If there is a delay in payment of gratuity, whether interest on delayed gratuity will be mandatory or discretionary? Guj HC decides

Gujarat High Court: Biren Vaishnav, J., reiterated that, interest on delayed payment of gratuity is mandatory and not discretionary.

The petitioner had prayed for a declaration that the respondent’s action in not paying the entire amount of Rs 10 lakhs towards gratuity to the petitioner was arbitrary. Hence, a direction was sought that respondents be directed to pay the remaining amount of gratuity to the petitioner along with 18% interest from the date of his retirement.

Analysis and Decision


High Court expressed that, in the Supreme Court decision of H. Gangahanume Gowda v. Karnataka Agro Industries Corpn. Ltd., (2003) 3 SCC 40, it was decided that the interest on delayed payment of gratuity is mandatory and not discretionary. When it is 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, the respondent had been 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. 

Hence, Bench stated that the present case was covered by the Supreme Court’s decision as stated above.

Therefore, Court directed the respondents to pay the petitioner the amount of gratuity of Rs 10 lakhs within a period of 10 weeks, and since the petitioner was superannuated in 2013 and the gratuity amount had been wrongfully withheld, the petitioner shall be entitled to interest at the rate of 9% from the date of his superannuation till the date of actual payment. [Ashvinkumar Ramniklal Jani v. State of Gujarat, 2022 SCC OnLine Guj 575, decided on 19-4-2022]


Advocates before the Court:

MR JAYRAJ CHAUHAN(2966) for the Petitioner(s) No. 1

MR MUKESH N VAIDYA(5197) for the Petitioner(s) No. 1

MR MUKUND M DESAI(286) for the Petitioner(s) No. 1

MS.SURBHI BHATI, AGP for the Respondent(s) No. 1,2,3

NOTICE SERVED BY DS for the Respondent(s) No. 4

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