Interest Mandatory For Delay In Payment Of Gratuity: Gujarat High Court Reiterates


The Gujarat High Court reiterated that under the provisions of Section 7 of the Payment of Gratuity Act, there is a clear mandate on the employer to pay gratuity within time and to pay interest on delay in payment of gratuity.

A division bench of Justice Biren Vaishnav directed Sardar Patel University to pay gratuity of the petitioner retired lecturer and Rs 10 lakh along with interest at 9% for wrongfully withholding gratuity since his retirement in 2013.

The direction was passed in a petition filed under Article 226 of the Constitution, where the petitioner had prayed that the respondent should take arbitrarily non-payment of Rs 10 lakh along with 18% interest on his gratuity.

Petitioner joined Sardar Patel University as Lecturer with effect from 04.10.1979. He was confirmed in service from 28.09.1986. It was the case of the petitioner that since he was appointed to the post of Lecturer after 01.04.1982, his services were counted in the pension scheme. He retired from service on 14.06.2013.

The petitioner claimed that he was entitled to Rs 10 lakh gratuity in view of a 2010 notification, according to which the gratuity amount was increased from Rs 3,50,000 to Rs 10 lakh. The state has provided this amount to CPF beneficiaries since 2010 under an amendment to Section 4(3) of the Payment of Gratuity Act.

On the contrary, the AGP argued that the petitioner is covered under the CPF scheme and is not entitled to gratuity.

The bench observed that the retirement of the petitioner indicates that GPF was deducted from his salary. Hence, he is entitled to get the benefit of the GPF scheme. Further, the question of gratuity of ten lakh rupees was raised in an earlier civil application with similar facts.

The High Court had then relied on the case H. Gangahanuma Gowda Vs. Karnataka Agro Industries Corporation Ltd. (2003) 3 SCC 40 . In this case, it was stated that interest is payable on delayed payment of gratuity. It also held that it was “compulsory and not discretionary.”

The government increased the amount of gratuity to Rs. 10 lakh and therein the petitioner who had retired in 2011 is entitled to interest on account of non-payment of gratuity of Rs.6.50 lakh in addition to 9% interest.

Noting that the petitioner in the present case had retired in 2013 “without any dispute”, the Bench held that he was entitled to interest on delayed payment of gratuity as per case DD Tiwari (d) others vs. Uttar Haryana Bijli Vitran Nigam & Ors. Is.

Justice Vaishnav remarked,

“Since the petitioner retired on 14.06.2013 and the amount of gratuity was wrongly withheld by the respondents, the petitioner would be entitled to interest at the rate of 9% from the date of his retirement till the date of actual payment.”

Case Title: Ashwinkumar Ramniklal Jani Vs State of Gujarat

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