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Judgment
B.P. Routray, J.
Heard Mr. P.K. Nayak, learned counsel for the petitioner and Mr. P.K. Parhi, learned DSGI along with Mr. D. Harichandan, learned CGC for the opposite parties.
Present writ petition is directed against order dated 18th August, 2025 of the Central Administrative Tribunal (CAT), Kataka Bench passed in OA No.50 of 2025, wherein learned Tribunal has refused the prayer of the petitioner to grant interest on delayed payment of gratuity.
The facts of the case, sans unnecessary details, are that, the petitioner was working as a Draughtsman Div-1 in opposite party – establishment and he has retired from service on 31st August 2014. Before his retirement, a disciplinary proceeding was initiated against him on 1st August, 2012 and challenging the same the petitioner approached the CAT in OA No.682 of 2012. Vide order dated 17th January 2023, the OA was allowed and the disciplinary proceeding initiated against the petitioner was quashed. In order dated 3rd July 2023, passed in RA No.4 of 2023 (arising out of OA No.786 of 2016), the Tribunal granted liberty to the petitioner to file appropriate representation before the competent authority for grant of gratuity in his favour. Further, in order dated 10th March 2022 passed in afore-stated OA, the Tribunal again directed present opposite parties to pay interest for delayed payment of CGEGIS from 31st August 2014 till the date of actual payment. Since the gratuity was not paid, the petitioner again filed OA No.776 of 2023 and vide order dated 8th January 2025, the Tribunal directed present opposite parties to grant the gratuity and benefits of other financial up-gradation in favour of the petitioner, as quickly as possible, preferably within a period of sixty days from the date of receipt of copy of the order. In said order dated 8th January 2025 it was specifically observed that the Tribunal is refraining from passing any order relating to payment of interest in absence of such prayer by the petitioner. It was further observed that in case of failure to pay the entitled dues to the petitioner within the stipulated period, the petitioner shall be entitled to 8% interest per annum with effect from 18th February 2024, i.e. the date of dismissal of the Writ Petition No.6181 of 2024.
After order dated 8th January 2025 passed by the Tribunal, the authorities cleared all financial dues of the petitioner including payment of gratuity. But due to non-payment of interest on the delayed payment of gratuity, as alleged by the petitioner, he again approached the Tribunal in OA No.50 of 2025. The Tribunal vide impugned order dated 18th August 2025 refused to allow the prayer of the petitioner for grant of interest for delayed payment of gratuity mainly on the ground that in the earlier Original Application the petitioner had not prayed for grant of interest on delayed payment of gratuity, and secondly, the delay in payment of gratuity is due to the litigations pursued by the petitioners in the Tribunal.
Mr. Nayak, learned counsel for the petitioner submits that, he approached the Tribunal on more than one occasion due to the illegal charge framed against him for proceeding in the disciplinary proceeding, which was ultimately quashed by the Tribunal in his favour, and therefore, there was no scope on the part of the petitioner to claim interest in the earlier Original Application on delayed payment of gratuity. It is further submitted on behalf of the petitioner that the prayer in the earlier OA was for upgraded financial benefits along with payment of gratuity and it includes grant of all such other benefits entitled to the petitioner. Therefore, absence of specific prayer for grant of interest on delayed payment of gratuity would not stand as a bar to deprive him from the same.
Conversely, Mr. Parhi, learned DSGI submits that, it is the petitioner due to whose action there was delay in payment of gratuity as he approached the Tribunal again and again in multiple litigations. It is submitted that since there is no fault on the part of the employer to pay the gratuity in favour of the petitioner, but it was due to pendency of litigations filed by the petitioner, therefore, the reason for delay in payment of gratuity cannot be attributed to the employer to pay the interest for delayed payment.
It is true that the petitioner had approached learned CAT on multiple occasions due to pendency of the disciplinary proceeding and the charge framed against him. Admittedly, the petitioner retired from service on superannuation on 31st August 2014 and he was not granted with the retiral benefits entitled on his part on the ground of pendency of the disciplinary proceeding. The disciplinary proceeding was ultimately quashed by the Tribunal vide order dated 17th January 2023.
It is important here to reproduce sub-section (3-A) of Section 7 of the Payment of Gratuity Act, 1972. The same reads as follows:
“(3-A) If the amount of gratuity payable under sub-section (3) is not paid by the employer within the period 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: 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 this ground.”
It is the settled that interest for delayed payment of gratuity is not required to be paid for the fault of the employee. In H.Gangahanume Gowda v. Karnataka Agro Industries Corpn. Ltd., (2003) 3 SCC 40, the Hon’ble Supreme Court have held as follows:-
“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 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 [(1985) 1 SCC 429 : 1985 SCC (L&S) 278 : (1985) 50 FLR 145] . 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 [(1988) 4 SCC 212 : 1988 SCC (L&S) 947 : (1988) 57 FLR 543] this aspect 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. That provision has prospective application.” xxx xxx xxx
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 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 discretion in the matter of awarding interest and that such a discretion exercised was not arbitrary.
10.In the light of the facts stated and for the reasons aforementioned, the impugned order cannot be sustained. Consequently, it is set aside. The respondent is directed to pay interest @ 10% on the amount of gratuity to which the appellant is entitled from the date it became payable till the date of payment of the gratuity amount. The appeal is allowed accordingly with cost quantified at Rs.10,000.”
It needs to be stated here that, as per the proviso to sub-section (3-A) of Section 7, no such interest shall be payable if the delay in payment is due to the fault of the employee. According to the submissions of Mr. Parhi, learned DSGI, the fault lies with the employee for non-payment of gratuity in time as he prosecuted the opposite parties in different litigations and thereby himself delayed the payment of gratuity. But we fail to agree with such submission of Mr. Parhi for the reason that filing of cases in appropriate Court of law against the employer by the petitioner claiming his right cannot be treated as a fault on his part to deprive him from getting the benefits arising out of the provisions of the statute. The right to sue is a recognized constitutional right and to approach appropriate Court of law to claim such right on the part of the petitioner is a statutory right guaranteed in his favour. Therefore, the petitioner cannot be put at fault for the reason that he filed cases against the employer in order to get the relief relating to his financial benefits.
There is no mention in the Payment of Gratuity Act to exempt the employer to not pay the interest for delayed payment of gratuity without their fault. The provisions prescribe that the employee is not entitled to get interest on delayed payment of gratuity only for the fault on his part.
The status of the petitioner to receive the gratuity under the Payment of Gratuity Act is not disputed. He retired from service on 31st August 2014 and received the gratuity on 15th March 2025. Therefore, it is seen that there is delay in payment of gratuity for more than nine years. So the question is, whether there is any fault found on the part of the petitioner to deprive him from getting the interest for delayed payment of gratuity amount, as per the prescription in the proviso under sub-section (3-A) of Section 7 of the Payment of Gratuity Act. The answer in our opinion is in negative because the petitioner is not at fault and he pursued his case to get his right either in terms of financial benefits or in terms of retiral benefits, and so the opposite party – employer is bound to pay the interest on delayed payment of gratuity. Apart from this, the provisions of Payment of Gratuity Act is for the benefit of poor employee and considering such benevolent object of the Act, the petitioner-employee cannot be deprived of getting interest on delayed payment of gratuity, particularly when he is not at fault.
So far as the observations of the Tribunal regarding application of constructive res judicata is concerned, it is stated here that the strict principles of res judicata in terms of the principles engrafted in Order 2 Rule 2 of the CPC is not attracted in the matter relating to the benevolent provisions of the Payment of Gratuity Act. As per the provisions of the Payment of Gratuity Act, an employee is entitled for interest at such rate in his favour for delayed payment of gratuity without his fault. Thus, such observation of the Tribunal to deny the Petitioner from getting the benefits of interest for delayed payment of the gratuity is not found appropriate to be applied against the Petitioner.
In view of the discussions made above and the reasons stated, taking note of the provisions of the Payment of Gratuity Act and the admitted delay in payment of same to the petitioner, the impugned order of the CAT at Annexure-3 is quashed, and the opposite parties are directed to pay simple interest at the rate of 8% per annum for the period from 31st August 2014 till 15th March 2025, within a period of three months from the date of receipt of certified copy of this judgment.
The Writ Petition is disposed of as allowed.