Non profit education institute also covered under purview of Gratuity Act

Institute of Economic Growth - Petitioner


The Controlling Officer under the Payment of Gratuity Act & Another - Respondents

Facts of the Case:
Respondent No. 2, retired after serving the petitioner, a post-graduate school for advanced teaching and research in Economics and Allied subjects, for 38 years. He was paid gratuity of Rs. 67,710, which was in accordance with the gratuity scheme of the petitioner institution.

He claimed that as per the provisions of the Payment of Gratuity Act, 1972 (the Act), he was entitled to a gratuity of Rs. 1 lakh. But the petitioner institute, a society registered under the Societies Registration Act, denied his claim.

Thus, respondent no. 2 approached the Controlling Officer under the Act, who held that the provisions of the Act do apply to the petitioner. He thereby directed the petitioner to pay the balance amount of Rs.32,290 to respondent No.2.

Petitioner challenged this order by the Controlling Officer before Delhi High Court. It contended that as per Section 2 (5) of the Act, only those educational institutions which are run for private gain are covered within the definition of Commercial Establishment, and it being a non-profit educational institute hence the Act does not apply to it.

Hon’ble High Court ruled that examining the term ‘establishment’ under Section 1(3) (b) of the Act in relation to Section 2(9) and Section 2(5) of the Delhi Shops & Establishments Act, 1954, it follows that the petitioner institute, though being a non profit organization, does fall within the purview of the Act.

Thus, it upheld the decision of the Controlling Officer while stating that now the Act even applies to the educational institutions, and directed the petitioner to pay the remaining amount with interest.



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