Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
2025 INSC 1264
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2025
(Arising out of SLP (C) No. 19581 of 2023)
THE ASSAM FINANCIAL
CORPORATION LIMITED & ORS. …Appellant (s)
versus
BHABENDRA NATH SARMA & ORS. …Respondent(s)
J U D G M E N T
J.K. Maheshwari, J.
1) Leave granted.
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2) Challenging the judgment passed by the Division Bench
2
of the High Court in Writ Appeal No.260 of 2022 preferred by
Assam Financial Corporation Limited (hereinafter referred to as
‘ AFC ’), the present appeal has been filed.
3) The fact situation shorn of details is such that the
Respondents, who were the original writ petitioners before the
High Court, were employees of the AFC and retired on
superannuation between 2018–2019. Upon retirement, retiral
Signature Not Verified
Digitally signed by
NIDHI AHUJA
Date: 2025.10.28
18:21:22 IST
Reason:
1 Impugned Judgment dated 25.07.2023
2 Gauhati High Court
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dues were paid including gratuity as per the regulations of the
AFC, particularly the Assam Financial Corporation (Payment of
Gratuity to Employees) Regulation, 1964 (hereinafter referred to
as ‘ 1964 Regulations ’) read with the Assam Financial
Corporation (Amendment) Staff Regulations, 2007 (hereinafter
referred to as ‘ 2007 Staff Regulations ’). Their plea before the
High Court was that they were entitled for gratuity as per
Section 4(5) of the Payment of Gratuity Act, 1972, but the
ceiling for gratuity as per AFC’s internal regulations were not in
sync with the Act.
4) The 2007 Staff Regulations of the AFC initially provided a
ceiling of Rs. 3.5 Lakhs for payment of gratuity, which was
subsequently enhanced to Rs. 7 lakhs vide Office Order No.
AFC/Estt/497/2012-13/1028 dated 25.07.2012 in parity with
the Government of Assam employees (hereinafter referred to as
‘ 2012 Office Order ’. The relevant portion of the said office
order is quoted for reference:
“14. Gratuity
The present limit of Death cum Retirement Gratuity is
enhanced up to a maximum of Rs. 7.00 lakh under the
existing provisions of the Corporation as per the Gratuity Act
in line with Govt. of Assam employees. ”
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5)
The Division Bench of the High Court while passing the
impugned judgment, confirmed the view taken by the learned
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Single Judge granting benefit of the enhanced gratuity in
terms of the provisions of the Payment of Gratuity Act, 1972.
6) Learned Single Judge has dealt with the Assam Financial
Corporation Group Gratuity Assurance Scheme (hereinafter
referred to as ‘ Scheme ’) along with the 1964 Regulations as
well as the 2007 Regulations and found that the Respondents
were ‘employees’ within the meaning of the Payment of Gratuity
Act, 1972 and in view of the non-obstante clause as contained
in Section 14, the Respondents are entitled to the higher ceiling
of gratuity which is payable under Section 4 of the Payment of
Gratuity Act, 1972.
7) We have extensively heard the learned counsel for the
parties and considered the material placed on record. It is
informed by the learned counsel for the parties that after the
passing of the 2012 Office Order, the upper ceiling for payment
of gratuity to employees of AFC remained as Rs. 7 Lakhs and it
was not until 2022 that the AFC considered enhancing the said
3 Judgment dated 08.04.2022 in W.P. (C)No. 3697 of 2020
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limit. It is also urged that the Respondent – employees all
retired in the interregnum, when the ceiling for payment of
gratuity was Rs. 7 Lakhs and hence they cannot seek parity
with the State Government Employees or seek a higher amount
of gratuity than the ceiling was fixed at Rs. 7 Lakhs.
8)
In this regard, the Memorandum for the Board being
Memo No. 6335 dated 02.03.2022 with the subject
‘Enforcement of Gratuity at par with Government of Assam’
(hereinafter referred to as ‘ 2022 Memorandum ’) was placed for
our consideration along with the counter affidavit, which is
relevant. It is a memorandum by the Managing Director for
consideration by the Board of Directors of the AFC to enhance
the limit of gratuity. The said Memorandum is reproduced as
thus:
“ASSAM FINANCIAL CORPORATION
MD.SHAH ROAD PALTAN BAZAR
GAUWAHATI 8
Memo No 6335 Date 02.03.2022
MEMORANDUM FOR THE BOARD
Subject No 08 Enforcement of Gratuity at par with
Govt. of Assam
ROP 2017 and in line with AFC Staff Regulation
This is to apprise the Board that the employees of the Corporation is
currently drawing gratuity ceiling amounting to Rs.7.00 Lakhs only since
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last enhancement vide Office order of the Corporation 23.08.2012. It is to
further apprise the Board that the payment of gratuity amount is
governed by the Gratuity Act, 1972, amended from time to time under the
Ministry of Law and Justice, Govt. of India. All the Govt. Organizations,
PSU etc. in principle fall under the ambit of the above Gratuity Act. As
per last amendment the gratuity ceiling for central govt. employees is
th
Rs.20.00 Lakhs (w.e.f. 29 March, 2018) for the retired employees.
However the gratuity ceiling adopted by the Govt. of Assam as per last
ROP (year 2017) is Rs.15.00 Lakhs. Now from the data and information
collected from different PSUs of Assam it is revealed that some of the
PSUs of Assam follow the Gratuity ceiling of Rs.20.00 Lakhs as per central
Govt. employees and others follow that of Govt. of Assam which is
Rs.15.00 Lakhs at present. The Corporation sought information in this
regard from 7 Nos of PSUs of Assam. The data gathered are noted below:
Name of the PSU Gratuity Ceiling
01 Assam Tourism Development Corporation Rs.15.00 Lakhs
02 AIDC (Assam Industrial Dev. Corporation) Rs.20.00 lakhs
03 Assam Fishery Dev. Corporation Rs.20.00 lakhs
04 Assam Mineral Dev. Corporation Rs.15.00 lakhs
05 Assam Text Book Corporation Rs.15.00 lakhs
06 ASTC (Assam State Transport Corporation) Rs.20.00 lakhs
07 Assam Petrochemicals Rs.20.00 lakhs
We have received written communication from 02,04,06 & 07 as on date.
It is a long demand of AFC employees to enhance the old gratuity limit to
the limit of Gratuity Act.
After receipt of above information the following observations have been
made.
i) The employees of the Govt. of Assam have been drawing gratuity to the
maximum amount of Rs.15.00 lakhs.
ii) Statutory Audit has also pointed out the gratuity disparity in their last
audit report published in the Annual Report for the year 2019-20.
iii) As per staff regulation of AFC, the Corporation is to follow Govt. of
Assam Rules to pay the gratuity amount to the employees of the
Corporation on superannuation. The gratuity ceiling for the Assam Govt.
Employees at present is Rs.15.00 lakhs.
For the greater interest of the employees of the Corporation LICI has been
entrusted under the Group Gratuity Cum Cash Accumulation Scheme.
On our request the LICI has put forward the approximate estimate dtd.
21.02.2022 for the additional expenses required for enhancing the limit
from Rs.7.00 lakhs to Rs.15.00 lakhs.
a) Life Coverage premium Rs.74,934.00
b) Additional Contribution Rs.1,97,40,904.00
c) Current Service Cost Rs.13,60,817.00
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As per discussion held with the concern person of LICI it is to be informed
that the above amount can be paid in phased manner preferably within
two years.
Keeping the above in view it is proposed to enhance the present limit of
gratuity from Rs.7.00 lakhs to Rs.15.00 lakhs. The additional payable
premium amount as mentioned above is to be paid in phased manner
within 2 (two) years if the Board approve the enhancement of Gratuity
limit to Rs.15.00 lakhs.
Submitted for consideration and approval of Board.”
9)
The Board of Directors of the AFC considered the
th
proposal of the Managing Director in their 395 meeting which
was held on 08.03.2022. After perusal of the same, the Board
made certain observations which are reflected in the Minutes of
the said meeting as follows:
“ Item No. 09:
Enhancement of Gratuity at par with Govt.
of Assam ROP 2017 and in line with AFC
Staff Regulation.
The Board considered the Memo No.6335 dt.
02.03.2022 regarding enhancement of Gratuity
at par with Govt. of Assam ROP-2017 and in
line with AFC Staff Regulation and after
detailed deliberation decided to defer the
proposal. The Board also decided that the
proposal shall be placed before the Board after
detail and proper study in the next financial
year.”
10)
It is pertinent to observe that in the 2022 Memorandum,
the Managing Director of the AFC acknowledged the provisions
of the Payment of Gratuity Act, 1972 and in particular said that
as per Staff Regulations of AFC, the Corporation is required to
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follow the Government of Assam Rules to pay gratuity amount
to the employees of the Corporation on superannuation which
had specified the ceiling of Rs.15,00,000/- at the relevant point
of time for State Government employees.
11) Learned senior counsel for the appellants referring the
notifications issued by the Governor of Assam dated
24.08.2012 and 17.01.2018 resisted the claim by stating that
the Board of Directors of State Level Public Enterprise may
adopt the provision regarding revision of pay/pay scales and
allowances after examining the financial involvement ( sic ) with
respect to such pay revision. It is further clarified that it be
allowed with the approval of the concerned Administrative
Department only when the Board of Directors agree to bear
such expenses. In view of the above, it is urged by the
Appellant AFC that since the Board of Directors had decided in
its meeting dated 08.03.2022 to defer the decision for
enhancing the limit for payment of gratuity, benefit of revised
ceiling of gratuity payment similar to what is available to State
Government employees cannot be granted to the employees of
the AFC.
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12) After hearing and considering the notifications issued by
the Hon’ble Governor, we have to examine the 2007 Staff
Regulations, in particular, Clause 107 whereof deals with
gratuity. The aforesaid provision is relevant, therefore,
reproduced as under:
“107. “GRATUITY:
i) An employee to be eligible for payment of
Gratuity must complete service in the Corporation
for minimum period of 5 years confirmed service.
ii) Death-cum-Retirement Gratuity is to be paid at
the rate of 16.5 times of the pay (Basic + DA)
subject to maximum of Rs.3.50 lacs or as notified
by the Govt. of Assam from time to time provided
employees have rendered 33 years of service on
the date of superannuation or in the event of death.
iii) Employee with less tenure of service will
receive gratuity equal to half a month’s pay (Basic
+ DA) for each completed 6 (six) monthly period of
service in the Corporation subject to maximum of
15(fifteen) months pay (Basic + DA) or Rs.3.50 lacs
whichever is less or as may be notified by the
Govt. of Assam from time to time.”
13)
After perusal thereof, it is clear that as far back as in
2007, the Death-cum-Retirement Gratuity was to be paid as
per the formula prescribed therein, subject to a maximum of
Rs. 3.5 Lakhs or as may be notified by the Government of
Assam from time to time.
14)
Similar provision has been made in case the period of 33
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years of service has not been completed as per sub-clause (3)
which also indicates that in addition to the formula as
prescribed, the gratuity be paid subject to a maximum limit of
15 months’ basic pay or 3.5 Lakhs, whichever is less, or as may
be notified by the Government of Assam from time to time.
15)
This limit of Rs. 3.5 Lakhs for AFC employees was
enhanced to Rs. 7 Lakhs in the 2012 Office Order which has
been quoted above in paragraph 4.
16) Once the Regulation itself prescribes for grant of gratuity
as per the formula therein subject to the ceiling fixed for the
employees by the AFC or as notified by the Government of
Assam, in our view, looking to the said benevolent provision
made in the 2007 Regulations for the benefit of the employees,
we cannot agree with the Appellant’s submission that by virtue
of notification dated 24.08.2012 and 17.01.2018 issued by the
Hon’ble Governor of Assam the payment of enhanced pay scale
/ allowances must first be approved by the Board of Directors
since it cannot override the 2007 Regulations. In our view, the
restriction made in payment of gratuity is not justified. Once
the regulation itself makes the provision to grant amount of
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gratuity in terms of the formula contained therein with a limit
of Rs. 3.5 Lakhs (later increased to 7 Lakhs) or as notified by
the Government of Assam from time to time, in our view,
interpretation of the regulation must be made which is in favor
of the employees.
17)
It has been urged before us that even though Regulation
107 of the 2007 Regulations mentions the ceiling for gratuity
notified by the State Government, the said enhanced ceiling
does not automatically apply to the AFC. However, the fact
situation of the present case cannot be lost sight of. Admittedly,
the ceiling for payment of gratuity as per the 2007 Regulations
was fixed at Rs. 3.5 Lakhs, which was enhanced to Rs. 7 Lakhs
in terms of the 2012 Office Order. Thereafter, the AFC took no
initiative to bring parity in the ceiling for payment of gratuity
while the Government of Assam kept enhancing the said limit
in terms of the Payment of Gratuity Act, 1972 and it was
enhanced to Rs. 15 Lakhs in 2017 itself.
18) Additionally, it goes without saying that Regulation 107
of the 2007 Regulations states ‘… maximum of Rs.3.50 lacs or as
notified by the Govt. of Assam from time to time…’ . In such a
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case, the inescapable conclusion is that the maximum limit for
payment of gratuity has to be Rs. 3.5 Lakhs (later enhanced to
Rs. 7 Lakhs) or the limit prescribed by the State Government
and in case where the limit prescribed by the State Government
is higher than the limit set by the AFC, the import of Regulation
107 has to be interpreted in such a manner that the benefit of
the higher limit set by the State Government has to be given to
the employees of the AFC.
19) Apart from the above reasoning, we have also taken into
consideration equitable treatment of the Respondent –
employees. It goes without saying that the AFC chose not to
bring about parity in ceiling for payment of gratuity prescribed
within its regulations and the ceiling set by the State
Government. It has been informed that now the AFC has
decided to increase the ceiling for payment of gratuity at par
with the State Government, but since these Respondents
retired in the interregnum when the limit was Rs. 7 Lakhs, they
are not entitled to a higher ceiling. In this fact situation, it
would be absolutely inequitable treatment for the Respondents
to suffer at the behest of the AFC’s lethargy. In any case, we
have found above that the import of Regulation 107 of the 2007
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Regulations is such that the higher limit for gratuity set by the
State Government shall apply to the AFC.
20) Both the Learned Single Judge and the Division Bench of
the High Court seem to have been impressed upon the
submission of the Respondents that the Respondents are
‘employees’ within the meaning of Section 4 of the Payment of
Gratuity Act, 1972 and that therefore, the ceiling for gratuity
under the said Act must apply, particularly in view of the non-
obstante clause as contained in Section 14 of the said Act.
However, even though arguments have been pressed
challenging the said findings, we are, at present, not expressing
any opinion regarding the same. We say so, because when the
regulations themselves (particularly Regulation 107) import the
higher ceiling for payment of gratuity as accepted by the State
Government under the Payment of Gratuity Act, 1972, the right
of the Respondents flows from the said regulation and the
question as to whether the Payment of Gratuity Act itself
applies to the AFC or not may be considered in an appropriate
case.
21) In view of the foregoing, we agree with the conclusion, by
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our separate reasons, as reached by the Learned Single Judge
and the Division Bench of the High Court and dispose of the
present appeal. As per above discussion, the gratuity be
calculated and paid within six months from today as directed.
22) The appeal stands disposed of accordingly. Pending
application(s), if any, shall also stand disposed of.
…………………………, J.
[ J.K. MAHESHWARI ]
…………………………, J.
[ VIJAY BISHNOI ]
New Delhi;
October 14, 2025.
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