Am I Entitled to Compound Interest on My Gratuity After a 13.5-Year Delay?

Gratuity Payment and Interest Eligibility

I served a 'Steel and Ferro Alloy Company managed college' as a faculty member in chemistry for 8.5 years. After my resignation, although the PF was promptly cleared, I was not paid the gratuity. As a result of my long fight, at last, in the last month, after 13.5 years, the gratuity amount was paid but without interest. My repeated representations made them pay 10% simple interest.

Am I not eligible for compound interest as the delayed period is 13.5 years? The gratuity amount was ₹31,875/- and simple interest at 10% was ₹43,345/-. Please quote case history or the relevant sections under the Gratuity Act of 1972. (One case history says, interest should never exceed the gratuity amount!)

Section 7 of the Gratuity Act

7. 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 subsection (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.

(3-A) If the amount of gratuity payable under subsection (3) is not paid by the employer within the period specified in subsection (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 a rate, not exceeding the rate notified by the Central Government from time to time for the 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 employer is required to pay simple interest only, not compound interest.

I endorse Mravimtnl. According to the amendment of 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 Government has fixed the rate of simple interest at 10% per annum. In the case of Ramakant Manjrekar Vs. NTC Ltd. 2004 III CLR 626 (MUM HC), it was held that the petitioner is entitled to simple interest at 10% per annum.

Thank you for your response. In my query, my emphasis was on the inordinate delay of 13.5 years. Your answers never addressed it. If the company has to pay only 10% simple interest, regardless of purposeful delay, no company will pay within 30 days. The very purpose of gratuity is lost.

Case History and Interest on Gratuity

One case history states that the district collector is authorized to collect the "gratuity amount with compound interest" and then it is paid to the employee. There needs to be a clear verdict on when to pay simple interest and when to pay compound interest. The company should face a penalty for non-compliance with labor laws; without it, such cases are bound to happen. Today it happened to me, and tomorrow it may happen to you or someone else.

The HR professionals should reflect on this seemingly small issue.