IN THE HIGH COURT OF KERALA

(W.P (C). No. 17700/2009 dated September 17, 2009)

PRESENT
MR. JUSTICE v. GIRI
Between
Harrisons Malyalam Ltd.
And
Balan

Payment of gratuity act (39 of 1972) – section 4(6) – forfeiture of gratuity – It is permissible on
extent provided in statute – Employee’s refusal to surrender 50 cents of land of employer, held
would not justify forfeiture of gratuity.

Respondent is an employee who has put in 38 years of service and not paid gratuity on retirement.
The controlling authority under the Gratuity Act, 1972 ordered the payment and that was affirmed
by the appellate authority. Hence the present petition by the employer challenging the order. It was
dismissed.

FACTS OF THE CASE:

1. Balan joined services on May 1, 1968 and retired on September 1, 2005.
2. He had put 38 years of service and claimed an amount of Rs. 76,730/- towards gratuity.
3. He was allotted 50cents of land, while he was in service, for the cultivation and this was on
account of his status as a workman.
4. Balan was asked to surrender the land at the time of his retirement. But he refused to do so.
5. Harrisons Malyalam Ltd. approached court for the recovery of possession of the land and
spent amounts for conducting the cases. It had incurred damages due to illegal possession of
land by Balan. According to the company, loss so caused is eligible to be adjusted against
the gratuity otherwise payable under the Act. It also further contended that gratuity is the
payment of meritorious service and that on account of the misconduct and unmerited
conduct of Balan, he is not entitled to gratuity until he hands over possession of the land
belonging to the company.
6. He filed an application before the Controlling authority under the Payment of Gratuity Act,
1972.
 7. The controlling authority, after condoning the delay in application, determined the gratuity
payable at Rs. 66536/- and directed the management to pay the sum together with simple
interest at 10 % with effect from October 1, 2005.
8. But the contention taken up by Harrisons Malyalam Ltd is essentially not one of forfeiture of
gratuity payable under the Act, but one which arises from the perceived right of right of the
employer to withhold the gratuity otherwise payable under this Act or enable the
management to reimburse the loss allegedly caused by the workman, from the gratuity
amount which is due to the workman, from the gratuity amount.

ARGUMENTS BY THE APPELLANT

The management contended that claimant (Balan) possessed 50 cents of land, which was allotted to
him for the purpose of cultivation. He had not handed over the land to the company even after the
retirement and because of that company had to incur a loss of 1 lakh. The management also said that
there was a delay on the part of Balan to approach the Controlling authority under the Act.

ARGUMENTS BY THE CLAIMANT

Balan claimed that gratuity is a retirement benefit to an employee and that the management did not
pay him his gratuity amount on the grounds of illegal possession of land.

JUDGEMENT:
1. The main question which arises here for the consideration is whether it is open to the
management to forfeit a portion of the gratuity payable to the employee on the ground that
according to the management, loss has been caused by reason of some action or omission on
the part of the employee.
2. The contention which was primarily raised before the authorities and now before the court is
that the 1st respondent was allotted 50 cents of land, while he was in service, for cultivation
and this time was on account of his status as a workman. He was asked to surrender the said
land at the time of his retirement. He refused to do so. Petitioner had to approach the Court
for the recovery of possession of the same land and had to incur damages due to illegal
occupation of the land by the respondent. According to the company, Loss so caused is
eligible to be adjusted against the gratuity otherwise payable under the Act.
3. But, Gratuity is the payment of meritorious service and that on account of misconduct and
unmerited conduct of the 1st respondent, he is not entitled to gratuity until he hands over the
possession of the land to the Company.
4. The contention taken up by the petitioner is essentially not one of the forfeiture of gratuity
payable under the Act, but one which arises from the perceived right of the employer to
withhold the gratuity otherwise payable under the Act or enable the management to
reimburse the loss allegedly caused by the workman, from the gratuity amount which is due
to the workman. Section 4(6) of the Act is relevant in the context.
Section 4(6) deals with the circumstances under which gratuity could be forfeited
Section 4(6) Notwithstanding anything contained in sub-section (1), -
(a) the gratuity of an employee, whose services have been terminated for any act, willful
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.
(b) the gratuity payable to an employee may be wholly or partially forfeited -
(i) 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.
5. The gratuity payable to an employee is a retirement benefit and would assume the
characteristics of a valuable property in the hands of the employee. The right to receive
gratuity and the eligibility is regulated by the provisions of the Act.
6. Section 4(6) of the Act provides for the forfeiture. The said circumstances cannot be
broadened and nothing can be added to the statute by the authority under the act or by the
management as constituintg a basis for forfeiture of the gratuity. To do so, would be to
accept the position that a valuable right to property is being taken away or whittled down by
recourse to a procedure which does not have a sanction of law. That would be
impermissible.
7. It would also be appropriate to refer to section 13 and 14 of the Act which reads as follows:

• Section: 13 Protection of gratuity:

No gratuity payable under this Act and no gratuity payable to an employee employed
in any establishment, factory, mine, oilfield, plantation, port, railway company or
 shop exempted under section shall be liable to attachment in execution of any decree
or order of any civil, revenue or criminal court.

• Section: 14 Act to override other enactments :

The provisions of this Act or any rule made there under shall have effect
notwithstanding anything inconsistent therewith contained in any enactment other
than this Act or in any instrument or contract having effect by virtue of any
enactment other than this Act.

1. Thus, section 13 and 14 of the act would reinforce the premise that gratuity payable under
the act is a valuable right protected by the provisions of the act itself and the right to receive
the same under the Act would be available not withstanding anything contra contained in
any other statute or instrument or contract.

DECISION OF THE COURT:

The high court observed that forfeiture by petitioner of the gratuity payable to the respondent
(Balan) was for the reason that the latter refused to surrender 50 cents of land allotted to him. The
reason advanced by the petitioner was not one of the grounds for the forfeiture under Section 4(6) of
the Gratuity Act, 1972. Hence it could not be sustained. Petition dismissed.

Source: Labour Law Journal 2010, May issue