Employer must pay interest if salary is delayed: Bombay HC

The employer must pay a reasonable interest if a payment, due to the employee, is made late, the Bombay High Court has held.

Mumbai, Sept 19: The employer must pay a reasonable
interest if a payment, due to the employee, is made late, the
Bombay High Court has held.
Whether the service contract of the employee provides for
payment of interest is immaterial, said the division bench
of Justices Anoop Mohta and C L Pangarkar.

Petitioner Yuvraj N Rodye was working with the
Maharashtra State Electricity Board since 1975.

In 1989, Royde became entitled for arrears of salary from
August 1975 onwards.

However, for no justifiable reason, the payment was
delayed. It was only in September 1994 that he was told to
collect his dues.

He received the amount, but applied for getting interest
for the period of delay.

MSEB took the stand that the service rules did not
provide for such payment.

He moved the Nagpur bench of High Court seeking interest
at the rate of 16 per cent on the total payment.

The High Court, in the decision pronounced yesterday,
held that he was entitled to get the interest. "There was no
justification to take such a long time for fixing arrears,"
the court said.

Whether the delay was intentional or not was immaterial,
court said, adding that "employees can't be allowed to suffer
because of inaction on the part of the employer."

However the court found that demand of 16 per cent
interest was unreasonable. The court directed that petitioner
be paid the interest at the rate of eight per cent from the
due date of payment of arrears.

Bureau Report

Tags: