Payment Of Gratuity Act; Controlling Authority Cannot Deny Interest On Delayed Gratuity: Calcutta HC

Calcutta High Court: A single judge bench of the Calcutta High Court consisting of Justice Shampa Dutt (Paul) directed the Food Corporation of India ('FCI') to pay the statutory interest on delayed gratuity to an employee. The court held that under Section 7(3A) of the Payment of Gratuity Act, 1972, the controlling authority has no discretion to deny interest on the delayed payment of gratuity. Background Himangshu Karmakar worked as a casual labourer from 1989. He was engaged through a contractor at the Food Storage Depot of FCI in Bankura, West Bengal. Over time, the FCI started paying his wages directly. In 1997, Karmakar and 58 others filed a writ petition seeking recognition as Class IV staff, along with its pay and benefits. A single judge bench ruled in their favour and in 1998, directed the FCI to pay them wages on par with Class IV staff. Aggrieved, FCI filed multiple appeals at the High Court and Supreme Court. However, all appeals were dismissed. Despite this, FCI delayed compliance. After a contempt proceeding was initiated, Karmakar finally received wages equivalent to Class IV scale. In 2018, he retired at 60 years of age. After retirement, he received his PF dues, but not his gratuity. Both, the controlling authority and the appellate authority under the Payment of Gratuity Act, 1972, directed immediate release of his gratuity. Notably, the controlling authority refused to grant interest, as Karmakar had not explicitly prayed for the same. Finally, in 2023, FCI deposited the gratuity amount, but did not provide any interest for the delay caused. Aggrieved, Karmakar filed a writ petition seeking interest at 10% per annum from 2018 to 2023 on the delayed gratuity amount. Arguments Karmakar argued that the Payment of Gratuity Act, 1972, mandates the employer to pay interest on any delayed gratuity. They submitted that the delay spanned over five years. They argued that the Controlling Authority erred by refusing to grant interest merely because Karmakar did not specifically pray for it in the initial application. They submitted that Section 7(3A) of the Payment of Gratuity Act, 1972, imposed a mandatory statutory duty on the employer for delay, and it is not subject to the Controlling Authority's discretion FCI argued that the Controlling Authority had properly exercised its discretion in deciding whether or not to award interest. They argued that the delay arose from litigation over gratuity itself, including the question of whether Karmakar was even covered under the Payment of Gratuity Act. They argued that in such circumstances, there is no clear obligation to pay interest. Court's Reasoning Firstly, the court noted that Section 4 of the Act provides that gratuity is payable to an employee upon retirement after 5 years of continuous service. The court held that this right arose immediately after Karmakar's retirement in 2018. Thus, the court noted that the duty to pay gratuity was absolute and not contingent on any further litigation. Secondly, the court explained that Section 7(3A) of the Act requires an employer to pay simple interest on any delayed gratuity until the amount is finally paid. The court held that this provision is mandatory and does not provide any discretion to deny interest (except when attributable to the employee's fault, and the employer has received prior permission from the Controlling Authority). Since no such permission was sought in this case, the court ruled that the payment of interest was mandatory. Thirdly, the court noted that the controlling authority could not have denied interest simply because it was not specifically prayed for in the initial application. The court held that no such explicit prayer is required once the delay is established. Citing Atul Chandra Mahata v. State of West Bengal (WP 10925(W) of 2003), the court held that interest under Section 7(3A) is a statutory right and that it cannot be waived at the discretion of the authority. Thus, the court allowed the writ petition and set aside the controlling authority's order. Consequently, the court directed FCI to pay interest for the period between 2018 and 2023. Decided on: 23.06.2025 Case No.: WPA 8398 of 2025 Counsel for the Petitioner: Mr. Samiran Mandal, Mr. Abhinaba Dan Counsel for the Respondent: Mr. Kamal Kumar Chattopadhyay, Ms. Rimi Chatterjee, Mr. Tanjir Ali Click Here To Read/Download The Order

Payment Of Gratuity Act; Controlling Authority Cannot Deny Interest On Delayed Gratuity: Calcutta HC

Pranav Kumar

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