Gratuity is an entitlement of the employee… the Municipality is not showing any charity by releasing gratuity – Calcutta HC Reiterates Right to Interest on Delayed Gratuity Payments

In a significant judgment, the Calcutta High Court has affirmed the entitlement of employees to interest on delayed gratuity payments, reinforcing that “Gratuity is an entitlement of the employee who has rendered uninterrupted and honourable service to the municipality… the Municipality as the employer is not showing any charity by releasing gratuity in favour of its retired employees.”

Facts and Legal Background:

Amiya Kumar Roy, a retired employee of the Bhatpara Municipality, did not receive his gratuity post-retirement on February 28, 2018. Following a legal battle initiated in 2020, the High Court had previously ordered the gratuity payment within eight weeks on August 5, 2021, leaving the question of interest for delayed payment open.

Despite the Municipality’s claims of financial hardships, the court noted that such constraints do not exempt an employer from fulfilling statutory obligations such as timely gratuity payments. The Municipality’s subsequent appeal challenged an additional demand for interest, which was addressed in the current proceedings.

Detailed Court Assessment and Ruling:

The bench, consisting of Hon’ble Justice Arijit Banerjee and Hon’ble Justice Prasenjit Biswas, meticulously rejected the Municipality’s argument based on the doctrines of waiver and estoppel, aligning with previous judgments that upheld employees’ rights to interest on delayed payments under the Payment of Gratuity Act, 1972.

Right to Gratuity and Interest: The court highlighted that gratuity, a statutory right under Section 7(3A) of the Payment of Gratuity Act, ensures a dignified post-retirement life for employees. Interest compensates for delays in gratuity payments, underpinning the survival and dignity of retired workers.

Statutory Obligations over Financial Excuses: The judges noted that financial difficulties cited by the Municipality do not justify delays in gratuity payments, emphasizing that the obligations to pay gratuity and applicable interest are statutory and not conditional on the employer’s financial status.

Interest Rate Application: The court upheld the interest rate of 10% per annum, as specified by the Central Government, from the due date to the actual payment date. However, the court set aside the lower court’s directive for an additional 3% interest for further delays post-judgment, marking a critical assessment of the lawful interest limits.

Conclusion and Modification of Orders:

The Calcutta High Court directed Bhatpara Municipality to pay the due gratuity with a 10% annual interest rate within eight weeks from the judgment date. The decision to award an additional interest of 3% beyond the statutory maximum was reversed, adhering strictly to the legal provisions.

Date of Decision: May 3, 2024

Bhatpara Municipality v. Amiya Kumar Roy & Ors