On March 7, 2019, the Supreme Court of India passed its judgment in the matter of Birla Institute of Technology v. The State of Jharkhand (C.A. No. 2530 of 2012), recalling its order dated January 7, 2019 (“Recalled Order”). In the Recalled Order, the Supreme Court had held that teachers would not be regarded as ‘employees’ under the Payment of Gratuity Act, 1972 (“Act”). The Recalled Order was subsequently stayed by the Supreme Court on January 9, 2019 and it decided to hear the matter afresh.

Brief facts

The respondent joined the appellant-institute as an assistant professor. Upon his superannuation, the appellant denied payment of the amount of gratuity demanded by the respondent. Upon an application filed by the respondent under the Act, the controlling authority directed the appellant to pay the required amount of gratuity to the appellant. Subsequent appeals filed by the appellant were decided in favour of the respondent. Hence, an appeal by way of special leave was filed by the appellant before the Supreme Court. 

Issue

Whether the teachers are entitled to claim gratuity under the Act?

Decision

Earlier, in the case of Ahmadabad Private Primary Teachers Association v. Administrative Officer, (2004) 1 SCC 755, it was held that teachers are not covered under the definition of ‘employee’ under the Act. This led to the Parliament to amend the definition of ‘employee’ under Section 2(e) of the Act on December 31, 2009 with retrospective effect from April 3, 1997 (“Amendment”). The Statement of Objects and Reasons of the Amendment clearly stated that the object of the Amendment was to extend the benefit of gratuity under the Act to teachers. 

The Supreme Court stated that the Amendment was not brought to its notice while passing the Recalled Order, and hence the same contained an error apparent on the face of it. It was held that subsequent to the Amendment, the decision in the case of Ahmadabad Private Primary Teachers Association (supra) was not applicable and teachers are entitled to claim the amount of gratuity under the Act from their employer with effect from April 3, 1997.