HMT Retiree May Pursue Recovery Of Unpaid 10% Interest On Gratuity Under Gratuity Act, Karnataka HC Says

The petitioner, a former employee of the respondent company, retired on 29 June 2013.

The Controlling Authority under the Payment of Gratuity Act, 1972, determined his gratuity at ₹6,38,079 and awarded simple interest at 10% per annum from 1 July 2013 until payment.

Although the company paid the gratuity on 23 October 2014, it did not pay the awarded interest.

After representations and an earlier direction from the High Court to consider them, the company rejected the petitioner’s request, citing its financial crisis.

The petitioner challenged that rejection and sought consideration of his representations.

Section 7 of the Payment of Gratuity Act, 1972, provides for determination of gratuity payable to an employee; the Controlling Authority had exercised that power to determine the petitioner’s gratuity and award interest.

Section 8 provides a recovery mechanism where an amount payable under the Act is not paid within the prescribed time: on an application by the aggrieved person, the Controlling Authority may issue a recovery certificate to the Collector, subject to giving the employer an opportunity to show cause.

The Court identified an application under Section 8 as the appropriate remedy for recovering the unpaid interest awarded in this case.

The amount of gratuity and the interest payable had already been determined by the Controlling Authority, but the company had not paid the interest.

Rather than determine the recovery claim through the writ petition, the Court held that the petitioner should use the statutory mechanism in Section 8 and apply to the Controlling Authority for recovery of the amount due.