Bombay High Court
H.A.L (Nd) Employees Co-Op Credit ... vs Devidas Gopalrao Varkhede And Anr on 20 November, 2025
Author: Manish Pitale
Bench: Manish Pitale
2025:BHC-AS:50231
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.14846 OF 2025
H.A.L. (ND) Employees Co-op. Credit Society Ltd.
through its Secretary Vijay Raghvendra Purandare ... Petitioner
Vs.
Devidas Gopalrao Varkhede and another ... Respondents
Mr. Aadil Parsurampuria a/w. Mr. Sachin D. Kadam for Petitioner.
Mr. Anilkumar Patil a/w. Ms. Zeel Jain and Mr. Digvijay A. Patil for Respondent
No.1.
Ms. Vaishali Raje, AGP for Respondent No.2-State.
CORAM : MANISH PITALE, J.
DATE : NOVEMBER 20, 2025
P.C. :
. Heard Mr. Aadil Parsurampuria, learned counsel appearing for the
petitioner and Mr. Anilkumar Patil, learned counsel appearing for the
contesting respondent No.1. The State of Maharashtra, in the facts and
circumstances of the present case, is a formal party. Ms. Vaishali Raje,
learned AGP appears for respondent No.2-State.
2. This petition challenges concurrent orders passed by the
controlling authority and the appellate authority under the provisions of
the Payment of Gratuity Act, 1972 (for short 'Gratuity Act'), whereby
the petitioner, which is a credit co-operative society, has been directed to
pay gratuity amount to the respondent No.1 along with interest, as the
gratuity amount was forfeited by the petitioner.
3. Respondent No.1 was working as secretary of the petitioner
society for about 33 years when he was served with a show cause notice
dated 30.04.2013 as to why appropriate action of relieving him from
MINAL SANDIP MINAL SANDIP PARAB
PARAB Date: 2025.11.21
11:17:49 +0530
service should not be taken in the light of resolutions passed in the
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General Body Meetings of the petitioner society, on allegations that
certain amounts of the petitioner society had been misappropriated.
4. By a letter dated 17.06.2013, the petitioner society relieved the
respondent No.1 on the ground that his explanation given to the said
show cause notice was not found to be satisfactory. It is the case of the
respondent No.1 that before the aforesaid letter was issued, he had
himself tendered his resignation on the very same day i.e. 17.06.2013.
5. It is to be noted that a reference was made in the show cause
notice dated 30.04.2013 to a criminal case registered in respect of the
alleged illegal siphoning off the amounts of the petitioner society,
wherein the respondent No.1 was arraigned as an accused. It is not
disputed that charge-sheet is filed wherein the respondent No.1 has also
been shown as an accused.
6. Since the petitioner society failed to disburse gratuity amount
payable to the respondent No.1 under the provisions of the Gratuity Act,
he was constrained to file an application before the controlling authority
i.e. the First Labour Court at Nashik, seeking an order for disbursal of
gratuity amount along with interest.
7. It is in these proceedings that the petitioner society came up with
a case that in the light of the aforesaid acts of the respondent No.1,
which amounted to offence involving moral turpitude, the gratuity was
withheld by exercising power under Section 4(6)(b)(ii) of the Gratuity
Act. The Controlling Authority i.e. the First Labout Court at Nashik
considered the rival submissions and held in favour of the respondent
No.1, directing payment of gratuity along with interest @10% p.a. from
17.06.2013 till its actual payment.
8. Aggrieved by the said order, the petitioner society filed appeal
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before the appellate authority i.e. the Industrial Court at Nashik. As per
the statutory requirement, the petitioner society deposited the principal
amount payable towards gratuity in order that the appeal be entertained
by the appellate authority. By the impugned judgment and order dated
08.05.2025, the Industrial Court (appellate authority) dismissed the
appeal and upheld the order dated 07.07.2022 passed by the First Labour
Court at Nashik (controlling authority).
9. Aggrieved by the same, the petitioner filed the present petition.
10. Mr. Aadil Parsurampuria, learned counsel appearing for the
petitioner society submitted that in the light of the settled position of law
in respect of the forfeiture of gratuity under the provisions of the
Gratuity Act clarified in the judgement of the Supreme Court in the case
of Western Coal Fields Limited Vs. Manohar Govinda Fulzele, 2025
SCC OnLine SC 345, the material on record clearly demonstrated that
the petitioner society, as the employer, was justified in withholding
gratuity as the case of the respondent No.1 was clearly covered under
Section 4(6)(b)(ii) of the Gratuity Act. The fact that the respondent No.1
has been arraigned as an accused in a criminal proceeding along with
other accused persons, involving allegations of misappropriation of huge
amounts of the petitioner society and the fact that he was put to notice
by the aforesaid show cause notice dated 30.04.2013 with regard to his
misconduct leading to the letter dated 17.06.2013, whereby he was
relieved from service, demonstrated that a clear case was made out by
the petitioner society for justifiably forfeiting gratuity to the respondent
No.1. Considering the huge amount of misappropriation in which the
respondent No.1 was involved, forfeiting the gratuity amount was
clearly justified. It was submitted that both the authorities below failed
to appreciate the facts of the present case in the correct perspective and
by the time the matter came up before the appellate authority (Industrial
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Court at Nashik), the judgement of the Supreme Court in the case of
Western Coal Fields Limited Vs. Manohar Govinda Fulzele (supra)
was holding the field, and therefore, the said judgement should have
been applied to the facts of the present case to hold against the
respondent No.1.
11. It was further submitted that in the light of the contents of the
show cause notice dated 30.04.2013 given to respondent No.1, issuing a
separate notice to him for forfeiting gratuity would be an empty
formality and therefore, the authorities below were not justified in
observing that principles of natural justice were not followed. It was
submitted that since the criminal proceeding is still pending, the
concurrent orders passed by the authorities below deserve to be set
aside.
12. It was further submitted that the respondent No.1 cannot rely
upon a report submitted by the Competent Authority under Section 88 of
the Maharashtra Co-operative Societies Act, 1960 (for short 'Co-
operative Societies Act'), which was confirmed by the Joint Registrar of
the Co-operative Societies, exonerating respondent No.1 and others, for
the reason that the challenge to the same is pending before the appellate
authority i.e. the concerned Minister. On this basis, it was submitted that
the writ petition may be allowed.
13. On the other hand, Mr. Anilkumar Patil, learned counsel
appearing for respondent No.1 submitted that the fundamental flaw in
the present case in the action taken by the petitioner society in forfeiting
gratuity, was absence of a notice to the respondent No.1, specifying
grounds why gratuity was being forfeited. It was only when the
respondent No.1 was constrained to approach the Labour Court
(Controlling Authority) raising his grievance, that the petitioner society,
for the first time, came forward with its version as to why gratuity was
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forfeited.
14. It was further submitted that even if the law laid down by the
Supreme Court in the case of Western Coal Fields Limited Vs.
Manohar Govinda Fulzele (supra) is applied to the facts of the present
case, in the light of the aforesaid report under Section 88 of the Co-
operative Societies Act, exonerating the respondent No.1 holding the
field, even on the test of 'preponderance of probabilities', no case is
made out by the petitioner society to take the drastic action of forfeiting
gratuity. The grounds necessary for exercising power under Section 4(6)
(b)(ii) of the Gratuity Act were not available for the petitioner society to
forfeit gratuity, and therefore, the petition deserves to be dismissed.
15. Having heard the learned counsel for the rival parties, this Court
finds that in the present case, one fact is undeniable. The petitioner
society never issued notice to the respondent No.1 before taking the
action of forfeiting gratuity payable to the said respondent. The action of
forfeiting the gratuity is indeed adverse to the interest of the employee
and it can be considered as a drastic action, requiring issuance of notice.
The only notice upon which the petitioner society relies is the show
cause notice dated 30.04.2013. A perusal of the same shows that in two
meetings of the General Body of the petitioner society, much anger was
expressed by the members against the manner in which the respondent
No.1 as the secretary of the petitioner society had functioned. There was
a demand to relieve him from his duties. There was indeed a reference
made to the registration of offence with regard to the allegations made
against the respondent No.1 and others. This notice merely indicated that
in the light of the dissatisfaction and anger expressed by members of the
petitioner society, the decision of relieving the respondent No.1 from his
service was contemplated. The said notice does not show any whisper
about the intention of the petitioner society to forfeit gratuity payable to
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the respondent No.1 under the provisions of the Gratuity Act.
16. The documents on record also show that in terms of the letter
dated 17.06.2013, the petitioner society 'relieved' the respondent No.1
from his services on the ground that the explanation given by him to the
show cause notice was not found to be satisfactory. In other words, no
enquiry was conducted and no findings were rendered after a properly
instituted enquiry against the respondent No.1 with regard to the
allegations of alleged illegal siphoning off the amounts of the petitioner
society. It is a matter of record that the respondent No.1 himself had
tendered a letter of resignation received by the petitioner society on the
very same day i.e. 17.06.2013. A copy of the said document was
tendered and it is not seriously disputed that the same formed part of the
record of the authorities below (marked as 'Exhibit U28'). Thus, this is
not a case of termination of service of the employee pursuant to an
enquiry and findings by an enquiry committee against the employee on
allegations that would amount to an offence involving moral turpitude
on the touchstone of the test of 'preponderance of probabilities' as
contemplated in the judgement of the Supreme Court in the case of
Western Coal Fields Limited Vs. Manohar Govinda Fulzele (supra).
17. The absence of a specific notice to the respondent No.1 before
taking the drastic action of forfeiting gratuity is also a glaring deficiency
in the facts and circumstances of the present case, which renders the
aforesaid act of the petitioner society illegal and unsustainable. In fact,
the appellate authority (Industrial Court at Nashik), while confirming the
order of the controlling authority (First Labour Court at Nashik),
recorded that no opportunity or hearing was given in respect of forfeiture
of gratuity amount to the respondent No.1. No error can be attributed to
the aforesaid finding rendered by the appellate authority.
18. Apart from this, it is also not denied that a report prepared by the
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Competent Authority under Section 88 of the Co-operative Societies Act
exonerated the respondent No.1 of the allegation of misappropriation of
funds. The said report was confirmed by the Joint Registrar of Co-
operative Societies. Although a challenge raised on behalf of the
petitioner society is pending before the Minister, that in itself, cannot be
a ground to justify the drastic action of forfeiting gratuity payable to the
respondent No.1.
19. The petitioner society, as the employer, could have exercised
power of forfeiting gratuity only within the four corners of Section 4 of
the Gratuity Act. It would be necessary to refer to the relevant portion of
the said provision, which reads as follows:-
"4. Payment of Gratuity.- (1) ***
(2) to (5) ***
(6) Notwithstanding anything contained in sub-section (i),-
(a) ***
(b) the gratuity payable to an employee may be
wholly or partially forfeited.
(i) ***
(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."
20. A bare perusal of the above-quoted provision would show that
gratuity payable to an employee can be wholly or partially forfeited,
only if services of such an employee have been terminated for an act,
which constitutes offence involving mortal turpitude. In the aforesaid
judgement of the Supreme Court in the case of Western Coal Fields
Limited Vs. Manohar Govinda Fulzele (supra), while expounding the
position of law with regard to the test applied to the phrase 'offence
involving moral turpitude', the following observations have been made:-
"10. As has been argued by the learned Solicitor General and
the learned Counsel appearing for MSRTC, sub-clause (ii) of
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Section 4(6)(b) enables forfeiture of gratuity, wholly or
partially, if the delinquent employee is terminated for any act
which constitutes an offence involving moral turpitude, if the
offence is committed in the course of his employment. An
'Offence' as defined in the General Clauses Act, means 'any act
or omission made punishable by any law for the time being'
and does not call for a conviction; which definitely can only be
on the basis of evidence led in a criminal proceeding. The
standard of proof required in a criminal proceeding is quite
different from that required in a disciplinary proceeding; the
former being regulated by a higher standard of 'proof beyond
reasonable doubt' while the latter governed by 'preponderance
of probabilities'. The provision of forfeiture of gratuity under
the Act does not speak of a conviction in a criminal proceeding,
for an offence involving moral turpitude. On the contrary, the
Act provides for such forfeiture; in cases where the delinquent
employee is terminated for a misconduct, which constitutes an
offence involving moral turpitude. Hence, the only requirement
is for the Disciplinary Authority or the Appointing Authority to
decide as to whether the misconduct could, in normal
circumstances, constitute an offence involving moral turpitude,
with a further discretion conferred on the authority forfeiting
gratuity, to decide whether the forfeiture should be of the whole
or only a part of the gratuity payable, which would depend on
the gravity of the misconduct. Necessarily, there should be a
notice issued to the terminated employee, who should be
allowed to represent both on the question of the nature of the
misconduct; whether it constitutes an offence involving moral
turpitude, and the extent to which such forfeiture can be made.
There is a notice issued and consideration made in the instant
appeals; the efficacy of which, has to be considered by us
separately."
21. It is relevant to note that in the said case also, it was noted that a
notice had been issued to the employee before proceeding to exercise the
power to forfeit gratuity by invoking Section 4(6)(b)(ii) of the Gratuity
Act.
22. Since no such notice was ever issued to the respondent No.1, the
action of forfeiting gratuity on the part of the petitioner society was
rendered unsustainable. Apart from this, the service of the respondent
No.1 was not terminated upon holding an enquiry for any specific
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charges and the report under Section 88 of the Co-operative Societies
Act had exonerated him.
23. In view of the observations made hereinabove, this Court finds no
merit in the present writ petition and accordingly, the writ petition is
dismissed.
24. Pending applications, if any, also stand disposed of.
(MANISH PITALE, J.)
Minal Parab
