Forfeiture of Gratuity

The gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused;

The gratuity payable to an employee shall be wholly forfeited-
· If the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
· If the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.

Gratuity of an employee stands protected except where dismissal owes to grounds provided under the Act

Panchmahal District Co-Operative Bank limited – Petitioner
Harjivandas Purshottamdas Prajapati – Respondent

Facts of the Case:

Respondent was working as Assistant-in-charge at Sukhpur branch of petitioner Bank. While he was in service, certain serious charges of misappropriation of funds of large amount were levelled against him and proceedings were instituted against him under Indian Penal code. Thereafter, he was placed under suspension. But before the regular charge sheet could be issued and /or regular departmental inquiry could be initiated and completed, the respondent reached the age of superannuation and was allowed to retire. But his retirement was subjected to an order that, he was being superannuated and allowed to retire on condition of not paying any monetary benefits.

After superannuation the respondent approached the controlling authority claiming his gratuity. The authority ordered the petitioners to pay the gratuity with interest. Feeling aggrieved, the petitioner preferred an appeal before the appellate authority under the Act (Payment of Gratuity Act, 1972) which was rejected. Aggrieved by this decision, the petitioner Bank approached Gujarat High Court. The respondents submitted that as per provisions of the Act, withholding or forfeiture of gratuity is permissible only in circumstances and to the extent provided for under Sec.4(6) of the Act. Otherwise, the amount towards gratuity shall stand protected under Sec.13 of the Act.


Hon’ble High Court while dismissing the petition ruled that the gratuity of an employee can be forfeited only if he is dismissed for misconducts under the Act. It was held that the orders passed by controlling or appellate authority in no manner will come in the way of the petitioner to take appropriate measure as available under law.

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