Delhi HC Says Gratuity Not Government Bounty | Orders UOI To Pay With Interest | Slams 18-Year Delay As Unconscionable
Safiya Malik
The High Court of Delhi Division Bench of Justice C. Hari Shankar and Justice Ajay Digpaul held that the delayed payment of terminal gratuity to a retired employee constituted an unconscionable lapse and directed the Union of India to release the gratuity amount of USD 23,879.94 with interest. The court dismissed the Union's petition challenging the grant of interest and upheld the Tribunal's finding that the delay was partly attributable to the authorities. However, the Bench also issued notice in the employee’s petition seeking enhancement of interest rate and period, allowing further legal scrutiny on that front.
The dispute arose over the entitlement of Ms. Promila Sawhney, a former Secretary at the Government of India Tourist Office in Los Angeles, to interest on delayed payment of terminal gratuity following her resignation in October 2000 after 22 years of service. While the Union of India (UOI) eventually sanctioned the gratuity amount of USD 23,879.94, it denied her claim for interest and attorney’s fees, prompting the present litigation.
Promila was initially appointed on a regular basis via an order dated 27 March 1978 and served until 31 October 2000. Upon resignation, she received only the leave salary amounting to USD 3338.01, with no gratuity. Repeated representations starting from 2001 were made by her, including correspondence with officials of the Ministry of Tourism and India Tourism offices in the USA. These appeals cited not only legal entitlements but also personal circumstances including single parenthood and financial distress.
The Director of the Tourist Office, in a letter dated 7 November 2001, recommended her claim for gratuity. Another correspondence dated 26 June 2002 reasserted this recommendation. Despite these, Promila’s requests remained unheeded. She submitted several further representations from 2016 to 2017 and finally sent a legal notice on 26 October 2018.
In response to this legal notice, an official email dated 2 November 2018 informed her counsel that gratuity had been approved and would be released. However, a subsequent letter dated 6 December 2018 retracted this assurance, citing the statute of limitations and labelling her claim as barred and stale. This retraction led Promila to file OA 1940/2021 before the Central Administrative Tribunal (CAT), seeking release of the gratuity with interest at 12% per annum and attorney’s fees.
The Tribunal, by its judgment dated 27 February 2024, upheld her claim to gratuity with interest. However, it limited the interest to a simple 1.5% per annum for the period between 1 November 2000 and 1 August 2019. The Union challenged this decision in W.P.(C) 1941/2025, arguing against any interest, while Promila sought enhancement of both rate and duration in W.P.(C) 8244/2024.
The Division Bench categorically rejected the Union’s preliminary objection regarding maintainability of Promila’s petition. "Section 14(1)(b)(ii) of the Administrative Tribunals Act, 1985 extends the jurisdiction of the Tribunal to 'all service matters' concerning a person... in connection with the affairs of the Union," the court noted. It also recorded that her appointment order specifically subjected her service conditions to Indian Government regulations.
On the question of gratuity entitlement, the Bench observed, "At the time of her resignation, she was an Indian citizen. Her right to terminal gratuity crystallised on that date. As such, any subsequent acquisition of US citizenship would make no difference."
With respect to the enforceability of a 1966 communication stating that gratuity was not to be claimed as a matter of right, the court held, "Such a stipulation would also infract Section 28(a) of the Indian Contract Act, 1872... and is unconstitutional and unenforceable in law."
On the central issue of delayed payment, the court stated: "Terminal benefits, which constitute the means of livelihood of an employee in the evening of her, or his, life, are not a bounty, and have to be paid with all due alacrity. Delay in payment of terminal benefits is unconscionable in law and in fact."
The Bench found that Promila had been persistently seeking her gratuity since 2000. It noted: "There is not a whisper of a justification for the respondents sitting on Promila’s legitimate claim for 18 years." It was further recorded that the UOI only acknowledged the entitlement after a legal notice in 2018 and then retracted the offer, which the court termed "unsavoury and unjustified."
Regarding the Tribunal’s award of interest at 1.5% per annum, the Bench expressed a need for further examination: "The legality of such a condition, as imposed on Promila, to our mind, is seriously disputable... The facts and circumstances of the present case are distinguishable."
The court cited Supreme Court precedents including S.K. Dua v State of Haryana and Union of India v Tarsem Singh to affirm that interest on delayed retirement benefits is justiciable. It quoted from S.K. Dua, where the Supreme Court held: "Even in absence of statutory rules, administrative instructions or guidelines, an employee can claim interest under Part III of the Constitution relying on Articles 14, 19 and 21 of the Constitution."
The Division Bench held that the Tribunal’s direction granting gratuity with interest was justified and warranted no interference. It stated: "We, therefore, are of the opinion that, to the extent that the Tribunal has allowed Promila’s claim to terminal gratuity with interest, the impugned judgment is unexceptionable. There is, therefore, no substance, whatsoever, in WP (C) 1941/2025."
However, with regard to the limited rate and duration of interest awarded, the court issued notice in the writ petition filed by Promila. It observed: "We feel, however, that the issue of whether the Tribunal was justified in restricting payment of interest to Promila till 1 August 2019, and fixing the rate of interest at 1.5% p.a., merits consideration."
Consequently, the Bench ordered: "Accordingly, we issue notice in WP (C) 8244/2024... returnable on 17 September 2025. Counter-affidavit be filed within four weeks... Rejoinder thereto, if any, within 4 weeks thereof."
To expedite proceedings, the Bench instructed: "No extension of time for filing counter affidavit and rejoinder shall be granted... Short written submissions, not exceeding four pages each, may also be filed in advance."
In the interim, the Court directed: "We direct that the terminal gratuity of Promila, along with interest as granted by the Tribunal, be released by the UOI within a period of four weeks from today, and a compliance report be placed on record."
The court concluded this portion of the case by stating: "This shall, however, remain subject to the outcome of WP (C) 8244/2024."
Advocates Representing the Parties
For the Petitioners: Mr. Gigi C. George, Standing Counsel with Mr. Ranjit Kumar, Advocate for the Union of India
For the Respondents: Mr. Om Prakash, Mr. Pankaj Kumar Yadav and Mr. Rajeev Ranjan Pathak, Advocates
Case Title: Union of India Through Ministry of Tourism v. Ms. Promila Sawhney and Vice Versa
Neutral Citation: 2025: DHC:5047-DB
Case Numbers: W.P.(C) 1941/2025 & W.P.(C) 8244/2024
Bench: Justice C. Hari Shankar, Justice Ajay Digpaul
