Service Law | Gratuity Payments Should Be Made Within 30 Days of Retirement: Gujarat High Court Denies Additional Interest on Delayed Gratuity Payment

Gujarat High Court, in Bipin Mafatlal Patel vs Gujarat Cancer and Research Institute, dismissed a petition seeking additional interest on delayed gratuity payments. The petitioner, a retired professor, claimed entitlement to 10% interest from May 2018 for unpaid gratuity. However, the court upheld the previous decisions, affirming that the professor was not entitled to interest beyond the amount already awarded.

Bipin Mafatlal Patel, a professor and Head of Anesthesia at Gujarat Cancer and Research Institute, retired on April 30, 2018, after 34 years of service. Upon retirement, he was entitled to ₹20,00,000 as gratuity under the Payment of Gratuity Act, 1972, but received only ₹10,00,000. Patel made several requests for the remaining ₹10,00,000 with 10% interest, which was not immediately paid by the Institute due to pending grants from the Gujarat government.

The petitioner applied to the Controlling Authority, which partially allowed his claim by awarding him ₹10,00,000 in arrears along with 10% simple interest, starting from September 1, 2021. Dissatisfied with the delay in receiving full payment and the calculation of interest, Patel filed an appeal seeking interest from May 2018, which was rejected by both the Controlling and Appellate Authorities.

The core legal issue centered on whether Patel was entitled to interest on the delayed payment of gratuity from May 1, 2018, the day after his retirement, or from September 1, 2021, as decided by the authorities. Patel argued that under Section 7(3A) of the Payment of Gratuity Act, 1972, employers are bound to pay gratuity within 30 days of retirement and are liable to pay interest for any delay.

Justice Hemant M. Prachchhak upheld the Appellate Authority's decision, stating that Patel’s entitlement to gratuity was properly calculated. The court highlighted that the professor's retirement was governed by a Government Resolution (G.R.) dated June 28, 1994, which extended the professor's service until the end of the academic year, affecting the retirement date used for calculating gratuity.

The court observed that although Patel retired on April 30, 2018, the enhanced gratuity limit of ₹20,00,000 became effective on March 29, 2018. As such, Patel was entitled to the higher gratuity but not to the interest he claimed from May 2018. The authorities had already paid the ₹10,00,000 balance along with 10% interest from September 2021, after the gratuity limit was revised, and there was no error in their decisions.

The Gujarat High Court affirmed that the petitioner was not entitled to 10% interest from May 2018, as claimed. Instead, the interest payable from September 2021 was in line with the legal provisions. The court dismissed the petition, ruling that the Appellate Authority’s decision was sound and without any legal irregularities.

Date of Decision: September 10, 2024

Bipin Mafatlal Patel vs Gujarat Cancer and Research Institute