N. Manoharan vs The Adminsitrative Officer

2026 INSC 143 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. OF 2026 @ SPECIAL LEAVE PETITION (CIVIL) NOS. 22628 – 22637 OF 2024

N. MANOHARAN, ETC. … APPELLANT(S)

VERSUS

THE ADMINISTRATIVE OFFICER AND ANOTHER … RESPONDENT(S)

WITH

CIVIL APPEAL NOS. OF 2026 SPECIAL LEAVE PETITION (CIVIL) NOS. 22638 – 22669 OF 2024

G. AROCKIASAMAY, ETC. … APPELLANT(S)

VERSUS

THE ADMINISTRATIVE OFFICER AND ANOTHER … RESPONDENT(S)

WITH

CIVIL APPEAL NOS. OF 2026 SPECIAL LEAVE PETITION (CIVIL) NO. 22670 OF 2024

S. ALANGAR LR OF (U. SUNDARA RAJ) … APPELLANT(S)

VERSUS

THE ADMINISTRATIVE OFFICER AND OTHERS … RESPONDENT(S)

JUDGMENT

S.V.N. BHATTI, J.

Signature Not Verified

1. Digitally signed by geeta ahuja Date: 2026.02.11 Leave granted.

18:01:12 IST Reason:

2. The point for consideration in the subject Civil Appeals is whether the

employees of Heavy Water Plant, Department of Atomic Energy, Government

1 of India, Tuticorin (“HWP”) are covered by the provisions of the Payment of

Gratuity Act, 1972 (“PG Act”).

3. The Civil Appeals arise from a common Judgment dated 21.06.2023 in

Writ Appeal No. 1687 of 2021, Writ Petition No. 19117 and batch. The

impugned Judgment held and declared that the employees of HWP are not

covered by the definition of Section 2(e) of the PG Act. Hence, the Civil Appeals

are at the instance of the retired employees of HWP. The circumstances

leading to the dispute between the parties are admitted and fall within a

narrow compass.

4. The Atomic Energy Act, 1962 (“AE Act”), was enacted by the Parliament

and is effective from 15.09.1962. The objective of the AE Act is to provide for

the development, control and use of atomic energy for the welfare of the people

of India and for other peaceful purposes. Section 3 of the AE Act deals with

‘General Powers of the Central Government’ to produce, develop, use and

dispose of atomic energy, either by itself or through any Authority or

Corporation established by it, or a Government Company; and carry out

research into any materials connected therewith. Section 3 of the AE Act is

comprehensive and encompasses all primary and ancillary activities

undertaken by the Central Government relating to atomic energy. The

Department of Atomic Energy, Government of India (“DAE”), is the

Department through which the Central Government discharges the functions,

duties, and responsibilities assigned to it under the AE Act. The parties admit

2 the following hierarchy of departments vis-à-vis atomic energy:

PRIME MINISTER

ATOMIC ENERGY COMMISSION

DEPARTMENT OF ATOMIC ENERGY

SERVICE R&D SECTOR I&M SECTOR PSUs ORGANIZATIONS

BHABHA ATOMIC RESEARCH CENTRE, NUCLEAR POWER MUMBAI CORPORATION OF INDIA LTD., MUMBAI DIRECTORATE OF INDIRA GANDHI CENRE HEAVY WATER PURCHASE & STORIES, FOR ATOMIC BOARD, MUMBAI MUMBAI RESEARCH, KALAPAKKAM IREL (INDIA) LTD., MUMBAI DIRECTORATE OF RAJA RAMANNA CENTRE NUCLEAR FUEL CONSTRUCTION, FOR ADVANCED COMPLEX, SERVICES & ESTATE TECHNOLOGY, INDORE HYDERABAD MANAGEMENT, MUMBAI VARIABLE ENERGY URANIUM CYCLOTRON CENTRE, CORPORATION OF KOLKATA INDIA LTD., HYDERABAD BOARD OF RADIATION & GLOBAL CENTRE FOR ISOTOPE NUCLEAR ENERGY GENERAL SERVICES TECHNOLOGY, ORGANIZATION, PARTNERSHIP, MUMBAI BAHADUEGARH KALPAKKAM BHARATIYA NABHIKIYA VIDYUT NIGAM LTD., ATOMIC MINERALS KALAPAKKAM DIRECTORATE FOR EXPLORATION & RESEARCH, HYDERABAD

5. On 01.05.1969, the Government of India/DAE issued Office

Memorandum No. 12/7/69-(P) for the constitution of a Board to administer

the Heavy Water Production Projects of the DAE. The operative portion of the

Office Memorandum reads as follows:

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6. The HWP in Tuticorin is one of the Heavy Water Boards established by

the DAE. The circumstance precipitating a dispute between the retired

employees and HWP can be traced to one of the pension payment orders

issued by HWP. On 25.07.2014, the pension payment order in favour of

retired employee, N. Manoharan, was issued under the CCS (Pension) Rules,

1972. The CCS (Pension) Rules, 1972 deal with comprehensively the

retirement benefits to which a retired employee is entitled, including gratuity.

The sum payable as gratuity under the PG Act and CCS (Pension) Rules, 1972,

is less than the sum payable under the PG Act. This led to an employee of

HWP filing an application before the Controlling Authority under the PG Act.

The Controlling Authority held that the provisions of the PG Act are attracted

to the employees of HWP, and a direction was ordered to pay the difference

between the PG Act and CCS (Pensions) Rules, 1972. The Controlling

4 Authority, on jurisdictional fact and the applicability of the PG Act, held that

HWP, constitutes an industry under the Industrial Disputes Act, 1947,

making the applicant-employee eligible for coverage under Section 1(3)(b) of

the PG Act. The Controlling Authority also relied on the Order dated

29.01.2016 of the High Court of Madras in WP Nos. 23577 to 23579 of 2015

and batch. HWP, Tuticorin, challenging the Order of the Controlling Authority,

filed an appeal before the Deputy Chief Labour Commissioner, and the appeal

filed was dismissed. The primacy of consideration of the appellate authority

as well proceeds on the fact that HWP is an industry under the Industrial

Disputes Act, 1947, and the employees are industrial employees covered by

the first limb of Section 2(e) of the PG Act.

7. HWP assailed the orders before the High Court in Writ Petition No.

23127 of 2015 and batch, which were dismissed on 31.03.2016, resulting in

the filing of Writ Appeal No. 1687 of 2021. The record discloses that HWP filed

Writ Petition No. 13346 of 2023 and batch challenging the subsequent orders

of the Controlling Authority directing payment of the difference of gratuity to

the retired employees of HWP. The Division Bench of the High Court of Madras

dealt with the Writ Appeals as lead cases and, by the Impugned Judgment,

and allowed the Writ Appeals as well as Writ Petitions filed by HWP. The

Impugned Judgment examined the issue under the following heads:

(i) On Interpretation of “Employee” (Section 2(e) of PG Act, 1972): The

Appellants were appointed by the Government of India, DAE. Their

appointment orders clearly stated they were governed by “Central Civil

Services Rules.” Since the Appellants held “civil posts under the Central

Government” and were governed by the CCS (Pension) Rules, 1972, which

5 provide for gratuity, they fall squarely within the exclusion clause. Therefore,

they do not come within the meaning of “employees” under Section 2(e) of the

PG Act.

(ii) Inapplicability of Section 14 (Overriding Effect): Section 14 applies only

to persons who first qualify as “employees” under the PG Act. Since the retired

employees were excluded at the threshold definition stage (Section 2(e)), they

never entered the ambit of the PG Act. Consequently, Section 14 cannot be

invoked to override the CCS (Pension) Rules in their case. Hence, a specific

exclusion in the definition clause cannot be defeated by a general overriding

clause.

(iii) Status of the Heavy Water Board (“HWB”): It rejected the argument that

the HWB is an industrial establishment/autonomous body, distinct from the

Central Government. It treated HWB as a unit of the DAE of the Government

of India. It was held that, unlike a Public Sector Undertaking like NPCIL,

which is a separate corporate entity, HWB functions directly under the

Ministry. The employees are, therefore, Central Government servants, not

merely employees of an autonomous industrial unit.

(iv) The Principle of Estoppel: The Appellants had already received their

retirement benefits, including pension and gratuity, under the CCS (Pension)

Rules, 1972, without protest at the time of retirement. An employee cannot

claim benefits under two different statutes for the same purpose. Having

accepted the benefits under the specific rules applicable to government

servants, i.e., CCS Rules, they are estopped from turning around and claiming

higher benefits under a general law, i.e., the PG Act, which expressly excludes

them.

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(v) Distinguishing Precedents (The MCD Case): Distinguishing this Court’s

judgment in Municipal Corporation of Delhi v. Dharam Prakash Sharma,1 it

was held that the employees were undeniably “employees” of the Corporation,

and the Corporation had merely adopted CCS Rules. Whereas in the present

case, the retired employees were originally Central Government servants

holding civil posts, which is a specific statutory exclusion not present in

the MCD (supra).

(vi) Regarding Refund: The High Court ordered that employees who had

already withdrawn the differential gratuity amounts deposited by the

Management “need not return the money” and the Management cannot

demand a refund of these amounts. For those employees (like the retired

employees in the present Civil Appeals) who had not yet withdrawn the money,

the High Court ordered that the amounts lying in the deposit must

be returned to the Management.

8. Learned Senior Counsel, Ms. Haripriya Padmanabhan, argues that

HWP is an industrial establishment. The orders constituting HWP confer

complete autonomy to HWP to decide on the appointment of employees, and

service conditions by which the employees are governed. HWP, as an entity,

has adopted and applied the CCS (Pension) Rules, 1972. From the above

circumstances, it cannot be gainsaid that the employees of HWP fall within

the exclusive definition of “employee” under Section 2(e) of the PG Act. The

absence of an exemption notification under Section 5 is a crucial factor in

determining the applicability of the PG Act to HWP’s employees. The entities

1 (1998) 7 SCC 22.

7 established as government companies/public sector undertakings have

exemption notifications in their favour, or the public sector undertaking, as a

corporate body, discharges the obligation under the PG Act. There is no

exemption notification in the case at hand. The impugned judgment fell into

a serious error by distinguishing the judgment in MCD (supra). Assuming

without admitting that the retirement benefits are paid as per CCS Rules/CCS

Pension Rules, unless it is established on all fours that the employees of HWP

squarely fall within Section 2(e) of the PG Act, denial of gratuity under the PG

Act is illegal, and the impugned judgment is liable to be set aside.

9. Shree S.D. Sanjay, learned ASG appearing for HWP, argues that the

standing of employees of HWP vis-à-vis HWP is, in more than one sense, a

jurisdictional fact. The jurisdictional fact is appreciated and decided on all the

circumstances which bring into existence HWP, whether as a Department of

Atomic Energy or a separate corporate entity. The employees do not state that

HWP is a separate public sector undertaking/government company with a

certificate issued by the Registrar of Companies. HWP, as per the inception

document, was constituted by the Office Memorandum dated 01.05.1969. The

sequence is a Board of Management known as the Heavy Water Projects

Board, created for managing the projects of DAE for the production of heavy

water. HWP is a project of the DAE. To sieve out HWP from its constituent

department is illegal and may go contrary to the AE Act. In response to the

argument about the functional freedom granted to HWP, it is argued that this

freedom is granted to accelerate the objectives sought through HWP projects.

The appointment orders were issued in accordance with the CCS Rules. The

department’s service rules cannot be treated as indicia for deciding the

8 jurisdictional fact. The appointment orders speak in unison that CCS Rules

govern the employees, and the resultant effect is that gratuity is payable

under the CCS (Pension) Rules, 1972. The circumstances leading to the

establishment of HWPs render the establishment subject to exclusion under

Section 2(e) of the PG Act. The need for an exemption notification under

Section 5 and the need to reply to overriding effect under Section 14 of the PG

Act depend on the Act’s applicability to the relationship between an employer

and an employee. The impugned judgment, in his argument, has briefly

summarised the position in fact and law, and no ground exists warranting

interference in the impugned judgment. It is lastly argued that, considering

the importance of the entities, the hierarchy of establishment, command and

control is decided by the Central Government. The employees cannot claim to

have the benefit of CCS Rules, status of a Central Government employee,

while for gratuity, the benefits under the PG Act.

10. The applicability or inapplicability of the PG Act, to begin with, depends

on whether the employee comes within the inclusive definition or the exclusive

definition. The same is dependent on jurisdictional facts. In Arun Kumar v.

Union of India,2 it has been held that a jurisdictional fact is a fact which must

exist before a court, tribunal, or authority assumes jurisdiction over a

particular matter. A jurisdictional fact is one on the existence or non-existence

of which depends the jurisdiction of a court, a tribunal or an authority. It is

the fact upon which an administrative agency’s power to act depends. If the

jurisdictional fact does not exist, the court, authority or officer cannot act. If

a court or authority wrongly assumes the existence of such a fact, the order

2 (2007) 1 SCC 732.

9 can be questioned by a writ of certiorari. 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.

11. It is axiomatic that a decision is an authority for what it decides and

not what can be logically deduced therefrom. In our view, the decision in MCD

(supra) cannot be an authority for deciding the applicability of the PG Act to

the employees of HWP. We cannot logically also deduce the similarity of

circumstances in the corporate entity of Municipal Corporation of Delhi and

an annexe of the DAE. Therefore, the applicability is determined by the facts

of the case considered by the tribunal/court.

12. It is relevant to notice that the amended definition deals with the first

limb of Section 2(e),3 and the second exclusionary limb is the same in the pre-

and post-amendment provisions. Construing Section 2(e), the second limb

begins with the words “but does not include” any such person (i) who holds a

post under the Central Government, (ii) a State Government, (iii) is governed

by any other Act or (iv) by any Rules providing payment of gratuity. The

exclusionary clause, if read by applying the golden rule without a further test,

3

Pre-Amendment Post-Amendment "employee" means any person (other than an "employee" means any person (other than an apprentice) employed on wages, in any apprentice) who is employed for wages, establishment, factory, mine, oilfield, whether the term such employment are plantation, port, railway company or shop to express or implied, in any; kind of work, do any skilled, semi-skilled, or unskilled, manual or otherwise, in or in connection manual, supervisory, technical or clerical with the work of a factory, mine, oilfield, work, whether the terms of such plantation port, railway company, shop or employment are express or implied, and other establishment to which this Act whether or not such person is employed in applies, but does not include any such a managerial or administrative capacity, but person who holds a post under the Central does· not include any such person who Government or a State Government and is holds a post under the Central Government governed by any other Act or by any rules or a State Government and is governed by providing for payment of gratuity." any other Act or by any rules providing for payment of gratuity.”

10 excludes employees of the Central and State Governments from the meaning

of “employee” under the PG Act. Secondly, it also excludes a person who is

governed by any other act. Thirdly, even if it is used as “or” but not as “and”,

it excludes any such person who is governed by any other Act or by any rules

providing for payment of gratuity. The provision contains the words both

“means” and “does not include”. Under interpretation of statutes, this Court

has repeatedly held that coupling the word “means” with “includes” denotes

an exhaustive definition.4 Conversely, the word “means” and “does not

include” should be read as exclusionary language that strictly excludes the

scope of the provision from certain classes. Consequently, a person who is

governed by any other Act, or governed by any Rules providing for payment of

gratuity, does not come within the ambit of the definition of “employee” under

the PG Act.

12.1 The construction of Section 2(e), as above, leads us to the factual matrix

of the case. The AE Act is not considered exhaustively for the present purpose.

Still, it is sufficient to refer to Section 3 of the AE Act which inter-alia

empowers the Central Government to produce, develop, use and dispose of

Atomic Energy, either by itself or through any Authority or Corporation

established by it or a Government Company, and carry out research into any

matters connected therewith. Similarly, to manufacture or to produce any

prescribed radioactive substance or the ancillary works connected therewith,

the difference in language between Clauses (a) and (b) of Section 3 clearly

demonstrate that a few of the functions/activities, the Central Government is

4 Mahalakshmi Oil Mills v. State of A.P. (1989) 1 SCC 164; P. Kasilingam And Others v. P.S.G

College Of Technology And Others (1995) supp SCC 2 348

11 empowered to do by itself or through any other authority or corporation

established by it or a Government Company, and has power to manufacture

or otherwise produce any prescribed or radioactive substance as per Clause

(b). The chart in the above paragraph demonstrates the choice vested in the

Central Government to undertake a particular act either directly or by

establishing a company/PSU.

13. Since its inception, a board has been constituted to manage the HWPs

of the DAE. The retired employees admit that HWP is not incorporated under

the Companies Act, is not recognised as a PSU, or functions as a Government

Company. In other words, the other attributes of a separate legal entity,

incorporated association, artificial person, limited liability, common seal,

perpetual succession, and transferability of shares are not present. In

substance, without any ambiguity, the HWP is created to manage the projects

of the DAE for the production of heavy water. HWP at Tuticorin is a project

under the management of the Heavy Water Projects Board of the DAE, and

cannot, by sieving, separate itself from being an ancillary or adjunct of the

DAE. For the limited purpose of gratuity, the larger and comprehensive

establishment of atomic energy facilities by the Central Government is not

replaced with a very narrow construction of the functional freedom given to

the Heavy Water Projects Board or individual Heavy Water Plants. The

jurisdictional fact, on appreciation, leads us to the conclusion that HWP is an

adjunct or ancillary operating through the Heavy Water Projects Board of the

DAE. On examination of constitution, establishment, and continuation, we

notice the character of HWP as an adjunct of the Department of Atomic

Energy, and by choice, we are not adverting to the appointment orders or any

12 other circulars for deciding the jurisdictional fact of “employees”. Therefore,

the employees fall within the exclusionary clause of Section 2(e) of the PG Act.

The result of such exclusion is that Sections 5 and 14 are not attracted in

deciding on the applicability of the PG Act to the employees of HWP.

14. For the above reasons, we are in agreement with the order impugned,

and the Civil Appeals fail and are dismissed. Pending applications, if any,

stand disposed of.

………..……….…………………J. [PANKAJ MITHAL]

………..…………………………J. [S.V.N. BHATTI]

New Delhi;

February 11, 2026.

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