Payment of Gratuity Act, 1972 – Sections 4 & 7 – Statutory and mandatory nature of gratuity
Paras 17, 18, 19, 20
Gratuity is a statutory right payable on superannuation, and cannot be withheld except in circumstances expressly provided under Section 4(6) of the Payment of Gratuity Act, 1972; delay in payment beyond the statutory period attracts mandatory interest under Section 7(3A).
Terminal benefits – Withholding without legal impediment – Illegality
Paras 14, 16, 18, 23
Non-payment of gratuity and leave encashment to a retired employee, in the absence of any disciplinary or criminal proceedings or statutory bar, is illegal and unsustainable.
Interest on delayed payment of gratuity – Not discretionary
Paras 20, 21, 22
Right to interest on delayed payment of gratuity is statutory in nature and not subject to the discretion of the employer; employer is bound to pay interest as notified by the Central Government.
Financial incapacity of employer – Not a valid defence
Paras 26, 27
Paucity of funds or financial incapacity cannot be pleaded as a defence for non-payment of statutory retiral benefits; welfare obligations override administrative or financial difficulties.
Terminal benefits and pension – Nature of right
Paras 24, 25, 29
Pension and terminal benefits are not a bounty or charity but constitute a property right under Article 300-A and an integral component of the right to livelihood under Article 21 of the Constitution of India.
Liability of cooperative institutions – Obligation to release retiral dues
Paras 8, 28, 30
Primary Agricultural Cooperative Society and its executive authorities are bound to release retiral benefits due for the period of service rendered, notwithstanding internal arrangements or allocation of responsibility.
ANALYSIS
1. Nature of the Writ Petition
The writ petition was filed under Article 226 seeking release of:
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Arrears of salary amounting to Rs.2,28,260/-, and
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Terminal benefits including gratuity and earned leave encashment,
with interest for prolonged and unexplained delay after superannuation.
2. Undisputed Factual Matrix
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Petitioner retired on 30.09.2011 without any stigma.
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No disciplinary or criminal proceedings were pending.
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Liability to pay arrears and retiral benefits was admitted.
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Part payment by DCCB was acknowledged.
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Remaining amount was withheld solely on the plea of lack of funds.
3. Statutory Framework Applied
The Court exhaustively analysed:
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Section 4 of the Payment of Gratuity Act, 1972 – entitlement and forfeiture.
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Section 7 of the Act – time limit for payment and statutory interest.
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Constitutional protections under Articles 21 and 300-A.
4. Rejection of Respondents’ Defence
The Court categorically rejected:
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Financial incapacity as a justification.
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Inter-se disputes between cooperative society and bank as a ground to deny the employee his dues.
The employee cannot be made to suffer due to administrative arrangements between authorities.
5. Interest and Enforcement
Relying on binding Supreme Court precedent, the Court held:
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Interest is automatic on delayed gratuity.
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Rate of 10% per annum is justified.
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Non-compliance may invite further legal consequences.
RATIO DECIDENDI
Gratuity and terminal benefits payable to a retired employee are statutory and constitutional entitlements forming part of the right to livelihood and property; in the absence of any legal impediment under the Payment of Gratuity Act, their withholding on grounds of financial incapacity or administrative inconvenience is illegal, and delayed payment necessarily attracts statutory interest, which is not discretionary but mandatory.
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