The Payment of Gratuity Act, 1972 treats gratuity as a statutory right for eligible employees. Yet a recurring question persists in workplaces: if an employer already pays pension, can gratuity be refused? A recent ruling reinforces the legal position clearly — pension does not cancel gratuity.
Court draws a clear line between pension and gratuity
In Chevalier T. Thomas Educational Trust v. The Joint Commissioner of Labour, the Madras High Court rejected the argument that pension and gratuity together amount to a “double benefit.” The Court underscored that gratuity is a mandatory, lump-sum statutory benefit payable on termination of service after the qualifying period, while pension is a separate arrangement created by an organisation.
Practical Meaning
Gratuity is a statutory obligation under the Act. Pension is a separate scheme. Internal policies or contracts cannot override gratuity — only a formal government exemption under the Act can.
When can gratuity legally be denied
While gratuity is a statutory right, the law permits forfeiture only in limited and serious situations. Courts have recognised forfeiture in cases involving misconduct connected with moral turpitude (for example, fraud or falsification of records), and in specific circumstances involving damage to property or violent behaviour — subject to due process and proper opportunity to respond.
Critical compliance note
Pension payments are not a valid ground to refuse gratuity. Any forfeiture must be legally supported, documented, and procedurally fair.
What affected employees can do
Employees who were denied gratuity solely because they receive a pension may consider challenging that decision. Employers must provide written reasons for any forfeiture, and employees can contest such action before the appropriate authority.
Straight answer in one line
If gratuity was denied only due to pension, the denial is legally questionable unless the employer holds a valid government exemption under Section 5 of the Act.
CNBC TV 18 summary
CNBC TV 18 reported that the Madras High Court clarified employers cannot deny statutory gratuity merely because a pension is being paid, unless a specific exemption is obtained from the government under the Payment of Gratuity Act, 1972. The matter arose from a long-serving employee’s gratuity claim being rejected on “double benefit” grounds, which the Court did not accept. The writ petition was dismissed, and the legal representatives were permitted to withdraw the deposited gratuity amount.
Why this ruling matters
The judgment reinforces a simple principle — gratuity is a statutory right, not a discretionary perk. Pension schemes do not cancel that obligation. In practical terms, gratuity and pension operate on parallel tracks, and receiving one does not erase the other.
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Note: This is an informational write-up for general awareness and should not be treated as formal legal advice.
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