‘Right to gratuity statutory right’: Andhra Pradesh High Court directs firm to pay employee

The Andhra Pradesh High Court recently said that the “right to receive gratuity” is a “statutory right” and the employer cannot take it away except through the procedure enunciated under the law.

Justice Maheswara Rao Kuncheam was hearing a contempt case filed by a man against his employers for failing to pay the arrears of his salary, retirement benefits, including gratuity, earned leave encashment, and provident fund for the specified period.

“The right to receive gratuity is a statutory right; the respondent authorities cannot take it away except through the procedure enunciated under the law,” the court observed on January 3.

Rreferring the Sections 4 (payment of gratuity) and 7 (determination of the amount of gratuity) of the Payment of Gratuity Act, 1972, the court said that the statutory provision clearly reveals that if the employer fails to pay the gratuity amount within 30 days from the date it becomes payable to the person, then the interest from that date would also become payable.

Highlighting the employees’ statutory entitlements, the court said it cannot be deprived, unless there is any legal impediment, especially in the event of lapse of time prescribed under the statutory framework.

The court added that in the light of statutory provisions, and taking into consideration the existing facts of the case, this court, without any hesitation, unequivocally rules that the petitioner‘s right to interest on delayed payment is statutory in nature and not subject to the discretion of the respondent authorities.

The case arose from the plea of the man seeking direction to the employer to release his arrears of salary, gratuity, as he was entitled to.

The petitioner was initially appointed in 1977 as a decadarised secretary in the cooperative society.

While he was working in a cooperative society as a paid secretary, he was promoted as a special category employee in 2009 in a district cooperative bank and rendered his services without any blemish, and attained superannuation in 2011 while he was working as a cashier at one of the bank’s branches.

Though the petitioner discharged his duties without any remark and retired from service in the year 2011, he was not paid the salaries for 14 months from May 2004 to June 2005 and for 21 months from June 2007 to February 2009, totaling to Rs 2.28 lakh apart from his terminal benefits, which have to be paid by the employer.

In 2014, the petitioner submitted a representation to the cooperative society for payment of his arrears of salary and also retirement benefits, such as gratuity, earned leave encashment, and provident fund etc.

On this representation, the cooperative society passed a resolution in 2014, requesting the bank to advance the amounts payable to the petitioner, noting that he had no financial irregularities during his service.

Even before this, in 2009, the district cooperative officer directed the cooperative society to take necessary action for payment of arrears of salary pending against the petitioner by following the existing bye-laws and rules in vogue.

However, the petitioner was not paid the arrears of salary nor the terminal benefits of gratuity, leave encashment of earned leave, and provident fund; therefore, he approached the high court in 2015, but when the employers failed to adhere to the order, the petitioner filed the contempt petition against them.

In 2016, the cooperative society responded that they did not have enough funds to pay the petitioner, and the bank cited that the petitioner had sued the bank in the wrong manner, as this bank has no responsibility in making payment of retirement benefits to the petitioner.

It is also stated by the bank that they had paid its share of gratuity and leave encashment to the petitioner in 2015 itself for the period he worked with the bank, and there is no single rupee due to the petitioner from the bank.

The court directed the cooperative society to release the gratuity amount and leave encashment, etc., with interest of 10 per cent annually from the date on which said amount became payable till the date of actual payment within 10 weeks of the date of receipt of a copy of this order.

Referring to the bank’s response, the court said that a mere financial incapacity or paucity of funds cannot be a valid defence for nonfulfilment of such statutory obligations, more particularly, when the employee rendered his services, as such, he is rightly entitled to terminal benefits under law.

The court said that the employers are liable to pay the statutory and mandatory entitlements, such as terminal benefits, leave encashment, gratuity, etc., of the employee in terms of the provisions of the Payment of Gratuity Act, 1972.