Bombay High Court
Sharda Nand Lal Das S/O Late Mahabir Lal ... vs Shri. S.J. Shelar, The Assistant Labour ... on 20 December, 2018
Equivalent citations: AIRONLINE 2018 BOM 1369
Author: Manish Pitale
Bench: Manish Pitale
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR.
WRIT PETITION NO. 2701 OF 2017
PETITIONER :- Sharda Nand Lal Das s/o Late Mahabir Lal
Das, Aged about 64 years, Occu.: Former
General Manager (Legal), Western Coalfields
Limited, R/o. Flat No.B-202, Sriram Heights,
Katol Road, Nagpur-440013.
...VERSUS...
RESPONDENTS :- 1) The Assistant Labour Commissioner,
(Central), Nagpur and the Controlling
Authority under the Payment of Gratuity
Act, 1972, C.G.O. Complex, Block-C, 1 st
Floor, Seminary Hills, Nagpur-440006.
2) Chairman-Cum-Managing Director, Western
Coal Field Ltd., Civil Lines, Nagpur.
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Mr.Akshay M. Sudame, counsel for the petitioner-employee.
Mrs.Mugdha Chandurkar, counsel for
respondent No.1-Controlling Authority.
Mr. A.M.Ghare, counsel for respondent No.2-employer.
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AND
WRIT PETITION NO. 3672 OF 2017
PETITIONER :- Western Coalfields Ltd., Through its
Chairman cum Managing Director, WCL HQ,
Coal Estate, Civil Lines, Nagpur, Tahsil &
District Nagpur.
...VERSUS...
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RESPONDENTS :- 1) The Controlling Authority under the
Payment of Gratuity Act and Assistant
Labour Commissioner (Central), CGO
Complex, Blocik "C", 1st Floor, Seminary
Hills, Nagpur-440006.
2) Shri Sharada Nandlal Das, Aged 65 years,
Occu.: Retired R/o. Flat No.B-102, Shriram
Residency, Katol Road, Kranti Surya Nagar,
Nagpur-440013.
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Mr.A.M.Ghare, counsel for the petitioner-employer.
Mrs.Mugdha Chandurkar, counsel for
respondent No.1-Controlling Authority.
Mr.Akshay M. Sudame, counsel for respondent No.2-employee.
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CORAM : MANISH PITALE, J.
DATE OF RESERVING THE JUDGMENT: 22.11.2018.
DATE OF PRONOUNCING THE JUDGMENT: 20.12.2018.
JUDGMENT
These two writ petitions that have come up for consideration before this Court, challenging order dated 27/02/2017 passed by the Assistant Labour Commissioner (Central), Nagpur and Controlling Authority under the Payment of Gratuity Act, 1972, whereby direction has been given to pay interest to the petitioner-employee under section 8 of the said Act on account of failure of the employer to pay the KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 3/29 amount of gratuity payable under the said Act, within prescribed time. Writ Petition No.2701 of 2017 has been filed by the petitioner- employee (Sharda Nandlal Das) claiming that the rate of interest has been wrongly calculated by the said authority and Writ Petition No.3672 of 2017 has been filed by the employer-Western Coalfields Ltd. claiming that it was not liable to pay any amount towards interest to the said employee as section 8 of the said Act was not applicable to the facts of the present case.
2. The petitioner (hereinafter referred to as the "employee") was employed with the respondent-Western Coalfields Ltd. (hereinafter referred to as the "employer") continuously for a period of 40 years and 4 months. The employee retired on 31/01/2012, upon attaining the age of superannuation. According to the employee, as his date of retirement was known to the employer, it was incumbent upon the said employer to have complied with the requirements of the Payment of Gratuity Act, 1972 (hereinafter referred to as the "said Act"), particularly section 7 thereof and amount of gratuity ought to have been paid to the employee within a period of 30 days of his retirement. As such payment was not made, the employee was constrained to submit an application dated 20/04/2012 to the employer for payment KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 4/29 of gratuity to which there was no response. In this background, the employee was constrained to file an application under Form 'N' of the Payment of Gratuity (Central) Rules, 1972, for a direction to the employer to make payment towards gratuity. The employee made this application on 15/05/2012 under section 7 of the said Act read with Rule 10(1) of the aforesaid Rules before the Controlling Authority, claiming gratuity to the tune of Rs.27,03,277/-. On 18/06/2013 the said Controlling Authority passed its order directing the employer to pay an amount of Rs.10,00,000/- (Rs.Ten Lakhs Only) together with interest at the rate of 10% per annum for delayed payment. The period of delay was to be calculated from 31/01/2012 i.e. the date of retirement of the employee. The employer desired to file an appeal against the said order of the Controlling Authority under section 7(7) of the said Act before the Appellate Authority and as per the proviso to sub-section(7) of section 7 of the said Act, the employer deposited the amount equal to the amount directed by the Controlling Authority as payable towards gratuity and interest to the employee. Accordingly, the employer deposited an amount of Rs.11,28,283/- (Rs.10,00,000/- towards gratuity and Rs.1,28,283/- towards interest) till the date of deposit before respondent No.1-Controlling Authority.
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3. On 24/06/2014 the Appellate Authority dismissed the appeal of the employer and upheld the order of respondent No.1 (hereinafter referred to as the "Controlling Authority"). On 23/07/2014 the employer addressed a letter to the Controlling Authority not to release the amount deposited under proviso to section 7(7) of the said Act, as the Management of the employer had decided to challenge the order of the Appellate Authority before this Court. The amount so deposited was not released to the employee. On 05/08/2014, the employee submitted document called GAR-43 in duplicate signed on revenue stamp, along with necessary documents for disbursal of the amount lying in deposit before the Controlling Authority. On 10/06/2015 the employee sent a letter to the Controlling Authority, stating that although this Court had not granted any stay in the writ petition filed by the employer, the amount lying in deposit had not been disbursed to him and the employee requested for release of the said amount. The amount continued to remain in deposit before the Controlling Authority. On 24/06/2015, the Controlling Authority sent a letter to the employer stating that if it failed to send a copy of the writ petition and stay order, the deposited gratuity amount and interest would be released to the employee without any further correspondence.
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4. The said writ petition bearing Writ Petition No.5146 of 2014 filed by the employer was dismissed by this Court, by order dated 08/07/2015. By subsequent order dated 31/07/2015, a minor correction was made by this Court in the order dated 08/07/2015. In any case, the said writ petition filed by the employer stood dismissed on 08/07/2015.
5. It has come on record that finally the said amount of Rs.11,28,283/- towards gratuity and interest, lying in deposit with the Controlling Authority, was transferred to the bank account of the employee on 02/11/2015. As the employer had failed to make payment to the employee immediately upon determination of the same by the Controlling Authority, on 30/11/2015 the employee sent a letter to the employer requesting payment of differential amount of interest on the amount of gratuity. The employee requested for payment of such interest by calculating the same at 15% compound interest per annum under section 8 of the said Act read with Notification dated 01/12/1987 issued by the Central Government, whereby the said rate of interest had been specified. Thereafter on 26/02/2016 the employee submitted application under form 'T' for recovery of gratuity under Rule 19 of the aforesaid Rules. On 28/03/2016, the employee was KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 7/29 constrained to submit a representation before the Controlling Authority seeking enforcement of section 8 of the said Act in his case and for payment of interest in terms thereof. As no action was taken by the Controlling Authority, the employee filed Writ Petition No.4771 of 2016 before this Court. The said writ petition was partly allowed by Division Bench of this Court. It was noted that the employee was claiming interest from the period 05/07/2013 till 02/11/2015. It was held by this Court that the employee was entitled for grant of interest till the amount was actually received by him. It was then recorded by this Court in its order dated 01/02/2017 that the issue that arose for consideration was as to whether the employer was liable to pay interest on the amount after it was deposited on 05/07/2013 with the Controlling Authority. This Court then recorded that the Controlling Authority could decide the said issue but the application moved by the employee under Form 'T' on 26/02/2016 cannot be refused by the Controlling Authority. Accordingly, the writ petition was partly allowed and the Controlling Authority was directed to pass suitable orders on the said application within four weeks.
6. In pursuance of the said direction, the Controlling Authority has passed the impugned order dated 27/02/2017, holding that the KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 8/29 employer-WCL was responsible for paying interest for the period between 05/07/2011 to 02/11/2013 (2 years, 3 months and 28 days) at the rate of 10% on the principal amount of Rs.10,00,000/-, which came to Rs.2,32,329/-. The employer was directed to pay the said amount to the employee within 30 days of receipt of the said order.
7. According to the employee, the rate of interest calculated by the Controlling Authority was wrong because interest ought to have been calculated as compound interest at 15% per annum under section 8 of the said Act read with Notification dated 01/12/1987 issued by the Central Government. Therefore, on 24/03/2017, the employee issued a notice of contempt to the officer holding the position of the Controlling Authority. Thereafter, the employee filed the present writ petition praying for quashing and setting aside of the said order dated 27/02/2017 issued by the Controlling Authority and for a declaration that he was entitled to receive compound interest at the rate of 15% per annum on the amount of gratuity from the date of superannuation till he actually received the amount of gratuity. The employer filed Writ Petition No.3672 of 2017 praying for quashing and setting aside of the said order dated 27/02/2017, contending that it was not liable to pay any amount towards interest as claimed by the employee.
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8. Mr. Akshay Sudame, learned counsel appearing for the petitioner-employee, submitted that the Controlling Authority had committed an error while calculating the interest payable to the employee for the period between 05/07/2013 to 02/11/2015 only at the rate of 10% per annum compound interest, for the reason that the rate of interest applicable under section 8 of the said Act read with Notification dated 01/12/1987 issued by the Central Government, was compound interest specified at 15% per annum. On this basis, it was submitted that the rate of interest was required to be increased to compound interest at the rate of 15% per annum on the principal amount of Rs.10,00,000/- and the impugned order deserved to be modified to that extent. The learned counsel for the employee placed emphasis on sections 7 and 8 of the said Act and he submitted that the crucial aspect to be appreciated in the present case was that compound interest at the aforesaid rate was payable to the employee under section 8 of the said Act till the date it was "actually paid to the employee." It was submitted that mere deposit of the amount by the employer with the Controlling Authority was not enough to absolve the employer from bearing the liability of payment of compound interest under the said provisions. It was further submitted that the employee could have been KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 10/29 deprived interest under the said provision only if the delay was on account of any fault attributable to the employee and in the absence of the same, the employer was clearly liable to pay compound interest at 15% per annum under section 8 of the said Act.
9. It was further submitted that in the order dated 01/02/2017, the Division Bench of this Court had clearly held that the employee was entitled to grant the interest till the amount was actually received by him. Therefore, the entitlement of the employee towards interest under the said provision was no longer a matter of debate. The only question that was left open was whether the employer was liable to pay compound interest to the employee. Reliance was placed by the learned counsel appearing for the employee on the judgments of the Hon'ble Supreme Court in the case of H. Gangahanume Gowda v. Karnataka Agro Indstries Corpn. Ltd., reported in AIR 2003 SC 1526 and Y.K.Singla v. Punjab National Bank and others, reported in (2013) 3 SCC 472.
10. On the other hand, Mr. A.M.Ghare, learned counsel appearing for the employer-WCL, submitted that once the employer had deposited the amount of gratuity determined by the Controlling Authority along with simple interest calculated at the rate of 10% per KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 11/29 annum before filing appeal before the Appellate Authority, its liability to pay any further interest to the employee was over. The learned counsel submitted that proviso to section 7(7) of the said Act required the employer to first deposit the said amount along with simple interest with the Controlling Authority and only then could the employer file the appeal before the Appellate Authority. According to the learned counsel, once such deposit was made by the employer before filing of appeal, it amounted to payment of gratuity along with interest to the employee and that the employer could not be held liable for payment of any further amount towards interest under section 8 of the said Act. It was further submitted that the Controlling Authority was responsible for the delay, if any, in disbursal of amount to the employee and that therefore, the employer could not be held responsible for the same. It was submitted that even the employee had been negligent in approaching the Controlling Authority for disbursal of amount in his favour, although he knew that the amount of gratuity and simple interest had been deposited by the employer with the Controlling Authority on 05/07/2013 itself.
11. Mrs.Mugdha Chandurkar, learned counsel appearing for the Controlling Authority, supported the impugned order passed by the said Authority contending that the amount as well as rate of interest had KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 12/29 been correctly calculated by the said Authority. It was further submitted that the amount could not be disbursed in the account of the employee till 02/11/2015 because of the communication sent by the employer informing the said Authority about filing of writ petition before this Court. According to the learned counsel, after the writ petition filed by the employer was dismissed, the amount was disbursed in favour of the employee. It was further submitted that the compound interest at 15% per annum was recoverable by the Collector under section 8 of the said Act and, therefore, the finding of 10% interest payable to the employee in the impugned order was fully justified.
12. Having heard the counsel for the parties. It needs to be examined as to whether under the scheme of the aforesaid Act, the employee in the present case was entitled to compound interest at 15% per annum till the amount was actually disbursed into his account on 02/11/2015. A perusal of the provisions of the said Act shows that section 4 of the said Act provides for payment of gratuity, specifying the entitlement of an employee to gratuity in various contingencies like superannuation, resignation, death or disablement. Section 7 of the said Act pertains to determination of the amount of gratuity and section 8 of the said Act provides for recovery of gratuity and entitlement of the KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 13/29 employee to compound interest at the rate specified by the Central Government by Notification if the amount of gratuity payable under the said Act is not paid by the employer within the prescribed time. Therefore, these two sections being relevant for the decision in the present case, need to be reproduced and they read as follows :-
"7. Determination of the amount of Gratuity. - (1) A person who is eligible for payment of gratuity under this Act or any person authorised, in writing, to act on his behalf shall send a written application to the employer, within such time and in such form, as may be prescribed, for payment of such gratuity.
(2) As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub-
section (1) has been made or not, 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 so determined.
[(3) The employer shall arrange to pay the amount of gratuity, within thirty days from the date it becomes payable to the person to whom the gratuity is payable. (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].
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(4) (a) If there is any dispute as to the
amount of gratuity payable to an employee under this Act or as to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the person entitled to receive the gratuity, the employer shall deposit with the Controlling Authority such amount as he admits to be payable by him as gratuity.
[(b) Where there is a dispute with regard to any matter or matters specified in clause (a), the employer or employee or any other person raising the dispute may make an application to the Controlling Authority for deciding the dispute.] [(c)] The controlling authority shall, after due inquiry and after giving the parties to the dispute a reasonable opportunity of being heard, determine the matter or matters in dispute and if, as a result of such inquiry any amount is found to be payable to the employee, the controlling authority shall direct the employer to pay such amount or, as the case may be, such amount as reduced by the amount already deposited by the employer.] [(d)] The controlling authority shall pay the amount deposited, including the excess amount, if any, deposited by the employer, to the person entitled thereto.
[(e)] As soon as may be after a deposit is made under Clause (a), the controlling authority shall pay the amount of the deposit-
(i) to the applicant where he is the employee; or
(ii)where the applicant is the employee, to the [nominee or, as the case may be, the guardian of such nominee or] heir of the employee if the Controlling Authority is satisfied that there is no dispute as to the right of the applicant to receive the amount of gratuity.
(5) For the purpose of conducting an inquiry under Sub-Section (4), the controlling authority shall have the same powers as are vested in a Court, while trying a suit, under the Code of Civil Procedure,1908 (5 of 1908), in respect of the following matters namely:-
(a) enforcing the attendance of any person or examining him on oath;
(b) requiring the discovery and production of documents;
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(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses.
(6) Any inquiry under this Section shall be a judicial proceeding within the meaning of Sections 193 and 228, and for the purpose of Section 196, of the Indian Penal Code, 1860 (45 of 1860).
(7) Any person aggrieved by an order under sub-section (4), may, within sixty days from the date of the receipt of the order, prefer an appeal to the appropriate Government or such other authority as may be specified by the appropriate Government in this behalf:
Provided that the appropriate Government or the appellate authority, as the case may be, may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of sixty days, extend the said period by a further period of sixty days.
[Provided further that no appeal by an employer shall be admitted unless at the time of preferring the appeal, the appellant either produces a certificate of the controlling authority to the effect that the appellant has deposited with him an amount equal to the amount of gratuity required to be deposited under sub-section (4), or deposits with the appellate authority such amount.] (8) The appropriate Government or the appellate authority, as the case may be, may, after giving the parties to the appeal a reasonable opportunity of being heard, confirm, modify or reverse the decision of the controlling authority.
8. Recovery of Gratuity. - If the amount of gratuity payable under this Act is not paid by the employer, within the prescribed time, to the person entitled thereto, the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the Collector, who shall recover the same, together with compound interest thereon [at such rate as the Central Government may, by notification, specify], from the date of KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 16/29 expiry of the prescribed time, as arrears of land revenue and pay the same to the person entitled thereto:
[Provided that the controlling authority shall, before issuing a certificate under this section, give the employer a reasonable opportunity of showing cause against the issue of such certificate:
Provided further that the amount of interest payable under this section shall, in no case, exceed the amount of gratuity payable under this Act]."
The scheme that emerges from the above quoted two sections provides for payment of gratuity to the employee within 30 days from the date it becomes payable. In fact, it is mandated that the employer shall pay the amount of gratuity as soon as it becomes payable. Sub-section (3-A) of section 7 of the said Act provides that if the gratuity payable to the employee is not paid within the period specified in sub-section (3), which is 30 days, the employer shall pay simple interest at the rate notified by the Central Government from the date on which the gratuity becomes payable to the date on which it is paid. The only rider to the said requirement of payment of interest by employer is that if the delay is attributable to a fault of the employee and if the employer has obtained permission in writing from the Controlling Authority for delayed payment on such ground, no interest would be payable. The proviso to section 7(7) of the said Act mandates that if the employer files an appeal before the Appellate Authority KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 17/29 challenging determination of gratuity by the Controlling Authority, it shall deposit the amount of gratuity with the Controlling Authority and that no appeal shall be admitted, unless such deposit is made. Section 8 of the said Act provides that if the amount of gratuity payable under the said Act is not paid by the employer within the prescribed time, the Controlling Authority shall issue a certificate to the Collector for recovery of the amount along with compound interest as notified by the Central Government. It is undisputed that the rate of simple interest payable under section 7(3-A) of the said Act as notified by the Central Government and relevant for the case of the employee is 10% per annum and the compound interest under section 8 of the said Act as per notification issued by the Central Government is 15% per annum compound interest.
13. The facts of the present case show that the employee stood superannuated from service on 31/01/2012 and accordingly, the gratuity payable to him under the said Act was required to be paid to him within 30 days of the said date. Since the employer failed to make payment within the said period, the employee filed an application before the Controlling Authority under the provisions of the said Act for a direction to the employer to make such payment. After issuing notice to the employer, by order dated 18/06/2013, the Controlling Authority KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 18/29 held that the employer was liable to pay gratuity amount of Rs.10,00,000/- (Rs.Ten Lakh Only) to the employee along with simple interest at 10% per annum from the date of superannuation i.e. 31/01/2012 till the actual date of its payment within 30 days of receipt of the said order. As the employer intended to file an appeal before the Appellate Authority to challenge the said order of the Controlling Authority, it deposited amount of Rs.11,28,283/- (Rs.10,00,000/-
towards gratuity + Rs.1,28,283/- towards interest), on 05/07/2013 before the Controlling Authority. After depositing the said amount, the employer filed appeal before the Appellate Authority, but the same was dismissed on 24/06/2014. Thereafter, on 23/07/2014, the employer sent a letter to the Controlling Authority not to release the aforesaid amount deposited on 05/07/2013. On 24/06/2015, the Controlling Authority sent a letter to the employer referring to the said letter dated 23/07/2014 and stated that if the employer failed to send a copy of the writ petition and stay order of this Court, the gratuity amount along with interest lying in deposit would be released. The writ petition filed by the employer bearing Writ Petition No.5146 of 2015 was dismissed on 08/07/2015 and it is after dismissal of the said writ petition, on 02/11/2015, the said amount was actually received in the account of the employee.
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14. Thereafter, the employee approached the employer for payment of compound interest under section 8 of the said Act for the delay in payment of aforesaid amount from 05/07/2013, when it was deposited by the employer before the Controlling Authority till 02/11/2015, when it was actually received in his account. In the order dated 01/02/2017, the Division Bench of this Court has held that the employee is entitled to grant of interest till the amount was actually received by him and the only question was as to who was liable.
15. The Hon'ble Supreme Court in the case of H. Gangahanume Gowda v. Karnataka Agro Indstries Corpn. Ltd. and Y.K.Singla v. Punjab National Bank and others (supra) has examined the entitlement of an employee to receive interest on delayed payment of gratuity in the context of section 7 of the said Act. It has been laid down that if the employee is not at fault for the delay, he is entitled to the interest. In both the judgments, applicability of section 7 was examined and it was held that the Court had no discretion to grant or not to grant interest on delayed payment of gratuity, as it was a statutory right that accrued to an employee to whom delayed payment of gratuity was made. But, in none of the cases decided by the Hon'ble KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 20/29 Supreme Court did any question arise pertaining to liability of employer to pay compound interest under section 8 of the said Act for the period between deposit of gratuity plus simple interest before the Controlling Authority under proviso to section 7(7) of the said Act, for filing an appeal, till its actual disbursal/payment to the employee.
16. In the present case, it is undisputed that the employer deposited the amount of gratuity with simple interest at 10% per annum on 05/07/2013 with the Controlling Authority, in order to file an appeal before the Appellate Authority. If it is held that after the said date i.e. 05/07/2013, the employer would have to pay compound interest under section 8 of the said Act, the purpose of the proviso to section 7(7) of the said Act and the remedy of appeal provided under the said provision, would be rendered illusory. The purpose of the aforesaid proviso requiring the employer to deposit the gratuity amount with interest as determined by law was that if the appeal stood dismissed, the amount would become immediately payable and it would be paid to the employee. On the other hand, if the appeal stood allowed, the amount lying in deposit would remain available to be refunded to the employer and the employer would not be required to run after the employee for recovering such amount. If the employer is KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 21/29 made to pay compound interest on such amount lying in deposit before the Controlling Authority during the pendency of appeal, it would be meaningless to make such deposit and the employer might as well have paid the amount to the employee while filing the appeal before the Appellate Authority. If such an interpretation is made, the whole purpose of the aforesaid proviso to section 7(7) of the said Act would be defeated.
17. In the present case, the employer did make the deposit of the gratuity amount along with interest at the rate of 10% per annum determined by the Controlling Authority under section 7(3-A) of the said Act on 05/07/2013 before filing the appeal. The appeal stood dismissed on 24/06/2014. Upon the said appeal being dismissed, the order of the Controlling Authority stood confirmed and the amount of gratuity with simple interest lying in deposit before the Controlling Authority became immediately payable to the employee. It is this date from which the interest component as contemplated under section 8 of the said Act becomes payable by the employer. The said provision categorically states that if the amount of gratuity payable under the said Act is not paid by the employer within the prescribed period, compound interest would be payable from the date of expiry of the prescribed KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 22/29 period. If the aforesaid provision i.e. section 8 of the said Act is compared with section 7 (3-A) of the said Act, it becomes clear that in section 7(3-A) of the said Act simple interest is payable, if the amount of gratuity is not paid by the employer within the specific period of 30 days from the date the amount of gratuity is payable. The said period of 30 days under section 7(3-A) is determined because the provision uses the words "the period specified in sub-section (3)", wherein the period of 30 days is specifically stated. But, section 8 of the said Act simply uses the words "within the prescribed period". Now, if the aforesaid words "within the prescribed period" used in section 8 of the said Act are construed as 30 days provided under section 7(3) of the said Act, as contended on behalf of the employee, it would lead to an anomalous situation where the employer will be liable to pay simple interest at 10% per annum from the date gratuity was payable to the employee and also to pay compound interest at 15% per annum from the date the amount of gratuity was payable. This would render proviso to section 7(7) of the said Act meaningless and it would also render the provision of appeal illusory.
18. Therefore, in the facts of the present case, the compound interest payable under section 8 of the said Act to the employee has to KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 23/29 be calculated from the date when the appeal filed by the employer stood dismissed by the Appellate Authority. The said date is 24/06/2014. The employer ought to have paid the amount of gratuity along with simple interest deposited by it before the Controlling Authority, immediately upon dismissal of its appeal on 24/06/2014 and upon failure to do so, it ran the risk of paying compound interest under section 8 of the said Act from 24/06/2014 i.e. the date of dismissal of its appeal. The words "within the prescribed period" used in section 8 of the said Act ought to mean the period prescribed under the order of the Controlling Authority whereby the liability of the employer was determined under section 7 of the said Act.
19. The employer could not have sent communication dated 23/07/2014 to the Controlling Authority not to release the amount lying in deposit with the said Authority, as it intended to challenge the order of the Appellate Authority before this Court. This is because the employer intended to invoke writ jurisdiction of this Court, which was not a statutory remedy like an appeal under section 7(7) of the said Act and there was no reason for the employer to have asked the Controlling Authority not to disburse the said amount, lying in deposit, to the employee.
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20. There is some substance in the contention raised on behalf of the employer that it was for the Controlling Authority to have disbursed the amount lying in deposit, but under the scheme of the aforesaid Act, the employer is required to make payment of gratuity as soon as it becomes payable to the employee and for any delay caused in actual payment of the amount to the employee, the liability would rest with the employer, particularly when no fault for the delay can be attributed to the employee.
21. The employer had no business to send communication to the Controlling Authority not to disburse the amount lying in deposit to the employee, as it intended to file a writ petition before this Court to challenge the order of the Appellate Authority. Upon the appeal being dismissed and the order of the Controlling Authority being confirmed, further delay in actual disbursal/payment of amount to the employee resulted in liability under section 8 of the said Act on the employer.
22. The reliance placed by the learned counsel appearing on behalf of the employer on various clauses to sub-section (4) of section 7 of the said Act to contend that once the employer had deposited the KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:23 ::: WPs2701+3672.17-Judgment 25/29 amount before the Controlling Authority, it was entirely the duty of the said Authority to pay the amount to the employee and that any delay caused in such payment would not attract compound interest under section 8 of the said Act, is not sustainable. Section 7(4)(e) of the said Act provides that when employer deposits amount that it admits to be payable towards gratuity to the employee, the same shall be paid to the employee as soon as it is deposited. In the present case, the said clause will not apply because the employer disputed its liability to pay gratuity to the employee and it never deposited any admitted amount. Clause
(d) of section 7(4) of the said Act would also not apply to the present case because it pertains to a situation where admitted amount is already deposited by the employer and upon deposit of excess amount determined by the Controlling Authority, the total amount is required to be paid by the Controlling Authority to the employee. In the present case, deposit of the amount of gratuity with simple interest was made by the employer as per the proviso to section 7(7) of the said Act, which provides for an appeal before the Appellate Authority to challenge the order passed by the Controlling Authority. Therefore, the said amount remained in deposit with the Controlling Authority during the pendency of appeal filed by the employer. This shows that the employer in the present case, is not entitled to claim that once it deposited the amount KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:24 ::: WPs2701+3672.17-Judgment 26/29 of gratuity plus simple interest with the Controlling Authority under proviso to section 7(7) of the said Act, it could not be held liable for any delay in payment of compound interest under section 8 of the said Act, upon dismissal of its appeal by the Appellate Authority. Additionally, in the present case, the employer sent communication dated 23/07/2014 to the Controlling Authority not to disburse the amount lying in deposit to the employee as it intended to file a writ petition before this Court. By doing so, which caused delay in actual disbursal of the amount lying in deposit, the employer rendered itself liable to pay compound interest for the period of delay under section 8 of the said Act.
23. Therefore, a reasonable interpretation of sections 7 and 8 of the said Act read together and applying them to the facts of the present case, would show that the employee would be entitled to grant of compound interest at 15% per annum under section 8 of the said Act from 24/06/2014 i.e. the date on which the Appellate Authority dismissed the appeal of employer to 02/11/2015 when the amount was actually received in the account of the employee. There can be no doubt about the fact that the employee was not at fault at any point in time for delay during the aforesaid period. It was also not the case of the employer that because the employee was issued a charge-sheet he KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:24 ::: WPs2701+3672.17-Judgment 27/29 was not entitled for gratuity, because he stood exonerated of the charges on 22/01/2016, as recorded in the impugned order passed by the Controlling Authority. The employer never made an issue of the said aspect and in any case, as per the judgment of the Hon'ble Supreme Court passed in the case of Y.K.Singla v. Punjab National Bank and others (supra), in such situation, where the employee stood finally exonerated, no fault could be attributed to him for delay in actual payment of gratuity under the said Act.
24. As regards the submission made on behalf of the employee that the entitlement of grant of interest for the period 05/07/2013 to 02/11/2015 already stood determined by order dated 01/02/2017 of Division Bench of this Court in Writ Petition No.4771 of 2016, it would be appropriate to note that in the said order, the Division Bench has held that the employee is entitled to grant of interest till the amount is actually received by him. Therefore, as per the aforesaid order of the Division Bench of this Court, there can be no doubt about entitlement of interest of the employee under section 8 of the said Act till the amount is actually received by him but the liability of the employer and its extent remained to be determined. In the facts of the present case and applying the provisions of sections 7 and 8 of the said Act read together, KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:24 ::: WPs2701+3672.17-Judgment 28/29 the employee is held to be entitled to compound interest at the rate of 15% per annum under section 8 of the said Act on the principal amount of Rs.10,00,000/- from 24/06/2014 to 02/11/2015. For the period between 05/07/2013 to 24/06/2014, when the appeal was pending before the Appellate Authority and the amount deposited by the employer under proviso to section 7(7) of the said Act was lying with the Controlling Authority, the employer cannot be held liable to pay compound interest under section 8 of the said Act, because holding so would render the provision of appeal under section 7(7) of the said Act as illusory.
25. The submission made on behalf of the Controlling Authority that interest was payable only at the rate of 10% per annum is only stated to be rejected. Notification dated 01/12/1987 issued by the Central Government, placed on record on behalf of the employee, clearly shows that the rate of interest payable under section 8 of the said Act has been specified as compound interest at 15% per annum. The other submission that such rate of interest was payable when it was determined by the Collector under the said provision, is also unsustainable because the Collector merely recovers the same as arrears of land revenue under the said provision and the rate of interest is KHUNTE ::: Uploaded on - 21/12/2018 ::: Downloaded on - 25/12/2018 22:06:24 ::: WPs2701+3672.17-Judgment 29/29 determined under section 8 of the said Act read with Notification dated 01/12/1987 issued by the Central Government.
26. In the light of the above, Writ Petition No.2701 of 2017 and Writ Petition No.3672 of 2017, both are partly allowed to the extent that the impugned order dated 27/02/2017 passed by respondent No.1- Controlling Authority is modified by directing the employer-WCL to pay compound interest at the rate of 15% per annum in terms of section 8 of the said Act on the principal amount of Rs.10,00,000/- to the employee for the period 24/06/2014 to 02/11/2015, within a period of 30 days from the date of this order.
27. Rule is made absolute in the above terms. No order as to costs.
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