of forfeiture of
gratuity, in the event of termination of service on misconduct, which can be
categorised as an act constituting an offence involving moral turpitude;
without there being any conviction in a criminal case or even a criminal
proceeding having been initiated.
3.
The appellant in one of the appeals is a Public Sector Undertaking[For brevity ‘PSU’] on whose behalf
learned Solicitor General Mr. Tushar Mehta appears. The other appeals are by
the Maharashtra State Road Transport Corporation[For brevity ‘MSRTC’] for whom Ms. Mayuri Raghuvanshi,
learned Standing Counsel appears. Impugned judgments found the forfeiture of
gratuity to be not permissible under the Payment of Gratuity Act,
1972 (the Act) relying on the decision of this Court in Union Bank of
India and Ors. vs. C.G. Ajay Babu[(2018)
9 SCC 529] . On behalf of the contesting respondent in the appeal
filed by the PSU, Mr. Shivaji M. Jadhav appears to defend the reasoning in the
judgment and none appears for the respondent in the appeals filed by the MSRTC;
though served with notice.
4.
Before we look into the facts of the separate cases, we have to dwell upon the
law as declared in C.G. Ajay Babu. C.G. Ajay Babu was a case in which a
delinquent employee, while working as Branch Manager in a Bank was dismissed
from service pursuant to allegations of misconduct being proved against him in
a departmental proceeding. The misconducts alleged and proved were the failure
to take steps to ensure and protect the interests of the Bank, failure to
discharge duties with utmost devotion, diligence and honesty and for acts
unbecoming of an Officer employee. Further show cause notice was issued
threatening forfeiture of gratuity, on the ground that the misconducts proved,
amounts to acts involving moral turpitude. The challenge made against the
dismissal before the High Court failed, but the forfeiture was held to be bad.
The forfeiture was upset, on the finding that, there was no allegation of
financial loss caused to the bank; which was the only ground on which gratuity
could be forfeited as per the Bipartite Settlement regulating the conduct and
behaviour of the employees of the Bank; including disbursal of gratuity.
5.
A Division Bench of this Court found that subsection (5) of Section
4 of the Act is a non obstante clause which does not affect the right of
an employee to receive better terms of gratuity, under any award, agreement or
contract with the employer. While subsection (5) made inapplicable the other
provisions of Section 4, subsection (6); which deals with forfeiture of
gratuity, despite being a non obstante provision made inapplicable only the
provisions of subsection (1); which created the statutory right for gratuity on
an employee, limited for the purposes of forfeiture. It was held that, insofar
as the delinquent employee having been in the service of a bank, which service
is regulated by the Bipartite Settlement, which also contains provisions
for payment of gratuity and its forfeiture, subsection (6) of Section
4 of the Act is inapplicable to the employees of the bank. The Settlement
providing for better terms of gratuity also provided for its forfeiture when
the misconduct results in financial losses to the bank and only to the extent
of the loss; while specifically prohibiting forfeiture of gratuity for
dismissal on any other ground. The order of the High Court was upheld finding
that the forfeiture; in the teeth of the provisions of the Bipartite
Settlement, could not have been carried out by the bank.
6.
Having held the forfeiture to be bad, the Bench also looked at the provision
for forfeiture under Section 4(6) of the Act and specifically found
that “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 in a Court of Law”
(sic Para 19). The Court placed reliance on another judgment of this Court
in Jaswant Singh Gill vs. Bharat Coking Coal Ltd. [(2007) 1 SCC 663] .
7.
Jaswant Singh Gill4, an employee of a PSU; the services in which were regulated
by the Conduct, Discipline and Appeal Rules, 1978 [For brevity ‘CDA Rules’] , retired during the pendency of
disciplinary proceedings, with the gratuity payable withheld, due to the
pending proceedings. On finalization of the disciplinary proceedings, the
appellant was found guilty of misconduct relatable to the role played in
causing shortages in stock and concealing it from the higher authorities, which
was held to be a very serious misconduct warranting punishment of dismissal;
which, however, was not imposed considering the fact that the employee had
superannuated. The Disciplinary Authority hence imposed the punishment of
forfeiture of the entire gratuity, which was challenged unsuccessfully before
the High Court. This Court found that the provision in the CDA Rules to
withhold the gratuity of an employee retiring, against whom disciplinary
proceedings are pending, and the provision to recover from the gratuity, the
whole or part of any pecuniary loss caused to the company were contrary to the
provisions under Section 4 of the Gratuity Act, which provisions of
the Act prevail over the CDA Rules. It was held that though the CDA Rules
provided for disciplinary proceeding to be continued after superannuation, the
major penalty of dismissal could not have been imposed after superannuation.
Looking at subsection (6) of Section 4; which takes away the accrued,
vested right under subsection (1), its application was held to be possible only
when the conditions incorporated therein are fulfilled. A scrupulous
observation of the provisions of subsection (6) would indicate that such
forfeiture could be effected only in the event of termination for reason of
wilful omission or negligence causing loss to the employer (clause (a)); or if
the termination is on account of riotous or disorderly or any other act of violence
(clause b(i)); or if the employee has been terminated for any act which
constitutes an offence involving moral turpitude (clause b(ii), none of which
were satisfied in that case. Jaswant Singh Gill, according to us, did
not find that forfeiture of gratuity under Section 4(6)(b)(ii) is
only possible if there is a conviction by a criminal court for an offence,
which alone could result in the misconduct being treated as one constituting
moral turpitude.
8.
Further Jaswant Singh Gill was overruled by a three Judge Bench
in Mahanadi Coalfields Ltd. vs. Rabindranath Choubey[(2020) 18 SCC 71] wherein it was held that even when an
employee retires during the pendency of disciplinary proceedings, the services
are deemed to be continued, for the purpose of continuation of the proceedings,
as per rules. The delinquent employee since deemed to be in service, even a
major penalty of termination could be imposed on the delinquent employee, who
has superannuated during the pendency of the proceedings. We cannot but
reiterate that, Jaswant Singh Gill4 had not considered the issue as to whether
there could be a forfeiture of gratuity if the delinquent employee is found to
have committed an offence involving moral turpitude; even when there is no
conviction entered by a Criminal Court on the very same offence.
9.
With all the respect at our command, the interpretation in C.G. Ajay Babu does
not come out of the statutory provision; Section 4(6)(b)(ii) of the
Act. Normally we would have referred the matter for consideration by a Larger
Bench, but, as we noticed, the statutory provision does not make it a
requirement that the misconduct alleged & proved in a departmental enquiry
should not only constitute an offence involving moral turpitude, but also
should be duly established in a Court of Law. The words "duly established
in a Court of Law" cannot be supplied to the provision. Moreover, as we
observed; the interpretation of sub clause (b)(ii) of subsection (6)
of Section 4 was uncalled for in C.G. Ajay Babu3 since the provisions
of the Section 4, including subsection (6) was found to be inapplicable to
the employer Bank and its employee, by virtue of subsection (5) of Section
4. The interpretation, hence, with due respect was an obiter making a reference
unnecessary.
10.
As has been argued by the learned Solicitor General and the learned Counsel
appearing for MSRTC, sub clause (ii) of Section 4(6)(b) enables
forfeiture of gratuity, wholly or partially, if the delinquent employee is
terminated for any act which constitutes an offence involving moral turpitude,
if the offence is committed in the course of his employment. 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. The standard of proof required in a criminal proceeding is quite
different from that required in a disciplinary proceeding; the former being
regulated by a higher standard of ‘proof beyond reasonable doubt’ while the
latter governed by ‘preponderance of probabilities’. The provision of
forfeiture of gratuity under the Act does not speak of a conviction in a
criminal proceeding, for an offence involving moral turpitude. On the contrary,
the Act provides for such forfeiture; in cases where the delinquent employee is
terminated for a misconduct, which constitutes an offence involving moral
turpitude. Hence, the only requirement is for the Disciplinary Authority or the
Appointing Authority to decide as to whether the misconduct could, in normal
circumstances, constitute an offence involving moral turpitude, with a further
discretion conferred on the authority forfeiting gratuity, to decide whether
the forfeiture should be of the whole or only a part of the gratuity payable,
which would depend on the gravity of the misconduct. Necessarily, there should
be a notice issued to the terminated employee, who should be allowed to
represent both on the question of the nature of the misconduct; whether it
constitutes an offence involving moral turpitude, and the extent to which such
forfeiture can be made. There is a notice issued and consideration made in the
instant appeals; the efficacy of which, has to be considered by us separately .
11.
As far as, the PSU is concerned, we find that the appellant was proceeded
against for the misconduct of producing a fraudulent ‘date of birth
certificate’ to obtain appointment. The learned Counsel for the
respondent argued that he has served almost 22 years in the PSU and that
gratuity is the fruits of his service; which was otherwise unblemished, and is
also a statutory right as per the Act, which cannot be denied to him on
termination. The learned ASG, however, points out the appellant would not have
obtained the appointment if his actual date of birth had been disclosed at the
time of appointment. The appellant, in fact was born in 1953, as proved at the
enquiry, while the date of birth submitted for his appointment was of the year
1960. The very substratum of the appointment having been removed, the appellant
cannot plead for any leniency and the terminated employee deserves no sympathy
asserts the Learned ASG, who also relies on the decision of this Court
in Devendra Kumar vs. State of Uttaranchal to contend that a
suppression of material information at the time of selection or appointment
would constitute an offence involving moral turpitude.
12.
Devendra Kumar[(2013) 9 SCC 363]
was a case where the services of the delinquent employee were terminated for
reason of suppressing material information regarding pending criminal cases
against him, at the time of appointment. This Court held that when an
appointment is obtained by employing fraud; the question is not whether the
applicant is suitable for the post but whether the appointment was obtained by
supressing material information. It was held that even if the offence alleged
in the case pending against the applicant would not involve moral turpitude,
suppressing such information would amount to moral turpitude.
13.
In 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.
14.
Now we come to the question of whether the forfeiture of gratuity of the
terminated employees should be only partly or wholly. Insofar as the PSU is
concerned, the appointment itself was invalid for reason of suppression of the
actual date of birth and production of a forged certificate. We extract paragraph
25 from Devendra KumarJudgment:
“25. More so, if the
initial action is not in consonance with law, the subsequent conduct of a party
cannot sanctify the same. Sublato fundamento cadit opus — a foundation being
removed, the superstructure falls. A person having done wrong cannot take advantage
of his own wrong and plead bar of any law to frustrate the lawful trial by a
competent court. In such a case the legal maxim nullus commodum
capere potest de injuria sua propria applies. The persons violating the
law cannot be permitted to urge that their offence cannot be subjected to
inquiry, trial or investigation. (Vide Union of India v. Major General Madan
Lal Yadav [(1996) 4 SCC 127 : 1996 SCC (Cri) 592 : AIR 1996 SC 1340] and
Lily Thomas v. Union of India [(2000) 6 SCC 224 : 2000 SCC (Cri) 1056] .) Nor
can a person claim any right arising out of his own wrongdoing (jus ex injuria
non oritur).”
15.
The 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.
16.
We allow the appeals with the above modification in so far as the extent of
gratuity forfeited in two appeals. Parties to bear their own costs.
17.
Pending application(s), if any, shall stand disposed of.
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