Tuesday 10 May 2022

Whether government is liable to pay interest if there is delay in payment of gratuity?

 The respondents are directed to pay to the petitioner

the amount of gratuity of Rs.10 lakhs within a period of

10 weeks from the date of receipt of copy of this order.

Since the petitioner superannuated on 14.06.2013 and

the amount of gratuity has been wrongfully withheld by

the respondents, the petitioner shall be entitled to

interest at the rate of 9% from the date of his

superannuation till the date of actual payment. {Para 10}

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO. 4452 of 2019


ASHVINKUMAR RAMNIKLAL JANI Vs STATE OF GUJARAT


CORAM: MR. JUSTICE BIREN VAISHNAV

Date : 19/04/2022


1. By way of this petition under Article 226 of the

Constitution of India, the petitioner has prayed for a

declaration that the action of the respondents in not

paying the entire amount of Rs.10 lakhs towards

gratuity to the petitioner is arbitrary. Further

direction is prayed that the respondents be directed

to pay the remaining amount of gratuity to the

petitioner along with 18% interest from the date of

his retirement.

2. Facts in brief would indicate that the petitioner had

joined service as an Assistant Lecturer on

28.08.1973 in the Government Polytechnic. His

appointment was under the pension scheme.

Thereafter, he joined services as a lecturer in the

Sardar Patel University with effect from 04.10.1979.

He was appointed as a ‘Reader’ through open

selection by direct recruitment with effect from

28.06.1984. He was confirmed in service with effect

from 28.09.1986. It is his case that since the

appointment was made after 01.04.1982 on the post

of reader, his services has been counted under the

GPF scheme. He retired from service on

14.06.2013.

3. Mr.Jayraj Chauhan learned counsel for the petitioner

would submit that it is no longer in doubt that the

petitioner was entitled to the benefit of pension as

per the Government Resolution dated 15.10.1984

and the subsequent notifications. He would rely on

a decision in case of State of Gujarat and Ors. v.

Ashwinkumar Ramniklal Jani rendered in LPA

No.219 of 2017 by which, in the case of the

petitioners, the Division Bench dismissed the appeal

of the State holding that the petitioner was entitled

to the benefits of pension, confirming the decision of

the coordinate bench of this Court rendered in

Special Civil Application No.15316 of 2015 dated

03.02.2016.

4. He would submit that after the date of retirement,

he was entitled to a gratuity of Rs.10 lakhs. This

was pursuant to a notification dated 24.05.2010, by

which, the gratuity amount was enhanced to Rs.10

lakhs from Rs.3,50,000/-. Consequential

amendments made in sub-section (3) of Section 4 of

the Payment of Gratuity Act. A resolution dated

19.07.2014 was passed by the State extending the

benefit of availability of gratuity of Rs.10 lakhs given

to CPF beneficiaries effective from the date of

amendment i.e. 24.05.2010.

5. Ms.Surbhi Bhati learned AGP for the State would

submit that reading the appointment order of the

petitioner with the Sardar Patel university would

indicate that the petitioner was governed by the CPF

scheme and therefore not entitled to the gratuity.

6. Considering the submissions made by the learned

advocates for the respective parties, the following

facts would indicate that the petitioner is entitled to

an amount of Rs.10,00,000/- as gratuity pursuant to

the amended notification with effect from

24.05.2010 which became part of the Act, by which,

the ceiling of gratuity was raised to Rs.10 lakhs.

Admittedly, from the pay slip of the Sardar Patel

University of June 2013, preceding the petitioner’s

retirement indicates that GPF was deducted from

the salary of the petitioner. Admittedly therefore

the petitioner was governed by the GPF scheme.

That all was not in doubt in view of the Division

Bench affirming the decision of the learned Single

Judge in the petition filed by the petitioner as

referred to herein above.

7. Even otherwise, as held by the Division Bench of this

Court in Civil Application No.3918 of 2019 in F/LPA

No.28476 of 2019, the Division Bench dismissed the

appeal of the State upholding the order of the

coordinate bench in Special Civil Application


Nos.7746 of 2014 with 7747 of 2014 dated

23.12.2016, where the Court considered the aspect

of payment of gratuity of Rs.10 lakhs and held as

under:

“1. Both the petitions raise identical questions of

facts and law, and therefore, they are being decided

by a common order.

2. The facts for the purpose of adjudication are

drawn from Special Civil Application No. 7746 of

2014 which is as under :-

2.1. The petitioner was serving in Shri

H.K.Commerce College, affiliated to Gujarat

University and he retired from service on 14th June,

2011. He had not opted for pension and continued

under the CPF Scheme. The petitioner had desired

the benefit of Government Resolution dated

13.4.2009 which enhanced the amount of gratuity to

Rs.10.00 Lacs. As the respondent had not paid the

amount of Rs.10.00 Lacs (Rupees Ten Lacs only)

towards gratuity, it is say of the petitioner that till

date, the respondents have not sent any reply to the

petitioner nor they have paid the remaining amount

of gratuity at par with other GPF holders. Therefore,

the petitioner has approached this Court with the

following reliefs :-

(A) to admit this petition;

(B) to declare that the action of the

respondents in not paying the entire amount of

Rs.10 Lacs towards gratuity to the petitioner is

arbitrary and bad in law and therefore be

pleased to issue a writ of mandamus or any

other appropriate writ,k order or direction

quashing and setting aside the action of the

respondents in not paying full gratuity to the

petitioner and further be pleased to direct the

respondents to pay remaining amount of

gratuity to the petitioner forthwith along with

12% interest per annum.

(c) Pending admission, hearing and final

disposal of this petition, the respondents be

directed to pay the remaining amount of

gratuity along with interest at the rate of 12%

per annum.

(d) to award the cost of this petition.

(e) to grant any other and further relief/s as

may be deemed fit and proper in the facts and

circumstances of the case.

3. Mr.Jairaj Chauhan, learned advocate appearing

for the petitioners has submitted that to both the

petitioners, the principal amount of gratuity has

already paid on 10.10.2014 . He has urged that Rs.

3.50 Lacs (Rupees Three Lacs Fifty thousand only )

paid on 14.9.2011 and the remaining amount of

Rs.6.50 Lacs (Rupees Six Lacs Fifty Thousand only)

has been paid on 10.10.2014. Therefore, the court

needs to pass necessary directions for the interest

part only.

4. This Court has heard learned AGP Ms.Asmita

Patel who has fairly submitted the Court may pass

appropriate order considering the decision rendered

in case of H.Gangahanume Gowda Vs. Karnataka

Agro Industries Corporation Ltd. reported

in (2003) 3 SCC 40. The Apex Court in the said

authority has decided the interest on delayed

payment of gratuity. It is also held that the same is

mandatory and not discretionary. When it is not the

case of the respondent that the delay in the payment

of gratuity was due to the fault of the employee and

that it had obtained permission in writing from the

controlling authority for the delayed payment on

that ground, the respondent had been directed to

pay interest @ 10% on the amount of gratuity to

which the appellant is entitled from the date it

became payable till the date of payment of the

gratuity amount.

5.Considering the submission of both the sides and

bearing in mind the ratio sought to be relied upon by

learned AGP , the amount of gratuity has already

paid on 14.9.2011 to the tune of Rs.3.50 Lacs and

the remaining amount Rs. 6.50 Lacs was paid on

10.10.2014 as petitioner had retired on 14.6.2011.

6. The Apex Court in the above referred decision has

held that the grant of gratuity well within time

mandatory and not discretionary wherein the Apex

Court has held that :-

“9. It is clear from what is extracted above

from the order of learned Single Judge that

interest on delayed payment of gratuity was

denied only on the ground that there was

doubt whether the appellant was entitled to

gratuity, cash equivalent to leave etc., in view

of divergent opinion of the courts during the

pendency of enquiry. The learned Single Judge

having held that the appellant was entitled for

payment of gratuity was not right in denying

the interest on the delayed payment of gratuity

having due regard to Section 7(3A) of the Act.

It was not the case of the respondent that the

delay in the payment of gratuity was due to the

fault of the employee and that it had obtained

permission in writing from the controlling

authority for the delayed payment on that

ground.As noticed above, there is a clear

mandate in the provisions of Section 7 to the

employer for payment of gratuity within time

and to pay interest on the delayed payment of

gratuity. There is also provision to recover the

amount of gratuity with compound interest in

case amount of gratuity payable was not paid

by the employer in terms of Section 8 of the

Act. Since the employer did not satisfy the

mandatory requirements of the proviso to

Section 7(3A), no discretion was left to deny

the interest to the appellant on belated

payment of gratuity. Unfortunately, the

Division Bench of the High Court, having found

that the appellant was entitled for interest,

declined to interfere with the order of the

learned Single Judge as regards the claim of

interest on delayed payment of gratuity only on

the ground that the discretion exercised by the

learned Single Judge could not be said to be

arbitrary. In the light of what is stated above,

the learned Single Judge could not refuse the

grant of interest exercising discretion as

against the mandatory provisions contained in

Section 7 of the Act. The Division Bench, in our

opinion, committed an error in assuming that

the learned Single Judge could exercise the

discretion in the matter of awarding interest

and that such a discretion exercised was not

arbitrary.

10. In the light of the facts stated and for the

reasons aforementioned, the impugned order

cannot be sustained. Consequently, it is set

aside. The respondent is directed to pay

interest @ 10% on the amount of gratuity to

which the appellant is entitled from the date it

became payable till the date of payment of the

gratuity amount. The appeal is allowed

accordingly with cost quantified at Rs.

10,000/-.”

6. Adverting to the facts herein, this Court

notices that the Government Resolution has been

passed by the State on 11-13/4/09 wherein the

limit of gratuity was raised to Rs.10 Lacs. The

facts remains that the entire sum had become due

to the petitioner who retired on 14.06.2011. For

no fault of the petitioners, the entire amount of

gratuity had not been paid well within the time

period and it had been paid in two parts i.e.

Rs.3.50 Lakhs on 14.09.2011 and remaining

amount of Rs.6.50 Lakhs on 10.10.2014. Hence,

for the late payment of Rs.6.50 Lakhs, there is no

jurisdiction and the petitioners have made out

their case to that extent. This Court is therefore of

the opinion that respondent is required to be

directed to pay simple interest @ 9% on the

amount of gratuity paid late i.e. Rs.6.00 Lacs to

which the petitioner was entitled from the date it

become payable till the date of payment of the

gratuity amount, i.e. from 14.09.2011 to

10.10.2014.

7. With the above observations and directions,

these petitions stand disposed of.”

8. Accordingly the case of the petitioner is covered by

the decision reproduced herein above.

9. The petitioner retired in the year 2013 for no fault of

his. Mr.Jayraj Chauhan would rely on the following

decisions in support of his claim that the petitioner

is entitled to interest on the delayed payment of

gratuity.

(I) In case of D.D.Tiwari (D) Thr. Lrs vs Uttar

Haryana Bijli Vitran Nigam reported in (2014) 8

SCC 894

(II) In case of Union of India v. M.S.Abdulla

reported in (2006) 6 SCC 455

(III) In case of Vijay L. Mehrotra v. State of U.P.

& Others reported in (2001) 9 SCC 687

(IV) In case of Union of India and Another v.

M.C. Desai and Others reported in (1996) 11

SCC 400

(V) In case of H. Gangahanume Gowda v.

Karnataka Agro Industries Corpn. Ltd. reported

in (2003) 3 SCC 40

(VI) In case of Y.K.Singla v. Punjab National

Bank and Others reported in (2003) 3 SCC 472

10. The respondents are directed to pay to the petitioner

the amount of gratuity of Rs.10 lakhs within a period of

10 weeks from the date of receipt of copy of this order.

Since the petitioner superannuated on 14.06.2013 and

the amount of gratuity has been wrongfully withheld by

the respondents, the petitioner shall be entitled to

interest at the rate of 9% from the date of his

superannuation till the date of actual payment.

11. The petition is allowed in the aforesaid terms.

(BIREN VAISHNAV, J)

ANKIT SHAH


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