Employee Cannot Invoke Consumer Forum For Gratuity Claims Against Employer: Kerala High Court

Justice Ziyad Rahman A.A delivered the judgment in a petition seeking to quash an order of the District Consumer Disputes Redressal Commission, Malappuram, which had directed the bank to pay the balance gratuity on a complaint by the respondent employee.

A complaint was submitted by the respondent employee before the District Consumer Disputes Redressal Commission, seeking arrears of gratuity amount receivable by him as per the provisions of the Payment of Gratuity Act. The District Commission allowed the complaint by directing the petitioner Society to pay the balance amount of Rs.2,20,217 along with compensation and cost of the proceedings. The Petitioner Society has challenged this order before the High Court.

The Court examined whether a retired employee claiming statutory gratuity could maintain a consumer complaint by asserting that he had availed the employer's services and therefore qualified as a "consumer" under Section 2(7) of the Consumer Protection Act, 2019.

The Court examined Sections 2(7) which deals with “consumer” and 2(42) which deals with “service” under the Consumer Protection Act, 2019, and observed that the consumer status arises only where a person hires or avails services for consideration.

The Court noted that the present case the respondent was an employee of the petitioner and therefore the nature of relationship between them is that of an employer-employee relationship, which is different from a person availing the services of another, who is a service provider.

“In a case of employer-employee, the service is being rendered by the employee to the employer in return of a specified remuneration in the form of salary and other allowances, and not vice versa. Therefore, as far as an employer is concerned, he cannot be treated as a service provider and the employee cannot be treated as a person who availed the services from the employer.” Court noted.

An employer-employee relationship does not satisfy this requirement because, in such a relationship, the employee renders services to the employer in return for salary and benefits—not the other way around. Consequently, an employer cannot be characterised as a service provider and an employee cannot be regarded as a consumer vis-à-vis the employer.

Reliance was placed on the Supreme Court's decision in Jagmittar Sain Bhagat and Others v Director, Health Services, Haryana and Others [(2013) 10 SCC 136], where the claim of a Government employee as a consumer under the Consumer Protection Act was rejected. In the said decision it was observed that Government servant does not fall under the definition of a'consumer' as defined under section 2(1)(d)(ii) of the Consumer Protection Act, 1986.

“A careful reading of the relevant provisions of the both the enactments, it can be seen that, the basic criteria with regard to the availing of services remains the same and hence those observations are applicable to the present enactment as well.” Court said

The Court noted that the principle continues to apply under the Consumer Protection Act, 2019 since the essential statutory requirements remain unchanged. The Court further referred to the Ministry of Water Resources v. Shreepat Rao Kamde [(2023) 13 SCC 819] in reaffirming the same position.

The Court distinguished decisions such as Chairman-cum-Managing Director, ONGC Ltd. v. Consumer Education Research Society [AIR 2020 SC 87] and Kerala State Co-operative Employees' Pension Board v. CDR Forum [2004 (1) KLT 111], where employees were treated as consumers because they had contributed to retirement benefit schemes and were receiving fund management services in return. Those cases involved a service provider-consumer relationship independent of the contract of employment.

The Court observed that gratuity is a statutory entitlement under the Payment of Gratuity Act requiring no employee contribution and does not involve any service rendered by the employer to the employee for consideration. Therefore, the earlier precedents concerning contributory pension schemes were held to be inapplicable.

Citing Indian Medical Association v. V.P. Shantha and Ors.[1995 (6) SCC 651] and ICICI Band Ltd. v Diagember Vaman Gurjar and Another [Revision Petition No. 28 of 2020], Court observed that consumer law governs relationships arising from “contracts for service”, whereas employment relationships are “contracts of service” and are expressly outside the ambit of the Consumer Protection Act.

The Court thus held that the District Consumer Commission had exercised jurisdiction it did not possess, and quashed the Commission's order while leaving open the retired employee's right to pursue any other remedy available under law.

Case Title: The Tirur Service Co-Operative Bank Ltd. v Moideen M

Citation: 2026 LiveLaw (Ker) 359

Case No: WP(C) 45358/ 2024

Counsel for Petitioner: Arjun Raghavan, T.R. Harikumar

Counsel for Respondent: Thareeq Anver, K. Salma Jennath, K. Shamsudheen, Arun Chand, Rassal Janardhanan A, Moyin K.P