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Section 4(5) of the Payment of Gratuity Act allows an employer to offer an employee a gratuity scheme better than the one enshrined in the Act.
An employer can’t in its scheme deny interest on gratuity, already assured by the Act, the Supreme Court ruled in Y.K. Singla v. Punjab National Bank .
The appellant was proceeded against for entering into a criminal conspiracy in granting loan in his capacity as a bank employee. His gratuity was withheld pending completion of the proceedings.
The gratuity he received on acquittal was without interest. The bank contended that according to its scheme, no interest was payable while the proceedings were on. The Supreme Court ordered payment of interest from the date of his retirement in 1996 till the payment of gratuity in 2010.
(The author is a New Delhi-based chartered accountant.)
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