The Madhya Pradesh High Court has clarified that reinstatement following termination, even with a 'dies non' designation for the intervening period, constitutes continuation of service for the purpose of calculating gratuity under the Payment of Gratuity Act, 1972. This ruling affirms that employers cannot fragment service periods to avoid statutory obligations, reinforcing the principle that reinstatement restores the employee’s original tenure.
Background & Facts
The Dispute
The dispute arose over the calculation of gratuity payable to Mukul Kumar Chaudhuri, a former employee of Northern Coalfield Limited, following his termination in 2000 and subsequent reinstatement in 2009. The employer paid gratuity only for the two distinct periods of service - 1982 to 2000 and 2009 to 2017 - treating them as separate tenures. The employee contended that his service was continuous, and the period of termination should be excluded but not treated as a break, entitling him to gratuity based on total service of over 25 years.
Key Facts
- The respondent joined Northern Coalfield Limited on 10.09.1982
- He was terminated by order dated 29.11.2000
- The Supreme Court, in a prior proceeding, directed his reinstatement and held he was not entitled to back wages for the period of termination
- The employer issued a reinstatement order dated 28.10.2009, effective 10.11.2009, stating that the period from 29.11.2000 to 09.11.2009 would be treated as 'dies non' - not counted as duty for any purpose, but without break in service
- The respondent continued service until his superannuation on 28.02.2017
- The employer calculated gratuity separately for the two periods and paid Rs. 7,09,800/-
- The respondent claimed gratuity based on total service of 25 years, 6 months, and 9 days, excluding the 'dies non' period
- The controlling authority rejected his claim on 09.10.2021
- The appellate authority, by order dated 20.09.2022, allowed the claim and calculated gratuity at Rs. 24,18,000/-, but capped it at Rs. 20,00,000/- under Section 4(3) of the Payment of Gratuity Act, 1972, as enhanced by the Office Memorandum dated 08.08.2018 (effective 01.01.2017)
- The balance payable was Rs. 12,90,200/- (Rs. 20,00,000 minus Rs. 7,09,800)
- The appellate authority directed payment of 10% simple interest per annum from 01.03.2017 until actual payment
Procedural History
- 29.11.2000: Termination of respondent
- 28.10.2009: Supreme Court order directing reinstatement
- 10.11.2009: Reinstatement effective date
- 09.11.2009: Employer’s reinstatement order issued, declaring intervening period as 'dies non' without break in service
- 28.02.2017: Respondent superannuated
- 09.10.2021: Controlling Authority rejected gratuity claim
- 20.09.2022: Appellate Authority allowed claim, directed payment of Rs. 12,90,200/- with 10% interest from 01.03.2017
- 23.06.2025: Learned Single Judge dismissed writ petition (W.P. No. 26429/2022) filed by employer
- 08.04.2026: Judgment delivered in Writ Appeal No. 2406 of 2025
Relief Sought
The appellant sought to set aside the appellate authority’s order and the Single Judge’s dismissal, arguing that gratuity should be calculated only on the two separate periods of service (1982 - 2000 and 2009 - 2017). The respondent sought enforcement of the appellate authority’s order, including payment of Rs. 12,90,200/- with 10% interest from 01.03.2017.
The Legal Issue
The central question was whether the period of employment prior to termination, followed by reinstatement with a 'dies non' designation for the intervening period but without break in service, must be aggregated for the purpose of calculating gratuity under the Payment of Gratuity Act, 1972.
Arguments Presented
For the Appellant
The appellant contended that the respondent’s service was discontinuous and must be treated as two separate tenures: 1982 - 2000 and 2009 - 2017. It relied on the reinstatement order’s 'dies non' clause to argue that the intervening period could not be counted for any purpose, including gratuity. It cited administrative practice and internal policy to assert that gratuity must be computed on each continuous stretch of service independently. It further argued that the appellate authority erred in treating the service as continuous, thereby inflating the gratuity amount beyond statutory intent.
For the Respondent
The respondent argued that reinstatement, by its very nature, restores the original employment relationship. The 'dies non' designation only excluded the period from being counted as duty for salary or promotion purposes, but the order explicitly stated there was no break in service. He relied on the plain language of the reinstatement order and the object of the Payment of Gratuity Act, 1972, which seeks to reward long-term service. He emphasized that the Act does not distinguish between service interrupted by unlawful termination and reinstated service, and that the Supreme Court’s direction to reinstate implied continuity of tenure.
The Court's Analysis
The Court examined the nature of reinstatement under service law and its implications under the Payment of Gratuity Act, 1972. It noted that reinstatement is not re-employment; it is a restoration of the original service relationship. The Court held that the phrase 'without break in service' in the reinstatement order was decisive. The employer could not unilaterally treat the service as fragmented when it had itself affirmed continuity.
"Reinstatement means continuation of service and therefore, the appellant is estopped from considering the services of the respondent no.1 as two different spells and calculate the amount of gratuity for two different spells."
The Court rejected the appellant’s argument that 'dies non' negated service continuity for gratuity purposes. It clarified that 'dies non' is a technical exclusion for purposes such as seniority, promotion, or back wages, but does not sever the employment link. The Act’s definition of 'continuous service' under Section 2A includes interruptions due to lawful or unlawful termination followed by reinstatement. The Court further observed that the appellate authority correctly excluded the 'dies non' period (29.11.2000 to 09.11.2009) and aggregated the remaining service to arrive at 25 years, 6 months, and 9 days.
The Court also affirmed the application of the enhanced ceiling of Rs. 20,00,000/- under the Office Memorandum dated 08.08.2018, effective 01.01.2017, as the respondent superannuated after that date. The interest rate of 10% per annum from 01.03.2017 was upheld as reasonable and in line with statutory remedies for delayed gratuity payments.
The Verdict
The appeal was dismissed. The Court upheld the appellate authority’s order dated 20.09.2022 and the Single Judge’s order dated 23.06.2025. The appellant was directed to pay the balance gratuity amount of Rs. 12,90,200/- along with 10% simple interest per annum from 01.03.2017 until actual payment. The appellant was given one month from the date of judgment to make the payment.
What This Means For Similar Cases
Reinstatement Preserves Service Continuity for Gratuity
- Practitioners must argue that any reinstatement order stating 'no break in service' triggers aggregation of pre- and post-termination service under the Payment of Gratuity Act, 1972
- Employers cannot rely on 'dies non' clauses to fragment service for gratuity calculation, even if such periods are excluded for salary or promotion
- The Act’s definition of continuous service under Section 2A applies irrespective of the reason for interruption, provided reinstatement occurs
Ceiling Limits Apply to Total Service, Not Separate Spells
- The statutory ceiling under Section 4(3) applies to the total gratuity payable based on cumulative service, not to each period separately
- When the ceiling is enhanced during employment, the higher limit applies if superannuation occurs after the enhancement date
- Employers must recalculate gratuity upon reinstatement, not merely pay on the most recent tenure
Interest on Delayed Gratuity Is Statutorily Presumed
- Delay in payment of gratuity after superannuation attracts interest, and 10% per annum is a reasonable rate where no specific provision exists
- Interest must run from the date of superannuation or the date the claim became due, whichever is later
- Courts will not permit employers to delay payment under the guise of internal review or dispute
