I am writing to seek clarification regarding a matter involving the adjustment of an outstanding loan amount owed by an employee at my establishment, which has recently been permanently closed. As we prepare to settle all terminal benefits, including gratuity, bonus, notice pay, and retrenchment compensation, I would like to know whether it is permissible to adjust the outstanding loan against these terminal benefits.
The Controlling Authority has indicated that adjustments against gratuity are not allowed. However, I would appreciate any guidance or advice on this matter, including any legal citations or precedents that support the possibility of such adjustments. The alternative of pursuing a civil case for the recovery of the outstanding loan is not ideal due to the associated costs and time commitment, especially as I plan to relocate from the city.
Thank you for your assistance. I look forward to your insights on this issue.
From India, Bhopal
4The Controlling Authority has indicated that adjustments against gratuity are not allowed. However, I would appreciate any guidance or advice on this matter, including any legal citations or precedents that support the possibility of such adjustments. The alternative of pursuing a civil case for the recovery of the outstanding loan is not ideal due to the associated costs and time commitment, especially as I plan to relocate from the city.
Thank you for your assistance. I look forward to your insights on this issue.
From India, Bhopal
Gratuity can be deducted against the damages or loss or destruction of property belonging to the employer,only if the employee is terminated for any act,wilful omission or negligence causing such losses. Due procedure shall be completed before doing that.
In your case it is the closure of establishment, not termination of employee for any action of employee mentioned above.
From India, Thiruvananthapuram
In your case it is the closure of establishment, not termination of employee for any action of employee mentioned above.
From India, Thiruvananthapuram
The version of the Controlling Authority is right.
You can adjust the outstanding from the other payable than the gratuity. Otherwise ask the employee to issue a cheque in favor of company for level the outstanding.
From India, Mumbai
You can adjust the outstanding from the other payable than the gratuity. Otherwise ask the employee to issue a cheque in favor of company for level the outstanding.
From India, Mumbai
Forfeit does not mean adjustment AND YOU CAN ADJUST THE GRATUITY AGAINS THE OUTSTANDIGN LOAN SUBJECT TO THE PROVISIONS OF THE LOAN AGREEMENT. In a judgement decided by the Allahabad HC, an employee took loan from the petitioner Bank by executing a loan agreement having a clause that the loan amount can be adjusted against the gratuity amount. He was discharged from the services on account of disciplinary proceedings. His gratuity was adjusted against loan amount. He claims gratuity on filing application before the controlling authority. His application was allowed. Appeal was filed against the order of controlling Authority, it was dismissed. Bank filed a Writ before the Allahabad HC. Held- Amount of gratuity has been adjusted towards the housing loan. It has neither been forfeited nor withheld. Adjustment of can be adjusted against loan, if loan agreement so provides. It is not barred by the provisions of Section 4(6) of the Payment of Gratuity Act, 1972.
State Bank of Bikaner & Jaipur Vs Appellate Authority & Others, 2013 LLR 637
Regards,
Dr Kamlesh Agrawal
Mumbai
From India, Delhi
State Bank of Bikaner & Jaipur Vs Appellate Authority & Others, 2013 LLR 637
Regards,
Dr Kamlesh Agrawal
Mumbai
From India, Delhi
The reply of the authority is right.
You can not deduct loan amount from the gratuity or PF, but you can adjust against bonus and other dues, including salary due to the employee and retrenchment compensation.
If the loan amount is large (you have not provided details), then salary, bonus and other dues will not be adequate. Since you can not adjust against gratuity, as the employee to pay the amount off when he is getting the gratuity (or before he gets it). If he refuses, you have no option but to file a civil suite for recovery
From India, Mumbai
You can not deduct loan amount from the gratuity or PF, but you can adjust against bonus and other dues, including salary due to the employee and retrenchment compensation.
If the loan amount is large (you have not provided details), then salary, bonus and other dues will not be adequate. Since you can not adjust against gratuity, as the employee to pay the amount off when he is getting the gratuity (or before he gets it). If he refuses, you have no option but to file a civil suite for recovery
From India, Mumbai
I would like to cite a practical step taken in such a situation despite the legal provision stated above.
1. The employer issues a letter listing the payment of various dues to the employee along with the amount recoverable from him.
2. The employee replies back asking the employer to deduct the recoveries from the gratuity payable.
3. The employee gives a pre-receipt indicating that he has received the gratuity amount in full.
4. The employer remits the balance amount to the employee.
This process was adopted and luckily nobody challenged the action.
From India, Mumbai
1. The employer issues a letter listing the payment of various dues to the employee along with the amount recoverable from him.
2. The employee replies back asking the employer to deduct the recoveries from the gratuity payable.
3. The employee gives a pre-receipt indicating that he has received the gratuity amount in full.
4. The employer remits the balance amount to the employee.
This process was adopted and luckily nobody challenged the action.
From India, Mumbai
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Payment of Gratuity Act, 1972 & The Rules.ppt
THE PAYMENT OF GRATUITY ACT 1972.doc