‘Employees Can’t Suffer from Organisation’s Lethargy’: SC Upholds Higher Gratuity for Assam Financial Corporation Staff

A bench of Justices J.K. Maheshwari and Vijay Bishnoi dismissed AFC’s appeal against the High Court’s decision, which had affirmed the entitlement of the Corporation’s retired employees to gratuity at par with State Government employees. Court held that the benefit of the higher limit for payment of gratuity must be extended to AFC staff since the Corporation’s own regulations tied the ceiling to the amount “notified by the Government of Assam from time to time.”

The case stemmed from a dispute between the Corporation and its retired employees, who superannuated between 2018 and 2019. They were paid gratuity capped at Rs. 7 lakh in accordance with AFC’s 2007 Staff Regulations and a 2012 office order. The employees approached the Gauhati High Court claiming entitlement to the revised limit of Rs. 15 lakh, introduced by the State Government in 2017 in line with amendments to the Payment of Gratuity Act, 1972.

Both the single judge and division bench of the High Court accepted their plea, holding that under Section 4(5) of the Gratuity Act and Regulation 107 of the Corporation’s 2007 Regulations, the employees were entitled to the higher limit. AFC, however, challenged the ruling, arguing that the enhancement required the approval of its Board of Directors and could not be applied retrospectively.

During the hearing, the Supreme Court examined Regulation 107, which provides that gratuity shall be paid up to Rs. 3.5 lakh or “as notified by the Government of Assam from time to time.” It observed that this clause clearly imported the ceiling adopted by the State Government. The bench said the Corporation’s failure to align its regulations with the State’s revisions reflected administrative inertia, not a legal bar.

“It would be absolutely inequitable treatment for the respondents to suffer at the behest of the AFC’s lethargy,” the bench observed, adding that the restriction on higher gratuity “is not justified” once the regulation itself adopts the State Government’s notification as a benchmark.

Court also took note of a 2022 memorandum by AFC’s Managing Director acknowledging that most State public sector undertakings had already enhanced their gratuity ceiling to Rs. 15–20 lakh, and recommending parity with Government norms. However, the Board deferred the proposal for further study instead of approving it.

Holding that the employees’ right to enhanced gratuity flowed from Regulation 107 itself, the bench found no reason to interfere with the High Court’s ruling. “When the regulations themselves import the higher ceiling for payment of gratuity as accepted by the State Government, the staff cannot be deprived of it due to the Corporation’s inaction,” the judgment said.

Without delving into whether the Payment of Gratuity Act directly applies to AFC, court disposed of the appeal by directing the Corporation to recalculate and pay the gratuity at the enhanced ceiling within six months.

Case Title: The Assam Financial Corporation Limited & Ors Vs Bhabendra Nath Sarma & Ors

Judgment Date: October 14, 2025