The Orissa High Court has clarified, reaffirming Supreme Court and prior High Court precedent, that 10% simple interest per annum is mandatorily applicable for delayed gratuity payments as per Section 7(3A) of the Payment of Gratuity Act, 1972 and the Central Government notification dated 01.10.1987; any contrary orders granting a lower rate are per incuriam and lack precedential value. This judgment is binding on subordinate courts and persuasive for other jurisdictions deciding the rate of interest on delayed gratuity payments.
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 |
| Bench | Single Judge Bench: MR. JUSTICE SANJAY KUMAR MISHRA |
| Precedent Value |
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| Overrules / Affirms |
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| Type of Law | Labour / Service Law – Gratuity (statutory interpretation under Payment of Gratuity Act, 1972) |
| Questions of Law |
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| Ratio Decidendi |
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| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
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| Facts as Summarised by the Court |
The Managing Director of Odisha State Cooperative Bank challenged an order of the Appellate Authority under the Payment of Gratuity Act, which confirmed both the order of the Controlling Authority awarding gratuity and the applicability of 10% interest on delayed payment. The challenge was limited to the interest rate, with the Petitioner seeking reliance on a coordinate bench order (W.P.(C) No.20586/2022) that granted only 6%. The Respondent pointed to statutory provisions and Supreme Court authority mandating 10%, and argued the coordinate bench decision was per incuriam for ignoring statute and binding precedents. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts in Orissa State, including Controlling and Appellate Authorities under the Payment of Gratuity Act. |
| Persuasive For | Other High Courts, Central Administrative Tribunal, and the Supreme Court (especially on the issue of rate of interest on delayed gratuity payments). |
| Overrules | Declares coordinate bench order in W.P.(C) No.20586/2022 (granting 6% interest on gratuity) as per incuriam and not to be followed |
| Distinguishes | Distinguishes coordinate bench orders that did not consider statute and binding precedent, clarifying that such judgments lack precedential value. |
| Follows |
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What’s New / What Lawyers Should Note
- The Orissa High Court has decisively declared that 10% per annum simple interest is the statutory rate on delayed gratuity under Section 7(3A) of the PG Act, as per the Central Government notification dated 01.10.1987, which remains in force.
- Any High Court orders granting a lower rate of interest by disregarding this notification and binding precedent are per incuriam and do not have any precedential binding effect.
- Lawyers should not rely on coordinate bench decisions granting 6% interest on delayed gratuity; such decisions are not to be followed.
- The judgment reiterates professional ethics—lawyers must bring binding precedent and contrary authority to the attention of the court; failure to do so is professional misconduct.
- The judgment underscores the importance of Article 141 and judicial discipline, holding that all courts and benches must follow Supreme Court law and statutory mandates.
Summary of Legal Reasoning
- The court first noted the specific statutory provision—Section 7(3A) of the Payment of Gratuity Act, 1972—which empowers the Central Government to notify the applicable rate of interest for delayed payment of gratuity.
- The bench examined the Central Government notification dated 01.10.1987, which prescribes 10% simple interest per annum, and confirmed that this has not been superseded to date.
- The judgment found that both the Supreme Court and Orissa High Court have, in a consistent line of precedent, held that 10% interest applies to delayed gratuity payments (citing H. Gangahanume Gowda (SC), Mohan Dakua and General Manager (P & EEL), Mahanadi Coalfields Ltd.).
- The court observed that a contrary coordinate bench decision (W.P.(C) No.20586/2022, awarding only 6% interest) ignored the statute, the notification, and binding authority, and was issued per incuriam.
- The doctrine of per incuriam was discussed: a judgment rendered by overlooking binding precedent or the governing statute does not have precedential value and is not to be followed.
- The judgment further referenced Article 141, requiring all courts to follow law laid down by the Supreme Court.
- The bench held that judicial discipline and uniformity require adherence to decisions of higher courts and laid-down statutory provisions; contrary views based on “prevailing interest rates” outside of notification/statute are impermissible.
Arguments by the Parties
Petitioner
- The challenge is solely to the quantum of interest (10%) awarded; sought to rely on a recent coordinate bench decision awarding 6% interest, arguing for alignment with prevailing simple interest rates in 2020 as allowed by public sector banks.
Respondent
- Asserted that under Section 7(3A) of the PG Act and the Central Government notification dated 01.10.1987, 10% interest is statutory and still in force.
- The coordinate bench order awarding 6% was rendered per incuriam, as it disregarded statutory provisions and prior Supreme Court/High Court judgments.
- Detailed reliance on Supreme Court (H. Gangahanume Gowda, Gagan Bihari Prusty) and previous Orissa HC judgments mandating 10% interest.
Factual Background
The Odisha State Cooperative Bank challenged the Appellate Authority’s order upholding the Controlling Authority’s direction to pay gratuity with 10% interest for delayed payment to a retired employee. The Bank limited its challenge to the awarded interest rate, referencing a coordinate bench decision granting 6% instead of 10%. The Respondent highlighted the statutory 10% interest, referencing binding Supreme Court and High Court precedent, and denied any legal basis for a lower rate.
Statutory Analysis
- Section 7(3A) of the Payment of Gratuity Act, 1972 stipulates that if gratuity is not paid within the specified period, the employer must pay simple interest at a rate notified by the Central Government.
- Notification dated 01.10.1987 (S.O. 874(E)) fixed this rate at 10% per annum; this notification is still operative and has not been superseded.
- The court’s interpretation is that the statute and notification admit of no discretion to apply a lower rate, except as expressly provided in the PG Act (e.g., delay due to employee’s fault and with written permission).
- The order affirmed that judicial discretion cannot override the statutory prescription or the Central Government’s notified rate.
Dissenting / Concurring Opinion Summary
No dissenting or concurring opinions are indicated or summarized in the judgment.
Procedural Innovations
- The court clarifies the procedure for reliance on coordinate bench judgments: a later judgment ignoring statutory provisions or binding precedent is per incuriam and not to be cited as authority.
- The court underscores the ethical obligation for counsel to disclose all relevant precedent to the bench.
- Costs are imposed for wasting judicial time and causing hardship due to the raising of already-settled issues.
Alert Indicators
- ✔ Precedent Followed – The decision affirms, applies, and follows binding Supreme Court and High Court precedent; it clarifies that any departure from the statutory interest rate is per incuriam and not to be followed.
- 🚨 Breaking Precedent – Declares contrary coordinate bench decisions (W.P.(C) No.20586/2022) as per incuriam, expressly rejecting their precedential authority on the interest rate issue.