Gratuity Is To Be Calculated From Date On Which It Became Payable, Not From Date Of Disbursement: Kerala High Court

The Kerala High Court recently observed that the maximum amount of gratuity payable under the Payment of Gratuity Act, 1972 must be calculated from the date on which gratuity became payable and not on the date the amount was actually disbursed.

The Court was considering the plea of a retired Regional Engineer from the Kerala State Housing Board whose DCRG and last month pay was withheld due to audit objections. The Petitioner retired in the year 2002. He had earlier approached the Court and the Secretary of the Board was directed to disburse the withheld amounts. However, according to the petitioner, in light of the 2010 Amendment to the Payment of Gratuity Act, 1972 under Section 4(3) he is entitled to a maximum gratuity of Rupees Ten Lakhs.

Dismissing the petitioner’s claim a single bench of Justice Murali Purushothaman observed:

“The gratuity is payable to an employee on the termination of his employment. The gratuity payable to an employee shall not exceed the maximum that is notified under the respective enactments as on the date on which the gratuity becomes payable. Even if it is assumed that the petitioner's claim for gratuity was under the Payment of Gratuity Act, 1972, the maximum amount of gratuity payable under the said Act has to be determined with respect to the date on which the gratuity became payable and not on the date on which sanction was accorded for payment of DCRG or the date on which the amount was actually disbursed to him. Therefore, there is no merit in the contention of the petitioner that he is entitled to the maximum gratuity of Rs.10,00,000/- as per section 4(3) of the Payment of Gratuity Act, 1972, as amended by Act 15 of 2010.”

The Court noted that the Petitioner is governed by the Kerala State Housing Board Employees' (Pension and other Retirement Benefits) Regulations, 1990. According to Regulation 4, Rule 68 of Part III of the Kerala Service Rules deals with the amount of gratuity payable to an employee. However, Section 14 of the Act states that the provisions of the Payment of Gratuity Act will override other enactments.

The Court held that due to the overriding provisions contained in section 4(3) of Act the employees of the Board can claim gratuity in terms of section 4(3). But in doing so, they cannot claim gratuity available under the KSR.

“He has to claim gratuity either under the Payment of Gratuity Act, 1972 or under the KSR. If he claims gratuity under the Payment of Gratuity Act, 1972, the amount will be determined under section 4 of the said Act, subject to the maximum amount notified under section 4 (3). If he claims under the KSR, the amount of DCRG will be determined under Rule 68 of the said Rules, subject to the maximum provided therein. He cannot have gratuity under the KSR with the ceiling limit payable under the Payment of Gratuity Act, 1972 and vice versa. “

Case Title: K. Rajendra Prasad V State Of Kerala

Citation: 2023 LiveLaw (Ker) 257

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