Gratuity Is Not a Bounty—It Is Property Under Article 300A: Madhya Pradesh High Court Slams Delay in Payment to Retired Teacher

“Employer Has No Discretion—Gratuity Must Be Paid From the Date It Becomes Due, Not When Claimed” — In a ruling that significantly reinforces the statutory and constitutional right of employees to receive gratuity, the Madhya Pradesh High Court has declared that gratuity is not a matter of charity or discretion but an enforceable property right protected under Article 300A of the Constitution. The Court held that a delay of nearly nine years in claiming gratuity does not defeat the employee's right, and the employer is duty-bound to pay it automatically upon retirement.

Deciding the case of Little World Higher Secondary School v. State of Madhya Pradesh & Others, the Division Bench headed by Justice Vivek Agarwal and Justice Vivek Jain dismissed a batch of writ appeals filed by the school challenging the gratuity claims awarded to its retired employee by the Controlling Authority.

“It is a statutory obligation of the employer to determine and pay the gratuity to the employee within 30 days from the date it becomes payable. The liability to pay gratuity does not depend upon any application being made by the employee,” the Court firmly ruled.

“Retirement Benefits Are Not Benevolence, But Constitutionally Protected Property”

The case involved a school teacher who had served from June 8, 2001, to July 1, 2011, and retired without being paid gratuity. She approached the Assistant Labour Commissioner, who allowed her claim along with interest under Section 7 of the Payment of Gratuity Act, 1972.

The employer resisted enforcement on the ground of limitation, contending that the application was filed too late under Rule 7 of the MP Gratuity Rules, 1973.

The Court dismissed this argument outright, noting that:

“Gratuity is payable as a matter of right and not grace. It is recognized as property under Article 300A of the Constitution of India. A person can be deprived of such property only in accordance with law.”

Citing L.S. Patel v. M.P. State Co-operative Dairy Federation and Mohan Lal v. Appellate Authority under the Gratuity Act, the Court held that there is no statutory limitation period under the Act that can nullify the employee’s right.

“Once gratuity becomes payable on retirement, the employer is duty-bound to determine the amount and pay it. The right to gratuity is automatic, absolute, and enforceable. There is no requirement of a formal application to trigger this right.”

“Employer’s Duty Is Triggered by Retirement, Not By Application”

The school had argued that the employee had not filed a timely claim and had not first submitted a request to the employer. But the Court clarified that the employer's duty to pay gratuity arises the moment the employee retires, and not when the employee seeks payment.

“The employer is not an adjudicating authority. It is under a statutory obligation to pay gratuity. The refusal to do so cannot be justified merely because no application was filed earlier.”

It further held that the provision under Rule 7(1) of the MP Rules, 1973, is only procedural and cannot defeat the substantive right to gratuity, especially since Rule 7(5) clearly provides that:

“No claim for gratuity shall be invalid merely because it was not filed within the prescribed time.”

“Delay by Employee Doesn’t Absolve Employer of Interest Liability”

Another important facet of the decision was the Court’s insistence on awarding interest for delayed payment. The Court held that:

“The only defence available to an employer for avoiding payment of interest is when the delay is attributable to the employee. In the present case, there is no such fault.”

Noting that the teacher had made oral representations, which were not denied by the school, the Court found that the employer was in breach of its statutory duties and liable to pay interest as well.

“The amounts of retiral dues are not bounties. They are deferred payments for past services and cannot be denied or delayed under any pretext.”

“Writ Appeals Dismissed—Gratuity with 10% Interest Must Be Paid”

Upholding the order of the Controlling Authority and the Single Judge, the High Court concluded:

“Let the amount along with interest as ordered by the Controlling Authority be paid to the respondent-employees within 30 days if not already paid.”

In doing so, the Court has sent a strong message to employers—particularly in the private educational sector—that failure to discharge statutory obligations under the Gratuity Act will not be tolerated, and delay tactics will invite not just liability, but interest and judicial censure.

Date of Decision: April 15, 2025