Gratuity Payment Delay: Will employees benefit by jailing the employer?

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Updated: Nov 20, 2019 6:55 PM

Payment of Gratuity Rules: The ultimate purpose of the Payment of Gratuity Act, 1972 is to benefit employees. No benefit will accrue to the employees if the employer is put behind bars.

gratuity payment rulesGratuity payment delayed? Here’s what the court says. Representational image

Payment of Gratuity Rules: The ultimate purpose of the Payment of Gratuity Act, 1972 is to benefit employees. No benefit will accrue to the employees if the employer is put behind bars, according to a judgement by Patna High Court in Whirlpool of India Ltd & Others vs The State of Bihar & Others. In the oral judgement dated January 25, 2019, the HC said, “…the intention of the legislation, in the considered opinion of the Court, is to benefit the employee. If a person is put behind bars, no benefit would accrue to the employee.”

Whirlpool India had appealed before the HC against summons issued by Chief Judicial Magistrate of Patna, over alleged violation Gratuity rules by “nonpayment of interest due under the Act to three employees and nonpayment of gratuity due under the Act to one employee.”

It was alleged in the inspection report that the company had not paid interest to three persons due to delay in payment of gratuity and further not paid gratuity to another person. However, the company’s counsel told HC that they had “not only complied with the deficiency pointed out in the report relating to payment of

gratuity but in fact have also paid up-to-date interest on delayed payment of interest to all the concerned four employees”. It also submitted relevant documents to validate its claim.

However, the government told the court that the company deserved to face trial “for admitted non removal of the deficiencies pointed out and the complaint was maintainable in law and action against the petitioners is justified.”

The counsel for Union for India submitted that “the Act being a beneficial legislation, law requires that it is to be read in distinction to penal statutes as it is for the welfare of the labour and has to be broadly and liberally construed having due regard to the directive principles of State policy.

The judgement

The HC agreed with the counsel for Union of India that a “beneficial legislation” like Payment of gratuity Act be given “a liberal interpretation and strictly enforced.” Ruling in favour of the company, HC said, “…the intention of the legislation, in the considered opinion of the Court, is to benefit the employee. If a person is put behind bars, no benefit would accrue to the employee. On the other hand, the payment which the petitioners have made to the employees concerned of not only gratuity and interest, but also interest for the delayed payment of interest, the actual relief which the employee gets is the benefit under the Act.”

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