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No deduction can be made from gratuity as it is a social security to employee.

the amount towards gratuity shall stand protected under Sec.13 of the Act.

sec 13. Protection of gratuity

No gratuity payable under this Act 22[and no gratuity payable to an employee employed in any
establishment, factory, mine, oilfield, plantation, port, railway company or shop exempted under
section 5] shall be liable to attachment in execution of any decree or order of any civil, revenue or
criminal court.
also read sec 4(6)

4(6) Notwithstanding anything contained in sub-section (1),
(a) the gratuity of an employee, whose services have been terminated for any act, wilful 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 16[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

The speaking order with reasons stated in sec 4(6) to forfeit the gratuity to the extent of the damage is must following due process of natural justice

From India, Ahmadabad
Vasant Nair

This is not a very correct understanding of Gratuity. There is no qualifying criteria of "service rendered is satisfactory" for payment for Gratuity.

If one meets the qualifying criteria stipulated in the Act, one becomes eligible for payment of Gratuity.

Best Wishes,

Vasant Nair

From India, Mumbai

Sorry to point out dear "essykkr" that your opinion is quite misleading for the members of this forum, as you have NOT ONLY misinterpreted the provisions of Section 13 of the Payment of Gratuity Act, BUT ALSO misquoted the Case Laws. So, please review your reply by rereading the provisions of the said Section 13, which protects from attachment by any court of law, BUT does not specify that the loss to the employer may not be adjusted out of the gratuity amount. Making unauthorized additions or alterations in the Statutory Laws is not at all advisable.

I reproduce the extract of Section 13 below for the information of one and all:

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 5 shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court.

You can very well see that there is no word "LOAN" mentioned in the said Section.

Further, the case law "Yada Laxmi V/s A.P State Corporation Bank, LLR 2006 (106), as quoted by you pertains only to the deceased employee, not any other retiring, resigning or terminated employee. You may also know that a particular case law applies to individual cases and does not become universal law unless a competent court of law specifically agrees to apply after its satisfaction to any other particular case.

Still further, it is not a case of withholding of the gratuity by the employer. It relates to payment of gratuity after adjustment of balance of loan amount. So, the case laws quoted by you are totally irrelevant in his particular case.

For your information the Payment of Gratuity Act clearly provides for forfeiture of gratuity of the employee by the employer for any loss or damage caused to the employer and Section 13 does not operate in that case.

So, please better review your reply by rereading the Payment of Gratuity Act as well as the case laws in totality, as reading between the lines is always dangerous and mislead a person.

From India, Delhi
anil kaushik

Dear Friends,
I beg to differ on the comments that loan amount can be adjusted against gratuity.
Speaking legally,
A.P. High court in the case of Yada Laxmi Vs.A.P. state co-op. bank in 2006 has held that an employee can not pledge or permit adjustment of payment of gratuity before it had accrued to him.. The payment of gratuity Act as well as sec. 60 of CPC were amended to keep entire amount of gratuity out of purview of attachment or other adjustments .
In this case employee took loan from the bank and unfortunately he expired before repayment. Bank ajusted the gratuity amount of the employee against loan. employee's wife claimed the gratuity and court rejected the concept of the bank of adjustment of loan against gratuity and directed the bank to release the gratuity.
Se. 13 Of the Gratuity Act provides immunity from attachment of gratuity amount even from the court order. SC in the case of Calcutta dock labour board case in1985 held that even if the gratuity was payable in any other scheme, it will squarely come under the purview of the act in respect of attachment.
Many organisations must be adopting the way of having agreement from unions or workers in respect of adjustnment of loan against gratuity but such agreements or undertakings or declarations have no legal sanctity if challenged in court of law.
This system works till it is not challenged but that does not mean that this kind of arrangement is legal.
anil kaushik
Chief Editor,Business Manager-HR magazine
B-138, Ambedkar Nagar, Alwar-301001(Raj.) India

From India, Delhi

Dear Mr. Dhingra,

yes you are right about the applicability of section 13. it talks about the attachement by court but what point Mr "Essykkr"wanted to make you missed it completely. With due respect as you are a Senior Member i want to point out that he wanted to say that the Gratuity Amount is protected from even the attachement of court. so how a company recover any amount out of it.

in my opnion the point number 2 of Ms. "Anjali Kishor Limaye" with a little change is the solution to the problem Legally as well as practically. the change would be only this dont take the cheque for the exact amount of gratuity from him take several PDC's of the amount to be adjusted, if possible bifurcate the Loan/Recovery amount. if the amount is more than the amount of gratuity, devide the amount in such a way that the first cheque covers the most of the gratuity amount but not identical to the amount payable unger payment of gratuity. This will make the amout recoverable from court comparatively in easier way if the employee refuses to payback the Loan. why i am saying to make different cheques is because if you will take the idetical amount cheque from the employee the first contention of the employee will be that they have indirectally recovered the amount out of gratuity. this is simple principle of natural justice and we all know it "what cannot be done directly cannot be done indirectly too".

2nd point: section 13 and section 4(6) as rightly pointed out by Mr "vkshah" makes the amount of gratuity irrecoverable against any payment due to employer other than the exceptions provided under the section 4(6). so in my opnion and in the light of the judgments sited by the worty members it is my understanding that the amount should be recovered if needed in the abovementioned fashion otherwise not.

Further discussions invited.

From India, New Delhi

Sir, thanks for your suggestion. Certainly i will take care of that.

now i am comming to the question of the Author of this thread.
"We have Long Term Settlement with Union for giving Loan in which we have clause of recovery of any outstanding amount at the time of seperation against Gratuity payable to the person.""
Is it legal?? what can be the consequencies??
Yes, it's illegal. would like to refer here section 14 of the Act which clear give override effect to other enactments, any instruments and contract etc. as the same also held in by Ahalabad High Court LLR 1119 All
it's a special act and in case of any dispute with regarding any other enactment, contract,or insturment this Act shall prevail.
Further view of members are welcome.


  • With due respect, I beg to differ with Senior Member Mr. P S Dhingra.
  • Section 13 is not allowing even courts of this country to attach gratuity amount. It is obvious that, when any court passes decree or order for attachment, it is with due legal process. But still gratuity amount is protected by the specific provisions under section 13.
  • It is needless to mention that, most of the labor and social security legislations are enacted to protect rights of Labor and in most of litigations courts in India have favored the labor.
  • It is very naïve on part of Mr. Dhingra to argue that, since there is no specific mention of words ‘Employer’ or ‘Loan’ in act, means employer can collect outstanding loan from gratuity due.
  • Further by arguing in very same way like Mr. Dhingra, since there is no specific mention in the act that, ‘employer can recover outstanding loan from gratuity’ , loans can not be recovered from gratuity due.
  • I feel if courts are prohibited from attaching gratuity then employer is also obviously prohibited from same which goes without saying.
Further section 4(6) specifically mentions circumstances under which Gratuity can be forfeited and again forfeiture is allowed only in case of Termination alone.

From India, Pune
Dear Sir,
Can you please help me in Gratuity Issues?
I am working one private company, for the past 6 years. I want to know whether I am eligible to get Gratuity to claim or not, because I am not having any PF deductions in this company and also they transferred me from one company to one company in the same group.
Kindly let me know the rules for Gratuity.
S. Sujatha

From India, Madras

Dear Kaushik,
Reading between the lines is always dangerous and misleading that creates more confusions rather than solving any problem. The case law "Yada Laxmi V/s A.P State Corporation Bank, LLR 2006 (106), as referred by you pertains only to the deceased employee, not any other retiring, resigning or terminated employee.
Also, it is not a case of attachment by any court of law. So, reference to the aspect of attachment is also irrelevant in this case.
So, please better read the case in totality to arrive at your learned opinion. This is also important for your from the point of view that you are an editor of an HR magazine.
Accordingly, you may need to review your reply.

From India, Delhi

Dear vkokamthankar,

Differing in opinion is your right. You can differ with me or even with all other members of this forum. Nobody can prohibit you. If you feel something, others can also express their feelings. If you can declare it as naive on my part to discuss or argue, I can also declare naive on your part to discuss or argue like that in which you have tried to stress your point.

MIND IT, interpretation of any legal provision, except on the face of the existing provision of the language, is not within the right of any one except the Ministry of Law of the Government of India, or the competent court of law. Nobody can add or omit any specific word against the existing provisions in he legal language. So, your interpretation about Section 13 with stress on the word EVEN, while stating "not allowing even courts of this country to attach gratuity amount" dos not justify at all, when the language is very clear and specifically meant for courts only.

Would you kindly like to clarify, who else can attach the amount due to be paid to any one? Can employer issue an attachment order? For your information attachment cannot be made by any person other than a court of law. So, where comes the question of attachment by EVEN courts?.

Evidently, just to oppose my views, you clearly seem to have forgotten that the present case, as referred to by the poster of this thread DOES NOT RELATE TO ATTACHMENT or FORFEITURE of gratuity.

The question of attachment by courts arise in cases filed by any third party, not having been related to the employer or the employment of the concerned employee, like Banks, Mortgage companies, etc. So, the Section 13 provides protection from attachment by courts against the debt of any third party against the employee. You may better discuss this issue with some judge to have clarification about attachment or the provisions of Section 13 of the Gratuity Act, if you feel my opinion is wrong.

If there is no specific mention of words ‘Employer’ or ‘Loan’ in act, it is clearly evident that the provisions do not automatically bar the employer, who pays the money to adjust his own dues out of the dues admissible to the employee. Rather, it is clearly naive on your part to intentionally apply the provisions of the section negatively against the employer, when section 13 has no relation with the employee and has specifically been designed to prohibit the courts to unnecessarily attach the dues against of the employee against the dues of the third parties. You are advised to reread the section to make clear what actually hat states.

Further, any judgment of any case law does not become universal. That is applicable individually only to the concerned case or if allowed specifically to some other particular case by virtue of the judgment of any court.

MIND IT, I am not an anti-employee person, which you can definitely observe from my hundreds of posts available in this very forum. Of course, to call a spade a spade is my habit, may that be in favor of employee or an employer that I discuss very frankly.

PS Dhingra

From India, Delhi
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