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Management cannot deny gratuity through contract or other instrument: Apex court

Friday, 1 January 2010 - 6:40pm IST | Place: New Delhi | Agency: PTI
The bench said the provision of gratuity can be waived by the management only under exceptional circumstances with the prior approval of the government.

The supreme court has ruled that gratuity is a statutory right of employees which cannot be denied to them on the ground that they are being given provident fund and pension benefits.

The apex court said no establishment can deny gratuity benefit to an employee, as the statutory provision enacted by Parliament cannot be "defeated" by introduction of any "contract or instrument".

"The provisions of the Act prevail over all other enactment or instrument or contract, so far as the payment of gratuity is concerned. The right to receive gratuity under the provisions of the Act cannot be defeated by any instrument or contract," a bench of justices B Sudershan Reddy and RM Lodha said in a judgement.

The apex court passed the judgement while dismissing the appeal of state-owned Allahabad Bank challenging a decision of the high court directing the management to grant gratuity benefts to certain retired employees.

The bank had taken the defence that it can deny gratuity to the employees who are already being extended provident fund and pension benefits as per the undertaking given by the employees.

The bench said the provision of gratuity can be waived by the management only under exceptional circumstances with the prior approval of the government. Such a waiver can be availed of, provided the government takes the view that pensionary and other retiral benefits are more favourable than gratuity benefits, the apex court said.


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