State Gratuity Authority Lacks Inherent Jurisdiction Under Gratuity Act Where Establishment Has Multi-State Branches: Delhi High Court
Holding that jurisdiction under the Payment of Gratuity Act turns on the identity of the “appropriate Government,” the High Court ruled that a State-appointed authority cannot entertain a claim where the employer has branches in more than one State. Such a defect is one of inherent jurisdiction and is not curable by waiver.
The Delhi High Court has held that where an establishment operates branches in more than one State, the Central Government, and not the State Government, is the “appropriate Government” under Section 2(a) of the Payment of Gratuity Act, 1972.
The Court further held that a Controlling Authority appointed by a State Government lacks inherent jurisdiction to adjudicate gratuity claims against such an establishment. The Court clarified that this is not a question of territorial or pecuniary jurisdiction capable of waiver, but one going to the root of competence.
The Court was deciding a writ petition challenging orders of the State-appointed Controlling Authority and Appellate Authority directing payment of gratuity to a former employee of the petitioner company.
A Bench of Justice Shail Jain observed that the statutory scheme mandates that jurisdiction under the Act flows exclusively from the identity of the “appropriate Government,” and cannot be assumed merely because the employee worked at a particular branch location. The Bench observed: “it is established that the appropriate Government under the present case would be the Central Government as the Petitioner-company has branches in more than one State, and not the State Government”
In this backdrop, the Bench further remarked that in the facts of the case and on an appropriate interpretation of the provisions of Sec 2 of the Act, “it is established that the said authority appointed by the State Government has no jurisdiction to entertain and decide the matter. Therefore, the said authority lacks inherent jurisdiction to entertain and try this case, and it is not a case of either want of Pecuniary Jurisdiction or Territorial Jurisdiction, which could be waived”.
Background
The petitioner company, incorporated under the Companies Act, operates offices in Delhi and NOIDA (Uttar Pradesh), among other locations. Respondent No. 3, who had served the company for nearly two decades, resigned in 2013 and sought gratuity under Section 7(4) of the Act. The claim was filed before the Controlling Authority appointed by the Government of NCT of Delhi.
The company objected to the authority’s jurisdiction, contending that because it maintained branches in more than one State, the Central Government was the appropriate Government under Section 2(a)(i)(b) of the Act. The Controlling Authority rejected the objection and awarded gratuity with interest. The Appellate Authority affirmed the decision without addressing the jurisdictional challenge.
Aggrieved, the company approached the High Court.
Court’s Observations
The Court examined Section 2(a) of the Act, which designates the Central Government as the appropriate authority where an establishment has branches in more than one State. Documentary material, including incorporation records, tax registrations, board minutes, and correspondence, established that the petitioner company operated from both Delhi and NOIDA.
Rejecting the respondent’s contention that the employee worked only in Delhi, the Court held that the statutory test focuses on the nature of the establishment, not the situs of employment. Once it is shown that the employer maintains multi-state branches, jurisdiction vests exclusively in the Central Government.
The Bench found that both the Controlling Authority and the Appellate Authority failed to examine the statutory requirement and instead assumed jurisdiction based solely on the location of the registered office. Such reasoning, the Court held, misconceives the legislative scheme.
Addressing the plea of waiver, the Court reiterated settled principles distinguishing inherent lack of jurisdiction from territorial or pecuniary defects. Relying on precedent, it held that consent or participation cannot cure the absence of statutory competence. Since the defect concerned inherent jurisdiction, it could be raised even at the writ stage.
The Court also rejected reliance on Sections 20 and 21 of the Code of Civil Procedure, observing that the Payment of Gratuity Act is a special statute with overriding effect under Section 14.
Conclusion
Holding that the State-appointed Controlling Authority lacked inherent jurisdiction to entertain the gratuity claim, the High Court set aside both the Controlling Authority’s award and the appellate order. The Court clarified that it had expressed no opinion on the merits of the employee’s entitlement, which may be pursued before the competent authority under the Act.
The writ petition was allowed, and the impugned orders were quashed.
Cause Title: M/s CSAT System (P) Ltd. v. Appellate Authority Under the Payment of Gratuity Act & Ors. (Neutral Citation: 2025:DHC:1036)
Appearances
Petitioner: Saurabh Shandilya, Advocate
Respondents: Kailash Sharma and Pushpanjali Tripathi, Advocates.