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Supreme Court Rules ONGC Not Liable For Gratuity To Workers Engaged Through Contractor
In a significant ruling clarifying the limits of a 's obligation under the , the has held that the cannot be held liable to pay gratuity to workers engaged through a contractor. A bench of Justices Ahsanuddin Amanullah and Manmohan set aside a order that had fastened such liability on ONGC, ruling that the under the Gratuity Act lacked the jurisdiction to decide the question of liability in the first place.
The judgment, delivered on , arose from four connected appeals filed by ONGC challenging a common order of the . The High Court had reversed the decision of the , which had earlier ruled in ONGC’s favour. The Supreme Court restored the ’s order, but directed that no recovery shall be made from the workers since ONGC had already paid the gratuity amount pursuant to an of this Court.
Background: A Dispute Over Gratuity for Contractual Workmen
The respondents—several individuals who had worked at ONGC establishments through contractors—filed claims before the under the Payment of Gratuity Act, seeking payment of gratuity from ONGC as the . The , despite ONGC’s objection that there was no and that the Authority had no jurisdiction to determine liability, held ONGC liable to pay gratuity. ONGC successfully appealed to the , which set aside the ’s order. However, the reversed the ’s decision, prompting ONGC to approach the Supreme Court.
Arguments: No , Says ONGC
Appearing for ONGC, Solicitor General advanced several key arguments. First, he submitted that under , gratuity is payable only to an “employee,” and the private respondents were not employees of ONGC. There was no between the parties, and therefore the Act was inapplicable. Second, he argued that under , the ’s responsibility extends only to wages, not gratuity, which is a separate component under the . Third, he pointed to Clause 12.4.1 of the contract between ONGC and the contractor, which expressly stated that the agreement was a job contract at arm’s length and did not create any between ONGC and the contractor’s employees. Finally, he contended that the ’s jurisdiction was limited to computing the amount of gratuity payable under the Act and did not extend to deciding or fastening liability on a party.
The only respondent represented before the Court was the contractor (Respondent No. 8 in SLP(C) No. 498/2024), who argued through Mr. that the liability does not rest on the contractor and that “whatever amount is payable ultimately has to come from the .” The other respondents, who had filed a counter affidavit essentially harping on the fact that they had worked for ONGC for a long period, offered nothing to counter the Solicitor General’s submissions.
: Cannot Decide Liability
The Supreme Court agreed with ONGC’s submissions, holding that the very maintainability of the proceeding before the was not permissible. The Court observed:
“The adjudication by the with regard to the liability was beyond its jurisdiction, as the only power conferred on the under the statute was to compute the amount which may be payable to the concerned ‘employee’.”
The Court noted that the had rightly interfered with the ’s order, and the High Court’s reversal of that decision was unjustified. On the question of the Payment of Wages Act and the CLRA Act, the Court found the Solicitor General’s contentions sustainable.
No Recovery of Amount Already Paid
While allowing the appeals and setting aside the High Court’s order, the Supreme Court directed that there shall be no recovery of the gratuity amount already paid by ONGC to the workers pursuant to the of this Court dated . The Court clarified that this direction was issued “after clarifying the aforesaid position in law.”
Implications: A Clear Line on Gratuity Liability for Principal Employers
This judgment provides significant clarity on the scope of a ’s liability under the Payment of Gratuity Act. It reaffirms that gratuity liability arises only in the presence of a , and that under the Gratuity Act are confined to computing the amount due and cannot adjudicate on the existence of such a relationship or fasten liability on any entity. The decision also underscores that principal employers are not automatically liable for gratuity merely because workers are deployed at their establishments through contractors, absent any contractual or statutory provision to the contrary.
The Court did not find it necessary to rely on the recent coordinate bench decision in , noting that the present case could be disposed of on the short point of jurisdiction alone.
