The Supreme Court has held that an employer's right to forfeit gratuity for misconduct causing damage is confined strictly to the loss it actually proves with independent evidence, such as an audit report or a calculation sheet. Bare allegations of loss are not enough. The ruling came in Prabhat Kumar Singh & Ors. v. Accu Pack Engineering Pvt. Ltd., decided by a bench of Justice Prashant Kumar Mishra and Justice Shree Chandrashekhar.
The appellants were employees of Accu Pack Engineering who were terminated in November 2018 without any disciplinary inquiry. The company alleged that their misconduct had caused it a loss of Rs. 50 lakh and sought to forfeit their gratuity under Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972.
The Court found that no evidence of the loss had ever been produced and that the employees had been denied an opportunity to contest the claim. It allowed the appeals, set aside the orders of the Appellate Authority and the Bombay High Court, restored the Controlling Authority's 2022 order directing payment of gratuity, and ordered compliance within two months.