H.GANGAHANUME GOWDA versus KARNATAKA AGRO INDUSTRIES CORPN. LTD.

Citation: [2003] 1 S.C.R. 832 · Decided: 05-02-2003 · Supreme Court of India · Bench: SHIVARAJ V. PATIL · Disposal: Appeal(s) allowed

Judgment (excerpt)

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B 
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H.GANGAHANUMEGOWDA 
v. 
KARNATAKA AGRO INDUSTRIES CORPN. LTD. 
FEBRUARY 5, 2003 
[SHIVARAJ V. PATIL AND ARIJIT PASAYAT, JJ.) 
Service Law: 
Payment of Gratuity Act, 1972-Ss. 7 and 8-Gratuity-lnterest on 
belated payment of-Denial by Court in exercise of its discretion-Propriety 
of-Held, denial not correct-Payment of gratuity with or without interest 
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. 
Suspension of appellant was withdrawn, but on his superannuation, 
no order was passed regarding regularization of the suspension period and 
settlement of salary and allowances payable to him on retirement. 
Appellant filed writ petition seeking payment of full salary and allowances 
for the period of suspension, gratuity cash equivalent of earned leave with 
E interest thereon and provident fund dues. Single Judge of High Court 
disposing of the writ petition, granted reliefs to the appellant but in 
exercise of its discretion refused payment of interest on belated payment 
of gratuity. In appeal, Division Bench held that though the appellant was 
entitled to interest on belated payment of gratuity, but the discretion 
F exercised by the Single Judge in denying the same was not arbitrary. 
In appeal to this court, appellant contended that interest on 
belated payment of gratuity is a statutory right and denial of the same in 
exercise of discretion was not correct. 
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Allowing the appeal, the Court 
H 
HELD: 1. Section 7 of Payment of Gratuity Act; 1972, mandates 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 
832 
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H. GANGAHANUME GOWDA 1•. KARNAT AKA AGRO INDUS. CORPN. LID. 
833 
as the case may be. However, under the proviso to Section 7(3A) of the A 
Act, 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. 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 B 
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. Earlier 
there was ~o provision for payment of interest on the delayed payment of 
gratuity. Sub-section (3A) was added to Section 7 by an amendment, which C 
came into force with effect from 1st October, 1987. (836-H; 837-A-D) 
State of Kera/a and Ors. v. M Padmanabhan Nayyar. I (1985) 50 FLR 
145 and Charan Singh v. Mis Bir/a Textiles and Anr .• (1988) 57 FLR 543 
SC, referred to. 
2. In the present case the Single Judge having held that the appellant 
was entitled for payment of gratuity was not right in denying the interest 
on the delayed payment of gratuity having due regard to Section 7(3A) of 
the Act. It was not the case of the respondent that the delay in the payment 
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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 E 
payment on that ground. 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 amount of 
gratuity payable was not paid by the employer in terms of Section 8 of F 
the Act. Since the employer did not satisfy the mandatory requirements 
of the proviso to Section 7(3A), no discretion was left to deny the interest 
to the appellant on belated payment of gratuity. Single Judge could not 
refuse the grant of interest exercising discretion as against the mandatory 
provisions contained in Section 7 of the Act. (838-B-D, F) 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. I 024 of 
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2003. 
From the Judgment and Order dated 21.11.200 I of the High Court of 
Karnataka in WA No. 4177 /200 I. 
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834 
SUPREME COURT REPORTS 
(2003] I S.C.R. 
A 
Ms. Anjana Chnadrashekhar and G.V. Chandashekhar 

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