Assam Financial Corporation Must Pay Gratuity as per State-Notified Ceiling | SC

Case Details: Assam Financial Corporation Ltd. vs. Bhabendra Nath Sarma - [2025] 180 taxmann.com 47 (SC)

Judiciary and Counsel Details

• J.K. Maheshwari & Vijay Bishnoi, JJ.
• Preetesh Kapur, Sr. Adv. & Debojit Borkakati, AOR for the Petitioner.
• Kaushik Choudhury, Ms Diksha Rai, Santosh Krishnan, AORs, Bipul Sarmah, Jyotirmoy Chatterjee, Saksham Garg, Piyush Vyas, Ms Purvat Wali, Ms Apurva Sachdev, Irfan Hasieb, Krishna Jyoti Deka, Vijay Deora, Ashwin Joseph, Advs. & Chinmoy Pradip Sharma, Sr. A.A.G. for the Respondent.

Facts of the Case

In the instant case, the Respondents were employees of the appellant, AFC, and retired on superannuation between 2018 and 2019. Upon retirement, retiral dues were paid, including gratuity, as per the regulations of the AFC, specifically the Assam Financial Corporation (Payment of Gratuity to Employees) Regulation, 1964, read in conjunction with the Assam Financial Corporation (Amendment) Staff Regulations, 2007.

Respondents filed a writ petition before the High Court, contending that they were entitled to gratuity as per section 4(5) of the Payment of Gratuity Act, 1972. Still, the ceiling for gratuity as per the AFC’s internal regulations was not in sync with the Act.

The Staff Regulations of AFC initially provided a ceiling of Rs. 3.5 Lakhs for the payment of gratuity, which was subsequently enhanced to Rs. 7 lakhs vide Office Order in parity with Government of Assam employees.

The High Court, by the impugned order, confirmed the view taken by the Single Judge, granting the benefit of enhanced gratuity in terms of the provisions of the Payment of Gratuity Act, 1972. Thereafter, an appeal was made before the Supreme Court.

It was noted that, in case where the limit prescribed by the State Government is higher than limit set by AFC, import of Regulation 107 of the Assam Financial Corporation (Payment of Gratuity to Employees) Regulation, 1964, has to be interpreted in such a manner that benefit of higher limit set by the State Government has to be given to employees of AFC.

Supreme Court Held

The Supreme Court observed that the import of Regulation 107 of 2007 Regulations is such that the higher limit for gratuity set by the State Government shall apply to AFC. Further, respondents were ‘employees’ within the meaning of section 4 of the Payment of Gratuity Act, 1972.

The Supreme Court held that, in view of the non-obstante clause as contained in section 14, respondents were entitled to a higher ceiling of gratuity which is payable under section 4 of the Payment of Gratuity Act, 1972. Thus, the appeal against the impugned order passed by the High Court was to be dismissed.

List of Cases Reviewed

• Order of the Division Bench of the Gauhati High Court in Writ Appeal No. 260 of 2022, dated 25-07-2023 (para 21) affirmed