Case at a Glance
Workers who had served ONGC through contractors approached the Controlling Authority under the Payment of Gratuity Act, which held ONGC liable to pay them gratuity. The Appellate Authority reversed that finding, but the Bombay High Court restored ONGC’s liability. The Supreme Court allowed ONGC’s appeals, holding that the Controlling Authority’s only power was to compute the gratuity payable and that it was not competent to decide the dispute raised by workers engaged through a contractor. Because ONGC had already paid under an interim order, the Court directed that nothing be recovered from the workers.
ONGC engaged contractors, and the private respondents worked for ONGC through those contractors. The contract between ONGC and the contractor, in Clauses 12.4 and 12.4.1, described the arrangement as a job contract on an arm’s-length basis and stated that it did not create any employer–employee relationship between ONGC and the contractor’s employees. The workers nevertheless sought gratuity from ONGC, and the Controlling Authority under the Payment of Gratuity Act, 1972 held ONGC liable even though ONGC maintained that it was not their employer.
The Appellate Authority ruled in ONGC’s favour. The Bombay High Court, by its order dated 23 August 2023 in a batch of writ petitions, reversed the Appellate Authority and fastened the gratuity liability on ONGC. ONGC came to the Supreme Court. During the pendency of the appeals, by an order dated 15 December 2023, the Supreme Court directed ONGC to pay gratuity to the workers, and ONGC complied. Before the Supreme Court, the Solicitor General appeared for ONGC; the contractor in the lead appeal argued that liability ultimately lay with the principal employer, and the workers relied on their long period of work through a counter affidavit.
The Key Question Before the Court
Can the Controlling Authority under the Payment of Gratuity Act decide whether a principal employer is liable to pay gratuity to workers engaged through a contractor — or is its power limited to computing the amount payable to an employee?
Why the Controlling Authority Was Not the Right Forum
ONGC argued that gratuity is payable only to an “employee” under Section 4 of the Payment of Gratuity Act and that the workers were not its employees; that a principal employer’s liability under Section 21(4) of the Contract Labour (Regulation and Abolition) Act, 1970 extends only to wages; that gratuity is treated separately under Section 2(vi) of the Payment of Wages Act, 1936; and that the Controlling Authority can compute the amount payable but cannot decide liability. ONGC also relied on Municipal Council, Nandyal Municipality v. K. Jayaram, decided on 16 December 2025, on workers sent through a contractor claiming a relationship with the principal employer.
The Bench accepted the submission that the proceedings were not maintainable for the relief claimed, recording that “the only power conferred on the Controlling Authority under the statute was to compute the amount” payable to the concerned employee. It found the Solicitor General’s contentions on the Payment of Wages Act and the Contract Labour Act “sustainable”, held that the Appellate Authority had rightly interfered, and concluded that the High Court was not justified in reversing it. The Court said it was not necessary to discuss the Nandyal Municipality decision in detail, since the appeals turned on the short point that the Controlling Authority was not competent to adjudicate the dispute raised by workers engaged through a contractor.
What the Court Actually Held
- The Controlling Authority under the Payment of Gratuity Act had power only to compute the gratuity payable; it was not competent to decide the dispute over ONGC’s liability towards workers engaged through a contractor.
- The Appellate Authority rightly interfered with the Controlling Authority’s order, and the Bombay High Court was not justified in reversing it.
- The appeals were allowed, the High Court’s order was set aside and the Appellate Authority’s order “stands revived”.
- Since ONGC had already paid gratuity under the Supreme Court’s interim order of 15 December 2023, the Court directed that there shall be no recovery from the workers.
Why This Judgment Matters
- It clarifies the limited role of the Controlling Authority when the very existence of an employer–employee relationship with a principal employer is disputed.
- It is significant for public sector undertakings and other principal employers that engage labour through contractors.
- The no-recovery direction protects workers who had already received money under an interim order of the Court.
What Should Advocates Take Away From the Judgment?
For Workers
- A gratuity claim against a principal employer that denies being your employer may not be decided by the Controlling Authority; the forum must be chosen carefully.
- Your contractor remains the first point of claim where the contract says the principal employer is not your employer.
- Amounts already paid to you under the Supreme Court’s interim order in this case are protected from recovery.
For Counsel
- Raise the jurisdictional objection early: the Controlling Authority computes gratuity; it does not adjudicate disputed employer status.
- Section 21(4) of the Contract Labour Act was argued to cover only wages, and the Court found that contention sustainable.
- Look at the contract clauses disclaiming an employer–employee relationship, as the Court noted Clauses 12.4 and 12.4.1 here.
Key Takeaways
- The Controlling Authority’s power is to compute gratuity payable to an employee.
- It could not decide ONGC’s disputed liability to contract workers.
- The Appellate Authority’s order in ONGC’s favour was revived.
- No recovery from workers already paid under the interim order.
Frequently Asked Questions
Can contract workers claim gratuity from the principal employer before the Controlling Authority?
In this case the Supreme Court held that the Controlling Authority’s only power was to compute the amount payable, and that it was not competent to decide the dispute raised by workers engaged through a contractor against ONGC.
Did the workers have to return the gratuity already paid?
No. ONGC had paid under the Court’s interim order of 15 December 2023, and the Court directed that there shall be no recovery from the workers.
Did the Court decide whether the workers were ONGC’s employees?
The decision turned on the Controlling Authority’s lack of competence. The Court accepted ONGC’s contentions as sustainable but did not discuss the Nandyal Municipality precedent in detail.
Conclusion
ONGC v. Suryakand D. Lad is a jurisdictional ruling: the Supreme Court did not let a computation forum decide a contested question of who the employer is. At the same time, it ensured that workers who had already received gratuity under its interim order would not have to give it back.
Practical takeaway: Before filing a gratuity claim against a principal employer, contract workers and their counsel should consider whether the employer relationship is disputed — if it is, the Controlling Authority may not be the forum that can decide it.
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