Facts of the case
The Payment of Gratuity Act, 1972 (the “Gratuity Act”) mandates payment of gratuity to an employee after he/she has rendered continuous service for not less than 5 years, on his/her superannuation, retirement or resignation or on his/her death or disablement due to accident or disease.
Initially, the Gratuity Act applied only to establishments like factory, oil field, mine, oilfield, plantation, port and railway company, shops and other establishment notified by the Central Government where 10 or more persons are employed, on any day of the preceding twelve months. On, 08.01.1982, the Central Government vide Notification No. S.O. 239 extended the benefit of the Gratuity Act to “local bodies”. As a result, the schools under the local bodies with 10 or more employees became liable to pay gratuity to their employees. However, the said notification did not apply to private schools.
Further, the Ministry of Labour and Employment vide Notification No. S-42013/1/95-SS.(II) dated 3.4.1997, extended the applicability of the Gratuity Act to educational institutions with 10 or more employees. As a result, private schools being educational institutions also became liable to pay gratuity to their employees under the Gratuity Act. However, some private schools raised a dispute stating that teachers in educational institutions or schools are not “employee” as defined in Section 2(e) of the Gratuity Act. This contention was accepted by the High Court of Gujarat in the case of Shantiben L. Christian v. Administrative Officer, Ahmedabad Municipal School Board. The judgment in Shantiben L. Christian was challenged before the Hon’ble Apex Court in the case of Ahmedabad Private Primary Teachers’ Association v. Administrative Officer and Others, . The Apex Court held that the expression “employee” as defined under Section 2 (e) of the Gratuity Act is restrictive and hence the teachers who impart education to students does not qualify to be an “employee” as they do not perform any kind of skilled, unskilled, semiskilled, manual, supervisory, managerial, administrative, technical or clerical work.
Later in 2009, Section 2(e) was amended and Section 13A was inserted to the Gratuity Act which in turn extended the benefit of gratuity to the teachers with retrospective effect from 03.04.1997, i.e.from the date of Notification No. S-42013/1/95-SS.(II). The constitutional validity of these amendments was challenged by various schools before the High Courts of Allahabad, Gujarat, Delhi, Bombay, Punjab and Haryana, Chhattisgarh and Madhya Pradesh who in turn refused to interfere with the amendments and dismissed the petitions. Being aggrieved by these High Court orders, the schools have filed appeals before the Apex Court. Further, some schools have directly approached the Apex Court by way of writ petitions filed under Article 32 of the Indian Constitution challenging the constitutional validity of 2009 amendments.
The appeals and writ petitions challenge the 2009 amendments on the following grounds namely:
a) That the legislature vide the Amendment Act 2009 overrules the judicial decision in Ahmedabad Private Primary Teachers' Association; and
b) That the retrospective amendments are unreasonable and unconstitutional.
1. Amendment Act 2009 overrules the judicial decision in Ahmedabad Private Primary Teachers' Association
The Apex Court held that the legislature cannot overrule a judicial decision, it can only amend the language of the provision that was the subject matter of the judicial decision. Hence, even after a court ruling, when the legislature acts within its power to usher in a valid law and rectify a legal error, it only exercises its constitutional power to enact the law and does not overrule the earlier court decision. The Court further observed that in Ahmedabad Private Primary Teachers' Association, this Court only interpreted the law as then existed in the statute and further even prompted the legislature to enact a legislation granting the benefit of gratuity to teachers who are denied the benefit due to a legal flaw. Therefore, the Court held that the legislature vides 2009 amendment, only rectified the infirmities and defects pointed out by this Court in the Ahmedabad Private Primary Teachers' Association, and effectuated the object and purpose of the Notification No. S-42013/1/95-SS.(II).
2. Retrospective amendments are unreasonable and unconstitutional
The Apex Court held that the power to amend a statute is a constitutional power vested with the legislature and the same cannot be confined and restricted to any particular type of statutes. The Court further held that the power to amend also includes the power to amend with retrospective effect. It was observed that the constitutional validity of the amendment is to be examined in the light of the relevant circumstances which prompted the legislature to make the retrospective amendment. In the instant case, the amendment enforces and gives effect to what was intended by the Notification No. S-42013/1/95-SS.(II) and seeks to bring equality and give fair treatment to the teachers. Hence, the amendment can hardly be categorised as unreasonable and unconstitutional.
Therefore, in the light of aforesaid findings, the Hon’ble Supreme Court:
a) upheld the validity of the Amendment Acts, and
b) directed the private schools to make payment along with the interest to the employees/teachers in accordance with the provisions of the Gratuity Act within a period of 6 weeks. In case of default, the employees/teachers were asked to move the appropriate forum to enforce payment in accordance with the provisions of the Gratuity Act.
Impact of the Order to Private Schools
The aforesaid order impacts private schools having 10 or more employees to implement and enforce payment of gratuity to its teachers and other employee staff. However, this is not the first judgment that mandates payment of gratuity for teachers. The High Court of Karnataka in 2017 has made the payment of gratuity to private school teachers compulsory. Although, this may pose a financial burden on private schools, it cannot be a reason for non-implementation of gratuity benefit to the teachers and other staff.
1 SCC 755