Supreme Court: Recovery of Amount from Retired Employee’s Gratuity is Not Justified

The Supreme Court has ruled that no amount can be recovered from the gratuity of retired employees, especially when the employee has already been acquitted of the charges through departmental or judicial proceedings.

 

A bench of Justice Prashant Kumar Mishra and Justice Prasanna B. Varale set aside a Punjab and Haryana High Court judgment that had upheld such recovery. The apex court gave relief to the appellant, making it clear that gratuity is a statutory right under the Payment of Gratuity Act, 1972, and deductions cannot be made arbitrarily.

 

Case Background

• The appellant retired in 2010 from the Punjab State Warehousing Corporation as a Senior Assistant.
• At retirement, he was sanctioned ₹6.5 lakh as gratuity. However, ₹75,720 was deducted, citing an old audit objection regarding alleged financial irregularities from 2009.
• The corporation argued that audit objections justified the deduction.
• The appellant approached the High Court, but his plea was dismissed in 2015.

 

Supreme Court’s Observations

• Gratuity is a social security benefit and cannot be withheld except in cases of proven misconduct under Section 4(6) of the Gratuity Act.
• Since the employee had neither been found guilty of misconduct nor faced any proven charges, the deduction was illegal and unjustified.
• The Court ordered that the amount deducted be returned to the retired employee with applicable interest.

 

Key Takeaways

• No deduction from gratuity without established misconduct.
• Audit objections alone are not grounds for recovery.
• Protects retired employees from financial hardship.