Bombay High Court: 10% Interest for Delayed Gratuity & Pension

In a case concerning a retired Pune teacher, the Bombay High Court ordered immediate payment of gratuity with 10% p.a. interest for delay—reaffirming that employers must disburse dues proactively.

Case Summary

• Employee: Retired teacher with 25 years’ service at a Maharashtra Government college.
• Pre-retirement requests: Asked management to compute & release gratuity on retirement date.
• Follow-ups: Reminded again on 12 Apr 2024; no response. After ~2 years, approached the High Court.
• HC Order: Release gratuity immediately with 10% p.a. interest from 30 Oct 2023 until final payment in 2025.

Court’s Rationale & Directions

• Gratuity is a statutory right under the Payment of Gratuity Act, 1972; delays invite interest.
• Employers/State must voluntarily disburse gratuity and process pension documents on time.
• Failure to release within the statutory timeline can lead to interest liability.

Gratuity — Quick Primer

• Payable on termination after ≥ 5 years continuous service (exceptions for death/disablement).
• Due within about 30 days of superannuation/retirement/resignation/other qualifying events.
• Delays beyond due date can attract statutory interest until paid.

Timeline (at a Glance)

Recommended Employer Actions

1. Pre-retirement readiness: Compute gratuity & finalize pension documents before the last working day.
2. Disburse on time: Aim to pay within the statutory window to avoid interest exposure.
3. Documentation: Keep acknowledgments of requests & internal approvals.
4. Escalation path: If administrative delays occur, set TATs & accountability for rapid closure.

Karma Global — Establishment Compliance Specialists

With two decades of pan-India experience, Karma Global supports end-to-end compliance under the Payment of Gratuity Act, 1972 — from applicability & exclusions (e.g., interns/short-term temps) to disciplinary impacts and separation-dues closure.

For assistance, write to marketing@karmamgmt.com.