Respected all,
We have a Long-Term Settlement with the Union for providing loans, which includes a clause for the recovery of any outstanding amounts at the time of separation against the Gratuity payable to the individual.
Is this legal? What could be the consequences?
Please provide your valuable input on this.
Thank you,
Sameer
From India, Ahmadabad
Acknowledge(0)
Amend(0)
We have a Long-Term Settlement with the Union for providing loans, which includes a clause for the recovery of any outstanding amounts at the time of separation against the Gratuity payable to the individual.
Is this legal? What could be the consequences?
Please provide your valuable input on this.
Thank you,
Sameer
From India, Ahmadabad
Acknowledge(0)Amend(0)
Dear Mahajan, As per my knowledge it is legal we can deduct outstanding amount from gratuity. Regard’s Shaikh
From India, Bhubaneswar
Acknowledge(0)Amend(0)
138From India, Bhubaneswar
Acknowledge(0)Amend(0)
It is legal to get Form V (under the Payment of Gratuity Act, 1972) filled in by the employee at the time of giving a loan. Also, obtain a request letter from the employee stating that in case of failure to pay back the loan due to any unforeseen circumstances in the future, the balance amount may be deducted from the gratuity payable to them.
We have successfully implemented this practice in our organization for the last 25 years. Additionally, we have a very strong union, and this clause is common in all our agreements throughout the years.
From India, Nagpur
Acknowledge(0)Amend(0)
We have successfully implemented this practice in our organization for the last 25 years. Additionally, we have a very strong union, and this clause is common in all our agreements throughout the years.
From India, Nagpur
Acknowledge(0)Amend(0)
Dear Sameer,
Irrespective of whether or not you have entered into any agreement with the management, any outstanding amount or overpaid amount can be recovered from the amount of gratuity. On the other hand, no outstanding or overpaid amount can be recovered from the Pension or Provident Fund, except that only the overpaid pension amount is recoverable from the monthly pension due to any employee. There is no rule that prohibits any outstanding amount from recovery from gratuity, being a statutory benefit.
PS Dhingra
Chief Executive Officer
Dhingra Group of Management & Vigilance Consultants
New Delhi
09968076381
dcgroup1962@gmail.com
From India, Delhi
Acknowledge(0)Amend(0)
Irrespective of whether or not you have entered into any agreement with the management, any outstanding amount or overpaid amount can be recovered from the amount of gratuity. On the other hand, no outstanding or overpaid amount can be recovered from the Pension or Provident Fund, except that only the overpaid pension amount is recoverable from the monthly pension due to any employee. There is no rule that prohibits any outstanding amount from recovery from gratuity, being a statutory benefit.
PS Dhingra
Chief Executive Officer
Dhingra Group of Management & Vigilance Consultants
New Delhi
09968076381
dcgroup1962@gmail.com
From India, Delhi
Acknowledge(0)Amend(0)
Dear Sam,
Let us take situations and try to find out the answer to your query:
Situation 1:
The amount outstanding is very high, the person is not in the good books of management, and has left the organization without full and final settlement. He does not seem to be willing to settle the amount.
Answer: In such a situation, you can definitely recover the amount from his gratuity and settle the remaining amount.
Situation 2:
The amount outstanding is considerably high, the person is still willing to settle the amount but does not have funds.
Process his gratuity, subject to payable by cheque. Once you get his gratuity cheque, you can ask the employee to come to the office, take a PDC (Post Dated Cheque) from that employee against the gratuity payment, and settle the amount.
Situation 2 is more practical and does not create a bad impression about the company, but again, it is risky.
Just in case if the cheque given is not realized, the company retains all rights to file a case.
Regards,
Anjali Kishor Limaye
From India, Mumbai
Acknowledge(0)Amend(0)
Let us take situations and try to find out the answer to your query:
Situation 1:
The amount outstanding is very high, the person is not in the good books of management, and has left the organization without full and final settlement. He does not seem to be willing to settle the amount.
Answer: In such a situation, you can definitely recover the amount from his gratuity and settle the remaining amount.
Situation 2:
The amount outstanding is considerably high, the person is still willing to settle the amount but does not have funds.
Process his gratuity, subject to payable by cheque. Once you get his gratuity cheque, you can ask the employee to come to the office, take a PDC (Post Dated Cheque) from that employee against the gratuity payment, and settle the amount.
Situation 2 is more practical and does not create a bad impression about the company, but again, it is risky.
Just in case if the cheque given is not realized, the company retains all rights to file a case.
Regards,
Anjali Kishor Limaye
From India, Mumbai
Acknowledge(0)Amend(0)
In view of the fact that the recovery of outstanding amounts can be obtained from Gratuity at the time of separation and has been incorporated into your long-term agreement with the employees, you could proceed with implementing the same. However, it would be prudent to have a separate written individual undertaking with the concerned individuals at the time of disbursal of loans, etc., to address such eventualities.
Vasant Nair
From India, Mumbai
Acknowledge(0)Amend(0)
Vasant Nair
From India, Mumbai
Acknowledge(0)Amend(0)
Gratuity becomes payable only when the service rendered is satisfactory. Otherwise, it is not payable. In this case, when the concerned employee has defaulted on his obligations to pay back, no gratuity should be payable in the first instance. If there is no earning under the heading "Gratuity", where is the question of any recovery.
Thanks & Best Wishes,
Harsh Kumar Sharan (XLRI Alumnus)
Director & Head - Executive Coaching & Training
Kritarth Consulting Private Limited
New Delhi
Email: hksharan@kritarth.com
From India, Delhi
Acknowledge(0)Amend(0)
Thanks & Best Wishes,
Harsh Kumar Sharan (XLRI Alumnus)
Director & Head - Executive Coaching & Training
Kritarth Consulting Private Limited
New Delhi
Email: hksharan@kritarth.com
From India, Delhi
Acknowledge(0)Amend(0)
Not repaying the loan does not amount to unsatisfactory service. Furthermore, as per the Gratuity Act, unsatisfactory service is not the criterion for forfeiture of gratuity. The gratuity can only be forfeited in cases of:
1) riotous, violent, or disorderly behavior
2) moral turpitude.
However, both of these misconducts must be proven through a domestic enquiry. Even if you are aware that the employee has committed these misconducts, and there are multiple witnesses, one cannot consider touching the employee's gratuity amount.
From India, Nagpur
Acknowledge(0)Amend(0)
1) riotous, violent, or disorderly behavior
2) moral turpitude.
However, both of these misconducts must be proven through a domestic enquiry. Even if you are aware that the employee has committed these misconducts, and there are multiple witnesses, one cannot consider touching the employee's gratuity amount.
From India, Nagpur
Acknowledge(0)Amend(0)
There is a clear provision under the Payment of Gratuity Act. Here, I would like to mention section 13 of the Act, which provides protection to Gratuity. This section enumerates the principle that the gratuity of an employee cannot be attached under any decree by court or any kind of payment, even for the recovery of a loan provided to the employees.
It has been held in a case titled Yada Laxmi vs. A.P State Corporation Bank, LLR 2006 (108), that the amount of gratuity is not liable to be adjusted towards any amount drawn by the employee as a personal loan or housing loan.
The Delhi High Court held in a case titled Taxmaco Ltd vs. Roshan Singh 2001 LLR 890 (Delhi) that, in view of the direct and categorical judgment of the Supreme Court of India, the Payment of Gratuity Act is a welfare piece of legislation, and the amount of payment of gratuity cannot be withheld from an employee even on non-vacation of company quarters.
Withholding or adjustment of gratuity is not permissible under any circumstance other than those mentioned in section 4(6) of the Act, as held by the Kerala High Court in a case titled K.C Methew vs. Plantation Corporation Kerala LLR 2001 (123).
I hope the above clears all doubts of the members who wrongly gave opinions without considering the provisions of the law.
For more information, feel free to write further.
Regards
From India, Delhi
Acknowledge(0)Amend(0)
It has been held in a case titled Yada Laxmi vs. A.P State Corporation Bank, LLR 2006 (108), that the amount of gratuity is not liable to be adjusted towards any amount drawn by the employee as a personal loan or housing loan.
The Delhi High Court held in a case titled Taxmaco Ltd vs. Roshan Singh 2001 LLR 890 (Delhi) that, in view of the direct and categorical judgment of the Supreme Court of India, the Payment of Gratuity Act is a welfare piece of legislation, and the amount of payment of gratuity cannot be withheld from an employee even on non-vacation of company quarters.
Withholding or adjustment of gratuity is not permissible under any circumstance other than those mentioned in section 4(6) of the Act, as held by the Kerala High Court in a case titled K.C Methew vs. Plantation Corporation Kerala LLR 2001 (123).
I hope the above clears all doubts of the members who wrongly gave opinions without considering the provisions of the law.
For more information, feel free to write further.
Regards
From India, Delhi
Acknowledge(0)Amend(0)
Gratuity cannot be adjusted against any amount. The actual amount of gratuity payable shall be paid to the employee by means of a cheque. In case any loan is payable by the employee, it shall be collected by means of a separate cheque or cash from the employee while giving the gratuity cheque to the employee. This is required to safeguard the Management from unwanted litigation in the event of the employee or his legal heirs filing a gratuity claim before the Gratuity Authority at a later period.
I fully agree with what Mr. essykkr. Regards.
From India, Selam
Acknowledge(0)Amend(0)
I fully agree with what Mr. essykkr. Regards.
From India, Selam
Acknowledge(0)Amend(0)Looking for something specific? - Join & Be Part Of Our Community and get connected with the right people who can help. Our AI-powered platform provides real-time fact-checking, peer-reviewed insights, and a vast historical knowledge base to support your search.