PG Act | Jurisdictional Fact Cannot Be Assumed—Gratuity Authority Cannot Confer Power Upon Itself: Supreme Court Draws Sharp Limits On Applicability

“By erroneously assuming the existence of such a jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess”, In a crucial pronouncement reinforcing the doctrine of jurisdictional fact, the Supreme Court, decided on February 11, 2026, held that authorities under the Payment of Gratuity Act, 1972 cannot assume jurisdiction unless it is first established that the claimant falls within the statutory definition of “employee” under Section 2(e).

The Bench of Justice Pankaj Mithal and Justice S.V.N. Bhatti ruled that the very applicability of the Payment of Gratuity Act depends upon the existence of a foundational jurisdictional fact, and in its absence, the Controlling Authority under the Act cannot entertain claims or grant relief.

The decision significantly strengthens administrative law principles governing statutory tribunals and quasi-judicial authorities.

When Gratuity Authority Assumed Coverage

The dispute arose when retired employees of the Heavy Water Plant (HWP), Department of Atomic Energy (DAE), approached the Controlling Authority under the Payment of Gratuity Act seeking differential gratuity, contending that they were covered under the Act.

The Controlling Authority held that HWP constituted an “industry” under the Industrial Disputes Act, 1947, and on that basis concluded that employees were entitled to gratuity under the PG Act. The Appellate Authority affirmed this reasoning.

However, the Madras High Court reversed the findings, holding that HWP employees were Central Government servants governed by the CCS (Pension) Rules, 1972 and thus excluded under Section 2(e) of the PG Act.

The matter reached the Supreme Court.

Can Jurisdiction Be Assumed Without Foundational Facts?

The Supreme Court framed the issue in terms of jurisdictional competence. It held that the applicability of the PG Act is not automatic; it depends upon the determination of whether the employee falls within the inclusive definition or within the exclusionary clause of Section 2(e).

The Court observed that this determination constitutes a jurisdictional fact.

Relying on Arun Kumar v. Union of India (2007) 1 SCC 732, the Court reiterated:

“A jurisdictional fact is a fact which must exist before a court, tribunal, or authority assumes jurisdiction over a particular matter.”

Further strengthening the principle, the Court held:

“The underlying principle is that by erroneously assuming the existence of such a jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess.”

This observation strikes at the very root of the orders passed by the Controlling Authority and Appellate Authority under the PG Act.

Supreme Court’s Reasoning: Threshold Determination Is Mandatory

The Court clarified that before invoking provisions such as Section 14 (overriding effect) or even examining entitlement, the authority must first conclusively determine whether the claimant is an “employee” under Section 2(e).

In the present case, once it was found that HWP employees:

• Held civil posts under the Central Government, and
• Were governed by CCS (Pension) Rules, 1972 providing for gratuity,

they stood excluded at the threshold.

Therefore, the Controlling Authority had no jurisdiction to proceed further.

The Court’s reasoning effectively underscores that statutory authorities cannot expand their jurisdiction by interpretative assumptions or by drawing parallels with industrial law concepts.

“Decision Is An Authority For What It Decides”—Limits Of Precedent

The Court also cautioned against over-extension of precedents while determining jurisdiction.

It observed:

“It is axiomatic that a decision is an authority for what it decides and not what can be logically deduced therefrom.”

The Bench held that the reliance placed on Municipal Corporation of Delhi v. Dharam Prakash Sharma was misplaced, as that case involved employees of a statutory corporation and not Central Government servants expressly excluded under Section 2(e).

Thus, jurisdiction cannot be borrowed from superficially similar precedents.

Impact On Statutory Tribunals And Authorities

The ruling has broader ramifications beyond gratuity law. It reinforces three critical principles:

First, statutory tribunals must ascertain foundational jurisdictional facts before exercising power.

Second, jurisdiction cannot be created by inference, analogy, or assumption.

Third, where Parliament has expressly excluded a class of persons from the definition clause, quasi-judicial authorities cannot dilute that exclusion by expansive interpretation.

By anchoring the discussion in administrative law doctrine, the Supreme Court has strengthened judicial discipline in the functioning of statutory authorities.

In dismissing the appeals, the Supreme Court reaffirmed that the Payment of Gratuity Act applies only where the statutory definition of “employee” is satisfied. If a person is excluded at the definition stage itself, the Controlling Authority under the Act lacks jurisdiction to adjudicate the claim.

The judgment stands as a significant reaffirmation of the doctrine of jurisdictional fact and the limits of statutory authority.

Date of Decision: February 11, 2026