The Supreme Court has set aside a Bombay High Court order that had fastened liability for payment of gratuity on the Oil and Natural Gas Corporation Limited (ONGC) to workers engaged through contractors.

A Bench comprising Justice Ahsanuddin Amanullah and Justice Manmohan held that the Controlling Authority under the Payment of Gratuity Act could not adjudicate upon the fundamental question of whether ONGC was liable to pay gratuity to persons who were not its employees.

The Court was dealing with four appeals arising from proceedings before the Bombay High Court, where the High Court had upheld liability against ONGC for payment of gratuity to private respondents who had worked through contractors.

ONGC's Argument

Solicitor General Tushar Mehta, appearing for ONGC, argued that the respondents were employees of the contractors and not of ONGC. Therefore, there was no employer-employee relationship between ONGC and the workers, and the Payment of Gratuity Act could not be invoked against ONGC.

It was further submitted that the contract between ONGC and the contractor expressly described the arrangement as a job contract, which did not create an employer-employee relationship between ONGC and the contractor's employees.

The Solicitor General also contended that the jurisdiction of the Controlling Authority was limited to determining the amount of gratuity payable to an employee and did not extend to deciding and fastening liability on ONGC in the first place.

Supreme Court Finds Controlling Authority Exceeded Jurisdiction

The Supreme Court accepted the core submission of ONGC.

The Court held that the proceedings before the Controlling Authority were not maintainable in the form in which the claim had been raised. According to the Court, the statutory authority was empowered to compute the amount of gratuity payable to a concerned “employee”, but it could not adjudicate upon the liability of ONGC in the circumstances of the case.

The Court also noted that the Appellate Authority had correctly interfered with the order fastening liability on ONGC, and the Bombay High Court was not justified in reversing that decision.

High Court Order Set Aside

Allowing the appeals, the Supreme Court set aside the Bombay High Court's order and revived the order passed by the Appellate Authority.

However, the Court clarified that the workers would not be required to return any gratuity amount already paid to them. The amount had been paid by ONGC pursuant to an earlier Supreme Court order dated December 15, 2023, and the Court directed that there would be no recovery from the workers.

The judgment was delivered on September 9, 2026, in M/s Oil and Natural Gas Corporation Ltd. v. Suryakand D. Lad & Ors. and connected matters.

Representation:-

For Petitioner(s) : Mr. Tushar Mehta, Solicitor General Mr. Abhishek Gupta, Adv. Mr. Gunnam Venkateswara Rao, AoR Ms. Ikshita Singh, Adv. Ms. Rajeshwari Shankar, Adv. Mr. Vamsi Krishna, Adv. Mr. Dhruv Tiwari, Adv. Ms. Devyani Mahra, Adv.

For Respondent(s) : Mr. Shashibhushan P. Adgaonkar, AoR Mr. Sharian Mukherji, Adv. Mr. Anoop Raj, Adv. Mr. Chirag Zanwar, Adv. Ms. Amiy Shukla Mr. Shakti Vardhan, Adv. Mr. Kailash Pandey, Adv. Mr. Ranjeet Singh, AoR Mr. Krishna Yadav, Adv. Mr. Sanjay Kumar, Adv. Mr. Ketan Joshi, Adv. Mr. Avineesh Jha, Adv. Mr. Riwaj Rai, Adv. Mr. Anand Dilip Landge, AoR