All power Mosfets have a parasitic diode from drain to source. In the case of an N-Fet, the diode points from source to drain, so is reverse-biased in the direction the NFet is connected as a switch. However, if you do something to make the source more positive than the drain (the reverse of the normal situation), the parasitic diode becomes forward biased, and the channel conducts, regardless of what you do to the gate.
btw-What is the part number of your Nfet???
Look at this, where the source voltage of the NFet is swept from 0 to 6V. Note the current that flows back into the battery when the source voltage exceeds 4.2V (3.7V battery + 0.5V Vf of the parasitic Schottky inside the FET)/