Aided School Teachers Entitled to Gratuity Under State Pension Rules, Not Gratuity Act: Supreme Court Clarifies Legal Position on Gratuity Claims

“Nomination absolves the employer from tracing all legal heirs; nominee receives gratuity in trust for all heirs”— In a significant judgment Supreme Court of India decisively ruled on the legal framework governing gratuity payments to aided school teachers in Maharashtra. The Court held that the payment of gratuity to teachers of aided schools is governed exclusively by the Maharashtra Civil Services (Pension) Rules, 1982, and not the Payment of Gratuity Act, 1972. The Bench comprising Justice Sudhanshu Dhulia and Justice K. Vinod Chandran also clarified that nominees are entitled to receive the gratuity amount without producing a legal heir certificate, subject to an indemnity undertaking.

The petitioner, son of a deceased aided school teacher, claimed gratuity under the Payment of Gratuity Act, 1972. His claim was rejected by both the original and appellate authorities and later by the High Court, on grounds that teachers in aided schools are governed by the State Pension Rules of 1982. Aggrieved, the petitioner approached the Supreme Court, arguing for application of the Gratuity Act, citing judgments like Birla Institute of Technology v. State of Jharkhand (2019) 4 SCC 513 which had held teachers to be eligible for gratuity under the Act.

On the other side, the State contended that the deceased teacher’s pay and retirement benefits were governed by the Maharashtra Civil Services (Pension) Rules, 1982, framed under Article 309 of the Constitution of India. The State argued that the Gratuity Act was not applicable in such circumstances, particularly because the death-cum-retirement gratuity (DCRG) under the Rules provided a more beneficial scheme.

Applicability of Gratuity Act to Aided School Teachers

The Supreme Court decisively rejected the petitioner’s contention, holding: “Though strictly speaking the teachers may not be holding a post under the State Government, it is akin to a post under the State Government, at least for the monetary benefits of pay and allowances while in service, as also pension and other benefits on retirement.” [Para 7]

Referring to Section 4(5) of the Payment of Gratuity Act, the Court noted: “Where an employee is entitled to receive better terms of gratuity under any award, agreement or contract with the employer, the provisions of Section 4 shall not apply.” [Para 8]

The Court reasoned that the comprehensive benefits under the Maharashtra Civil Services (Pension) Rules, 1982—which include pension and gratuity benefits—offered a superior protection compared to the limited monetary benefit under the Gratuity Act.

The Bench emphasized: “It cannot be that teachers in aided schools receive gratuity under the Gratuity Act, while Government teachers receive benefits under the Rules of 1982; uniformity must prevail where conditions of service are regulated by the State.” [Para 9]

Comparative Benefit Assessment: Rules of 1982 More Comprehensive

Delving into the comparative analysis, the Court highlighted that the 1982 Rules provide a more equitable and protective scheme, particularly in cases of death or cessation of service without the minimum qualifying period. Noting the graduated slabs of DCRG based on years of qualifying service, the Court observed:

“On death prior to five years of service, the benefits under the Rules of 1982 would be more beneficial to the dependents of the employees.” [Para 9]

The Court ruled that for teachers in aided schools, the Pension Rules govern gratuity, and reliance on the Gratuity Act is misplaced.

Nominee’s Entitlement: Legal Heirship Certificate Not Required

Turning to the issue of the nominee’s entitlement, the Court settled the debate by holding that production of a legal heir certificate was not necessary in such cases. The judgment made a crucial observation:

“Payment to a nominee does not extinguish the rights of other legal heirs. The nominee holds the money in trust for all legal heirs, absolving the employer from any further identification process.” [Para 11]

The Court found no justification to compel the petitioner to undergo the process of obtaining a legal heir certificate, particularly when the employer had already acknowledged the nomination for provident fund disbursement.

Direction for Timely Payment with Interest

To avoid further hardship to the petitioner, the Court directed: “The petitioner shall approach the first respondent with an application for payment of DCRG along with an undertaking to indemnify the Government and the school from future claims. Payment shall be made expeditiously, with simple interest at 7% per annum from one month after the date of death till the date of payment.” [Para 12]

The Supreme Court allowed the Special Leave Petition, granting the petitioner gratuity under the more beneficial 1982 Pension Rules while clarifying two crucial legal positions:

• Teachers of aided schools in Maharashtra are governed by the Maharashtra Civil Services (Pension) Rules, 1982 for gratuity, not the Payment of Gratuity Act, 1972.

• Nominees are entitled to receive gratuity without legal heirship certification, safeguarding the employer while respecting other heirs’ rights.

The Court succinctly concluded:

“The conferment of gratuity is governed by statutory rules applicable to aided schools, balancing state responsibility with equitable entitlement of dependents, ensuring no undue hardship by way of procedural technicalities.” [Para 13]

This judgment reinforces a uniform pensionary regime for aided school teachers in Maharashtra and simplifies the procedural hurdles faced by nominees in accessing rightful benefits.

Date of Decision: 14th July 2025