The Supreme Court held that under the AFC’s Staff Regulations, the gratuity ceiling for employees is linked to notifications issued by the State Government. Consequently, AFC employees are entitled to the enhanced gratuity limit prescribed by the Government of Assam, as the regulations incorporate such external ceilings for employee benefit.
Facts Of The Case:
The Assam Financial Corporation Limited (AFC) appealed against a High Court judgment favouring its retired employees. The employees, who retired between 2018–2019, had been paid gratuity under AFC’s internal regulations, which had a ceiling of Rs. 7 lakhs as per a 2012 office order. They contended that they were entitled to a higher gratuity ceiling as per the Payment of Gratuity Act, 1972, which was aligned with the enhanced limit of Rs. 15 lakhs adopted by the Government of Assam. The AFC argued that its Board had deferred a proposal to enhance the limit in 2022 and that the higher government ceiling did not apply automatically. The Supreme Court examined AFC’s 2007 Staff Regulations, which stipulated that gratuity was payable subject to a maximum limit “as notified by the Govt. of Assam from time to time.” The Court found that this clause imported the higher limit set by the State Government into AFC’s regulations. It held that the employees were entitled to the benefit of the Rs. 15 lakh ceiling, rejecting AFC’s claim that a separate Board approval was required, as the regulation itself provided for the applicability of the state-notified limit.
Procedural History:
The legal dispute originated with a writ petition filed by the retired employees before the Gauhati High Court, challenging the gratuity ceiling applied by the Assam Financial Corporation (AFC). The Learned Single Judge allowed the petition, directing payment of gratuity as per the enhanced ceiling under the Payment of Gratuity Act, 1972. The AFC then filed a Writ Appeal before the Division Bench of the High Court, which dismissed the appeal and upheld the Single Judge’s judgment. Aggrieved by this decision, the AFC filed a Special Leave Petition (SLP) before the Supreme Court of India, which granted leave and led to the present Civil Appeal. The Supreme Court, after hearing the parties, ultimately dismissed the appeal and affirmed the judgments of the High Court, directing the AFC to calculate and pay the enhanced gratuity within six months.