Teachers Absorbed Into State Service From Panchayats Are Entitled To Gratuity Under Payment Of Gratuity Act: MP HC

Background

Shivnath Singh Kushwah had first joined the teaching service as a Shiksha Karmi Grade II in 2008, and thereafter, as Adhyapak and then as Madhyamik Shikshak. He was recruited in accordance with the M.P. Panchayat Shiksha Karmi (Recruitment and Conditions of Service) Rules, 1997.

In 2018, the State Govt. changed the rules to M.P. School Education Service (Teaching cadre) Conditions and Recruitment Rules, 2018 ('Rules 2018') and as per Rule 18(2) of Rules 2018, the teachers working in Panchayats were given an option to migrate to the Department of School Education.

When Shivnath Singh retired in 2020, the state refused to count his past service towards gratuity. Instead, it argued that Shivnath Singh opted to migrate, and therefore retired before completing 5 years in the service. Thus, he would not be eligible for gratuity under Rule 44 of M.P. Civil Services Rules, 1976, as it requires the completing of 5 years in service. The state also argued that he was not an "employee" as defined under Section 2(e) of the Gratuity Act, nor was the State an "employer" under Section 2(f).

However, the Controlling Authority disagreed with the state and directed the State to pay Rs. 10,04,767 to Shivnath Singh as gratuity. Aggrieved, the state filed a writ petition challenging the order.

Arguments

The state argued that Shivnath Singh has served for less than 5 years after his absorption in 2018, as he retired in 2020. Thus, they argued that he was not eligible for Gratuity, since under Rule 18(2) of the 2018 Rules, any prior service before absorption was not to be counted towards benefits. Further, under Rule 44 of the Pension Rules, 1976, no gratuity is payable if the worker does not complete five years in service.

On the other hand, Shivnath Singh argued that the controlling authority was correct in considering his service as 'continuous service' from the date of his original appointment in 2008. He argued that the state had not availed any exemption under the Act, and was therefore bound to pay appropriate gratuity.

Court's Reasoning

Firstly, the court rejected the argument that the case was not covered by the Payment of Gratuity Act. Section 2(e), the Court noted that the exclusion from the definition of "employee" applies only when a person is governed by other rules that provides for gratuity. Since the Panchayat service was non-pensionable and Shivnath Singh was not covered by any other rules, the court ruled that this exclusion would not apply.

Secondly, the court ruled that Rule 2(g) of the 1976 Pension Rules only excludes government servants, if they were appointed after 2005. The court reasoned that since Singh was absorbed in 2018, he was not covered by the 1976 rules. Thus, the court held that he could not be denied gratuity on the basis of Rule 44 of the 1976 rules, which mandates 5 years of service.

Thirdly, relying on M.P. Power Management Co. v. M.P. Vidyut Mandal Pensioners' Association (Civil Appeal No. 10266–68/2018), the court held that gratuity and pension are separate entitlements, and one cannot be denied merely because the other was granted. The court explained that gratuity is a mandatory statutory benefit and not discretionary.

Fourthly, the court explained that Rule 18(2) of the 2018 Rules clearly states that employees absorbed under 2018 rules would not be entitled to allowances before the date of absorption. However, the Court clarified that this restriction applied only to pay-related benefits, and not statutory entitlements like gratuity.

Thus, the court upheld that order of the Controlling Authority, and dismissed the writ petition.

Decided on: 06.05.2025

Case No. W.P. No. 31272/2024

Counsel for the Petitioners: Shri Ravindra Dixit, Government Advocate

Counsel for the Respondents: Shri Suryabhan Singh Solanki and Ms. Sakshi Basnet