Employers liable for compound interest on certified gratuity dues, including simple interest: Calcutta High Court

The petitioners challenged attachment orders dated 27 November 2025 and 3 July 2026, and sought to reduce the 10% simple interest awarded on gratuity to 8%.

They had paid the principal gratuity and part of the simple interest, but an amount remained unpaid after the payment deadline fixed by the High Court.

They argued that the Certificate Officer could not impose 15% compound interest on the unpaid amount insofar as it included simple interest, and relied on financial hardship and authorities concerning interest on interest.

The employees’ respondents contended that Section 8 of the Payment of Gratuity Act, 1972, authorised compound interest during recovery proceedings.

Whether compound interest under Section 8 of the Payment of Gratuity Act, 1972, may be levied on the amount certified for recovery when that amount includes simple interest payable under Section 7(3A).

Whether the impugned attachment orders or the 10% simple-interest rate warranted interference or modification by the Court.

Section 7(3A) of the Payment of Gratuity Act, 1972, requires an employer to pay simple interest on delayed gratuity, subject to the statutory proviso.

Section 8 provides for recovery of unpaid gratuity through the Collector, together with compound interest at the rate specified by the Central Government; it also limits the interest payable under that section to the amount of gratuity payable.

The Court treated the amount certified under Section 8 as the amount directed to be paid by the controlling authority, including simple interest, and found no scope for excluding that component from the recovery calculation.

The Court considered that Section 8 applies when the controlling authority issues a certificate for recovery of the amount payable under the Act.

Because the certified amount derives from the controlling authority’s payment order and includes simple interest on the principal gratuity, the Court held that Section 8’s compound-interest mechanism applies to that certified amount; it found no basis in the Act for the petitioners’ proposed distinction.

The Court consequently found no reason to interfere with the impugned orders.

WPA 17299 of 2026 was dismissed; connected applications were disposed of and any interim order was vacated.