FACTS

The appeals arose from a common order dated 23.08.2023 passed by the High Court of Bombay in W.P.(C) Nos. 2443 of 2022, 1724, 1826 and 2355 of 2021, by which the liability to pay gratuity to the private respondents was fastened upon Oil and Natural Gas Corporation Ltd. (ONGC).

The private respondents had worked through contractors under ONGC. Their claims for gratuity were initially considered by the Controlling Authority, which held ONGC liable to pay gratuity. ONGC challenged that determination before the Appellate Authority and succeeded. The Bombay High Court, however, reversed the Appellate Authority, resulting in the appeals before the Supreme Court.

ONGC maintained that the private respondents were not its employees and that there was no employer-employee relationship between them. It also relied upon Clause 12.4.1 of the contract with the contractor, which stipulated that the agreement was a job contract, was at arm’s length, and did not create an employer-employee relationship between ONGC and the contractor’s employees.

ISSUE

Whether the Controlling Authority under the Payment of Gratuity Act was competent to adjudicate the underlying liability and fasten gratuity liability upon ONGC in respect of persons who had worked through contractors, or whether its statutory jurisdiction was limited to computing the amount payable to an employee.

MAIN ARGUMENTS

ONGC argued that Section 4 of the Gratuity Act requires payment of gratuity to an “employee”, whereas the private respondents were not employees of ONGC. On that basis, ONGC contended that the provisions of the Gratuity Act could not be invoked against it in the facts of the cases.

ONGC further submitted that Section 21(4) of the Contract Labour (Regulation and Abolition) Act, 1970 concerns responsibility for payment of wages and does not extend to gratuity. Reliance was also placed on Section 2 of the Payment of Wages Act, 1936 to submit that gratuity payable on termination, except in the specified circumstances, does not fall within the definition of wages.

On jurisdiction, ONGC argued that the Controlling Authority could deal with a dispute regarding the amount of gratuity payable, but could not adjudicate the foundational question of liability and then fasten that liability upon ONGC.

ONGC also referred to Municipal Council, represented by its Commissioner, Nandyal Municipality, Kurnool District, A.P. v. K. Jayaram & Ors., decided on 16.12.2025, for the proposition that a person working in an establishment through a contractor cannot claim an employer-employee relationship with the principal employer merely on that basis.

The contractor submitted that the liability did not rest upon it and that whatever amount was payable ultimately had to come from the principal employer, ONGC. The workers’ counter-affidavit principally relied upon the fact that they had worked for ONGC for a long period. The Supreme Court noted that this did not answer the jurisdictional submission advanced on behalf of ONGC.

DECISION

The Supreme Court allowed the appeals and held that the Bombay High Court’s order could not be sustained. The Court agreed with ONGC that the proceedings, having regard to the relief sought before the Controlling Authority, were not maintainable in that form.

The Court held that adjudication by the Controlling Authority regarding the liability itself was beyond its jurisdiction. According to the Court, the power conferred upon the Controlling Authority under the statute was to compute the amount that may be payable to the concerned “employee”. The Appellate Authority had therefore rightly interfered with the original determination, and the High Court was not justified in reversing the Appellate Authority.

The Supreme Court further stated that ONGC’s contentions under the Payment of Wages Act, 1936 and the Contract Labour (Regulation and Abolition) Act, 1970 were sustainable. Although the Municipal Council, Nandyal Municipality decision had been cited, the Court considered it unnecessary to examine that judgment further in view of the order it proposed to pass.

Accordingly, on the short point that the Controlling Authority was not competent to go into the lis raised before it by persons who had worked through contractors under ONGC, the Supreme Court set aside the Bombay High Court’s order and revived the order of the Appellate Authority.

IMPORTANT CLARIFICATION

During the pendency of the proceedings, ONGC had already paid the gratuity amounts claimed by the workers pursuant to the Supreme Court’s order dated 15.12.2023. The Court therefore expressly directed that no recovery of those amounts shall be made from the workers.

KEY TAKEAWAY

The judgment draws a clear jurisdictional distinction between computing gratuity payable to an employee and adjudicating the foundational liability of a principal employer. In the circumstances before the Court, where the claimants had worked through contractors and ONGC disputed the employer-employee relationship and its liability, the Controlling Authority was held incompetent to adjudicate and fasten that liability upon ONGC.

The ruling is particularly relevant to gratuity disputes involving contract labour and principal employers because it emphasises the statutory limits of the Controlling Authority’s jurisdiction. At the same time, the Court protected the workers from recovery of gratuity amounts that had already been paid during the litigation.

Case Details

Case: M/s Oil and Natural Gas Corporation Ltd. v. Suryakand D. Lad & Ors. and connected appeals

Citation: 2026 INSC 1019

Court: Supreme Court of India

Decision Date: 09 September 2026

Coram: Ahsanuddin Amanullah, J. and Manmohan, J.