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N. Manoharan, Etc. v. The Administrative Officer and Another

Civil Appeal · 2026 INSC 143Decided 11 Feb 2026
C.A. No.-001513-001522 - 2026
Justice Pankaj Mithal · Justice S.V.N. Bhatti

Background

Retired employees of the Heavy Water Plant (HWP), Tuticorin, a unit under the Department of Atomic Energy (DAE), sought a higher gratuity amount under the Payment of Gratuity Act, 1972, arguing it exceeded what they had already received under the CCS (Pension) Rules, 1972. Authorities under the Gratuity Act initially agreed with them, but the Madras High Court later held that HWP employees, being Central Government servants governed by CCS Rules, were excluded from the definition of "employee" under Section 2(e) of the Gratuity Act. The retired employees appealed this High Court ruling to the Supreme Court.

Decision Breakdown

The Supreme Court held that HWP is not a separate corporate entity (unlike a PSU such as NPCIL) but is an adjunct/ancillary unit functioning directly under the DAE's Heavy Water Projects Board, and its employees hold civil posts under the Central Government governed by the CCS (Pension) Rules. Interpreting Section 2(e) of the Gratuity Act, the Court found that its exclusionary clause squarely covers persons "governed by any other Act or by any rules providing for payment of gratuity," which includes CCS Rules employees. It distinguished the precedent relied upon by the employees (Municipal Corporation of Delhi v. Dharam Prakash Sharma) since that case involved a genuinely separate corporate entity, unlike HWP. Consequently, the Court agreed with the High Court that HWP employees fall outside the Gratuity Act's coverage, and Sections 5 and 14 of that Act (dealing with exemptions and overriding effect) do not apply. The civil appeals were dismissed.

Lesson Learnt

Employees holding civil posts under the Central Government and covered by specific service rules like the CCS (Pension) Rules that already provide for gratuity cannot additionally claim benefits under the general Payment of Gratuity Act: the specific statutory exclusion prevails, and one cannot claim the best of both regimes.

Official source (sci.gov.in)View Judgment (PDF)

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