Bombay High Court
Indian Institute Of Technology , Bombay … vs Tanaji Babaji Lad And Ors on 4 October, 2024
2024:BHC-AS:39265
Megha WP_12746_2024_fc.docx
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.12746 OF 2024
Indian Institute of Technology,
Bombay ...Petitioner
V/s.
1) Tanaji Babaji Lad
2) The Appellate Authority under
Payment of Gratuity Act, 1972 &
the Deputy Chief Labour
Commissioner (Central), Mumbai.
3) The Controlling Authority under
Payment of Gratuity Act, 1972 and
Assistant Labour Commissioner
(Central), Mumbai ...Respondents
WITH
WRIT PETITION NO.12770 OF 2024
Indian Institute of Technology,
Bombay ...Petitioner
V/s.
1)Dadarao Tanaji Ingle
2) The Appellate Authority under
Payment of Gratuity Act, 1972 &
the Deputy Chief Labour
Commissioner (Central), Mumbai.
3) The Controlling Authority under
Payment of Gratuity Act, 1972 and
Assistant Labour Commissioner
(Central), Mumbai ...Respondents
Digitally
signed by
WITH
MEGHA
MEGHA SHREEDHAR
SHREEDHAR PARAB
WRIT PETITION NO.12776 OF 2024
PARAB Date:
2024.10.05
10:53:08
+0530
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Indian Institute of Technology,
Bombay ...Petitioner
V/s.
1)Raman Sukar Garase
2) The Appellate Authority under
Payment of Gratuity Act, 1972 &
the Deputy Chief Labour
Commissioner (Central), Mumbai.
3) The Controlling Authority under
Payment of Gratuity Act, 1972 and
Assistant Labour Commissioner
(Central), Mumbai. ...Respondents
_________________________________________________________________
Mr. Arsh Mishra for Petitioners.
Ms Gayatri Singh, Senior Advocate with Ms Sudha Bhardwaj i/b. Ms
Shreya Mohapatra for Respondents.
_________________________________________________________________
CORAM : SANDEEP V. MARNE, J.
Judgment reserved on : 26 September 2024.
Judgment pronounced on : 4 October 2024.
Judgment:
1) Rule. Rule is made returnable forthwith. With the
consent of the learned counsel appearing for parties, the Petitions are
taken up for final disposal.
2) Indian Institute of Technology, Bombay (IIT Bombay)
has filed these Petitions challenging the orders passed by thePage No. 2 of 24
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Megha WP_12746_2024_fc.docxAssistant Labour Commissioner (Central), Mumbai acting as
Controlling Authority under the Payment of Gratuity Act, 1972,(PG
Act) allowing the applications filed by Respondent-employees and
directing payment of gratuity to them. The orders passed by the
Controlling Authority have been upheld by the Appellate Authority
and the Deputy Chief Labour Commissioner(Central), Mumbai by
orders dated 3 April 2024, which are also subject matter of challenge
in the present Petitions.
3) Petitioner IIT-Bombay is a premier research and
educational institute in technology and engineering disciplines and
established under the provisions of the Institute of Technology Act,
1961. It is recognized as institute of eminence by the Government of
India. Petitioner has employed regular staff for conducting various
study and academic programs. Its campus is spread over land
admeasuring more than 500 acres. Various projects undertaken by
Petitioner for different durations are implemented by itself or through
collaboration of private or government organisations. With a view to
maintain the infrastructure spread over vast tract of land as well as
for execution of various projects, Petitioner needs manpower of skilled,
semi- skilled and unskilled in nature. For provision of such manpower,
Petitioner engages various contractors for supply of required labour
force.
4) According to Petitioner, the Respondents-employees are
few such contract labourers provided by various contractors engaged
by it for execution of various works at the campus as well as on
projects undertaken by IIT, Bombay. It is contended that
Respondents are employees of the concerned contractors and that
there has been no employer-employee relationship between PetitionerPage No. 3 of 24
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Megha WP_12746_2024_fc.docxand Respondents at any point of time. It appears that the last
engagement of the Respondents was through the contractor M/s.
Moosa Services Company. Respondents filed applications in Form ‘N’
before the Controlling Authority complaining about the non-payment
of gratuity by the Petitioner. The Controlling Authority issued notices
to the Petitioner in such applications. Petitioner appeared before the
Controlling Authority and filed its reply denying existence of any
employer-employee relationship as well as responsibility to pay
gratuity to the Respondents. Petitioner also relied upon Clause 9 of
the relevant Work Order, under which the contractor was under
obligation to follow all labour laws. Petitioner prayed for dismissal of
the applications.
5) Evidence was led before the Controlling Authority. After
considering the rival contentions, the Controlling Authority held that
Petitioner was liable to pay gratuity to Respondents and accordingly
passed order dated 31 January 2022 directing it to pay following
amounts to Respondents towards gratuity as under:
(i) Tanaji Babaji Lad 1,89,945/-
(ii) Dadarao Tanaji 2,35,170/-
Ingale
(iii) Raman Sukar 4,28,805/-
Garase
The Controlling Authority has further directed Petitioner to pay
simple interest @10% per annum on the amounts indicated above
w.e.f. the dates of retirement of each of the Respondents, till the date
of actual payment.
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Megha WP_12746_2024_fc.docx 6) Petitioner filed Appeals before the Appellate Authority
challenging the orders passed by the Controlling Authority. It appears
that while filing the Appeals, Petitioner deposited the principal
amount of gratuity with the Appellate Authority. Appellate Authority
has however, dismissed Petitioner’s appeal by order dated 3 April
2024. Petitioner has accordingly filed the present Petitions
challenging the orders passed by the Controlling and the Appellate
Authority.
7) Mr. Arsh Misra, the learned counsel appearing for the
Petitioner would submit that the Controlling and the Appellate
Authorities have failed to appreciate the factum of non-existence of
employer-employee relationship between Petitioner and Respondents.
That Respondents are employees of the Contractor, who alone is
responsible for payment of gratuity as per the terms and conditions of
the work orders. That Petitioner did not control or supervise the
Respondents. He would rely upon judgment of this Court in
Cummins (I) Ltd. V/s. Industrial Cleaning Services and Others, 1
in support of his contention that obligations under the Contract
Labour (Regulation and Abolition) Act 1970 cannot be superimposed
under the PG Act. That in Cummins (I) Ltd. this Court has held that
in case of workmen of a contractor, the responsibility of payment of
gratuity is of the contractor and not of the principal employer.
8) Mr. Misra would further submit that the applications filed
by Respondents were otherwise bad for non-joinder of necessary
parties as the concerned contractor was not joined as party
Respondent to the applications. He would submit that the Competent
1. 2017(3)Mh.L.J. 294
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Authority has erred in holding that the Director of IIT, Bombay, has
ultimate control over the affairs of the establishment and that
therefore Petitioner is the employer of Respondents. He would submit
that the Appellate Authority erroneously held Petitioner to be
employer of Respondents by misinterpreting Section 2(f)(i) of the PG
Act. He would take me through the evidence on record to demonstrate
admissions on behalf of the Respondents about the payment of salary
to them by the contractor. That under the Work Order executed with
contractors, the obligation for following of labour legislations was put
squarely on the contractor and that therefore the contractor alone was
responsible for payment of gratuity. Mr. Misra prayed for setting
aside the order passed by the Controlling Authority and the Appellate
Authority.
9) Petitions are opposed by Ms. Gayatri Singh, the learned
Senior Advocate appearing for the Respondents-employees. She would
submit that this is not a case involving the employment of
Respondents through a singular contractor. That Respondents have
been working with Petitioner for considerable period of time through
several contractors. She would submit that since 1999 there have been
different contractors, under whom Respondents have worked. That
therefore, the ratio of judgment of this Court in Cummins (I) Ltd.
(supra) would have no application to the facts of the present cases.
She would take me through the definition of the term ’employer’ and
would submit that the Petitioner is found to be in ultimate control of
affairs relating to the services of Respondents. That the definition of
the term ’employer’ under the PG Act is broad and wide and the
judgment in Cummins (I) Ltd. (supra) is delivered taking into
consideration the narrow definition of the term ’employee’ in the
unamended Act. She would further submit that the Controlling
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Authority can determine the issue of existence of employer-employee
relationship as PG Act is a complete code in itself. In support, she
would rely upon judgment of the Apex Court in State of Punjab Vs.
Labour Court, Jullundur and Ors.,2 in support of her contention
that Controlling Authority can decide the issue of existence of
employer-employee relationship, which is not binding outside the
provisions of the PG Act. Ms Singh would rely upon judgment of
Delhi High Court in Martin Burn, LTd. Vs. Moorjani (T.G.) and
Others 3
10) Ms. Singh would take me through one of the Work Orders
issued in favour of M/s. Moosa Services Company, which was for
tenure of only one year and that there was no condition imposed on
the contractor for payment of gratuity. She would submit that if
Respondents are made to run behind the contractors, they will have to
file multiple claims against several contractors though they have
rendered continuous services with IIT, Bombay, even after
termination of contracts of such contractors. That Respondents cannot
be punished for non-impleadment of contractors as specific application
was filed for providing list of contractors and IIT, Bombay failed to
provide such list. She would take me through evidence on record in
support of her contention that the officials of IIT, Bombay, In-charge
Junior Engineer at Central and Estate office used to give instructions
for performance of work. That specific evidence was led about the
change of employer during the course of service of Respondents. Ms.
Singh would therefore submit that the Controlling Authority and
Appellate Authority have rightly inferred that Petitioner is the real
employer having complete control over the affairs of Respondents and
2. 1979 AIR 1981
3. 1973 II L.L.N. 447.
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therefore Petitioner is rightly held liable for payment of gratuity to
Respondents.
11) Ms. Singh would further submit that out of three
Respondents, Dadarao Ingle and Tanaji Lad have already withdrawn
the principal amount of gratuity from the Appellate Authority. That
the third Respondent -Raman Garase unfortunately committed
suicide on account of non-availability of funds to take care of medical
expenditure, as he was suffering from paralysis. That his widow is in
dire need of funds and that therefore she should be allowed to
withdraw the amount deposited with the Appellate Authority. She
would submit that since the amount of gratuity is already received by
two Respondents, nothing survives in the Petitions. She would pray
for dismissal of the Petitions.
12) Rival contentions of the parties now fall for my
consideration.
13) There is no dispute to the position that Respondents are
the contract employees of the Petitioner-IIT, Bombay. It is sought to
be contended on behalf of the Respondents that Shri Raman Garase
and Dadarao Ingle were initially engaged directly by the IIT, Bombay
and were latter converted through a contractor. In the light of
admitted position of the last engagements of Respondents being
through contractor-M/s. Moosa Services Company at the time of their
retirement, it is not necessary to delve deeper into the aspect as to the
exact authority who appointed the Respondents initially. Though,
Respondents were lastly engaged by Contractor, M/s. Moosa Services
Company at the time of their retirements, the Controlling and
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Appellate Authority have held Petitioner-IIT, Bombay liable for
payment of gratuity to them.
14) It would be necessary to consider the nature of services
rendered by Respondents. Brief details of their services, as indicated
in the chart submitted by Ms. Singh, are as under:
Name Date of Initial Years Date of Amount Amount
appointme Appointin of retiremen Awarded withdraw
nt g servic t towards n
Authority e gratuity
1 Raman 1981 IIT 39 December 4,28,805/- -
Sukar Bombay 2019
Garase
2 Dadarao January IIT 26 December 2,35,170/- 2,35,170/-
Tanaji Ingle 1994 Bombay 2019
3 Tanaji 1999 Contractor 20 Yrs December 1,85,945/- 1,85,945/-
Babaji Lad 6 2019
mths
Thus, one of Respondents Raman Garase worked for over 39 long
years in IIT, Bombay, initially as contract worker of IIT and latter
through contractors. The other two Respondents have also rendered
substantial years of service of 26 and 20 years respectively. Ms. Singh
has also placed on record list of various contractors, through whom
services are rendered by Respondents since the year 1999. The
details of such contractors are as under:-
Contractors Name Tenure
Moosa Services Co. Julu-2013-Dece 2019 (continues
till today)
Goodluck Multiservices and Jan 2011-June 2013
Hospitality Pvt. LTd.
Moosa Services Co. April 2008-December 2010
All services Under One Roof January 2006- March 2008
A-1 Enterprises September 2002-December 2005
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Shri- Krupa Services August 2001-August 2002
All Services Under One Roof 1999 (may be from before)- July
2001
15) In evidence also, Respondents gave names of various
contractors through whom they have rendered services. Thus,
engagement of Respondents through multiple contractors is not under
dispute in the present case. Respondents do not desire to establish
employer-employee relationship by contending that contract was sham
or bogus nor they claim the benefit of permanency in services of
Petitioner-IIT, Bombay. Their claim is for payment of gratuity. Their
last contractor has not paid gratuity. What must be appreciated in
the present case is that Respondents have not travelled with their
contractors to different organisations during the tenure of their long
services. On the contrary, they have continued with IIT, Bombay for
considerable period of time even though contractors kept on changing.
Since there are multiple contractors and since services of
Respondents are not terminated after end of contract, no occasion
aroses for them to claim gratuity from various contemporaneous
contractors. After the retirement in December -2019, if Respondents
were to raise a demand for payment of gratuity from the last
contractor-M/s. Moosa Services Company, in respect of entire services
rendered by them, the request would have been rejected as the said
contractor has no liability towards Respondents in respect of period
when it did not have a valid contract. Therefore, even if Respondents
were to file claims before the Controlling Authority against
contractors for payment of gratuity, the gratuity would have been
sanctioned only in respect of the last tenure of services with the
concerned contractor. This would have led to loss of gratuity in
respect of past services rendered under various contractors.
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Megha WP_12746_2024_fc.docx 16) Under the PG Act, the term 'employee' is defined under Section 2(e) as under:-
“2(e) employee” means any person (other than an apprentice)
who is employed for wages, whether the terms of such
employment are express or implied, in any kind of work,
manual or otherwise, in or in connection with the work of a
factory, mine, oilfield, plantation, port, railway company, shop
or other establishment to which this Act applies, but does not
include any such person who holds a post under the Central
Government or a State Government and is governed by any
other Act or by any rules providing for payment of gratuity;.
Section 2(f) defines the word ’employer’ as under:-
2(f) “employer” means, in relation to any establishment,
factory, mine, oilfield, plantation, port, railway company or
shop –
(i) belonging to, or under the control of, the Central
Government or a State Government, a person or
authority appointed by the appropriate Government for
the supervision and control of employees, or where no
person or authority has been so appointed, the head of
the Ministry or the Department concerned,
(ii) belonging to, or under the control of, any local
authority, the person appointed by such authority for
the supervision and control of employees or where no
person has been so appointed, the chief executive office
of the local authority,
(iii) in any other case, the person, who, or the authority
which, has the ultimate control over the affairs of the
establishment, factory, mine, oilfield, plantation, port,
railway company or shop, and where the said affairs are
entrusted to any other person, whether called a
manager, managing director or by any other name, such
person;
17) The Controlling and Appellate Authorities are swayed by
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Megha WP_12746_2024_fc.docxas principal employer in respect of the Respondents. Thus, any
person, who is employed for service for the performance of specified
type of work in an establishment is covered by definition of the term
’employee’. The term ’employer’ under Section 2(f) includes inter alia
the authority, which has the ultimate control over the affairs of the
establishment. In ordinary course, Respondents could have been held
to be the employees of the contractor since their salaries are paid by
the contractors. However, the present case involves a unique situation
where the contractors cannot be held as employers of Respondents for
limited purpose for determining their entitlement for gratuity.
18) Before proceeding further, it would be necessary to
consider the issue as to whether the Controlling Authority can
exercise jurisdiction under Section 7 of the PG Act for direction to pay
gratuity when the establishment denies employer-employee
relationship. In Martin Burn Ltd.(supra) the Division Bench of
Delhi High Court has held that since existence of employer-employee
relationship is jurisdictional condition, the Controlling Authority
cannot enquire into the said issue. The Division Bench in paragraph 2
held as under:-
2. …
The jurisdiction of the Controlling Authority to determine the amount of
gratuity depends on the pre-existence of the relationship of
employer and employee between the petitioner and the
Respondents 2 and 3. These jurisdictional conditions cannot be
finally determined by the Controlling Authority. But this only
means that the conclusion which the Controlling Authority may
arrive at on this issue is impeachable by the aggrieved party in a
civil court. (Magiti Sasamal V. Pandab Bissoi(1962) 3 S.C.R. 673), .
This does not mean, however, that the Controlling Authority
cannot at all inquire into this issue or that the petitioner can
disable the Controlling Authority from making an inquiry by
merely denying that the Respondents 2 and 3 are its employees.
On the contrary, the Legislature has intended that initially the
Controlling Authority may find out whether the relationship of
employer and employee exists. If he finds that it does not exist,
then he would drop the proceedings. If he finds that it exists, he
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would continue the proceedings to determine the amount of gratuity. This
is subject to the right of the aggrieved party to go to the civil court for a
final determination of this issue which goes to the jurisdiction of the
Controlling Authority. The various administrative authorities and
tribunals established by the Legislature and falling within the first class
of tribunals referred to in Queen v. Special Commissioners of Income-tax
[(1888)21 Q.B.D 313] (vide supra), function in this way. They make a
preliminary determination of the existence of the conditions on
which their jurisdiction depends. They are not barred from doing
so. They do not have to wait for the decision of a civil Court before
undertaking any inquiry. This would defeat the object of the
statutes under which they function and make them a dead letter.
For instance, under the Delhi Rent Control Act, 1958, the jurisdiction of
the Controller to pass an order for eviction or to fix the standard rent
depends on the pre-existence of the relationship of landlord and tenant
between the parties. This does not mean that the Controller has to wait
for a decision of the civil court as to the existence of such a relationship. A
mere denial by the tenant of the existence of such relationship does not
disable the Controller from holding the inquiry under that Act. (0m
Prakash Gupta v. Rattan Singh,[(1964) 1 S.C.R. 259]). The same principle
was applied to the proceedings before the Competent Authority under the
Slum Areas (Improvement and Clearance) Act, 1956 by a Division Bench
of this Court in C. R. Abrol v. Administrator under the Slums Act etc.
(I.L.R. (1970) I Delhi 768 at 775. Similarly, under the Employees Provident
Fund Act, 1952, the payment of contribution by the employer to the
provident fund depends on the satisfaction of the jurisdictional condition
that the factory of the employer is covered by the said Act. A mere denial
by the employer as to the coverage of his factory under the Act does not,
however, mean that the Central Provident Fund Commissioner is disabled
from holding the inquiry. On the contrary, he must hold an inquiry though
his finding regarding the coverage of the factory may be challengeable in a
civil court. (Wire Netting Stores v. Regional Provident Fund
Commissioner,(1970 38 F.J.R. 277 at 286].
(emphasis added)
19) Thus, as held by the Division Bench of the Delhi High
Court, Controlling Authority can go into the issue of relationship of
employer-employee between the parties, which declaration can be
challenged before Civil Court as determination is preliminary in
nature. Similar view appears to have been adopted by Single Judge of
this Court, Justice Gupte in Cummins (I) Ltd. (supra). In
paragraph 8 of the judgment, this Court held that ‘existence of a
relationship of employer and employee is a matter to be determined by
the Authority itself under the Gratuity Act’.
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Megha WP_12746_2024_fc.docx 20) In my view, therefore, while deciding the application of
payment of gratuity, if the Controlling Authority encounters a dispute
about existence of employer-employee relationship, it can conduct
preliminary determination of the issue, though such determination
may not bind outside the scope of PG Act. Therefore, the Controlling
Authority and the Appellate Authority have rightly gone into the
issue of existence of employer-employee relationship for deciding
Respondent’s entitlement for gratuity.
21) Mr. Misra heavily relied upon judgment of this Court in
Cummins (I) Ltd. (supra), as according to him, the judgment
squarely covers the issue involved in the present Petitions. In
Cummins (I) Ltd., Petitioner therein had originally engaged with
one entity as contractor for providing cleaning services at its factory.
The contract was terminated on 31 December 1984 and the cleaning
services were continued by another contractor. The new contractor
agreed to continue employment of all 74 employees, who were earlier
employed by previous contractor. An agreement was executed between
the two contractors to govern the terms and conditions of take over.
Under the agreement, the new contractor undertook liability to pay
gratuity to the employees. Petitioner sought to terminate the contract
with the new contractor and the Union filed complaint of unfair
labour practice, both against new contractor as well as the Company
for payment of bonus and ex-gratia. The Industrial Court held that
there was no employer-employee relationship between the workmen
and the company, which order was confirmed by the Apex Court. The
Union thereafter raised a demand for absorption in regular
employment of the Company and for payment of equal wages.
Memorandum of Settlement was reached between the Company and
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the union, under which company agreed to take 73 workmen of the
new contractor in its employment. Accordingly, the workmen tendered
resignation to new contractor and joined the company’s service. After
tendering of resignations workmen submitted applications in Form I
to the new contractor for payment of gratuity. Since the gratuity was
not paid, workmen filed application in Form N before the Controlling
Authority for payment of gratuity. In that application, the new
contractor made application for its impleadment, which was allowed.
The Controlling Authority thereafter determined the amount of
gratuity payable to the workmen and directed the company to pay the
same. This direction of the Labour Court was challenged before this
Court in Cummins (I) Ltd. This Court held in paragraphs 5 and 6
as under:
5. The chief controversy between the parties concerns the liability of the
Petitioner as the principal employer to pay gratuity to the employees of
Respondent No.1, a contractor engaged by the Petitioner. What is at
issue at the very outset is the jurisdiction of the Authority to determine
the liability of the Petitioner as a principal employer. The submission of
Mr.Pai is that the aspects with which the Authority is concerned in an
application under Section 7(4) are (a) the admissibility of the claim of an
employee and (b) the determination of the amount of gratuity. Learned
Counsel submits that all that the Authority has to decide is whether the
applicant is a person entitled to receive gratuity and what is the amount
of such gratuity payable to him. The Authority, it is submitted, cannot
embark upon an inquiry as to who is the employer whether it is the
contractor who engages the workman or the principal employer who
engages the contractor. Besides, it is submitted, the issue as to whether
there is an employer employee relationship between the Petitioner and
the concerned workmen has attained finality and is no more res integra
before the Authority. Mr.Pai also submits that the application under
Form ‘I’ for payment of gratuity was made by individual workmen to
Respondent No.1. Individual applications in Form ‘N’ before the
Authority were also filed by workmen against Respondent No.1. The
Petitioner was joined to the applications at the behest of Respondent
No.1. It is submitted that the Petitioner had opposed its impleadment. It
is submitted that at the time of arguing the impleadment, Respondent
No.1 had admitted that it was the immediate employer of the concerned
workmen. What was alleged by it was that the gratuity amount due to
the workmen was to be reimbursed by the Petitioner under the contract
between the parties. It is submitted that the impleadment order made it
clear that the liability to pay gratuity could be fastened upon the
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Megha WP_12746_2024_fc.docxPetitioner had undertaken to reimburse the gratuity. In other words, the
application for impleadment was not made or allowed on the basis that
the Petitioner was the principal employer and liable to pay gratuity to
the workmen but that under the contract between the parties, the
Petitioner was liable to reimburse the amount of gratuity paid by
Respondent No.1 to its workmen.
6. In the first place, it is rather odd that in an application for payment of
gratuity under Section 7 of the Gratuity Act against the applicant’s
admitted employer, i.e. Respondent No.1, the Authority should have
impleaded the Petitioner expressly on the footing that the liability of
payment of gratuity can be fastened upon the Petitioner only on the basis
of a contractual commitment as between the admitted employer and the
Petitioner, and then decided on the Petitioner’s liability as the ’employer’
itself. That would be impermissible. Considering, however, the extensive
arguments advanced at the Bar on the jurisdiction of the Authority to
determine the identity of the employer and merits of such determination,
I propose to consider the matter fully and on a wider footing.
22) Mr. Misra has relied upon Cummins (I) Ltd. (supra) in
support of his contention that liability to pay gratuity would be on the
contractor as held by this Court in Cummins (I) Ltd. In my view,
however, the fact situation in the case before this Court in Cummins
(I) Ltd. was entirely different where there was a specific agreement.
The concerned workers had essentially filed the application for
payment of gratuity against the contractor and the company was
brought into picture by impleading it at the behest of application
made by the contractor. Otherwise, the workers had never raised any
claim for payment of gratuity by the company and the claim was made
essentially against the contractor. The contractor however, sought to
enforce the alleged agreement between it and the company and sought
to shift the liability to pay gratuity on the company. This Court did
not approve impleadment of the company to application filed against
contractor for payment of gratuity. This Court thereafter went into
the broader issue by ignoring the impropriety in impleadment of the
company to the application before the Controlling Authority and held
in paragraph 9 as under:-
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9. Coming now to the merits, the person liable to pay gratuity must be an
“employer” as defined in Clause (f) of Section 2. Just as the employee is a
person employed for wages in, or in connection with the work of, an
establishment, to which the Gratuity Act applies, the employer must be a
person, who had the ultimate control over the affairs of the establishment.
It is not disputed that the employees, with whom we are concerned in the
present case, were employed in the firm of Respondent No.1. It is this firm,
which is the establishment for the purposes of gratuity so far as these
employees are concerned. It is Respondent No.1 or its partners who had
the ultimate control over the affairs of this establishment and it is
Respondent No.1 who alone could be termed as an employer in relation to
the establishment. Respondent no.1 may be carrying on business at its
own business premises or at the factory of the Petitioner. That is quite
besides the point. The authority in its impugned order seems to have
proceeded on the footing that in the present case, all Applicants were
working inside the factory premises of the Petitioner and never on the
premises of Respondent No.1 and that the employer in respect of these
workmen was accordingly the Petitioner who had ultimate control over the
affairs of the factory. This reasoning is essentially fallacious in that it
disregards that as far as the Applicants are concerned, the establishment
in which the Applicants were employed was the establishment of
Respondent No.1, though they may be physically working at another
establishment as part of their duties with the former establishment. The
mere fact that they were designated to work inside the factory premises of
the Petitioner does not make the factory premises an “establishment” as
far as these employees are concerned. The Authority was not right in
holding that for deciding the liability of gratuity under the provisions of
the Gratuity Act, it was immaterial as to who was the immediate employer
of the Applicants or that the employer in respect of any person, who works
inside factory premises, is the occupier of the factory premises .
23) In the facts of that case, this Court held that the
contractor had ultimate control over the affairs of the establishment
and therefore the contractor alone could be termed as ’employer’ in
relation to the establishment. This Court further held that contractor
carried on business at his own premises or at the factory of the
company. In Cummins (I) Ltd. this Court thereafter went into the
issue as to whether definition of the term ‘principal employer’ under
the Contract Labour Court Act could be imported in Section 2(f) of the
PG Act. Relying on judgment of the Apex Court in Ahmedabad
Primary Teachers’ Association vs. Administrative Officer, 4 this
Court held that the concept of ‘principal employer’ under the Contract
4. (2004) 1 Supreme Court Cases 755,
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Act cannot be introduced in the definition of the term ’employer’ under
the PG Act. This Court held in paragraphs 10 and 11 as under:-
10 Mr.Naik for Respondent No.1 suggests that though Respondent No.1
was the contractor who had engaged the Applicants as employees, it is the
Petitioner who was the principal employer. He refers in this connection to
the definition of ‘principal employer’ under the Contract Labour Act. There
is no reason to import the definition of ‘principal employer’ in Clause (f) of
Section 2 of the Gratuity Act. The Supreme Court in the case of
Ahmedabad Primary Teachers’ Association vs. Administrative Officer
considered the definition of “employee” in clause (e) of Section 2 of the
Gratuity Act. Definitions of the word “employee” in diverse labour
enactments including the Employees’ Provident Funds Act, 1952 were
cited before the Court and the Court was urged to construe the word
“employee” in clause (e) of Section 2 of the Gratuity Act widely and include
teachers within it. The Supreme Court rejected the wide construction
suggested in that case, holding that the “legislature was alive to various
kinds of definitions of the word “employee” contained in various previous
labour enactments when the Act (i.e. the Gratuity Act) was passed in
1972. If it intended to cover in the definition of ’employee’ all kinds of
employees, it could have as well used such wide language as is contained
in section 2(1) of the Employees’ Provident Funds Act, 1952 which defines
’employee to mean ‘any person who is employed for wages in any kind of
work, manual or otherwise, in or in connection with the work of an
establishment ………..Nonuse of such wide language in definition of
’employee’ in section 2(e) of the Act of l972 reinforces our conclusion that
teachers are clearly not covered in the definition.” Even here, the
legislature whilst defining the word “employer” in the Gratuity act, had
before it various templates of definitions of “employer” in different labour
law legislations including the concept of “principal employer” under the
Contract Labour Act. It advisedly did not use these templates or introduce
the concept of “principal employer” in the definition of “employer” in clause
(e) of Section 2. The Contract Labour Act envisages ‘contract labour’ as a
workman employed in connection with the work of an establishment
where he is hired in or in connection with the workh the work of an
establishment where he is hired in or in connection with the work of an
establishment by or through a contractor. The Contract Labour Act
defines both “contractor” and “principal employer” in relation to the
“establishment”. An ‘establishment’ implies any place where any industry,
trade, business, manufacture or occupation is carried on. A ‘contractor’ in
relation to such establishment is a person who undertakes to produce a
given result for the establishment through contract labour or who supplies
contract labour for any work of the establishment, whereas a ‘principal
employer’ in relation to the establishment is a person responsible for the
supervision and control of the establishment. There is no reason why this
dichotomy between a contractor and a principal employer should be
imported into the definition of “employer” under the Gratuity Act. The
Gratuity Act simply refers to an “establishment” and an “employee” as a
person employed in or in connection with such establishment and an
“employer” as a person having the ultimate control over the affairs of thePage No. 18 of 24
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Megha WP_12746_2024_fc.docxestablishment. The ‘establishment’ contemplated under these definitions
is any business establishment which employs the employee. That
establishment is obviously the firm of Respondent No.1 here, and not the
factory of the Petitioner.
11 Mr.Naik relies on Section 21 of the Contract Labour Act and submits
that in any event, the responsibility to pay ‘gratuity’ as part of ‘wages’ is
on the ‘principal employer’ as defined under the Contract Labour Act and
the Petitioner as such principal employer is bound to pay the gratuity to
the concerned workmen even if they be employed by the contractor. In
other words, the argument is that, if not under the Gratuity Act, the
liability to gratuity can certainly be fastened unto the Petitioner under the
Contract Labour Act. That may be so. Still, this liability does not arise
under the Gratuity Act and there is certainly no jurisdiction or authority
in the Controlling Authority to determine whether any liability could be
fastened unto the Petitioner under Section 21 of the Contract Labour Act
as the principal employer under that Act. That would require the
Authority to embark on an inquiry as to whether Respondent No.1 is a
‘contractor’ and the Petitioner is a ‘principal employer’ within the meaning
of that Act and whether gratuity as ‘wages’ is payable and not paid by
Respondent No.1 within the meaning of that Act. These inquiries are
foreign to the Controlling Authority operating under the Gratuity Act and
determining matters specified in Clause (a) of subsection (4) of Section 7
thereof. As I have noted above, the matters to be determined by the
Authority are simply the following : (i) Whether the applicant is an
“employee” as defined in clause (e) of Section 2 of the Gratuity Act, (ii)
Whether the opponent is an “employer” as defined in clause (f) of Section
2, (iii) Whether the conditions for entitlement to receive gratuity under
sub section (1) of Section 4 of the Gratuity Act are satisfied, and (iv) What
is the quantum of such gratuity and interest thereon, if any, having regard
to sub sections (3), (4) and (5) of Section 7 of the Gratuity Act.
Nonpayment of wages, or of gratuity as part of wages, may invite an action
under Section 15 of the Payment of Wages Act read with Section 21 of the
Contract Labour Act or alternatively, under Section 33C of the Industrial
Disputes Act. In either case, the Authority under the Gratuity Act is not
the forum.
24) This Court summed up the conclusions in paragraph 14
as under:
14. … The infirmity in the impugned order found by me, however, is not
about any finding of fact but a matter of law and jurisdiction where the
Authority under the Gratuity Act has determined liability arising under
another legislation (namely, the Contract Labour Act) and which is
required to be enforced by recourse to the provisions of yet another
legislation (namely, the Payment of Wages Act or the Industrial Disputes
Act).
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Megha WP_12746_2024_fc.docx 25) It appears that Special Leave Petition filed by Contractor
challenging the judgment in Cummins (I) Ltd. (supra) has been
dismissed by the Supreme Court by order dated 27 February 2017.
26) In my view the judgment rendered by this Court in
Cummins (I) Ltd. (supra) is in unique facts and circumstances of
that case and the same cannot be applied to the present case. In
Cummin (I) Ltd. this Court held that the contractor therein had
ultimate control over the affairs of its establishment and that the
contractor could have posted the workers either at its own premises or
in the factory of the company. Whether this could have been done by
the contractor in the present case? The answer to my mind appears to
be in negative. As observed above, the Respondents have continued to
work at IIT, Bombay for several years despite change of multiple
contractors. There is evidence on record to indicate that supervision
and control over activities of Respondents used to be exercised by
engineers and officials of IIT, Bombay. In fact, two out of the three
Respondents were initially engaged by IIT, Bombay and subsequently
converted as contract workers. Only their salaries were routed
through the contractors. None of the contractors paid salaries to
Respondents never made them work for a single day outside IIT,
Bombay. It is therefore, difficult to hold that Respondents were
working on the establishment of the contractors and not on the
establishment of the IIT, Bombay. If, Petitioners were to work at
various places where contracts are awarded to contractors, their
services would be on the establishment of such contractors. In the
present case, despite being total absence of any contract between
contractors for continuation of services of same workers, Respondents
have continued to serve at the campus of the IIT. Their services are
thus rendered on the establishment of IIT, Bombay and not on the
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establishment of the new contractors. In my view, therefore, the
Controlling and Appellate Authorities have rightly held Petitioner-IIT,
Bombay to be the employer liable to pay gratuity to the Respondents.
27) Reliance by Ms. Singh on judgment of Apex Court in
State of Punjab Vs. Labour Court, Jullundur (Supra) also
appears to be apposite. The Apex Court has held that PG Act is a
complete Code in itself and therefore the entire enquiry about
entitlement of a worker for gratuity must be conducted within the
framework of PG Act. Worker is therefore not expected to first seek a
declaration of employer-employee relationship by filing a reference
under the ID Act and thereafter file application for payment of
gratuity. Therefore, even preliminary enquiry about establishment of
employer-employee relationship can be conducted by Controlling
Authority within the framework of PG Act.
28) As observed above, if Respondents are made to run behind
multiple contractors for securing gratuity from each of them, the same
would not only result in multiplicity of proceedings but would also
frustrate the very purpose of creating swift and speedy remedy before
the Controlling Authority for payment of gratuity. Respondents have
continuously worked at the campus of IIT, Bombay through multiple
contractors. The common thread runs through different terms of
service rendered by them is their connection with IIT, Bombay. It is
difficult to hold that the terms and conditions of services of
Respondents were determined by succeeding contractors and that IIT
Bombay had absolutely no control or supervision over them in 39
years long services rendered by one of the Respondents. This clearly
appears to be an arrangement of merely routing of salaries through
the contractor.
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Megha WP_12746_2024_fc.docx 29) Perusal of the work order issued to last contractor M/s.
Moosa Services Company also indicates that there is no specific
condition for payment of gratuity by the said contractor. However, so
far as the provident fund contribution and ESI contribution is
concerned, there are specific conditions in the work order for deposit
of such contribution by the contractor. In this connection it would be
apposite to reproduce clauses 14 and 28 of the work order dated 1 July
2019 issued to M/s. Moosa Services Company.
14) Contractor must deposit the ESIC and provident fund contribution to
the concern office for those workers engaged in IIT Campus and the
statement must submit along with each R.A. bill to the Estate Office. He
should get Sub Code No. for IIT Bombay and the P.F. amount of workers
should not be deposited in contractors common account.
15) Provident Fund contribution shall be given as per circular of
commissioner of provident fund, Maharashtra & Goa as notified time to
time.
xxx
28) Details of P.F. contribution and ESIC contribution paid by the
contractor with respect to the labourers are required to be submitted
before the release of second R.A. bills and if contractor fails to do so,
recovery of the PF and ESIC contribution will be done from their R.A. Bill
amount and will be credited to the PF and ESIC accounts directly by the
Institute.
30) Mr. Misra has relied upon Clauses 9 and 33 of the work
order in support of his contention that the contractor was supposed to
observe all the labour laws, which would also include the PG Act.
Clauses 9 and 33 of the work order read thus:-
9)The Contractor has to follow all labour laws. Government of India &
Govt. of Maharashtra LAbour Acts which are in force at present and
introduced from time to tiem, such as Acts, enforced by Regional
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Megha WP_12746_2024_fc.docxOfficer of Control Labour Act, and all necessary arrangement for labour
security insurance will have to be made by the contractor at his own cost
including paying minimum wages declared by competent authority from
time to time.
33.All rules and regulations under the Labour Contract Act, 1970 and
minimum wages act are required to be followed scrupulously while
supplying labourers to the institute.
31) When IIT, Bombay is specific in directing deposit of ESIC
and PF contribution, it is incomprehensible as to why liability for
payment of gratuity was not specifically incorporated in the Work
Order. It appears that in the description of work appended to the
contract, there is a condition for continuous deployment of workmen
for maximum 89 days excluding Sundays and holidays against various
requisition issued by the Estate Office. Far from engaging different
workers for maximum tenure of 89 days, the Respondents continued
to work with IIT, Bombay notwithstanding replacement of various
contractors. In fact, if the tests laid down by the Apex Court in
Balwant Rai Saluja & Anr Etc.Etc vs Air India Ltd.& Ors 5,
Respondent would be in a position to satisfy most of the said tests for
the purpose of establishment of employer -employee relationship even
under the ID Act. Since the enquiry into existence of employer-
employee relationship in the context of PG Act is summary or
preliminary in nature, which does not bind parties outside the
framework of PG Act, it is not necessary to satisfy all the tests laid
down in Balwant Rai Saluja (supra). Be that as it may. It is not
necessary to delve deeper into the terms and conditions of Work Order
to which Respondents are not parties. The present case involves
peculiar facts and circumstances, under which some workmen have
continued with IIT-Bombay through multiple contractors. I am
therefore, convinced that for the limited purpose of payment of
gratuity, Respondents are required to be treated as employee of IIT-
5. AIRONLINE 2013 SC 652
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Bombay. No interference is therefore warranted in the impugned
orders.
32) After considering the overall conspectus of the case, I am
of the view that no palpable error is committed by the Controlling
Authority and the Appellate Authority in passing the impugned
orders. Two out of the three Respondents are already paid principal
amount of gratuity. Only interest remains to be paid to them. So far
as the third employee is concerned, he has unfortunately passed away
and his legal heirs are awaiting the payment of gratuity in respect of
the deceased workmen.
33) Writ Petitions are accordingly rejected. Legal heirs of
Respondent -Raman Garase are permitted to withdraw the entire
deposited amount of gratuity before the Appellate Court. Petitioner
shall pay the amount of interest awarded by the Controlling Authority
to the Respondents/ their heirs within a period of two months.
34) With the above directions, Writ Petitions are dismissed.
Rule is discharged. There shall be no orders as to costs.
[SANDEEP V. MARNE, J.]
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