Shanti Lal Mathur vs State of Rajasthan and Others

Veerender Singh Siradhana, J—The limited controversy involved in the instant writ application is only to the extent of non-payment of interest on the amount of gratuity for which order of payment was made on 4th February, 2003, and the payment was made on 21st January, 2003.

Briefly, the essential material facts necessary for appreciation of the controversy are that while the petitioner (since deceased through legal heirs) while working on the post of Statistical Assistant in the Department of Economics and Statistics, Government of Rajasthan, was sent on deputation to Rajasthan Energy Development Agency (for short ''REDA'') on 6th February, 1992, on the post of Scientific Assistant. The petitioner was finally absorbed and his technical resignation from the parent department i.e. Government of Rajasthan, was accepted on 5th December, 1998. The petitioner retired attaining the age of superannuation on 31st October, 2001, from the REDA. Since the amount of gratuity was released after an inordinate delay, the petitioner has instituted the present writ application claiming interest on the amount for delay @ 24% per annum.

I have heard the learned counsel for the parties and with their assistance, perused the materials available on record as well as gave my thoughtful consideration to the rival submissions at Bar.

Relief Clause 2 of the Prayer is no more pursued. The amount of gratuity became due to the petitioner in view of the fact that the parent department accepted the technical resignation of the petitioner vide order dated 5th December, 1998, with effect from 28th September, 1998. It was the duty of the State-respondents to release the amount of gratuity as per the mandate of Payment of Gratuity Act, 1972 (hereinafter referred to as the ''Act of 1972''). To appreciate the claim of the petitioner, at this juncture it will be relevant to consider the text of Section 7 of the Act of 1972, which reads thus:-

"Determination of the amount of gratuity.--

(1) A person who is eligible for payment of gratuity under this Act or any person authorized, 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.

(3A) 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.]

The issue fell for consideration of the Hon''ble Supreme Court in the case of H. Gangahanume Gowda Vs. Karnataka Agro Industries Corpn. Ltd., AIR 2003 SC 1526 : (2003) 96 FLR 986 : (2003) 1 JT 644 : (2003) 1 LLJ 1119 : (2003) 1 SCALE 671 : (2003) 3 SCC 40 : (2003) SCC(L&S) 257 : (2003) 1 SCR 832 : (2003) 2 SLJ 52 : (2003) 1 UJ 472 : (2003) AIRSCW 885 : (2003) 3 Supreme 372 : (2003) 2 Supreme 12 , and has been interpreted in the backdrop of Section 7(2), holding that there is no discretion available to exempt or relieve the employer from payment of gratuity with or without interest as the case may be. The relevant interpretation as contained in para 7 of the case of H. Gangahanume Gowda (supra) reads thus:-

"7. It is evident from Section 7(2) that as soon as gratuity becomes payable, the employer, whether any application has been made or not, is obliged to 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. Under Section 7(3), the employer shall arrange to pay the amount of gratuity within 30 days from the date it becomes payable. Under Sub-section 3(A) of Section 7, if the amount of gratuity is not paid by the employer within the period specified in Sub-section (3), he 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; 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 that ground. From the provisions made in Section 7, a clear command can be seen mandating the employer to pay the gratuity within the specified time and to pay interest on the delayed payment of gratuity. No discretion is available to exempt or relieve the employer from payment of gratuity with or without interest as the case may be. However, under the proviso to Section 7(3A), no interest shall be payable if delay in payment of gratuity is due to the fault of the employee and further condition that the employer has contained permission in writing from the controlling authority for the delayed payment on that ground. Under Section 8, provision is made for recovery of gratuity payable under the Act, if not paid by the employer within the prescribed time. The Collector shall recover the amount of gratuity with compound interest thereon as arrears of land revenue and pay the same to the person entitled. A penal provision is also made in Section 9 for non-payment of gratuity. Payment of gratuity with or without interest as the case may be does not lie in the domain of discretion but it is a statutory compulsion. Specific benefits expressly given in a social beneficial legislation cannot be ordinarily denied. Employees on retirement have valuable rights to get gratuity and any culpable delay in payment of gratuity must be visited with the penalty of payment of interest was the view taken in State of Kerala and Others Vs. M. Padmanabhan Nair, AIR 1985 SC 356 : (1985) LabIC 664 : (1985) 1 LLJ 530 : (1984) 2 SCALE 959 : (1985) 1 SCC 429 : (1985) 2 SCR 476 : (1985) 1 SLJ 106 : (1985) 17 UJ 764 . Earlier there was no provision for payment of interest on the delayed payment of gratuity. Sub-section (3A) was added to Section 7 by an amendment, which came into force with effect from 1st October, 1987. In the case of Charan Singh Vs. Birla Textiles and Another, AIR 1988 SC 2022 : (1988) 3 JT 579 : (1989) LabIC 27 : (1989) 1 LLJ 250 : (1988) 2 SCALE 580 : (1988) 4 SCC 212 : (1988) 2 SCR 742 Supp : (1989) 1 SLJ 46 : (1988) 2 UJ 655 , this aspect was noticed in the following words.

There was no provision in the Act for payment of interest when the same was quantified by the Controlling Authority and before the Collector was approached for its realization. In fact, it is on the acceptance of the position that there was a lacuna in the law that Act 22 of 1987 brought about the incorporation of Sub-section 3(A) in Section 7. That provision has prospective application."

Applying the principle of law as declared by the Hon''ble Apex Court of the land to the facts of the present case, it is evident that the petitioner severed his relationship with the parent department with effect from 28th September, 1998, as his technical resignation was accepted vide order dated 5th December, 1998. The pensionary benefits of the government servants on permanent transfer from the Rajasthan Government to State Public Sector Undertaking/Autonomous Body and vis-a-vis are governed by Section-I of Appendix-IX under Pension Rules, 1996. Section-I of Appendix-IX under Clause 4 reads thus:-

"(4) Pensionary benefits

(i) Resignation from Government service with a view to secure employment in a State public enterprise/autonomous body with proper permission will not entail forfeiture of the service for the purpose of retirement/terminal benefits. In such cases, the Government servant concerned shall be deemed to have retired from service from the date of such resignation and shall be eligible to receive all retirement/terminal benefits as admissible under the relevant rules applicable to him in his parent organization.

(ii) Pension and gratuity:-

(A) A Government servant eligible for pension and selected/absorbed in a State enterprise/autonomous body having a pension scheme should exercise an option within six months of the date of his resignation, for either of the following two alternatives:-

(a) either to count the service rendered under the Rajasthan Government for pension in public sector undertaking/autonomous body.

(b) or to receive pro rata retirement benefits for the service rendered under the Rajasthan Government.

The option shall be exercised in writing. The option once exercised shall be final. In case no option is exercised within the stipulated period the Government servant will be deemed to have opted in favour of sub clause (a) above.

(B) In case the Government servant opts in favour of sub-clause (a) of clause (A) above, he will be eligible to draw pension in accordance with the rules of the Public Sector Undertaking/Autonomous Body (organization) for the combined service under the Rajasthan Government and that under the Public Sector Undertaking/Autonomous Body (organization) on his final retirement from that body. If he resigns from service of the Public Sector Undertaking/A.B. (organization), his resignation will be treated as resignation from Rajasthan Government service entailing forfeiture of past service including that under the Government and consequent loss of pensionary benefits for the combined service.

(C) In case the Government servant opts in favour of sub clause (b) of clause (A), he will have further option which will also have to be exercised along with the option referred to in clause (A) above:-

(a) either to receive pro rata monthly pension,

(b) or to receive a lump sum amount in lieu of monthly pension. In case no specific option is indicated by him in this behalf, he will be deemed to have opted in favour of sub clause (a) of this clause.

(D) In the event of his option in favour of sub-clause (a) of clause (C), he will draw pro rata pension and retirement gratuity for the service rendered under the Government. He will also be eligible to commute upto one-third of his pension.

(E) If he opts in favour of sub clause (b) of clause (C), he will receive lump sum amount in lieu of pro rata pension; in addition to the retirement gratuity. The lump sum amount will be calculated by applying the commutation table under the R.C.S. (Commutation of Pension) Rules, 1996, applicable on the date of his cessation of service under the Government. The commutation shall be subject to medical examination. The pension so commuted shall not be restored at any stage.

(F) The provisions of option under clauses (C), (D) and (E) shall also apply to a Government servant selected for appointment/absorption in a Public Sector Undertaking/Autonomous Body having no pension scheme.

(G) Calculation of pro rata retirement benefits:--313 The retirement gratuity and pro rata pension will be calculated in accordance with the Rajasthan Civil Services (Pension) Rules, 1996.

NOTE:--The benefit of the scheme of voluntary retirement as embodied in Rules 50 to 52 of the R.C.S. (Pension) Rules, 1996, will not be admissible in such cases.

(H) Date of payment of pro rate retirement benefits:-The amount of retirement gratuity and lump sum amount in lieu of pension wherever opted will be payable immediately after the date of his permanent absorption/date of resignation. The amount of pro rata monthly pension wherever applicable will also be payable from the date following the date of cessation of service under the Rajasthan Government.

(I) Limitation as to the total amount of gratuity:--The total gratuity admissible in respect of the service rendered under the Government of Rajasthan and that under the Public Sector Undertaking/Autonomous Body shall not exceed the amount that would have been admissible, had the Government servant continued in Government service and retired on the same pay which he drew on retirement from Public Sector Undertaking/Autonomous Body.

(J) Effect of Liberalization of Pension/Gratuity Rules after absorption:--Any further liberalization of pension/gratuity rules decided upon by the Government of Rajasthan in respect of its employees after the permanent absorption/date of resignation of a Rajasthan Government servant to join PSU/Autonomous Body, will NOT be extended to him in case he has opted to receive a lump sum amount in lieu of pension and the permanent absorption/resignation has taken place from a date prior to the date from which rationalization/liberalization in pension rules has been given effect to by the Rajasthan Government.

(K) A Government servant who opts for pro rata monthly pension on his resignation from Government service will not be entitled to Dearness Relief/Interim Relief on pension during his service in public sector enterprise/autonomous body "

A glance of the condition as contemplated under sub-clause (i) of Clause 4 would reveal that resignation from Government service with a view to secure employment in a State public enterprise/autonomous body with proper permission will not entail forfeiture of the service for the purpose of retirement/terminal benefits. In such cases, the Government servant concerned shall be deemed to have retired from service from the date of such resignation and shall be eligible to receive all retirement/terminal benefits as admissible under the relevant rules applicable to him in his parent organization.

The fact that the petitioner was entitled to gratuity is not in dispute. From the inter-departmental communication, it is evident that the matter was being dealt with between the respondent number 1 and 2 on the one hand and respondent number 3 and 4 on the other hand with regard to admissibility of the pension for the period of with effect from 28th September, 1998 to 31st October, 2001, while the petitioner served REDA, where there is no Pension Scheme.

It is not the case of the State-respondents that the delay in payment of gratuity was due to the fault of the employee himself. Be that as it may, in view of mandate of Section 7 of the Act of 1972, the State-respondents were to make the payment of gratuity within the stipulated period. In the case of H. Gangahanume Gowda (supra), the Hon''ble Apex Court of the land has held that if the employer fails to satisfy the mandatory requirement of proviso to Section 7(3A), no discretion is available to deny the interest on a belated payment of gratuity.

For the reasons and discussions herein above, the writ application with reference to claim of interest on delayed payment of gratuity succeeds and is hereby allowed.

The respondent number 1 and 2 - Secretary, Department of Planning, Secretariat, Jaipur and Director, Economics and Statistics Directorate, Yojana Bhawan, Tilak Marg, C-Scheme, Jaipur, are directed to pay interest @ 9% per annum on the amount of gratuity which the petitioner (through his legal heirs) is entitled from the date it became payable till the date of payment of the gratuity amount.

However, in the facts and circumstances of the case, there shall be no order as to costs.