Teachers Entitled to Gratuity: Supreme Court Upholds Amended Gratuity Act

The case of Birla Institute of Technology v. The State of Jharkhand & Ors. deals with a significant legal question concerning the applicability of the Payment of Gratuity Act, 1972, to teachers in educational institutions. The Supreme Court’s judgment, delivered on March 7, 2019, reaffirmed that teachers are covered under the Act following the retrospective amendment made by the Parliament in 2009.

The issue stemmed from a dispute over whether teachers were considered “employees” under the Payment of Gratuity Act. The case also highlights the importance of legislative amendments in overriding previous judicial interpretations.

Case Background

The appellant, Birla Institute of Technology (BIT), is a renowned technical educational institution. The respondent, a retired assistant professor, sought gratuity payments from BIT under the Payment of Gratuity Act, 1972.

The respondent had joined BIT on September 16, 1971, and retired on November 30, 2001. After retirement, he applied for gratuity under the Act. However, BIT rejected his claim, arguing that teachers were not covered under the definition of “employee” as per the Supreme Court’s ruling in Ahmedabad Pvt. Primary Teachers’ Association v. Administrative Officer (2004), which excluded teachers from the scope of the Act.

The respondent approached the controlling authority under the Gratuity Act, which ruled in his favor and directed BIT to pay gratuity along with interest. BIT’s appeal before the appellate authority was dismissed, as was its subsequent writ petition in the Jharkhand High Court. BIT then challenged the decision in the Supreme Court.

Petitioner’s Arguments

BIT, represented by its counsel, contended that:

The Supreme Court had already ruled in Ahmedabad Pvt. Primary Teachers’ Association that teachers were not included under the Payment of Gratuity Act.
The institute was not liable to pay gratuity to teachers, as they did not fall under the category of skilled, semi-skilled, or unskilled workers covered by the Act.
The High Court had erred in dismissing their petition without considering the binding precedent.

Respondent’s Arguments

The respondent, along with representatives from the Jharkhand government, countered these claims by stating:

The Payment of Gratuity (Amendment) Act, 2009, had retrospectively changed the definition of “employee” to include teachers.
The amendment was specifically enacted to override the Supreme Court’s previous interpretation and ensure gratuity benefits for teachers.
The institute was bound by the amended law, which had retrospective effect from April 3, 1997, thereby making the respondent eligible for gratuity.

Supreme Court’s Observations and Ruling

The Supreme Court initially ruled in favor of BIT on January 7, 2019, relying on its previous judgment in Ahmedabad Pvt. Primary Teachers’ Association. However, it later realized that the 2009 amendment had not been brought to its attention.

The Court took suo motu cognizance and recalled its previous order, stating:

“The apparent error is that it was not brought to our notice that the Parliament, consequent upon the decision of this Court in Ahmedabad Pvt. Primary Teachers’ Association, had amended the definition of ‘employee’ under the Payment of Gratuity Act with retrospective effect from April 3, 1997.”

Upon rehearing the matter, the Court ruled in favor of the respondent and upheld the High Court’s decision. The judgment stated:

“In the light of the amendment made in the Payment of Gratuity Act, reliance placed by the appellant on the decision in Ahmedabad Pvt. Primary Teachers’ Association is wholly misplaced. It has lost its binding effect.”

The Court clarified that:

The 2009 amendment had been enacted specifically to overrule the exclusion of teachers from the Act.
Teachers had been deemed eligible for gratuity from April 3, 1997, onward.
The appellant was liable to pay the gratuity amount with interest.

Conclusion

This judgment sets a crucial precedent by confirming that teachers in educational institutions are entitled to gratuity under the amended Act. It also highlights the importance of legislative intervention in rectifying judicial interpretations that may inadvertently exclude certain classes of employees from statutory benefits.

The Supreme Court’s ruling ensures that teachers receive the same social security benefits as other employees covered under the Payment of Gratuity Act. It underscores the principle that statutory benefits cannot be arbitrarily denied due to outdated interpretations when the law itself has been amended to include them.

Petitioner Name: Birla Institute of Technology.
Respondent Name: The State of Jharkhand & Ors..
Judgment By: Justice Abhay Manohar Sapre, Justice Indu Malhotra.
Place Of Incident: Jharkhand.
Judgment Date: 07-03-2019.

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