High Court Orders MP Gramin Bank to Release Gratuity to Widow of Bank Employee

The Madhya Pradesh High Court has directed Central Madhya Pradesh Gramin Bank to release gratuity to the widow of a deceased employee who had been terminated for allegedly misappropriating ₹1 lakh from the branch cash chest. The court stated that in the absence of any criminal prosecution, the bank could not forfeit gratuity.

Case Background

The deceased employee was subjected to departmental/disciplinary proceedings by issuance of charge sheet dated 30.08.2016 which levelled two charges which were as under:-
(a) The first charge was that the petitioner did not open the branch of the bank on 30.07.2016 despite being In-charge of the branch.
(b) The second charge was that the petitioner committed defalcation of Rs.1.00 Lakh in the cash chest of the branch on 29.07.2016.

Upon both the charges being found proved in the departmental enquiry, the deceased husband of petitioner was dismissed from service vide order dated 30.04.2017 which was confirmed in appeal vide order Annexure P-4 dated 02.11.2017. The husband of the petitioner thereafter expired on 19.11.2017, shortly after his appeal had been rejected by the appellate authority of the bank.

The petitioner had submitted an application for release of gratuity which was rejected by the bank vide Annexure P-5 dated 20.01.2018 on the ground that as per Section 4(6)(b) of Payment of Gratuity Act read with Clause 72(e) of Service Regulations of the Bank, gratuity is not payable in cases of dismissal.

Thereafter the petitioner filed WP No.7205/2020 before this Court which was disposed off directing the respondents to decide representation of the petitioner and now the bank has passed a fresh order (Annexure P-9) dated 18.08.2021 which is impugned in the present petition. In the said order it has been mentioned that as per Clause-72(e) of the Service Regulations of the bank, the husband of the petitioner being an officer, therefore as per Clause 72 (2) there would be forfeiture of gratuity because he stood dismissed on account of misconduct, and proviso would not apply on him.

Section 4(6) of the Payment of Gratuity Act allows an employer to forfeit gratuity to the extent of damage suffered in cases of misconduct, negligence, or acts causing financial loss. Subsection (b) specifically covers acts involving moral turpitude committed during employment. Similarly, the Service Regulations state that gratuity may only be forfeited for financial losses suffered by the employer.

The widow argued that since the misappropriated amount was returned, no actual loss occurred, and gratuity could not be withheld. The bank contended that the employee’s act involved moral turpitude, which justified partial or complete forfeiture.

What Court said

The court observed that the bank’s internal regulations cannot override the Payment of Gratuity Act, 1972, and noted there was no criminal prosecution against the employee. Relying on Union Bank of India v. C.G. Ajay Babu, the bench emphasized that Section 4(6)(b)(ii) cannot be invoked to deny gratuity when an employee has only been dealt with under service rules, without any criminal proceedings.

The court directed the bank to calculate and release the gratuity to the widow within 60 days, with 6% annual interest from the date of the employee’s death until actual payment.

Download Court Order PDF (This PDF is available for Premium Users Only. Click here to join premium)