Employer's failure to issue statutory notice under Section 7(2) negates limitation for gratuity applications.

The Respondent-employees (formerly in management cadres) resigned from M/s. Aplab Ltd.

Gundu Daji Desai resigned in 2015, but the employer did not pay gratuity, citing financial difficulties and the employee’s failure to submit statutory Form “I”.

In 2022, the employees moved the Controlling Authority under the Payment of Gratuity Act, 1972.

The employer argued the claims were time-barred under Rule 10 of the Maharashtra Rules and that “Special Allowance” should be excluded from “wages”.

The Controlling and Appellate Authorities partly allowed the claims, directing the employer to pay gratuity including the special allowance, with 10% interest.

Both the employer (challenging the inclusion of allowances and interest) and employees (seeking calculation based on 26 days per year instead of 15) filed Cross-Writ Petitions.

1. Whether the applications for gratuity were barred by limitation given the delay of nearly seven years.

2. Whether the employer is liable to pay interest under Section 7(3A) despite the employee's delay in filing Form “I”.

3. Whether "Special Allowance" falls within the definition of "wages" under Section 2(s) of the Act.

4. Whether the employees are entitled to gratuity calculated at 26 days per year based on alleged company policy.

The Court applied Section 7(2) of the Payment of Gratuity Act, which mandates an employer to determine and provide notice of gratuity regardless of whether an application is filed.

It relied on the Second Proviso to Rule 10 of the Payment of Gratuity (Maharashtra) Rules, 1972, which stipulates that no limitation applies if the employer fails to issue the statutory notice.

Regarding interest, Section 7(3A) was applied, which mandates simple interest for delayed payments unless written permission for delay is obtained from the Controlling Authority.

For the calculation of wages, Section 2(s) was invoked, which includes dearness allowance but excludes various other allowances from the definition of "wages".

The Court reasoned that the employer cannot plead limitation because it failed its mandatory duty under Section 7(2) to suo motu determine and notify the gratuity amount.

The "Second Proviso to Rule 10" effectively nullifies the delay in filing Form “I” in such cases.

Regarding interest, the Court found the employer liable because it failed to obtain written permission for the delay as required by the proviso to Section 7(3A).

However, the Court adjusted the interest liability, noting that interest should not run on the "admitted amount" once it was deposited with the Authority.

On the substantive issue of "Special Allowance," the Court found the lower authorities failed to conduct a factual inquiry into whether the allowance was "dearness allowance" in disguise or an excluded benefit.

Since the nature of the allowance and the 26-day calculation policy were based on unverified photocopied documents, a factual determination was required.

The Court held that the claims were not time-barred due to the employer's statutory default.

It ordered that: (i) interest is payable on the unpaid/enhanced portion, but not on the deposited amount from the date of deposit.

(ii) the Appellate Authority must determine if "Special Allowance" constitutes "wages" under Section 2(s) based on original records.

(iii) the Authority must verify the authenticity of documents regarding the 26-day calculation claim.

The Appellate Authority was directed to decide the remanded points within eight weeks.