Case Note & Summary
The Supreme Court dismissed two civil appeals filed by Nagar Ayukt Nagar Nigam, Kanpur and Nagar Nigam, Gorakhpur against orders of the Allahabad High Court which upheld the decisions of Controlling Authorities under the Payment of Gratuity Act, 1972 (the Act) granting gratuity to employees of the Municipal Corporations. The appellants argued that their employees were governed by the Uttar Pradesh Municipal Corporation Act, 1959 and the Retirement Benefits and General Provident Fund Regulations, 1962, which provided gratuity at a lower rate (15 days salary per month for 16.5 months) compared to the Act (15 days salary for every completed year without ceiling). The High Court had relied on Municipal Corporation of Delhi v. Dharam Prakash Sharma to hold that only Central or State Government employees are exempt under Section 2(e) of the Act. The Supreme Court noted that the Central Government had issued a notification on 08.01.1982 under Section 1(3)(c) of the Act specifying 'local bodies' as a class of establishments to which the Act applies. This notification was not brought to the High Court's attention but was considered by the Supreme Court. The Court held that by virtue of this notification, the Act applies to Municipal Corporations. Further, Section 14 of the Act gives it overriding effect over any inconsistent provisions in other enactments, including the state regulations. Therefore, the employees of the Municipal Corporations are entitled to gratuity under the Act, and the restrictive benefits under the state regulations are inapplicable. The appeals were dismissed, affirming the orders of the Controlling Authorities and the High Court.
Headnote
A) Gratuity - Applicability to Local Bodies - Section 1(3)(c) Payment of Gratuity Act, 1972 - Central Government notification dated 08.01.1982 specifies 'local bodies' as a class of establishments to which the Act applies - Held that the Act is applicable to Municipal Corporations by virtue of the said notification (Paras 10-11). B) Gratuity - Overriding Effect - Section 14 Payment of Gratuity Act, 1972 - The provisions of the Act override any inconsistent provisions in any other enactment or instrument - Held that the restrictive gratuity benefits under the Uttar Pradesh Municipal Corporation Act, 1959 and Regulations framed thereunder are inapplicable in view of Section 14 (Paras 11-12). C) Gratuity - Employees of Municipalities - Section 2(e) Payment of Gratuity Act, 1972 - The definition of 'employee' excludes only Central Government or State Government employees - Held that employees of Municipalities are not exempt and are entitled to gratuity under the Act (Paras 5, 13).
Issue of Consideration
Whether the Payment of Gratuity Act, 1972 applies to employees of Municipal Corporations governed by the Uttar Pradesh Municipal Corporation Act, 1959 and the Retirement Benefits and General Provident Fund Regulations, 1962, or whether the Act overrides such state regulations.
Final Decision
The Supreme Court dismissed both civil appeals, holding that the Payment of Gratuity Act, 1972 applies to Municipal Corporations by virtue of the notification dated 08.01.1982 under Section 1(3)(c), and Section 14 overrides any inconsistent provisions in the state regulations. The orders of the Controlling Authorities and the High Court were affirmed.
Law Points
- Payment of Gratuity Act
- 1972 applies to local bodies by virtue of notification under Section 1(3)(c)
- Section 14 overrides inconsistent state regulations
- employees of municipalities entitled to gratuity under the Act
