GUJARAT WATER SUPPLY AND SEWERAGE BOARD vs MAHESHKUMAR GOVINDLAL CONTRACTOR
- Court
- Gujarat High Court
C/SCA/12208/2026 JUDGMENT DATED: 09/10/2026
(GJHC240452432026)
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 12208 of 2026
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE DIVYESH A. JOSHI
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Approved for Reporting Yes No
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GUJARAT WATER SUPPLY AND SEWERAGE BOARD & ANR.
Versus
MAHESHKUMAR GOVINDLAL CONTRACTOR & ORS.
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Appearance:
MR. HARDEEP L MAHIDA(7112) for the Petitioner(s) No. 1,2
JWALIT B SONEJI(7895) for the Respondent(s) No. 1
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CORAM: HONOURABLE MR. JUSTICE DIVYESH A. JOSHI
Date : 09/10/2026
ORAL JUDGMENT
1) By way of filing the present petition under Articles 226 and
227 of the Constitution of India, the petitioners have challenged
the legality, validity and propriety of the order dated 27.04.2026
passed by the Appellate Authority, Ahmedabad, in Gratuity
Appeal No. 125 of 2025, whereby the appeal preferred by the
petitioners came to be dismissed, thereby confirming the order
dated 07.08.2025 passed by the Controlling Authority,
Ahmedabad, in Gratuity Case No. 1990 of 2022.
2) Heard learned advocate Mr. Hardeep L. Mahida appearing
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for the petitioners and learned advocate Mr. Jwalit B. Soneji for
Respondent No. 3.
3) Learned advocate Mr. Hardeep L. Mahida appearing for the
petitioners submits that the petitioner – Board is a statutory
body constituted under the provisions of the Gujarat Water
Supply and Sewerage Board Act, 1979, and is governed by the
rules, regulations and instructions issued by the Government
from time to time. He submits that Respondent No. 3 herein was
appointed as an Executive Engineer on 09.08.1983 and after
rendering more than 36 years of service, retired upon attaining
the age of superannuation on 31.07.2019 and his last drawn
salary was Rs. 1,25,552/-.
3.1) Learned advocate further submits that during the course of
his service, certain irregularities had been committed by
Respondent No. 3 and therefore, departmental proceedings had
been initiated against him. Pursuant to the said proceedings, a
direction was issued by the competent authority to withhold a
certain amount from the gratuity payable to Respondent No. 3.
He submits that under the applicable rules and regulations,
Respondent No. 3 was entitled to receive gratuity of Rs.
20,00,000/-. However, in view of the order passed in the
departmental proceedings, an amount of Rs. 2,20,000/- was
required to be withheld and the remaining amount of Rs.
17,80,000/- was payable to Respondent No. 3.
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3.2) He further submits that Respondent No. 3 retired from
service on 31.07.2019, however, the amount of gratuity was not
released to him on account of the pendency of the departmental
proceedings. Learned advocate submits that the petitioners have
placed reliance upon a circular issued by the Finance Department
of the Government of Gujarat, which states that in cases where a
charge-sheet has been issued to an employee before the date of
retirement, or departmental proceedings have been initiated or a
court case has been instituted against such employee, the
amount of gratuity may be withheld for a period of two years
from the date of retirement, subject to the conditions stipulated
therein. Learned advocate further submits that as departmental
proceedings were pending against Respondent No. 3, the
petitioners did not proceed further with the preparation and
forwarding of the gratuity papers for payment of the amount
claimed by him.
3.3) However, learned advocate fairly submits before this Court
that, during that relevant point of time, no specific order appears
to have been passed by the competent authority directing the
withholding of the gratuity amount of Respondent No. 3 on the
basis of the circular issued by the Finance Department. He
further submits that the rate of interest of 10% per annum
awarded by the authorities concerned is excessive and
unwarranted in the facts and circumstances of the present case.
Learned advocate further submits that the amount directed to be
paid under the order passed by the Controlling Authority had
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already been deposited before the said authority at the time of
filing the appeal and that the amount is still lying with the
Controlling Authority. He, therefore, submits that considering
the aforesaid factual aspects, the impugned orders, insofar as
they direct payment of interest at the rate of 10% per annum,
deserve to be quashed and set aside by allowing the present
petition.
4) Per contra, learned advocate Mr. Jwalit Soneji appearing
for Respondent No. 3 submits that it is an admitted position of
fact that Respondent No. 3 served the petitioner – Board for
more than 36 years and retired from service on 31.07.2019 after
attaining the age of superannuation. He submits that
Respondent No. 3 was legally entitled to receive gratuity under
the provisions of the Payment of Gratuity Act, 1972. However,
the petitioners failed to release the admissible amount of
gratuity within the prescribed period, compelling Respondent
No. 3 to approach the Controlling Authority.
4.1) Learned advocate further submits that, after considering
and appreciating the documents and material available on
record, the Controlling Authority rightly held that there was
considerable delay on the part of the petitioners in releasing the
amount of gratuity. He submits that the statutory provisions
governing payment of gratuity provide for payment of interest
where the employer fails to make payment within the prescribed
period, subject to the conditions stipulated under the Act.
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Therefore, Respondent No. 3 is legally entitled to receive interest
for the delayed payment of gratuity.
4.2) He further submits that the authorities below have
considered the relevant factual aspects, the material available on
record and the applicable statutory provisions of law before
passing the impugned orders. No error of fact or law has been
committed by either of the authorities in directing the
petitioners to pay interest on the delayed payment of gratuity.
4.3) Learned advocate has also placed reliance upon the
decision of the Division Bench of Hon’ble Apex Court in the case
of H. Gangahanume Gowda vs. Karnataka Agro Industries
Corporation Limited following decisions reported in 2002 (0)
AIJEL-SC 10329 . In view of the aforesaid submissions, learned
advocate submits that the impugned orders are just, fair,
reasonable and legal and do not call for any interference by this
Court. He, therefore, submits that the present petition deserves
to be dismissed.
5) Having heard learned advocates for the respective parties
and having gone through the material available on record, this
Court is of the opinion that the principal question which arises
for consideration is whether the authorities below have
committed any error in directing the petitioners to pay interest
at the rate of 10% per annum on the delayed payment of gratuity
to Respondent No. 3.
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6) It is an admitted position of fact that Respondent No. 3 was
appointed as an Executive Engineer on 09.08.1983 and served
the petitioner – Board for more than 36 years. After attaining the
age of superannuation, he retired from service on 31.07.2019 and
his last drawn salary was Rs. 1,25,552/-. It is further emerges from
the record that Respondent No. 3 was entitled to receive gratuity
of Rs. 20,00,000/- as a retirement benefit. However, in view of
the departmental proceedings initiated against him, the
petitioners sought to withhold a certain amount from the
gratuity payable to him. According to the case put forward by the
petitioners, an amount of Rs. 2,20,000/- was required to be
withheld, leaving an amount of Rs. 17,80,000/- payable to
Respondent No. 3.
6.1) It appears from the record that although Respondent No. 3
was permitted to retire from service after attaining the age of
superannuation, the amount of gratuity was not paid to him
within the prescribed period. Consequently, Respondent No. 3
approached the Controlling Authority, Ahmedabad, by way of
filing an application under the provisions of the Payment of
Gratuity Act, 1972, seeking payment of amount of gratuity along
with interest for the delay in payment. Pursuant to the said
application, proceedings were initiated before the Controlling
Authority by issuing notice to the petitioners. The parties were
provided an opportunity to place their respective cases, and the
relevant documents and material were considered by the
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Controlling Authority. After considering and appreciating the
material available on record, the Controlling Authority passed
the order dated 07.08.2025, directing the petitioners to pay the
amount of gratuity along with interest at the rate of 10% per
annum for the period of delay. Being aggrieved by and dissatified
with the aforesaid order, the petitioners preferred Gratuity
Appeal No. 125 of 2025 before the Appellate Authority,
Ahmedabad. However, after considering the contentions raised
by the parties, the Appellate Authority dismissed the appeal by
order dated 27.04.2026, thereby confirming the order passed by
the Controlling Authority. It is against the said orders that the
petitioners have approached this Court.
6.2) It is the specific case of the petitioners that the petitioner –
Board is a statutory authority governed by the rules, regulations
and circulars issued by the Government and, therefore, the
instructions contained in the aforesaid circular were required to
be followed. The pendency of departmental proceedings
justified the withholding of the amount of gratuity and
consequently, the award of interest for the period during which
the amount remained unpaid was not taken into consideration.
However, the aforesaid submission is required to be examined in
light of the statutory provisions of law under the payment of
gratuity and the factual position emerging from the record.
6.3) It is pertinent to note that learned advocate appearing for
the petitioners has fairly conceded before this Court that no
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specific order was passed by the competent authority during the
relevant period directing the withholding of the gratuity amount
of Respondent No. 3 on the basis of the circular issued by the
Finance Department. The aforesaid submission assumes
significance because the petitioners seek to justify the non-
payment of gratuity primarily on the ground of the pendency of
departmental proceedings and the instructions contained in the
circular. However, in the absence of a specific order passed by
the competent authority, the petitioners cannot justify the
prolonged non-payment of the admissible amount of gratuity
merely by placing reliance upon the pendency of such
proceedings.
6.4) It is also required to be noted that the record does not
indicate that Respondent No. 3 was duly informed, by way of an
appropriate order or notice, that the amount of gratuity was
being withheld on the basis of the aforesaid circular. In the
absence of compliance with the applicable statutory
requirements and the procedure prescribed for withholding the
amount, the petitioners cannot be permitted to rely upon the
pendency of departmental proceedings as an independent
ground for avoiding their statutory obligation to pay gratuity
within the prescribed period.
6.5) It is further required to be noted that under Section 7 of
the Payment of Gratuity Act, 1972, the employer is required to
determine the amount of gratuity payable and arrange for its
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payment within the period prescribed under the Act. Section
7(3A) further provides for payment of simple interest where the
amount of gratuity is not paid within the period specified under
Section 7(3), subject to the exception stipulated in the proviso
thereto. The statutory provision, therefore, casts an obligation
upon the employer to pay interest on delayed payment of
gratuity unless the conditions prescribed under the statutory
provisions of law are satisfied. The mere fact that the employer is
a statutory body or that certain departmental proceedings were
pending against the employee would not, by itself, be sufficient
to absolve the employer of the statutory obligation to pay
interest.
7) Herein in the present case, the petitioners have not
demonstrated that the delay in payment of gratuity was
attributable to any act or omission on the part of Respondent No.
3. The petitioners also did not demonstrate that the conditions
stipulated in the proviso to Section 7(3A) of the Payment of
Gratuity Act, 1972, were satisfied so as to exempt them from the
payment of interest.
7.1) On the contrary, the material available on record indicates
that Respondent No. 3 retired from service on 31.07.2019,
whereas the admissible amount of gratuity was not paid within
the prescribed period. The respondent – workman was,
therefore, required to approach the Controlling Authority for
securing payment of his statutory retirement benefit. In this
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regard, it is also required to be noted that the question of
entitlement to gratuity and the question of entitlement to
interest on delayed payment are governed by the statutory
provisions of the Payment of Gratuity Act, 1972. Once the
amount of gratuity becomes payable, the employer is required to
comply with the statutory requirements governing its
determination and payment. If payment is delayed, the claim for
interest is required to be considered in accordance with Section
7(3A) of the Act.
8) At this stage, I would like to rely upon and refer to the
decision delivered by the coordinate Bench of this Court in
Special Civil Application No. 6930 of 2015. The relevant
observations are reproduced hereinbelow:
“10. It is true that this Court has passed an order in the Civil
Application No.177 of 2012 and observed that the relief prayed for in
the said application cannot be granted. However, this Court has at
the same time permitted the present respondent-workman for
approaching the appropriate forum for other ancillary benefits as
the respondent-workman has been reinstated on 5.3.2012. Thus, as
per the permission granted by this Court, the respondent-workman
filed an application for getting ancillary benefits i.e. for the payment
under the Minimum Wages Act, as per the calculation produced at
page 75 of the compilation. The Labour Court considered the
documents produced on record before it and after considering the
material, passed the order by which direction is given to the
petitioner to pay minimum wages of Rs.86,323.60 for the period in
question as per the calculation produced at page 75. Thus, I am of
the opinion that when this Court granted permission to file an
application for ancillary reliefs to the respondent-workman and
when the Labour Court has granted said ancillary reliefs, by giving
direction to the petitioner to pay minimum wages to the respondent-
workman for a particular period, no illegality has been committed by
the Labour Court nor it can be said that the Labour Court has
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exceeded its jurisdiction and granted the relief which this Court has
not granted to the respondent-workman in Civil Application No.177
of 2012. Thus, in the opinion of this Court, the aforesaid submission
of learned advocate for the petitioner is misconceived.
11. Further, the scope of judicial review is very limited while
exercising powers under Article 227 of the Constitution of India. The
Hon’ble Supreme Court in the case of Jasmer Singh V/s State of
Haryana and another, reported in 2015 (4) SCC 458 more particularly
on paragraphs 18 and 19 as under:
“18. The said award is challenged by the respondent employer
in Civil Writ Petition No.9532 of 2001 urging untenable
contentions. In the said writ petition, the High Court exercised
its jurisdiction contrary to the judgment of this Court in Syed
Yakoob v. K.S. Radhakrishnan and also the judgment which
was referred to in Harjinder Singh v. Punjab State
Warehousing Corporation. The learned counsel for the
appellant has aptly placed reliance upon another judgment of
Anoop Sharma v. Public Health Division No.1, Panipat to which
the Division Bench of the High Court have exercised in their
supervisory power under Article 227 of the Constitution of
India in setting aside the finding of fact recorded on the basis
of the pleadings and evidence on record.
19. Further in Harjinder Singh v. Punjab State Warehousing
Corporation, wherein this Court opined on the exercise of
power by the Court under Article 227 of the Constitution of
India as under: (SCC p.205, para 21)
“21. Before concluding, we consider it necessary to observe
that while exercising jurisdiction under Articles 226 and/or
227 of the Constitution in matters like the present one, the
High Courts are duty-bound to keep in mind that the Industrial
Disputes Act and other similar legislative instruments are
social welfare legislations and the same are required to be
interpreted keeping in view the goals set out in the Preamble
of the Constitution and the provisions contained in Part IV
thereof in general and Articles 38, 39(a) to (e), 43 and 43-A in
particular, which mandate that the State should secure a
social order for the promotion of welfare of the people, ensure
equality between men and women and equitable distribution
of material resources of the community to subserve the
common good and also ensure that the workers get their dues.
More than 41 years ago, Gajendragadkar, J opined that:
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“10...The concept of social and economic justice is a living
concept of revolutionary import; it gives sustenance to the
rule of law and meaning and significance to the ideal of
welfare State.”
(State of Mysore v. Workers of Gold Mines, AIR p.928, para*
10)”
Keeping in mind the aforesaid observation of the Hon’ble Supreme
Court, I am of the opinion that no interference is required in the
impugned order. Accordingly, this petition is required to be dismissed
and is accordingly dismissed.”
9) I would also like to rely upon the decision of the Hon'ble
Apex Court in the case of H. Gangahanume Gowda v. Karnataka
Agro Industries Corporation Limited, 2003 (0) AIJEL-SC 10329,
wherein the Hon'ble Apex Court considered the statutory
entitlement of an employee to interest on delayed payment of
gratuity under Section 7(3A) of the Payment of Gratuity Act,
1972. The Apex Supreme Court, while considering the aforesaid
provision, observed that the employer is under a statutory
obligation to pay gratuity within the prescribed period and to pay
interest in the event of delayed payment, subject to the
exception contained in the proviso to Section 7(3A). It was
further held that where the employer fails to satisfy the
requirements of the statutory exception, the entitlement to
interest cannot be denied by exercising discretion contrary to the
mandatory provisions of the Act.
The aforesaid decisions make it clear that the payment of
interest on delayed gratuity is not merely a matter of discretion
but is a statutory consequence flowing from the failure of the
employer to make payment within the prescribed period, subject
to the exception expressly provided under the Act.
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9.1) Considering the above stated totality of the facts of the
matter, it is required to be noted that the petitioners have not
established that the delay in payment of gratuity was
attributable to Respondent No. 3 or that the requirements of the
statutory exception were satisfied. Consequently, the petitioners
cannot avoid the payment of interest merely by relying upon the
pendency of departmental proceedings or the circular issued by
the Finance Department.
10) I would further like to refer to the decision delivered by the
coordinate Bench of this Court in Special Civil Application No.
2717 of 2022, wherein the issue relating to the entitlement of an
employee to interest on delayed payment of gratuity was
considered. The relevant observations made by the coordinate
Bench in paragraphs 8 to 14 are reproduced hereinbelow:
“ 8 . At this stage, it is fruitful to refer the decisions of the Hon'ble
Apex Court and this Court with regard to awarding interest while
interpreting provisions of Section 7(3-A) of the Payment of Gratuity
Act.
9. In the case of State of Uttar Pradesh and others vs. Dhirendra
Pal Singh reported in (2017) 1 SCC 49 Hon'ble Apex Court has held
as under:-
“Head Note: B Service Law- Retirement/ Superannuation retiral
Benefits- Gratuity and Pension-Interest-Withholding of 30% of
gratuity and pensionary dues found to be invalid.
9 . In State of Kerala and others v. M. Padmanabhan Nair[1], this
Court has held that pension and gratuity are no longer any bounty to
be distributed by the Government to its employees on the retirement
but are valuable rights in their hands, and any culpable delay in
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disbursement thereof must be visited with the penalty of payment of
interest. In said case the Court approved 6% per annum interest on
the amount of pension decreed by the trial court and affirmed by the
High Court. As to the rate of interest on amount of gratuity Section
7(3-A) of Payment of Gratuity Act, 1972, it is provided that if the
amount of gratuity payable is not paid by the employer within the
period specified in sub-section (3), the employer shall pay, from the
date on which gratuity becomes payable to the date on which it is
paid, simple interest at such rate, not exceeding the rate notified by
the Central Government from time to time for repayment of long
term deposits, as that Government may by notification specify. It
further provides that no such interest shall be payable if the delay in
payment is due to the fault of the employee, and the employer has
obtained permission in writing from the controlling authority for the
delayed payment on this ground. In the present case, there is no plea
before us that the appellants had sought any permission in writing
from the controlling authority. As to the delay on the part of
employee, it has come on the record that he made representations,
whereafter he filed a suit in respect of withheld amount of gratuity
and pension. In Y.K. Singla v. Punjab National Bank and others[2],
this Court, after discussing the issue relating to interest payable on
the amount of gratuity not paid within time, directed that interest at
the rate of 8% per annum shall be paid on the amount of gratuity.
10. In the light of law laid down by this Court, as above, and further
considering the facts and circumstances of the case, we modify the
impugned order passed by the High Court in respect of interest
directed to be paid on the amount of withheld gratuity and pension.
We direct that the appellants shall pay interest at the rate of 6% per
annum on the unpaid amount of pension from the date it had fallen
due and interest at the rate of 8% per annum on the unpaid amount
of gratuity from the date of retirement of the employee.”
10 . In the decision in the case of Ashvinkumar Ramniklal Jani vs.
State of Gujarat reported in 2022 SC OnLine Guj 575, the Court
has held as under:-
“7.XXX
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
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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.
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.
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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/-.”
11. In the decision of full bench of High Court of Judicature at Patna,
in the case of Champaran Sugar Company Ltd. Vs. Joint Labour
Commissioner and Appellate Authority and others in Civil Writ
Jurisdiction Case No. 1090 of 1985, dated 11 November 1986, the
Hon'ble Full Bench has observed as under:-
“Head Note:-2 Payment of Gratuity Act, 1972, Ss. 4, 7 and 8-
Payment of interest on delayed payments of gratuity - Right to
interest on delayed payments of gratuity is statutory, the same can
be granted in the absence of an express claim therefore in the
application of the employee before the Controller:
19. To sum up on this aspect, answer to the second question is
rendered in the affirmative and it is held that the right to interest on
delayed payment of gratuity is statutory and the same can be
granted in the absence of an express claim therefore in the
application of the employee before the Controller.”
12. Considering the facts and circumstances of the case, I am of the
opinion that the right to interest on delayed payment of gratuity is
statutory and the same can be granted in favour of the employee
concerned at the time of his retirement. Further in case of H.
Gangahanume Gowda Vs. Karnataka Agro Industries Corporation
Ltd. reported in (2003) 3 SCC 40, the Apex Court has decided the
interest on delayed payment of gratuity and the same is mandatory
and not discretionary.
13. Further, the pension and gratuity are no longer any bounty to be
distributed by the Government to its employees on the retirement
but are valuable rights in their hands, and any culpable delay in
disbursement thereof must be visited with the penalty of payment of
interest.
14. In view of the aforesaid facts and in light of the provisions of law
and considering the settled legal principle, I am of the opinion that
present petition is required to be dismissed and the impugned order
passed by the both the authorities deserve to be confirmed, as it is
provided under Section 7(3-A) of the Payment of Gratuity Act that on
the date of retirement, the amount of gratuity is required to be paid
to the employee and in case of failing, such employee would be
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entitled for the interest over the late payment made in favour of the
concerned employees at the rate of 10% simple interest.”
The aforesaid decision is required to be considered in the
context of the statutory obligation imposed upon the employer
under the Payment of Gratuity Act, 1972. The employer cannot
be permitted to defeat the statutory entitlement of an employee
by merely relying upon administrative instructions when the
conditions necessary to justify withholding of gratuity have not
been established in accordance with law.
11) It is also required to be noted that the petitioners have not
disputed the fact that Respondent No. 3 rendered more than 36
years of service and retired after attaining the age of
superannuation. The dispute raised in the present petition
principally concerns the award of interest on the delayed
payment of gratuity. The petitioners have not demonstrated any
sufficient legal ground to establish that the delay was
attributable to respondent No. 3 or that the statutory
requirements for exemption from payment of interest had been
fulfilled.
12) In view of the facts and circumstances of the present case, I
am of the opinion that the Controlling Authority rightly
considered the delay in payment of gratuity and directed the
petitioners to pay interest at the rate of 10% per annum. The
Appellate Authority, in turn, considered the contentions raised
by the petitioners and found no ground to interfere with the
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order passed by the Controlling Authority.
13) At this juncture, I would like to refer to and rely upon the
relevant extract of Section 7(3A) of the Payment of Gratuity Act,
reproduced hereunder:
(3-A) If the amount of gratuity payable under sub-section (3) is not
paid by the employer within the period specified in sub-section (3),
the employer shall pay, from the date on which the gratuity becomes
payable to the date on which it is paid, simple interest at such rate,
not exceeding the rate notified by the Central Government from time
to time for repayment of long-term deposits, as that Government
may, by notification specify:
Provided that no such interest shall be payable if the delay in the
payment is due to the fault of the employee and the employer has
obtained permission in writing from the controlling authority for the
delayed payment on this ground.] [ Substituted by Act 22 of 1987,
Section 7, for sub-Section (3) (w.e.f. 1.10.1987).]
A bare perusal of the aforesaid statutory provision
crystallise the position of fact that the requirement to pay
interest on delayed payment of gratuity is mandatory in nature.
Therefore, if an employer fails to pay the amount of gratuity
within the prescribed period, in that event, the employer is liable
to pay interest to the employee for the period of delay, in
accordance with the applicable statutory provisions. Secondly, so
far as the rate of interest is concerned, it is notified by the
Central Government by way of issuing notifications from time to
time. Therefore, while passing the impugned order, the
Controlling Authority has rightly placed reliance upon the
relevant notification issued by the Central Government.
Therefore, by no stretch of imagination and in view of the above-
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stated statutory provisions of law and the applicable notification,
the rate of interest awarded by the Controlling Authority cannot
be said to be unjustified, unreasonable, or contrary to the
statutory provisions of law.
14) So far as the contention raised by learned advocate for the
petitioners regarding the rate of interest is concerned, it is
submitted that the award of interest at the rate of 10% per
annum is excessive. However, the petitioners have not been able
to demonstrate any sufficient ground warranting interference
with the rate of interest awarded by the authorities below. The
award of interest is required to be examined in light of the
statutory provisions and the period for which the admissible
amount of gratuity remained unpaid.
15) It is further required to be noted that the Hon'ble Apex
Court, in H. Gangahanume Gowda (supra), directed payment of
interest at the rate of 10% on the amount of gratuity from the
date on which it became payable until the date of actual
payment. The aforesaid decision reinforces the statutory
obligation of the employer to compensate the employee for the
delay in payment of gratuity, subject to the applicable statutory
exception.
16) Herein in the present case, the petitioners have not
established that the delay was attributable to respondent No. 3
or that any permission in writing had been obtained from the
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Controlling Authority on the ground contemplated under the
proviso to Section 7(3A) of the Act. Therefore, the contention
that the rate of interest is excessive, in the absence of any
further legally sustainable ground, does not warrant interference
with the impugned orders.
17) It is also brought to the notice of this Court by learned
advocate appearing for the petitioners that during the pendency
of the appeal before the Appellate Authority, the amount
payable pursuant to the order passed by the Controlling
Authority had already been deposited before the Controlling
Authority and that the said amount is still lying with the said
authority. In that regard, deposit of the amount does not, by
itself, extinguish the liability arising on account of delayed
payment of gratuity. The question of entitlement to interest is
required to be determined with reference to the statutory
provisions and the period during which the amount remained
unpaid. The amount deposited before the Controlling Authority
is, therefore, required to be dealt with in accordance with the
operative orders passed by the authorities below.
18) Having considered the submissions advanced by learned
advocates for the respective parties, the statutory provisions
provisions of law under the Payment of Gratuity Act and the
material available on record, I am of the opinion that the
petitioners have failed to establish any error in the orders passed
by the Controlling Authority and the Appellate Authority. The
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authorities below have considered the relevant factual aspects
and the contentions raised by the respective parties. The
petitioners have not demonstrated that the delay in payment of
gratuity was attributable to Respondent No. 3 or that the
statutory conditions for withholding the amount or for
exemption from payment of interest were satisfied. The
impugned orders, therefore, do not call for any interference by
this Court in exercise of its jurisdiction under Articles 226 and 227
of the Constitution of India. In view of the aforesaid discussion,
the present petition is devoid of merits and deserves to be
dismissed.
19) Accordingly, the present petition is dismissed. The order
dated 27.04.2026 passed by the Appellate Authority,
Ahmedabad, in Gratuity Appeal No. 125 of 2025, confirming the
order dated 07.08.2025 passed by the Controlling Authority,
Ahmedabad, in Gratuity Case No. 1990 of 2022, do not call for
any interference by this Court.
It is further directed that the amount deposited by the
petitioners before the Controlling Authority, including the
amount towards interest, shall be disbursed in favour of
Respondent No. 3 after due verification and in accordance with
the orders passed by the authorities below.
(DIVYESH A. JOSHI,J)
GARVITA
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