Receiving Welfare Fund Benefits Not A Bar To Statutory Gratuity: Kerala High Court Upholds Abkari Workers' Right Against BEVCO

The Division Bench comprising Justice Sushrut Arvind Dharmadhikari and Justice Syam Kumar V.M. allowed a batch of writ appeals filed by the abkari workers challenging the decision of the Single bench.

It held that exclusion of employees from receiving the statutory right to gratuity cannot be taken away without a proper notification by the government. Moreover, since the abkari employees do not fall within the exemption provided under the Gratuity Act, they are entitled to payment of gratuity.

The Single Bench had dismissed the pleas finding that if payment under the Gratuity Act is made to the retired workers, then it would amount to double payment of gratuity, under the Kerala Abkari Workers Welfare Fund Act and the Payment of Gratuity Act.

The appellants had filed the writ petitions being aggrieved by the denial of gratuity payments to them by the KSBC on the ground that terminal benefits were already paid by the Kerala Abkari Workers Welfare Fund Act (KAWWF Act).

The Single Bench had also reasoned that the abkari workers are a different class of workers and cannot be equated with the regular employees of KSBC. Further, the Single Judge took note of the existence of a bilateral agreement between the KSBC and the trade unions that envisaged gratuity would be covered under the Abkari Workers Welfare Fund Board. Aggrieved, the appellants had come before the Division Bench.

The Court referred to the relevant provisions under the Payment of Gratuity Act, namely, Sections 2(e), 4(5), 5 and 14. It found that the term 'employee' falling within the Act only excludes persons holding Government posts and those governed by another other Act or Rules that provide for payment of gratuity.

As per Section 4(5), an employee has the right to receive better terms of gratuity in accordance with any agreement with the employer, over and above that provided under the Act. Section 14 says that the Act shall have overriding effect over other Rules, law and contracts.

Section 5 provides the Government with a power to exempt, by notification any group of employees or establishment from receiving gratuity as per the Act if they already receive benefits which are not less favourable than those provided under the Act.

Though this notification can be issued retrospectively, it cannot be in a manner prejudicially affecting interests of any persons and not earlier than the Act's commencement, the Bench held.

The Court also placed reliance on the precedents set by the Apex Court and the High Court on the subject. It then observed that benefits under the Act is exempted to an employee only upon satisfaction of the two conditions under Section 2(e):

“It follows from the above settled position of law as discernible from the statutory provisions and the precedents that exclusion from the definition of employee under Section 2 (e) requires two aspects to co-exist, ie, he must be holding a post under the Central Government or a State Government and must be governed by another Act or by any Rules providing for gratuity payment. The latter part alone cannot be extrapolated to deny entitlement to gratuity… Mere coverage of benefits, under any other law by itself will not suffice to exclude a person from the definition of employee. The former part that is, he should be holding a post under Central or State Government must also be satisfied.”

It was further found that an establishment cannot be exempted unless done so by a notification in accordance with Section 5.

With respect to the Single Judge's separate classification of abkari workers, it was observed:

“Unilateral classification which found approval in the impugned judgment cannot be justified especially when it denies the statutory right to gratuity. The conclusion regarding unjust enrichment too cannot be sustained as any denial of statutory right through a manner or method beyond what is envisaged under law is improper and unsustainable. Receipt of amounts/emoluments under a scheme/fund evolved under law and simultaneous receipt of a statutorily ordained gratuity cannot be termed unjust enrichment. If the State perceives it as double benefit the power to exemption ought to have been invoked as envisaged in law. On the said ground too, the Writ Appeal has to be allowed.”

The Court then directed that the appellants be paid gratuity as per the Act and the Service Rules of KSBC within 3 months of the judgment. It thus disposed of the appeals.