Workers engaged through a contractor at ONGC claimed gratuity directly from ONGC as the principal employer; the Controlling Authority under the Payment of Gratuity Act, 1972, and, on appeal, the Bombay High Court, had both held ONGC liable to pay.
A bench of Justices Ahsanuddin Amanullah and Manmohan set that aside, holding that a Controlling Authority's jurisdiction under the Act is limited to computing the gratuity due to an already-established employee — it has no power to first adjudicate the disputed, anterior question of who the real employer is. Since ONGC had already paid the workers the disputed amount, the Court directed that no recovery be made from them.
Principal employers facing a gratuity claim from contract workers should raise the employer-identity dispute at the earliest stage and be prepared to contest jurisdiction, since a Controlling Authority's order fixing them as the liable employer is now vulnerable to challenge as being outside its statutory power to decide.