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Nagar Ayukt Nagar Nigam, Kanpur v. Sri Mujib Ullah Khan & Anr. and connected matters

Civil Appeal · 2019 INSC 449Decided 2 Apr 2019
Civil Appeal No. 2628 of 2017, Civil Appeal No. 2629 of 2017
Justice Mohan M. Shantanagoudar · Justice Hemant Gupta

Background

Municipal Corporation employees in Kanpur and Gorakhpur claimed gratuity under the Payment of Gratuity Act, 1972 before the Controlling Authorities, who ruled in their favour. The Municipal Corporations challenged this, arguing that gratuity for their employees was instead governed by more restrictive state Retirement Benefits and General Provident Fund Regulations framed under the U.P. Municipal Corporation Act, 1959, which capped gratuity at 15 days' salary for a maximum of 16.5 months rather than per completed year without limit. The Allahabad High Court had upheld the Controlling Authorities' orders in favour of the employees, prompting the Corporations' appeals to the Supreme Court.

Decision Breakdown

The Supreme Court held that a Central Government notification dated 8 January 1982, issued under Section 1(3)(c) of the Payment of Gratuity Act, had specifically extended the Act's application to "local bodies" employing ten or more persons: a notification the High Court had not even been shown. Relying on Section 14 of the Act, which gives it overriding effect over any inconsistent provision in any other enactment, the Court held that the more restrictive state regulations could not override the Central gratuity scheme, and that the earlier precedent cited by the appellants (Municipal Corporation of Delhi vs. Dharam Prakash Sharma) did not apply since it dealt with a different pension-and-gratuity rule framework. The Court found no error in the Controlling Authorities' orders and dismissed both appeals.

Lesson Learnt

The Payment of Gratuity Act applies to municipal and local body employees (once duly notified as a covered class of establishment) and overrides any less generous gratuity scheme under state service regulations: employers cannot rely on a state law to pay employees less gratuity than the central Act guarantees.

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

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