What is the procedure to hold gratuity and F&F to an employee who involved in fraud activity

An employee involved in fraud activity and we have filed an FIR against the employee. Management decided not pay the F&F, Gratuity. is it possible to hold the gratuity and F&F or it will create any legal issue.

Dear Venkatesh,

Please refer to section 4(6) of the Payment of Gratuity Act,1972.

Registration of FIR by the Police against such employee alleged to have committed an act of fraud against the organization simply cannot be a reason for withholding his statutory gratuity; it should be consequent on the order of the employee's dismissal after conviction by the Court or as a result of a domestic enquiry simultaneously and independently conducted in this regard by the employer.

First of all, the retirement of the employee, particularly as the misconduct alleged is fraud, has to be subject to such action as per rules depending on the outcome of the disciplinary action. You can withhold gratuity till the decision of the departmental inquiry by passing a specific order to that effect and subject to the provision that in case the employee is exonerated of the charges, he shall be paid gratuity along with interest as notified (10% simple interest).

To my knowledge, Payment of Gratuity Act does provide for withholding gratuity. Provisions of Section of 4(6) of the Payment of Gratuity Act only deal with forfeiture, not withholding gratuity. And this could be invoked only on the strength of an order of termination of the employee consequent to his conviction in a criminal case or the findings in a Departmental Proceedings.

In my above posting "............payment of Gratuity Act does provide for withholding gratuity..........." may kindly be read as "...............Payment of Gratuity Act does not provide for withholding gratuity.........".

The lapse is regretted.