Institute of Legal and Management Studies

The Supreme Court recently declined to interfere with the Gauhati High Court's ruling which ruled in favor of the retired employees granting them higher limit of gratuity set by the State Government. The Court said that once the State's regulation specifies a higher limit for the grant of gratuity, then there can't be discrimination regarding the disbursal of the amount of gratuity and every employee shall be given equal treatment.

A bench of Justices JK Maheshwari and Vijay Bishnoi heard the case where a group of employees retired from the Assam Financial Corporation (“AFC”) between 2018 and 2019. Upon their superannuation, they were paid gratuity with a ceiling of ₹7 lakhs, as per the AFC's internal regulations, even though the Government of Assam had already raised the ceiling for its employees to ₹15 lakhs in line with the Payment of Gratuity Act, 1972.

The retirees approached the Gauhati High Court, which ruled in their favor. Both the Single Judge and the Division Bench held that, under Regulation 107 of the AFC Staff Regulations (2007), the gratuity ceiling applicable to AFC employees was directly linked to the State Government's notified limit.

AFC challenged these findings before the Supreme Court, contending that the higher ceiling was not automatically applicable until the Corporation's Board formally adopted it.

Opposing the AFC's stand, the Respondent-retired employees argued that they were entitled to a higher ceiling of ₹15 lakhs, which was the limit for employees of the Government of Assam at the time of their superannuation but was notified later by the AFC.

Upon hearing both the parties, the judgment authored by Justice Maheshwari upon interpreting the gratuity regulation stated that “the higher limit for gratuity set by the State Government shall apply to the AFC.”

Rejecting AFC's plea that the enhancement required Board approval, the Court noted that such an argument would defeat the purpose of the provision and unjustly penalize employees. The Court held that employees who retired in the intervening period between the State's enhancement and AFC's delayed action could not be deprived of the benefit due to AFC's lethargy.

“Apart from the above reasoning, we have also taken into consideration equitable treatment of the Respondent – employees. It goes without saying that the AFC chose not to bring about parity in ceiling for payment of gratuity prescribed within its regulations and the ceiling set by the State Government. It has been informed that now the AFC has decided to increase the ceiling for payment of gratuity at par with the State Government, but since these Respondents retired in the interregnum when the limit was Rs. 7 Lakhs, they are not entitled to a higher ceiling. In this fact situation, it would be absolutely inequitable treatment for the Respondents to suffer at the behest of the AFC's lethargy.”, the court said.

Accordingly, the appeal was dismissed.

Cause Title: THE ASSAM FINANCIAL CORPORATION LIMITED & ORS. versus BHABENDRA NATH SARMA & ORS.

Click here to read/download the judgment

Appearance:

For Petitioner(s) : Mr. Preetesh Kapur, Sr. Adv. Mr. Debojit Borkakati, AOR

For Respondent(s) : Mr. Kaushik Choudhury, AOR Mr. Bipul Sarmah, Adv. Mr. Jyotirmoy Chatterjee, Adv. Mr. Saksham Garg, Adv. Mr. Chinmoy Pradip Sharma, Sr. A.A.G. Ms. Diksha Rai, AOR Mr. Piyush Vyas, Adv. Ms. Purvat Wali, Adv. Ms. Apurva Sachdev, Adv. Mr. Irfan Hasieb, Adv. Mr. Krishna Jyoti Deka, Adv. Mr. Vijay Deora, Adv. Mr. Santosh Krishnan, AOR Mr. Ashwin Joseph, Adv.