Employee Governed By CCS Pension Rules Can't Claim Gratuity Under Payment Of Gratuity Act : Delhi HC

A Division Bench of the Delhi High Court comprising Justice Anil Kshetarpal and Justice Amit Mahajan held that an employee governed by statutory rules providing for gratuity (such as CCS (Pension) Rules) is excluded from the definition of “employee” under Section 2(e) of the Payment of Gratuity Act, 1972, and therefore cannot claim gratuity under the 1972 Act. Further it was held that resignation results in forfeiture of past service hence, employee will be disentitled from pension and gratuity. Background Facts The employee was appointed as a Post Graduate Teacher (History) with the Kendriya Vidyalaya Sangathan (KVS) in July 1995. She rendered over 13 years of service. Then she tendered her resignation due to chronic back pain and prolonged ill health. Her resignation was formally accepted by the KVS in April 2009. Later she sought the release of her retirement benefits. The KVS denied these claims. It invoked its Bye-law No. 26, which is identical to Rule 26 of the Central Civil Services (Pension) Rules, 1972, which states that a resignation results in the forfeiture of past service. Aggrieved, the employee approached the Controlling Authority under the Payment of Gratuity Act, 1972, which directed the KVS to pay her gratuity. The employee then approached the Central Administrative Tribunal for her pension claim. She challenged the validity of the byelaw and sought pension. The Tribunal dismissed her application. It was held that in view of Rule 26 of the CCSP Rules, resignation resulted in forfeiture of past service, therefore, she was not entitled to pensionary benefits. Aggrieved, the employee filed the writ petition before the Division Bench of the Delhi High Court. It was contended by the employee that Section 4 of the Payment of Gratuity Act, 1972, provides that if any employee has rendered continuous service of not less than five years then even in cases of resignation he is eligible for the payment of gratuity. She had completed more than 13 years of service. It was further argued that the Kendriya Vidyalaya Sangathan is a Society registered under the Societies Registration Act, 1860. Therefore it is governed by the Payment of Gratuity Act. Its internal bye-laws cannot defeat the statutory rights conferred by a Parliamentary enactment. It was contended that the Central Civil Services (Pension) Rules, 1972 cannot override an Act of Parliament. Rule 26 of the CCS Pension Rules provides for forfeiture of past service upon resignation, it is inconsistent with Section 4 of the Payment of Gratuity Act. Therefore it cannot be made applicable to employees of the respondent-Society. On the other hand it was contended by the Kendriya Vidyalaya Sangathan that at the time of entering service, the employee had accepted the applicability of the Central Civil Services (Pension) Rules, 1972. Therefore she was bound by Rule 26 which provides for forfeiture of past service upon resignation. Findings of the Court It was observed by the Division Bench that the definition of “employee” under the Payment of Gratuity Act, excludes a person who holds a post under the Central Government or a State Government. Further it also excludes a person who is governed by any other Act or rules providing for payment of gratuity. It was noted by the Court that where gratuity is regulated by a distinct statutory framework, the Payment of Gratuity Act would not operate. It was further observed that the employee's service conditions were governed by the Central Civil Services (Pension) Rules, 1972, which was adopted by the Kendriya Vidyalaya Sangathan. The employee had opted for the GPF-cum-pension scheme under 1972 Rules at the time of entering service. Therefore, her entitlement to pension and gratuity flowed from the CCS Pension Rules and not under the Payment of Gratuity Act. It was noted that the respondent is a Society registered under the Societies Registration Act, 1860, but its service conditions are wholly regulated by the CCS Pension Rules which provides for Gratuity. It was held that the employee is governed by CCSP Rules 1972 providing for gratuity. Therefore, she does not fall within the definition of “employee” under the Payment of Gratuity Act. Hence she cannot claim gratuity under the Payment of Gratuity Act. Relying upon the Supreme Court judgment in N. Manoharan v. Administrative Officer, it was clarified that where an employee is governed by statutory rules (CCS Pension Rules) providing for gratuity, such an employee would be excluded from the ambit of the Payment of Gratuity Act. Further, relying upon the judgment in Union of India & Ors. v. Braj Nandan Singh, it was observed that upon resignation, past service stands forfeited and no qualifying service survives for the purpose of pensionary benefits. Therefore, the effect of resignation leaves no scope for retaining benefits linked to qualifying service. ...

Employee Governed By CCS Pension Rules Can't Claim Gratuity Under Payment Of Gratuity Act : Delhi HC

Namdev Singh

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