Employers must pay statutory 10% interest on gratuity withheld beyond its due date.

The petitioner retired as Company Secretary of the Uttarakhand Seeds and Tarai Development Corporation Ltd. on 31 August 2017, but his retiral dues, including gratuity, were withheld.

In an earlier writ petition, the High Court declared the withholding of gratuity, leave encashment, group insurance and other monetary benefits illegal and directed their release; the Supreme Court dismissed the Corporation’s SLP against that judgment.

After a subsequent writ petition granted him liberty to seek the remaining dues by representation, the petitioner’s representation was rejected.

In the present petition, he pressed only his claims for interest on gratuity and on delayed payment of other retiral dues; he did not press his remaining claims.

1. Whether the petitioner was entitled to interest on gratuity withheld after it became payable upon retirement.

2. Whether, and at what rate, the petitioner was entitled to interest on delayed payment of leave encashment and other retiral dues.

Section 7(3A) of the Payment of Gratuity Act, 1972, read with the Central Government Notification dated 1 October 1987, provides for simple interest at 10% per annum where gratuity is not paid within the specified time.

The Court applied the principle that interest is payable from the date an amount becomes due.

It also relied on the earlier judgment in the petitioner’s case, which declared the Corporation’s withholding of his retiral benefits illegal; that judgment had been affirmed when the Supreme Court dismissed the Corporation’s SLP.

The earlier judgment established that the Corporation had unlawfully withheld the petitioner’s retiral benefits, and its dismissal in the Supreme Court left that determination undisturbed.

As the petitioner had retired on 31 August 2017 and the delay was not attributed to him, the Court held that interest on gratuity ran from that date at the statutory-notified rate of 10% per annum.

Applying the principle that interest follows when payment is delayed beyond the date it is due, the Court also awarded 6% simple interest per annum on the other delayed dues from 31 August 2017.

The reliefs the petitioner did not press were dismissed, and the writ petition was disposed of accordingly.