Calcutta High Court.
Calcutta High Court: Controlling Authority Cannot Deny Interest on Delayed Gratuity: Kolkata, India – In a significant ruling for employees awaiting their gratuity payments, the Calcutta High Court has clarified that the controlling authority under the Payment of Gratuity Act, 1972, has no discretion to deny interest on delayed gratuity. Justice Shampa Dutt (Paul) directed the Food Corporation of India (FCI) to pay statutory interest to an employee, emphasizing the mandatory nature of Section 7(3A) of the Act.
The case centered on Himangshu Karmakar, who began working as a casual laborer for FCI in 1989. Over time, his wages were paid directly by FCI. In 1997, Karmakar and 58 other workers filed a writ petition seeking recognition as Class IV staff, along with associated pay and benefits. A single judge bench ruled in their favor in 1998, directing FCI to pay them wages on par with Class IV staff. Despite multiple appeals by FCI to the High Court and Supreme Court, all were dismissed.
However, FCI delayed compliance, and it was only after contempt proceedings were initiated that Karmakar finally received wages equivalent to the Class IV scale. Upon his retirement in 2018 at the age of 60, Karmakar received his Provident Fund (PF) dues but not his gratuity. Both the controlling authority and the appellate authority under the Payment of Gratuity Act, 1972, directed the immediate release of his gratuity. Notably, the controlling authority initially refused to grant interest, citing that Karmakar had not explicitly prayed for it.
Finally, in 2023, FCI deposited the gratuity amount, but without any interest for the five-year delay. Aggrieved by this, Karmakar filed a writ petition seeking interest at 10% per annum for the period between 2018 and 2023 on the delayed gratuity amount.
Arguments Presented
Karmakar’s counsel argued that the Payment of Gratuity Act, 1972, unequivocally mandates employers to pay interest on any delayed gratuity. They contended that the delay, spanning over five years, was undeniable. Furthermore, they submitted that the Controlling Authority erred in refusing interest merely because it was not specifically requested in the initial application, asserting that Section 7(3A) of the Act imposes a mandatory statutory duty on the employer for delays, which is not subject to the Controlling Authority’s discretion.
Conversely, FCI argued that the Controlling Authority had properly exercised its discretion in deciding whether or not to award interest. They claimed the delay arose from ongoing litigation regarding gratuity itself, including the question of whether Karmakar was even covered under the Act. In such circumstances, FCI argued, there was no clear obligation to pay interest.
High Court’s Reasoning
Justice Shampa Dutt (Paul) of the Calcutta High Court delivered a clear and decisive judgment based on three key points.
Firstly, the court noted that Section 4 of the Act stipulates that gratuity is payable to an employee upon retirement after five years of continuous service. The court held that Karmakar’s right to gratuity arose immediately upon his retirement in 2018, making the duty to pay gratuity absolute and not contingent on any further litigation.
Secondly, the court emphasized the mandatory nature of Section 7(3A) of the Act, which requires an employer to pay simple interest on any delayed gratuity until the amount is finally paid. The court stated that this provision provides no discretion to deny interest, except in cases where the delay is attributable to the employee’s fault and the employer has obtained prior permission from the Controlling Authority. As no such permission was sought by FCI in this case, the court ruled that the payment of interest was mandatory.
Thirdly, the court rejected the argument that interest could be denied simply because it was not specifically prayed for in the initial application. Citing the precedent of Atul Chandra Mahata v. State of West Bengal, the court reiterated that interest under Section 7(3A) is a statutory right that cannot be waived at the discretion of the authority. No explicit prayer is required once the delay in payment is established.
Consequently, the Calcutta High Court allowed the writ petition, setting aside the controlling authority’s order that denied interest. The court directed FCI to pay interest for the period between 2018 and 2023.
The judgment, delivered on June 23, 2025, in Case No.: WPA 8398 of 2025, was represented by Mr. Samiran Mandal and Mr. Abhinaba Dan for the Petitioner, and Mr. Kamal Kumar Chattopadhyay, Ms. Rimi Chatterjee, and Mr. Tanjir Ali for the Respondent. This ruling reinforces the statutory rights of employees regarding timely gratuity payments and the mandatory nature of interest on delays.
