Kerala HC rules that gratuity should be calculated based on date it becomes payable 

The Kerala High Court ruled that the maximum amount of gratuity payable to an employee should be determined based on the date when the gratuity becomes payable, rather than the date of actual disbursement. The case involved a retired regional engineer who had worked with the Kerala state housing board.

The court emphasised that gratuity is payable to an employee upon the termination of their employment and should not exceed the maximum amount specified under the applicable laws on the date when the gratuity becomes due. The court clarified that even if the petitioner’s claim for gratuity was under the payment of gratuity Act of 1972, the maximum amount should be determined based on the date when the gratuity became payable, not the date of sanction or disbursement.

The petitioner had worked with the Kerala state housing board until May 31, 2002. The Board sanctioned his pensionary benefits on May 20, 2006, but withheld his Death-Cum-Retirement Gratuity (DCRG) amount of ?2.6 lakh and the payments for the last month due to audit objections.

Following the court’s direction, the board subsequently granted the withheld DCRG and the last month’s pay. However, the petitioner filed a plea claiming entitlement to the maximum gratuity of ?10,00,000 as per the 2010 amendment to the payment of gratuity Act of 1972, along with 9 per cent interest for the delay in gratuity disbursement.

The High Court held that the petitioner’s gratuity should be determined based on the date when it became payable, as per the provisions of the Kerala service rules and the payment of gratuity Act of 1972. Therefore, the court rejected the petitioner’s claim for maximum gratuity but allowed him to approach the Board for seeking interest on the delayed disbursement of DCRG.