In a decisive ruling, the Karnataka High Court has reaffirmed the strict statutory requirement under Section 4 of the Payment of Gratuity Act, 1972 that an employee must complete not less than five years of continuous service to be eligible for gratuity. The Court set aside orders passed by the Controlling Authority and Appellate Authority, holding that their failure to apply this mandatory provision rendered their decisions unsustainable in law.
Background & Facts
The Dispute
The petitioner, M/s. Bengaluru Metro Rail Corporation Limited (BMRCL), challenged orders passed by the Controlling Authority and Appellate Authority under the Payment of Gratuity Act, 1972, directing it to pay gratuity to the first respondent, Sri. Nandeesh H.V. The dispute arose when the first respondent, who had rendered 4 years, 9 months, and 12 days of service, tendered his resignation on 19.03.2022 and subsequently claimed gratuity.
Key Facts
- The first respondent was appointed by BMRCL on 09.06.2017
- He resigned on 19.03.2022, having completed 4 years, 9 months, and 12 days of service
- He filed an application before the Controlling Authority seeking gratuity under the Payment of Gratuity Act, 1972
- The Controlling Authority, by order dated 22.10.2024, directed BMRCL to pay gratuity
- BMRCL filed an appeal before the Appellate Authority, which was dismissed by order dated 22.09.2025
- BMRCL challenged both orders before the Karnataka High Court
Procedural History
- 19.03.2022: First respondent resigned from service
- Application filed: First respondent sought gratuity before the Controlling Authority
- 22.10.2024: Controlling Authority passed order directing payment of gratuity (Annexure-D)
- Appeal filed: BMRCL appealed to the Appellate Authority
- 22.09.2025: Appellate Authority dismissed the appeal (Annexure-E)
- 2025: BMRCL filed Writ Petition No. 35414 of 2025 before the Karnataka High Court
- 29.06.2026: High Court allowed the writ petition
Relief Sought
The petitioner sought:
- Quashing of the order dated 22.10.2024 passed by the Controlling Authority
- Quashing of the order dated 22.09.2025 passed by the Appellate Authority
- Directions for refund of any amount deposited pursuant to the impugned orders
The Legal Issue
The central question before the Court was whether an employee who has not completed five years of continuous service as mandated under Section 4 of the Payment of Gratuity Act, 1972 is entitled to receive gratuity upon resignation.
Arguments Presented
For the Petitioner (BMRCL)
- Contended that Section 4 of the Payment of Gratuity Act, 1972 explicitly requires not less than five years of continuous service for gratuity eligibility
- Argued that the first respondent’s service period of 4 years, 9 months, and 12 days fell short of the statutory requirement
- Submitted that the Gratuity Authorities failed to consider this mandatory provision and erroneously directed payment of gratuity
For the Respondents
- The first respondent relied on the orders of the Controlling Authority and Appellate Authority, which had directed payment of gratuity
- The State respondents (Labour Officer and Assistant Labour Commissioner) did not contest the petitioner’s submissions on merits
The Court's Analysis
The Court observed that the issue fell within a narrow compass and pertained solely to the interpretation of Section 4 of the Payment of Gratuity Act, 1972. The provision unequivocally states:
"Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years."
The Court held that the Gratuity Authorities had failed to have regard to the relevant considerations and disregarded the statutory mandate. By directing payment of gratuity to an employee who had not completed the requisite five years of service, the authorities had acted contrary to law.
The Court emphasized that statutory provisions must be strictly construed, particularly when they prescribe mandatory eligibility criteria. The orders of the Gratuity Authorities were thus unsustainable in law and liable to be set aside.
The Verdict
The Karnataka High Court allowed the writ petition and issued a Writ of Certiorari. The Court:
- Quashed the order dated 22.10.2024 passed by the Controlling Authority (Annexure-D)
- Quashed the order dated 22.09.2025 passed by the Appellate Authority (Annexure-E)
- Directed that any amount deposited pursuant to the impugned orders be refunded to the petitioner
What This Means For Similar Cases
Strict Compliance with Statutory Mandates
This judgment reaffirms that statutory eligibility criteria under the Payment of Gratuity Act, 1972 are non-negotiable. Employers and employees must note:
- Five years of continuous service is a mandatory requirement for gratuity eligibility
- Gratuity Authorities cannot override this provision even if they perceive the employee’s service period as substantial
- Any order directing payment of gratuity in contravention of this provision is liable to be set aside
Judicial Review of Administrative Orders
- Courts will strictly scrutinize orders passed by quasi-judicial authorities under the Payment of Gratuity Act
- Authorities must apply the law as it stands and cannot exercise discretion to relax statutory requirements
- Practitioners should challenge erroneous orders through writ petitions where statutory provisions are disregarded
Practical Implications for Employers
- Employers must ensure compliance with the five-year service requirement before processing gratuity claims
- In cases of premature resignation, employers can resist gratuity claims by relying on Section 4 of the Act
- Employers should maintain accurate service records to defend against unwarranted claims
