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Gratuity : 6% Or 10% Interest For Delayed Payment Of Gratuity? Supreme Court To Consider

By Akshat Bhat      Mar 29, 2022      0 Comments      1,661 Views

The Supreme Court has given notice on a petition contesting a judgement by the Orissa High Court reducing interest on delayed gratuity payments from 10% to 6% under the Interest Act rather than the Payment of Gratuity Act.

A bench consisting of Justice DY Chandrachud and Justice Surya Kant has issued a notice with a 12-week deadline for filing reply affidavits, as well as a 6-week deadline for filing counter affidavits.

During the hearing, counsel for the petitioner, Advocate Madhusmita Bora, made the following submissions:

  1. Simple interest became obliged to be paid for the delay in disbursing gratuity with the addition of sub-section 3(a) to Section 7 of the Payment of Gratuity Act 1972.
  2. On October 1, 1987, the Union Ministry of Labour issued a notification setting the rate of interest at 10% per annum.
  3. As a result, the Single Judge made an error by decreasing the interest payable to the petitioner on the late payment of gratuity from 10% to 6% per year.

The current Special Leave Petition was filed in response to the Division Bench's ruling dismissing the writ appeal and confirming the Single Judge's order directing interest on the delayed payment of gratuity at 6% per year rather than the claimed 10% per year.

In the impugned Order, the High Court found that the Payment of Gratuity Act makes no provision for a mandatory minimum rate of interest on late payments.

The Court went on to say that the Single Judge had directed, after reviewing the provisions of the Interest Act, that instead of the claimed 10% interest on the delayed payment of gratuity amount, it would be appropriate in the interest of justice if interest for the delayed period was at the rate of 6% per annum, and that the Single Judge had made no error.

The High Court should not have applied the provisions of the Interest Act instead of the Payment of Gratuity Act, 1972, according to the special leave petition filed by Advocate Madhusmita Bora, because the Petitioner's case is squarely covered by the Payment of Gratuity Act, 1972.

According to the petition, the issue in the case is whether to reduce the percentage of interest due to a delay in granting the gratuity from 10% to 6%, while ignoring the applicability of the judgement in Paradeep Port Trust v. Controlling Authority and others in W.P. (C) 13892 of 2005, which held that the Payment of Gratuity Act, 1972 will be effective as of May 24, 1994 in reference to the letter issued by.

BACKGROUND

The Petitioner was employed as an executive engineer at the Paradip Port Trust in Orissa (Respondent No. 1 herein) and has been aggrieved since 2002, when he was superannuated after more than 38 years of service.

The current Petitioner submitted Form N with the Assistant Labour Commissioner(C), Bhubaneshwar, seeking interest on a gratuity that had been paid late.

The Assistant Labour Commissioner(C), Bhubaneshwar, recognising the application of the Payment of Gratuity Act, 1972, ordered the Pradip Port Trust management to pay the Petitioner simple interest at a rate of 10% per annum.

The Respondent Port Trust filed an appeal with the Appellate Authority, but the Regional Labour Commissioner (C), Bhubaneshwar upheld the Assistant Labour Commissioner's decision.

The Respondent then filed a writ suit in the High Court of Orissa, Cuttack, challenging the Controlling Authority's Order dated 10.10.2012 and the Appellate Authority's Order dated 26.07.2013.

The Single Judge lowered the interest incurred on the employer's (Respondent No.1) delay in releasing gratuity from 10% to 6% per annum under the Interest Act, as required under the Payment of Gratuity Act, 1972.

The Petitioner filed an appeal with the Division Bench of the High Court, which was dismissed. The Division Bench of the High Court further found that the Payment of Gratuity Act does not contain any clause mandating a minimum rate of interest on late payments.



Tags:
Interest For Delayed Payment GratuitySupreme Court of IndiaOrissa High CourtJustice DY Chandrachud Justice Surya KantAdvocate Madhusmita BoraPayment of Gratuity Act 1972 section 3(a) Payment of Gratuity Act 1972 Section 7 Union Ministry of Labour Advocate Madhusmita BoraParadeep Port Trust v Controlling Authority (C) 13892
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