IMPORTANT POINT
Municipal Corporations are covered under the Payment of Gratuity Act, 1972.

JUDGMENT :

Hemant Gupta J.

The challenge in Civil Appeal No. 2628 of 2017 is to an order dated 19.04.2007 passed by the learned Single Bench of the High Court of Judicature at Allahabad, whereby an order dated 08.12.2006 passed by the Controlling Authority, Kanpur under the Payment of Gratuity Act, 1972 (Act) was not interfered with.

2. Civil Appeal No. 2629 of 2017 has also been taken up along with present appeal wherein the challenge is to an order dated 02.05.2007 of the High Court of Judicature at Allahabad upholding an order dated 29.04.2006 of Controlling Authority (Additional Labour Commissioner, Gorakhpur, U.P.) passed under the Act allowing the petition for gratuity in favour of the respondent herein.

3. The appellant, the Municipal Corporation, Kanpur is governed by the Uttar Pradesh Municipal Corporation Act, 1959 (1959 Act), whereas, 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 thereof.

4. 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 Act.

5. 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.

6. The appellant relies upon Section 3 of the U.P Dookan Aur Vanijya Adhishthan Adhiniyam, 1962 (1962 Act) which is to the effect that such Act will have no application to the office of Government or Local Bodies. Therefore, on the strength of such statutory provision, it was argued that the Act would not be applicable in respect of the Municipalities. The appellant is not a factory, mine, oilfield, plantation, port and railway company and that there is no notification as stipulated under Clause (c) of Section 1(3) of the Act. Therefore, the employees of the Municipalities are entitled to the gratuity in terms of the Regulations framed in exercise of powers of Section 548 of the 1959 Act and not under the Act.

7. On the other hand, learned counsel for the respondent pointed out that the Central Government has published a notification in terms of Section 1(3)(c) of the Act on 08.01.1982 to extend the applicability of the Act to the Municipalities. Thus, the Act is applicable to the Municipalities. The relevant provisions of the Act read as under:

"1. Short title, extent, application and commencement.- (1) This Act may be called the Payment of Gratuity Act, 1972.

(2) It extends to the whole of India:

Provided that in so far as it relates to plantations or ports, it shall not extend to the State of Jammu and Kashmir.

(3) It shall apply to-

(a) every factory, mine,