Gujarat HC Upholds 10% Interest On Retired Water Board Engineer’s Delayed Gratuity Despite Pending Inquiry

Respondent No. 1, an employee of the petitioner Board, retired on superannuation on 30 April 2023 after approximately 33 years of service.

The Board paid him ₹10,00,000 as gratuity on 5 October 2023; the judgment records that ₹10,00,000 had been deducted from a gratuity amount of ₹20,00,000 in connection with a pending departmental inquiry.

Respondent No. 1 sought interest for delayed payment. The Controlling Authority granted interest at 10% per annum, and the Appellate Authority affirmed that decision.

The Board challenged both orders by writ petition, arguing that the delay was connected to the inquiry and, alternatively, that the interest rate was excessive.

Section 4(6) of the Payment of Gratuity Act, 1972 permits forfeiture of gratuity in specified circumstances, including where an employee’s services are terminated for conduct causing loss or damage, or for specified misconduct; the Court considered termination material to the applicability of the provision.

Section 7(3A) requires simple interest on gratuity not paid within the prescribed period, subject to the statutory exceptions.

The Court also referred to Champaran Sugar Company Ltd. v. Joint Labour Commissioner and Appellate Authority and Others, which it cited for an award of 10% simple interest on delayed gratuity.

The Court held that the employee had retired on superannuation and had not been terminated, so the pending inquiry did not bring the case within the forfeiture provisions relied upon by the Board.

Nor, in the absence of a specific competent order authorising withholding, did the inquiry alone justify delaying payment of gratuity.

Because the gratuity was paid after the prescribed period, the statutory obligation to pay interest arose; the Board also failed to establish sufficient grounds for disturbing the 10% rate fixed by the authorities.

It confirmed the Appellate Authority’s order awarding interest at 10% on the delayed gratuity payment and discharged the Rule.

The judgment stated that the respondent could withdraw the interest in accordance with law after verification by the competent authority.