Case: NAGAR NIGAM, GORAKHPUR Vs. SHRI RAM SHANKER YADAV

3. The appellant, the Municipal Corporation, Kanpur is governed by the Uttar Pradesh Municipal Corporation Act, 1959 1959 Actwhereas, 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, 1962 1962 Regulations 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 thereof4. 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 Municipalities are entitled to gratuity only in terms of such Regulations and not under the Act5. The High Court relied upon a judgment reported as Municipal Corporation of Delhi vs Dharam Prakash Sharma and another AIR 1999 SC 293  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.

Court's reasoning:
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 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 notify9. 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, 189710. 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 apply11. 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.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 bodies13. 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, 1972 1972 Rules which specifically provides for payment of Pension and Gratuity. The Act is applicable to the Municipalities, therefore, it is wholly inconsequential even if there is no reference to the notification dated 08.01.198214. The entire argument of the appellant is that the State Act confers restrictive benefit of gratuity than what is conferred under the Centralargument 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 Authority15. 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.