2025 INSC 233 Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2608 of 2025

(@ SPECIAL LEAVE PETITION (C) NO.10088 of 2020)

Western Coal Fields Ltd.      …Appellant

versus

Manohar Govinda Fulzele  …Respondent

W I T H

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)

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J U D G M E N T

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

1

  on whose behalf

learned   Solicitor   General   Mr.   Tushar   Mehta

appears.  The other appeals are by the Maharashtra

State Road Transport Corporation

2

  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

1 For brevity ‘PSU’

2 For brevity ‘MSRTC’

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decision of this Court in Union Bank of India and

Ors.   vs.   C.G.   Ajay   Babu

3

.  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

3

.  C.G. Ajay Babu

3

 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

3 (2018) 9 SCC 529

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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

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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

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Court in  Jaswant Singh Gill vs. Bharat Coking

Coal Ltd.

4

.  

7.Jaswant Singh Gill

4

, an employee

of a PSU; the services in which were regulated by

the Conduct, Discipline and Appeal Rules, 1978

5

,

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

4 (2007) 1 SCC 663

5 For brevity ‘CDA Rules’

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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

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Gill

4

, 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

4

 was

overruled by a three Judge Bench in  Mahanadi

Coalfields   Ltd.   vs.   Rabindranath   Choubey

6

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   Gill

4

 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

6 (2020) 18 SCC 71

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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

3

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 Babu

3

 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. 

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10.As has been argued by the learned

Solicitor General and the learned Counsel appearing

for MSRTC, sub­clause (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,

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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

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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

7

 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

7

  was   a   case

where the services of the delinquent employee were

7 (2013) 9 SCC 363

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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

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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   Kumar

7

Judgment: 

“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

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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

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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.

……………………..……………, J.

[SUDHANSHU DHULIA] 

……………………..……………, J.

[K. VINOD CHANDRAN]

NEW DELHI;

FEBRUARY 17, 2025.

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