Gratuity - a Right not Bounty

The Supreme Court has ruled that, Gratuity is an inalienable right of an employee and not a bounty or reward that is offered by the management, A Bench of Justices S B Sinha and H S Bedi said that when a benefit is extended to a group of employees, the same cannot be denied to the other group of employees, if they were entitled to the benefit under the scheme.

The Apex Court observed while dismissing an appeal filed by the Life Insurance Corporation of India (LIC), “An employee is entitled to gratuity if it is not a bounty. It is payable of successful tenure of service,” LIC had filed the appeal against a Karnataka High Court ruling which had held that the corporation’s Chairman does not enjoy any unbridled powers to fix pay scales and other benefits for the employees.

The Gujarat and Kerala High Court had ruled in favour of the High Court earlier, but the Karnataka High Court gave contrary ruling following which the corporation had appealed in the Apex Court.

The Chairman or the other authorities can invoke the powers only as delegated to them under the relevant statute.

The dispute related to fixation of reduced gratuity to officers who had retired prior to August one, 1994. According to an order passed by the Chairman, those employees who retired prior to August one, 1994, were entitled to reduced gratuity based on the pay scale.

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