The Himachal Pradesh High Court has affirmed that an employee’s entire service, including the period spent on daily wage basis prior to regularization, must be counted for calculating gratuity under the Payment of Gratuity Act, 1972. This ruling reinforces the principle that statutory welfare benefits cannot be denied on technical grounds, even when the employer delays regularization.
Background & Facts
The Dispute
The dispute arose over the calculation of gratuity payable to Joginder Singh, a former Class-IV employee of the Public Works Department, Government of Himachal Pradesh. The petitioner-State contended that only the period after regularization in 2012 should be considered for gratuity computation, excluding the 12-year period during which Singh was employed on a daily wage basis from 2000 to 2012.
Key Facts
- Respondent Joginder Singh was engaged as a Beldar (Class-IV) on daily wage basis on 01.08.2000
- His services were regularized w.e.f. 01.01.2012 pursuant to official orders
- He retired on superannuation on 31.01.2017 after rendering a total of 16 years and 6 months of continuous service
- The daily wage service spanned 240 days per calendar year from 01.08.2000 to 31.12.2011
- The employer did not pay gratuity for the entire period, prompting the respondent to file an application under Section 7 of the Payment of Gratuity Act, 1972
- The Controlling Authority, Mandi Zone, by order dated 31.03.2018, awarded gratuity of ₹1,45,385/- based on total service, with interest at 10% per annum from 01.02.2017
- The State filed an appeal before the Joint Labour Commissioner-cum-Appellate Authority on 03.08.2018 (claimed as 30.07.2018)
- The Appellate Authority dismissed the appeal on 15.07.2019, holding it time-barred under Section 7(7) of the Act
Procedural History
- 01.08.2000: Respondent engaged as daily wage worker
- 01.01.2012: Services regularized
- 31.01.2017: Respondent retired
- 31.03.2018: Controlling Authority awarded gratuity of ₹1,45,385/- with 10% interest from 01.02.2017
- 03.08.2018: Appeal filed by State (claimed as 30.07.2018)
- 15.07.2019: Appellate Authority dismissed appeal as time-barred (124 days delay)
- 20.09.2020: Writ Petition (CWP No.3983 of 2020) filed before Himachal Pradesh High Court
- 18.05.2026: Judgment delivered by Justice Jiya Lal Bhardwaj
Relief Sought
The petitioners sought quashing of the Controlling Authority’s order dated 31.03.2018 and the Appellate Authority’s order dated 15.07.2019, arguing that:
- Only post-regularization service should count for gratuity
- The appeal was filed within 120 days
- The entire service calculation violated the Act
The Parties' Positions
Petitioners (State of HP): Argued that daily wage service cannot be included in gratuity computation, citing conflicting Supreme Court judgments and the Finance Department’s circular dated 31.12.2020. Claimed the appeal was filed within limitation.
Respondent (Joginder Singh): Did not file a written reply, but his counsel supported the Controlling Authority’s order, asserting statutory entitlement under the Act.
The Legal Issue
The central question was whether the entire service rendered by an employee, including the period of daily wage employment prior to regularization, must be counted for the purpose of calculating gratuity under Section 4(2) of the Payment of Gratuity Act, 1972, and whether an appeal filed beyond 120 days under Section 7(7) is maintainable.
Arguments Presented
For the Appellant/Petitioner
The State relied on the conflict between Netram Sahu v. State of Chhattisgarh (2018) and Bharat Sanchar Nigam Ltd. v. Teja Singh (2009), arguing that the matter had been referred to a larger bench in Dhansai Sahu v. State of Chhattisgarh (C.A. No.564 of 2020), and therefore the matter should be adjourned sine die. It further contended that the appeal was filed within 120 days from receipt of the order on 04.04.2018, and that daily wage service should not be included as it was not ‘regular service’ under the Act.
For the Respondent/State
The respondent’s counsel relied on the binding precedent of Netram Sahu v. State of Chhattisgarh, emphasizing that the Act is a welfare legislation meant to protect long-serving employees. He argued that once services are regularized, the entire continuous service must be counted, regardless of initial employment status. He also cited Bindumati v. State of H.P. and Kirpa Ram v. State of HP as consistent judicial affirmations.
The Court's Analysis
The Court undertook a detailed review of the statutory framework and binding precedents. It noted that the Payment of Gratuity Act, 1972 is a welfare legislation designed to secure the economic rights of employees who render long and continuous service. The Court emphasized that the Act does not distinguish between daily wage and regular service for the purpose of gratuity computation once regularization has occurred.
"In our considered opinion, once the State regularized the services of the appellant while he was in State services, the appellant became entitled to count his total period of service for claiming the gratuity amount subject to his proving continuous service of 5 years as specified under Section 2A of the Act which, in this case, the appellant has duly proved."
The Court held that the judgment in Netram Sahu continues to govern despite its referral to a larger bench, citing Rajnish Kumar Rai v. Union of India and Ashok Kumar v. UOI, which establish that a decision remains binding until overruled by a larger bench. The Court further relied on its own co-ordinate bench’s decision in Deputy Director, Animal Husbandry v. Rup Singh Thakur, which had applied the same principle.
Regarding the limitation issue, the Court accepted the Appellate Authority’s finding that the appeal was filed on 03.08.2018, which was 124 days after the order dated 04.04.2018. The Court rejected the petitioner’s claim of filing on 30.07.2018, noting that the Appellate Authority had recorded the correct date. It affirmed the principle laid down in Deputy Director, Animal Health v. Satish Kumar that the 120-day limitation under Section 7(7) is mandatory and no extension is permissible.
The Court also noted that the State had not challenged the Controlling Authority’s order through appeal within the statutory period, thereby allowing it to attain finality. The Finance Department’s circular dated 31.12.2020 could not override a statutory right established by judicial precedent.
The Verdict
The petition was dismissed. The Court upheld the Controlling Authority’s order dated 31.03.2018, which awarded gratuity of ₹1,45,385/- with interest at 10% per annum from 01.02.2017. The State was directed to pay the entire amount within three months from the date of judgment. No costs were awarded.
What This Means For Similar Cases
Entire Service Must Be Counted Upon Regularization
- Practitioners must argue that any employee whose services are regularized is entitled to gratuity based on total continuous service, including daily wage tenure
- Employers cannot invoke Finance Department circulars or internal policies to deny statutory gratuity
- The Netram Sahu precedent is binding across all Indian jurisdictions until overruled by a larger bench
Limitation Under Section 7(7) Is Strict
- Appeals against Controlling Authority orders must be filed within 120 days from receipt of the order
- No equitable extension is permissible, even for government departments
- The date of filing recorded in the appellate record prevails over the petitioner’s claim
Welfare Legislation Overrides Technical Defenses
- Courts will not permit the State to deny benefits on technical grounds when the employee has rendered long, uninterrupted service
- The burden is on the employer to act promptly and fairly, not to delay and litigate
- Any attempt to re-litigate a final order after acquiescence will be rejected
