Summary
A 1997 notification extended the Payment of Gratuity Act, 1972 to educational institutions, but Ahmedabad Private Primary Teachers' Association (2004) held that teachers were not 'employees' under Section 2(e). Parliament's Amendment Act of 2009 widened the definition and inserted Section 13A, both with effect from 3 April 1997. Private schools challenged the amendments as overruling a judgment and as unreasonably retrospective. The Supreme Court dismissed the appeals and writ petitions. A legislature may retrospectively cure a defect a court has identified, and the amendment ended discrimination against teachers. Service before 3 April 1997 counts where termination occurs after that date. The statutory cap limits the burden, and the 2016 repeal of the amending Act does not undo its amendments.
Issues
- Whether the retrospective amendment of Section 2(e) and insertion of Section 13A of the Payment of Gratuity Act by the 2009 Amendment Act impermissibly overruled Ahmedabad Private Primary Teachers' Association and violated separation of powers
- Whether the retrospective amendments are unreasonable, confiscatory or violative of Articles 14, 19(1)(g), 21 and 300-A
- Whether gratuity is payable for service before 3 April 1997, and whether the Repealing and Amending Act, 2016 affects the amendments
Provisions considered
- Sections 2(e) and 13A (as amended/inserted by Act of 2009), Payment of Gratuity Act, 1972Teachers are 'employees' with effect from 3 April 1997, and gratuity is payable under the 1997 notification as validated. The amendments were upheld. (¶¶ 9, 13, 14, 20, 22)
- Sections 1(3)(c) and 4, Payment of Gratuity Act, 1972Entitlement depends on termination occurring after the Act applies. Earlier service counts towards the five-year requirement and the computation. (¶¶ 15, 19)
- Section 6A, General Clauses Act, 1897The repeal of the 2009 amending Act by the Repealing and Amending Act, 2016 did not affect the textual amendments already made. (¶¶ 23, 24)
Held
- A legislature may retrospectively amend the provision a court interpreted and cure the defect identified. Doing so changes the law and does not overrule the decision, which itself invited legislation for teachers, so there is no breach of separation of powers. (¶ 13)
- Retrospective effect from 3 April 1997, the date of the notification covering educational institutions, gives effect to what the notification intended. Schools cannot claim a vested right arising from a drafting defect at the expense of teachers. Financial outgo is of little weight, and the statutory ceiling on gratuity limits liability. (¶¶ 14, 16)
- Following Goodyear India v. K.G. Devessar, gratuity is payable where termination occurs after the Act applies to the establishment. The whole period of continuous service, including service before 3 April 1997, counts for eligibility and computation. (¶¶ 15, 19)
- Denying teachers gratuity while other staff received it was discriminatory, and the amendment cured that injustice without violating Articles 14, 19(1)(g), 21 or 300-A. Gratuity is a minimum condition of service, not a bounty, and fee-regulation laws or T.M.A. Pai do not excuse non-payment. (¶ 20)
- Retrospective legislation is not confined to tax statutes, and the dissent in Lohia Machines does not assist the schools. Under Section 6A of the General Clauses Act, repealing the 2009 amending Act in 2016 did not affect the amendments it had made. (¶¶ 21, 22, 23, 24)
Result
Appeals, transferred case and writ petitions dismissed; interim stays were vacated and the private schools were directed to pay gratuity with interest under the Act within six weeks, failing which employees may move the appropriate forum; no costs.