Employees of Municipalities/Local Bodies are Entitled to Payment under Payment of Gratuity Act- Supreme Court

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April 03, 2019

Case name: Nagar Ayukt Nagar Nigam, Kanpur V. Sri Mujib Ullah Khan and Another

The present appeal challenges High Court’s order, whereby the High Court of Allahabad held that the employees of the Municipalities are entitled to the gratuity in terms of the provisions of the Payment of Gratuity Act, 1972. The Appellants have argued that the gratuity is payable to employees of the Municipalities in terms of the Retirement Benefits and General Provident Fund Regulations, 1962 and not under the Act.

Bench’s Verdict

The Two-Judge Bench of the Supreme Court dismissed the appeal while holding that the employees of the “local bodies” are entitled to payment of gratuity under the Act. The observations made by the Apex Court in the case are enumerated below:

That a perusal of the above provisions as envisages under Section 1(3) of the Payment of Gratuity Act entails the entities to which the Act is applicable. Section 1(3) (c) of the Act states that the Act is applicable to the establishments or class of establishments which Central Government may notify. The Apex Court noted that in furtherance of Section 1(3) (c) the Central Government published a notification and specified that Local Bodies in which ten or more persons are employed, or were employed, on any day of the preceding twelve months as a class of establishment to which this Act shall apply.

The Court thus opined that the aforesaid notification makes it abundantly clear that the Act is applicable to the local bodies i.e., the Municipalities.

The entire case can be accessed here.

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