- 1 - NC: 2025:KHC-D:5456-DB WA No.100066 of 2025 IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 25TH DAY OF MARCH, 2025 PRESENT THE HON'BLE MR. JUSTICE S G PANDIT AND THE HON'BLE MR. JUSTICE C.M. POONACHA WRIT APPEAL NO.100066 OF 2025 (L-PG) BETWEEN: CENTRAL WAREHOUSING CORPORATION THRO. ITS: GENERAL MANAGER (PERSONNEL) CORPORATE OFFICE: NO.4/1, SIRI INSTITUTIONAL AREA AUGUST KRANTI MARG AT-NEW DELHI-110016 REP. BY REGIONAL MANAGER, REGIONAL OFFICE: LF-10, NANDINI LAYOUT, AT. BENGALURU-560096. …APPELLANT (BY SRI SHIVAPRASAD B. SAJJAN, ADVOCATE.) AND: 1. SRI. G.C. BHAT, ADDRESS: NO.35, 5TH MAIN, NEAR CHURCH, SHARAVATHI NAGAR, AT. SHIMOGA-577201. 2. THE CONTROLLING AUTHORITY UNDER THE PAYMENT OF GRATUITY, ACT AND ASSISTANT LABOUR COMMISSIONER (CENTRAL) AT. HUBBALLI-580025. …RESPONDENTS (BY SRI RAGHUVEER SATTIGERI, ADVOCATE FOR R1; R2 – NOTICE SERVED, UNREPRESENTED.) THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF KARNATAKA HIGH COURT ACT, 1961, PRAYING TO SET ASIDE THE Digitally signed by MALLIKARJUN RUDRAYYA KALMATH Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC-D:5456-DB WA No.100066 of 2025 IMPUGNED ORDER DATED 10.01.2025, PASSED BY THE SINGLE JUDGE, DISMISSING W.P.NO.102635/2024 (L-PG) AND CONSEQUENTLY ALLOW THE SAME I.E., W.P.NO.102635/2024 (L-PG) AND PASS AN APPROPRIATE ORDER EXPUNGING THE ADVERSE OBSERVATIONS PRE-EMPTIVELY MADE BY THE LEARNED SINGLE JUDGE AGAINST THE OFFICERS OF THE APPELLANT-CORPORATION WITHIN THE IMPUGNED ORDER DATED 10.01.2025, IN W.P. NO.102635/2024 (L-PG) AND ETC.,. THIS WRIT APPEAL COMING ON FOR PRELIMINARY HEARING THIS DAY, JUDGMENT IS DELIVERED THEREIN AS UNDER: CORAM: THE HON'BLE MR. JUSTICE S G PANDIT AND THE HON'BLE MR. JUSTICE C.M. POONACHA ORAL JUDGMENT (PER: THE HON'BLE MR. JUSTICE S G PANDIT) The petitioner is in appeal aggrieved by the order dated 10.01.2025 in W.P.No.102635/2024 (L-PG), wherein the petitioner’s challenge to the Controlling Authority’s order dated 11.09.2023 directing the petitioner to pay gratuity of ₹7,88,165/- to the respondent No.1 with interest at 10% p.a. from 12.12.2013, till the date of actual payment, is rejected. 2. Heard Sri Shivaprasad Sajjan, learned counsel for the petitioner/appellant and Sri Raghuveer Sattigeri, learned counsel for respondent No.1 and perused the writ petition papers. - 3 - NC: 2025:KHC-D:5456-DB WA No.100066 of 2025 3. Learned counsel for the petitioner/appellant would submit that after enquiry, respondent No.1 was imposed with penalty of dismissal under order dated 06.12.2013. It is stated that more than five years after respondent No.1 was dismissed, he requested for disbursement of eligible gratuity amount in terms of the provisions of Payment of Gratuity Act, 1972 (for short, ‘the Act of 1972’). Thereafter respondent No.1 approached the Controlling Authority and Assistant Labour Commissioner (Central) Hubballi, under section 4 of the Act, 1972, seeking payment of gratuity amount along with interest. The Controlling Authority by order dated 11.09.2023 (Annexure- A), directed the petitioner/appellant to pay gratuity of ₹7,88,165/- to respondent No.1 along with simple interest at 10% p.a. from 12.12.2013 till the date of actual payment. Aggrieved by the same, the petitioner was before this Court in W.P.No.102635/2024. The learned single Judge after considering the rival contentions of the parties, dismissed the writ petition and confirmed the order passed by the Controlling Authority, against which the present appeal is filed. - 4 - NC: 2025:KHC-D:5456-DB WA No.100066 of 2025 4. Learned counsel Sri Shivaprasad Sajjan, for the petitioner/appellant vehemently contends that the Controlling Authority failed to appreciate the fact that respondent No.1 was dismissed from service on the charges of causing loss to the petitioner corporation. When respondent No.1 is dismissed by way of punishment, he would not be entitled for any gratuity. Learned counsel invites attention of this Court to Annexure-E the order of dismissal dated 06.12.2013 and submits that the charge against respondent No.1 is pledging warehouse receipts and getting sanctioned loans from various banks. When respondent No.1 has caused loss by pledging warehouse receipts to various banks, the petitioner corporation is justified in forfeiting the gratuity of respondent No.1. 5. To a specific query to the learned counsel for petitioner/appellant as to whether there is any order passed under section 4(6) of the Act of 1972 forfeiting the gratuity, learned counsel would submit that no proceedings under section 4(6) of the Act of 1972 is initiated to forfeit the gratuity and no order is passed. - 5 - NC: 2025:KHC-D:5456-DB WA No.100066 of 2025 6. Learned counsel Sri Raghuveer Sattigeri, for respondent No.1 supports the order passed by the learned single Judge and submits that no show cause notice whatsoever is issued under section 4(6) of the Act of 1972 calling upon the petitioner to show cause as to why gratuity should not be forfeited. Learned counsel would submit that unless respondent is given an opportunity under section 4(6) of the Act of 1972, the gratuity amount of respondent No.1 could not be forfeited. As there is no proceedings initiated to forfeit the gratuity, learned counsel would submit that the petitioner has no authority to recover or forfeit the gratuity of respondent No.1. Learned counsel would further submit that no proceedings are initiated by the petitioner corporation to determine the loss caused by respondent No.1. In the absence of determining the loss caused, the petitioner could not possess power to forfeit the gratuity. Thus, he prays for dismissal of the writ appeal. 7. Having heard the learned counsels appearing for the parties and on perusal of the entire writ petition papers, the only point that arises for consideration in this appeal is, - 6 - NC: 2025:KHC-D:5456-DB WA No.100066 of 2025 “whether the learned single Judge’s order requires interference?” 8. The answer to the said point for consideration raised in this appeal is in the negative for the following reasons. 9. It is an admitted fact that respondent No.1 was dismissed from service of petitioner corporation by order dated 06.12.2013 for the proved charges of misconduct. Under the Act of 1972, section 4 provides for payment of gratuity and the said section itself i.e., section 4(6) empowers the employer to forfeit wholly or partly the gratuity payable to an employee. Admittedly no proceedings are initiated by the employer to determine the loss caused by respondent No.1 to the petitioner corporation. In the absence of any proceedings to determine the loss caused, merely because an employee is dismissed, his gratuity cannot be forfeited. 10. Section 4(6) of the Act of 1972 reads as follows: - 7 - NC: 2025:KHC-D:5456-DB WA No.100066 of 2025 4. Payment of gratuity.— (6) Notwithstanding anything contained in sub-section (1), - (a) the gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused. (b) the gratuity payable to an employee may be wholly or partially forfeited] – (i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or (ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.” 11. A reading of the above provision makes it abundantly clear that the employer would possess power to forfeit wholly or partially the gratuity payable to an - 8 - NC: 2025:KHC-D:5456-DB WA No.100066 of 2025 employee, but before forfeiting the gratuity, the employer shall issue show cause notice to the employee calling upon him to show cause as to why gratuity shall not be forfeited. In the instant case, no such proceedings is initiated to forfeit the gratuity. 12. The Hon’ble Apex Court in the case of Western Coal Fields Ltd. Vs. Manohar Govinda Fulzele1, while considering the permissibility of forfeiture of gratuity in the event of termination of service on misconduct, has observed that necessarily, there should be a notice issued to the terminated employee, who should be allowed to represent both on the question of nature of the misconduct; whether it constitutes an offence involving moral turpitude, and the extent to which such forfeiture can be made. Moreover, gratuity is not automatic on dismissal/termination from service. 13. Be that as it may, respondent No.1 in the meanwhile approached the Controlling Authority seeking payment of gratuity. The Controlling Authority at paragraph 1 2025 SCC Online SC 345 - 9 - NC: 2025:KHC-D:5456-DB WA No.100066 of 2025 No.22 of the order has rightly observed that respondent No.1 i.e., the petitioner herein has utterly failed to exercise its right to forfeit the gratuity under section 4(6) of the Act of 1972 for the loss caused, which is attributable to respondent No.1. Further, the appellant has failed to pass order in exercise of power under Section 4(6) of the Act of 1972, forfeiting the gratuity after due process. In the absence of such order to forfeit the gratuity, the employer would not get jurisdiction to withhold the gratuity. Therefore, the Controlling Authority is justified in directing the release of the gratuity with interest. There is no error or illegality in the order passed by the Controlling Authority or the learned Single Judge. 14. The petitioner places reliance on a decision of a Co-ordinate Bench of this Court dated 13.01.2025, in Writ Appeal No.295/2024 in the case of Sri C.V.Revankar vs. State Bank of India. In the above stated case the charge against the employee itself was causing loss to an extent of ₹1,91,35,000/-, which charge was proved and thereafter proceedings under section 4(6) of the Act of 1972 - 10 - NC: 2025:KHC-D:5456-DB WA No.100066 of 2025 was initiated and gratuity was forfeited. The facts of the said case is entirely distinguishable, as such the said decision would not assist the petitioner in any manner. 15. The petitioner corporation having not taken any action in terms of section 4(6) of the Act of 1972, could not have forfeited the gratuity. The petitioner corporation has failed to act in accordance with law. Having failed to take action in accordance with law, the petitioner corporation cannot blame the respondent or the Controlling Authority. 16. Under the above circumstances, it is a fit case to impose costs. The petitioner shall pay a cost of ₹25,000/- (Twenty-Five Thousand Rupees only) to respondent No.1. The Writ Appeal stands dismissed accordingly. 17. It is seen that in terms of the order dated 01.02.2025 passed in the above Writ Appeal, the petitioner deposited a sum of ₹16,66,807/- before this Court by demand draft No.146293 dated 05.02.2025, drawn on Union Bank of India. Respondent No.1 is at liberty to withdraw the said amount. - 11 - NC: 2025:KHC-D:5456-DB WA No.100066 of 2025 18. The pending interlocutory applications, if any, stand disposed of as they do not survive for consideration. Sd/- (S G PANDIT) JUDGE Sd/- (C.M. POONACHA) JUDGE MRK CT: UMD. List No.: 1 Sl No.: 11