Case Note & Summary
The case involves a writ petition filed by Allahabad Bank, a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, challenging an order of the Appellate Authority under the Payment of Gratuity Act, 1972. The respondent employee, Shyamsunder Baldeoprasad Butolia, a retired officer of the bank, was paid gratuity of Rs. 3,50,000 but the payment was delayed. The employee claimed interest on the delayed payment under Section 7(3A) of the Payment of Gratuity Act, 1972. The Controlling Authority rejected the claim on 26/09/2003, relying on Clause 20(3)(iii) of the Allahabad Bank (Officers') Service Regulations, 1979, which allegedly provided for interest only if the delay was due to the employer's fault. The Appellate Authority reversed this order on 16/12/2003, directing the bank to pay interest at 10% per annum from 01/02/2001 (the date gratuity became payable) until the date of the order. The bank then filed the present writ petition, which was admitted and the impugned order was stayed on 21/09/2005. The core legal issue was whether the statutory provision under Section 7(3A) of the Payment of Gratuity Act, which mandates interest for delayed payment without any condition of fault, can be overridden by the bank's service regulations. The bank argued that the service regulations govern the terms of employment and that interest is payable only if the delay is attributable to the employer's fault. The employee contended that the statutory provision is paramount and that the regulations cannot curtail the statutory right. The High Court analyzed Section 7(3A) and noted that it provides for simple interest from the date gratuity becomes payable to the date of payment if the amount is not paid within the specified period. The proviso to Section 7(3A) only exempts interest if the delay is due to the employee's fault and the employer has obtained written permission from the Controlling Authority. The court held that the statutory provision is clear and unambiguous, and the service regulations cannot override it. The court dismissed the writ petition, affirming the Appellate Authority's order and directing the bank to pay interest as ordered. The court also noted that the entire gratuity amount had already been paid, and the only dispute was regarding interest.
Headnote
A) Gratuity - Interest on Delayed Payment - Section 7(3A) Payment of Gratuity Act, 1972 - Mandatory Interest - The employer bank rejected the claim for interest on delayed gratuity relying on Clause 20(3)(iii) of its Service Regulations, 1979. The Appellate Authority reversed and directed interest at 10% per annum. The High Court held that Section 7(3A) is a statutory provision that mandates interest for delayed payment, and service regulations cannot override the statute. The court dismissed the writ petition, affirming the appellate authority's order. (Paras 1-5) B) Gratuity - Service Regulations vs. Statute - Section 7(3A) Payment of Gratuity Act, 1972 - Overriding Effect - The petitioner bank argued that Clause 20(3)(iii) of the Allahabad Bank (Officers') Service Regulations, 1979, provides for interest only if delay is due to employer's fault. The court rejected this, stating that the statutory provision under Section 7(3A) does not require fault of the employer; interest is payable automatically if gratuity is not paid within the specified period. Service regulations cannot curtail the statutory right. (Paras 3-5)
Issue of Consideration
Whether the employer is liable to pay interest under Section 7(3A) of the Payment of Gratuity Act, 1972, on delayed payment of gratuity despite the existence of service regulations that may provide otherwise.
Final Decision
The High Court dismissed the writ petition, upholding the order of the Appellate Authority dated 16/12/2003 directing the petitioner bank to pay interest at 10% per annum on the gratuity amount of Rs. 3,50,000 for the period from 01/02/2001 till the date of the order. The rule was discharged with no order as to costs.
Law Points
- Payment of Gratuity Act
- 1972
- Section 7(3A) provides for mandatory interest on delayed gratuity payment
- Service regulations cannot override statutory provisions
- Interest payable from date gratuity becomes payable to date of payment
- No fault of employee required for interest under Section 7(3A)
