Supreme Court upholds the amendment of Payment of Gratuity Act, 1972 covering Teachers under its ambit

Supreme Court upholds the amendment of Payment of Gratuity Act, 1972 covering Teachers under its ambit

The court also observed that the payment of gratuity cannot be categorized as a windfall or a bounty payable by the private schools as it is one of the minimal conditions of service.

The Supreme Court recently upheld the amendment of Payment of Gratuity Act, 1972 extending the benefit of gratuity to teachers.

"The amendment with retrospective effect remedies the injustice and discrimination suffered by the teachers on account of a legislative mistake…"

The bench comprising Justices Sanjiv Khanna and Bela M. Trivedi dismissed the appeals/writ petitions challenging the constitutional validity of the amendment to Section 2(e) and insertion of Section 13A to the Payment of Gratuity Act, with retrospective effect from 3rd April 1997 (vide the Payment of Gratuity (Amendment) Act, 2009).

In the case of Ahmedabad Private Primary Teachers' Association v. Administrative Officer and Others, (2004) 1 SCC 755, the Court interpreted the definition of employee in Section 2(e) of the Gratuity Act, and held that the teachers who impart education to students were not "employee" as they do not perform any kind of skilled, unskilled, semi-skilled, manual, supervisory, managerial, administrative, technical or clerical work.

However later, the Gratuity Act was amended and the Section 2(e) thus reads : "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.

As a result, several private schools challenged the constitutional validity of the amendments and seven High Courts dismissed the writ petitions in this regard. In this case, the Supreme Court was considering the appeals filed against these High Court judgments and also some writ petitions filed under Article 32.

The appellants/petitioners raised these two contentions: a) The legislation vide the Amendment Act 2009 overrules the judicial decision in Ahmedabad Private Primary Teachers' Association (supra) and violates the doctrine of separation of powers. (b) The retrospective amendments are unreasonable, excessive and harsh, and therefore, unconstitutional.

Rejecting the first contention, the bench observed that the earlier decision in Ahmedabad Private Primary Teachers' Association (supra) had interpreted the law, that is, Section 2(e) of the PAG Act, as it then existed in the statute.

"The judgment even acknowledged and prompted the legislature to enact a legislation granting the benefit of gratuity to teachers, who had been excluded because of the legal flaw. When the legislature acts within its power to usher in a valid law and rectify a legal error, even after a court ruling, the legislature exercises its constitutional power to enact the law and does not overrule an earlier court decision.", it said.

Regarding the second ground, the bench noted that, the legislature, vide the Amendment Act, 2009, has given retrospective effect to the amended provision of Section 2(e) and the newly inserted Section 13A with effect from 3rd April 1997, which is also the date of the notification issued by the Government under Section 1(3)(c), making the PAG Act applicable to the educational institutions with ten or more employees.

"The amendment enforces and gives effect to what was intended by the notification, but could not be achieved on account of the technical and legal defect. The lacuna, a distortion in the language that had the unwitting effect of leaving out teachers, has been rectified so as to achieve the object and purpose behind the issuance of the notification, making the PAG Act applicable to all educational institutions. The argument of the educational institutions that they have been taken by surprise is incorrect and unacceptable as the legislation had cured the inadvertent defect in a statute, as pointed out by this Court, through legislative repair. Private schools, when they claim a vested right arising from the reason of defect, should not succeed, for acceptance would be at the expense of teachers who were denied and deprived of the intended benefit. Marginal inconvenience in the form of financial outgo or difficulty is of little weight, when curing of an inadvertent defect is made retrospectively in greater public interest, which consideration will overrule the interest of one or some institutions.

Dismissing the appeals/writ petitions, the court observed:

"We would not accept any attempt to circumscribe and limit the power vested with the sovereign legislature, thereby putting fetters when such fetters are not prescribed by the Constitution. When and which cases to exercise the power has to be left to the legislature. In case the constitutional validity of the amendment act is challenged, the court is entitled to examine the relevant circumstances which prompted the legislature to make retrospective amendment. Judicial review, when validity of an amendment act is challenged, is decided on the grounds of lack of legislative competence, violation of the fundamental rights or any other provisions of the Constitution of India. In the present case, the notification No. S-42013/1/95-SS.(II) dated 3rd April 1997 had ensured that the benevolent provisions requiring payment of gratuity should be extended to the "employees" of the educational institutions. The amendment with retrospective effect is to make the benevolent provisions equally applicable to teachers. The amendment seeks to bring equality and give fair treatment to the teachers. It can hardly be categorised as an arbitrary and high-handed exercise"