Madhya Pradesh High Court: In a bunch of writ appeals challenging the order dated 11-10-2021 passed by the Controlling Authority-cum-Assistant Labour Commissioner, Jabalpur under the Payment of Gratuity Act, 1972 (Payment of Gratuity Act) directing the appellant-employer to pay the gratuity with interest, a Division Bench of Suresh Kumar Kait, CJ., and Vivek Jain,* J., dismissed the appeals and held that employer’s statutory obligation to pay gratuity begins immediately upon the employee’s exit, and interest accrues if payment is delayed. The Court directed the appellant-employer to pay the amount of gratuity along with interest as ordered by the Controlling Authority within 30 days, if not already paid.
Brief Facts
In the instant matter, the respondent (Employee No. 3 in the lead matter, W.A. No. 563/2023) was employed as a teacher by the appellant institution and served from 08-06-2001 to 01-07-2011. After rendering over 10 years of continuous service, the employee was not paid gratuity upon cessation of employment. Consequently, the respondent filed an application under Section 7(4) of the Payment of Gratuity Act before the Controlling Authority.
The Controlling Authority, Assistant Labour Commissioner, Jabalpur passed an order dated 11-10-2021 directing the appellant to pay gratuity amounting to ₹1,09,385/- with interest @10% per annum from the date of exit till realisation. The Controlling Authority’s order was upheld by single-judge bench of this court vide order dated 08-02-2023. The school challenged these decisions through the present writ appeals.
Moot Point
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Can an employee directly approach the Controlling Authority under the Payment of Gratuity Act without first applying to the employer?
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Whether the claim is barred by limitation under Rule 7(1) of the M.P. Gratuity Rules, 1973?
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Whether the employee, being a teacher, is covered under the definition of “employee” in Section 2(e) of the Payment of Gratuity Act?
Parties’ Contentions
The appellant contended that a teacher is not entitled to gratuity per Ahmedabad (P) Primary Teachers’ Assn. v. Administrative Officer, (2004) 1 SCC 755. However, the appellant later fairly admitted that after amendment in the Payment of Gratuity Act as amended by Amending Act 47 of 2009 and as per Birla Institute of Technology v. State of Jharkhand, (2019) 4 SCC 513, a teacher is covered within the definition of employee in terms of Section 2(e) of Payment of Gratuity Act.
The appellant argued that per Rule 7(1) of the M.P. Gratuity Rules, the employee must apply within 30 days of gratuity becoming payable, and since no such application was made to the employer, the claim is not maintainable. It was further contended that no application for condonation of delay under Rule 7(5) was filed before the Controlling Authority, rendering the claim time-barred.
On the other hand, the respondents (employee) emphasised that Section 7(2) of the Payment of Gratuity Act mandates that gratuity becomes payable as soon as it becomes due, irrespective of any application by the employee. It was asserted that the Payment of Gratuity Act does not prescribe a limitation period, and the M.P. Rules cannot override the parent statute.
Court’s Observation
The court noted that the appellant’s fair concession that post-2009, teachers are included within the definition of “employee” under Section 2(e) of the Payment of Gratuity Act, citing Birla Institute of Technology (Supra).
The Court observed that “the obligation on the employer to pay gratuity does not depend on application to be submitted by the employee who has exited from the employment.” The Court stated that Section 7(2) of the Payment of Gratuity Act operates independently and operates as soon as gratuity ‘becomes payable’ and not upon submission of application to the employer. The Court stated that as per Section 7(3) employers must determine and pay gratuity within 30 days of it becoming payable.
On the issue of limitation, the Court asserted that even though Rule 7(1) of the M.P. Rules prescribes a time limit, sub-rule (5) states that no claim shall be invalid merely due to delay. Moreover, the Court held that
“The Act does not contemplate any limitation for raising a claim for gratuity by an employee nor does it contemplate defeating such claim by any law of limitation.
The Court noted that the employee had repeatedly approached the employer (though orally), which was not denied by the school, and this rebutted any claim that no attempt was made before approaching the Controlling Authority. On direct approach to the Controlling Authority, the Court held that once the employer fails to fulfill the statutory obligation, a dispute arises, and the employee is entitled to directly approach the Controlling Authority under Section 7(4) of the Payment of Gratuity Act.
“The employer is not the adjudicating authority under the Act of 1972… the argument raising the status of employer to the status of adjudicating authority… is utterly misconceived and misplaced.”
The Court reaffirmed that gratuity is a statutory right and recognized as property under Article 300-A of the Constitution of India and hence, “a person can be deprived of his property only in accordance with a “law” made in this regard,” i.e., it cannot be withheld arbitrarily or on technical grounds of limitation.
“Amounts of retiral dues, including gratuity, are not bounties. It is deferred payment to the employee for the long services rendered by him to the Department. This payment is made to the employees in December of their life with a view to provide them a security. They can use this amount for their own settlement, discharge of social obligations, etc.”
Court’s Decision
The Court held that —
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Teachers are eligible for gratuity post the 2009 amendment.
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No prior application to the employer is necessary for initiating proceedings before the Controlling Authority.
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Limitation under the M.P. Rules cannot override substantive rights under the Payment of Gratuity Act.
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Employer’s statutory obligation begins immediately upon the employee’s exit, and interest accrues if payment is delayed.
The Court dismissed the appeals with the direction to appellant to pay the amount of gratuity along with interest as ordered by the Controlling Authority within 30 days, if not already paid.
[Little World Higher Secondary School v. State of M.P., Writ Appeal Nos. 563 to 572 of 2023, Decided on 15-04-2025]
*Judgment by Justice Vivek Jain
Advocates who appeared in this case :
Shri Kishore Shrivastava, Senior Advocate and Shri Sanjay Ram Tamrakar, Senior Advocate with Shri Ankit Chopra and Shri Raman Choubey, Counsel for the Appellant
Shri B.D. Singh, Government Advocate, Counsel for the Respondent/State
Shri Aditya Ahiwasi, Counsel for the Respondent No. 3
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