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IN THE HIGH COURT OF KERALA AT ERNAKULAM
Sushrut Arvind Dharmadhikari, P.V. Balakrishnan, JJ.
The Kerala State Co-Operative Bank Ltd. – Petitioner
Versus
P.Sidharthakumar – Respondent
W.A. Nos. 1745 of 2021 & 58 of 2022
Decided On : 06-02-2026
Certainly. Based on the provided legal document, the key points are as follows:
The Court held that gratuity entitlements can exceed statutory limits if such benefits are stipulated in contractual schemes or insurance policies, and that employers, including banks, are required to comply with these contractual obligations (!) .
The liability to pay gratuity remains with the employer under the relevant Act, but contractual schemes that provide better benefits are valid and enforceable, and such benefits are also attributable to the employee (!) (!) .
The insurance scheme's role is to facilitate the payment of gratuity, and the insurer's obligation is limited to paying the amount specified in the policy. Any amount in excess of the statutory gratuity that is payable under the contractual scheme also benefits the employee (!) (!) .
The court directed that the employer (bank) must compute the employee's gratuity as per the contractual scheme, considering the benefits and pay revisions applicable, and if the amount calculated exceeds what has been paid, the employer should claim the excess from the insurer and disburse it to the employee's legal heirs, with interest (!) (!) (!) .
The Court emphasized that the employer must include pay revision benefits in the gratuity calculation, and the amount payable should be determined in accordance with the contractual scheme, which may provide benefits beyond statutory limits (!) .
The judgment set aside the previous order and mandated the employer to re-calculate the gratuity, submit a claim for any excess amount to the insurer, and disburse the excess amount along with interest to the employee or heirs. The employer is also required to provide the calculation details and is permitted to approach the competent authority if there are disputes regarding the computation (!) (!) (!) (!) (!) (!) (!) .
The Court clarified that if the calculated amount based on the contractual scheme is less than what has already been disbursed, the employer shall not recover the excess from the employee's heirs (!) .
These points encapsulate the Court's reasoning, directives, and the legal principles regarding contractual gratuity benefits exceeding statutory limits, employer obligations, and the role of insurance schemes.
| Table of Content |
|---|
| 1. entitlement of gratuity payment to the petitioner. (Para 3 , 4) |
| 2. arguments regarding application and limits of gratuity. (Para 7 , 10) |
| 3. court's analysis on gratuity calculation according to policy. (Para 8 , 9 , 11) |
| 4. direction to compute gratuity as per established policy terms. (Para 12) |
| 5. conclusion to allow writ appeals and directives to bank. (Para 13) |
JUDGMENT :
P.V.BALAKRISHNAN, J.
These intra-court appeals are filed challenging the judgment dated 19.11.2021 passed by the learned Single Judge in W.P.(C) No.11845/2020. W.A.No.1745/2021 is filed by the respondents 1 and 2 and W.A.No.58 of 2022 is filed by the legal heirs of the petitioner in W.P.(C)No.11845/2020.
2. The parties are hereinafter referred to as in their status in the writ petition, for convenience.
3. The writ petition was filed by the petitioner aggrieved by the non payment of the entire amount of gratuity payable to him under Section 4 (5) of the Payment of Gratuity Act (hereinafter referred to as 'the Act' for short). The petitioner joined the service of the first respondent bank on 05.05.1980 and retired from service on 30.04.2017, after completing 37 years of service. After retirement, even though retirement benefits were sanctioned to the petitioner, the gratuity was not paid in full. The petitioner is entitled to an amount of Rs.25,25,399/- towards gratuity under the “Cannanore District Co-operative Central Bank Employees Group Gratuity and Life Assurance Scheme”. Initially the first respondent raised a claim for an amount of Rs.22,84,593/- under the Master Policy No.3839, on behalf of the petitioner, from the 3rd respondent LIC. Accordingly, the 3rd respondent credited the said amount to the account of the first respondent bank and the entire amount was paid to the petitioner, in two installments. At the time of retirement of the petitioner, the gratuity corresponding to DA increased with effect from 01.01.2017 was not received by the petitioner. The said amount was sanctioned subsequently and the first respondent bank, claimed an additional amount of Rs.2,40,806/- from the 3rd respondent, in proportion to the increase in DA. The said amount was also credited to the account of the first respondent, by the LIC on 08.11.2017. But, the first respondent, failed to pay the amount to the petitioner. Later, the 2nd respondent issued Ext.P4 order to the first respondent Bank stating that it has resolved to remit the excess amount received on account of arrears of gratuity of the petitioner corresponding to the DA increase, over and above the existing ceiling limit of 20 Lakhs to the LIC. According to the petitioner, he is entitled to receive the balance amount of Rs.2,40,806/-, with interest. It is in such circumstances, the petitioner approached this Court by filing the afore writ petition seeking the following reliefs:
“b) Issue a writ of Certiorari to quash Exhibit-P4 order issued by the 2nd respondent since it is legally not sustainable.
c) Issue a writ of mandamus or any other appropriate writ, order or direction commanding the 3rd respondent LIC to re-credit the balance amount of gratuity amounting to Rs.2,40,806/-, as per Master Policy No.3839 to the account of the 1st respondent bank, in case the said amount is remitted back to the 3rd respondent LIC by the 1st respondent and then to release the same to the petitioner together with interest at the rate of 9% per annum.”
Or
In the alternative, commanding the 1st respondent to disburse the balance amount of gratuity amounting to Rs.2,40,806/- as per Master Policy No.3839 together with interest at the rate of 9% per annum, in case the said amount is with the 1st respondent bank.
4. The learned Single Judge by a common judgment dated 19.11.2021 passed in this case and in W.P.(C)No.11877/2020 allowed the writ petition in the following manner:
“Respondent bank is directed to remit the amount of Rs.2,40,806/- and Rs.19,91,944/- to the respective petitioners after making request to the LIC to whom
Gratuity entitlements exceed statutory limits if stipulated in insurance contracts, and banks are required to comply with contractual obligations under the Payment of Gratuity Act.
Employees are entitled to gratuity benefits under insurance policies that exceed statutory limits as per the Payment of Gratuity Act.
Employees are entitled to gratuity benefits as per the terms of their employment scheme, which can exceed statutory limits under the Payment of Gratuity Act.
Employees are entitled to the full amount accumulated in their individual accounts under the LIC-linked Group Gratuity Scheme despite previous payments.
The gratuity payable to an employee is governed by the law applicable at their date of retirement, and amounts exceeding the statutory ceiling limit are recoverable.
Gratuity is a statutory entitlement not subject to withholding after superannuation absent explicit legal grounds for forfeiture, emphasizing employee protection under the Act.
An employee is entitled to receive full amounts accumulated under LIC-linked gratuity schemes post-retirement, not merely those received earlier.
Co-operative banks are legally obligated to pay the balance of gratuity to employees that exceeds the amount disbursed through insurance schemes, in accordance with the established legal dictum regar....
Employees are entitled to the preferred gratuity options as per established Full Bench judgments, and employers must comply with the provisions under the Payment of Gratuity Act.
The court affirmed the entitlement to gratuity payments and directed timely disbursement without further impediments.
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