The Supreme Court has clarified that an employee who resigns or opts for voluntary retirement is entitled to gratuity under the Payment of Gratuity Act, 1972, provided the individual has completed at least five years of continuous service. The ruling came from a bench comprising Justice Rajesh Bindal and Justice Manmohan, marking a significant reaffirmation of statutory protection for workers across the country.
Court directs DTC to release gratuity to legal heirs
The case concerned a long-serving Delhi Transport Corporation (DTC) employee who had resigned after nearly three decades of service due to pressing family circumstances. Despite 30 years of uninterrupted employment, the corporation denied him gratuity, pension, and leave encashment, citing resignation as a forfeiture of all retirement-related benefits.
Following his death, his legal heirs pursued the claim, eventually reaching the Supreme Court after contesting the corporation’s interpretation of service rules and statutory obligations.
In its ruling, the apex court directed DTC to immediately disburse gratuity to the family of the deceased employee, reinforcing that the organisation was bound by the Payment of Gratuity Act, 1972, as it did not possess any exemption from its application.
Pension denial upheld, but gratuity cannot be withheld
While the bench upheld the Delhi High Court’s earlier view that the employee’s resignation resulted in forfeiture of past service—making him ineligible for pension under Rule 26 of the Central Civil Services (Pension) Rules, 1972—it drew a sharp distinction between pensionary benefits and gratuity.
The judgment, authored by Justice Bindal, emphasised that gratuity is a statutory right under Section 4 of the Payment of Gratuity Act. The provision clearly states that an employee who has completed not less than five years of service is entitled to gratuity “regardless of the fact that he had retired or resigned from service.”
The Court underlined that statutory protection cannot be diluted by internal service rules, reaffirming the purpose of the 1972 Act—to ensure financial security and dignity for employees and their families after long-service tenures.
A ruling with wider significance for workers
Labour law experts note that this ruling strengthens the rights of millions of employees in both public and private sectors, particularly in cases where resignation occurs due to illness, family responsibilities, or unavoidable personal circumstances.
The Supreme Court’s categorical affirmation removes ambiguity for organisations that attempt to deny gratuity by equating resignation with forfeiture of benefits. The ruling also aligns with earlier judicial reasoning that gratuity is a form of deferred wage and cannot be withheld except under specific statutory grounds.
This judgment is expected to influence service-related disputes nationwide, including those in Karnataka, where workers in transport, manufacturing, and public service sectors often face delays or disputes regarding gratuity settlements.