Financial distress of employer cannot be an excuse for denying or delaying payment of gratuity

By POONAM GANDHI Corporate Law Judiciary January 1, 2025

TaxGuru Citation: 2025 taxguru.in 139
Case Name: Sadhoo Beedi Enterprises Vs Controlling Authority (Kerala High Court)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Courts: All High Courts, Kerala High Court

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Sadhoo Beedi Enterprises Vs Controlling Authority (Kerala High Court)

Kerala High Court held that financial distress of the employer is not at all an excuse for denying or delaying payment of gratuity. Thus, held that no further time can be granted to employer for payment of gratuity.

Facts- The petitioner is an establishment covered under the Payment of Gratuity Act, 1972. The 2^nd respondent employee, who retired from the establishment on 30.04.2017 on superannuation, submitted application under Rule 10(1) of the Kerala Payment of Gratuity Rules, 1973, before the 1^st respondent Controlling Authority, contending that the employer refused to pay the full gratuity due to him.

1^st respondent passed order u/s. 7(4) of the Act directing the petitioner to pay the 2^nd respondent the balance gratuity amount of Rs.1,04,291/- with 10% interest from 19.05.2019 and interest at the rate of 10% per annum from 01.05.2017 to 18.05.2019 on Rs.1,14,291/- within 30 days from the date of receipt of the order.

Since the amount ordered was not paid to the 2nd respondent, the 1^st respondent issued show cause notice and directed to pay the gratuity as ordered within 7 days. Being aggrieved, the petitioner has preferred this writ petition.

Conclusion- Held that financial distress of the employer is not at all an excuse for denying or delaying payment of gratuity, which provides socio-economic security to the employee. Gratuity is to be paid in lump sum, that too, within 30 days from the date it becomes payable. Ext.P2 order directing the petitioner to pay gratuity was passed on 21.11.2023. No further time can be granted to the petitioner for payment of gratuity as ordered in Ext.P2. Pursuant to the interim order of this Court dated 21.10.2024, the petitioner has deposited an amount of Rs.20,000/- with the 1^st respondent as condition for stay of further proceedings pursuant to Ext.P5. The petitioner shall deposit the balance amount along with interest before the 1st respondent within 30 days from the date of receipt of a copy of this judgment. On such deposit, the 1st respondent shall disburse the amount to the 2nd respondent within a period of ten days therefrom.