The Supreme Court of India, in a judgment dated October 14, 2025, has disposed of an appeal filed by the Assam Financial Corporation (AFC), upholding the conclusion of the Gauhati High Court that retired employees are entitled to a higher gratuity ceiling.
The bench of Justice J.K. Maheshwari and Justice Vijay Bishnoi held that the AFC’s own Staff Regulations (specifically Regulation 107) import the higher gratuity limit “as notified by the Govt. of Assam from time to time.” The Court found that the employees’ right to the higher amount flows from this internal regulation, regardless of the AFC Board’s subsequent decision to defer an enhancement.
Background of the Case
The case was initiated by former employees (Respondents) of the AFC who retired on superannuation between 2018-2019. Upon retirement, they were paid gratuity as per the AFC’s 1964 Regulations and the 2007 Staff Regulations.
The 2007 Staff Regulations had an initial gratuity ceiling of Rs. 3.5 Lakhs, which was enhanced to Rs. 7 Lakhs by an Office Order dated July 25, 2012. This order noted the enhancement was “in line with Govt. of Assam employees.”
The retired employees (original writ petitioners) filed a plea before the High Court, arguing they were entitled to the higher gratuity ceiling applicable to Government of Assam employees (Rs. 15 Lakhs as per the 2017 ROP), which the AFC had not adopted for its employees retiring during that period.
A Learned Single Judge of the Gauhati High Court ruled in favour of the employees, finding they were ’employees’ under the Payment of Gratuity Act, 1972, and entitled to the higher ceiling under the Act. This view was confirmed by a Division Bench in Writ Appeal No. 260 of 2022, prompting the AFC to appeal to the Supreme Court.
Arguments of the Appellant (AFC)
Learned senior counsel for the appellant (AFC) resisted the claim, arguing that the respondents retired when the corporation’s internal ceiling was fixed at Rs. 7 Lakhs.
The AFC contended that notifications issued by the Governor of Assam (dated August 24, 2012, and January 17, 2018) stipulated that any revision of pay or allowances by a State Level Public Enterprise must be adopted by its Board of Directors after examining the financial involvement.
The appellant highlighted that the AFC Board of Directors, in a meeting on March 8, 2022, had considered a proposal for enhancement but “decided to defer the proposal.” Based on this, the AFC argued that the enhanced benefit available to State Government employees could not be automatically granted to its employees.
Court’s Analysis
The Supreme Court’s analysis centered on Clause 107 of the AFC’s 2007 Staff Regulations, which deals with gratuity. The judgment reproduced the regulation, which states that gratuity is to be paid “…subject to maximum of Rs.3.50 lacs or as notified by the Govt. of Assam from time to time…” A similar provision was noted in sub-clause (3) of the same regulation.
The bench observed that this “benevolent provision” must be interpreted in favor of the employees. The Court held that the notifications issued by the Governor regarding Board approval “cannot override the 2007 Regulations” and that the “restriction made in payment of gratuity is not justified.”
The judgment stated: “Once the Regulation itself prescribes for grant of gratuity in terms of the formula contained therein with a limit of Rs. 3.5 Lakhs (later increased to 7 Lakhs) or as notified by the Government of Assam from time to time, in our view, interpretation of the regulation must be made which is in favor of the employees.”
The Court provided a conclusive interpretation of Regulation 107: “…the inescapable conclusion is that the maximum limit for payment of gratuity has to be Rs. 3.5 Lakhs (later enhanced to Rs. 7 Lakhs) or the limit prescribed by the State Government and in case where the limit prescribed by the State Government is higher than the limit set by the AFC, the import of Regulation 107 has to be interpreted in such a manner that the benefit of the higher limit set by the State Government has to be given to the employees of the AFC.”
The bench also noted that the AFC’s internal Memorandum dated March 2, 2022, acknowledged that the Government of Assam’s ceiling was Rs. 15 Lakhs. The Court found that the respondents should not suffer “inequitable treatment” due to the “AFC’s lethargy” in failing to bring parity to the ceiling.
Significantly, the Supreme Court clarified that it was not expressing an opinion on the High Court’s finding regarding the applicability of the Payment of Gratuity Act, 1972. The Court stated its decision was based on separate reasoning: “We say so, because when the regulations themselves (particularly Regulation 107) import the higher ceiling for payment of gratuity… the right of the Respondents flows from the said regulation…”
Decision
In view of its analysis, the Supreme Court agreed with the conclusion reached by the High Court, albeit for its “separate reasons,” and disposed of the appeal.
The court directed that the gratuity for the respondent employees be calculated as per the higher ceiling and paid “within six months from today as directed.”
