Court Remands Case to Determine Inclusion of Special Allowance as Dearness Allowance in Gratuity Calculations
In a significant judgment, the Bombay High Court, presided by Justice Amit Borkar, has remanded a case involving the payment of gratuity by M/s Aplab Ltd. to its former employee, Gundu Daji Desai, for fresh consideration by the Appellate Authority. The judgment, delivered on March 7, 2026, addresses pivotal issues under the Payment of Gratuity Act, 1972, particularly focusing on the employer's procedural obligations and the inclusion of special allowances in gratuity calculations.
The court's decision comes after a protracted legal battle initiated by Desai, who resigned from Aplab Ltd. in 2015 but filed for gratuity payment only in 2022. The employer contested the claim on grounds of delay and procedural non-compliance by the employee. However, the court emphasized the employer's failure to issue the requisite statutory notice under Section 7(2) of the Act, thereby negating the limitation plea against the employee's delayed application.
Justice Borkar underscored that the employer's obligation to determine and notify the gratuity amount exists irrespective of an employee's formal application. The court highlighted the beneficial nature of gratuity legislation, aimed at securing terminal benefits for employees, and interpreted procedural provisions to advance this purpose.
The court also addressed the employer's liability for interest on unpaid gratuity, stipulating that while the employer's deposit of the admitted amount mitigates interest liability on that portion, interest on the unpaid balance must be computed from the date gratuity was originally due.
A key aspect remanded for reconsideration involves whether the special allowance paid to Desai constitutes dearness allowance under Section 2(s) of the Act. The court noted the necessity of determining the true nature of such allowances, which impacts the calculation of gratuity. The Appellate Authority has been directed to reassess this component, considering the authenticity of documentary evidence presented.
The case is scheduled for re-examination on March 23, 2026, with the Appellate Authority tasked to conclude its findings within eight weeks. The decision underscores the judiciary's role in ensuring statutory compliance and equitable treatment of employees within the framework of labor laws.
Bottom Line:
Payment of Gratuity Act, 1972 - Procedural compliance under Section 7 and Rule 10 - Employer's failure to issue the statutory notice required under Section 7(2) negates the plea of limitation for the employee's delayed application for gratuity.
Statutory provision(s): Payment of Gratuity Act, 1972 - Sections 2(s), 7(2), 7(3), 7(3A); Payment of Gratuity (Maharashtra) Rules, 1972 - Rules 7, 10, 10A.
Gundu Daji Desai v. M/s. Aplab Ltd., (Bombay) : Law Finder Doc id # 2863300
