For an officer employee dismissed from the services, if the management is paying the maximum gratuity (he is eligible for Rs. 14 lakh, but the maximum limit is Rs. 10 lakh) after 3 years from the date of termination of services, can he demand interest for the delay? If so, how much and at what rate of interest? Is there any legal provision for this? Is the maximum limit inclusive of interest or only the gratuity amount? If there is no legal provision, what do the experts say regarding this matter?
From India, Madurai
Acknowledge(0)
Amend(0)
From India, Madurai
Acknowledge(0)Amend(0)
Your query is not clear to me. I presume that the employee is in receipt of a gratuity of 10 lakhs. However, the said payment is received by him late, and he wants to claim interest on this late/delayed payment. You want to know whether the employee concerned can claim interest now on delayed payment and at what rate.
My answer to you is: YES; simple interest @ 10% p.a.
Legal Provisions for Claiming Interest on Delayed Gratuity Payment
Please refer to rule 7 (5), which states that an application for payment of gratuity filed after the expiry of the periods specified in this rule shall also be entertained by the employer if the applicant adduces sufficient cause for the delay in preferring his claim. No claim for gratuity under the Act shall be invalid merely because the claimant failed to present his application within the specified period. Any dispute in this regard shall be referred to the controlling authority for his decision.
Also, as held in P Rama Rao v CA u/r POG 1996 LIC 2765 (AP), rule 7 is intended only to give an opportunity to the employee to seek expeditiously the payment.
Amendment in 1987 Regarding Interest on Gratuity
According to the amendment in 1987, if the amount of gratuity due to any person is not paid by the employer within 30 days, the employer is required to pay simple interest until the date of payment. The Central Govt. has fixed the rate of simple interest at 10% p.a.
In Ramakant Manjrekar Vs. NTC Ltd. 2004 III CLR 626 (MUM HC), it is held that the petitioner is entitled to simple interest @ 10% p.a.
Under the circumstances, the employee can make an application to the company immediately to receive simple interest at 10% p.a. on delayed payment of gratuity.
If the company does not take any action on the said application, he needs to apply to the Controlling Authority u/r the Act (i.e., Labour Commissioner) in the prescribed form within 90 days for issuing necessary direction to his employer to pay him simple interest @ 10% p.a.
Regards
From India, Mumbai
Acknowledge(1)
Amend(0)
2584My answer to you is: YES; simple interest @ 10% p.a.
Legal Provisions for Claiming Interest on Delayed Gratuity Payment
Please refer to rule 7 (5), which states that an application for payment of gratuity filed after the expiry of the periods specified in this rule shall also be entertained by the employer if the applicant adduces sufficient cause for the delay in preferring his claim. No claim for gratuity under the Act shall be invalid merely because the claimant failed to present his application within the specified period. Any dispute in this regard shall be referred to the controlling authority for his decision.
Also, as held in P Rama Rao v CA u/r POG 1996 LIC 2765 (AP), rule 7 is intended only to give an opportunity to the employee to seek expeditiously the payment.
Amendment in 1987 Regarding Interest on Gratuity
According to the amendment in 1987, if the amount of gratuity due to any person is not paid by the employer within 30 days, the employer is required to pay simple interest until the date of payment. The Central Govt. has fixed the rate of simple interest at 10% p.a.
In Ramakant Manjrekar Vs. NTC Ltd. 2004 III CLR 626 (MUM HC), it is held that the petitioner is entitled to simple interest @ 10% p.a.
Under the circumstances, the employee can make an application to the company immediately to receive simple interest at 10% p.a. on delayed payment of gratuity.
If the company does not take any action on the said application, he needs to apply to the Controlling Authority u/r the Act (i.e., Labour Commissioner) in the prescribed form within 90 days for issuing necessary direction to his employer to pay him simple interest @ 10% p.a.
Regards
From India, Mumbai
Acknowledge(1)Amend(0)CiteHR is an AI-augmented HR knowledge and collaboration platform, enabling HR professionals to solve real-world challenges, validate decisions, and stay ahead through collective intelligence and machine-enhanced guidance. Join Our Platform.
Payment of Gratuity Act, 1972 & The Rules.ppt
THE PAYMENT OF GRATUITY ACT 1972.doc