Introduction:
In P. Gopinathan v. Union of India [2026 LiveLaw (Ker) 401], the Kerala High Court upheld the constitutional validity of the second proviso to Section 8 of the Payment of Gratuity Act, 1972, holding that the statutory ceiling limiting recoverable interest on delayed gratuity to the amount of gratuity itself is a matter of legislative policy and does not violate Article 14 of the Constitution. Justice Gopinath P dismissed a writ petition filed by a retired employee who challenged the provision after being denied a portion of the interest recovered from his employer through revenue recovery proceedings.
The petitioner, a former employee of the Economic Transport Organisation, had been awarded gratuity of ₹1,88,752 along with statutory interest by the Controlling Authority under the Payment of Gratuity Act. As the employer failed to comply with the order, the authorities initiated revenue recovery proceedings and recovered ₹4,57,219. However, while disbursing the recovered amount, the authorities applied the second proviso to Section 8, restricting the recoverable interest to an amount not exceeding the gratuity payable. Consequently, the petitioner received ₹3,77,504 instead of the entire recovered amount. Aggrieved by this restriction, he approached the High Court questioning the constitutional validity of the statutory provision.
Arguments of the Parties:
The petitioner argued that the second proviso to Section 8 created an arbitrary distinction between employees whose employers voluntarily paid gratuity and those who were compelled to recover the amount through statutory proceedings. According to him, Section 7(3A) of the Payment of Gratuity Act provides for payment of simple interest on delayed gratuity without prescribing any ceiling. Therefore, limiting recoverable interest only when the amount is realised through revenue recovery proceedings resulted in unequal treatment among similarly placed employees.
It was further contended that this distinction lacked any reasonable basis and violated the guarantee of equality under Article 14 of the Constitution. The petitioner submitted that an employee should not suffer a reduction in statutory interest merely because the employer failed to honour the gratuity order voluntarily, forcing the employee to invoke coercive recovery mechanisms.
The Government Pleader opposed the writ petition and submitted that the provisions of Sections 7 and 8 of the Payment of Gratuity Act must be read together. It was argued that although Section 7(3A) provides for payment of simple interest on delayed gratuity, it does not exclude the operation of the second proviso to Section 8. According to the State, the legislative intention was to ensure that while interest remains payable, the total recoverable interest cannot exceed the gratuity amount itself. Therefore, the Controlling Authority had correctly applied the statutory limitation.
Court’s Judgment:
The Kerala High Court rejected the petitioner’s challenge and upheld the constitutional validity of the second proviso to Section 8 of the Payment of Gratuity Act.
The Court held that the petitioner’s interpretation treated Sections 7 and 8 as conflicting provisions, whereas they are intended to operate harmoniously. Justice Gopinath P observed that Section 7(3A), which grants simple interest on delayed payment of gratuity, cannot be read in isolation. The provision must be interpreted along with Section 8, which prescribes the mechanism for recovery of gratuity and places a statutory cap on the recoverable interest.
The Court noted that nothing in Section 7 or Section 7(3A) indicates that the restriction contained in the second proviso to Section 8 ceases to apply merely because interest has become payable under Section 7(3A). Both provisions complement each other and must be construed in a manner that gives effect to the legislative scheme as a whole.
Addressing the constitutional challenge under Article 14, the Court reiterated that legislation can be invalidated only on recognised constitutional grounds, such as lack of legislative competence, infringement of fundamental rights, violation of the Constitution’s basic structure, or manifest arbitrariness, as recognised by the Supreme Court in Shayara Bano v. Union of India (2017) 9 SCC 1. The petitioner had failed to establish any of these grounds.
The Court emphasised that prescribing a ceiling on recoverable interest is essentially a matter of legislative policy. It observed that courts cannot substitute their own views for the wisdom of Parliament merely because a different policy choice may appear more beneficial to one class of litigants. Unless a statutory provision is shown to be unconstitutional, judicial interference is unwarranted.
Applying the principle of harmonious construction, the Court held that Section 7 creates the right to receive gratuity with statutory interest, while Section 8 governs the mode of recovery and imposes a legislative limit on the amount of recoverable interest. These provisions are not inconsistent but operate together within the statutory framework.
The Court therefore concluded that the second proviso to Section 8 does not create any unconstitutional discrimination and cannot be characterised as arbitrary. Since the Controlling Authority had correctly applied the statutory ceiling while disbursing the recovered amount, there was no legal infirmity in its action.
Accordingly, the writ petition was dismissed, and the constitutional validity of the second proviso to Section 8 of the Payment of Gratuity Act, 1972, was upheld. The judgment reaffirms the principle that legislative policy choices relating to economic and labour welfare legislation are entitled to judicial deference unless they clearly violate constitutional limitations. It also underscores the importance of reading statutory provisions harmoniously to preserve the overall legislative intent rather than interpreting them in isolation.