Timely Disbursal of Gratuity with Statutory Interest and Expedited Pension Processing

Introduction

In Chetana Rajput v. Modern Education Society & Ors (Bombay High Court, 28 March 2025), Dr. Chetna Rajput—a long-serving Hindi teacher—approached the High Court under Article 226 of the Constitution of India. Having rendered 25 years of combined part-time and full-time service at Nowrosjee Wadia College (an autonomous, aided institution), Dr. Rajput retired on 30 September 2023. Despite repeated requests, the college management failed to release her gratuity and pensionary benefits. This writ petition sought mandamus directing (a) payment of gratuity under the Payment of Gratuity Act, 1972 (the Act) and (b) prompt processing and release of pension papers by the educational authorities.

Summary of the Judgment

The Division Bench of Justice Ashwin D. Bhobe and Justice Ravindra V. Ghuge held that:

Under Section 7(3) of the Payment of Gratuity Act, an employer must pay gratuity within one month of retirement. Non-payment is arbitrary and violative of a statutory obligation.
Drawing on existing welfare jurisprudence, the Court directed the Management to pay the gratuity within 30 days, with simple interest at 10% per annum from the date it became due (30 October 2023) until actual payment.
On pensionary benefits, the Court found no legal impediment to processing. It ordered the college to cure any documentary deficiencies and submit the pension proposal immediately, directing senior education authorities to release benefits forthwith.

Analysis

1. Precedents Cited

Netram Sahu v. State of Chhattisgarh, (2018) 5 SCC 430 – Held the Payment of Gratuity Act is a benevolent statute; the State must not force employees into litigation to secure gratuity.
SLP No. 4468 of 2022 (Order dated 3 March 2025) – The Supreme Court reaffirmed that delayed gratuity attracts simple interest at 10% p.a., as notified under Section 7(3A) of the Act.
Payment of Gratuity Act, 1972 – Section 7(3): gratuity payable within 30 days of retirement; Section 7(3A): interest on delayed payments up to the rate notified by the Central Government.

2. Legal Reasoning

(a) Statutory Duty and Welfare Purpose: The Act is a social welfare measure. The Bench emphasized that once entitlement arises—here, after 25 years of service—the employer’s duty to disburse gratuity is absolute.

(b) Payment First, Dispute Later: Even if questions arise about part-time versus full-time service or approval defects, the institution must pay gratuity on time and then pursue recovery or review against itself, not deny the employee her dues.

(c) Interest Calculation: By reference to Section 7(3A) and the Central Government’s 1987 notification, the Court fixed interest at 10% p.a. from the statutory due date until payment.

(d) Pension Processing: Pension proposals must be forwarded at least six months before superannuation. The Court found inordinate delay by the autonomous college and directed it to cure deficiencies and expedite submission to the Deputy Director of Education.

3. Impact

Educational and autonomous institutions will face judicial scrutiny for delayed gratuity/pension payments.
Employees will rely on this decision to claim interest on late gratuity.
The ruling reinforces that welfare statutes must be implemented proactively, discouraging administrative inaction.
Future litigants can seek mandamus under Article 226 to enforce statutory payment obligations without awaiting internal remedies.

Complex Concepts Simplified

Article 226: Power of High Courts to issue writs (mandamus, certiorari, etc.) for enforcement of fundamental rights or any other purpose.
Writ of Mandamus: A judicial order compelling a public authority to perform a public duty.
Gratuity: A lump-sum payment to an employee who has completed at least five years of continuous service, payable upon retirement, resignation, or death.
Superannuation: Retirement of an employee on reaching the prescribed age limit.
Continuous Service: Unbroken employment period; breaks for statutory leave do not interrupt continuity.
Autonomous College: An institution with academic and administrative independence, but still bound by statutory norms and regulatory approvals.

Conclusion

Chetana Rajput v. Modern Education Society crystallizes two cardinal principles: (1) statutory welfare benefits like gratuity must be disbursed within prescribed timelines; (2) delayed payment attracts mandatory interest at the notified rate. It also underscores the judiciary’s readiness to enforce pension processing obligations against educational bodies. This Judgment serves as a robust precedent for employees seeking relief against administrative inertia and for public authorities charged with executing statutory entitlements.