The Jharkhand High Court observed that a notification issued in terms of Section 7(3-A) of the Payment of Gratuity Act, 1972, can be modified only by issuing a fresh notification in terms of the said section.

The Court observed that an employer is liable to provide 10% interest rate on delayed gratuity payment in terms of Central Government Notification of 01.10.1987 issued in consonance with Section 7 (3-A) of the Payment of Gratuity Act, 1972.

The Court was considering a Writ Petition seeking quashing of order passed by the Labour Commissioner cum Appellate Authority under Payment of Gratuity Act, whereby the Labour Commissioner directed payment of interest @ 10% per annum on the amount of gratuity payable to respondent.

The single-bench of Justice Anubha Rawat Choudhary observed, "....the Government may notify any rate of interest in terms of section 7 (3-A)of the Act of 1972 but it shall not exceed the rate notified by Central Government from time to time for repayment of long-term deposits. It is not in dispute that in terms of Section 7 (3-A), a notification dated 01.10.1987 has been issued by the Central Government providing for payment of rate of interest @ 10%. This Court is of the considered view that such notification dated 01.10.1987 is binding on the parties till it is modified by issuance of another notification."

The Petitioner was represented by Advocate G.M. Mishra while the Respondent was represented by Advocate Rohit Ranjan Sinha.

Counsel for the Petitioner submitted that the direction to pay interest at the rate of 10% on the due amount of gratuity is contrary to the provision of Section 7 (3-A) of Payment of Gratuity Act, 1972 and that as per the said provision, the maximum interest at the rate of 10% can be awarded. He further submitted that the “maximum” necessarily means that there has to be an application of mind and considering the facts and circumstances of the case any amount less than the same may be required to be paid. He also submitted that a plea was raised before the Appellate Authority that the current simple rate of interest notified by the Central Government on long-term deposits is only 6%, and therefore, the award of 10% was not in accordance with the law.

He averred that the Appellate Authority, while dismissing the appeal, referred to notification dated 01.10.1987 to sustain the award of interest at the rate of 10%, but the notification certainly cannot override the provision of the Act which prescribes that the maximum rate is 10%, meaning thereby any amount less than 10% can also be granted.

On the other hand, the Counsel for the Respondents submitted that the notification dated 01.10.1987, which was brought on record through counter-affidavit, clearly quantifies the rate of interest at 10% and that the said notification was issued in terms of Section 7(3-A) of the Act of 1972, and if the rate was required to be modified, the same was to be followed by notification to be issued by the Government. He submitted that maximum rate of interest at the rate of 10% has been provided under Section 7 (3-A), with a clear mandate that the Government has to issue notification and the corresponding notification is dated 01.10.1987. He averred that in absence of any fresh Government notification with regard to interest payable on gratuity amount, the same is binding and has been relied upon by the appellate authority also to sustain the direction for granting interest at the rate of 10%.

The Court at the outset noted that the legal question for it to solve is as to whether the rate of interest on gratuity as provided under Section 7 (3-A) of the Act of 1972 by issuance of notification dated 01.10.1987 is binding on the employer or whether the rate of interest could be any other rate depending upon the variation of the rate of interest by the Central Government from time to time for re-payment of long-term deposit.

After considering relevant judgements to this regard, the Court observed that once the notification has been issued by the Central Government notifying the rate of interest payable on gratuity in terms of Section 7 (3-A) of the Act of 1972, the same is binding on all concerned and has the force of law

"The rate of interest payable by Central Government on long term deposit may vary from time to time and it is for the Central Government to issue appropriate notifications from time to time in terms of Section 7(3-A) of the Act of 1972 modifying the applicable rate of interest and in absence of any subsequent notification modifying the rate of interest prescribed vide notification dated 01.10.1987, any other rate of interest cannot be made automatically applicable merely because there has been change in the rate of interest by the Central Government payable in long term deposits," the Court observed.

It was of the view that the 1987 notification is binding on the parties until it is modified by government.

"This Court is of the considered view that such notification dated 01.10.1987 is binding on the parties till it is modified by issuance of another notification. Section 7 (3-A) of the Act of 1972 provides the parameter for fixing the rate of interest but the section by itself does not fix any rate of interest. However, the rate of interest is to be notified by the Central Government in terms of Section 7(3-A) of the Act of 1972 which has been notified vide notification dated 01.10.1987 @ 10% but no subsequent notification has been issued to modify this rate," the Court observed.

The Petition was accordingly dismissed.

Cause Title: M/s. Tata Steel Limited vs. The State of Jharkhand Employer Liable

Appearances:

Petitioner- Advocate G.M. Mishra, Advocate

Respondent- Advocate Rohit Ranjan Sinha, Advocate Atul Vivek, AC to AAG II Ravi Prakash Mishra

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Jharkhand High CourtJustice Anubha Rawat Choudhary

Sheetal Joon