Karnataka HC Upholds Release Of Employee’s Disputed Gratuity Pending SC Ruling, But He Must Repay If His Initial Service Is Not Counted

The first respondent claimed gratuity calculated from his initial appointment on 1 October 1983, rather than from his regularisation on 30 September 1993; he retired on 30 April 2013.

The Controlling Authority under the Payment of Gratuity Act, 1972, directed payment of the differential gratuity, with 10% interest in default.

The State challenged that order in a writ petition, relying on a related appeal and a pending Special Leave Petition before the Supreme Court.

The Single Judge directed release of the gratuity upon the employee undertaking to repay it, with 6% interest, if the pending issue were decided against him. The State appealed.

The dispute arose under the Payment of Gratuity Act, 1972, which governed the employee’s gratuity claim, and the appeal was brought under Section 4 of the Karnataka High Court Act.

The Court stated no substantive rule on whether pre-regularisation service counts towards gratuity, and cited no precedents. Instead, it declined to express an opinion on that merits question while it was pending before the Supreme Court and upheld the conditional arrangement safeguarding both parties’ interests.

Because the service-counting issue was already before the Supreme Court, the Division Bench considered it inappropriate to decide the merits in the appeal.

It found that the Single Judge’s arrangement balanced the employee’s claim to receive the gratuity with the State’s ability to recover it if the pending issue were ultimately resolved against him.

The Court further specified that, following an adverse Supreme Court decision, the employee must refund the amount with 6% interest within 30 days of notice; failure to do so would attract 18% interest thereafter.

The employee remains subject to the refund and interest directions if the Supreme Court decides the pending issue against him.