Section 4(6) in the Payment of Gratuity Act 1972 provides for forfeiture of gratuity as follows:
(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 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
But before forfeiture, the employer has to issue a show-cause notice as to why the gratuity shall not be forfeited for the reasons to be stated. In consideration of the reply, a speaking order shall be issued.