Bombay High Court Clarifies Applicability of Payment of Gratuity Act, 1972 to Zilla Parishad Employees and Prescribes Mandatory Consideration of Forfeiture under Section 4(6)

Introduction

The Nagpur Bench of the Bombay High Court, in Zilla Parishad, Amravati v. Pradeep Bhaurao Pokale (2025 BHC-NAG 5300), addressed two recurring questions in service jurisprudence:

• Whether employees of statutory local bodies such as Zilla Parishads are covered by the Payment of Gratuity Act, 1972 (PG Act) in the absence of an explicit government exemption under Section 5.
• Whether, while deciding an employee’s claim for gratuity, the Controlling Authority is bound to examine possible forfeiture or withholding in light of pending departmental or criminal proceedings, as contemplated by Section 4(6) of the PG Act.

The petitioners—Zilla Parishad, Amravati and its Executive Engineer—assailed an order of the Controlling Authority awarding the respondent (a retired Executive Engineer) gratuity of ₹20,00,000 with 10% interest. The core dispute revolved around the interplay between the Maharashtra Civil Services (Pension) Rules, 1982 (MCS-Pension Rules) and the PG Act.

Summary of the Judgment

Justice M. S. Jawalkar partially allowed the writ petition and:

1. Set aside the Controlling Authority’s order dated 19-01-2023.
2. Remitted the matter for fresh adjudication, directing the Authority to specifically consider Section 4(6) (forfeiture/withholding of gratuity) in view of the pending criminal trial under the Prevention of Corruption Act against the respondent.
3. Declared that the PG Act applies to Zilla Parishad employees because no exemption under Section 5 exists.
4. Ordered transfer of the amount (₹14,00,000 plus interest) deposited in the High Court to the Controlling Authority, to be dealt with in the remanded proceedings.

Analysis

Precedents Cited

The Court’s discourse is heavily precedent-driven, drawing from both Supreme Court and Bombay High Court pronouncements:

1. Chairman-cum-Managing Director, Mahanadi Coalfields Ltd. v. Sri Rabindranath Choubey, AIR 2020 SC 2978
   • Three-Judge Bench holding that gratuity may be withheld during pendency of disciplinary proceedings; after retirement, appropriate penalties (including forfeiture of gratuity) may be imposed if guilt is proved.
   • Provided jurisprudential backbone for the High Court’s stance that Section 4(6) considerations cannot be ignored merely because the employee has superannuated.
2. Western Coalfields Ltd. v. Manohar Govinda Fulzele, Civil Appeal No. 2608/2025
   • Reaffirmed that disciplinary or criminal proceedings pending at retirement keep the “employer-employee” nexus alive for limited purposes, allowing penalties affecting post-retiral benefits.
3. Suresh Laxman Tikhile v. Municipal Council, Achalpur, WP No. 4810/2024 (Bom HC) & Municipal Council, Achalpur v. Anil Laxmanrao Pataskar, WP No. 887/2024
   • Held that the PG Act applies to municipal employees unless exempted; emphasised Section 4(5) (entitlement to “better terms”).
4. Other authorities relied on by the respondent—e.g., Jaswant Singh Gill (2007), Nivedita Sharma (2011), and various Bombay High Court rulings—were distinguished on facts or considered inapplicable because they lacked the factor of pending criminal prosecution or did not involve statutory local bodies without exemption under Section 5.

Legal Reasoning

1. Statutory Coverage under the PG Act
   • Section 1 of the PG Act extends the legislation to every establishment employing 10 or more persons unless specifically exempted under Section 5.
   • The Court noted no notification of exemption had been obtained by the Zilla Parishad; thus, employees continue to derive a “statutory right” to the more beneficial gratuity quantum under the PG Act (currently capped at ₹20 lakh via Central amendment).
   • Section 4(5) preserves any “better terms” of gratuity; since the PG Act ceiling is higher than the ₹14 lakh limit under the MCS-Pension Rules/Govt. Resolution of 01-03-2019, employees may legitimately opt for the PG Act.
2. Withholding/Forfeiture under Section 4(6)
   • The Controlling Authority awarded full gratuity without analysing that the respondent was facing prosecution for offences involving moral turpitude (Prevention of Corruption Act) and was under suspension at retirement.
   • Section 4(6)(b)(ii) permits total or partial forfeiture where services are terminated for an act constituting such offence. Although the respondent is not yet “terminated,” the Court held the Authority must factor in the pendency of trial before deciding entitlement/quantum.
   • Reliance on Mahanadi Coalfields established that post-retirement, disciplinary/criminal liability persists for gratuity-withholding purposes.
3. Maintainability of Writ versus Statutory Appeal
   • Ordinarily, Section 7(7) PG Act provides an efficacious appeal limited to 60+60 days. The petitioner missed this window.
   • However, the Court entertained the writ because:
     1. the core issue implicated jurisdictional questions (applicability of the Act itself); and
     2. the employer had already deposited the determined amount (negating the “avoidance of deposit” rationale used in CEO, Zilla Parishad, Beed).

Impact of the Judgment

• Uniform Application of PG Act to Local Bodies: The decision cements the principle that unless explicit exemption exists, employees of Zilla Parishads—and by extension other local government bodies—are within the PG Act’s fold.
• Controlling Authorities’ Obligations: When criminal or disciplinary proceedings are pending, Controlling Authorities must meticulously apply Section 4(6) before quantifying gratuity. Mechanical awards of the statutory maximum stand vulnerable to judicial review.
• Policy Re-alignment: State governments and local bodies that rely solely on internal pension rules (e.g., MCS-Pension Rules) may either (a) seek a Section 5 exemption, or (b) align their gratuity ceilings to the Central limits to avoid litigation.
• Procedural Guidance: Employers who fail to file statutory appeals in time may still invoke the writ jurisdiction if jurisdictional questions exist and statutory deposits are made, but this remains discretionary and fact-specific.

Complex Concepts Simplified

Payment of Gratuity Act (PG Act), 1972

A central welfare statute mandating a one-time lump-sum payment to employees who have rendered at least five years’ continuous service, subject to maximum ceilings (₹20 lakh at present).

Section 4(5) – “Better Terms” Clause

Allows employees to opt for a more advantageous gratuity arrangement available under any other rule, award, or contract.

Section 4(6) – Forfeiture of Gratuity

Authorises forfeiture (partial/total) of gratuity if the employee’s services are terminated for misconduct that causes financial loss, involves violence, or constitutes an offence of moral turpitude.

Section 5 – Exemption

Permits the appropriate government to exempt an establishment from the PG Act if an alternative gratuity scheme is “not less favourable” to employees.

Controlling Authority

A quasi-judicial authority (usually the Assistant Labour Commissioner or Deputy Commissioner) designated to enforce the PG Act at the first instance.

Writ Jurisdiction (Article 226)

Constitutional power of High Courts to issue directions/orders for enforcement of fundamental and other legal rights, exercisable even when alternative remedies exist in exceptional circumstances.

Conclusion

The ruling in Zilla Parishad, Amravati v. Pokale blends employee welfare with safeguards against public-sector corruption. While affirming that Zilla Parishad staff enjoy the broader coverage and higher monetary ceiling of the PG Act, the Court equally underscores an employer’s right—and the Controlling Authority’s duty—to consider forfeiture where serious misconduct is alleged and adjudication is pending.

Henceforth, local bodies in Maharashtra (and possibly across India, given persuasive value) must either obtain a Section 5 exemption or honour the PG Act’s mandates. Simultaneously, Controlling Authorities cannot ignore Section 4(6); they must record clear findings on whether pending proceedings justify withholding or forfeiture. The precedent thus balances the Act’s beneficial intent with the imperative of protecting public funds from being disbursed to employees who may later be convicted of grave misconduct.