Bombay High Court
MUNICIPAL CORPORATION OF GREATER MUMBAI THR.THE GENERAL MANAGERversusPRAVIN KUMAR BHIMA PATEL
- Decided
- Disposal
- Disposed Off
Holding
The Court held that the interest rates prescribed by the Central Government notifications (10% simple interest under Section 7(3A) and 15% compound interest under Section 8) must be applied, and the petitioners' request to reduce the rate to 6% is untenable.
Summary
The Brihan Mumbai Electric Supply and Transport Undertaking (BEST) filed a series of writ petitions challenging orders of the Controlling and Appellate Authorities that directed payment of interest on delayed gratuity to its retired employees. While BEST does not dispute paying the gratuity itself, it sought to limit the interest to 6% per annum, contesting the statutory rates of 10% simple interest (Section 7(3A)) and 15% compound interest (Section 8) notified by the Central Government in 1987. The Court examined the relevant provisions of the Payment of Gratuity Act, 1972, the notifications issued under it, and precedents including the Supreme Court’s decision in Gagan Bihari Prusty v. Paradip Port Trust and the Division Bench’s order of 9% interest. It held that the statutory notifications are binding and that the interest rate cannot be reduced below the notified rates. Consequently, the Court dismissed all the writ petitions, ordering no alteration of the interest liability and refusing any stay pending other dismissed petitions.
Issues considered
- The appropriate rate of interest payable on delayed gratuity under the Payment of Gratuity Act, 1972.
- Whether BEST can lawfully reduce the interest rate to 6% per annum contrary to the Central Government notifications.
- Whether the pendency or dismissal of other related writ petitions affects the present petitions.
- The validity and applicability of the 1987 Central Government notifications under Sections 7(3A) and 8 of the Act.
Legislation cited
- Payment of Gratuity Act, 1972 — s. 7(3), 7(3A), 7(7), 8
Subjects
- Payment of Gratuity Act
- interest on delayed gratuity
- employer liability
- statutory notification
- writ petition
- BEST
- employee retirement benefits
- simple interest
- compound interest
Judgment
Neeta Sawant 24-WP-2595-2025-GROUP.docx
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 2595 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Arvind Pingle .....Respondent
Alongwith
WRIT PETITION NO. 609 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Dattatray Tukaram Rane .....Respondent
Alongwith
WRIT PETITION NO. 606 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Shivaji Pandurang Karande .....Respondent
_____________________________________________________________________________
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Alongwith
WRIT PETITION NO. 610 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Vilasrao Bapurao Metkari .....Respondent
Alongwith
WRIT PETITION NO. 608 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Philip Anthony Kinny .....Respondent
Alongwith
WRIT PETITION NO. 607 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Ravindra Krishna Shetye .....Respondent
_____________________________________________________________________________
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Alongwith
WRIT PETITION NO. 966 OF 2026
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Meghshyam Narayan Parab .....Respondent
Alongwith
WRIT PETITION NO. 4948 OF 2026
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Kalyanrao Ramdas Sakunde .....Respondent
Alongwith
WRIT PETITION NO. 1517 OF 2026
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Avinash Rajaram Sirmukadam .....Respondent
_____________________________________________________________________________
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Alongwith
WRIT PETITION NO. 1739 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Arun Dhondiram Aitawade .....Respondent
Alongwith
WRIT PETITION NO. 2879 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Udaykumar V. Yajandar .....Respondent
Alongwith
WRIT PETITION NO. 3004 OF 2026
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Sandeep Suresh Rege .....Respondent
_____________________________________________________________________________
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Alongwith
WRIT PETITION NO. 4015 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Balkrishna Eknath Patil .....Respondent
Alongwith
WRIT PETITION NO. 4084 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Ravikiran Dinkar Shilimkar .....Respondent
Alongwith
WRIT PETITION NO. 4019 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Khyati Dattatray Dalvi .....Respondent
_____________________________________________________________________________
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Alongwith
WRIT PETITION NO. 4086 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Dudhnath Lale Pal .....Respondent
Alongwith
WRIT PETITION NO. 4203 OF 2025
With
INTERIM APPLICATION NO. 13820 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Ajaykumar Matabadal Singh .....Respondent
Alongwith
WRIT PETITION NO. 5433 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
_____________________________________________________________________________
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: Versus :
Pravin Kumar Bhima Patel .....Respondent
Alongwith
WRIT PETITION NO. 5380 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Rekha Prakash Surve & Ors. .....Respondent
Alongwith
WRIT PETITION NO. 5449 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Sunita Sunil Sawant .....Respondent
Alongwith
WRIT PETITION (ST.) NO. 21308 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
_____________________________________________________________________________
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Sandesh Harish Chandra Dandekar .....Respondent
Alongwith
WRIT PETITION (ST.) NO. 21310 OF 2025
Municipal Corporation of Greater Mumbai
Through the General Manager, Brihan
Mumbai Electric Supply and Transport
Undertaking (BEST) …..Petitioner
: Versus :
Samir Suryakant Gharat .....Respondent
Alongwith
WRIT PETITION (ST.) NO. 23050 OF 2025
Municipal Corporation of Greater Mumbai
Through the General Manager, Brihan
Mumbai Electric Supply and Transport
Undertaking (BEST) …..Petitioner
: Versus :
Jadideep Shripad Kulkarni .....Respondent
Alongwith
WRIT PETITION (ST.) NO. 23442 OF 2025
Municipal Corporation of Greater Mumbai
Through the General Manager, Brihan
Mumbai Electric Supply and Transport
Undertaking (BEST) …..Petitioner
: Versus :
Satish Vamanrao Mahajan .....Respondent
Alongwith
WRIT PETITION (ST.) NO. 23564 OF 2025
Municipal Corporation of Greater Mumbai
Through the General Manager, Brihan
Mumbai Electric Supply and Transport
Undertaking (BEST) …..Petitioner
: Versus :
Mangesh Krishna Pednekar .....Respondent
_____________________________________________________________________________
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Alongwith
WRIT PETITION (ST.) NO. 23884 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Sharad Shantaram Gunjal .....Respondent
Alongwith
WRIT PETITION (ST.) NO. 23886 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Vishwas Sitaram Vichare .....Respondent
Alongwith
WRIT PETITION (ST.) NO. 28873 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Shaji Padmanabhan Maikkapaddy .....Respondent
_____________________________________________________________________________
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Alongwith
WRIT PETITION (ST. ) NO. 28925 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Anil Bapurao Jawale .....Respondent
Alongwith
WRIT PETITION (ST.) NO. 29341 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Ramesh Tukaram Ghanvat & Anr. .....Respondents
Alongwith
WRIT PETITION NO. 14187 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Dipak Balkrishna Dhavan .....Respondent
Alongwith
_____________________________________________________________________________
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WRIT PETITION (ST.) NO. 31911 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Prakash Pandurang Vichare .....Respondent
Alongwith
WRIT PETITION NO. 18993 OF 2024
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Mangesh Parshuram Mhaske, .....Respondent
through BEST Kamagar Sanghtana
CITU Centre
Alongwith
WRIT PETITION NO. 19056 OF 2024
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Ganpat Baban Sonawane .....Respondent
Alongwith
_____________________________________________________________________________
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WRIT PETITION NO. 19051 OF 2024
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Mangalprasad Acchibar Singh .....Respondent
Alongwith
WRIT PETITION NO. 19063 OF 2024
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Satish Harishchandra Rane .....Respondent
Alongwith
WRIT PETITION NO. 19052 OF 2024
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Ulhas Pandharinath Choudhary .....Respondent
Alongwith
_____________________________________________________________________________
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WRIT PETITION (ST.) NO. 41231 OF 2025
Municipal Corporation of Greater
Mumbai Through the General
Manager, Brihan Mumbai Electric
Supply and Transport Undertaking
(BEST) …..Petitioner
: Versus :
Arvind Balku Bandal .....Respondent
Mr. Vishal Talsania (through V.C.) with Ms. Kavita Anchan, for the
Petitioner.
Mr. Arvind Pingle, Respondent in person in WP-2595 of 2025.
Mr. Sagar Redkar, for the Respondent in WP(ST.)-23442-2025.
Mr. Shailesh S. Pathak, for the Respondent in WP(ST)-28925-2025.
Mr. Mayuresh Nagle, for the Respondent in WP-4084-2025 and WP-4019-
2025.
Ms. Sayli Wani, for the Respondent in WP-5449-2025.
Mr. Niraj Prajapati, for the Respondent in WP-5433-2025.
Ms. Lubdha Bhoir with Ms. Gargi Gupte, Ms. Gayatri Nayak, Mr. Vinit
Dhotre ib. Mr. Rajesh Khobragade, for the Respondent in WP-18993-2024,
WP-19056-2024, WP-19051-2024, WP-19063-2024, WP-19052-2024.
CORAM : SANDEEP V. MARNE, J.
DATED : 10 SEPTEMBER 2026.
P.C :
1) These petitions are filed by Brihan Mumbai Electric Supply and
Transport Undertaking (BEST) challenging various orders passed by the
Controlling and Appellate Authorities determining the entitlement of
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Respondent-employees to receive gratuity. Though the orders passed by
the Controlling and Appellate Authorities under the Payment of
Gratuity Act, 1972 (PG Act) are challenged by the Petitioner-BEST, it is
not really averse to payment of gratuity as per the PG Act to the
Respondent-employees.
2) Mr. Talsania, the learned counsel appearing for the
Petitioner-BEST, on instructions, makes a statement that there is no
reservation on the part of BEST in so far as payment of gratuity under
the PG Act to the employees is concerned. As a matter of fact, in most of
the cases, the gratuity is already paid to the concerned employees.
3) The only reservation that Petitioner-BEST has is to the
direction issued by the Controlling and Appellate Authorities for
payment of interest @ 10% p.a. on the amount of gratuity. Here again,
Petitioner does not contend that no interest is awardable on the amount
of gratuity. It has shown willingness to pay interest @ 6 % p.a. on the
amount of gratuity to each of its employees. Therefore, the limited
challenge that survives in the petitions is about direction for payment of
interest at the rate exceeding 6%.
4) Under the provisions of sub-section (3A) of Section 7 of the
PG Act, if the amount of gratuity is not paid by the employer within the
period specified, the employer becomes liable to pay simple interest at
such rate not exceeding the rate notified by the Central Government
from time to time for repayment of long term deposits as the
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Government may by Notification specify. Section 7(3A) of the PG Act
provides thus:
(3A) If the amount of gratuity payable under sub-section (3) is not paid by the
employer within the period specified in sub-section (3), the employer shall pay,
from the date on which the gratuity becomes payable to the date on which it is
paid, simple interest at such rate, not exceeding the rate notified by the Central
Government from time to time for repayment of long-term deposits, as that
Government may, by notification specify: Provided that no such interest shall be
payable if the delay in the payment is due to the fault of the employee and the
employer has obtained permission in writing from the controlling authority for
the delayed payment on this ground.
5) In exercise of powers conferred under Section 7(3)of the PG
Act, the Central Government has issued Notification dated 1 October
1987 which reads thus:
In exercise of the powers conferred by sub-section (3-A) of section 7 of the
Payment of Gratuity Act, 1972 (39 of 1972), the Central Government hereby
specifies ten per cent per annum as the rate of simple interest payable for the time
being by the employer to his employee in cases where the gratuity is not paid
within the specified period.
This notification shall come into force on the date of its publication in the Official
Gazette.
Thus as per the Notification dated 1 October 1987 issued under Section
7(3A) of the PG Act, the rate of interest notified 10%.
6) There is another provision in the PG Act for payment of
interest. Section 8 of the PG Act provides for recovery of gratuity and
interest. Section 8 provides thus:
8. Recovery of gratuity.-
If the amount of gratuity payable under this Act is not paid by the employer,
within the prescribed time, to the person entitled thereto, the controlling
authority shall, on an application made to it in this behalf by the aggrieved person,
issue a certificate for that amount to the Collector, who shall recover the same,
together with compound interest thereon at such rate as the Central Government
may, by notification, specify,] from the date of expiry of the prescribed time, as
arrears of land revenue and pay the same to the person entitled thereto :
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Provided that the controlling authority shall, before issuing a certificate under
this section, give the employer a reasonable opportunity of showing cause against
the issue of such certificate:
Provided further that the amount of interest payable under this section shall, in
no case exceed the amount of gratuity payable under this Act.
7) Thus, under Section 8, if the amount of gratuity payable
under the Act is not paid by the employer within the prescribed time, the
Controlling Authority can issue a Certificate of recovery for recovery of
amount of gratuity by the Collector together with compound interest
thereon at such rate as the Central Government may by Notification
specify. Accordingly, in exercise of powers under Section 8 of the PG
Act, the another Notification has been issued by the Central Government
on 1 December 1987 which reads thus :
In exercise of the powers conferred by section 8 of the Payment of Gratuity Act,
1972 (39 of 1972), the Central Government hereby specifies 15 per cent, per
annum as the rate of compound interest, recoverable by the Collector for the time
being, along with the amount of gratuity and payable to the person entitled
thereto.
This notification shall come into force on the date of its publication in the
Official Gazette.
Thus while issuing the recovery certificate, the Controlling Authority
directs payment of compound interest of 15% p.a.
8) There is a reason why Sections 7 and 8 of the PG Act
provide for payment of hefty rate of interest by the employer. There is
legislative object behind making the employer pay hefty rate of interest
in the event of failure to pay gratuity to the employee. Afterall, gratuity
represents one of the major facets of retirement benefits of an employee.
Any delay in payment of gratuity adversely affects the employee whose
salary is stopped post retirement. Therefore timely payment of amount of
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gratuity is of paramount importance. It is employee’s money which is
kept in the trust with the employer. If the employer violates or breaches
such trust and does not pay to the employee the lawful amount of
gratuity within the specified time, the employer must be made liable to
pay interest on the amount of gratuity. This is a reason why Section 7 of
the PG Act empowers the Central Government to notify the rate of
interest payable on unpaid amount of gratuity. In exercise of statutory
powers, Notification dated 1 October 1987 is issued by the Central
government specifying simple rate of interest @ 10% p.a.
9) The employer who acts negligently and defies the order of
the Controlling and Appellate Authority and drives the employee to
further litigation in the form of recovery of amount of gratuity and
makes him spend time and energy in filing a Recovery Application is
further penalized by imposing a liability to pay compound rate of
interest @ 15% p.a. under the provisions of Section 8 of the PG Act read
with Notification issued thereunder.
10) The legislative objective behind specifying rates of interest
of 10% and 15% p.a. is to ensure that the employers do not retain the
amount of gratuity payable to a retiring employees. This legislative
objective cannot be frustrated by contending that the interest @ only 6%
p.a. needs to be paid in the facts and circumstances of the case.
11) There are other stringent provisions under the PG Act qua
employers. Under Section 7(7) the appeal preferred by the employer
cannot be entertained unless the whole of the amount of gratuity
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awarded is deposited. Highlighting the legislative intent behind Section
7(7) of the PG Act this Court in Mahanagar Media Network Pvt, Ltd.
Versus. Stanny Pereira has held in para 9 as under:
9) The Appeal however needs to be filed within a period of 60 days from
the date of receipt of order of the Controlling Authority. Under first
Proviso to sub-section (7) of Section 7 of the PG Act, the Appellate
Authority has power of condoning the delay of only 60 days. Thus, appeal
under sub-section (7) of Section 7 of the PG Act cannot be filed once
period of 120 days has passed from the date of passing of the order by the
Controlling Authority. Second Proviso to sub-section (7) of Section 7 of
the PG Act provides that no appeal filed by the employer can be admitted
unless at the time of filing of the appeal, the appellant either produces the
certificate of Controlling Authority about deposit of amount equal to the
amount of gratuity to be deposited under subsection (4) of Section 7 of the
PG Act or the Appellant deposits with the Appellate Authority such
amount. No appeal can be entertained unless the awarded amount of
gratuity is first deposited by the employer. The statutory scheme of sub-
section (7) of Section 7 of the PG Act is that though remedy of appeal is
provided, such remedy has to be exercised within maximum period of 120
days. There is legislative objective behind prescribing a limit on
condonation of delay considering the position that the PG Act is a social
welfare legislation. Gratuity is payable only upon cessation of employment
and is to be paid at the time of their retirement. Legislative objective is
that employees cannot be made to wait endlessly for receipt of gratuity.
The gratuity is to be paid with a view to provide financial assistance to the
employee whose monthly salary stops after cessation of service/retirement.
Therefore, the Legislature has put an embargo on condonation of delay in
filing appeal under first proviso to sub-section 7 of Section 7 of the PG Act.
An additional condition is imposed in the second Proviso for employers,
who cannot embroil the employee in endless litigation by simply lodging
an appeal before the Appellate Authority. The employer must deposit
awarded amount of gratuity so that baseless appeals are not filed with the
objective of delaying payment of gratuity and the employee does not have
to run behind the employer for recovery of gratuity, in the event of
dismissal of the appeal.
12) Also, under the first proviso to Section 7(7) the delay in
filing appeal cannot be condoned beyond 60 days. All these provisions
are deliberately and consciously incorporated under the PG Act to ensure
that the employers do not delay in payment of gratuity by engaging the
employees in litigation.
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13) Mr. Talsania, the learned counsel appearing for the
Petitioner submits that BEST has filed series of Writ Petitions before the
Division Bench of this Court challenging the Notification dated 1
October 1987. He invites the attention of this Court to order dated 26
March 2025 by which an arrangement is made for deposit of balance 4%
interest in the Court during pendency of challenge to the Notification
dated 1 October 1987. Mr. Talsania, therefore submits that hearing of the
present petitions be deferred till decision of the 12 Writ Petitions
pending before the Division Bench. In my view, however it is not
necessary to await decision of those 12 Writ Petitions for variety of
reasons. Firstly, it appears that those 12 petitions have been dismissed
for default. No doubt steps are being taken by the Petitioner-BEST for
restoration of those petitions, but the fact remains that as of now those
petitions stand dismissed.
14) Secondly and more importantly, this Court is guided by the
order passed by the Hon’ble Apex Court in Gagan Bihari Prusty Versus.
Paradip Port Trust & Ors.1 in which the Hon’ble Apex Court has
directed in para-4 as under :
4. In our view, the said argument is of no substances, in particular where an
employee retires and he has to receive the gratuity belatedly, the interest would
be payable as per the notifications issued by the Central Government without
having Therefore, the direction of the Single Judge maintained by the Division
Bench for payment of gratuity with interest @ 6% per annum is not justified.
The petitioner would be entitled to get interest 10% per annum on the amount
of gratuity. The differential amount of interest shall be paid by the respondent
within a period of four weeks from today.
1 SLP (C)-4468/2022 decided on 3 March 2025
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15) Thus, the Hon’ble Apex Court has directed that whenever
gratuity is paid belatedly, interest would be payable as per Notifications
issued by the Central Government without any excuse. I am not
impressed with the submission of Mr. Talsania that the Notification
dated 1 October 1987 was not under challenge before the Apex Court.
The Apex Court was concerned with the issue of validity of directions
issued by the Single Judge, as well as Division Bench of the Orrisa High
Court in reducing the rate of interest to @ 6% p.a.. The Hon ’ble Apex
Court has recognized the principle that whenever there is delay in
payment of gratuity, the interest has to be paid as per the Notification
issued under Sections 7 and 8 of the PG Act.
16) Thirdly, it appears that Petitioners have already made an
unsuccessful attempt in another proceedings before the Division Bench
for reduction of liability to pay interest and for payment of interest of
only @ 6% p.a. In Ajay Vasantrao versus. The State of Maharashtr & Ors.2
the issue before the Division Bench was about non-payment of gratuity
by BEST due to lack of financial resources. While disposing off the
petitions by judgment and order dated 30 June 2026, the Division Bench
directed in para-13 of the judgment as under :
13. We accordingly direct the BEST Undertaking to pay interest at the rate of
9 per cent per annum to be paid on their retirement dues to each of the
employees, which be calculated from the date the amount becoming due and
payable, till the date the amount is actually received by each employee.
However, if there is any higher rate of interest prescribed in any of the
Statutory Rules, Regulations, Act, Circulars, Office Memorandums of the
Government issued under the Payment of Gratuity Act, 1972 or other relevant
enactments, the obligation of the BEST Undertaking would be to pay such
higher rate of interest. The rate of interest being paid be accordingly notified
by the BEST Undertaking by issuance of a circular. The interest amount be
disbursed as expeditiously as possible and in any event within a period of three
months from the date of this order; and more particularly as clearly stated by
Mr.Kumbhakoni that on 5th June 2026 the first tranche of Rs.500 crores has
2 WP-913-2024 (a/w. connected petitions) decided on 30 June 2026
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been disbursed to BEST Undertaking and such money is available. Also the
second tranche of Rs.500 crores is to be released to the BEST Undertaking by
the MCGM. We accordingly direct that the interest component be first paid
from such amounts as received/being received from the MCGM before the
amounts are utilized for any other purpose.
17) Petitioner-BEST felt aggrieved by the direction of payment
of interest @ 9% p.a. and applied before the Division Bench by filing
Interim Application (L.) No. 24312 of 2026. One of the prayers in
Interim Application was as under :
(b) modify the rate of interest payable by the Applicant on the outstanding
gratuity dues of the employees to 6% p.a. in paragraph 13 of the Order and
permit the Applicant to pay the balance interest component of 4% p.a. on the
outstanding gratuity dues, subject to the outcome of Writ Petition (L.) No.
3761 of 2024 pending before this Hon'ble Court.
18) The Division Bench however refused to grant any reduction
in the rate of interest in favour of the Petitioner-BEST while rejecting
the Interim Application by order dated 3 August 2026. Thus, as against
mere pendency of 12 Writ Petitions before the Division Bench
challenging Notification dated 1 October 1987 (Petitions are not even
pending since they have been dismissed for default), there is a direction by
the Hon’ble Apex Court to pay gratuity as per the statutory Notifications
and there are final directions by the Division Bench of this Court in Ajay
Vasantrao Naik rejecting the prayer of the Petitioners for reduction of
interest to 6% p.a.
19) Fourthly, the Notification dated 1 October 1987 is not under
challenge in the present petitions. The Notification was not challenged
before the Controlling or Appellate Authorities as well. Before the
Controlling and Appellate Authorities, Petitioner-BEST had disputed
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liability to pay gratuity. Now that liability is not questioned by the BEST,
it is ready to pay gratuity, as well as, interest @ 6 % p.a. to the employees.
However, an altogether new challenge is sought to be introduced in the
present petitions about the rate of interest payable . In my view, that
dispute cannot be entertained in the present petitions. Even if the
objection relating to entertainability of objection relating to rate of
interest is to be momentarily ignored, in view of the discussion above, I
do not find any valid reason for reducing the rate of interest payable on
the gratuity.
20) In Chetna Rajput versus. Modern Education Society & Ors. 3
this Court has held in para-16 as under :
6. The Ministry of Labour, Government of India, in exercise of powers conferred
by Sub-section (3A) of Section 7 of the Payment of gratuity Act, 1972 has issued
notification dated 01.10.1987 notifying 10% as the rate of simple interest payable
by the employer to his employee in cases where the gratuity is not paid within the
specific period. Recently, the Hon'ble Supreme Court has held in it 's order dated
3rd March, 2025 passed in SLP No. 4468 of 2022 holding that interest on the
delayed payment of gratuity, has to be @ 10%, without any excuse. Therefore, We
hereby direct the Respondent Nos. 1 and 2 to pay the amount of gratuity payable
to the Petitioner with interest component of 10% p.a. from 30.10.2023 till actual
payment.
21) In view of this position, I find it unnecessary to keep these
petitions pending any longer. The Respondent-employees have retired
from BEST services long back and awaiting payment of balance amount
of interest. Since the Notification is not challenged in the present
petition, it is not necessary to await decision of 12 petitions pending
before the Division Bench.
3 MANU/MH/1891/2025
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22) In view of the above discussion, there is no warrant for
interference in the orders passed by the Controlling and Appellate
Authorities. The Writ Petitions are accordingly dismissed. There shall
be no order as to costs.
Digitally
signed by
NEETA
NEETA SHAILESH
SHAILESH SAWANT
SAWANT Date:
2026.09.16
11:17:05
+0530 [SANDEEP V. MARNE, J.]
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