Emphasising that Trust and Trustees are not distinct for gratuity liability, the Bombay High Court has refused to entertain the writ filed under Article 227 of the Constitution as a substitute for the statutory appeal under Section 7(7) of the Payment of Gratuity Act, 1972, as the maximum condonable period of 120 days had expired, reinforcing the legislative intent to prevent employers from dragging employees into endless gratuity litigation.
The Court held that for the purpose of discharging gratuity liability, a Trust and its Trustees are not distinct legal entities, and that service of notice on the authorised person of the Trust, in this case the Administrative Manager Mr. Krishnanath Satardekar, constitutes valid service on all parties under Rule 15(2) of the Payment of Gratuity (Central) Rules, 1972 (P.G. Act).
Accordingly, the Court imposed costs of Rs. 1 lakh on the Breach Candy Swimming Bath Trust after noting that the Trust had actually withdrawn the Respondent’s gratuity amount of Rs. 11.67 lakhs from the LIC on 17 February 2025, even while falsely informing the Respondent that the Managing Committee was reviewing his request, depicting a deliberate design to deny gratuity.
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The Court also directed payment of compound interest at 15% p.a. as specified under Section 8 of the P.G. Act read with the Central Government Notification dated 1 December 1987, instead of the simple interest at 10% p.a. awarded by the Controlling Authority, since the matter had already progressed to the recovery stage due to the Petitioners’ non-compliance.
On the merits of forfeiture under Section 4(6)(a) of the P.G. Act, the Court held that no forfeiture could be inferred because the Petitioners never issued a notice in Form-M specifying the basis and extent of the alleged Rs. 5 crores loss, and because the alleged act of shredding membership records did not constitute a direct loss to the employer’s property as contemplated by the provision.
A Single Judge Bench of Sandeep V. Marne observed that the Petitioners had consciously bypassed the statutory remedy of appeal under Section 7(7) of the Payment of Gratuity Act, 1972 (P.G. Act), which prescribes a maximum limitation of 60 days plus a further condonable period of 60 days, totalling 120 days, beyond which no appeal can be entertained. The Court noted that the Petitioners were fully aware of the gratuity proceedings well before the Controlling Authority passed its order, as the Respondent had written three letters dated 16 December 2024, 25 January 2025, and submitted Form-I on 19 February 2025, all of which were acknowledged by the Trust.
More significantly, the Court observed that the Trust had actually withdrawn the Respondent’s gratuity amount of Rs. 11.67 lakhs from the LIC on 17 February 2025, even while falsely informing the Respondent that the Managing Committee was reviewing his request. The Court rejected the Petitioners’ contention that Mr. Krishnanath Satardekar was not authorised to receive notices, observing that he was the Administrative Manager of the Trust and not merely a Clerk, and that Rule 15(2) of the P.G. Rules specifically permits service on an authorised person when there are numerous parties represented through such a person.
The Court further observed that for the purpose of gratuity liability, the Trust and the Trustees cannot be treated as distinct, since a Trust is not a juristic entity and must be represented through its trustees. On the question of forfeiture under Section 4(6) of the P.G. Act, the Court noted that no notice in Form-M was ever issued by the Petitioners rejecting the gratuity claim, which is mandatory under Rule 8 of the P.G. Rules, and that the alleged act of shredding membership records did not constitute a direct loss to the employer as contemplated by the provision.
Briefly, the Breach Candy Swimming Bath Trust, which runs the elite Breach Candy Club in Mumbai, employed Rajesh Somnath Nerkar as Office Clerk on 1 November 2000, and he rose through the ranks to become Manager by 9 July 2008, serving the Trust for 23 years. In 2012-2013, when the Trust digitised its membership records, the Respondent allegedly shredded the original application forms, an act he purportedly admitted by letter dated 9 December 2022. Following a No-Confidence Resolution against the earlier Managing Committee in October 2013, the new Managing Committee suspended the Respondent on 16 January 2023 and ultimately terminated his services on 2 July 2023.
The Respondent then approached the City Civil Court, which by decree, held the termination illegal and awarded him Rs. 15.38 lakhs with 6% p.a. interest towards arrears of salary, while rejecting both his Rs. 80 lakh damages claim and the Trust’s Rs. 5 crore counter-claim. When the first appeals by both parties are pending consideration, the Respondent filed an Application before the Controlling Authority under the Payment of Gratuity Act, 1972 seeking Rs. 11.67 lakhs as gratuity.
Notices in the gratuity application were served on Mr. Krishnanath Satardekar, the Administrative Manager of the Trust, on 25 March 2025, but the Petitioners did not appear, leading to ex-parte proceedings from 8 August 2025. Later, by order dated 19 November 2025, the Controlling Authority allowed the application and directed payment of Rs. 11.67 lakhs with simple interest at 10% p.a. from 2 July 2023. A copy of this order was served on the Trust by advocate’s notice dated 29 November 2025, but the Petitioners neither complied with the order nor filed an appeal under Section 7(7) of the Payment of Gratuity Act, 1972. Hence, the Respondent was compelled to file Recovery Application.
