# INDEPENDENT SCHOOLS' FEDERATION OF INDIA (REGD.) v. UNION OF INDIA AND ANOTHER

- **Citation:** [2022] 13 S.C.R. 776
- **Court:** Supreme Court of India
- **Decided:** 2022-08-29
- **Case number:** Civil Appeal No. 8162 of 2012
- **Bench:** Sanjiv Khanna, Bela M. Trivedi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/independent-schools-federation-of-india-regd-v-union-of-india-and-another-35403
- **Pages:** 32

## Headnote

Payment of Gratuity Act, 1972: ss.1(3)(c), 2(e), 13, 13A -
Payment of Gratuity (Amendment) Act, 2009 - Amendment to s. 2(e)
and insertion of s. 13A to the 1972 Act with retrospective effect
from 3.04.1997 vide the Amendment Act of 2009 whereby benefit of
gratuity to the teachers of private schools who have rendered
continuous service for not less than 5 years, on their superannuation,
retirement or resignation, or on their death or disablement due to
accident or disease - Constitutional validity of - High Court
dismissed the petitions of the several private schools challenged
the constitutional validity of the amendments - In appeal before
this Court, challenged on the ground that the Amendment Act, 2009
overrules the judicial decision in Ahmedabad Private Primary
Teachers' Association, 2004 and violates the doctrine of separation
of powers; and that the retrospective amendments are unreasonable,
excessive and harsh, and thus, unconstitutional - On appeal, Held:
Legislature has constitutional powers to amend the language of the
provision that was the subject matter of the court decision, and
such an amendment does not overrule the court decision -
Overruling assumes a decision based on the same law - In the instant
case, law is amended, and the defects are removed or cured, the
law has changed, and therefore, the earlier interpretation is no
longer applicable and becomes irrelevant - Doctrine of separation
of powers demarcates the exclusive domains of the legislature, which
enacts the laws, and the courts which interpret the enacted law -
When the legislature acts within its power to usher in a valid law
and rectify a legal error, even after a court ruling, the legislature
exercises its constitutional power to enact the law and does not
overrule an earlier court decision - As regards the challenge, that
the retrospective amendments are unreasonable there are uppercap limits on payment of gratuity -Though gratuity is computed
with reference to years of service, in view of upper cap limit, the
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payment towards gratuity cannot exceed the specified amount, even
if the employee would be entitled to higher amount in view of the
years of the service rendered to the employer - Hence, the
amendment is not unreasonable or harsh - The teachers were
discriminated to be denied benefit of gratuity, a terminal benefit,
which was payable to other employees of the private schools/
educational institutions, including those engaged in administrative
and managerial work - Amendment with retrospective effect remedies
the injustice and discrimination suffered by the teachers on account
of a legislative mistake - Amendment was necessary to ensure that
something which was due and payable to the teachers is not denied
to them due to a defect in the statute.
Retroactive effect and retrospective operation - Distinction
between - Discussed.
Dismissing the appeals, the Court
HELD: 1.1 The first ground should not hold for long, as
the legislation in question rectifies the infirmities and defects
pointed out by the Court, and the amended clause (e) to Section
2, defining the word "employee" and the newly inserted Section
13A with retrospective effect from 3rd April 1997, effectuate and
catalyse the object and purpose of the Notification No. S-42013/
1/95-SS.(II). This power to legislate with retrospective effect,
which vests in every sovereign legislature, is not taken away by
a court decision. However, a court decision cannot be overruled
by the legislature. The legislature can amend the language of the
provision that was the subject matter of the court decision, and
such an amendment does not overrule the court decision.
Overruling assumes a decision based on the same law. Where
the law, as in the present case, has been amended, and the defects
have been removed or cured, the law changes, and therefore,
the earlier interpretation is no longer applicable and becomes
irrelevant. Doctrine of separation of powers demarcates the
exclusive d

## Text

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 [2022] 13 S.C.R. 776
776
INDEPENDENT SCHOOLS' FEDERATION OF INDIA (REGD.)
v.
UNION OF INDIA AND ANOTHER
(Civil Appeal No. 8162 of 2012)
AUGUST 29, 2022
[SANJIV KHANNA AND BELA M. TRIVEDI, JJ.]
Payment of Gratuity Act, 1972: ss.1(3)(c), 2(e), 13, 13A -
Payment of Gratuity (Amendment) Act, 2009 - Amendment to s. 2(e)
and insertion of s. 13A to the 1972 Act with retrospective effect
from 3.04.1997 vide the Amendment Act of 2009 whereby benefit of
gratuity to the teachers of private schools who have rendered
continuous service for not less than 5 years, on their superannuation,
retirement or resignation, or on their death or disablement due to
accident or disease - Constitutional validity of - High Court
dismissed the petitions of the several private schools challenged
the constitutional validity of the amendments - In appeal before
this Court, challenged on the ground that the Amendment Act, 2009
overrules the judicial decision in Ahmedabad Private Primary
Teachers' Association, 2004 and violates the doctrine of separation
of powers; and that the retrospective amendments are unreasonable,
excessive and harsh, and thus, unconstitutional - On appeal, Held:
Legislature has constitutional powers to amend the language of the
provision that was the subject matter of the court decision, and
such an amendment does not overrule the court decision -
Overruling assumes a decision based on the same law - In the instant
case, law is amended, and the defects are removed or cured, the
law has changed, and therefore, the earlier interpretation is no
longer applicable and becomes irrelevant - Doctrine of separation
of powers demarcates the exclusive domains of the legislature, which
enacts the laws, and the courts which interpret the enacted law -
When the legislature acts within its power to usher in a valid law
and rectify a legal error, even after a court ruling, the legislature
exercises its constitutional power to enact the law and does not
overrule an earlier court decision - As regards the challenge, that
the retrospective amendments are unreasonable there are uppercap limits on payment of gratuity -Though gratuity is computed
with reference to years of service, in view of upper cap limit, the
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payment towards gratuity cannot exceed the specified amount, even
if the employee would be entitled to higher amount in view of the
years of the service rendered to the employer - Hence, the
amendment is not unreasonable or harsh - The teachers were
discriminated to be denied benefit of gratuity, a terminal benefit,
which was payable to other employees of the private schools/
educational institutions, including those engaged in administrative
and managerial work - Amendment with retrospective effect remedies
the injustice and discrimination suffered by the teachers on account
of a legislative mistake - Amendment was necessary to ensure that
something which was due and payable to the teachers is not denied
to them due to a defect in the statute.
Retroactive effect and retrospective operation - Distinction
between - Discussed.
Dismissing the appeals, the Court
HELD: 1.1 The first ground should not hold for long, as
the legislation in question rectifies the infirmities and defects
pointed out by the Court, and the amended clause (e) to Section
2, defining the word "employee" and the newly inserted Section
13A with retrospective effect from 3rd April 1997, effectuate and
catalyse the object and purpose of the Notification No. S-42013/
1/95-SS.(II). This power to legislate with retrospective effect,
which vests in every sovereign legislature, is not taken away by
a court decision. However, a court decision cannot be overruled
by the legislature. The legislature can amend the language of the
provision that was the subject matter of the court decision, and
such an amendment does not overrule the court decision.
Overruling assumes a decision based on the same law. Where
the law, as in the present case, has been amended, and the defects
have been removed or cured, the law changes, and therefore,
the earlier interpretation is no longer applicable and becomes
irrelevant. Doctrine of separation of powers demarcates the
exclusive domains of the legislature, which enacts the laws, and
the courts', which interpret the law as enacted. The earlier
decision in Ahmedabad Private Primary Teachers' Association by
this Court had interpreted the law, that is, Section 2(e) of the
PAG Act, as it then existed in the statute. The judgment even
acknowledged and prompted the legislature to enact a legislation
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granting the benefit of gratuity to teachers, who had been excluded
because of the legal flaw. When the legislature acts within its
power to usher in a valid law and rectify a legal error, even after
a court ruling, the legislature exercises its constitutional power
to enact the law and does not overrule an earlier court decision.
[Para 13][791-E-G; 792-A-B]
1.2 The second ground is again devoid of any merit and
substance. The legislature, vide the Amendment Act, 2009, has
given retrospective effect to the amended provision of Section
2(e) and the newly inserted Section 13A with effect from 3rd April
1997, which is also the date of the notification issued by the
Government under Section 1(3)(c), making the PAG Act applicable
to the educational institutions with ten or more employees. The
amendment enforces and gives effect to what was intended by
the notification, but could not be achieved on account of the
technical and legal defect. The lacuna, a distortion in the language
that had the unwitting effect of leaving out teachers, has been
rectified so as to achieve the object and purpose behind the
issuance of the notification, making the PAG Act applicable to all
educational institutions. The argument of the educational
institutions that they have been taken by surprise is incorrect
and unacceptable as the legislation had cured the inadvertent
defect in a statute, as pointed out by this Court, through legislative
repair. Private schools, when they claim a vested right arising
from the reason of defect, should not succeed, for acceptance
would be at the expense of teachers who were denied and deprived
of the intended benefit. Marginal inconvenience in the form of
financial outgo or difficulty is of little weight, when curing of an
inadvertent defect is made retrospectively in greater public
interest, which consideration would overrule the interest of one
or some institutions. The observations of this Court in
Ahmedabad Private Primary Teachers' Association were sufficient
to indicate that a legislation should intervene to grant the benefit
of gratuity to teachers. The contention that the private schools
were sure to succeed as to deny the teachers the benefit of the
Notification No. S-42013/1/95-SS.(II) dated 3rd April 1997, is
questionable and farfetched to be accepted. The challenge was
contested and had remained pending before the High Courts and
then this Court. The private schools had relied on some
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judgments of this Court, but these judgments have interpreted
the word "employee" under other enactments. The law is subject
to uncertainty ex-ante when two or more views are possible, but
there may be certainty ex-post litigation in view of the law of
precedents, which reduces uncertainty. [Para 14][792-D-G; 793A-C]
1.3 A secondary argument on behalf of the private
educational institutions that they would be liable to pay gratuity
for a period of service prior to 3rd April 1997, and, therefore, the
amendments are unconscionable and tyrannous, is equally
fallacious for several reasons. The argument of unreasonableness
and that the amendment is financially confiscatory, predicated on
past liability, which may pre- date the notification effective from
3rd April 1997, apart from the other reasons, is to be rejected as
there are upper-cap limits on payment of gratuity. Therefore,
though gratuity is computed with reference to the years of service,
in view of the upper-cap limit, the payment towards gratuity cannot
exceed the specified amount, even if the employee would be
entitled to higher amount in view of the years of the service
rendered to the employer. [Para 15, 16][793-D; 795-E-F]
1.4 The provisions of the PAG Act, even post the
retrospective amendments, will apply only to those teachers who
were in service as on 3rd April 1997, and at the time of termination
have rendered service of not less than 5 years. The period of 5
years may be partly before 3rd April 1997, as the date on which
the person was employed does not determine the applicability of
the PAG Act. The date of termination of service, in the form of
superannuation, retirement, or resignation, or death or
disablement due to accident or disease, should be post the
enforcement date, which in the present case is 3rd April 1997.
The entire length of service, including the service period prior
to 3rd April 1997, is to be counted for the purpose of computing
the entitlement condition of 5 years of service. This is the correct
effect of the ratio and decision in Management of Goodyear India
Limited's case and the decisions explaining retroactive effect of
a statute. This legal position would be equally true and correct
when the PAG Act was first enforced with effect from 16th
September 1972, and when Notification No. S-42013/1/95-SS.(II)
INDEPENDENT SCHOOLS' FEDERATION OF INDIA (REGD.)
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under Section 1(3)(c) of the PAG Act was issued and enforced
with effect from 3rd April, 1997. It would be the position in case
of all notifications issued under Section 1(3)(c) of the PAG Act,
unless a contrary intention is expressed.[Para 19][800-C-F]
1.5 The schools have claimed violation of Articles 14,
19(1)(g), 21 and 300-A of the Constitution of India which, are not
violated as, to deny gratuity benefits to the teachers upon
enforcement of the notification No. S-42013/1/95-SS.(II) dated
3rd April 1997 was itself an anomaly which mandated
correction. The effect of the decision in Ahmedabad Private
Primary Teachers' Association's case was that although private
educational institutions were covered under the PAG Act, gratuity
benefits could not be extended to teachers in view of the legal
flaw in the definition, consequent to which they were not treated
as employees. The teachers were discriminated to be denied
benefit of gratuity, a terminal benefit, which was payable to other
employees of the private schools/educational institutions,
including those engaged in administrative and managerial work.
The amendment with retrospective effect remedies the injustice
and discrimination suffered by the teachers on account of a
legislative mistake, which was understood after the
pronouncement of the judgment in Ahmedabad Private Primary
Teachers' Association's case. The amendment was necessary to
ensure that something which was due and payable to the teachers
is not denied to them due to a defect in the statute. Payment of
gratuity cannot be categorized as a windfall or a bounty payable
by the private schools as it is one of the minimal conditions of
service.The argument of the private schools that they do not have
capacity and ability to pay gratuity to the teachers is unapt and
parsimonious. All establishments are bound to follow the law,
including the PAG Act. The private schools were certainly aware
of the intent of the Government that the educational institutions,
as an establishment, would be covered and must pay gratuity upon
issue of notification No. S-42013/1/95-SS.(II) dated 3rd April 1997.
Some schools have raised an argument relying upon decision of
this Court in T.M.A. Pai Foundation and Others v. State of
Karnataka and Others, which observes that as a matter of
principle, charging of capitation fee or profiteering by educational
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institutions is impermissible. However, the judgment does not
state that the teachers should not be paid gratuity. In fact, the
judgment holds that the educational institutions are entitled to
reasonable surplus to meet the cost of expansion and
augmentation of the facilities and this does not amount to
profiteering. It is possible that in some States there are fee fixation
laws which will have to be complied with. But compliance with
these laws does not mean that the teachers should be deprived
and denied gratuity, which they were/ are entitled to receive as
other employees of an educational institution. Regulation of fee
is to ensure that there is no commercialisation and profiteering,
and the effect is not to prohibit a school from fixing and collecting
"just and permissible school fee". [Para 20][800-G-H; 801-A-B,
D-G]
1.6 The submission of the private schools was that the
judgments of this Court upholding retrospective amendments
are valid only when there is a tax implication as the Government
has to refund the paid taxes, is unfounded and irrational.The
power to amend, which includes the power to amend the statute
with retrospective effect, is a constitutional power vested with
the legislature, which is not confined and restricted to any
particular type of statutes, namely, tax statutes. This Court would
not accept any attempt to circumscribe and limit the power vested
with the sovereign legislature, thereby putting fetters when such
fetters are not prescribed by the Constitution. When and which
cases to exercise the power has to be left to the legislature. In
case the constitutional validity of the amendment act is challenged,
the court is entitled to examine the relevant circumstances which
prompted the legislature to make retrospective amendment.
Judicial review, when validity of an amendment act is challenged,
is decided on the grounds of lack of legislative competence,
violation of the fundamental rights or any other provisions of the
Constitution of India. In the present case, the notification No. S42013/1/95-SS.(II) dated 3rd April 1997 had ensured that the
benevolent provisions requiring payment of gratuity should be
extended to the "employees" of the educational institutions. The
amendment with retrospective effect is to make the benevolent
provisions equally applicable to teachers. The amendment seeks
to bring equality and give fair treatment to the teachers. It can
INDEPENDENT SCHOOLS' FEDERATION OF INDIA (REGD.)
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hardly be categorised as an arbitrary and high-handed exercise.
[Para 22][802-D-H; 803-A]
1.7 The stay orders are vacated. The private schools would
make payment to the employees/teachers along with the interest
in accordance with the provisions of the PAG Act within a period
of 6 weeks from today and in case of default, the employees/
teachers may move the appropriate forum to enforce payment in
accordance with the provisions of the PAG Act. [Para 26][807-BC]
Management of Goodyear India Limited. v. Shri K.G.
Devessar (1985) 4 SCC 45; - Relied (Para 25)
Ahmedabad Private Primary Teachers' Association v.
Administrative Officer and Others, (2004) 1 SCC 755 :
[2004] 1 SCR 470; A. Sundarambal v. Government of
Goa, Daman and Diu and Others (1988) 4 SCC 42 :
[1988] 1 Suppl. SCR 604; Haryana Unrecognised
Schools' Association v. State of Haryana (1996) 4 SCC
225 : [1996] 1 Suppl. SCR 253; State of Tamil Nadu v.
Arooran Sugar Ltd. (1997) 1 SCC 326 : [1996] 8 Suppl.
SCR 193; State of Gujarat and Another v. Raman Lal
Keshav Lal Soni and Others (1983) 2 SCC 33; [1983]
2 SCR 287; T.R. Kapur and Others v. State of Haryana
and Others, (1986) Supp SCC 584. Union of India and
Others v. Tushar Ranjan Mohanty and Others (1994) 5
SCC 450 : [1994] 1 Suppl. SCR 651; Shri Prithvi Cotton
Mills Ltd. and Another v. Broach Borough Municipality
and Others (1969) 2 SCC 283 : [1970] 1 SCR 388;
Ujagar Prints and Others (II) v. Union of India and
Others (1989) 3 SCC 488 : [1988] 3 Suppl. SCR 770;
National Agricultural Cooperative Marking Federation
of India Ltd. and Another v. Union of India and Others
(2003) 5 SCC 23 : [2003] 3 SCR 1; Shanti Conductors
Private Limited and Another v. Assam State Electricity
Board and Others (2019) 19 SCC 529; Vineeta Sharma
v. Rakesh Sharma and Others (2020) 9 SCC 1: [2020]
10 SCR 135; Darshan Singh v. Ram Pal Singh and
Another 1992 Supp. (1) SCC 191 Bakshish Singh v. M/
s Darshan Engineering Works and Others, (1994) 1
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SCC 9 : [1993] 3 Suppl. SCR 178; T.M.A. Pai
Foundation and Others v. State of Karnataka and Others
(2002) 8 SCC 481 : [2002] 3 Suppl. SCR 587; Indian
School, Jodhpur and Another v. State of Rajasthan and
Others. (2021) 10 SCC 517 : 2021 (5) JT 432; Lohia
Machines Ltd. and Another v. Union of India and Others
(1985) 2 SCC 197 : [1985] 2 SCR 686; JethanandBetab
v. State of Delhi (1960) 1 SCR 755; Secretary of State
for India in Council v. Hindusthan Co-operative
Insurance Society, Ltd. 1931 SCC OnLine PC 37;
KhudaBux v. Manager, Caledonian Press 1954 SCC
OnLine Cal 132; - Referred to.
Case Law Reference
[2004] 1 SCR 470
referred to
Para 7
[1988] 1 Suppl. SCR 604
referred to
Para 7
[1996] 1 Suppl. SCR 253
referred to
Para 7
[1996] 8 Suppl. SCR 193
referred to
Para 12
[1983] 2 SCR 287
referred to
Para 12
[1994] 1 Suppl. SCR 651
referred to
Para 12
[1970] 1 SCR 388
referred to
Para 13
[1988] 3 Suppl. SCR 770
referred to
Para 13
[2003] 3 SCR 1
referred to
Para 13
[2020] 10 SCR 135
referred to
Para 18
[1993] 3 Suppl. SCR 178
referred to
Para 20
[2002] 3 Suppl. SCR 587
referred to
Para 20
[1985] 2 SCR 686
referred to
Para 21
(2019) 19 SCC 529
referred to
Para 17
[2020] 10 SCR 135
referred to
Para 18
[1990] 3 Suppl. SCR 212
referred to
Para 18
[1993] 3 Suppl. SCR 178
referred to
Para 20
[2002] 3 Suppl. SCR 587
referred to
Para 20
[1985] 2 SCR 686
referred to
Para 20
(1985) 2 SCC 197
referred to
Para 21
INDEPENDENT SCHOOLS' FEDERATION OF INDIA (REGD.)
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[1960] 1 SCR 755
referred to
Para 24
(1985) 4 SCC 45
relied/followed on
Para 25
CIVIL APPELLATE JURISDICTION : Civil Appeal No.8162
of 2012.
From the Judgment and Order dated 02.12.2011 of the High Court
of Delhi at New Delhi in Writ Petition (C) No.6168 of 2010.
With
Civil Appeal Nos.8684 Of 2012, 2229, 9406 of 2013, 6316-6329,
6330-6331 Of 2017, 3870, 7457, 7458, 7459, 7460, 7461, 7462 of 2018,
SLP (C) Nos.12535 Of 2014, 15069 Of 2015, 19930 of 2017, 3293 of
2019 2235 of 2020, Writ Petition (Civil) No.44 Of 2016, Writ Petition
(Civil) No.1158 of 2019 And Transfer Case (Civil) No.104 of 2015.
Vikramjeet Banerjee, AAG, S. K. Gupta, Bhuvan Kapoor, Ms.
Alka Agrawal, Ms. Swati Ghildiyal, Siddhartha Sinha, Ms. Shruti Agarwal,
Shivam Singhania, Nring Chamwibe Zeliang, Prashant Rawat, Ms. Janhvi
Prakash, Gurmeet Singh Makker, Navanjay Mahapatra, Tathagat Sharma,
Aditya Mishra, Raman Yadav, Amrish Kumar, Avi Singh, Manohar Pratap,
Karan Dhalla, Aditya Purohit, Mizba Dhebak, Ranjan Kumar Pandey,
Amol Nirmalkumar Suryawanshi, R. P. Gupta, Ashok Mathur, Ashwani
Kumar, Mishra Saurabh, Ms. Shobha Gupta, Nishant Bahuguna, Shubham
Jalan, Ms. Prachi Sharma, Ms. Sakshi Tiwari, Ms. Kamini Jaiswal,
Nachiketa Joshi, Ms. Sucheta Joshi, Ms. Himadri Haksar, Ms. Medhavi
Mishra, Niraj Sharma, Ankit Goel, Kunal Verma, Parmanand Gaur, Ajit
Pravin Wagh, Sudhanshu S. Choudhari, Amrik Singh, Shreekant Neelappa
Terdal, Sumeer Sodhi, Dhruv Wadhwa, Ms. Deepanwita Priyanka, Ms.
Ruchi Kohli, Ms. Srishti Mishra, Ms. Ranjeeta Rohatgi, Ms. Samten
Doma, Naresh Kumar, Rajesh Imandar, Shashwat Solanki, Ms. Revanta
Solanki, Wasim L. Shaikh, Rauf Rahim, Mrs. Anil Katiyar, Advs. for the
appearing parties.
The Judgment of the Court was delivered by
SANJIV KHANNA, J.
Leave granted in the special leave petitions.
2. The civil appeals by way of special leave, which impugn the
judgements of the High Court of Allahabad- Lucknow Bench1, the High
1 City Montessori School and Another v. Union of India and Others., Miscellaneous
Bench No. 3075/2015; and City Montessari School v. Appellate Authority, Misc. Single
No. 4583/2017.
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Court of Gujarat2, the High Court of Delhi3, the High Court of BombayAurangabad Bench4, the High Court of Punjab and Haryana5, the High
Court of Chhattisgarh- Bilaspur Bench6 and the High Court of Madhya
Pradesh,-Indore Bench7, as well as a batch of writ petitions under Article
32 of the Constitution of India, were heard together as they involve a
common question - constitutional validity of the amendment to Section
2(e) and insertion of Section 13A to the Payment of Gratuity Act, 19728,
with retrospective effect from 3rd April 1997 vide the Payment of Gratuity
(Amendment) Act, 20099.
3. The PAG Act enacted and enforced with effect from 16th
September 1972, requires payment of gratuity to an employee after he
has rendered continuous service for not less than 5 years, on his
superannuation, retirement or resignation or on his death or disablement
due to accident or disease.10 However, sub-section (3) to Section 1 of
the PAG Act restricts its applicability to the following establishments :
"1. Short title, extent, application and commencement. -
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(3) It shall apply to -
2 Saraswati Vidya Mandal v. Ashaben Vinubhai Majmudar and Another, S.C.A. No.
17839/ 2011 and 11 other cases; Jain Citizens Education Society, Surendranagar and
Another v. Union of India and Others, S.C.A. No. 9022/2011 and 1 other Case; and
Nalanda Kelavani Mandal v. Shri Amrutbhai Nathudas Patel and Another, S.C.A. No.
18772/2015, and 5 other cases.
3 Independent Schools' Federation of India (Regd.) v. Union of India & Anr., W.P. (C)
No. 6168/2010; and Maharishi Shiksha Sansthan Registered Society v. Union of India
and Another., W.P(C) 4696/2012.
4 Saint Xaviers High School v. Shailaja Vishnu Deshpande., Writ Petition No. 15344/
2017; and Saint Xaviers High School v. Jayashree Shamal Ghosh, Writ Petition No.
15282/2019.
5 The Sonipat Hindu Educational & Charitable Society v. Union of India and Another,
C.W.P. No. 17643/2010 (O&M); Maharishi Dayanand Education Society and others v.
Union of India and Others, C.W.P.16884/2012; and Independent Schools Association,
Chandigarh v. Union of India and Others, C.W.P. No. 23489/2011.
6 The Secretary, Board of Secondary Education and Others v. Union of India and
Others, W.P.L. No. 138/2012 and 1 other case.
7 Bal Niketan Sangh through Smt. Meena Phadke v. State of Madhya Pradesh & Others.,
Writ Petition No. 5508/ 2014.
8 For short, "PAG Act".
9 For short, "Amendment Act, 2009".
10 Section 4 of the PAG Act.
INDEPENDENT SCHOOLS' FEDERATION OF INDIA (REGD.)
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(a) every factory, mine, oilfield, plantation, port and railway
company;
(b) every shop or establishment within the meaning of any law for
the time being in force in relation to shops and establishments in a
State, in which ten or more persons are employed, or were
employed, on any day of the preceding twelve months;
(c) such other establishments or class of establishments, in which
ten or more employees are employed, or were employed, on any
day of the preceding twelve months, as the Central Government
may, by notification, specify in this behalf."
In the present case, we are only concerned with clause (c) and
not clauses (a) and (b) to sub-section (3) to Section 1 of the PAG Act.
As per clause (c), the PAG Act applies to an establishment or a class of
establishments in which ten or more employees are employed, as the
Central Government may, by notification, specify on this behalf.11
4. In exercise of powers conferred by clause (c) to Section 1(3)
of PAG Act vide notification No. S.O. 239, the provisions of the PAG
Act were made applicable to the "local bodies" in which ten or more
persons are employed, as a class of establishments, with effect from 8th
January 1982. As a result, the schools under the local bodies with ten or
more employees became liable to pay gratuity to their employees.
However, the notification did not apply to private schools.
5. By Notification No. S-42013/1/95-SS.(II) issued by the Ministry
of Labour and Employment, Government of India on 3rd April, 1997, the
provisions of the PAG Act have been made applicable to the educational
institutions with ten or more employees. The private schools being
educational institutions, in which ten or more persons are employed,
became liable to pay gratuity to their employees as per the provisions of
the PAG Act.
6. However, some private schools raised a dispute claiming that
the teachers in educational institutions or schools are not "employee" as
defined in Section 2(e) of the PAG Act. The expression "employee" in
11 Sub-section 3A to Section 1, inserted by the Payment of Gratuity (Second Amendment)
Act, 1984 with effect from 18th May 1984, states that a shop or establishment to which
the PAG Act applies, shall continue to be governed by the enactment, notwithstanding
the number of persons employed therein, at any time after the PAG Act has become
applicable, falls below ten.
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clause (e) to Section 2, post the Payment of Gratuity (Amendment) Act,
1994, which came into effect from 24th May 1994, at that time, read
thus:
"2. Definitions. -
xx xx xx
(e) employee means any person (other than apprentice) employed
on wages, in any establishment, factory, mine, oilfield, plantation,
port, railway company or shop, to do any skilled, semi-skilled, or
unskilled, manual, supervisory, technical or clerical work, whether
the terms of such employment are express or implied, and whether
or nor such person is employed in a managerial or administrative
capacity, but does not include any such person who holds a post
under the Central Government or a State Government and is
governed by any other Act or by any rules providing for payment
of gratuity."
The contention that the teachers did not fulfil the description of
the employees, who are skilled, semi-skilled or unskilled persons employed
on wages, was accepted by the Full Bench of the High Court of Gujarat
vide judgment dated 4th May 200112. Thus, the teachers were denied
the benefit of gratuity, but other employees of the private schools, were
entitled to the benefit of gratuity.
7. This decision of the High Court of Gujarat was impugned by an
association of teachers - Ahmedabad Private Primary Teachers'
Association, before this Court, but their challenge was rejected vide
judgment dated 13th January 200413. Applying the doctrine of pari
materia, this Court held that the expression "employee", as defined vide
clause (e) to Section 2, is restrictive and not expansive. Relying on
decisions in A. Sundarambalv. Government of Goa, Daman and Diu
and Others14 and Haryana Unrecognised Schools' Associationv. State
of Haryana15, while interpreting the definition of an "employee" under
the Minimum Wages Act, 1948, and the Payment of Bonus Act, 1965, as
also the definition of "workmen" under the Industrial Disputes Act, 1947,
12 Shantiben L. Christian v. Administrative Officer, Ahmedabad Municipal School
Board,Special Civil Application No. 5272 of 1987.
13 Ahmedabad Private Primary Teachers' Association v. Administrative Officer and
Others, (2004) 1 SCC 755.
14 (1988) 4 SCC 42.
15 (1996) 4 SCC 225.
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this Court pointed to the difference in the definition of word "employee"
in the Employees' Provident Fund and Miscellaneous Provisions Act,
1952. Accordingly, teachers who impart education to students were held
not to be an "employee" under Section 2(e) of the PAG Act as they do
not perform any kind of skilled, unskilled, semi-skilled, manual, supervisory,
managerial, administrative, technical or clerical work. Reasoning in
Ahmedabad Private Primary Teachers' Association (supra) is
crystalized in paragraph 25 of the judgment, which reads:
"25. The legislature was alive to various kinds of definitions of
the word "employee" contained in various previous labour
enactments when the Act was passed in 1972. If it intended to
cover in the definition of "employee" all kinds of employees, it
could have as well used such wide language as is contained in
Section 2(f) of the Employees' Provident Funds Act, 1952 which
defines "employee" to mean "any person who is employed for
wages in any kind of work, manual or otherwise, in or in
connection with the work of an establishment ...". Non-use
of such wide language in the definition of "employee" in Section
2(e) of the Act of 1972 reinforces our conclusion that teachers
are clearly not covered in the definition."
Nevertheless, being conscious that the teachers would be thereby
deprived of the benefit of gratuity, the Court had observed and clarified:
"26. Our conclusion should not be misunderstood that teachers
although engaged in a very noble profession of educating our young
generation should not be given any gratuity benefit. There are
already in several States separate statutes, rules and regulations
granting gratuity benefits to teachers in educational institutions
which are more or less beneficial than the gratuity benefits provided
under the Act. It is for the legislature to take cognizance of situation
of such teachers in various establishments where gratuity benefits
are not available and think of a separate legislation for them in
this regard. That is the subject-matter solely of the legislature to
consider and decide."
8. On 26th November 2007, the Payment of Gratuity (Amendment)
Bill, 2007, was introduced in the Parliament seeking to amend the definition
of the word "employee" and thereby rectify the error or lacuna identified
by this Court in Ahmedabad Private Primary Teachers' Association
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(supra). The object and reasons, as stated and obvious, were to extend
the benefit of gratuity to teachers of private educational institutions. The
bill was referred to the Standing Committee on 10th December 2007.
After due deliberations and in-depth consideration, the Standing
Committee deemed it appropriate to suggest changes vide the 26th
Standing Committee Report. The report, on the aspect of grant of gratuity
to teachers with effect from 3rd April, 1997 states:
"36...The Committee feel that implementing the law from the
year 2004 will cause irreparable loss to a large number of teachers
of the country, particularly to those who have already retired. The
Committee, therefore, call upon the Government to make the law
applicable with retrospective effect, i.e. from the date of
notification in the year 1997. This will provide the needed succour
as well as justice to all those affected persons who were denied
their rightful benefits due to some technical flaw/legal lacuna in
the definition of the term 'employee' as contained in Section 2 (e)
of the Payment of Gratuity Act, 1972."
9. Accepting the said recommendation of the 26th Standing
Committee Report, the Payment of Gratuity (Amendment) Bill, 2009
was introduced in the Parliament on 24th February 2009 and was passed
on 31st December 2009. Clause (e) to Section 2 of the PAG Act was
amended with retrospective effect from 3rd April, 1997, and reads:
"2. Definitions. -
xx xx xx
(e) "employee"means any person (other than an apprentice)
who is employed for wages, whether the terms of such employment
are express or implied, in any kind of work, manual or otherwise,
in or in connection with the work of a factory, mine, oilfield,
plantation, port, railway company, shop or other establishment to
which this Act applies, but does not include any such person who
holds a post under the Central Government or a State Government
and is governed by any other Act or by any rules providing for
payment of gratuity;"
Further, Section 13A was inserted also with effect from 3rd April
1997 and reads :
"13A. Validation of payment of gratuity.-Notwithstanding
anything contained in any judgement, decree or order of any court,
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for the period commencing on and from the 3rd day of April, 1997
and ending on the day on which the Payment of Gratuity
(Amendment) Act, 2009, receives the assent of the President, the
gratuity shall be payable to an employee in pursuance of the
notification of the Government of India in the Ministry of Labour
and Employment vide number S.O. 1080, dated the 3rd day of
April, 1997 and the said notification shall be valid and shall be
deemed always to have been valid as if the Payment of Gratuity
(Amendment) Act, 2009 had been in force at all material times
and the gratuity shall be payable accordingly:
Provided that nothing contained in this section shall extend, or
be construed to extend, to affect any person with any punishment
or penalty whatsoever by reason of the non-payment by him of
the gratuity during the period specified in this section which shall
become due in pursuance of the said notification."
10. The object and reasons for the Amendment Act, 2009 refers
to the judgment in Ahmedabad Private Primary Teachers' Association
(supra), and states that the legislature, to cover the definition of
"employee" to all kinds of employees, has used language similar to the
wide language of clause (f) of Section 2 of the Employees' Provident
Funds and Miscellaneous Provisions Act, 1952. It is also crystal clear
that the Parliament has passed and enacted the Amendment Act, 2009
to confer, with retrospective effect from the date of the notification on
3rd April 1997, benefit of gratuity to the teachers who have rendered
continuous service for not less than 5 years, on their superannuation,
retirement or resignation, or on their death or disablement due to accident
or disease.
11. Several private schools challenged the constitutional validity
of the amendments, which writ petitions have been dismissed by seven
High Courts, as mentioned in the first paragraph of this judgment. These
appeals by way of special leave impugn these judgments. Some private
schools have also filed writ petitions under Article 32 of the Constitution
of India before us.
12. The power of the Parliament and State Legislatures under
Articles 245, 246 and 248 of the Constitution of India, as held by this
Court in State of Tamil Nadu v. Arooran Sugar Ltd.16 and several
16 (1997) 1 SCC 326.
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other decisions of this Court, includingState of Gujarat and Another v.
Raman Lal Keshav Lal Soni and Others17, T.R. Kapur and Othersv.
State of Haryana and Others18and Union of India and Othersv.
Tushar Ranjan Mohanty and Others19, to legislate, embraces the power
to amend, delete or obliterate the statute or enact a statute prospectively
or retrospectively. To be fair, the appellants and the writ petitioners do
not contest the competency, and that the legislature has the power to
amend an already enacted law or enact a new law with retrospective
effect. They also do not dispute that the amendment to Section 2(e), and
the insertion of Section 13A have been given retrospective effect. The
two main grounds of challenge raised and required to be considered in
nutshell can be summarised as:
(a) The legislation vide the Amendment Act 2009 overrules the
judicial decision in Ahmedabad Private Primary Teachers'
Association (supra) and violates the doctrine of separation of
powers.
(b) The retrospective amendments are unreasonable, excessive
and harsh, and therefore, unconstitutional.
13. The first ground should not hold us for long, as the legislation
in question rectifies the infirmities and defects pointed out by the Court,
and the amended clause (e) to Section 2, defining the word "employee"
and the newly inserted Section 13A with retrospective effect from 3rd
April 1997, effectuate and catalyse the object and purpose of the
Notification No. S-42013/1/95-SS.(II). This power to legislate with
retrospective effect, which vests in every sovereign legislature, is not
taken away by a court decision. However, a court decision cannot be
overruled by the legislature. The legislature can amend the language of
the provision that was the subject matter of the court decision, and such
an amendment does not overrule the court decision. Overruling assumes
a decision based on the same law. Where the law, as in the present case,
has been amended, and the defects have been removed or cured, the
law changes, and therefore, the earlier interpretation is no longer
applicable and becomes irrelevant. Doctrine of separation of powers
demarcates the exclusive domains of the legislature, which enacts the
laws, and the courts', which interpret the law as enacted. The earlier
17 (1983) 2 SCC 33.
18 (1986) Supp SCC 584.
19 (1994) 5 SCC 450.
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decision in Ahmedabad Private Primary Teachers' Association (supra)
by this Court had interpreted the law, that is, Section 2(e) of the PAG
Act, as it then existed in the statute. The judgment even acknowledged
and prompted the legislature to enact a legislation granting the benefit of
gratuity to teachers, who had been excluded because of the legal flaw.
When the legislature acts within its power to usher in a valid law and
rectify a legal error, even after a court ruling, the legislature exercises
its constitutional power to enact the law and does not overrule an earlier
court decision. This principle is too well settled to require elaborate
quotations, albeit reference can be made amongst other cases to Shri
Prithvi Cotton Mills Ltd. and Another v. Broach Borough
Municipality and Others20, Ujagar Prints and Others (II) v. Union
of India and Others21 and National Agricultural Cooperative
Marking Federation of India Ltd. and Anotherv. Union of India
and Others22.
14. The second ground is again devoid of any merit and substance.
The legislature, vide the Amendment Act, 2009, has given retrospective
effect to the amended provision of Section 2(e) and the newly inserted
Section 13A with effect from 3rd April 1997, which is also the date of the
notification issued by the Government under Section 1(3)(c), making the
PAG Act applicable to the educational institutions with ten or more
employees. The amendment enforces and gives effect to what was
intended by the notification, but could not be achieved on account of the
technical and legal defect. The lacuna, a distortion in the language that
had the unwitting effect of leaving out teachers, has been rectified so as
to achieve the object and purpose behind the issuance of the notification,
making the PAG Act applicable to all educational institutions. The
argument of the educational institutions that they have been taken by
surprise is incorrect and unacceptable as the legislation had cured the
inadvertent defect in a statute, as pointed out by this Court, through
legislative repair. Private schools, when they claim a vested right arising
from the reason of defect, should not succeed, for acceptance would be
at the expense of teachers who were denied and deprived of the intended
benefit.