The High Court of Tripura on May 29, 2020 in the case of Samir Kumar Ghosh v. The State of Tripura, had dealt with the issue of applicability of Payment of Gratuity Act (“Act”) to a municipality, which had adopted CCS (Pension) Rules, 1972, as well as, whether the determination of appropriate government has any bearing for determination of the ceiling upto which gratuity is payable.

Facts of the case:

The petitioner, a retired employee of Agartala Municipal Corporation ('AMC') had filed the petition praying for a direction to AMC to pay his gratuity on the basis of his last pay drawn inclusive of basic salary and dearness allowance and by applying revised ceiling of Rs.10,00,000 for payment of gratuity, which was the ceiling applicable as on the date of his retirement in the year 2015.

The Respondents have contended  that the petitioner is not governed by the Act since the AMC has adopted CCS (Pension)Rules, 1972.

Issues:

The issues which arose before the High Court of Tripura were as follows:

1. Whether the Act is applicable to an employee engaged by a municipality?
2. Whether the revised ceiling of wages introduced by the Central Government would be applicable to an retired employee engaged in an establishment, for which the appropriate government is the State Government?

Decision by the court:

The High Court, relying on the decision of the Supreme Court in the case of Nagar Nigam, Gorakhpur v. Ram Shankar Yadav and anr., (2019) 6 SCC 103, held that, an employee of a municipality will be governed by the Act and the fact that the AMC has adopted CCS Pension Rules would not alter this position. The petitioner’s entitlement of gratuity upon his retirement, therefore, have to be calculated in accordance with the provisions made in the Act.

The High Court further held that, since the gratuity payable to the employee of a municipality is governed by the Act, the gratuity has to be computed in accordance with Section 4(2) of the Act on the basis of his basic pay as well as dearness allowance drawn by him on the date of retirement.

With respect to the question on whether or not to apply the revised limit notified by the Central Government, the High Court, relying on the case of single bench decision of Tripura High Court in Bhupati Debnath v. State of Tripura and ors. held that, whilst the distinction between the State or the Central Government being an appropriate Government in relation to different classes of establishments, manifests itself in various sections contained in the Act, when it comes to Section 4 of the said Act which pertains to payment of gratuity, this distinction of the appropriate Government being Central or the State Government, has no effect, especially pursuant to amendment by virtue of Act 12 of 2018, whereby the power to prescribe such ceiling has been vested in the Central Government to be exercised by issuing notification in this regard.

Therefore, AMC was directed to calculate gratuity by applying the revised ceiling as prescribed by the Central Government.

This update has been contributed by Arka Majumdar (Partner) and Juhi Roy (Associate).