[Cites 9, Cited by 0]
Bombay High Court
Aplab Ltd vs Nitendra Upadhyay on 7 March, 2026
Author: Amit Borkar
Bench: Amit Borkar
2026:BHC-AS:11226
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MPBalekar
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 2875 OF 2025
Gundu Daji Desai,
SHABNOOR Aged 65 years, Occ.: - Retired,
AYUB R/at: A-202, Sai Karuna CHSL,
PATHAN
Digitally signed by
Neelam Nagar, Phase II, Gavanpada,
SHABNOOR AYUB
PATHAN Mulund (East), Mumbai, 400 081. ... Petitioner
Date: 2026.03.07
14:45:01 +0530
V/s.
M/s. Aplab Ltd.,
Plot No.12, TTC Industrial Area,
Thane - Belapur Road, Digha, Navi
Mumbai, 400 708. ... Respondent
WITH
WRIT PETITION NO. 2888 OF 2025
Jayprakash Jagnnath Raut, ... Petitioner
V/s.
M/s. Aplab Ltd. ... Respondent
WITH
WRIT PETITION NO. 2879 OF 2025
Anil Vaman Nemade ... Petitioner
V/s.
M/s. Aplab Ltd. ... Respondent
WITH
WRIT PETITION NO. 2878 OF 2025
Manish V. Chavan ... Petitioner
V/s.
M/s. Aplab Ltd. ... Respondent
WITH
WRIT PETITION NO. 2889 OF 2025
Sandeep Waman Athavale ... Petitioner
V/s.
M/s. Aplab Ltd. ... Respondent
1
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WITH
WRIT PETITION NO. 2881 OF 2025
Pratik Rajaram Gupte ... Petitioner
V/s.
M/s. Aplab Ltd. ... Respondent
WITH
WRIT PETITION NO. 2887 OF 2025
Rosariya Thomas ... Petitioner
V/s.
M/s. Aplab Ltd. ... Respondent
WITH
WRIT PETITION NO. 2884 OF 2025
Shrikrushna Pandurang Zope ... Petitioner
V/s.
M/s. Aplab Ltd. ... Respondent
WITH
WRIT PETITION NO. 2885 OF 2025
Yogesh Suresh Dewasthali ... Petitioner
V/s.
M/s. Aplab Ltd. ... Respondent
WITH
WRIT PETITION NO. 4113 OF 2025
M/s. Aplab Ltd. ... Petitioner
V/s.
Shrikrushna Pandurang Zope ... Respondent
WITH
WRIT PETITION NO. 4947 OF 2025
M/s. Aplab Ltd. ... Petitioner
V/s.
Sandeep Vaman Athavale ... Respondent
2
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WITH
WRIT PETITION NO. 4114 OF 2025
M/s. Aplab Ltd. ... Petitioner
V/s.
Gundu Daji Desai ... Respondent
WITH
WRIT PETITION NO. 4925 OF 2025
M/s. Aplab Ltd. ... Petitioner
V/s.
Yogesh Suresh Dewasthali ... Respondent
WITH
WRIT PETITION NO. 4944 OF 2025
M/s. Aplab Ltd. ... Petitioner
V/s.
Rosariya Thomas ... Respondent
WITH
WRIT PETITION NO. 5062 OF 2025
M/s. Aplab Ltd. ... Petitioner
V/s.
Jayprakash Jagannath Raut ... Respondent
WITH
WRIT PETITION NO. 4116 OF 2025
M/s. Aplab Ltd. ... Petitioner
V/s.
Pratik Rajaram Gupte ... Respondent
WITH
WRIT PETITION NO. 4941 OF 2025
M/s. Aplab Ltd. ... Petitioner
V/s.
Manish V. Chavan ... Respondent
3
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WITH
WRIT PETITION NO. 4926 OF 2025
M/s. Aplab Ltd. ... Petitioner
V/s.
Anil Vaman Nemade ... Respondent
WITH
WRIT PETITION NO. 5072 OF 2025
M/s. Aplab Ltd. ... Petitioner
V/s.
Dharmatma Suryabali Pandey ... Respondent
WITH
WRIT PETITION NO. 5052 OF 2025
M/s. Aplab Ltd. ... Petitioner
V/s.
Nitendra Upadhyay ... Respondent
Mr. Yogendra M. Pendse a/w Ms. Priyanka Patkar for the
Petitioner in WP Nos. 2875 of 2025, 2888 of 2025, 2879 of
2025, 2878 of 2025, 2881 of 2025, 2887 of 2025, 2884 of
2025, 2885 of 2025, and 2889 of 2025; and for the
Respondents in WP Nos. 4113 of 2025, 4947 of 2025, 4114 of
2025, 4925 of 2025, 4944 of 2025, 5062 of 2025, 4116 of
2025, 4941 of 2025, 4926 of 2025, 5072 of 2025, 5052 of
2025.
Mr. Kiran S. Bapat, Sr. Advocate a/w Mr. Jayesh Desai i/by
Desai & Desai Associates for the Petitioner in W.P. Nos. 4113 of
2025, 4947 of 2025, 4114 of 2025, 4925 of 2025, 4944 of
2025, 5062 of 2025, 4116 of 2025, 4941 of 2025, 4926 of
2025, 5072 of 2025, 5052 of 2025 and for the Respondents in
WP Nos. 2875 of 2025, 2888 of 2025, 2879 of 2025, 2878 of
2025, 2881 of 2025, 2887 of 2025, 2884 of 2025, 2885 of
2025, and 2889 of 2025.
4
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CORAM : AMIT BORKAR, J.
RESERVED ON : MARCH 6, 2026
PRONOUNCED ON : MARCH 7, 2026
JUDGMENT:
1. As all the petitions arise out of a common judgment and
order, they are being disposed of by this common judgment. For
the purpose of convenience and clarity, the facts stated in the
petition filed by the employer are treated as the primary facts of
the dispute.
2. The present writ petition is directed against the judgment
dated 09.11.2023 passed by the learned Controlling Authority
under the Payment of Gratuity Act, 1972, who is also the learned
Judge of the Fourth Labour Court at Thane, in Application (PGA)
No.173 of 2022. The petition also challenges the judgment dated
19.10.2024 delivered by the learned Appellate Authority under the
Payment of Gratuity Act, 1972, who is the learned Member of the
Industrial Court at Mumbai, in Appeal (PGA) No.8 of 2024. The
petitioner company is a limited company registered under the
provisions of the Indian Companies Act, 1913. It carries on the
business of manufacturing UPS systems and industrial AC and DC
power units and engages employees in different categories for its
production and administrative activities. At the time of his
resignation, the respondent was working in the capacity of Chief
Regional Manager and his last drawn basic salary was Rs.36,500
per month. The respondent tendered his resignation without
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giving the prescribed notice period of three months as required
under the rules of the company. However, in his resignation letter
he expressed willingness to compensate the notice period of two
months, which amounted to Rs.71,783. The respondent also
furnished an undertaking authorising the Accounts Officer to
inform the Head Office and Accounts Department to adjust an
amount of Rs.2,09,443 which was pending in his name on account
of regularisation as advised by him to the Corporate Head Office.
3. The case of the petitioners is that the respondent did not
submit Form "I" to the employer claiming gratuity, nor was there
any communication from the respondent to the company after his
resignation. The respondent also did not personally approach the
company for payment of gratuity after leaving service in the year
2015. According to the petitioners, the respondent for the first
time filed an application before the Controlling Authority under
Section 7(7) of the Payment of Gratuity Act in the year 2022
seeking payment of gratuity, which was clearly beyond the time
prescribed under the Act and the Rules framed thereunder.
4. The petitioners filed their written statement before the
Controlling Authority and contended that at the time of
resignation the respondent himself had authorised the company, by
his letters dated 02.02.2015 and 04.03.2015, to adjust an amount
of Rs.2,09,433 either in part or in full along with Rs.71,783
towards two months' salary in accordance with the company rules
against his full and final settlement. It was further pointed out that
as per the company's calculation of full and final settlement, the
respondent was entitled to gratuity calculated at the rate of fifteen
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days' wages for every completed year of continuous service, which
amounted to Rs.3,79,038. The company stated that the said
amount could not be paid due to financial difficulties. The
petitioners also contended that the respondent had not submitted
any application to the employer in Form "I" under Rule 7 of the
Payment of Gratuity (Maharashtra) Rules, 1972 within thirty days
from the date when gratuity became payable. It was also their case
that the respondent did not file any application seeking
condonation of delay under the relevant rules.
5. In support of his claim, the respondent filed his affidavit in
lieu of examination in chief. During cross examination, the
respondent admitted that he was part of the management cadre
and that his basic salary was Rs.36,500. He also admitted that he
had not issued any letter to the company after his resignation
seeking payment of gratuity and that the petitioner company had
not refused to pay the gratuity amount. On behalf of the
petitioners, an affidavit in lieu of examination in chief was filed by
Mr. Rajesh Deherkar, Finance Controller and Company Secretary of
the petitioner company. The said witness stated that employees in
the management cadre were not entitled to any special allowance
for the purpose of gratuity. According to him, the expression
"special allowance" used by the company was only a descriptive
term referring to a combination of various allowances and
incentive schemes adopted by the company, and it had no relation
to terminology used under other statutory enactments. He further
stated that any similarity in nomenclature with terms used under
other enactments was purely coincidental. The witness was cross
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examined at length, however no material could be brought on
record to discredit his testimony. When the respondent approached
the Controlling Authority claiming gratuity, the petitioners
deposited the admitted amount before the authority while
expressly reserving their right to challenge the issue relating to
condonation of delay as well as the maintainability of the
application filed by the respondent after considerable delay.
6. The petitioners also filed detailed written arguments before
the Controlling Authority reiterating the factual and legal position
and placing on record the reasons for non payment or forfeiture of
gratuity claimed by the respondent. It was specifically contended
that the respondent had approached the authority after a gap of
about six years and had not filed any application seeking
condonation of delay. The petitioners further contended that
gratuity under the Act is payable only on the basis of basic wages
and dearness allowance and that the respondent was not paid any
dearness allowance.
7. The learned Controlling Authority, by judgment dated
09.11.2023, partly allowed the application filed by the respondent
and directed the petitioners to pay an amount of Rs.9,13,950
towards gratuity. The authority also directed the petitioners to pay
simple interest at the rate of 10 percent per annum on Rs.97,822
from 02.03.2015 to 30.10.2023 and further simple interest at the
rate of 10 percent per annum on Rs.8,16,128 from 31.05.2016
until full realisation. The authority further directed that the
amount already deposited by the petitioners should be adjusted
against the total amount of Rs.9,13,950.
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8. Aggrieved by the said decision, the petitioners preferred an
appeal under Section 7(7) of the Payment of Gratuity Act, 1972
challenging the judgment dated 09.11.2023 passed by the
Controlling Authority in Application (PGA) No.173 of 2022. The
principal ground raised in the appeal was that the Controlling
Authority ought not to have adjudicated the main application for
payment of gratuity in the absence of any application for
condonation of delay as contemplated under Rule 10A of the
Payment of Gratuity (Maharashtra) Rules, 1972. The petitioners
also contended that the special allowance could not be taken into
account while calculating gratuity in view of the definition of
wages under Section 2(s) of the Payment of Gratuity Act, 1972.
9. The respondent also preferred an appeal challenging the
same judgment on the ground that gratuity ought to have been
calculated on the basis of twenty six days' wages instead of fifteen
days' wages. The learned Appellate Authority, by its common
judgment dated 19.10.2024, dismissed both the appeals.
10. Mr. Bapat, learned Senior Advocate appearing on behalf of
the employer, submitted that the claim of the employee was
confined only to the last drawn basic pay and dearness allowance.
According to him, the claim of the employee never included special
allowance. He pointed out that even in the statement annexed to
the application filed by the employee under the relevant rules, the
wages last drawn were shown only as basic wages and dearness
allowance. He submitted that the employer was always ready and
willing to pay the amount of gratuity in accordance with law.
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11. Inviting attention to Section 2(s) of the Payment of Gratuity
Act, 1972, he submitted that the definition of wages includes all
emoluments earned by an employee while on duty or on leave in
accordance with the terms of employment and which are paid or
payable in cash, including dearness allowance, but excluding
bonus, commission, house rent allowance, overtime wages and any
other allowance. According to him, once the statute itself excludes
other allowances from the definition of wages, the special
allowance claimed by the employee cannot be included for the
purpose of calculating gratuity.
12. He further invited attention to Section 7(3A) of the Act and
submitted that although sub section (3) requires the employer to
pay gratuity within thirty days from the date it becomes payable,
sub section (3A) provides that if the amount is not paid within the
prescribed period, the employer becomes liable to pay simple
interest from the date the gratuity becomes payable until the date
of actual payment. However, according to him, the liability to pay
interest would arise only when the employer wrongfully withholds
the payment without raising any dispute under Section 7(4) of the
Act. In the present case, the respondent himself admitted during
cross examination that the petitioner company had never refused
to pay gratuity. In such circumstances, according to him, the
authority could not have directed payment of interest.
13. Learned Senior Counsel also invited attention to Rule 10 of
the Payment of Gratuity (Maharashtra) Rules, 1972 and
particularly to the proviso appended to the said rule. He submitted
that under Rule 7 an employee is required to file an application
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before the competent authority within thirty days from the date
when gratuity becomes payable. The second proviso to Rule 10
provides that where the employer fails to issue the notice
contemplated under sub section (2) of Section 7 read with sub rule
(5) of Rule 8, the limitation prescribed for filing the application
would not apply. However, even in such circumstances the
employee is expected to approach the authority within a
reasonable time.
14. According to him, although the petitioner had not issued a
notice under Section 7(2) of the Act, the respondent approached
the authority after a long lapse of time and therefore cannot claim
interest on the amount. He further submitted that in the
application filed by the employee there is no pleading that the
special allowance was in reality a disguised form of dearness
allowance. He also pointed out that in the affidavit filed before the
competent authority the employer had specifically stated that the
employee was entitled to dearness allowance and this assertion
was not challenged during cross examination. Even in his
examination in chief, the employee stated that he was entitled to
claim dearness allowance. In these circumstances, according to
him, the employee cannot now be permitted to contend that the
special allowance was nothing but dearness allowance.
15. Per contra, Mr. Pendse, learned Advocate appearing for the
employee in all the petitions, submitted that the employee's claim
is founded on the company policy which provides for payment of
gratuity calculated on the basis of twenty six days' wages and not
fifteen days' wages. He pointed out that in paragraph 2 of the
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application filed before the competent authority it is specifically
stated that as per the company policy employees who have
completed ten years of continuous service are entitled to gratuity
at the rate of fifteen days' wages for every completed year of
service, whereas employees who have completed more than fifteen
years of service are entitled to gratuity calculated on the basis of
twenty six days' wages.
16. He submitted that documentary material in the form of
salary slips was produced before the Appellate Authority but the
same was not properly considered. He further submitted that
before the Appellate Authority a document showing restructuring
of perks of the petitioner company with effect from 1 April 2004
was placed on record. The said document contained a column
indicating that in cases where the employee had completed more
than fifteen years of service, gratuity was to be calculated on the
basis of twenty six days' wages. According to him, this document
related to other employees of the company and clearly reflected
the policy followed by the petitioner.
17. He further submitted that in respect of employees occupying
managerial positions, dearness allowance was paid in the form of
special allowance. According to him, the petitioner did not raise
any dispute regarding payment of gratuity and therefore was liable
to pay interest under the provisions of the Act. He submitted that
the authorities under the Act committed an error in restricting the
employee's claim to fifteen days' wages when the company policy
itself provided for calculation of gratuity on the basis of twenty six
days' wages. According to him, this Court should modify the
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impugned judgment and direct the petitioner to pay the difference
of eleven days' wages per year towards gratuity. He therefore
submitted that the petitions filed by the employer deserve to be
dismissed and the petitions filed by the employee deserve to be
allowed by granting gratuity calculated on the basis of twenty six
days' wages per year.
Analysis and reasons
Limitation and procedural compliance under Section 7 and Rule 10:
18. Section 7(1) of the Payment of Gratuity Act lays down the
general rule regarding initiation of a claim for gratuity. The
provision states that a person who becomes eligible for gratuity is
required to send a written application to the employer seeking
payment of such gratuity. The application has to be made in the
form prescribed under the Rules and within the time contemplated
under the statutory scheme. The purpose of this requirement is
largely procedural. It enables the employer to formally examine
the claim and determine the amount payable. However, the statute
does not place the entire burden on the employee alone. The Act
creates a scheme in which both the employee and the employer are
assigned certain duties once gratuity becomes payable.
19. The detailed procedure governing such claims is contained in
Rule 7 and Rule 10 of the Payment of Gratuity (Maharashtra)
Rules, 1972. Rule 7 deals with the application which may be made
by the employee to the employer in the prescribed form for
payment of gratuity. Rule 10 then provides the mechanism by
which the employee can approach the Controlling Authority in the
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event the employer does not properly deal with the claim. These
provisions show that the scheme of the Act is not merely
dependent upon the filing of an application by the employee. It
also casts a clear obligation upon the employer to act once gratuity
becomes payable.
20. This obligation of the employer flows from Section 7(2) of
the Act. The section clearly states that as soon as gratuity becomes
payable, the employer is required to determine the amount of
gratuity and give notice in writing to the person entitled to receive
it. A copy of such notice must also be sent to the Controlling
Authority specifying the amount determined. Significantly, the
statute provides that this duty exists whether or not an application
under Section 7(1) has been made. In other words, the employer
cannot remain passive and wait indefinitely for the employee to
make an application. The Act expects the employer to determine
the gratuity and communicate it without delay.
21. In the present case, the objection raised by the petitioners is
that the respondent did not submit Form "I" within the time
prescribed under the Rules and that the application before the
Controlling Authority was filed after several years. On that basis
the petitioners contended that the claim ought not to have been
entertained. This argument at first glance appears attractive.
However, when the statutory scheme is examined closely and the
material on record is considered, the argument cannot be
accepted.
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22. The record placed before the Court does not indicate that the
petitioners ever complied with the requirement of Section 7(2).
There is no material showing that the employer determined the
gratuity amount after the respondent's resignation and issued the
statutory notice to the respondent and to the Controlling Authority.
In fact, the case of the petitioners throughout has been that the
respondent never submitted Form "I" and therefore the employer
was not required to process the claim. This approach misses the
clear language of Section 7(2) which obligates the employer to
determine gratuity even in the absence of an application.
23. At this stage it becomes necessary to refer to the second
proviso to Rule 10 of the Maharashtra Rules. The proviso
specifically states that no limitation shall apply for filing an
application before the Controlling Authority where the employer
has failed to give the notice required under Section 7(2) read with
Rule 8. The object behind this proviso recognises that if the
employer neglects the duty of determining gratuity, the employee
should not lose the right to claim the amount merely because some
time has passed. Otherwise the employer could simply remain
silent and later defeat the claim by raising the plea of limitation.
24. When the facts of the present case are examined in the light
of this statutory scheme, the position becomes clear. The
petitioners have strongly relied upon the delay and the absence of
Form "I". At the same time, they have not shown that they
performed the statutory obligation of issuing the notice required
under Section 7(2). Once this position emerges from the record,
the second proviso to Rule 10 directly comes into operation. The
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proviso is intended precisely for such situations where the
employer has failed to perform the statutory duty cast upon it.
25. Therefore, the employer cannot be permitted to defeat the
claim by taking advantage of delay when the delay itself has been
contributed to by the employer's inaction. The statutory scheme
does not allow such a result. The law relating to gratuity is a
beneficial piece of legislation meant to secure a terminal benefit to
employees after years of service. The procedural provisions must
therefore be interpreted in a manner which advances the purpose
of the Act rather than defeats it. For these reasons, the objection
raised by the petitioners on the ground of limitation cannot be
accepted. The respondent's approach to the Controlling Authority,
though made after some time, cannot be treated as barred in view
of the employer's failure to issue the notice contemplated under
Section 7(2).
Deposit of admitted amount and liability to interest:
26. Section 7(4)(a) of the Payment of Gratuity Act provides for
the course to be followed when a dispute arises regarding gratuity.
The provision places a clear obligation upon the employer. If there
is any disagreement regarding the amount payable or the
entitlement of the employee, the employer must deposit with the
Controlling Authority the amount which it admits to be payable.
The intention of the legislature is apparent. Even when the parties
are disputing certain aspects of the claim, the employee should not
be deprived of the portion of gratuity which is admittedly due.
Therefore, the statute requires the employer to deposit that
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admitted amount before the authority so that the employee's
statutory benefit is not unnecessarily withheld.
27. In the present matter the employer has followed this
requirement to a certain extent. When the proceedings were
pending before the Controlling Authority, the employer deposited
the amount which it admitted to be payable. At the same time the
employer reserved its right to contest the remaining claim raised
by the employee. Such a course is permissible under the scheme of
the Act because the employer is entitled to raise a dispute
regarding the balance amount while complying with the statutory
requirement of depositing the admitted portion.
28. At this stage it becomes necessary to consider the provisions
contained in Section 7(3) and Section 7(3A) of the Act. Section
7(3) states that once gratuity becomes payable, the employer must
arrange to pay the amount within thirty days. This provision
emphasises the legislative intention that gratuity should be paid
promptly. Gratuity is a terminal benefit earned by the employee for
the service rendered over the years. Therefore, the law expects the
employer to discharge this obligation without unnecessary delay.
29. Section 7(3A) deals with the consequence of failure to
comply with this requirement. It provides that if the employer does
not pay the gratuity within the period of thirty days, the employer
becomes liable to pay simple interest on the delayed amount. The
interest is payable from the date on which the gratuity became
payable until the date on which it is actually paid. The object of
this provision is compensatory in nature. It is meant to compensate
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the employee for the delay in receiving a statutory benefit which
was otherwise payable to him.
30. The proviso to Section 7(3A) creates a limited exception. It
states that interest will not be payable if the delay in payment is
due to the fault of the employee and if the employer has obtained
written permission from the Controlling Authority for making
delayed payment on that ground. Thus, two conditions are
required to be satisfied before the employer can avoid liability to
pay interest. First, the delay must be attributable to the employee.
Second, the employer must have obtained written permission from
the Controlling Authority explaining the reason for delay.
31. When the facts of the present case are examined in this
background, certain aspects are not in dispute. The employer did
not completely deny the liability to pay gratuity. Instead, it
deposited the amount which it admitted to be payable before the
Controlling Authority. This conduct shows that the employer
recognised the statutory liability to pay gratuity to the employee.
At the same time the employer disputed the remaining portion of
the claim and contested the proceedings. However, it is equally
clear that the employer did not obtain any written permission from
the Controlling Authority for delaying payment beyond the
statutory period of thirty days. No material has been placed on
record to show that such permission was sought or granted before
the expiry of the statutory period. As a result, the employer cannot
rely upon the exception provided in the proviso to Section 7(3A).
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32. Another relevant circumstance is that the employee was
required to wait for the balance amount of gratuity until the
dispute was adjudicated by the authority. The delay in receiving
the unpaid portion cannot be ignored. Interest under Section
7(3A) operates as compensation for such delay. Whenever an
amount which is legally payable under the statute remains unpaid
and no sufficient justification is shown, the employee becomes
entitled to interest on that amount. At the same time, the fact that
the employer deposited the admitted amount cannot be
overlooked. Once the admitted amount was deposited before the
authority, the employee was not deprived of that portion
thereafter. Therefore, the employer's liability to pay interest must
be considered in a balanced manner. The deposit made by the
employer reduces its responsibility to the extent of the amount
already deposited.
33. For this reason interest on the amount which was admitted
and deposited by the employer cannot continue to run from the
date of deposit. Once that amount was placed before the
Controlling Authority, the employer had fulfilled its obligation in
respect of that part of the claim. Therefore, directing payment of
interest on the deposited amount even after the date of deposit
would not be justified.
34. However, the position is different with respect to the
remaining amount which was not deposited and which ultimately
came to be determined by the Controlling Authority. The employee
was deprived of that portion during the entire period of dispute.
Since the employer did not obtain written permission under the
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proviso to Section 7(3A), the statutory consequence must follow.
The employee would therefore be entitled to interest on that
unpaid portion from the date specified in the order of the
Controlling Authority until the date on which the amount is
actually paid.
35. The Controlling Authority has already directed payment of
interest at the rates and for the periods mentioned in its order.
That direction substantially reflects the statutory requirement,
though a limited modification is necessary in view of the deposit
made by the employer. Accordingly, it is appropriate to clarify that
interest shall not be payable on the amount which was admitted
and deposited by the employer from the date of such deposit.
Interest shall, however, continue to run on the remaining balance
amount which has been ordered to be paid by the Controlling
Authority.
36. It is also necessary to keep in mind the possibility of
recalculation of gratuity after remand. If upon reconsideration the
authority comes to the conclusion that the component described as
special allowance forms part of wages and that the employee is
entitled to higher gratuity, the enhanced amount will also carry
interest in accordance with Section 7(3A). Such interest shall be
calculated from the date on which the gratuity originally became
payable until the date of actual payment. While doing so, the
authority shall give proper credit for the amount already deposited
by the employer so that there is no duplication in payment.
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Inclusion of special allowance as part of "wages" under Section
2(s):
37. Section 2(s) of the Payment of Gratuity Act defines the
expression "wages" for the limited purpose of calculating gratuity.
The provision states that wages include all emoluments earned by
an employee while he is on duty or while he is on leave in
accordance with the terms of employment, provided such amounts
are paid or payable in cash. The section also makes it clear that
dearness allowance forms part of wages. At the same time, the
legislature has consciously excluded certain payments from the
definition. These exclusions include bonus, commission, house rent
allowance, overtime wages and any other allowance. Therefore,
while interpreting this provision the Court must examine the true
nature of the payment and not merely the label attached to it. In
other words, what is required to be seen is whether a payment
which is described by a particular name is, in reality, dearness
allowance or whether it is an independent allowance which the
statute intends to exclude. If the allowance is in substance
dearness allowance, it will form part of wages for calculating
gratuity. On the other hand, if it is an allowance of a different
character, it cannot be included merely because it forms part of the
salary structure.
38. In the present case the employer has taken a clear stand that
the component described as "special allowance" in the salary
structure is not dearness allowance. According to the employer, the
said allowance is only a consolidated component representing
different incentives and benefits given by the company. The
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management witness, who was examined before the Controlling
Authority, stated that the expression "special allowance" is used
internally in the company to denote adjustment of several
allowances and incentive schemes. He also stated that this
allowance has no connection with dearness allowance as
understood in other labour statutes. The witness further explained
that the similarity in nomenclature should not lead to a
presumption that the allowance is equivalent to dearness
allowance.
39. This witness was subjected to cross examination. During the
course of cross examination certain admissions were obtained from
the respondent employee. The respondent admitted that his last
drawn basic salary was Rs.36,500. He also admitted that
immediately after his resignation he had not written any letter to
the company demanding gratuity. These admissions do not directly
decide the nature of the special allowance, but they form part of
the factual background of the dispute.
40. Apart from oral evidence, certain documents were also relied
upon by the parties. Salary slips of the respondent were placed on
record before the authorities. In addition to that, the respondent
relied upon a document which was described as a restructuring of
perks of the company with effect from 1 April 2004. According to
the respondent, this document indicates that for employees who
have completed more than fifteen years of service, gratuity may be
calculated on the basis of twenty six days. However, the said
document appears to have been produced in photocopy form. The
authorities below did not examine the original document nor did
29-wp-2875-2025 with connected petitions final.doc
they record any clear finding about its authenticity or applicability.
41. A careful reading of the judgment of the Appellate Authority
shows that the authority has not decided the essential question. It
has not examined whether the component described as special
allowance is in reality a form of dearness allowance. It has also not
evaluated the evidentiary value of the photocopied documents
relied upon by the employee. When documents are produced in
photocopy form, the authority is required to examine whether they
can be relied upon as secondary evidence and whether their
contents are proved. That exercise has not been carried out in the
present case.
42. In matters of this nature the character of a particular salary
component cannot be determined merely by referring to the
nomenclature used in the salary slip. It depends on several factual
aspects. These include the purpose for which the payment is made,
the manner in which it is calculated, whether it is linked to cost of
living, whether it is paid uniformly to employees, and whether the
terms of employment describe it as compensation for rise in living
expenses. These aspects can only be examined properly by the fact
finding authority after considering the original documents and the
surrounding circumstances.
43. On the present record there remains a clear factual
uncertainty. The material placed before this Court does not
conclusively establish whether the special allowance paid to the
respondent is truly dearness allowance in disguise or whether it is
an independent allowance which stands excluded under Section
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2(s). The authorities below have also not examined the original
records or given specific findings regarding the photostat copies of
the salary slips and restructuring documents. Because of this
omission the issue remains unresolved.
44. In such circumstances it would not be appropriate for this
Court, while exercising writ jurisdiction, to undertake a fresh
examination of disputed facts. The proper course is to require the
competent fact finding authority to examine the matter in detail.
That authority is in a better position to evaluate the documents,
record evidence if necessary, and arrive at a proper finding on the
nature of the allowance.
45. For these reasons the issue requires reconsideration by the
Appellate Authority. The matter therefore deserves to be remanded
for a limited purpose. The authority shall examine whether the
special allowance paid to officers like the respondent is in
substance dearness allowance forming part of wages under Section
2(s), or whether it is an independent allowance excluded by the
statute. While undertaking this exercise the authority shall also
consider the authenticity and evidentiary value of the photocopied
documents relied upon by the parties.
46. In view of the reasons recorded and the detailed discussion
made in the preceding paragraphs, this Court now proceeds to
pass the following order.
47. The writ petitions are partly allowed in the limited manner
stated. The common judgment of the Appellate Authority dated
19.10.2024 and the Controlling Authority's judgment dated
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09.11.2023 are affirmed except as modified in this judgment.
48. The matter is remitted to the Appellate Authority for fresh
consideration only on the question whether the photocopied
documents and salary records establish entitlement to gratuity at
the rate of 26 days for officers like the respondent; and whether
special allowance is, in substance, dearness allowance for the
purpose of Section 2(s).
49. The Appellate Authority shall effect adjustment of amounts
already deposited. If on remand enhanced gratuity is found
payable, interest shall be computed on the enhanced portion from
the date it became payable until actual payment; interest shall not
be payable on amounts already deposited from the date of deposit.
50. The Appellate Authority shall also take into consideration the
submission made on behalf of the employer that one of the
respondents, Mr. Gupte, had given an undertaking authorising the
Accounts Officer of the Company to advise the Head Office and
Accounts Department to adjust an amount of Rs.2,09,443/- which
was pending in his name due to certain regularisation issues
earlier communicated by him to the Corporate Head Office. If such
amount is found to be payable by the employee to the company
and is supported by proper records, the authority shall consider
the same while finalising the computation and settlement of
gratuity.
51. Parties shall appear before the Appellate Authority on the
23rd March 2026.
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52. The Appellate Authority shall comply with the directions
given above and decide the remanded point within eight weeks
from receipt of this order.
53. No order as to costs.
(AMIT BORKAR, J.)
