Delayed Payment Of Gratuity - CiteHR
Korgaonkar K A
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R MOHAN
Ex-bank Manager

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For an officer employee dismissed from the services, if the management paying the maximum gratuity ( he is eligible Rs.14 lake , but maximum limit Rs.10 lake ) after 3 years from the date of termination of services, whether he can demand interest for the delay ? If so how much and at what rate of interest ? Any legal provision is there ? The maximum limit is
with interest or without interest(only gratuity) ? If there is no legal provision, what the experts are saying in this regard !

Dear R MOHAN,

Your query is not clear to me.

I presume that the employee is in receipt of Gratuity of 10 lacs. However, the said payment is received by him late and he want to claim interest on this late / delayed payment. You want to know whether the employee concerned can claim interest now on delayed payment and and what rate.

My answer to you is: YES; simple interest @ 10 % pa.

Please refer the rule 7 (5) which says 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, and 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 employee to seek expeditious the payment.

According to amendment 1987, if the amount of gratuity due to any person is not paid by employer in 30 days, the employer is required to pay simple interest till the date of payment. Central Govt. has fixed the rate of simple interest at 10 % pa.

In Ramakant Manjrekar Vs. NTC Ltd. 2004 III CLR 626 (MUM HC) it is held that the petitioner is entitled to simple interest @ 10 % pa.

Under the circumstances, the employee can make an application to the company immediately for getting simple interest at 10% pa on delayed payment of gratuity.

If the company does not take any action on the said application, he need to apply to the Controlling Authority u/r the Act (i.e. Labour Commissioner) in prescribed form with in 90 days for issuing necessary direction to his employer to pay him simple interest @ 10 % pa..

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