Gratuity jurisdiction contractual employee of central psu

Saurabh (Querist) 07 May 2026 This query is : Resolved
Facts of the Case:
I am seeking legal guidance on behalf of an employee who has been working on a contractual basis under a Public Sector Undertaking (PSU), which is a Government of India entity registered and headquartered in Andhra Pradesh. The employee has been engaged through a series of 179-day contracts, which have been continuously renewed by the PSU. However, before every renewal, the PSU deliberately gives a one-day break, after which a fresh contract is issued. The employee has worked uninterruptedly from 16th August 2021 and the last date of the current contract is 14th May 2026, making the total period of service approximately 4 years and 9 months. Although the PSU is based in Andhra Pradesh, the employee has been physically working at a Government of India Ministry office located in New Delhi throughout the entire period of service. Despite the employee working in Delhi, the PSU deducts Rs. 200 per month as Andhra Pradesh State Professional Tax from the employee's salary.
Query 1 — Jurisdiction for Gratuity Case (Delhi or Andhra Pradesh?):
Since the PSU is registered in Andhra Pradesh but the employee has been physically working in a Central Government Ministry in New Delhi for the entire duration of service, I would like to know which authority will have jurisdiction to hear a gratuity claim — whether it will be the labour authority in Delhi or in Andhra Pradesh. Additionally, since the employer is a Central PSU under the Government of India, will the Central Government labour machinery apply, such as the Regional Labour Commissioner (Central), Delhi, or will it be a state authority?
Query 2 — Whether a Gratuity Case is Maintainable:
The total period of service from 16.08.2021 to 14.05.2026 comes to approximately 4 years and 9 months, which is numerically less than the 5-year minimum required under Section 4 of the Payment of Gratuity Act, 1972. However, the one-day break given before every contract renewal has been deliberately engineered by the PSU to prevent the employee from accumulating continuous service and claiming statutory benefits. The employee has worked for more than 240 days in each year of service. In light of the above, I would like to know whether GRATUITY CASE is maintainable.

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Quick Summary

This discussion addresses a contractual employee's gratuity claim against a Central PSU. Despite the PSU being registered in Andhra Pradesh, the employee works in New Delhi. The key questions are about jurisdiction (Delhi vs. Andhra Pradesh) and the maintainability of the gratuity claim, given the employee's service period is just under five years but includes deliberate one-day breaks between contracts. The advice clarifies that jurisdiction lies with the Regional Labour Commissioner (Central) in New Delhi, as that's where the service was rendered. It also confirms that the gratuity case is maintainable, as the law protects against artificial breaks, and completing 240 days of service in the final year qualifies the employee for gratuity.

T. Kalaiselvan, Advocate (Expert) 07 May 2026
Since the employer is a Public Sector Undertaking (PSU) and the employee is working within a Central Government Ministry, the "Appropriate Government" under Section 2(a) of the Payment of Gratuity Act, 1972, is the Central Government.
Under the Code of Civil Procedure and various labor law principles, jurisdiction is usually determined by where the cause of action arises or where the employee is stationed.
Even if the PSU is headquartered in Andhra Pradesh, the employee’s place of work is New Delhi. Since the service was rendered in Delhi and the employment contract was executed/performed there, the RLC (Central) in New Delhi has the jurisdiction to hear the case.
The deduction of Andhra Pradesh Professional Tax for a Delhi-based employee is an administrative irregularity. However, this does not shift the legal jurisdiction of the work performed; it likely serves as further evidence of the employer's attempt to treat the employee as a remote resource despite their physical presence in Delhi.
The "5-year rule" is the most common hurdle for contractual employees, but the law provides significant protection against the "one-day break" tactic.
An employee is deemed to be in "continuous service" for one year if they have actually worked for 240 days (in a non-mine/non-seasonal establishment).
High Courts (notably the Madras High Court in Netram Sahu v. State of Chhattisgarh and various Delhi HC rulings) have held that if an employee completes 240 days in the 5th year, they are eligible for gratuity.
Since your employee has served 4 years and 9 months and worked more than 240 days in each year (including the final year), the case is highly maintainable.
The Supreme Court of India has repeatedly come down heavily on "artificial breaks." If the nature of the work is perennial and the break is a mere "paper device" (like a 1-day gap), the service is treated as uninterrupted. Since the employee has worked for 1,730 days with only 1-day gaps, the Controlling Authority will likely view this as a continuous contract designed to defeat the spirit of the Act.
Serve a formal legal notice to the PSU demanding the gratuity amount within 30 days. If they refuse or ignore the notice, file Form 'N' (Application to the Controlling Authority) before the Regional Labour Commissioner (Central) in New Delhi.

Saurabh (Querist) 07 May 2026
Ok Thank You So much Sir

Dr. J C Vashista (Expert) 08 May 2026
Very well explained, opined and obliged by learned expert Mr. T Kalaiselvan.

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