I agree with the observations of Madhuji for the prime reason that it's the responsibility of the employer to compute the gratuity due and intimate the employee (in form No.L) who left, inviting him (or heir) to receive the gratuity thus computed. It's the fault on the part of the employer and they have to disburse gratuity with accrued interest till full settlement. It's worth considering a few settled court cases in the matter for a proper understanding of the provisions:
In Gangahanume Gowda v. Karnataka Agro Industries Corpn. Ltd., (2003) 3 SCC 40, it was decided that the interest on delayed payment of gratuity is mandatory and not discretionary. The Gujarat High Court, through Justice Biren Vaishnav, reiterated that interest on delayed payment of gratuity is mandatory and not discretionary. The petitioner had prayed for a declaration that the respondent's action in not paying the entire amount of Rs 10 lakhs towards gratuity to the petitioner was arbitrary. Hence, a direction was sought that respondents be directed to pay the remaining amount of gratuity to the petitioner along with 18% interest from the date of his retirement. The High Court expressed that, as per the Supreme Court decision of H. Gangahanume Gowda v. Karnataka Agro Industries Corpn. Ltd., (2003) 3 SCC 40, the interest on delayed payment of gratuity is mandatory and not discretionary.
If the employer doesn't pay gratuity, in cases related to the non-payment of gratuity under this Act, the employer could face imprisonment for a term not less than six months but up to two years unless the court, with documented reasons, believes that a lesser term of imprisonment or a fine would serve the interests of justice.
Also, read this section which will have an overriding effect over other acts: "Section: 14 Act to override other enactments, etc. The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act."
In the case of Indian Red-Cross Society vs Vidyaben H. Vyas on 27 August 2003, the Gujarat High Court held that the limitation prescribed under the Payment of Gratuity Act is 60 days for the purpose of preferring an appeal. The appellate authority is empowered to extend the period of limitation by another sixty days. The legal position enunciated by the Supreme Court in Shantilal M. Bhayani V. Shanti Bai must be understood in the context of the Limitation Act 1963. The Division Bench of Calcutta High Court, Andhra Pradesh High Court, and Madras High Court have concluded that limitation is not applicable to the appellate authority as it is an executive authority vested with quasi-judicial powers and, therefore, Section 5 to 25 of the Limitation Act do not apply to the persona designata or administrative authorities.
The controlling authority had not committed any error, and there is no procedural irregularity by either of the authorities. The reasons given by both authorities are based on oral and documentary evidence produced before them, and the findings are not baseless or perverse. The Apex Court has considered these aspects in the case of ROSHAN DEEN V. PREETILAL, 2002 (1) SCC PAGE 100, where it observed that the purpose of powers conferred on the High Court is to advance justice, not to thwart it, even where justice is the by-product of an erroneous interpretation of law.
[Source: https://www.scconline.com/blog/post/2022/05/10/if-there-is-a-delay-in-payment-of-gratuity-whether-interest-on-delayed-gratuity-will-be-mandatory-or-discretionary-gujarat-high-court-retirement-employee-superannuation/]
[Source: https://indiankanoon.org/doc/1190655/]
From India, Bangalore
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1272In Gangahanume Gowda v. Karnataka Agro Industries Corpn. Ltd., (2003) 3 SCC 40, it was decided that the interest on delayed payment of gratuity is mandatory and not discretionary. The Gujarat High Court, through Justice Biren Vaishnav, reiterated that interest on delayed payment of gratuity is mandatory and not discretionary. The petitioner had prayed for a declaration that the respondent's action in not paying the entire amount of Rs 10 lakhs towards gratuity to the petitioner was arbitrary. Hence, a direction was sought that respondents be directed to pay the remaining amount of gratuity to the petitioner along with 18% interest from the date of his retirement. The High Court expressed that, as per the Supreme Court decision of H. Gangahanume Gowda v. Karnataka Agro Industries Corpn. Ltd., (2003) 3 SCC 40, the interest on delayed payment of gratuity is mandatory and not discretionary.
If the employer doesn't pay gratuity, in cases related to the non-payment of gratuity under this Act, the employer could face imprisonment for a term not less than six months but up to two years unless the court, with documented reasons, believes that a lesser term of imprisonment or a fine would serve the interests of justice.
Also, read this section which will have an overriding effect over other acts: "Section: 14 Act to override other enactments, etc. The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act."
In the case of Indian Red-Cross Society vs Vidyaben H. Vyas on 27 August 2003, the Gujarat High Court held that the limitation prescribed under the Payment of Gratuity Act is 60 days for the purpose of preferring an appeal. The appellate authority is empowered to extend the period of limitation by another sixty days. The legal position enunciated by the Supreme Court in Shantilal M. Bhayani V. Shanti Bai must be understood in the context of the Limitation Act 1963. The Division Bench of Calcutta High Court, Andhra Pradesh High Court, and Madras High Court have concluded that limitation is not applicable to the appellate authority as it is an executive authority vested with quasi-judicial powers and, therefore, Section 5 to 25 of the Limitation Act do not apply to the persona designata or administrative authorities.
The controlling authority had not committed any error, and there is no procedural irregularity by either of the authorities. The reasons given by both authorities are based on oral and documentary evidence produced before them, and the findings are not baseless or perverse. The Apex Court has considered these aspects in the case of ROSHAN DEEN V. PREETILAL, 2002 (1) SCC PAGE 100, where it observed that the purpose of powers conferred on the High Court is to advance justice, not to thwart it, even where justice is the by-product of an erroneous interpretation of law.
[Source: https://www.scconline.com/blog/post/2022/05/10/if-there-is-a-delay-in-payment-of-gratuity-whether-interest-on-delayed-gratuity-will-be-mandatory-or-discretionary-gujarat-high-court-retirement-employee-superannuation/]
[Source: https://indiankanoon.org/doc/1190655/]
From India, Bangalore
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For the calculation of gratuity, continuous service is a key factor. However, breaks in service can impact how the total service period is counted. Based on your scenario:
- You worked in the company for a total of 26 years but had two breaks during that time.
- Gratuity is calculated based on the years of continuous service, but breaks do not necessarily disqualify you unless the breaks were considered a termination of service and not treated as authorized leave or temporary separation with continuity maintained.
According to the Payment of Gratuity Act, 1972 in India:
1. Continuous Service: If the gaps between your employment were considered interruptions and your service was not carried over, those breaks may not count towards your total service for gratuity.
2. Employment Resumption: If the company treated your rejoining after each break as a fresh employment start, only the periods where you worked without a break will be counted.
3. Total Service Consideration: If the company did not break your continuity of service and you were treated as if on leave during the periods you were not working, the entire 26 years of service might be counted.
Gratuity is calculated based on continuous service with the employer. Since you had two breaks in your service, the calculation depends on how your employer treated those breaks. If the employer considered each rejoining as a new employment, the service period would be calculated separately for each stretch. If the breaks were not considered an interruption in service (e.g., if they were treated as sabbaticals or authorized leave), the full 26 years might be eligible for gratuity.
Suggestion:
To clarify how much of your total service is eligible for gratuity, you should:
1. Check your employment records with the HR department to see if your service was considered continuous or if each rejoining was treated as a fresh start.
2. Refer to your company's gratuity policy or discuss with the HR department for specifics about how the breaks were treated in terms of gratuity calculation.
3. If the company did not break continuity officially, you may be eligible for gratuity based on the entire 26 years, but if the breaks were treated as separations, only the periods of actual work without breaks may be counted.
From India, Surat
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- You worked in the company for a total of 26 years but had two breaks during that time.
- Gratuity is calculated based on the years of continuous service, but breaks do not necessarily disqualify you unless the breaks were considered a termination of service and not treated as authorized leave or temporary separation with continuity maintained.
According to the Payment of Gratuity Act, 1972 in India:
1. Continuous Service: If the gaps between your employment were considered interruptions and your service was not carried over, those breaks may not count towards your total service for gratuity.
2. Employment Resumption: If the company treated your rejoining after each break as a fresh employment start, only the periods where you worked without a break will be counted.
3. Total Service Consideration: If the company did not break your continuity of service and you were treated as if on leave during the periods you were not working, the entire 26 years of service might be counted.
Gratuity is calculated based on continuous service with the employer. Since you had two breaks in your service, the calculation depends on how your employer treated those breaks. If the employer considered each rejoining as a new employment, the service period would be calculated separately for each stretch. If the breaks were not considered an interruption in service (e.g., if they were treated as sabbaticals or authorized leave), the full 26 years might be eligible for gratuity.
Suggestion:
To clarify how much of your total service is eligible for gratuity, you should:
1. Check your employment records with the HR department to see if your service was considered continuous or if each rejoining was treated as a fresh start.
2. Refer to your company's gratuity policy or discuss with the HR department for specifics about how the breaks were treated in terms of gratuity calculation.
3. If the company did not break continuity officially, you may be eligible for gratuity based on the entire 26 years, but if the breaks were treated as separations, only the periods of actual work without breaks may be counted.
From India, Surat
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So far as the breaks in the continuity of service are concerned, it's not practical to count the absence/breaks as 'service rendered' break is a break. But for the purposes of computation, it's fair to calculate for the first spell taking the last pay drawn of this spell itself; this is one portion. For the 2nd spell again, the qualifying service will be reckoned from the date he rejoined till the end, computing here also at LPD; this will be the 2nd portion. However, both combined, the overall limit of Rs. 20 lakhs will apply. I think this method is reasonable. This was exactly what happened in my own case also.
In my case, it was slightly different with respect to the breaks. I had, technically, a break, but without a break, I'm not trying to confuse anyone. Due to the closure of my erstwhile company, all the services of employees (about 3300 persons) were treated as 'terminated' as of 28.2.2001, and accordingly, everyone was settled. Afterwards, about less than 100 employees out of these 'terminated' lot were reengaged at LPD rates w.e.f. 1.3.2001, continuously on the same (essential roles), on a contract basis under certain terms for over 7 years. Some were relieved in between for whom compensation was paid as per terms as terminal benefit once again.
Both the services were treated as separate. All contract employees who worked over 5 years of continuous service were paid 'gratuity' once again. No Form L was issued. There was a delay of over a month that occurred; the union claimed gratuity with interest via a court case which was won, and gratuity was paid with interest till the date of settlement.
From India, Bangalore
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In my case, it was slightly different with respect to the breaks. I had, technically, a break, but without a break, I'm not trying to confuse anyone. Due to the closure of my erstwhile company, all the services of employees (about 3300 persons) were treated as 'terminated' as of 28.2.2001, and accordingly, everyone was settled. Afterwards, about less than 100 employees out of these 'terminated' lot were reengaged at LPD rates w.e.f. 1.3.2001, continuously on the same (essential roles), on a contract basis under certain terms for over 7 years. Some were relieved in between for whom compensation was paid as per terms as terminal benefit once again.
Both the services were treated as separate. All contract employees who worked over 5 years of continuous service were paid 'gratuity' once again. No Form L was issued. There was a delay of over a month that occurred; the union claimed gratuity with interest via a court case which was won, and gratuity was paid with interest till the date of settlement.
From India, Bangalore
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Dear Mr. PKS,
Presently, you are in the same organization where you had served for 9 years initially. You can request your employer to consider the gratuity for the 9 years before the first break period as one part, and the gratuity for your last continuous service period as another part. However, as per the provisions of the Gratuity Act 1972, you cannot claim gratuity for your first 9 years of service.
Regards,
From India, Gurgaon
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Presently, you are in the same organization where you had served for 9 years initially. You can request your employer to consider the gratuity for the 9 years before the first break period as one part, and the gratuity for your last continuous service period as another part. However, as per the provisions of the Gratuity Act 1972, you cannot claim gratuity for your first 9 years of service.
Regards,
From India, Gurgaon
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