Gratuity may be forfeited upon termination for employment-related misconduct constituting an offence involving moral turpitude.

Respondent No. 4, Dr. Sunil Kumar Singh, was employed by Eastern Coalfields Ltd. as a medical officer and superannuated on 31 March 2017.

A disciplinary proceeding was initiated against him on 27 December 2016 concerning an allegation that he demanded and accepted ₹400 as illegal gratification for issuing a pre-employment medical examination report.

A connected CBI criminal case was also pending.

Although the employee retired during the pendency of the proceedings, the petitioner withheld his gratuity of ₹10,00,000 on the ground that the disciplinary and criminal proceedings were pending.

The Controlling Authority directed payment of the gratuity, holding that gratuity could not be withheld in the absence of termination under Section 4(6) of the Payment of Gratuity Act, 1972, but declined to award interest.

The Appellate Authority directed release of the gratuity upon execution of an indemnity bond and provided for repayment with interest depending on the outcome of the criminal case.

During the writ proceedings, the CBI Court convicted the employee under Section 7 of the Prevention of Corruption Act, 1988; the sentence was suspended and his criminal appeal remained pending.

Eastern Coalfields challenged both orders before the High Court.

1. Whether gratuity could be withheld or forfeited where disciplinary proceedings had been initiated before the employee’s superannuation and continued thereafter under the applicable Coal India Conduct, Discipline and Appeal Rules.

2. Whether the employee’s conviction for accepting illegal gratification constituted an offence involving moral turpitude attracting Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972.

3. Whether the Controlling and Appellate Authorities under the Payment of Gratuity Act could direct unconditional or conditional release of gratuity by disregarding the employer’s disciplinary jurisdiction and the subsequent conviction.

Section 4(6) of the Payment of Gratuity Act, 1972 permits forfeiture of gratuity where the employee’s services have been terminated for damage or loss caused to the employer, riotous or disorderly conduct, violence, or an act constituting an offence involving moral turpitude committed in the course of employment.

The Court relied on Chairman-cum-Managing Director, Mahanadi Coalfields Ltd. v. Rabindranath Choubey, (2020) 18 SCC 71, which overruled the contrary reasoning in Jaswant Singh Gill v. Bharat Coking Coal Ltd., (2007) 1 SCC 663, and recognised that disciplinary proceedings may continue after superannuation where the applicable service rules so provide.

It also relied on State Bank of India v. Ratan Kumar Rabbai, 2022 SCC OnLine Cal 1218, holding that authorities under the Payment of Gratuity Act cannot sit in appeal over a disciplinary authority’s valid order.

Western Coal Fields Ltd. v. Manohar Govinda Fulzele, Civil Appeal No. 2608 of 2025, held that conviction is not an indispensable prerequisite to forfeiture where the misconduct itself constitutes an offence involving moral turpitude, though the disciplinary authority must determine the extent of forfeiture after giving the employee an opportunity of representation.

Moral turpitude means conduct involving vileness, depravity, or conduct contrary to honesty and accepted standards of morality.

Rules 34.1–34.3 of the Coal India Conduct, Discipline and Appeal Rules were relied upon as permitting continuation of disciplinary proceedings and withholding of gratuity in appropriate cases.

The Court found that the sole charge against the employee concerned demand and acceptance of a bribe while performing his official medical functions.

Acceptance of illegal gratification by a doctor issuing a fitness or medical certificate was held to be conduct involving moral turpitude and an offence committed in the course of employment.

The employee’s normal superannuation did not, in the Court’s view, extinguish the employer’s disciplinary jurisdiction, particularly because the disciplinary proceeding had commenced before retirement and the applicable service rules permitted its continuation.

The subsequent conviction by the CBI Court further established the serious nature of the misconduct, notwithstanding the pendency of the criminal appeal.

Applying Section 4(6)(b)(ii), the Court held that the employer was legally entitled to forfeit the gratuity.

The authorities under the Payment of Gratuity Act had therefore proceeded on an erroneous legal basis in treating superannuation as an absolute bar to withholding or forfeiture and in directing release of the gratuity.

The orders of the Controlling Authority dated 11 June 2018 and the Appellate Authority dated 10 October 2018 were quashed and set aside.

WPA 8203 of 2019 was allowed; connected applications were disposed of and the interim order was vacated.