2003 (2) TMI 528 - SC - Indian Laws

Court orders 10% interest on delayed gratuity payments, overturns denial.

The Supreme Court held that the appellant was entitled to interest on belated gratuity payment under the Payment of Gratuity Act. The Division Bench ... Interest on delayed payment of gratuity - mandatory obligation of employer to determine and pay gratuity within prescribed time - proviso to Section 7(3A) of the Payment of Gratuity Act, 1972 (no interest if delay due to fault of the employee and employer has obtained permission in writing from the controlling authority) - recovery of gratuity as arrears of land revenue with interest under Section 8 of the Payment of Gratuity Act, 1972Interest on delayed payment of gratuity - mandatory obligation of employer to determine and pay gratuity within prescribed time - proviso to Section 7(3A) of the Payment of Gratuity Act, 1972 (no interest if delay due to fault of the employee and employer has obtained permission in writing from the controlling authority) - Whether the appellant was entitled to interest on belated payment of gratuity and whether the High Court could deny such interest by exercising discretion. - HELD THAT: - The Court held that Section 7(2) and (3)/(3A) of the Payment of Gratuity Act, 1972 impose a clear mandate on the employer to determine and pay gratuity within the specified period and to pay simple interest on delayed payment. The proviso to Section 7(3A) is the sole exception permitting non-payment of interest where the delay is due to the fault of the employee and the employer has obtained written permission from the controlling authority. In the present case the Single Judge denied interest on the ground of alleged doubt about entitlement, but had otherwise directed payment of gratuity; the respondent did not invoke or satisfy the proviso to Section 7(3A). Consequently no judicial discretion lay to withhold interest once entitlement to gratuity was recognised. The Division Bench erred in upholding the Single Judge's denial on the basis that the exercise of discretion was not arbitrary, because the statutory provision displaces such discretion except in the limited circumstances specified in the proviso.Interest on belated payment of gratuity could not be denied; the employer must pay interest from the date gratuity became payable until payment, unless the proviso to Section 7(3A) applies.Final Conclusion: The High Court order denying interest on belated payment of gratuity was set aside; the respondent was directed to pay interest (awarded at 10% by the Court) on the gratuity from the date it became payable until payment, and the appeal was allowed with costs. Issues:- Whether the appellant is entitled to interest on belated payment of gratuityRs.- Whether the High Court was correct in denying interest on belated payment of gratuityRs.- Whether the discretion exercised by the learned Single Judge in denying interest on belated payment of gratuity was arbitraryRs.Analysis:- The appellant and other officials were suspended in 1999, challenging the suspension. The Corporation withdrew the suspension later. The appellant retired in 2000 without settlement of suspension period or salary. He filed a writ petition seeking various dues, including interest on belated gratuity payment. The Single Judge granted relief except for interest on gratuity. The appellant appealed this denial.- The Division Bench found the appellant entitled to interest on belated gratuity payment but upheld the Single Judge's decision, stating the denial was not arbitrary. The appellant argued that interest on belated gratuity payment is a statutory right under the Payment of Gratuity Act, and the High Court erred in denying it based on discretion.- The Act mandates payment of gratuity within a specified time and interest on delayed payment. The employer must pay interest if gratuity is not paid on time, subject to certain conditions. Denying interest on belated gratuity payment goes against the statutory compulsion. Previous cases have emphasized the importance of timely gratuity payment and the penalty of interest for culpable delays.- The Single Judge denied interest on belated gratuity payment due to doubts about entitlement during ongoing court proceedings. However, this denial contradicts the Act's clear provisions mandating interest on delayed gratuity payments. The Division Bench erred in upholding this denial, wrongly assuming the Single Judge had discretion in awarding interest, which is not the case under the Act.- The Supreme Court set aside the impugned order, directing the Corporation to pay interest on the gratuity amount at 10% from the due date till payment. The appeal was allowed with costs.