Bank employees gratuity payment can be adjusted against outstanding dues

Last updated: 21 October 2022

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The Karnataka High Court has ruled that banks cannot adjust an employee's gratuity payment against outstanding home loans or other dues. Gratuity is protected under Section 7 of the Payment of Gratuity Act, 1972, and cannot be forfeited or attached by an employer. While an employee's liability for damages caused by wilful misconduct can lead to forfeiture of gratuity to that extent, general outstanding debts like home loans are considered separate commercial transactions and are not grounds for withholding gratuity.

Court :
Karnataka High Court

Brief :
The gratuity of an employee whose services are being considered to be terminated on the accountability of an act of wilful omission/negligence causing any damage or loss to, or destruction of, property belonging to the employer shall be forfeited to the extent of the damage or loss/vandalization so caused. In above case employer bank has adjusted outstanding home loan of employee against payment of gratuity, which will not be allowed.

Citation :
WRIT PETITION NO. 11463 OF 2020 (L-RES)

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Judgement posted by

FCS Deepak Pratap Singh

Associate Vice President - Secretarial & Compliance (SBI General Insurance Co. Ltd.)

Dear Friends, MyselfFCSDeepak P. Singh ( B.Sc.. LLB, FCS. FIII, CIAFP, CRMP, ID) , A Fellow Member of ICSI, Law Graduate ,Fellow Member of Insurance Institute of India, Certified Independent Director ,Certified Insurance Anti Fraud Professional , Certified Risk Governance Professional ( ICSI-III) and cleared Limited I ... Read more

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