When Can Employers Forfeit Your Gratuity? Calcutta High Court Sets the Record Straight

As someone who has spent considerable time dealing with employment disputes, I’ve seen countless cases where employers attempt to withhold gratuity payments citing employee misconduct. The recent judgment by Justice Shampa Dutt (Paul) of the Calcutta High Court in M/s. Xpro India Limited v. State of West Bengal & Ors. (WPA 4620 of 2025) offers much-needed clarity on this contentious issue.

The Facts That Started It All

The case involved a technician who worked for Xpro India Limited from 2012. The company suspected him of sharing confidential information with a competitor and terminated his services in October 2022 after a domestic enquiry. Not content with just firing him, they also decided to forfeit his entire gratuity, claiming his conduct involved “moral turpitude” under Section 4(6) of the Payment of Gratuity Act.

The employee wasn’t having any of it. He approached the Controlling Authority, who ordered the company to release the gratuity with interest. When the company appealed, the Appellate Authority upheld this decision. Finally, the company moved the High Court, which is where this story gets interesting.

What the Court Actually Found

Having reviewed numerous similar cases in my practice, I wasn’t surprised by the Court’s findings, though they are worth examining carefully:

Evidence Matters More Than Suspicion The Court found that the company had failed to produce any concrete evidence of wrongdoing. No call records, no witness statements, no proof of actual information sharing. The enquiry officer’s conclusions were based on suspicion rather than facts. In my experience, this is unfortunately common – employers often assume that their suspicions are sufficient grounds for severe action.

“Moral Turpitude” Has a Specific Meaning The Court reminded us that moral turpitude isn’t just any misconduct – it refers to conduct that shocks the moral sense of the community. Simply exploring job opportunities with competitors, even rivals, doesn’t automatically constitute moral turpitude. This distinction is crucial for both employers and employees to understand.

Natural Justice Cannot Be Overlooked The Court emphasized that disciplinary proceedings must follow principles of natural justice. From what I’ve observed in practice, many employers conduct perfunctory enquiries without giving employees a fair opportunity to defend themselves.

What This Means in Practice

For Employees: Your gratuity isn’t something an employer can snatch away on a whim. It’s a statutory entitlement that has been hard-won through decades of labour legislation. If your employer is threatening to forfeit it, they need solid evidence of serious misconduct – not just suspicions or minor violations.

That said, don’t think you’re completely protected. Genuine cases of fraud, theft, or serious breach of trust can indeed lead to forfeiture. The key is that it must be proven, not just alleged.

For Employers: Before you even think about forfeiting gratuity, ask yourself: do you have concrete, documentable evidence of misconduct? Can you prove actual loss or harm to your business? Is the misconduct serious enough to shock the moral conscience?

If the answer to any of these is no, you’re likely on shaky ground. Remember, the law doesn’t favor forfeiture – it’s meant to be an exception for truly egregious cases.

The Practical Takeaway

In my years of practice, I’ve noticed that many employment disputes could be avoided if both parties understood their rights and obligations clearly. This judgment reinforces that:

1. Gratuity forfeiture requires substantial evidence, not mere suspicion
2. The misconduct must genuinely involve moral turpitude
3. Disciplinary enquiries must be conducted fairly and transparently
4. Courts will intervene when findings are based on “no evidence”

The Calcutta High Court has done both employers and employees a service by clarifying these boundaries. The company in this case has been ordered to pay the gratuity with 8% simple interest within sixty days – a reminder that unsuccessful attempts at forfeiture can be costly.

A Word of Caution

While this judgment provides helpful guidance, every case depends on its specific facts. If you’re facing a similar situation – whether as an employee fighting forfeiture or an employer considering it – proper legal advice is essential. The line between legitimate disciplinary action and overreach can be surprisingly thin.

The law recognizes that employees have worked for their gratuity, and employers have legitimate interests in protecting their businesses. The challenge is finding the right balance, and judgments like this help us understand where that balance lies.