On April 15, 2025, the Madhya Pradesh High Court ("Court") in Little World Higher Secondary School v. The State of Madhya Pradesh (Writ Appeal No. 563 to 572 of 2023), dismissed 10 (ten) writ appeals filed by Little World Higher Secondary School challenging orders directing payment of gratuity to a former teacher. The Court held that payment of gratuity being a deferred wage, is a property right under Article 300-A of the Constitution and cannot be denied without authority of law, and that gratuity claims cannot be defeated by limitation periods or due to non-filing of a prior application for claiming gratuity.
Facts
Respondent No. 3 was employed as a teacher at Little World Higher Secondary School from June 8, 2001, to July 1, 2011. The teacher was not paid gratuity despite having rendered more than 5 (five) years of qualifying service and therefore, an application was filed under Section 7(4) of the Payment of Gratuity Act, 1972 ("Gratuity Act") before the Controlling Authority seeking payment of gratuity. The Controlling Authority, through an order dated October 7, 2021, directed the school to pay gratuity amounting to Rs. 1,09,385 (Rupees one lac nine thousand three hundred eighty-five) along with interest at 10% (ten percent) per annum from the date of exit from employment until its realization. This order was upheld by a Single Judge of the Madhya Pradesh High Court on February 8, 2023, leading to the present appeals.
Contentions of the Appellant
The counsel for the appellant contended that the application before the Controlling Authority was not maintainable on the following grounds:
1. The claim for gratuity was not made in proper form, i.e., first before the employer as required under Section 7(1) of the Gratuity Act read with Rule 7(1) of the Gratuity (Madhya Pradesh) Rules, 1973 ("MP Gratuity Rules");
2. The application was time-barred as per Rule 7(1) of MP Gratuity Rules, which provides a limitation period of 30 (thirty) days from the date gratuity becomes payable. Further, no application for condonation of delay was filed by the employee as required under Rule 7(5) of the MP Gratuity Rules.
3. While the Gratuity Act does not provide for a limitation period to prefer a claim, the MP Gratuity Rules provide for a remedy if the employer does not discharge his obligation to pay gratuity and the remedy itself contains a specific limitation period. Therefore, the scheme of both the legislations being different, there is no conflict between them.
Contentions of the Respondent
The counsel for the respondent raised the following contentions:
1. Section 7(2) of the Gratuity Act specifically provides that gratuity shall be paid as soon as it becomes payable, irrespective of any application preferred by the employee under Section 7(1) of the Gratuity Act;
2. The Gratuity Act does not provide any limitation period for making an application for claim of gratuity before the employer or the Controlling Authority, and therefore, the MP Gratuity Rules conflict with the Gratuity Act to that extent.
3. The MP Gratuity Rules were framed in 1973, prior to the 1987 amendment to the Gratuity Act, and the State Government failed to amend the MP Gratuity Rules in accordance with the said amendment. Accordingly, the rules must be read in perspective of the amendment.
Findings
Payment of Gratuity: The Court observed that upon a combined reading of Sections 7(1), 7(2) and 7(3) of the Gratuity Act, it becomes clear that the employer's obligation to pay gratuity does not depend on an application submitted by the employee. Rather, the application under Section 7(1) of the Gratuity Act is merely to remind the employer of its statutory obligation, and the employer is obligated to determine the amount of gratuity and arrange for its payment within 30 (thirty) days from the date it becomes payable (i.e., the date on which the employee leaves the employment), without awaiting an application in that regard. Further, the Court held that Section 3A of the Gratuity Act which substituted Section 3 of the Gratuity Act vide the 1987 amendment, clearly provides that neither the liability to pay/ receive gratuity nor the liability of pay/ receive interest thereto depends on any limitation period or application submitted by the employee.
Limitation Period: The Court noted that Rule 7(5) itself provides that "no claim for gratuity under the Act shall be invalid merely because the claimant failed to present his application within the specified period". The Court held that this provision makes it clear that claims for gratuity cannot be dismissed on the ground of limitation. The Court further observed that the Act does not contemplate any limitation for raising a claim for payment of gratuity, nor does it contemplate defeating such a claim by any law of limitation. The Court emphasized that limitation does not curtail the substantive right but curtails the remedy to claim such substantive right, and when the remedy provided as per Section 7(4) of the Act of 1972 imposes an unconditional statutory duty on the employer to determine and pay gratuity within 30 (thirty) days of it becoming payable, failing which interest accrues automatically, regardless of whether the employee has filed an application, and does not depend on limitation, then the employer cannot raise the ground of limitation to defeat or defend such claim of gratuity.
Gratuity as a constitutional right: The Court observed that retiral dues, including gratuity, constitute deferred payments to be made to employees for their long-term services to provide them security, and are not in nature of bounties. The Court, referring to previous judgements, affirmed that retiral dues are also recognized as property under Article 300-A of the Indian Constitution and therefore, a person cannot be deprived of this right without the authority of law
Non-maintainability of the application: On the appellant's contention that the respondent could not directly approach the Controlling Authority without first applying to the employer, it was noted that the respondent had pleaded that she had repeatedly approached the school for gratuity, and this was not denied in the employer's response, reinforcing that a dispute had arisen, enabling recourse to the Controlling Authority under Section 7(4). Therefore, once the employer fails to pay gratuity within 30 (thirty) days as required by Section 7(3) of the Gratuity Act, a dispute arises that can be directly taken to the Controlling Authority.
Therefore, the Court dismissed all ten appeals filed by the respondent and Court directed it to pay the gratuity amount along with interest, as ordered by the Controlling Authority and affirmed by the Single Judge, within 30 (thirty) days.
Analysis
This judgement raises several significant implications for both employers and employees. Firstly, it reinforces that gratuity is an absolute right that matures on the date of exit from employment and is not dependent on any application by the employee or barred by limitation. By doing so, the Court has strengthened the social security framework for employees. Secondly, the judgment places a clear obligation on employers to proactively determine and pay gratuity within the statutory timeframe, failing which they would be liable to pay interest. Lastly, by elevating gratuity to the status of a constitutional right protected under Article 300-A of the Indian Constitution, the Court has affirmed that such right cannot be taken away except by authority of law. Therefore, in light of these observations, this decision will likely serve as an important precedent in future cases involving gratuity claims and will guide employers in fulfilling their statutory obligations under the Gratuity Act.
Please find a copy of the Judgement, here.
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