Supreme Court Revisits Gratuity for Teachers: Birla Institute of Technology vs. State of Jharkhand (2019)

Date of the Judgment: March 7, 2019

Citation: [Not Available in Source]

Judges: Abhay Manohar Sapre, J. and Indu Malhotra, J.

Can a previous judgment be recalled due to a crucial legal amendment that was not brought to the court’s attention? The Supreme Court of India addressed this very question in a case concerning the payment of gratuity to teachers. This case highlights the importance of considering all relevant legal changes and the power of the court to rectify its errors. The Supreme Court bench, comprising Justices Abhay Manohar Sapre and Indu Malhotra, revisited its earlier decision due to a significant amendment to the Payment of Gratuity Act, 1972.

Case Background

The Birla Institute of Technology (BIT), a prominent technical education institute, was involved in a dispute regarding the payment of gratuity to one of its former Assistant Professors (Respondent No. 4). The professor, who had served from 1971 to 2001, sought gratuity under the Payment of Gratuity Act, 1972, which the institute initially denied. The controlling authority under the Act ruled in favor of the professor, directing BIT to pay the gratuity along with interest. This decision was upheld by the appellate authority and subsequently by the High Court of Jharkhand.

Timeline:

Course of Proceedings

The case initially went through the following course of proceedings: The controlling authority ruled in favor of the professor, directing BIT to pay the gratuity with interest. The institute’s appeal was dismissed by the appellate authority. A single judge of the High Court also dismissed the institute’s writ petition, and subsequently, the Division Bench of the High Court dismissed the Letters Patent Appeal (LPA). Initially, the Supreme Court allowed the appeal on 07.01.2019, relying on the judgment in Ahmadabad Pvt. Primary Teachers Association vs. Administrative Officer and Others (2004) 1 SCC 755. However, this order was stayed suo motu by the Supreme Court on 09.01.2019, when it was brought to the court’s notice that the Parliament had amended the definition of “employee” in the Payment of Gratuity Act, 1972, with retrospective effect from 03.04.1997, which was not brought to the notice of the court on 07.01.2019.

Legal Framework

The core of the dispute revolves around the definition of “employee” under Section 2(e) of the Payment of Gratuity Act, 1972. Initially, the definition read as follows:

“2. (e) ‘employee’ means any person (other than an apprentice) employed on wages, in any establishment, factory, mine, oilfield, plantation, port, railway company or shop, to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied, and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity.”

This definition was interpreted in Ahmadabad Pvt. Primary Teachers Association vs. Administrative Officer and Others (2004) 1 SCC 755 to exclude teachers. However, the Parliament amended Section 2(e) of the Payment of Gratuity Act, 1972, through Amending Act No. 47 of 2009, with retrospective effect from 03.04.1997. The amended definition is as follows:

“(e) “employee” means any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of work, manual or otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway company, shop or other establishment to which this Act applies, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity.”

The amendment broadened the definition of “employee” to include “any kind of work, manual or otherwise,” effectively bringing teachers within the ambit of the Act.

Arguments

Appellant’s (Birla Institute of Technology) Arguments:

• The appellant contended that the issue was no longer res integra, as the Supreme Court in Ahmadabad Pvt. Primary Teachers Association (supra) had already held that teachers were not covered under the definition of “employee” under Section 2(e) of the Payment of Gratuity Act, 1972.
• They argued that the earlier judgment of the Supreme Court was binding and should be followed.

Respondent’s (State of Jharkhand & Ors.) Arguments:

• The respondents argued that the Parliament had amended the definition of “employee” in Section 2(e) of the Payment of Gratuity Act, 1972, with retrospective effect from 03.04.1997, specifically to include teachers within its ambit.
• They contended that the amendment nullified the effect of the judgment in Ahmadabad Pvt. Primary Teachers Association (supra) and that teachers were now entitled to gratuity under the Act.
• They also submitted that the constitutional validity of the Amending Act No. 47 of 2009 was under challenge in a writ petition, but that did not affect the right of the teacher to claim gratuity.

Submissions by Parties

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the Courts below were justified in holding that respondent No.4 was entitled to claim gratuity amount from the appellant (employer) under the Act.

Treatment of the Issue by the Court

Authorities

The following authorities were considered by the court:

Judgment

The Supreme Court recalled its earlier order dated 07.01.2019, which had favored the appellant. The court held that the amendment to Section 2(e) of the Payment of Gratuity Act, 1972, by Amending Act No. 47 of 2009, with retrospective effect from 03.04.1997, brought teachers within the definition of “employee” and made them eligible for gratuity. Therefore, the court dismissed the appeal, upholding the decisions of the lower courts. The court also imposed costs of Rs. 25,000 on the appellant, payable to the respondent teacher.

Treatment of Submissions

How each authority was viewed by the Court?

• Ahmadabad Pvt. Primary Teachers Association vs. Administrative Officer and Others (2004) 1 SCC 755: The Supreme Court initially relied on this case in its order dated 07.01.2019. However, the court later held that the amendment to Section 2(e) of the Payment of Gratuity Act, 1972, by Amending Act No. 47 of 2009, rendered this judgment inapplicable.
• Section 2(e) of the Payment of Gratuity Act, 1972 (unamended): The court acknowledged that this definition, as interpreted in Ahmadabad Pvt. Primary Teachers Association (supra), excluded teachers from the purview of the Act.
• Section 2(e) of the Payment of Gratuity Act, 1972 (amended by Act No. 47 of 2009): The court held that this amendment, with retrospective effect from 03.04.1997, brought teachers within the definition of “employee” and made them eligible for gratuity.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The court acknowledged that the amendment to Section 2(e) of the Payment of Gratuity Act, 1972, was a significant event that had a direct bearing on the case.
• The court recognized that the amendment was specifically enacted to nullify the effect of the judgment in Ahmadabad Pvt. Primary Teachers Association (supra) and to include teachers within the definition of “employee”.
• The court emphasized that the amendment had retrospective effect from 03.04.1997, making teachers eligible for gratuity from that date.
• The court also noted that the pendency of a writ petition challenging the constitutional validity of the amendment did not affect the right of the teacher to claim gratuity.

Logical Reasoning

Key Takeaways

• The definition of “employee” under the Payment of Gratuity Act, 1972, now includes teachers due to the amendment by Act No. 47 of 2009, with retrospective effect from 03.04.1997.
• The judgment in Ahmadabad Pvt. Primary Teachers Association (supra), which had excluded teachers, is no longer applicable.
• Educational institutions are now obligated to pay gratuity to their teachers who meet the eligibility criteria under the Act.
• The pendency of a writ petition challenging the constitutional validity of the amendment does not affect the right of the teacher to claim gratuity.

Directions

The Supreme Court directed the appellant (Birla Institute of Technology) to pay the gratuity amount to the respondent teacher along with costs of Rs. 25,000.

Development of Law

The ratio decidendi of this case is that the amendment to Section 2(e) of the Payment of Gratuity Act, 1972, by Amending Act No. 47 of 2009, with retrospective effect from 03.04.1997, effectively overruled the earlier interpretation of the definition of “employee” as laid down in Ahmadabad Pvt. Primary Teachers Association (supra). This case clarifies that teachers are now included within the ambit of the Payment of Gratuity Act and are entitled to gratuity benefits from 03.04.1997.

Conclusion

The Supreme Court’s decision in Birla Institute of Technology vs. State of Jharkhand underscores the importance of legislative amendments and their impact on judicial interpretations. By recalling its earlier order and upholding the retrospective application of the amended definition of “employee,” the court ensured that teachers receive the gratuity benefits they are entitled to under the Payment of Gratuity Act, 1972. This case serves as a reminder of the dynamic nature of law and the judiciary’s role in adapting to legislative changes.