Kerala High Court: Deposit Contemplated U/S 7(7) Payment Of Gratuity Act Refers To Amount Of Gratuity Adjudicated Upon With Interest Thereon

The Kerala High Court has clarified that the deposit contemplated under the second proviso to sub-section (7) of Section 7 of the Payment of Gratuity Act, 1972 refers to the amount of gratuity adjudicated upon with interest thereon.

The Court was deciding a Writ Petition challenging the Order of the Regional Joint Labour Commissioner, Kollam, the Appellate Authority constituted under the 1972 Act, by which the employer was directed to deposit the gratuity amount determined by the Controlling Authority under sub-section (4) of Section 7 of the Act.

A Single Bench of Justice K. Babu observed, “The statutory provision, the principles of constructions referred to above and the precedents referred to above persuade me to enter into a conclusion that the deposit contemplated under the second proviso to sub-section (7) of Section 7 of the Act refers to the amount of gratuity adjudicated upon with interest thereon.”

The Bench held that under clause 'c' of sub-section (4) of Section 7, the Controlling Authority, after conducting the enquiry, arrives at the amount found to be payable to the employee, which necessarily carries the interest accrued.

Advocates Pooja Menon and M. Gopikrishnan Nambiar appeared for the Petitioner, while Senior Government Pleader (SGP) C.S. Sheeja appeared for the Respondents. Mathew P. Babu was the party-in-person and K.M. Firoz was the Amicus Curiae.

Issue for Consideration

The question that arose for consideration in this case was whether the phrase in the proviso to sub-section (7) of Section 7 of the Payment of Gratuity Act “an amount equal to the amount of gratuity required to be deposited” includes the entire amount directed to be paid under sub-section 4(c) of Section 7 of the Act, as a condition precedent for admitting the Appeal.

Contentions

The counsel for the Petitioner submitted that proviso to sub-section (7) of Section 7 of the Act mandates only the deposit of the ‘gratuity amount’ as a condition precedent for admitting the Appeal. It was further submitted that the statute does not mandate that the interest accrued to the amount due to the employee as gratuity is required to be paid as pre-deposit. On the other hand, it was contended by the Respondent that the pre-deposit contemplated under the proviso to sub-section (7) of Section 7 of the Act is the amount equal to the amount of gratuity required to be deposited under sub-section (4) which includes the gratuity amount and interest.

Court’s Observations

The High Court in view of the above issue and contentions, noted, “… the deposit as contemplated under second proviso to sub section (7) of Section 7 is with respect to the amount of gratuity ordered to be paid or deposited by the employer. … The “law declared” is the “ratio decidendi” of the judgment. The binding nature of a decision is lost if it is per incuriam.”

The Court reiterated that it is not desirable to depend on the principle of per incuriam unless it was a “glaring case of obtrusive omission”.

“… the principle of per incuriam would apply only if the earlier decision was demonstrably wrong and only in exceptional instances where, by obvious inadvertence of oversight, a statutory provision or a binding ruling which was counter to the reasoning had not been noticed”, it added.

The Court said that clause (c) of sub-section (4) of Section 7 undoubtedly refers to the amount directed to be paid by the employer after due inquiry by the Controlling Authority which means the gratuity amount and the interest thereupon and therefore, the amount of gratuity ordered to be paid at the time of filing the appeal necessarily includes the interest, if any.

“In Standard Stonewares and Tiles v. Appellate Authority, this Court held that the deposit contemplated under the second proviso to sub-section (7) of Section 7 of the Act was in respect of the entire gratuity amount ordered to be paid by the employer under clause 'c' of sub-section (4) of Section 7. After holding so, the Court further observed that the Statute prescribes only the deposit of gratuity amount and not the interest thereon”, it further noted.

Conclusion

The Court also remarked that the observation that the Statute prescribes only the deposit of gratuity amount and not the interest thereon, which is understood as its ratio, is per incuriam and ceases to be binding even on Co-ordinate Benches.

“Referring to Section 107 of the Central Goods and Services Tax Act, 2017, the learned counsel for the petitioner submitted that if the legislature had intended to include the interest also as part of the gratuity amount, it would have necessarily included the phrase ‘gratuity plus interest’. … the Writ Petition lacks merits and it stands dismissed. However, the petitioner is granted two weeks time from this day to deposit the amount as directed in Ext.P4”, it concluded.

Accordingly, the High Court dismissed the Writ Petition.

Cause Title- The Managing Director, Kerala State Financial Enterprises Ltd. v. Mathew P. Babu & Anr. (Neutral Citation: 2025:KER:94712)

Appearance:

Petitioner: Advocates Pooja Menon, M. Gopikrishnan Nambiar, K. John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C. Abraham, Raja Kannan, and Jai Mohan.

Respondents: SGP C.S. Sheeja and Amicus Curiae K.M. Firoz.

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