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The Assam Financial Corporation Limited & Ors. vs Bhabendra Nath Sarma & Ors.

Not available · 2025 INSC 1264Decided 14 Oct 2025
Not available
Justice J.K. Maheshwari · Justice Vijay Bishnoi

Background

The respondents were employees of the Assam Financial Corporation (AFC) who retired between 2018 and 2019 and were paid gratuity under the AFC's own 1964 Gratuity Regulations, as amended by 2007 Staff Regulations. They argued they were entitled to a higher gratuity ceiling under Section 4(5) of the Payment of Gratuity Act, 1972, but the AFC applied a lower internal ceiling. The Gauhati High Court's Single Judge and Division Bench both ruled in favour of the employees, prompting the AFC's appeal to the Supreme Court.

Decision Breakdown

The Supreme Court examined Regulation 107 of the 2007 Staff Regulations and found that it imported the higher gratuity ceiling accepted by the State Government under the Payment of Gratuity Act, meaning the employees' entitlement flowed from the AFC's own regulations rather than needing to rely on the Gratuity Act directly. The Court held it would be inequitable for employees to suffer because the AFC delayed updating its ceiling, and deliberately declined to decide the separate, more general question of whether the Payment of Gratuity Act itself applies to AFC employees, leaving that open for a future case. The appeal was dismissed and the AFC was directed to calculate and pay the balance gratuity within six months.

Lesson Learnt

Where an employer's own service regulations independently incorporate a statutory benefit or ceiling, employees can claim that benefit directly under the regulations, and an employer cannot use its own delay in updating internal rules as a shield to deny employees their due.

Official source (sci.gov.in)View Judgment (PDF)

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