The Court held that statutory interest at 10% per annum on delayed gratuity under Section 7(3A) of the Payment of Gratuity Act, 1972, as notified by Central Government, is binding and cannot be reduced by reference to prevailing bank rates; earlier contrary decisions awarding only 6% interest are per incuriam and lack precedential value. This judgment upholds Supreme Court and previous High Court precedents, providing binding guidance for gratuity-related disputes.
Summary
| Category | Data |
|---|---|
| Case Name | WP(C)/10606/2019 of M.D.,ODISHA STATE COOPERATIVE BANK LTD, Vs MANAGOBINDA BARIK |
| CNR | ODHC010321712019 |
| Date of Registration | 20-06-2019 |
| Decision Date | 28-10-2025 |
| Disposal Nature | Disposed Off |
| Judgment Author | MR. JUSTICE SANJAY KUMAR MISHRA |
| Court | Orissa High Court |
| Precedent Value | Binding within Orissa; persuasive for other jurisdictions |
| Overrules / Affirms |
|
| Type of Law | Labour and Social Welfare Law—Statutory interpretation under Payment of Gratuity Act, 1972 |
| Questions of Law | What is the correct rate of interest payable on delayed gratuity under Section 7(3A) of the P.G. Act, 1972? |
| Ratio Decidendi |
The statutory mandate of Section 7(3A) of the Payment of Gratuity Act, 1972, as notified by the Central Government, fixes the interest rate for delayed gratuity at 10% per annum. This binding rate prevails irrespective of the lower interest rates offered by banks or contrary judicial pronouncements. All contrary judgments (particularly those granting only 6%) that do not consider statutory provisions and binding Supreme Court authority are per incuriam and lack precedential value. The employer is liable to pay 10% simple interest from the due date until actual payment unless delay is attributable to the employee and the employer has obtained written permission for delay. Failure to award 10% interest constitutes statutory and judicial error. |
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon by the Court |
|
| Facts as Summarised by the Court |
The petitioner bank challenged the order confirming award of 10% interest on delayed gratuity by statutory authorities. The petitioner argued for reducing the rate to 6% relying on a coordinate bench’s recent decision. The respondent contended that Central Government notification mandates 10% and the Supreme Court has authoritatively settled the issue. The coordinate bench’s contrary decision was rendered without considering governing statute and binding precedent. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts and authorities within Orissa; controlling on similar facts for payment of gratuity interest issues. |
| Persuasive For | Other High Courts and tribunals; serves as a precedent for interpreting Section 7(3A) of the Payment of Gratuity Act, 1972. |
| Overrules | Effectively overrules per incuriam coordinate bench decision in W.P.(C) No. 20586 of 2022 and Division Bench upholding only 6% interest. |
| Distinguishes | Clearly distinguishes decisions awarding less than 10% interest for delayed gratuity as per incuriam. |
| Follows | Follows H. Gangahanume Gowda (SC); Follows Supreme Court and prior Orissa High Court judgments upholding 10% interest. |
What’s New / What Lawyers Should Note
- Reaffirms that 10% interest per annum on delayed gratuity is mandatory as per Section 7(3A) and Central Government notification dated 01.10.1987, still in force.
- Judgments awarding 6% or any lesser interest, contrary to Section 7(3A) and Supreme Court authority, are per incuriam and hold no precedential value.
- All legal practitioners must ensure they bring binding precedents and applicable statutory notifications to the Court’s notice—suppression may amount to professional misconduct.
- The binding nature of Article 141 CrPC (law declared by Supreme Court) reiterated.
- Directs costs for wasting judicial time and causing unnecessary hardship to employee due to litigation over settled law.
Summary of Legal Reasoning
- Statutory Construction: Section 7(3A) of the Payment of Gratuity Act, 1972, mandates payment of simple interest at a rate as notified by the Central Government if gratuity is not paid within 30 days.
- Validity of Central Government Notification: The notification dated 01.10.1987 fixing 10% per annum simple interest continues to be valid and has not been superseded.
- Supreme Court Precedent: In H. Gangahanume Gowda v. Karnataka Agro Industries Corporation Ltd. and Gagan Bihari Prusty v. Paradip Port Trust, the Supreme Court mandated 10% interest for delayed gratuity. No discretion lies with authorities to reduce this unless the notification has changed or the employee is at fault and required written permission was sought.
- Per Incuriam Doctrine: The coordinate bench granting 6% interest did not consider the statute or binding precedent and is, therefore, per incuriam; such orders lack precedential value and cannot displace binding precedent or statute.
- Article 141 and Judicial Discipline: Law declared by the Supreme Court is binding on High Courts and subordinate courts. Uniformity and consistency are necessary, and deviation not permitted.
- Professional Ethics: Lawyers must bring relevant judgments and statutory provisions before the Court. Suppressing such authority undermines the justice system and can harm clients.
- Award of Costs: The Court awarded costs against the petitioner for needless prolongation of litigation in settled law, recognizing the hardship to retired employees.
- Order and Relief: Petition dismissed; order awarding 10% upheld.
Arguments by the Parties
Petitioner
- Contended that the impugned authority’s award of 10% interest was erroneous.
- Sought reduction of interest to 6%, relying on a recent coordinate bench decision (W.P.(C) No.20586 of 2022).
- Argued prevailing simple interest rates in banks should influence the determination of interest rate for delayed gratuity.
Respondent
- Argued that Section 7(3A) and Central Government Notification mandate 10% interest.
- Asserted that Supreme Court and earlier High Court judgments had consistently upheld the statutory rate and the coordinate bench decision cited by petitioner was per incuriam.
- Placed reliance on binding precedents: H. Gangahanume Gowda v. Karnataka Agro Industries Corporation Ltd. (SC); Gagan Bihari Prusty (2025, SC); and other Orissa High Court decisions.
- Emphasized obligation of lawyers to put all binding authorities before the Court.
Factual Background
The bank challenged an order of the appellate authority confirming award of 10% simple interest on delayed payment of gratuity to a retired employee, as per the Payment of Gratuity Act, 1972. The petitioner sought reduction of the interest rate by highlighting a coordinate bench’s decision that awarded only 6% interest; the respondent relied on the Central Government notification and Supreme Court precedent to argue that 10% interest is statutory and binding. The coordinate bench’s judgment relied upon by the petitioner had not considered relevant statutes and earlier binding precedents.
Statutory Analysis
- Section 7(3A), Payment of Gratuity Act, 1972: Mandates payment of simple interest at a rate notified by Central Government for delayed payment of gratuity, unless delay is due to employee’s fault and employer has obtained written permission.
- Central Government Notification (01.10.1987): Specifies 10% per annum simple interest—notification has continuing effect and has not been superseded or amended.
- The court interpreted Section 7(3A) narrowly and strictly as a statutory command, precluding discretion by courts or authorities to reduce the rate unless so notified by Government and unless the statutory preconditions are met.
Procedural Innovations
- The Court awarded costs against the petitioner for persisting with litigation on a settled law issue, recognizing wasted judicial time and hardship to the employee.
- Noted the duty of lawyers to disclose binding judgments and statutory notifications to the Court as a matter of professional ethics.
Alert Indicators
- ✔ Precedent Followed – The judgment reaffirms binding statutory and Supreme Court precedent on interest rates for delayed gratuity, correcting erroneous per incuriam decisions.
- 🚨 Breaking Precedent – Declares previous coordinate bench decisions awarding less than 10% interest as per incuriam and without precedential authority.