Court holds gratuity ceiling enhancement from Rs.10 lakh to Rs.20 lakh applicable only from March 29, 2018, rejecting claims of Federation employees retired between 2016 and 2018 for retrospective benefit
In a significant judgment delivered on September 22, 2026, the Himachal Pradesh High Court (Division Bench comprising Justices Ajay Mohan Goel and Yogesh Jaswal) dismissed a writ petition filed by retired employees of the Himachal Pradesh State Co-operative Marketing and Consumers Federation Limited (HIMFED). The petitioners sought the benefit of enhanced gratuity ceiling of Rs.20,00,000/- effective retrospectively from January 1, 2016, following a State Government Office Memorandum that revised gratuity benefits for government employees.
The petitioners, who retired between January 1, 2016, and March 29, 2018, contended that since the State Government had revised gratuity benefits applicable to its employees with effect from January 1, 2016, the HIMFED employees, being under the control of the State, were also entitled to the enhanced gratuity from the same date. They challenged the Federation's decision to grant the enhanced gratuity only from March 29, 2018, the date when the Central Government amended the Payment of Gratuity Act, 1972, increasing the maximum gratuity limit from Rs.10,00,000/- to Rs.20,00,000/-.
The Court carefully analyzed the provisions of the HIMFED Service Rules, particularly Rule 3.10, which provides that gratuity for Federation employees is payable strictly in accordance with the Payment of Gratuity Act, 1972, as amended from time to time. The Court observed that the amendment increasing the gratuity ceiling came into effect on March 29, 2018, by virtue of a Central Government notification under the Payment of Gratuity Act. Therefore, the Federation was justified in granting the enhanced gratuity only to employees retiring on or after that date.
Rejecting the petitioners' argument that the State Government's Office Memorandum dated February 25, 2022, which made the enhanced gratuity applicable from January 1, 2016, should bind the Federation, the Court held that the Office Memorandum was limited to State Government employees only and could not be extended to autonomous bodies like the Federation without a statutory or service rule basis. The Court emphasized that the Federation is governed by its own bylaws and service rules, and there was no legal foundation to mandate parity with State Government employees regarding gratuity.
The Court also clarified the distinction between gratuity and leave encashment benefits in Rule 3.10 of the Service Rules. While gratuity is governed by the Payment of Gratuity Act, leave encashment benefits follow the leave rules applicable to Government employees as amended from time to time. The amendment in Rule 3.10 introduced leave encashment benefits but did not alter the existing position that gratuity entitlement is regulated solely by the Payment of Gratuity Act.
Lastly, the Court declined to adjudicate on claims relating to arrears of revised pay scale and leave encashment raised by the petitioners in the present proceedings, granting them liberty to pursue such claims independently through appropriate legal channels.
In conclusion, the Himachal Pradesh High Court held that the Federation employees are entitled to gratuity as per the Payment of Gratuity Act, 1972, and the enhancement of gratuity ceiling from Rs.10,00,000/- to Rs.20,00,000/- applies only from March 29, 2018. The petitioners retired before this date are not entitled to retrospective benefits. The writ petition was dismissed accordingly.
Bottom Line:
Employees of HIMFED are entitled to gratuity as per the Payment of Gratuity Act, 1972 and not automatically on parity with State Government employees; enhancement of gratuity ceiling from Rs.10,00,000/- to Rs.20,00,000/- is applicable to Federation employees only from 29.03.2018, the date on which the Central Government notification under the Payment of Gratuity Act took effect. State Government Office Memorandum granting revised gratuity from 01.01.2016 to its own employees does not confer a corresponding right on Federation employees. Claim regarding arrears of revised pay scale and leave encashment was left open to be agitated separately.
Statutory provision(s):
Payment of Gratuity Act, 1972; HIMFED Service Rules, Rule 3.10; Central Civil Services (Pension) Rules, 1972 (Rule 50(1)(b))
