Gratuity can be Withheld Post Superannuation if Guilty of Misconduct

Hon’ble Supreme Court in the matter of Chairman cum Managing Director, Mahanadi Coal Fields vs Sri Rabindranath Choubey Civil Appeal No. 9693 of 2013 dealt with two important legal issues as under:

  • Whether employer can withhold payment of gratuity of an employee after superannuation in view of pending disciplinary proceedings; and
  • Whether punishment of dismissal can be imposed on an employee after superannuation if found guilty of misconduct in the said disciplinary proceedings.

With regard to withholding gratuity, the Hon’ble Court observed that provision regarding withholding gratuity as provided u/s 4(6) of the Payment of Gratuity Act shall prevail over provision u/s 4(1) which confers the right to gratuity to an employee as provision for forfeiture of gratuity contains a non-obstante clause. In view thereof, an employer has the right to withhold gratuity during the pendency of disciplinary proceedings.

With regard to the question of dismissal after superannuation, the court held that disciplinary authority has the power to impose penalty of dismissal even after superannuation of employee, considering that the inquiry had begun at a time before the employee had reached the age of superannuation. In any case, if there cannot be any dismissal after superannuation, intendment of the provision u/s 4(6) would be defeated.

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