The Bombay High Court has held that gratuity payments delayed beyond one month after an employee’s retirement will attract a 10% interest. This ruling came in a case where a retired teacher, Dr. Chetna Rajput, had to approach the court after her gratuity and pension benefits were unjustifiably delayed by Nowrosjee Wadia College, which is run by the Modern Education Society.
Dr. Rajput, who had served for 25 years, initially worked as a part-time teacher and later as a full-time Assistant Teacher. She retired on 30 September 2023 and requested the college to release her gratuity on the date of retirement. Despite follow-ups, including a written request in April 2024, the institution failed to respond or release the due benefits.
Gratuity must be paid within one month of retirement,the court observed, adding that delays beyond this period, without valid justification, are against the law.
Represented by Advocate Mr. Vaibhav Kulkarni, Dr. Rajput filed a writ petition under Article 226 of the Constitution. The court noted that the teacher’s appointments, both part-time and full-time, were officially approved, and she had rendered more than 10 years of qualifying service under the Pension Rules.
The college, represented by Advocate Mr. S.R. Ronghe, argued that the delay was due to complications in calculating the pension, stemming from Dr. Rajput’s part-time and full-time service history. The college submitted that the required proposal for processing her pension had only been forwarded to the Deputy Director of Education on 30 December 2024.
The State, represented by AGP Mr. S.P. Kamble, clarified that the delay was the college’s responsibility and not attributable to the government.
The High Court, comprising Justices Ravindra V. Ghuge and Ashwin D. Bhobe, pointed out that there was no legal barrier preventing the timely processing of Dr. Rajput’s retirement benefits. Referring to the Payment of Gratuity Act, 1972, the bench emphasized that the gratuity is a statutory right of employees who have provided continuous service of more than five years.
“The Payment of Gratuity Act is a welfare legislation meant to benefit long-serving employees. The state and institutions should pay gratuity voluntarily, rather than forcing retired employees to approach the courts,” the judges stated.
The court relied on Section 7(3A) of the Act, which mandates interest for delays in gratuity payment. A Ministry of Labour notification dated 1 October 1987 specifies 10% as the applicable interest rate in such cases. The court also cited a recent Supreme Court judgment affirming this position.
Quoting from the judgment:
“We hold that the delay in payment of gratuity is unjustified and arbitrary. The petitioner is entitled to 10% interest from 30 October 2023 until the actual payment date.”
Furthermore, the bench directed the college to expedite the processing of Dr. Rajput’s pension and complete any pending formalities without further delay. Acknowledging the explanations provided by the college regarding the delay, the court nonetheless emphasized the need for prompt compliance in all future cases.
The petition was partly allowed, with a direction to the college to clear all dues along with applicable interest and process the pension benefits immediately.
Citation: Chetna Rajput v. Modern Education Society (2025:BHC-AS:14501-DB)
Decided on: 28 March 2025
Bench: Justice Ravindra V. Ghuge and Justice Ashwin D. Bhobe
Petitioner’s Counsel: Mr. Vaibhav Kulkarni with Mr. Prathamesh Deshpande, Ms. Disha Rathod, and Mr. Yash Agarwal
Respondents’ Counsel: Mr. S.R. Ronghe (for College), Mr. S.P. Kamble (AGP for State)
