Calcutta HC Upholds Forfeiture of Former CMD’s Gratuity, Rules Company CDA Regulations Override Gratuity Act [Read Judgment]

Kolkata: The Calcutta High Court, in an intra-court appeal, has set aside a Single Judge’s order and affirmed the right of MSTC Limited to forfeit the gratuity of its former Chairman and Managing Director (CMD), Malay Sengupta, on the ground of pecuniary loss caused by negligence. The Division Bench comprising Hon’ble Justice Lanusungkum Jamir and Hon’ble Justice Rai Chattopadhyay delivered the judgment on December 10, 2025.

The core dispute revolved around the applicability of the Payment of Gratuity Act, 1972 vis-à-vis the MSTC Conduct, Discipline and Appeal Rules, 1980 (MSTC CDA Rules), in relation to the recovery of ₹10 lakh imposed as a penalty on Mr. Sengupta after his retirement. The penalty followed disciplinary proceedings initiated for loss caused to the company due to negligence in conduct.

The Court noted that the respondent, a Presidential appointee to the Board of Directors, retired on April 30, 2009, with the disciplinary proceedings having been initiated just days prior. The disciplinary authority subsequently imposed a penalty of recovery from his gratuity.

Accepting the appellant company’s submissions, the High Court held that Rule 30A(ii) of the MSTC CDA Rules confers an exclusive right upon the employer to recover pecuniary loss from gratuity, independent of the conditions for forfeiture prescribed under Section 4(6) of the Payment of Gratuity Act, 1972. The Court found that the CDA Rules were not repugnant to the 1972 Act.

The Bench observed that the service rules governing the employee were determinative, noting that Rule 30A(ii) “operates in two situations—either where the employee is found guilty of misconduct as enumerated under the Payment of Gratuity Act, 1972, or where the employee is found guilty of negligence causing pecuniary loss to the company, for recovery of such loss. These two situations operate independently, and the existence of either renders the employee liable under the CDA Rules.”

The Division Bench placed reliance on the Supreme Court’s decision in Mahanadi Coalfields Ltd. v. Rabindranath Choubey, observing that the Single Judge had relied extensively on Jaswant Singh Gill v. Bharat Coking Coal Ltd., which now stands overruled in view of the Mahanadi Coalfields judgment.

Consequently, the Court upheld the disciplinary action and the consequent recovery from gratuity. It also faulted the Single Judge for having ventured into examining the propriety of the disciplinary proceedings against the respondent, which was not an issue raised in the writ petition. The Bench reiterated that it is well-settled law that courts should not re-evaluate the legality or factual findings of disciplinary proceedings in such circumstances.

Accordingly, the High Court allowed the appeal, set aside the Single Judge’s order dated March 25, 2025, as well as the Appellate Authority’s order under the Payment of Gratuity Act dated April 30, 2019, and upheld the order of the Controlling Authority dated February 20, 2018, which had rejected the employee’s claim for gratuity.

Case Details:

Case Name: MSTC Limited v. Malay Sengupta & Ors.

Case Number: FMA 959 of 2025 with CAN 01 of 2025, arising out of WPA 15908 of 2019

Coram: Hon’ble Justice Lanusungkum Jamir and Hon’ble Justice Rai Chattopadhyay

Heard on: 28.10.2025

Judgment on: 10.12.2025

Advocate for Appellant (MSTC Limited): Mr. Soumya Majumder, Senior Advocate

Advocate for Respondent No. 1: Mr. Biplab Ranjan Bose

[Read Judgment]