Payment Of Gratuity Delayed Beyond One Month Of Retirement, Attracts 10% Interest: Bombay HC

Bombay High Court: A division bench comprising of Justices Ravindra V. Ghuge and Ashwin D. Bhobe held that Nowrosjee Wadia College had to pay gratuity with 10% interest to a retired teacher, as their retirement benefits had been delayed without justification. The court held that educational institutions cannot withhold gratuity for more than one month, even if there are disputes over the pension calculation. Background Nowrosjee College had engaged Dr. Chetana Rajput as a Professor for 25 years, until she retired in 2023. While she was initially appointed as a part time teacher, she later also started working at the Shikshan Sevak at Ness Wadia College for 18 hours each week. When another full-time Assistant Teacher retired and superannuated, her sanctioned post became vacant. Consequently, Dr. Chetana Rajput was promoted to full-time Assistant Teacher in 2019. Nearing retirement, Dr. Rajput requested for her gratuity to be released by her retirement date. However, she received no response. Soon, she submitted another representation in April 2024, but the college did not respond or comply. Aggrieved, she filed a writ petition and approached the High Court. On 21 August 2024, the High Court directed the college to process her pension. Later, on 3 March 2025, the court again noted that the college had only forwarded her proposal on 30 December 2024, despite there being no impediment to doing so earlier. Argument Representing Dr. Rajput, Mr. Vaibhav Kulkarni argued that Dr. Rajput was initially appointed as a part time teacher (100% aided), and later was promoted as a full-time Assistant Teacher. This was also approved by the Regional Deputy Director of Education. He argued that she had served for 25 years and had over 10 years of qualifying experience as per the Pension Rules. Thus, he submitted, that she was entitled to pension and gratuity. Representing the college, Mr. S.R. Ronghe submitted that the delay caused in releasing the gratuity amount were due to some issues regarding the calculated pension amount. He argued that due to Dr. Rajput's combined part-time and full-time service. the pension calculations were not finalised. He explained that the education authorities had raised certain issues with the proposals submitted by the management, but these issues were now addressed and the matter was pending before them. Mr. S.P. Kamble, representing the State, argued that the delay in releasing gratuity and pension benefits was attributable to the college and society, not the state. Court's reasoning First, the court listed the facts not in dispute. Dr. Chetana Rajput had been working as a part time teacher from 1998 to 2019, and then was promoted to full time Assistant teacher until she finally retired in 2023. Both these appointments were approved by all the relevant authorities. Further, the college had also passed her pension proposal on 20 December 2024, showing that she was entitled to gratuity. Despite this, the court noted that she was not paid neither gratuity nor any pension. Secondly, the court explained that under the Payment of Gratuity Act, 1972, gratuity must be paid within one month of retirement, and it is payable to employees who have provided continuous service for at least five years. The court explained that the Act is a welfare legislation, and its meant to benefit employees who have served for extended periods. Thus, the court noted that it is the state's duty to pay gratuity voluntarily, instead of forcing employees to approach the courts. Thus, the court held that the college ought to have paid Dr. Rajput's gratuity by October 2023 (one month into her retirement). The court found no justification for the delay, and held that even if there were disputes about the amount, the authorities should have paid the gratuity amount and then recovered it from the management later if necessary. The court referred to Section 7(3A) of the Payment of Gratuity Act, 1972, which imposed interest over gratuity, if not paid within a specific period. The court referred to a Ministry of Labour notification dated 1 October 1987, which had set 10% as a rate of simple interest to be paid in such cases. Thus, the court held that 10% interest must be paid on delayed gratuity payments, without any exception. The court directed the college to ensure the release of benefits at the earliest. Case Title: Chetana Rajput v. Modern Education SocietyCitation: 2025 LiveLaw (Bom) 155 Counsel for the Petitioner: Mr. Vaibhav Kulkarni a/w Mr. Prathamesh Deshpande a/w Ms. Disha Rathod a/w Mr. Yash Agarwal Counsel for the Respondents: Mr. S.R. Ronghe for Respondent Nos. 1 and 2; Mr. S.P. Kamble, AGP for the State Click Here To Read/Download The Order

Payment Of Gratuity Delayed Beyond One Month Of Retirement, Attracts 10% Interest: Bombay HC

Pranav Kumar

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