Breaking: Teachers Are Entitled To Gratuity, Holds SC After Recalling Erroneous Judgment [Read Judgment]

The bench comprising Justice Abhay Manohar Sapre and Justice Indu Malhotra also slapped a cost of Rupees 25,000, on Birla Institute of Technology, the appellant in the case.

Error In Earlier Judgment

On January 7, 2019 the Supreme Court bench comprising of Justice AM Sapre and Justice Indu Malhotra held that, a teacher, irrespective of the type of educational institute he/she is working, is not an 'employee' under Section 2(e) of the Payment of Gratuity Act and, therefore, has no right to invoke the Act for claiming gratuity from his/her employer.

On January 8, Live Law published an article on why this judgment denying gratuity to teachers is 'Per Incuriam'. It had quoted the 2009 amendment and 1997 notification and some high court judgments post 2009 amendment.

On January 9, the bench headed by Justice Sapre suo motu listed the appeal and passed order observing that it finds prima facie error in this judgment. It then stayed the operation of the judgment and directed the registry to post the appeal for rehearing.

The matter was reheard and the bench recalled its 7^th January judgment and reserved the matter for judgment.

Did Not Notice 2009 Amendment

In the judgment delivered on Thursday, the bench observed that it was only after the pronouncement of the order in this appeal, it came to its notice that consequent upon the judgment rendered in Ahmadabad Pvt. Primary Teachers Association (supra), the Parliament amended the definition of the word "employee" as defined in Section 2(e) of the Payment of Gratuity Act, 1972 by Amending Act No. 47 of 2009 on 31.12.2009 with retrospective effect from 03.04.1997. The bench said:

"This amendment, in our opinion, had a direct bearing over the issue involved in this appeal. The effect of the amendment made in the Payment of Gratuity Act vide Amending Act No. 47 of 2009 on 31.12.2009 was two-fold. First, the law laid down by this Court in the case of Ahmadabad Pvt. Primary Teachers Association (supra) was no longer applicable against the teachers, as if not rendered, and Second, the teachers were held entitled to claim the amount of gratuity under the Payment of Gratuity Act from their employer with effect from 03.04.1997."

The bench also addressed the contention that the constitutional validity of  the 2009 Amending Act is under challenge in Supreme Court in a pending writ petition. It observed that pendency of any writ petition by itself does not affect the constitutionality of the Amending Act, and nor does it affect the right of the teacher in any manner in claiming gratuity amount from the appellant(employer) under the Act. The bench said:

"It is only when the Court declares a Statute as being ultra vires the provisions of the Constitution then the question may arise to consider its effect on the rights of the parties and that would always depend upon the declaration rendered by the Court and the directions given in that case. Such is not the case here as of now."

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