Bombay High Court holds gratuity to be a mandatory post-retirement benefit and any delay in its disbursal entitles the employee to interest at the statutory rate

The petitioner was a teacher who had served for 25 years in aided posts, initially part-time and later full-time with appropriate government approval, retired on 30 September 2023. Despite her qualifying service and uncontested entitlement, she had not received gratuity or pension benefits at the time of filing this Writ Petition No. 11027 of 2024. The respondents cited delays in processing the gratuity and pensionary benefits due to the issue pertaining to the entitlement to pension in context of part time service and full-time service rendered by the petitioner. 

The Bombay High Court categorically rejected these justifications. Relying on the Supreme Court’s decision in Netram Sahu v. State of Chhattisgarh, (2018) 5 SCC 430, and Section 7(3A) of the Payment of Gratuity Act, the court reiterated that gratuity is a welfare measure and must be paid promptly within 30 days of retirement. It held that employers are under a legal obligation to ensure payment, failing which interest becomes payable as a matter of law not discretion.

The Court ordered the respondents to pay the full gratuity amount along with 10% per annum interest from 30 October 2023 until the date of actual payment, citing the 1987 Central Government notification. It also directed the respondents to expedite the processing of the petitioner’s pension, recognizing her entitlement based on more than 10 years of approved service. The Court further emphasized that an employer cannot withhold gratuity or pension benefits on account of internal administrative delays or disputes with regulatory authorities.

This judgment solidifies a key principle: employers particularly aided institutions cannot escape their statutory duties under welfare legislation by citing internal inefficiencies. Delay in disbursement of terminal benefits not only violates statutory provisions but also attracts financial liability by way of interest. Judgement pronounced on March 28, 2025.