Employer Gratuity Retention Restricted by Karnataka High Court

The Karnataka High Court has ruled that an employer cannot withhold an employee's gratuity unless legal proceedings for compensation are initiated. The ruling came as the court rejected Central Warehousing Corporation's plea to withhold gratuity from dismissed employee G C Bhat without initiating recovery processes for alleged losses.

The Karnataka High Court has delivered a significant judgment, clarifying that employers must initiate legal proceedings to withhold gratuity from dismissed employees. This ruling emerged from a case involving the Central Warehousing Corporation and former employee G C Bhat.

Justice Suraj Govindaraj emphasized that punitive actions like dismissal do not empower an employer to retain gratuity payments unless recovery proceedings for alleged losses are initiated. The corporation had contended Bhat's dismissal was linked to substantial financial misappropriation, yet failed to pursue legal recovery, which the court deemed essential.

The court criticized the corporation's inaction and ordered it to pay Bhat Rs 7,88,165 with interest, extending the payment deadline to January 31, 2025. The judgment serves as a precedent for future cases, advising management to ensure recovery proceedings accompany any dismissal due to financial misconduct.

(With inputs from agencies.)