In a significant ruling reinforcing employee rights, the Andhra Pradesh High Court has emphatically declared that the right to receive gratuity is a statutory right, which employers cannot withhold arbitrarily. The court directed a cooperative society to pay a retired employee his long-pending gratuity and other terminal benefits, along with 10% annual interest for the delay.
Court's Firm Stand on Statutory Entitlements
Justice Maheswara Rao Kuncheam, presiding over a contempt case, delivered the judgment on January 3, 2026. The case was filed by an employee whose former employers failed to pay his arrears of salary and retirement benefits, including gratuity, earned leave encashment, and provident fund.
The court's observation was clear and unambiguous: "The right to receive gratuity is a statutory right; the respondent authorities cannot take it away except through the procedure enunciated under the law." This statement underscores that such entitlements are protected by law, not merely discretionary gestures from employers.
Referring specifically to Sections 4 and 7 of the Payment of Gratuity Act, 1972, the bench highlighted a crucial provision. If an employer fails to disburse the gratuity amount within 30 days from the date it becomes payable, they are liable to pay interest from that date onwards. The court asserted that these statutory entitlements cannot be denied to an employee unless there is a legal impediment, and the passage of time does not erase this obligation.
Background of the Employee's Long Struggle
The petitioner's ordeal spanned over a decade. He was initially appointed in 1977 as a decadarised secretary in a cooperative society. After being promoted to a special category employee in a district cooperative bank in 2009, he served without any blemish until his superannuation in 2011 while working as a cashier.
Despite his clean service record, he was not paid salaries for two separate periods: 14 months from May 2004 to June 2005 and 21 months from June 2007 to February 2009. The total arrears amounted to Rs 2.28 lakh, excluding his terminal benefits like gratuity and leave encashment.
His struggle for justice began with a representation to the cooperative society in 2014. Although the society passed a resolution requesting the bank to advance the payments, noting his clean financial record, no action followed. The petitioner approached the High Court in 2015. When the employers failed to comply with the court's order, he was forced to file a contempt petition.
The employers' defenses were rejected by the court. The cooperative society pleaded a lack of funds, while the bank claimed it had no responsibility and had already paid its share for the period the employee worked with them. The court dismissed the plea of financial incapacity, stating it cannot be a valid defense for shirking statutory obligations towards an employee who has rendered service.
The Final Verdict and Its Implications
The Andhra Pradesh High Court's final order was decisive. It directed the cooperative society to release the gratuity amount and leave encashment, etc., with 10% annual interest. The interest is to be calculated from the date the amount became payable until the date of actual payment. The society was given 10 weeks from the receipt of the court order to complete the payment.
The judgment sets a powerful precedent for employees across sectors, especially in cooperative banks and societies. It clarifies that:
- Gratuity is a statutory, non-negotiable right of an employee.
- Employers are mandatorily liable to pay terminal benefits as per the Payment of Gratuity Act.
- Financial incapacity is not an acceptable excuse for non-payment.
- Employees are entitled to interest on delayed payments as a matter of statutory right, not at the discretion of authorities.
This ruling serves as a stern reminder to all employers about their legal duties and reinforces the judiciary's role in protecting the hard-earned benefits of the workforce, ensuring justice even after retirement.
