Bank May Forfeit Gratuity for Criminal Misconduct But Not Employee’s Own PF | HC

Case Details: LS Dinamani vs. Management of Canara Bank - [2025] 181 taxmann.com 314 (HC-Karnataka)

Judiciary and Counsel Details

• R. Nataraj, J.
• R. Nagendra Naik, Adv. for the Petitioner.
• J. Pradeep Kumar, Adv. for the Respondent.

Facts of the Case

In the instant case, the petitioner was an employee of Canara Bank. He was convicted for offences punishable under section 120B read with sections 468, 471, 420 of the IPC and was dismissed from service.

The Respondent-bank forfeited gratuity and provident fund payable to the petitioner consequent to his dismissal from service. The petitioner filed writ petition challenging the order of the respondent forfeiting gratuity as well as provident fund.

The petitioner contended that in the order dismissing him from service, there was no ascertainment of loss suffered by the bank and hence, the respondent was not justified in forfeiting the gratuity.

He also contended that the respondent had initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and recovered a sum of Rs.1.90 crores and hence, the bank did not suffer any loss.

It was noted that the petitioner was not entitled to any gratuity in view of Section 4(6) of the Payment of Gratuity Act, 1972. Further, in so far as provident fund to which the petitioner was entitled to, Regulation 19 of Canara Bank Staff Provident Fund Regulations enabled the bank to deduct any amount contributed by it to adjust any loss caused by the act of the employee. However, it did not authorize the bank to forfeit the amount contributed by the employee.

High Court Held

The High Court held that the respondent was directed to release the petitioner’s contribution to provident fund along with interest as applicable for delayed payment of provident fund from date of dismissal of the petitioner from service till date of payment.