In an interim relief to the Bruhat Bengaluru Hotels Association and other petitioners, the Karnataka High Court has directed the State Government not to initiate coercive action under the Karnataka Compulsory Gratuity Insurance Rules, 2024, provided the employers pay the insurance premium due for employees who have completed five years of service.
Justice B.M. Shyam Prasad passed this order on April 28, 2025, while hearing a batch of writ petitions, including WP 9358/2024 and WP 12931/2025, challenging the constitutional validity of the 2024 Insurance Rules. The court ordered these petitions to be tagged together and also allowed impleadment of trade unions to ensure all concerned voices are heard.
The pleadings are yet to be completed, and at this stage, this Court is of the opinion that there should be no precipitation with the canvass as aforesaid remaining at large. However, a stay of the operation of the Insurance Rules could mean that even those employers who could pay the insurance premium contemplated may not, and this must be avoided.
The petitioners, represented by Senior Advocate K. Kasturi and Advocate Prashanth B.K., argued that the Rules unfairly compel employers to pay gratuity insurance premiums even for employees who are not yet entitled to gratuity benefits, as eligibility under the Payment of Gratuity Act, 1972, arises only after five years of service. They also contended that the Rules do not account for employers' financial capabilities, disproportionately burdening small businesses.
The Insurance Rules compel employers to pay gratuity insurance premium even regarding employees who have not completed five years when it cannot be disputed that only on completion of five years of service, an employee will be entitled to gratuity, the counsel submitted, further noting that this imposes undue financial pressure on small-scale industries.
On the other side, advocates Muralidhar L. Peshwa and Maitreyi Krishnan, representing trade unions, defended the Rules, stating they are rooted in Section 4A of the Payment of Gratuity Act, introduced in 1989, and aimed at safeguarding workers’ gratuity rights without requiring them to engage in prolonged litigation.
"The Insurance Rules have come about after many decades though Section 4-A is introduced into the Payment of Gratuity Act 1972… the Rules are to ensure that the employees are not driven to multiple litigation in the hierarchy provided for under the Gratuity Act," they argued.
The court, in balancing the competing interests, ruled that coercive measures should be withheld till June 3, 2025, but only if the petitioners clear the insurance dues for eligible employees who have completed the requisite five years of service.
Additionally, the court directed the petitioners to amend their petitions and include the All India Central Council of Trade Union (AICCTU) and the Centre of Indian Trade Unions (CITU) as respondents. These trade unions will now formally participate in the ongoing legal proceedings.
The matter will be next heard on June 3, 2025, and the parties have been given liberty to complete their pleadings by then.
Case Title: Bruhat Bangalore Hotels Association vs. The Principal Secretary
Case Number: WP 9358/2024
Counsel for Petitioners: Senior Advocate K. Kasturi, Advocate Prashanth B.K.
Counsel for Respondents: Advocates Muralidhar L. Peshwa, Maitreyi Krishnan
