IMPORTANT POINT
The Division Bench having found that appellant was entitled to interest on belated payment of gratuity committed an error in assuming that the learned Single Judge could exercise the discretion in the matter of awarding interest and that such a discretion exercised was not arbitrary.

Headnote:Gratuity Act, 1972-Sections 7 and 8-Determination of Amount of gratuity and recovery of gratuity-Single Judge granted relief of gratuity except interest on its belated payment-Division Bench found that appellant was entitled to interest on belated payment of gratuity but held its denial by Single Judge was not arbitrary exercise of discretion-Appeal to Supreme Court-Whether D.B. was right in its view? (No)-Appeal allowed.
Held : It is clear from what is extracted above from the order of learned Single Judge that interest on delayed payment of gratuity was denied only on the ground that there was doubt whether the appellant was entitled to gratuity, cash equivalent to leave etc., in view of divergent opinion of the courts during the pendency of enquiry. The learned Single Judge having held that the appellant was entitled for payment of gratuity was not right in denying the interest on the delayed payment of gratuity having due regard to Section 7(3A) of the Act. It was not the case of the respondent that the delay in the payment of gratuity was due to the fault of the employee and that it had obtained permission in writing from the controlling authority for the delayed payment on that ground. As noticed above, there is a clear mandate in the provisions of Section 7 to the employer for payment of gratuity within time and to pay interest on the delayed payment of gratuity. There is also provision to recover the amount of gratuity with compound interest in case amount of gratuity payable was not paid by the employer in terms of Section 8 of the Act. Since the employer did not satisfy the mandatory requirements of the proviso to Section 7(3A), no discretion was left to deny the interest to the appellant on belated payment of gratuity. Unfortunately, the Division Bench of the High Court, having found that the appellant was entitled for interest, declined to interfere with the order of the learned Single Judge as regards the claim of interest on delayed payment of gratuity only on the ground that the discretion exercised by the learned Single Judge could not be said to be arbitrary. In the first place in the light of what is stated above, the learned Single Judge could not refuse the grant of interest exercising discretion as against the mandatory provisions contained in Section 7 of the Act. The Division Bench, in our opinion, committed an error in assuming that the learned Single Judge could exercise the discretion in the matter of awarding interest and that such a discretion exercised was not arbitrary. In the light of the facts stated and for the reasons aforementioned, the impugned order cannot be sustained. Consequently, it is set aside. The respondent is directed to pay interest @ 10% on the amount of gratuity to which the appellant is entitled from the date it became payable till the date of payment of the gratuity amount. The appeal is allowed accordingly with cost quantified at Rs. 10,000/-. (Paras 9 & 10)

JUDGMENT

Shivaraj V. Patil, J.-Leave granted.

2. A limited point that arises for consideration and decision in this appeal is whether Division Bench of the High Court having found the appellant entitled to interest on belated payment of gratuity was right in denying the same holding that the discretion exercised by the learned Single Judge in that regard was not arbitrary.

3. While in service, the appellant and few other officials were kept under suspension in March, 1999. Aggrieved by the same, the appellant and others filed writ petition Nos. 11893-11898 of 1999 inter alia contending that order of suspension passed was one without authority of law and without application of mind. After service of notice in the writ petitions, the respondent-Corporation realizing that it was not possible to support the said order of suspension, withdrew the same by an order dated 21-5-1999. Taking note of the order dated 21-5-1999 revoking the suspension, the High Court disposed of the writ petitions as having become infructuous, however, reserving liberty to the writ petitioner to approach the High Court for seeking appropriate relief, if necessary. The appellant reached the age of superannuation on 1-1-2000 and retired. The respondent-Corporation did not pass any order regarding regularization of the suspension period and settlement of salary and allowances payable to him on retirement. In this situation, the appellant was constrained to approach the High Court again in Writ Petition No. 26980 of 2000 seeking payment of full salary and allowances for the period of suspension, gratuity, cash equivalent of earned leave together with interest thereon @ 18% per annum and settlement of provident fund dues. During the pendency of the writ petition, however, the respondent settled the provident fund dues. The High Court disposed of the writ petition on 18-6-2001 holding that since the appellant had retired from service, the enquiry contemplated earlier could not have been proceeded with in the absence of enabling provision in the service rules of the respondent-Corporation and consequently granted reliefs to the appellant except interest on belated payment of gratuity. The appellant, aggrieved by the order of the learned Single Judge, to the extent of denial of interest on the belated payment of gratuity, filed Appeal No. 4177 of 2001. The Division Bench in the appeal found that the appellant was entitled to payment of interest on the belated payment of gratuity, but, however, held that the discretion exercised by the learned Single Judge in denying interest was not arbitrary. In that view, the writ appeal was dismissed.

4. The learned counsel for the appellant urged that claim for interest on belated payment of gratuity is a statutory right as envisaged under Sections 7 and 8 of the Act; the High Court committed an error in denying the same to the appellant on the ground of discretion on the facts and circumstances of the case. According to the learned counsel, when the appellant on fact was found to be entitled to interest, he should not have been denied the same.

5. The learned counsel for the respondent-Corporation argued in support and justification of the impugned order.

6. In order to appreciate the above contentions urged, it is necessary to notice the provisions of the Payment of Gratuity Act, 1972 (for short the Act ) to the extent they are relevant. They are extracted below:-

"7. Determination of the amount of gratuity.-

(1) A person who is eligible for payment of gratuity under this Act or any person authorized, in writing to act on his behalf shall send a written application to the employer, within such time and in such form, as may be prescribed, for payment of such gratuity.

(2) As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub-section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controllin

Click Here to Read the rest of this document

2003 Supreme(SC) 140

IMPORTANT POINTThe Division Bench having found that appellant was entitled to interest on belated payment of gratuity committed an error in assuming that the learned Single Judge could exercise the discretion in the matter of awarding interest and that such a discretion exercised was not arbitrary.