SUPREME COURT RULES: ASSAM FINANCE CORPORATION RETIREES ENTITLED TO HIGHER GRATUITY, SAYS NO DISCRIMINATION AFTER STATE FIXES ENHANCED LIMIT:

The Supreme Court recently upheld a ruling of the Gauhati High Court granting retired employees of the Assam Financial Corporation (AFC) the benefit of a higher gratuity limit fixed by the State Government. The apex court refused to interfere with the High Court’s decision and emphasized that once the State Government prescribes a higher gratuity ceiling, all employees governed by those regulations must be treated equally, without any discrimination in the disbursal of the amount.

The case arose when a group of employees who retired from the Assam Financial Corporation between 2018 and 2019 were paid gratuity subject to a ceiling of ₹7 lakhs. This ceiling was fixed under the internal regulations of the Corporation, even though the Government of Assam had already enhanced the gratuity limit to ₹15 lakhs in accordance with the Payment of Gratuity Act, 1972. Feeling aggrieved, the retired employees approached the Gauhati High Court seeking parity with the State Government employees.

The Single Judge and subsequently the Division Bench of the High Court ruled in favor of the employees. They held that under Regulation 107 of the Assam Financial Corporation Staff Regulations, 2007, the gratuity ceiling applicable to AFC employees was directly tied to the limit notified by the State Government. Therefore, when the State increased the gratuity ceiling, the benefit automatically extended to employees of the Corporation without the need for a separate resolution from the AFC Board.

Challenging this interpretation, the AFC appealed to the Supreme Court, contending that the enhanced ceiling fixed by the State could not automatically apply to its employees unless and until the Corporation’s Board formally adopted it. According to the Corporation, the payment of gratuity had to be governed strictly by its internal rules, and any modification required explicit approval from the Board.

The retired employees, however, argued that they were entitled to the higher ceiling of ₹15 lakhs since that was the limit applicable to State Government employees at the time of their retirement. They contended that the subsequent delay by the AFC in implementing the revised limit could not deprive them of a benefit that was already in effect under the State’s notification.

After hearing both sides, the bench of Justices J.K. Maheshwari and Vijay Bishnoi dismissed the Corporation’s appeal. In a judgment authored by Justice Maheshwari, the Court interpreted Regulation 107 and held that the higher gratuity limit prescribed by the State Government must automatically apply to the employees of the AFC. The Court reasoned that requiring a separate approval from the AFC Board would defeat the very purpose of the regulation and would amount to denying employees the benefits to which they were rightfully entitled.

The Court further observed that employees who retired in the intervening period between the State’s enhancement of the gratuity limit and the AFC’s eventual decision to adopt it should not be penalized due to administrative inaction. Denying them the higher ceiling would, in the Court’s view, amount to inequitable treatment. The Court noted that the AFC’s failure to promptly align its gratuity regulations with those of the State demonstrated lethargy and negligence, and it would be unjust to make employees bear the consequences of such delay.

Accordingly, the Supreme Court affirmed the High Court’s decision and dismissed the AFC’s appeal. The ruling reinforces the principle that once a higher gratuity limit is prescribed by the State Government, all similarly placed employees are entitled to equal treatment, and no discrimination can be permitted in the payment of gratuity.