Grade Pay is included in wages for gratuity calculations, and employers are mandated to pay interest on delayed gratuity unless the delay is due to the employee's fault.

JUDGMENT

Employer has filed these writ petitions challenging the order passed by Appellate Authority in his Appeals filed under Section 7 of Payment of Gratuity Act, 1972.

2. Since common questions of law and fact are involved in these writ petitions, therefore they were heard together and are being decided by a common judgment. However, for the sake of brevity, facts of Writ Petition (M/S) No.3159 of 2024 alone are being considered and discussed.

3. Nirvikar (respondent in WPMS No.3159 of 2024) was employed as Associate Professor in College of Engineering, Roorkee and he served as such between 24.01.2005 to 19.09.2020. Since he was not paid gratuity, therefore, he moved an application under Section 7(4)(b) of Payment of Gratuity Act, 1972 stating that he rendered continuous satisfactory service in the College of Engineering for more than 15 years, however, despite requests, he has not been paid gratuity, therefore, the employer be directed to pay gratuity to him with 10% interest. In his application, respondent stated that at the time of his discharge from service on 19.09.2020, he was getting ₹79,199/- as wages. Petitioner filed written statement before the Controlling Authority stating that although respondent was appointed on 24.01.2005; but, in 2007, he joined a different institution having separate approval from AICTE, where he served for some time and later joined the petitioner-college, where he worked till 31.08.2017. Thus, it was contended that respondent did not serve continuously in the petitioner-college for a continuous period of 5 years. It was further contended that respondent did not make any application for gratuity to the petitioner within 30 days from the date of cessation of employment, in terms of Rule 7(1) of Uttar Pradesh Payment of Gratuity Rules, 1975. The Controlling Authority allowed the respondent’s application vide order dated 29.09.2022 and petitioner was directed to pay ₹7,31,068/- as gratuity within 30 days with simple interest @ 10% per annum.

4. Petitioner challenged the order passed by Controlling Authority in an Appeal filed under Section 7(7) of Payment of Gratuity Act, 1972. The Controlling Authority dismissed the Appeal vide judgment dated 12.09.2024, which is challenged in the writ petition.

5. Heard learned counsel for the parties and perused the record. Learned counsel for the petitioner contended that the Controlling Authority as well as the Appellate Authority have erred by treating Grade Pay as part of wages; while, Grade Pay has to be excluded. He submitted that at the time of his discharge from service, respondent was getting ₹47,141/- as basic pay+ ₹16,028/- as Dearness Allowance, thus, his wages were ₹63,169/- and gratuity was to be computed on the said amount; but, in the impugned judgment, gratuity has been calculated by treating wages of the respondent as ₹72,199/- per month. He further contended that, as per Uttar Pradesh Payment of Gratuity Rules, 1975, the employee is required to make an application within 30 days from the date gratuity becomes payable which, however, was not done by the respondent, thus, he is not entitled to interest on delayed payment of gratuity, therefore, the impugned judgment is unsustainable. He further contended that the Controlling Authority as well as Appellate Authority erred in granting interest @ 10% on the delayed payment of gratuity to the respondent, which is much in excess of the rate notified by the Central Government, as provided in Section 7(3-A) of the Act.

6. The aforesaid submissions made by learned counsel for the petitioner are bereft of merit. The expression “wages” has been defined in Section 2(s) of Payment of Gratuity Act, 1972, as follows:

“2(s) "wages" means all emoluments which are earned by an employee