The Authors are Gyanendra Mishra, Partner and Maruti Nandan, Associate at Dentons Link Legal.
Introduction:
In a recent judgment titled Punjab National Bank vs. Niraj Gupta and Anr.[1] the Hon’ble Delhi High Court (“Hon’ble HC”) clarified that an employee’s gratuity could not be forfeited on the grounds of an ‘offence amounting to moral turpitude’ if there is no criminal conviction by a court of competent jurisdiction. The Hon’ble HC emphasized that it is not within the employer’s authority to determine what constitutes an ‘offence amounting to moral turpitude’.
Facts:
The Respondent (“Employee”) was serving as deputy general manager at Punjab National Bank (“Bank”) in the year 2015 when he was deputed as MD and CEO of Punjab National Bank International Ltd. in the UK where he was accused of sexual harassment of a colleague. As a result of this, he was called back to India, and an investigation was initiated against him by the Internal Complaints Committee (“IC”) of the Bank constituted under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“PoSH Act”). The IC ultimately held the Employee guilty of the sexual harassment allegations made against him.
As a result of the finding of the IC the Bank dismissed the Employee from his employment with the Bank, and it also served him with a show cause notice for forfeiture of gratuity for his acts amounting to moral turpitude as per section 4 of the Payment of Gratuity Act, 1972 (“Gratuity Act”). The reply to the notice by the Employee was found unsatisfactory by the Bank, resulting in forfeiture of his gratuity on account of an offence involving moral turpitude.
Aggrieved by this forfeiture of gratuity, the Employee reached out to the Controlling Authority of Gratuity, which ruled in his favour, and directed the Bank to pay the Employee his full gratuity along with interest. The Bank appealed before the Appellate Authority for Gratuity, which vide its April 2022 order (“Impugned Order”) dismissed the appeal preferred by the Bank, holding that essential conditions as stipulated under section 4(6)(b)(ii) of the Gratuity Act were not proved against the Employee by a court of competent jurisdiction, and the action of the Bank to forfeit the gratuity payable to the Employee is not justified and is unlawful. Aggrieved by the Impugned Order, the Bank preferred a writ petition before the Hon’ble HC.
Submissions by the Parties:
The Bank submitted that the Impugned Order was bad in law, as the allegations of sexual harassment against the Employee were proved during the investigation by the IC, and since the same amounts to an act involving moral turpitude therefore, the forfeiture of gratuity cannot be held to be unjustified. The Bank further submitted that the Appellate Authority erred in law by ruling that for an offence to fall within the ambit of ‘moral turpitude’ there must be a criminal case filed before a competent court. It also submitted that any act which is against the morals of society at large amounts to moral turpitude, and filing of criminal case or conviction may not be a necessary factor.
On the other hand, the Employee submitted that the reasoning of the Bank that the act alleged against him amounts to moral turpitude is unlawful as neither was he charged with an act involving moral turpitude, nor any criminal proceeding has been initiated against him. He further submits that mere dismissal of an employee by a departmental inquiry would not by itself constitute an offence involving moral turpitude, but rather for an employer to forfeit gratuity under Section 4(6)(b)(ii) of the Gratuity Act the dismissed employee shall be convicted for a misconduct involving moral turpitude, punishable by law for the time being in force.
Issue Before the Hon’ble Delhi HC:
Whether the act of the Bank to forfeit the gratuity payable to the Employee in the absence of any criminal proceeding before a court of competent jurisdiction justified?
Hon’ble Delhi High Court’s Observation:
The Hon’ble Delhi HC observed that for forfeiture of gratuity of an employee, the conditions that must be satisfied are:
- the terminated employee must be convicted for an offence punishable by law for the time being in force; and
- the said offence must be an offence involving ‘moral turpitude’.
The Delhi HC further observed that the expression provided under (4)(6)(b)(ii) of the Gratuity Act i.e., “constitutes an offence involving moral turpitude” suggests that the legislature has deliberately used a language of certainty in the provision and a mere possibility of the employee having committed an act constituting an offence involving moral turpitude is not sufficient to attract the aforementioned provision.
The Delhi HC further relied upon a landmark judgment of the Hon’ble Apex Court (Hon’ble SC) titled Union Bank of India vs. CG Ajay Babu[2] wherein the Hon’ble SC has held that for forfeiture of gratuity, the act/conduct involving moral turpitude is not for the employer to decide. Rather, it must be strictly decided as per the realm of criminal law and by a court of competent jurisdiction. Further, the Hon’ble SC has also held that it is not the conduct of a person involving moral turpitude that is required for forfeiture of gratuity rather the said conduct/act should constitute an ‘offence’ involving moral turpitude. The Hon’ble SC also highlighted the definition of ‘offence’ as contained in the General Clauses Act, 1897 whereby, to constitute an offence, the act should be made punishable under law which comes under the ambit of criminal law.
In this context, the Hon’ble Delhi HC dismissed the Bank’s writ petition. The Delhi HC ruled that although the Employee was found guilty of sexual harassment by the IC, which led to his dismissal according to the Bank’s rules, the Bank’s decision to forfeit his gratuity was not legally correct. The Hon’ble Delhi HC further stated that the crucial element of the act resulting in dismissal constituting an “offence amounting to moral turpitude” has not been proven against the Employee by a court of competent jurisdiction, as no criminal proceedings, either by the complainant or by the Bank, have been initiated against the Employee, let alone a conviction.
Future Implications For The Employers:
- Internal findings of misconduct by a disciplinary committee are not enough to forfeit an employee’s gratuity. There must be a criminal conviction by a court of competent jurisdiction for gratuity to be forfeited on the grounds of offence amounting to moral turpitude.
- Dismissal of an employee for misconduct as per the rules of the employer does not automatically trigger forfeiture of gratuity.