Gratuity has to be calculated from the day it became payable and not from date of disbursement: Kerala High Court

The Kerala High Court recently held that as per the Payment of Gratuity Act of 1972, the maximum amount of gratuity payable to an employee has to be determined with respect to the date on which the gratuity becomes payable to them (termination of employment) and not the date on which the amount has to be disbursed to them [K Rajendra Prasad v State of Kerala & Ors.]..Justice Murali Purushothaman held so while considering a case filed by a retired Regional Engineer who had worked with the Kerala State Housing Board."The gratuity is payable to an employee on the termination of his employment. The gratuity payable to an employee shall not exceed the maximum that is notified under the respective enactments as on the date on which the gratuity becomes payable. Even if it is assumed that the petitioner's claim for gratuity was under the Payment of Gratuity Act, 1972, the maximum amount of gratuity payable under the said Act has to be determined with respect to the date on which the gratuity became payable and not on the date on which sanction was accorded for payment of DCRG or the date on which the amount was actually disbursed to him," the Court said in its judgment..The petitioner in this case had worked with the Kerala State Housing Board till May 31, 2002.On May 20, 2006, the Board sanctioned his pensionary benefits but withheld his Death-Cum-Retirement Gratuity (DCRG) amount of ₹2.6 lakh and also the payments for the last month that he worked, accounting it as his liability on audit objections.This prompted the petitioner to approach the High Court which initially directed the Board to disburse the DCRG withheld, together with the salary for the last month within a period of one month from the date of receipt of the judgment.However, the High Court did not schedule a time frame for the petitioner to claim interest for the delay in the disbursement of DCRG.Accordingly, the Board granted the payment of DCRG and the last month’s pay..The petitioner then moved the present plea before the High Court with a claim that he is entitled to the maximum gratuity of ₹10,00,000 as per the 2010 amendment of the Payment of Gratuity Act of 1972, and for 9% interest for 9 years and 11 months on the amount of gratuity..The High Court said that as per the provisions of the Kerala Service Rules and the Payment of Gratuity Act, the petitioner’s gratuity has to be decided with respect to the date on which the gratuity becomes payable to him.Therefore, the High Court rejected the petitioner's contention that he should be paid maximum gratuity but said that he is free to approach the Board with a representation seeking interest for the delay in disbursement of DCRG..The petitioner was represented by advocates Rajan Joseph and Koshy George.The respondents were represented by advocates CN Prabhakaran (Government Pleader),George Boban, K Denny Devassy, Manoj Ramaswamy, and TK Sajeev..[Read Judgment]