The Karnataka High Court has ruled that an employer is not allowed to withhold or forfeit an employee’s gratuity unless legal proceedings to recover alleged losses have been initiated against them. This decision was made by Justice Suraj Govindaraj, who rejected a challenge by the Central Warehousing Corporation against an order passed by the Controlling Authority.
The case involved former employee G.C. Bhat, to whom the corporation was directed to pay ₹7,88,165 as gratuity, along with 10% interest from December 12, 2013, until the actual payment date. The corporation had dismissed Bhat due to serious charges of misappropriation, claiming the loss amounted to ₹1.71 crore. They argued that the gratuity could be withheld and adjusted against the loss. However, the corporation also pointed out the delay in Bhat’s filing of the application, as he had approached the Controlling Authority seven years after his dismissal.
Upon reviewing the case, the court noted that although the corporation forfeited Bhat’s gratuity, it had failed to initiate legal proceedings to recover the alleged loss. The court emphasized that the employer should take legal action to recover the losses before forfeiting any dues. It also highlighted that dismissal alone does not entitle an employer to retain the gratuity without proper proceedings. The corporation’s failure to act was deemed negligent, and the court ordered them to pay the outstanding gratuity by January 31, 2025.
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