Karnataka High Court grants interim relief in challenge to Gratuity Insurance Rules

The Petitioners challenged the validity of the Karnataka Compulsory Gratuity Insurance Rules, 2024 (“Rules”) arguing that the said Rules are unconstitutional mainly on two grounds: first, they mandate premium payments for an employee, who is not yet eligible to receive gratuity under the provisions of the Payment of Gratuity Act, 1972 (“Act”) as the Act mandates payment of gratuity for the employees who have rendered five years of continuous service with the employer and second, the Rules do not consider the financial capacity of a small-scale employers, which places an unnecessary burden.

Considering the arguments advanced from the Petitioners, the High Court of Karnataka passed a common interim order on April 28, 2025, in this WP No. 9358/2024 among other Writs, stating that employers are required to take insurance coverage for their gratuity liabilities towards eligible employees only. Furthermore, the court granted interim relief by restraining the State Government from taking any coercive action against non-payment of gratuity insurance premiums till the next hearing that is scheduled on June 3, 2025.