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PETITIONER: CHARAN SINGH

       Vs.

RESPONDENT: BIRLA TEXTILES & ANR.

DATE OF JUDGMENT31/08/1988

BENCH: MISRA RANGNATH BENCH: MISRA RANGNATH VENKATACHALLIAH, M.N. (J)

CITATION:  1988 AIR 2022            1988 SCR  Supl. (2) 742  1988 SCC  (4) 212        JT 1988 (3)   579  1988 SCALE  (2)580

ACT:     Payment  of Gratuity Act, 1972-Sections 7 and  &-Payment of  interest  on  gratuity-When and  in  what  circumstances admissible.

HEADNOTE:     The appellant was in the service of Respondent firm from April,1944 till he resigned on 24.5.83. The employer did not determine  the amount of gratuity payable to the  appellant. Appellant furnished the necessary application for payment of gratuity and since no action was taken by the employer,  the appellant approached the statutory controlling authority for gratuity and interest thereon. The employer  contested.  The controlling  authority determined the amount of gratuity  at Rs.16,380  and directed the employer to pay the  same  along with compound interest at 9%.     On  appeal  by  the employer,  the  appellate  authority confirmed  the determination of gratuity but set  aside  the order for payment of interest.     This appeal by special leave is in regard to  payability of  interest  on  gratuity.  The  appellant  relied  on  the provisions of the Interest Act and section 34 of the Code of Civil Procedure, also.     Dismissing the appeal,     HELD:  If  It  is  only  when  the  Collector  issue   a certificate for recovery of the dues as a public demand that interest as provided under Section 8 is admissible. [745Hl     1.2 In the instant case the appellant is not entitled to interest  on  the amount of gratuity found due to  him.  The controlling  authority had directed interest as provided  in Section  8  to be paid, which the  Appellate  Authority  had vacated.  From the facts of this case, it is clear that  the stage for action under section 8 had not been reached in  as much the appellant had not applied for recovery of  gratuity to the Collector. [745G-H]                                                   PG NO 742                                                   PG NO 743     2.   There  was no provision in the Act for  payment  of interest  when  the same was quantified by  the  controlling authority  and before the Collector was approached  for  its realisation. In fact, it is on the acceptance of the  lacuna

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in   the  law  that  Act  22  of  1987  brought  about   the incorporation  of  sub-section (3A) in Section 7.  But  that provision    has   prospective,   and   not    retrospective application. [746A-B]     3.    The  provisions  of  the  Interest  Act  and   the provisions  of  Section 34 of the Code  of  Civil  Procedure would  be of no avail to the appellant since no  notice  was given  demanding interest and the controlling  authority  is not  a  court for falling back on section 34  of  the  Code. [746C]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 2659  of 1986.     From  the  Judgment  and Order dated  14.6.1985  of  the Appellate Authority Delhi in Appeal No. 2 of 1985.     Anil Kumar Gupta and B.N. Singhvi for the Appellant.     Raja  Ram Agarwal, Parveen Kumar and Vivek  Gambhir  for the Respondents.     The Judgment of the Court was delivered by     RANGANATH MISRA, J. The short question in this appeal by special leave is whether the appellant-workman was  entitled to interest on the gratuity due to him under the  provisions of the Payment of Gratuity Act, 1972 (39 of 1972).     Appellant joined service under Respondent No. 1 in April 1944  and  was  relieved from  service  on  his  resignation with,effect  from 24.5.2983. The employer did not  determine the amount ,of gratuity payable to the appellant as required under  Section  7(2) of the Act. On 7.6. 1983, the appellant furnished  an application in Form-l for payment of  gratuity but  no  action was taken by the  employer;  then  appellant approached   the   statutory   controlling   authority   for determination  of the amount of gratuity and requested  that on the sum due interest may be paid. The employer  contested the claim both in regard to gratuity as also interest. On 3. 12.  1984., the controlling authority determined the  amount of gratuity at Rs. 16,380 and directed the Respondent No.  1 to pay along with compound interest of 9 per cent. Thereupon                                                   PG NO 744 Respondent  No., 1 challenged the order before  he appellate Authority.    The   appellate   Authority    affirmed    the determination  of  gratuity  but set  aside  the  order  for payment of interest.     We have beard learned counsel for both parties in regard to payability of interest. Relevant portions of section 7 of the  Act,  as  it stood in 1983, when the  cause  of  action arose, may now be extracted:     "7: Determination of the amount of gratuity:     (1)  A  person who is eligible for payment  of  gratuity under this Act or any person authorised, in writing, to  act on  his  behalf  shall send a  written  application  to  the employer,  within  such  time and in such form,  as  may  be prescribed, for payment of such gratuity.     (2)  As soon as gratuity becomes payable,  the  employer shall, whether an application referred to in sub-section (1) has  been made or not, determine the amount of gratuity  and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity so determined ;     (3)The  employer-  shall arrange to pay  the  amount  of gratuity,  within  such time as may be  prescribed,  to  the person to whom the gratuity is payable ;     (4)  (a)  If there is any dispute as to  the  amount  of

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gratuity payable to an employee under this Act or as to  the admissibility  of any claim of, in relation to, an  employee for  payment  of gratuity, or as to the person  entitled  to receive  the gratuity, the employer  shall deposit with  the controlling authority such amount as he admits to be payable by him as gratuity.     Explanation’ Where there is a dispute with regard to any matter  specified  in this clause the employee may  make  an application  to  the controlling authority for  taking  such action as is specified in clause (b).     (b) .....................................................     (c) .....................................................                                                   PG NO 745     (5) ....................................................,,     (6)   ................................................     (7)   ................................................     Sec. 8: Recovery of gratuity: If the amount of  gratuity payable  under this Act is not paid by the employer,  within the  prescribed  time, to the person entitled  thereto,  the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that  amount to the Collector, who shall recover  the  same, together with compound interest thereon at the rate of  nine per  cent  per  annum,  from  the  date  of  expiry  of  the prescribed time, as arrears of land revenue and pay the same to the person entitled thereto. "     The  provisions  of Section 7 have been  amended  twice, first by Act 25 of 1984 with effect from 1.7.1984 and  again by  Act 22 of 1987. The 1987 Amendment has substituted  sub- section  (3) and added sub-section (3A) in Section 7 to  the following effect:     "(3)  The  employer shall arrange to pay the  amount  of gratuity within thirty days from the date it becomes payable to the person to whom the gratuity is payable.     If the amount of gratuity payable under sub-section  (3) is  not paid by the employer within the period specified  in sub-section  (3), the employer shall pay, from the  date  on which  the gratuity becomes payable to the date on which  it is  paid,  simple interest at such rate, not  exceeding  the rate  notified by the Central Government from time to  time, repayment  of long term deposits, as that Government  may,by notification specify . . . . . . . . . . .. . . ."     The  controlling  authority  had  directed  interest  as provided  in  Section  8  to be  paid  which  the  Appellate Authority  had vacated. From facts of the case, it is  clear that  the  stage  for action under section 8  had  not  been reached  inasmuch the appellant had not applied for recovery of gratuity to the Collector. It is only when the  Collector issues  a certificate for recovery of the dues as  a  public demand  that  interest  as  provided  under  Section  8   is admissible.                                                   PG NO 746     There  was  no  provision  in the  Act  for  payment  of interest  when  the same was quantified by  the  controlling authority  and before the Collector was approached  for  its realisation.  In  fact,  it  is on  the  acceptance  of  the position  that there was a lacuna in the law that Act 22  of 1987 brought about the incorporation of sub-section (3A)  in Section 7. That provision has prospective application.     Learned counsel for the appellant tried to rely upon the provisions of the Interest Act and the provisions of Section 34  of  the  Code of Civil Procedure. We  do  not  find  any support  for  the  appellant’s  stand  from  either  of  the provisions.  Admittedly,  no  notice  was  given   demanding interest  and the controlling authority is not a  court  for

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falling back on Section 34 of the Code. We are satisfied  in the facts of the case that the appellant was not entitled to interest  on the amount of gratuity found due to him.  Since that  was  the only matter agitated in the appeal  with  the conclusion  indicated,  this  appeal  has  to  fail  and  is dismissed.     There would be no order for costs.    G.N.                                 Appeal dismissed.