Forfeiture of Gratuity: [Section 4(6)]

1. Forfeiture to the extent of the damage/ loss: If the services of an employee have been terminated for-

(i) any act,

(ii) willful omission, or

(iii) negligence

causing any damage or loss to, or destruction of, property belonging to the employer- there the gratuity shall be forfeited to the extent of the damage or loss so caused;

2. Wholly or partially forfeiture of gratuity: (i) where 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 (ii) 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, there the gratuity payable to the employee may be wholly or partially forfeited.

Case law: If the employer has to be paid any amount regarding any type of charge by the employee and he has not paid the same during the course of his service then the employer can adjust the amount from the gratuity of the employee at the time of the payment of the gratuity at the termination of his employment. In Wazir Chand Vs Union of India 2001, LLR 172 (SC), it was held that there was no illegality in the amount of gratuity, which was paid by the employer. The appellant even after superannuation continued to occupy the quarter and the government in accordance with the rules, charged the rent from him and after adjusting other dues, the gratuity amount offered to be paid.

In Travancore Plywood Industries Ltd. Vs Regional Joint Labour Commissioner, (1966) II LLJ 85 (Ker.) it was held that the refusal of employees to surrender land belonging to the employer is not a sufficient ground to withhold the gratuity.

In the case Parmali Wallance Ltd Vs State of M.P., (1996) II LLJ 515 (MP), it was held that the right of the employer to forfeit the amount of earned gratuity of an employee whose services were terminated for any act, willful omission or negligence causing any damage to the employer is limited to the extent of the damage, and the proof of such damage.

When an offence of theft under law involves moral turpitude, gratuity stands wholly forfeited in view of Section 4(6) of the Act. [Bharat Gold Mines Ltd. Vs Regional Labour Commissioner (Central), (1987) 70 FJR 11 (Kern.)]

But when an employee, who has been given the benefit of probation under Section 3 of the Probation of Offenders Act, 1958, cannot be disqualified to received the amount of his gratuity. [S.N.Sunderson (Minerals) Ltd. Vs Appellate Authority-cum-Deputy Labour Commissioner, (1990) 60 FLR 6 (Summary) (M.P.]

In the case of K.C.Mathew Vs Plantation Corporation of Kerala Ltd., 2001 LLR (2) (Ker.), it was clearly held that withholding of gratuity is not permissible under any circumstances other than those enumerated in Section 4(6) of the Act and the right to gratuity is a statutory right and none can be deprived from such right.