Employees governed by any other Act or Rules not to fall under Gratuity Act: SC

The Supreme Court has said a person who is governed by any other Act, or any Rules providing for payment of gratuity, does not come within the ambit of the definition of “employee” under the Payment of Gratuity Act, 1972.

A bench of Pankaj Mithal and S V N Bhatti affirmed the High Court's judgment holding that employees of Heavy Water Plant, Tuticorin (HWP) are not covered by the definition of Section 2(e) of the PG Act.

A batch of civil appeals by retired employees raised a legal issue whether the employees of Heavy Water Plant, Department of Atomic Energy, Government of India, Tuticorin are covered by the provisions of the PG Act.

They were aggrieved with a common judgment of June 21, 2023, which held and declared that the employees of HWP are not covered by the definition of Section 2(e) of the PG Act.

Additional Solicitor General S D Sanjay, for HWP, argued that the standing of employees of HWP vis-à-vis HWP is, in more than one sense, a jurisdictional fact.

As per the inception document, HWP was constituted by the Office Memorandum of May 01, 1969. The sequence is a Board of Management known as the Heavy Water Projects Board, created for managing the projects of DAE for the production of heavy water. HWP is a project of the DAE. To sieve out HWP from its constituent department is illegal and may go contrary to the AE Act, he said.

The employees' counsel submitted, the employees of HWP fall within the exclusive definition of “employee” under Section 2(e) of the PG Act. The absence of an exemption notification under Section 5 is a crucial factor. The denial of gratuity under the PG Act is illegal, and the impugned judgment is liable to be set aside, he said.

The court pointed out, a jurisdictional fact is a fact which must exist before a court, tribunal, or authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on the existence or non-existence of which depends the jurisdiction of a court, a tribunal or an authority. It is the fact upon which an administrative agency’s power to act depends.

The court said, the applicability or inapplicability of the PG Act, to begin with, depends on whether the employee comes within the inclusive definition or the exclusive definition. The same is dependent on jurisdictional facts.

Citing Arun Kumar Vs Union of India (2007), the bench said, "If the jurisdictional fact does not exist, the court, authority or officer cannot act. If a court or authority wrongly assumes the existence of such a fact, the order can be questioned by a writ of certiorari. The underlying principle is that by erroneously assuming the existence of such a jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess.''

With regard to interpretation of statutes, the court explained, coupling the word “means” with “includes” denotes an exhaustive definition. Conversely, the word “means” and “does not include” should be read as exclusionary language that strictly excludes the scope of the provision from certain classes.

On precedent, the court said, a decision is an authority for what it decides and not what can be logically deduced therefrom.

In the case, the court noted, since its inception, a board has been constituted to manage the HWPs of the DAE. The retired employees admit that HWP is not incorporated under the Companies Act, is not recognised as a PSU, or functions as a Government Company. In other words, the other attributes of a separate legal entity, incorporated association, artificial person, limited liability, common seal, perpetual succession, and transferability of shares are not present, it pointed out.

"The jurisdictional fact, on appreciation, leads us to the conclusion that HWP is an adjunct or ancillary operating through the Heavy Water Projects Board of the DAE. On examination of constitution, establishment, and continuation, we notice the character of HWP as an adjunct of the Department of Atomic Energy,'' the bench said.

The court said, it was not adverting to the appointment orders or any other circulars for deciding the jurisdictional fact of “employees”.

"Therefore, the employees fall within the exclusionary clause of Section 2(e) of the PG Act. The result of such exclusion is that Sections 5 and 14 are not attracted in deciding on the applicability of the PG Act to the employees of HWP,'' the bench said, expressing its agreement with the impugned judgment and dismissing the civil appeals.

Case Title: N Manoharan Etc Vs The Administrative Officer And Another

Bench: Justices Pankaj Mithal and S V N Bhatti

Date of Judgment: February 11, 2026