Termination of service is necessary for forfeiture of gratuity by employer – Bombay HC

 Termination of service is necessary for forfeiture of gratuity by employer – Bombay HC

The Bombay High Court (“Bombay HC”) on July 25, 2019 reiterated the requirement of termination of service of an employee for forfeiture of his/her gratuity in Shri Shankar Dadoba Naik v. Maharashtra State Road Transport Corporation, Palghar Division and others. (Click here to view judgment).

Shankar Dadoba Naik a bus conductor, an employee of the Maharashtra State Road Transport Corporation (“Corporation”) had been served with a show cause notice for dismissal of service on account of misconduct on July 07, 2003 by the Corporation. Shankar Dadoba Naik challenged this show cause notice, however, his challenge was dismissed by the Industrial Court. He challenged the decision of the Industrial Court by way of a writ petition. The Bombay High Court admitted his plea, status-quo was ordered with regard to the employment during the pendency of this writ petition on December 20, 2010. However, on December 02, 2011, Shankar Dadoba Naik was served another show cause notice by the Corporation for forfeiture of his gratuity. His superannuation was due on December 31, 2011, Shankar Dadoba Naik withdrew his writ petition post his superannuation. Vide order of the Corporation dated December 12, 2011, Shankar Dadoba Naik’s gratuity was forfeited. This case was a writ petition filed by Shankar Dadoba Naik against this order of forfeiture of Gratuity.

Bombay HC noted that only a final show cause notice was issued to Shankar Dadoba Naik, he was never served a termination order. Bombay HC relied on the Supreme Court judgment of Jaswant Singh Gill v. Bharat Cooking Coal Ltd. and Ors. to hold that once a workman stood superannuated and he was not served with an order of termination, the requirements of forfeiture of gratuity under the Payments of Gratuity Act, 1972 (“Act”) are not met. The conditions of forfeiture of gratuity being termination of employee for riotous or disorderly conduct, violence or termination for any act which constitutes an offence involving moral turpitude in the course of his employment. Bombay HC finally held that for forfeiture of gratuity it is mandatory that a termination order be served upon the employee.

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The Bombay HC, in this case, has upheld the rights of employees. This case brings forward the importance of a formal and written ‘termination order/letter’. Therefore, as the Bombay HC has reiterated that superannuated employees who have not received a termination letter will continue to be entitled to gratuity, it becomes important for employers to issue termination letters to all their employees including workmen upon termination.

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