Supreme Court Ruling on denying Gratuity to Teacher is Per Incuriam

The verdict passed by the Honorable Supreme Court held on Birla Institute of Technology Vs. State of Jharkhand: decided on 07.01.2019 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 can be unhesitatingly termed as a 'Per Incuriam' judgment.

Per Incuriam judgment is the one which is decided without reference to a statutory provision or prior judgment, which would have been relevant. This is a classic case of a per incuriam judgment which did not notice an unambiguous statutory amendment. Per Incuriam, literally translated as "through lack of care" is a device within the common law system of judicial precedent. A finding of per incuriam means that a previous court judgment has failed to pay attention to relevant statutory provision or precedents. The significance of a judgment having been decided per incuriam is that it need not be followed by a lower court. Ordinarily, the rationes of a judgment is binding upon lower courts in similar cases. However, a lower court is free to depart from a decision of a superior court where that earlier judgment was decided per incuriam.

Hon’ble Supreme Court Verdict in Ahmedabad Pvt. Primary Teacher Association Vs. Admn. Officer passed on 13.01.2004 {reported as (2004)1 SCC 755}

The Supreme Court ruled that teachers are not entitled to gratuity under the payment of Gratuity Act, 1972 as they do not fall within description of definition of "employee" under Section 2(e) of the Payment of Gratuity Act, 1972.

The said judgment concluded with these remarks: "It is for the Legislature to take cognizance of situation of such teachers in various establishments where gratuity benefits are not available and think of a separate legislation for them in this regard. That is the subject matter solely of the Legislature to consider and decide."

After this judgment, by Act 47 of 2009 (w.r.e.f. 3-4-1997), the definition of Section 2(e) in the Payment of Gratuity Act, 1972 was amended. This changed definition of “employee” vide amendment of 2009, has not been considered in this judgment. Therefore, this judgment is liable to be reviewed.

1997 Notification and 2009 Amendment

But, well before this judgment, the Central Government, vide the Ministry of Labour and Employment Notification, extended provisions of Payment of Gratuity Act to the educational institutions employing 10 or more persons.

In 2009, an amendment was introduced to the definition of 'employee' by the Payment of Gratuity (Amendment) Act, 2009, The amended definition of 'employee' under Section 2(e) reads: "2(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."

It also inserted Section 13-A which reads: "13-A. Validation of payment of gratuity.—

Notwithstanding anything contained in any judgment, decree or order of any court, for the period commencing on and from the 3^rd day of April, 1997 and ending on the day on which the Payment of Gratuity (Amendment) Act, 2009, receives the assent of the President, the gratuity shall be payable to an employee in pursuance of the notification of the Government of India, in the Ministry of Labour and Employment vide Number S.O. 1080, dated the 3^rd  day of April, 1997 and the said notification shall be valid and shall be deemed always to have been valid as if the Payment of Gratuity (Amendment) Act, 2009 had been in force at all material times and the gratuity shall be payable accordingly:

Provided that nothing contained in this section shall extend, or be construed to extend, to affect any person with any punishment or penalty whatsoever by reason of the non-payment by him of the gratuity during the period specified in this section which shall become due in pursuance of the said notification."

In a statement of objects and reasons of the amendment Act, it said:

"Keeping in view the observations of the Hon'ble Supreme Court, it is proposed to widen the definition of 'employee' under the said Act in order to extend the benefit of gratuity to the teachers."

Supreme Court did not consider 2009 Amendment

The judgment impugned before the Supreme Court was delivered by the Jharkhand High Court in the year 2008, before enactment of the 2009 amendment. Even then, the high court distinguished the Ahmadabad Pvt. Primary Teachers Association judgment on the ground that it is applicable only to the primary teachers working in primary schools and since the case at hand is not a case of a primary teacher, it has no application to this case.

The Supreme Court, while considering the appeal, observed that the high court made an incorrect reading of the SC judgment. It seems no one brought to the notice of the court about the 2009 amendment, which is squarely applicable in this case.

Some Judgments Post Amendment

·         In 2012, the Bombay High Court, taking note of this amendment, held that a teacher is an 'employee' within the meaning of Section 2(e) of the said Act and hence the provisions of the said Act were applicable - The President/Secretary vs Shri Pradipkumar on 21 February, 2012. --  There is no escape but to hold that a Teacher is an 'employee' within the meaning of Section 2(e) of the said Act and hence the provisions of the said Act are applicable.

·         The Chhattisgarh High Court has also held so in St.Xaviers H.S.School v/s State Of Chhattisgarh And Ors on 11 December, 2015 – There is  no ground to deny the statutory payment of gratuity under the Act of 1972 to teachers and even on the ground of financial hardship, petitioner-school cannot avoid the statutory obligation. It is quite vivid that teacher is covered under the definition of Section 2(e) of the amended Act of 1972 and gratuity is "property" within the meaning of Article 300-A of the Constitution of India.

·          Last month, a single bench of the Orissa High Court in The President v/s Appellate Authority Under The on 18 December, 2018 – held that without taking note of the amendment, concluded that teachers are clearly not covered in the definition of employee under the Act.

This judgment Birla Institute of Technology Vs. State of Jharkhand: decided on 07.01.2019 by Hon'ble Supreme Court) is based on the earlier judgment of Hon’ble Supreme Court in Ahmedabad Pvt. Primary Teacher Association Vs. Admn. Officer passed on 13.01.2004 {reported as (2004)1 SCC 755}. After this judgment, by Act 47 of 2009 (w.r.e.f. 3-4-1997), the definition of Section 2(e) in the Payment of Gratuity Act, 1972 was amended. This changed definition of “employee” vide amendment of 2009, has not been considered in this judgment. Therefore, this judgment is liable to be reviewed.