The Orissa High Court has ruled that gratuity of a retired employee cannot be withheld to recover the defaulted loan amount of another person, even if the retired employee had stood as a guarantor.
The Court observed that gratuity is a statutory right and a form of social security meant for the employee’s welfare after retirement. It cannot be attached or withheld except as provided under the Payment of Gratuity Act, 1972.
The bench noted that acting as a guarantor for a loan does not fall under the permissible grounds for withholding gratuity. Therefore, the employer or bank cannot deduct or retain gratuity payments to recover dues from such guarantees.
The Court directed that the withheld gratuity be released to the retired employee along with interest, emphasizing that social security benefits must not be subjected to contractual liabilities like loan recovery.
