Jharkhand HC: Employers Must Pay 10% Interest for Delayed Gratuity Payments

19 Dec, 2024

A single-judge bench of the Jharkhand High Court, led by Justice Anubha Rawat Choudhary, has held that employers are obligated to pay interest at a rate of 10% for delays in gratuity payments. This decision aligns with a notification issued by the Central Government under Section 7(3-A) of the Payment of Gratuity Act, 1972.

The case involved an employee of Tata Steel Limited (Management), who sought interest on the gratuity amount after the employer failed to make the payment within the prescribed timeframe.

Section 7(3-A) of the Payment of Gratuity Act, 1972, stipulates that if an employer does not pay the gratuity within the specified period, they are required to pay simple interest on the unpaid amount. The interest accrues from the due date of gratuity payment to the actual date of payment, at a rate not exceeding the one notified by the Central Government for long-term deposits.

As per the Central Government’s Notification S.O. 873(E) dated October 1, 1987, the rate of simple interest for such cases is specified as 10% per annum. This rate is applicable when gratuity payments are delayed beyond the prescribed timeline.

Read more at Live Law 

Publisher: Monisha Ponnappa | Bizprout Expert Systems Private limited