Dear All,
My cousin was working in an organization from 8 years. During his service he stole some goods from company and sold it and took some commissions from some vendors. When the organization came to know about it, they terminated his services and settled the issue in XXX lacs. The organization provided a 100 Rs stamp letter to him saying that “Mr. X was working in our organization and stole goods from company and took commissions from vendors. Now Mr. X will pay XXX Rs. to the organization by cheque and after it there will be no due towards Mr. X.” The letter was signed by Employer, Employee and witnesses.
Next day, all the said amount was paid to the company by cheque.
Now, he is claiming for his Gratuity but company is not paying it.
Can he legally claim for Gratuity?
Can company deny for his Gratuity?
Please suggest............

From India, Ambala
Labour Law & Hr Consultant
Seasoned Ir Professional
Insolvency N Gst Professional
+1 Other


Dear Bijenderkhatri,
Gratuity is a terminal benefit of employment payable to an employee for the blemishless service rendered by him in the same establishment. The termination of employment as contemplated u/s 4 (1) of the Payment of Gratuity Act,1972 can be normally due to superannuation or retirement or resignation or death or disablement due to accident or disease of the employee concerned. But the Act also contemplates termination of employment at the instance of the employer by way of dismissal due to certain misconducts enumerated in clauses (a) and (b) of ss (6) of section 4 and provides for the forfeiture of gratuity proportionately, wholly or partially not withstanding the provision of sec.4(1). Certainly, theft and illicit receipt of commission from vendors are serious misconducts on the part of an employee warranting his dismissal from service resulting in forfeiture of his gratuity if so decided by the employer.
What one can finally cull out from your post is that after the theft and illegal gratification committed by the employee came to the knowledge of the employer, the employer seems to have been more interested in the recovery of the losses sustained by him from the employee though he was terminated and hence the settlement to the tune of XXX lakhs. It is absolutely clear that no notice of forfeiture of gratuity was given by the employer. Therefore, under these circumstances, the employer can not deny his gratuity. The employee can file a claim for gratuity u/s 7(4)(b) of the PG Act,1972.

From India, Salem

He should be happy that he was not prosecuted. He is not entitled for gratuity
From India, Pune

Since there was no formal charge sheet, enquiry and finding by the Enquiry officer that the employee has stolen goods or made quantifiable loss to the company the employer cannot forfeit gratuity. In order to forfeit gratuity, the employee should have been dismissed for an act causing damage or loss to the company. Obviously, dismissal without enquiry is illegal. Moreover, the employer was compensated for the loss suffered by him. Now legally there is no due payable by the employee and the employer having accepted the cheque for the sum demanded as value of goods misappropriated, the matter is over. Now it is the turn of he employee to claim gratuity. He can claim it in full and the employer cannot open the old story of theft.
From India, Kannur

I feel the employer can deny the gratuity due to the severe misconduct like theft. As the employee caught in red handed and later in stamp paper he acknowledged the same. In that case the employer can directly terminate the service without conducting inquiry. We are also not sure whether this misconduct was done first time or earlier done the same but didn’t get caught. It is good that employer did not lodge police complain.
Further, As per gratuity act the payable amount may be wholly and partially forfeited due to
1. His riotous or disorderly conduct or any other violent act;
2. Committing an offence involving moral turpitude.

From India, Bhubaneswar

The above are the clauses as per section 4(6)(b) and the issue is falling in section 4(6)(a).
There is no defence for misconduct. But once the employer has been compensated for the loss, there is no meaning in forfeiting the gratuity. All that the Act says that employer can forfeit the gratuity to the extent of the loss caused to him. Now having compensated, the loss is zero. There is no quantifiable loss remaining. Only in the case of dismissal for misconduct involving moral turpitude, the forfeiture is maintainable though the loss is not quantifiable. For that also the misconduct of moral turpitude should happen DURING the COURSE of EMPLOYMENT. Remember one case in which the employee who was charged for an offence of kidnapping a girl was denied gratuity saying that he was involved in a serious misconduct. But the court observed that the misconduct (act of kidnapping) has not happened during the employment and therefore, the employee discharged should be paid his gratuity.

From India, Kannur

Gartuity will be paid to him in full and final settlement. sumit
From India, Ghaziabad

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