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The Supreme Court, in the case of Union Bank of India vs CG Ajay Babu held that under the Payment of Gratuity Act, dismissal from service shall not result in an automatic forfeiture of gratuity and shall further be subject to sub sections (5) and (6 ) of section 4 of the above act. The bench, passing the judgment consisted of Justice Kurian Joseph and Justice Sanjay Kishan Kaul.
Looking at the case background, the respondent Ajay Babu was an employee of the bank and worked in the capacity of a Branch Manager. The disciplinary proceedings were initiated against him during the course of his employment citing his failure to protect the bank's interest and his conduct that lacked devotion and commitment to service. Terminating his service on June 2004, the bank had issued a show cause notice to him asking why shouldn't his due gratuity, be forfeited. The bank further rejected his response and his gratuity was forfeited. This forfeiture was challenged in the High Court wherein it was held that since his misconduct did not cause any financial loss to the bank, there cannot be possibly any forfeiture of gratuity.
The Supreme Court upheld this and noted that there was an already existing clause in the bank's Bipartite Settlement laying down that there cannot be any forfeiture of gratuity on account of dismissal for misconduct unless such proven misconduct has caused a financial loss to the bank. The court held that there was no contention that the employee had caused financial loss to the bank which is why section 4(6) of the Act that allows forfeiture of gratuity to the extent of the financial loss cannot be adhered to. The Apex Court also dismissed the plea of moral turpitude against the respondent saying that in order to constitute moral turpitude, there must be an act or offense involving the same and that any mere conduct sans the offence shall not suffice. The bank noted while concluding , “To be an offence, an act should be made punishable under law. It is absolutely in the realm of criminal law. It is not for the bank to decide whether any offence has been committed. It is for the court"
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