REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2628 OF 2017

NAGAR AYUKT NAGAR NIGAM,      ……APPELLANT KANPUR

      VERSUS

SRI MUJIB ULLAH KHAN AND ANOTHER    …...RESPONDENTS

WITH

CIVIL APPEAL NO. 2629 OF 2017

NAGAR NIGAM, GORAKHPUR      ……APPELLANT

      VERSUS

RAM SHANKER YADAV AND ANOTHER    …...RESPONDENTS

J U D G M E N T   

Hemant Gupta J.

The challenge in Civil Appeal No. 2628 of 2017 is to an order

dated 19.04.2007 passed by the learned Single Bench of the High

Court of Judicature at Allahabad, whereby an order dated 08.12.2006

passed by the Controlling Authority,  Kanpur under the Payment of

Gratuity Act, 19721 was not interfered with.   

1 Act

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2. Civil Appeal No. 2629 of 2017 has also been taken up along

with  present  appeal  wherein  the  challenge  is  to  an  order  dated

02.05.2007 of the High Court of Judicature at Allahabad upholding an

order  dated 29.04.2006 of  Controlling  Authority  (Additional  Labour

Commissioner,  Gorakhpur,  U.P.)  passed under the Act  allowing the

petition for gratuity in favour of the respondent herein.  

3. The appellant, the Municipal Corporation, Kanpur is governed

by the Uttar Pradesh Municipal Corporation Act, 19592, whereas, the

respondent is an employee of the appellant. The employees in both

cases claimed gratuity by invoking the jurisdiction of the Controlling

Authorities under the Act. The argument of the appellant before the

learned Single Bench was that the gratuity is payable in accordance

with the Retirement Benefits and General Provident Fund Regulations,

19623 framed under  Section 548 of  the 1959 Act  as amended on

11/01/1988.  Such Regulations  contemplate  payment  of  gratuity  at

the rate of 15 days salary per month for 16.5 months. It was found by

the High Court that it is the Act which is applicable, whereby, gratuity

calculated at the rate of  15 days salary for every completed year

without any ceiling of months or part thereof.  

4. The argument raised by the appellant before the High Court is,

that  the  gratuity  is  payable  in  terms  of  Rule  4(1)  of  the  1962

Regulations  published  under  Section  548  (1)  of  the  1959  Act  as

amended  on  11.01.1988.  Therefore,  the  employees  of  the

2 1959 Act 3 1962 Regulations  

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Municipalities  are  entitled  to  gratuity  only  in  terms  of  such

Regulations and not under the Act.  

5. The High Court relied upon a judgment reported as Municipal

Corporation of Delhi vs Dharam Prakash Sharma and another4

to  hold  that  only  employees  of  Central  Government  or  the  State

Government are exempt from the applicability of the Act, therefore,

the employees of the Appellants would be governed by the Act and

are entitled to gratuity in terms of the scale mentioned therein. It was

held that the Act is not applicable only to the Central Government or

State  Governments  in  terms  of  definition  of  an  ‘employee’  under

Section  2  (e)  of  the  Act.  Therefore,  the  employees  of  the

Municipalities are entitled to the gratuity in terms of the provisions of

the Act.  

6. The appellant  relies  upon Section 3 of  the U.P Dookan Aur

Vanijya Adhishthan Adhiniyam, 19625 which is to the effect that such

Act  will  have no  application  to  the  office of  Government  or  Local

Bodies.  Therefore, on the strength of such statutory provision, it was

argued  that  the  Act  would  not  be  applicable  in  respect  of  the

Municipalities.  The  appellant  is  not  a  factory,  mine,  oilfield,

plantation, port and railway company and that there is no notification

as stipulated under Clause (c) of Section 1(3) of the Act.  Therefore,

the employees of  the Municipalities  are entitled to  the gratuity  in

4 AIR 1999 SC 293  5 1962 Act

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terms of the Regulations framed in exercise of powers of Section 548

of the 1959 Act and not under the Act.  

7. On the other hand, learned counsel for the respondent pointed

out that the Central Government has published a notification in terms

of Section 1(3)(c) of the Act on 08.01.1982 to extend the applicability

of the Act  to the Municipalities.  Thus,  the Act is  applicable  to the

Municipalities.  The relevant provisions of the Act read as under:   

“1. Short title, extent, application and commencement.- (1)  This Act may be called the Payment of Gratuity Act, 1972. (2) It extends to the whole of India:  Provided that  in  so far  as  it  relates to plantations or ports,  it  shall  not  extend to  the State  of  Jammu and Kashmir.  (3) It shall apply to-  

(a) every  factory,  mine,  oilfield,  plantation,   port and railway company;  

(b) every  shop  or  establishment  within  the   meaning of any law for the time being in  force in relation to shops and  establishments in a State, in which  ten  or  more  persons  are  employed,  or

were employed,  on  any  day  of  the preceding twelve months;  (c) such other establishments or class of  

establishments, in which ten or more  employees are employed, or were  employed, on any day of the  preceding   twelve months, as the Central  Government may,  by notification,  specify

in this behalf.”

8. A perusal of the above provisions would show that the Act is

applicable to (1) every factory, mine, oilfield,  plantation,  port  and

railway  company;  (2)  every  shop  or  establishment  within  the

meaning of any law for the time being in force in relation to shops

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and establishments  in  a State,  in  which ten or  more persons are

employed, the said provision has two conditions, viz. (i) a shop or

establishments within the meaning of a State law and (ii) in which

ten or more persons are employed; and (3) the establishments or

class of establishments which Central Government may notify.         

9. The appellant is not covered by clauses (a) and (b) of Section

1(3)  of  the  Act.  Clause  (a)  is  not  applicable  on  the  face  of  the

provisions, but even clause (b) is not applicable in view of Section 3

(c) of the 1962 Act as such Act is not applicable to the offices of the

Government  or  local  authorities.  The  Local  Authorities  means  a

municipal committee, district board etc or entrusted with the control

or management of a municipal or local fund in terms of Section 3(31)

of the General Clauses Act, 1897.

10. In  terms  of  the  above  said  Section  1(3)(c)  of  the  Act,  the

Central Government has published a notification on 08.01.1982 and

specified 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  said

notification dated 08.01.1982 reads as under:-

                            “ New Delhi, the 8th January, 1982

NOTIFICATION

S.O. No. 239….-In exercise of the powers conferred by clause (c) of sub-section (3) of section 1 of the Payment of  Gratuity  Act,  1972  (39  of  1972),  the  Central Government hereby specified ‘local bodies’ in which ten or more persons are employed, or were employed, on

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any  day  preceding  twelve  months,  as  a  class  of establishments to which the said Act shall  apply with effect from the date of publication of this notification in the Official Gazette.

Sd/. (R. K. A. Subrahmanya)

Additional Secretary

(F. No. S-70020/16/77-FPG)”

11. We  find  that  the  notification  dated  08.01.1982  was  not

referred  to  before  the  High  Court.  Such  notification  makes  it

abundantly clear that the Act is applicable to the local bodies i.e., the

Municipalities. Section 14 of the Act has given an overriding effect

over any other inconsistent provision in any other enactment.  The

said provision reads as under:   

“14. Act  to  override  other  enactments,  etc.  – The  provisions  of  this  Act  or  any  rule  made thereunder  shall  have  effect  notwithstanding anything  inconsistent  therewith  contained  in  any enactment other than this Act or in any instrument or contract  having  effect  by  virtue  of  any  enactment other than this Act.”

12. In view of Section 14 of the Act, the provision in the State Act

contemplating payment of Gratuity will be inapplicable in respect of

the employees of the local bodies.

13. Section 2(e) of the Act alone was referred to in the judgment

reported  as  Municipal  Corporation  of  Delhi  (supra).  The  said

judgment  is  in  the  context  of  CCS  (Pension)  Rules,  19726 which

specifically provides for payment of Pension and Gratuity. The Act is

6 1972 Rules

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applicable to the Municipalities, therefore, it is wholly inconsequential

even if there is no reference to the notification dated 08.01.1982.  

14. The  entire  argument  of  the  appellant  is  that  the  State  Act

confers restrictive benefit of gratuity than what is conferred under the

Central Act. Such argument is not tenable in view of Section 14 of the

Act and that liberal payment of gratuity is in fact in the interest of the

employees. Thus, the gratuity would be payable under the Act. Such

is the view taken by the Controlling Authority.

15. In view of the aforesaid, we find that there is no error in the

orders passed by the Controlling Authorities under the Act  and as

maintained  by  the  High  Court.  Consequently,  the  appeals  are

dismissed.

…….………..…………………………J. (Mohan M. Shantanagoudar)

……………………………………………J.       (Hemant Gupta)

New Delhi April 2, 2019

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