Employees Governed by Statutory Pension Rules Cannot Invoke Payment of Gratuity Act After Resignation, Delhi High Court Holds

A bench of Justice Anil Kshetrapal and Justice Amit Mahajan heard a writ petition challenging orders of the Central Administrative Tribunal which denied gratuity to a teacher who had resigned. The petition contested the Tribunal’s reliance on Rule 26 of the Central Civil Services (Pension) Rules, 1972 (CCSP Rules), and raised the question whether an employee who resigned after more than five years of service could claim gratuity under the Payment of Gratuity Act, 1972 (PG Act).

The High Court dismissed the petition and upheld the Tribunal’s orders dated 30.05.2023 and 17.07.2023. The Court held that the petitioner was governed by the CCSP Rules as adopted by the Kendriya Vidyalaya Sanghathan (KVS) and therefore fell within the exclusion in Section 2(e) of the PG Act. The Court noted that the PG Act applied only where an employee was not already governed by "any other Act or by any rules providing for payment of gratuity." The Court, in its reasoning, observed: "Though the Respondent is a Society registered under the Societies Registration Act, 1860, its service conditions are wholly regulated by the CCSP Rules as adopted. Gratuity is specifically provided for within that statutory framework. Therefore, the Petitioner is an employee governed by rules providing for payment of gratuity within the meaning of the exclusion clause contained in Section 2(e) of the PG Act. Once such statutory rules occupy the field, the employee cannot simultaneously invoke a parallel statutory regime under the PG Act." The Court also reiterated that, on interpretation of Rule 26, the rule was "mandatory, clear and unambiguous" and that "upon resignation, past service stands forfeited and no qualifying service survives for the purpose of pensionary benefits."

Background: The petitioner, appointed as a Post Graduate Teacher (History) with KVS on 09.07.1995, served uninterruptedly until she tendered resignation effective 18.08.2008 and was accepted on 23.04.2009. She completed 13 years and one month of service and sought release of retiral benefits including gratuity and pension. KVS denied gratuity relying on Bye-law No.26 (pari materia to Rule 26 CCSP Rules) which provided for forfeiture of past service on resignation. The Controlling Authority under the PG Act directed payment of gratuity on 05.09.2012, applying precedent that a provision inconsistent with Section 4 of the PG Act would be inoperative. KVS obtained interim stay in a writ petition and the matter reached the Tribunal in O.A. No.81/2018. The Tribunal dismissed the OA, applying Rule 26 and treating the petitioner as governed by the CCSP Rules; a review was dismissed on 17.07.2023. The petitioner then filed the present writ.

Counsel for the petitioner argued that Section 4 of the PG Act entitled an employee who had rendered more than five years’ continuous service to gratuity even upon resignation, and that Bye-law No.26 could not defeat statutory rights under the PG Act. Counsel for KVS maintained that the petitioner had accepted applicability of the CCSP Rules and therefore stood excluded from the PG Act under Section 2(e). The High Court analysed the definition of "employee" in Section 2(e), held that the exclusion applied where service was governed by other statutory rules providing for gratuity, and concluded that Section 14 (which gives overriding effect where the PG Act otherwise applied) did not arise because the PG Act did not apply to the petitioner. The Court distinguished reliance on other authorities and found no merit in the challenge to Rule 26. The petition was dismissed with the Tribunal’s orders upheld; no interim directions or liberty beyond dismissal were granted.

Case No.: W.P.(C) 14081/2023 Case Title: Vimla Singh ex PGT History v. Commissioner Kendriya Vidyalaya Sangathan Appearances: For the Petitioner(s): Mr. P. V. Singh and Mr. Ashok Kumar Panigrahi, Adv. For the Respondent(s): Mr. S. Rajappa, Mr. R. Gowrishankar and Ms. G. Dhivyasri, Adv.