The High Court has upheld an order directing a bank to pay gratuity to the widow of a dismissed officer. The Court held that an employer cannot forfeit gratuity under service regulations unless it satisfies the conditions laid down in Section 4(6) of the Payment of Gratuity Act, 1972.
A Division Bench comprising Justice Vivek Rusia and Justice Pradeep Mittal delivered the judgment on May 12, 2026, in Central Madhya Pradesh Gramin Bank v. Smt. Babita Mor (Writ Appeal No. 3160 of 2025).
Widow Sought Release of Gratuity
Babita Mor, the widow of late Rajesh Mor, sought release of gratuity payable to her husband.
The Bank had initiated disciplinary proceedings against Rajesh Mor after issuing a charge sheet on August 30, 2016. The Bank alleged that he failed to open a branch under his charge and misappropriated ₹1 lakh from the branch cash chest.
The inquiry officer found both charges proved. The Bank dismissed him from service on April 30, 2017. It later rejected his appeal on November 2, 2017.
Rajesh Mor died on November 19, 2017.
Bank Rejected Gratuity Claim
After her husband’s death, Babita Mor applied for gratuity.
The Bank rejected her claim on January 20, 2018. It relied on Section 4(6)(b) of the Payment of Gratuity Act and Clause 72(e) of its Service Regulations.
Following directions in an earlier writ petition, the Bank reconsidered the matter. However, it again rejected the claim on August 18, 2021. The Bank maintained that the gratuity stood forfeited under its Service Regulations.
Babita Mor then filed a writ petition. A Single Judge allowed her plea and directed the Bank to release the gratuity amount. The Bank challenged that order before the Division Bench.
Bank Relied on Service Regulations
The Bank argued that its Service Regulations governed the deceased officer’s employment conditions.
According to the Bank, dismissal for misconduct automatically resulted in forfeiture of gratuity. It contended that the Single Judge wrongly applied the Payment of Gratuity Act instead of Regulation 72.
The Bank also relied on the Supreme Court’s decision in P. Rajan Sandhi v. Union of India. It argued that dismissal following disciplinary proceedings justified denial of gratuity.
Widow Opposed Forfeiture
The respondent argued that the deceased officer had already deposited the amount allegedly misappropriated.
As a result, the Bank suffered no actual financial loss. She contended that Section 4(6) permits forfeiture only to the extent of the loss caused to the employer.
She also argued that the Payment of Gratuity Act overrides conflicting service regulations.
Court Gives Priority to Gratuity Act
The Division Bench agreed with the Single Judge.
The Court held that Section 14 of the Payment of Gratuity Act gives the statute overriding effect over inconsistent service regulations.
Relying on Jaswant Singh Gill v. Bharat Coking Coal Ltd., the Bench observed that employers can forfeit gratuity only in situations specifically mentioned under Section 4(6).
The Court also rejected the Bank’s reliance on P. Rajan Sandhi. It noted that the case concerned the Working Journalists Act, a special statute. The Bank’s Service Regulations, in contrast, were only regulatory provisions and could not override the Gratuity Act.
Conditions for Forfeiture Not Established
The Court found that the Bank failed to satisfy the requirements of Section 4(6).
Although the disciplinary proceedings involved allegations of misappropriation, the employee had already deposited the disputed amount. Therefore, the Bank suffered no actual pecuniary loss.
For that reason, Section 4(6)(a), which allows forfeiture to the extent of actual loss, did not apply.
The Court also found that Section 4(6)(b)(ii) did not apply. No criminal court had convicted the employee for an offence involving moral turpitude. In fact, authorities had not initiated any criminal prosecution against him.
The Bench clarified that dismissal in departmental proceedings alone cannot lead to automatic forfeiture of gratuity.
Writ Appeal Dismissed
The Court held that service regulations cannot defeat the statutory right to gratuity.
It upheld the Single Judge’s order directing payment of gratuity to the widow and dismissed the Bank’s appeal as devoid of merit.
Case Details
Case: Central Madhya Pradesh Gramin Bank v. Smt. Babita Mor
Case No.: Writ Appeal No. 3160 of 2025
Court: High Court of Madhya Pradesh
Decision Date: May 12, 2026
