The High Court
Case Details
IN THE HIGH COURT OF ORISSA, CUTTACK W.P.(C) No.4006 of 2017 (In the matter of an application under Articles 226 and 227 of the Constitution of India) The Managing Director, Tribal Development Co-operative Corporation of Odisha Limited & Another -Versus- ....... Petitioners Controlling Authority under Payment of Gratuity Act & Asst. Labour Commissioner, Rayagada & another ....... Opposite Parties Advocate for the parties For Petitioner : Mr. B. Mohanty, Advocate For Opposite Party No.1 : Mr. B. Nayak, Addl. Govt. Advocate For Opposite Party No.2 : Mr. N. Biswal, Advocate ---------------------------- CORAM: JUSTICE SANJAY KUMAR MISHRA --------------------------------------------------------------------------------- Date of Hearing & Judgment: 03.07.2025 --------------------------------------------------------------------------------- S.K. Mishra, J. This writ petition has been preferred by the Petitioner-Corporation challenging the order dated 31st October, 2016 passed by the Controlling Authority under Payment of Gratuity Act & Assistant Labour Commissioner, Rayagada, shortly hereinafter, ‘Controlling Authority’ in P.G. Case No.02 of 2016, vide which it has been ordered for payment of Rs.53,587/- towards interest to the Applicant (Opposite Party No.2) within thirty days of the receipt of the said order towards delayed payment of gratuity. 2. The order dated 31st October, 2016 in P.G.
Legal Reasoning
Case No.02 of 2016 has been challenged basically on the ground that number of departmental proceedings and dispute cases were pending against the Opposite Party No.2 at the time of his compulsory retirement from service. As the exact amount recoverable from him was not known to the employer, the gratuity amount was withheld. On finalization of liability account, the Opposite Party No.2 made an application on 14.12.2009 for payment of admissible gratuity amount. Pursuant to submission of such application, the gratuity amount was paid to him after adjustment of the recoverable dues from W.P.(C) No.4006 of 2017 Page 2 of 22 other retiral dues. Therefore, in view of the proviso to Section 7(3-A) of the Payment of Gratuity Act, 1972, shortly hereinafter, ‘the Act, 1972’, the payment of gratuity got delayed due to the fault of the Opposite Party No.2. The delay cannot be attributed to the Petitioner- Corporation directing it to make huge payment towards interest granting premium to a dishonest employee. The Opposite Party No.1 has passed the impugned order mechanically without application of mind directing payment of interest in an illegal and arbitrary manner. 3. A Counter Affidavit has been filed on behalf of Opposite Party No.1 justifying the impugned order passed in P.G. Case No.02 of 2016. That apart, it has also been stated in the Counter that, in view of the alternative remedy available under Section 7(7) of the Act, 1972, the Writ Petition is not maintainable. The right to appeal under Section 7(7) of the Act, 1972 becomes a vested right only when precondition of deposit is complied with.
Decision
Hence, the writ petition is not maintainable. W.P.(C) No.4006 of 2017 Page 3 of 22 4. It has further been stated in the Counter that, in view of the provision enshrined under Section 7(3-A) of the Act, 1972, it was obligatory on the part of the Petitioner-Corporation to pay interest @ 10% per annum from the date of retirement of Opposite Party No.2 till the date of actual payment. The plea taken by the Petitioner- Corporation has no legal sanctity and is liable to be rejected. Further, so far as the ground of delay, it has been stated that the present Opposite Party No.2 filed an application for condonation of delay along with application filed under Section 7(4)(c) of the Act, 1972 and the Controlling Authority, after condoning the delay, passed the impugned order, which is appealable. 5. The Opposite Party No.2 has also appeared and filed a Counter Affidavit opposing to the prayer made in the writ petition on various grounds, including the ground that, since no permission was obtained in writing from the Controlling Authority for withholding the gratuity in terms of the proviso under Section 7(3-A) of the Act, 1972, the Controlling Authority has rightly W.P.(C) No.4006 of 2017 Page 4 of 22 passed the impugned order directing the Petitioner- Corporation to make payment of interest in terms of Section 7(3-A) of the Act, 1972 and there is no infirmity in the impugned order passed by the Controlling Authority. 6. It has further been stated in the Counter Affidavit by the Opposite Party No.2 that the Petitioner- Corporation has not mentioned as to since when the dispute cases were pending against the Opposite Party No.2 and when those cases were finalized. It has further been stated in the Counter that no intimation was given to the Opposite Party No.2 or the Controlling Authority regarding withholding of payment of gratuity on any ground and no permission was also taken from the Controlling Authority in the said regard. Hence, the Petitioner-Corporation was liable to pay the interest, which has been rightly ordered by the Controlling Authority vide the impugned order. 7. Mr. Mohanty, learned Counsel for the Petitioner, reiterating the grounds detailed in the writ W.P.(C) No.4006 of 2017 Page 5 of 22 petition, submitted that since the delay in payment of gratuity was due to the fault of the Opposite Party No.2, against whom the departmental proceeding so also surcharge proceedings were pending, the Controlling Authority (Opposite Party No.1) was not justified to direct the Petitioner-Corporation to make payment of interest vide the impugned order. 8. So far as maintainability of the writ petition, Mr. Mohanty, learned Counsel for the Petitioner submits, since the order has been passed in terms of Section 7(3-A) of the Act, 1972 with regard to interest, the same is not appealable under Section 7(7) of the Act, 1972. Hence, being remediless, the Petitioner preferred the writ petition. 9. Per contra, Mr. Nayak, learned AGA submitted that, it is well evident from the impugned order that the Opposite Party No.2 filed an application under Section 7(4)(a) of the Act, 1972 for non-payment of interest. He further submitted, since the principal amount of gratuity was paid to the Opposite Party No.2 and no permission W.P.(C) No.4006 of 2017 Page 6 of 22 was obtained from the Controlling Authority for withholding or delaying the payment of gratuity, the Controlling Authority was justified to grant interest in terms of the provision enshrined under Section 7(3-A) of the Act, 1972. 10. Learned Counsel for the State further submitted that, since the order was passed by the Controlling Authority in terms of Section 7(4)(c) of the Act, 1972, the same is appealable under Section 7(7) of the Act and to avoid deposit of the amount in terms of second proviso under sub-section-7 of Section 7 of the Act,1972, intentionally, the Management has preferred the present writ petition. Hence, the writ petition is not maintainable in view of the alternative remedy of appeal available under Section 7(7) of the Act, 1972. 11. Learned Counsel for the Opposite Party No.2- Workman, reiterating the submission made by the learned Counsel for the State, submitted that there is no infirmity in the impugned order passed by the Opposite Party No.1, vide which the Petitioner-Corporation was W.P.(C) No.4006 of 2017 Page 7 of 22 directed to make payment of interest @ 10% per annum for the delayed payment of gratuity. To substantiate his submission, learned Counsel for Opposite Party No.2 filed website copy of the order dated 16.08.2022 passed by this Court in W.P.(C) No.18589 of 2018 (Managing Director, Orissa State Cashew Development Corporation Ltd., Bhubaneswar and another Vrs. Controlling Authority under Payment of Gratuity Act- Cum-Assistant Labour Commissioner, Khordha and another) after handing over a copy of the same to the learned Counsel for the Petitioner so also relied on the judgment of this Court reported in 2024 (III) ILR-CUT- 875 (Cuttack Central Co-operative Bank Ltd. Vrs. The Joint Labour Commissioner, Odisha & others). 12. In Managing Director, Orissa State Cashew Development Corporation Ltd. (supra), so far as payment of interest, this Court held as follows: “6. Admittedly, neither the Petitioners-Corporation sought for permission of the Controlling Authority to delay the payment of Gratuity of the Opposite Party No.2 nor preferred an Appeal in terms of Sub-Section (7) of Section 7 of the Payment of Gratuity Act, 1972. Hence, this Court is not inclined to interfere with the W.P.(C) No.4006 of 2017 Page 8 of 22 Order impugned dated 13.06.2018 passed in P.G. Case No.02 of 2018 by the Controlling Authority-Cum- Assistant Labour Commissioner, Khordha.” 13. Similarly, in Cuttack Central Co-operative Bank Ltd. (supra), this court held as follows: “25. This Court in a recent judgment in The Sr. Branch Manager, the National Small Industries Corporation Ltd. (supra), taking note of various provisions under the Act, 1972 so also Rules, 1972 and various judgments of the Supreme Court held as follows: “42. On examination of the various legal provisions under the Act, 1972 and Rules made thereunder so also the Judgments cited by the learned Counsel for the parties, as detailed above, this Court is of the following views: to an employee on a) As prescribed under section 4(1) of the Act, 1972, gratuity shall be the payable termination of his employment after he has rendered continuous service for not less than five years on his superannuation or on his retirement or resignation or on his death or to accident or disablement due disease. However, completion of continuous service of five years shall the not termination of the employment of any employee to death or disablement. necessary where is due be b) In terms of section 7(1) of the Act, 1972 read with rule 7(1) & (6) of the Rules, 1972, a person, who is eligible for payment of gratuity under the W.P.(C) No.4006 of 2017 Page 9 of 22 shall send said Act, 1972 or any person authorized, in writing, to act on his behalf, a written application to the Employer in Form „I‟ ordinarily within thirty days from the date the gratuity became payable, either by personal service or by registered post acknowledgement due. c) As provided under rule 7 (1) of the Rules, 1972, where the date of superannuation or retirement of an employee is known, the employee may apply to the Employer before thirty of days for superannuation or payment of gratuity. the date retirement of that an application d) Rule 7(5) of the Rules, 1972 provides for payment of gratuity filed after the expiry of the periods specified in rule 7(1) of the Rules, 1972 shall also be entertained by the Employer, if the applicant adduces sufficient cause for the delay in preferring his claim. claim e) As provided under rule 7(5) of the the no Rules, 1972, gratuity under the Act, 1972 shall be invalid merely because the claimant has failed to present his application within the specified period. for In terms of Rule-8(1) under Rules, f) 1972, within fifteen days of the receipt of an application under rule 7 for payment of gratuity, the Employer shall, if the claim is found admissible on verification, issue a notice in Form W.P.(C) No.4006 of 2017 Page 10 of 22 „L‟ to the applicant employee, nominee or legal heir, as the case may be, specifying the amount of gratuity payable and fixing a date, not being later than the thirtieth day after the date of receipt of the application, for payment thereof. to g) As provided under rule 8(1) (ii) of the Rules, 1972, if the claim for gratuity is not found admissible, the Employer is to issue a notice in Form the applicant employee, „M‟ nominee or legal heir, as the case may be, specifying the reasons as to why the claim for gratuity is not considered admissible. In either case, where is admissible or inadmissible, a copy of the notice in Form „L‟ or „M‟ given to the applicant shall be endorsed to the Controlling Authority. the gratuity claimed claim h) An Employer cannot simply issue notice in Form-M to the employee rejecting for payment of gratuity. If the Employer so desires to forfeit the gratuity, a Show Cause Notice has to be given, because the the gratuity amount Employee is otherwise entitled is to is a drastic be the Employee consequence concerned. forfeited, which to which for i) As provided under rule 10(1)(iii) of the Rules, 1972, if pursuant to the application filed in terms of rule 7 of Rules, 1972 a notice is given under rule 8(1) either specifying an amount of gratuity which is considered by the W.P.(C) No.4006 of 2017 Page 11 of 22 the claimant application less than what is payable or rejecting his/her eligibility for payment of gratuity or the Employer fails to issue any notice as required under rule 8 within the time specified therein, employee, nominee or legal heir, as the case may be, may, within ninety days of the occurrence of the cause for the application, apply in Form „N‟ to the Controlling Authority for issuing a direction under section 7(4) of the Act, 1972 with as many extra copies as are the opposite parties. j) In view of the provisions enshrined under section 7(2) of the Act, 1972, as soon as gratuity becomes payable, the Employer shall, whether an application referred to in sub-section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also the Controlling Authority, specifying the amount of gratuity so determined. the Act, 1972, k) As prescribed under section 7(3) of the Employer shall arrange to pay the amount of gratuity, within thirty days from the date it becomes payable to the person to whom the gratuity is payable. l) In terms of section 7(3-A) of the Act, 1972, if the amount of gratuity payable under sub- section (3) is not paid by the W.P.(C) No.4006 of 2017 Page 12 of 22 the period Employer within specified in sub-section (3), the Employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the Central Government from time to time for repayment of long-term deposits, as that Government may, by notification specify (As per dated 10.10.1987 issued by the Central Government, in exercise of powers conferred under sub-section (3-A) of section 7 of the P.G. Act, 1972, 10% interest is payable). notification the m) In view of the proviso under section 7(3-A) of the Act, 1972, no such interest is payable if the delay in the payment is due to the fault of the employee and the Employer has obtained permission in writing from the Controlling Authority the delayed payment on the said ground. for n) As prescribed under section 7(4)(a) of the Act, 1972, if there is any dispute as to the amount of gratuity payable to an employee under the said Act or as to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the person entitled to receive the gratuity, the Employer shall deposit with the Controlling Authority such amount as he admits to be payable by him as gratuity. W.P.(C) No.4006 of 2017 Page 13 of 22 o) Where there is a dispute with regard to any matter or matters specified in clause (a), the Employer or employee or any other person raising the dispute may make an application Controlling Authority for deciding the dispute, in terms of section 7(4)(b) of the Act, 1972. the to p) As provided under section 7(4)(c) of the Act, 1972, the Controlling Authority shall, after due inquiry and after giving the parties to the dispute a reasonable opportunity of being heard, determine the matter or matters in dispute and if, as a result of such inquiry any amount is found to be payable to the employee, the Controlling Authority shall direct the Employer to pay such amount or, as the case may be, such amount as the amount already reduced by deposited by the Employer. q) As provided in sub-section (6) of section 4 of the Act, 1972, the gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the Employer, shall be forfeited to the extent of the damage or loss so caused. r) As per the settled position of law, as detailed above, before forfeiting the gratuity of an employee in terms of clause (1) of sub-section 6 of section 4 of the Act, 1972, any damage or loss to, or destruction of, W.P.(C) No.4006 of 2017 Page 14 of 22 property belonging to the Employer has to be quantified by the Employer. if s) Similarly, as prescribed in clause (b) of sub-section 6 of section 4 of the Act, 1972, the gratuity payable to an employee may be wholly or partially the services of such forfeited, employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in course of his employment. of gratuity forfeiture t) As held by the apex Court in Union Bank of India (supra), under sub-section (6)(b)(ii) of section 4 of the Act, is permissible if the termination of an employee is for any misconduct which constitutes an offence involving moral turpitude, employee concerned is convicted accordingly by a Court of competent jurisdiction. It is the Employer not to decide for the offence has been whether committed amounting involving moral turpitude. and the to u) As held in Rabindranath Choubey (supra), if departmental proceeding initiated against an has been employee before his retirement, if the service rules of the Employer provide so, the departmental proceeding can continue even after retirement of an employee and if the employee is W.P.(C) No.4006 of 2017 Page 15 of 22 guilty, minor or major found punishment, the punishment of dismissal can be imposed by the Employer, even the employee has retired. including law, order appropriate v) As was further held by the apex in Rabindranath Choubey Court (supra), the enquiry proceeding has to be concluded first on merit and after in passing accordance with thereafter necessary consequences as per section 4 of the Act, 1972, more particularly sub-section (6) of section- 4 of the Act, 1972 and the Rules of the Employer shall to follow. The recovery, as provided under section- 4(6) of the Act, 1972, is in addition to a punishment that can be imposed on an his employee superannuation.” after (Emphasis Supplied) far as 28. So Controlling Authority, the Supreme Court Gangahanume Gowda (supra), held as follows. imposing 10% interest by the in H. “7. It is evident from Section 7(2) that as soon as gratuity becomes payable, the employer, whether any application has been made or not, is obliged to determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity. Under Section 7(3), the employer shall arrange to pay the amount of gratuity within 30 days from the date it becomes payable. Under sub-section (3-A) of Section 7, if the amount of gratuity is not paid by the employer within the period specified in sub-section (3), he shall pay, from the date on W.P.(C) No.4006 of 2017 Page 16 of 22 which the gratuity becomes payable to the date on which it is paid, simple interest at such rate not exceeding the rate notified by the Central Government from time to time for repayment of long- term deposits; provided that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment on that ground. From the provisions made in Section 7, a clear command can be seen mandating the employer to pay the gratuity within the specified time and to pay interest on the delayed payment of gratuity. No discretion is available to exempt or relieve the employer from payment of gratuity with or without interest as the case may be. However, under the proviso to Section 7(3-A), no interest shall be payable if delay in payment of gratuity is due to the fault of the employee and further condition that the employer has obtained permission in writing from the controlling authority for the delayed payment on that ground. Under Section 8, provision is made for recovery of gratuity payable under the Act, if not paid by the employer within the prescribed time. The Collector shall recover the amount of gratuity with compound interest thereon as arrears of land revenue and pay the same to the person entitled. A penal provision is also made in Section 9 for non- payment of gratuity. Payment of gratuity with or without interest, as the case may be, does not lie in the domain of discretion but it is a statutory compulsion. Specific benefits expressly given in a social beneficial legislation cannot be ordinarily denied. Employees on retirement have valuable rights to get gratuity and any culpable delay in payment of gratuity must be visited with the penalty of payment of interest was the view taken in State of Kerala v. M. Padmanabhan Nair„. Earlier there was no provision for payment of interest on the delayed payment of gratuity. Sub-section (3-A) was added to Section 7 by an amendment, which came into force with effect from 1-10-1987. In the case of Charan Singh v. Birla Textiles this aspect W.P.(C) No.4006 of 2017 Page 17 of 22 was noticed in the following words: (SCC pp. 214-15, para 4) "4. There was no provision in the Act for payment of interest when the same was quantified by the controlling authority and before the Collector was approached for its realization. In fact, it is on the acceptance of the position that there was a lacuna in the law that Act 22 of 1987 brought about the incorporation of sub-section (3-A) in Section 7. prospective application”. provision That has 9. It is clear from what is extracted above from the order of the learned Single Judge that interest on delayed payment of gratuity was denied only on the ground that there was doubt whether the appellant was entitled to gratuity, cash equivalent to leave etc., in view of divergent opinion of the courts during the pendency of enquiry. The learned Single Judge having held that the appellant was entitled to payment of gratuity was not right in denying the interest on the delayed payment of gratuity having due regard to Section 7(3-A) of the Act. It was 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. As noticed above, there is a clear mandate in the provisions of Section 7 to the employer for payment of gratuity within time and to pay interest on the delayed payment of gratuity. There is also provision to recover the amount of gratuity with compound interest in case the amount of gratuity payable was not paid by the employer in terms of Section 8 of the Act. Since the employer did not satisfy the mandatory requirements of the proviso to Section 7(3-A), no discretion was left to deny the interest to the appellant on belated payment of gratuity. Unfortunately, the Division Bench of the High Court, having found that the appellant was entitled to interest, declined to interfere with the order of the learned Single Judge as regards the claim of interest on delayed payment of gratuity only on the ground W.P.(C) No.4006 of 2017 Page 18 of 22 that the discretion exercised by the learned Single Judge could not be said to be arbitrary. In the first place in the light of what is stated above, the learned Single Judge could not refuse the grant of interest exercising discretion as against the mandatory provisions contained in Section 7 of the Act. The Division Bench, in our opinion, committed an error in assuming that the learned Single Judge could exercise the in the matter of awarding discretion that such a discretion interest and exercised was not arbitrary”. (Emphasis supplied) this Court 29. Similarly, in Abhay Kumar Samantray (supra), referring to the notification made by the Central Government dated 01.10.1987 in terms of sub-section (3-A) of section 7 of the Act, 1972, held as follows: “22. Hence, this Court is of the view that the Controlling Authority under P.G. Act-Cum- Divisional Labour Commissioner, Cuttack, was justified to take into consideration the total period of service of the Opposite Party from the date of his initial engagement (14.11.1991) till the date of his superannuation (31.03.2018), so also award 10% simple interest on the awarded amount for the delayed period, so also ordering to pay further simple interest @ 10% per annum till the payment is made, if the Petitioner-Corporation fails to deposit the said ordered amount within 30 days from the date of pronouncement of the judgment”. (Emphasis supplied) 31. In Calcutta Dock Labour Board (supra) the Supreme Court, referring to Section 13 & 14 of the Act, 1972, held that section 13 of the Act, 1972 gives total immunity to gratuity from attachment. Paragraph Nos.5 & 6 of the said judgment, being relevant, are extracted below: W.P.(C) No.4006 of 2017 Page 19 of 22 “5. Reference may now be made to Sections 13 and 14 of the Act which are very relevant. 13. Protection of gratuity – No gratuity payable under this Act shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court. 14. Act to override other enactments, etc.- The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act. 6. We may point out that by Central Act No.25 of 1984 Section 13 has been amended with effect from July 1, 1984, and the amended section reads thus: in No gratuity payable under this Act and no gratuity payable to an employee employed establishment, any factory, mine, oilfield, plantation, port, railway company or shop exempted under Section 5 shall be liable to attachment in execution of any decree or order of any civil, revenue, or criminal court. In the absence of any notification within the meaning of Section 5 of the Act the amendment is not relevant for consideration. Section 14 has overriding effect and Section 13 gives total immunity to gratuity from attachment. The preamble of the Act clearly indicates the legislative intention that the Act sought to provide a scheme for payment of gratuity to all employees engaged in, inter alia, ports and under this Act gratuity was payable to workers like Md. Safiur Rehman. The gratuity which was payable to him squarely came within the purview of the Act and, therefore, became entitled to immunity under Section 13 thereof”. (Emphasis supplied)” W.P.(C) No.4006 of 2017 Page 20 of 22 14. In view of the submissions made by the learned Counsel for the parties, as detailed above, so also the settled position of law, this Court is of the view that the writ petition is not maintainable in view of the alternative remedy available under Section 7(7) of the Act, 1972. That apart, this Court is also of further view that there is no infirmity in the impugned order passed by the Controlling Authority (Opposite Party No.1) in P.G. Case No.02 of 2016, vide which the Petitioner-Corporation was directed to make payment of Rs.53,587/- towards interest to the Opposite Party No.2 for the period from 30.10.2003 to 29.06.2010 because of delay in making payment of gratuity. 15. Accordingly, the writ petition stands dismissed. 16. In view of the dismissal of the writ petition, the Petitioner-Management is directed to make payment to the Opposite Party No.2 in terms of the impugned order dated 31st October, 2016, passed in P.G. Case No.02 of W.P.(C) No.4006 of 2017 Page 21 of 22 2016 at the earliest, preferably within a period of four weeks from the date of production of certified copy of this order, failing which, the Petitioner-Management shall be liable to pay Rs.10,000/- (Rupees ten thousand) to the Opposite Party No.2 towards costs, in addition to the awarded amount. 17. Urgent certified copy of this Judgment be granted on proper application as per rules. …….…………………… S.K. MISHRA, J. Orissa High Court, Cuttack. Dated, the 3rd July, 2025/Prasant Signature Not Verified Digitally Signed Signed by: PRASANT KUMAR PRADHAN Designation: Secretary Reason: Authentication Location: High Court of Orissa, Cuttack. Date: 08-Jul-2025 12:09:28 W.P.(C) No.4006 of 2017 Page 22 of 22