Orissa High Court Upholds Employee's Right to Gratuity, Rejects Bank's Appeal

Cuttack Central Co-operative Bank's attempt to withhold gratuity over loan guarantee dismissed; Court rules in favor of statutory rights under Payment of Gratuity Act, 1972.

In a significant judgment, the Orissa High Court has affirmed the statutory rights of employees to receive gratuity upon retirement, dismissing an appeal by Cuttack Central Co-operative Bank Ltd. against the release of gratuity to a retired employee. The division bench, comprising Chief Justice Harish Tandon and Justice Murahari Sri Raman, delivered the verdict on September 18, 2025, in WA No.323 of 2025, reinforcing the statutory provisions of the Payment of Gratuity Act, 1972.

The case centered around the bank's decision to withhold the gratuity of its former Deputy Manager, who retired on July 31, 2010. The bank argued that the employee, having served as a guarantor for a loan that defaulted, should have her gratuity withheld to cover the loan amount. This stance was contested by the employee, leading her to seek redress through the Payment of Gratuity Act’s Appellate Authority, which ruled in her favor. The bank’s subsequent appeals, first to the Appellate Authority and then through a writ petition, were unsuccessful.

The High Court, in its judgment, underscored the conditions under Section 4(6) of the Payment of Gratuity Act, 1972, which only allows for the forfeiture of gratuity if an employee is terminated for acts causing damage or loss to the employer’s property. Since the employee in question retired without any disciplinary issues or termination, the court found no legal grounds for withholding her gratuity.

The bench highlighted that gratuity is a statutory right and a form of deferred salary for services rendered, emphasizing that it cannot be withheld except under specific statutory provisions. The court also noted that writ courts should refrain from interfering with the findings of statutory authorities unless such findings are irrational or perverse, which was not the case here.

By dismissing the appeal, the Orissa High Court has reinforced the protective legal framework for employees’ post-retirement benefits, sending a clear message to employers about the limits of their power under the Payment of Gratuity Act, 1972.

Bottom Line:

Payment of Gratuity - Employer cannot withhold gratuity amount on grounds not explicitly provided under section 4(6) of Payment of Gratuity Act, 1972.

Statutory provision(s): Payment of Gratuity Act, 1972, Section 4(6)

Cuttack Central Co-operative Bank Ltd., Cuttack v. Joint Labour Commissioner, Bhubaneswar-cum-Appellate Authority, (Orissa)(DB) : Law Finder Doc Id # 2796365