Kerala Toddy Workers Welfare Fund, Employee Of Licensee, Not An Employer: Kerala High Court

Background Facts

The employee (Petitioner) was a worker in toddy shops Nos. 135 to 138 and 119 to 122 in the Kuttanadu Excise range. These toddy shops were licensed to licensees (Respondents). The Welfare Fund Inspector issued a determination order under Section 8 of the Kerala Toddy Workers Welfare Fund Act, 1969, holding the employee liable to pay welfare funds for these toddy shops. The employee appealed against this order, and the Appellate Authority remanded the matter back to the Welfare Fund Inspector for a fresh determination. Upon remand, the Welfare Fund Inspector again issued a final determination order on December 11, 2007, affirming the employee's liability to pay the welfare fund. The determination order was issued under Section 8 of the Kerala Toddy Workers Welfare Fund Act, 1969. The employee's liability was assessed based on the definition of “employer” under Section 2(c) of the Act, which includes any person who employs others in the establishment, directly or indirectly.

This order was challenged by the employee, arguing that he was not a licensee or owner of the toddy shops but merely an employee who assisted respondents in conducting the affairs of the toddy shops. It was contended by the employee that he could not be held responsible for the welfare fund contributions, which were the duty of the licensees. It was further argued that mere association with the business does not constitute being an employer under the Act. It was contended by the employee that he did not have the authority to employ any other person in the toddy shops. As an employee, he lacked the capacity to hire workers, and thus, he should not be held responsible for remitting welfare fund contributions.

On the other hand it was argued by the respondents that the definition of “employer” under Section 2(c) of the Kerala Toddy Workers Welfare Fund Act, 1969, was broad and inclusive. It was contended that it encompassed not only the license holders but also any person who conducts the shop and has the ability to hire workers. It was further claimed that the employee was effectively conducting the business of the toddy shops and was in a position to employ other persons. It was argued by respondents that petitioner was not merely an employee but also an occupier and operator of the toddy shops. It was further highlighted that the employee had entered into an agreement with the licensee respondents and Union officials, indicating his active role in managing the toddy shops. This agreement, they argued, demonstrated his capacity to hire and manage workers, thus making him liable for the welfare fund contributions.

It was further asserted by the respondents that the employee had collected welfare fund contributions from the workers, thereby fulfilling the role of an employer under the Act. It was argued that employee's involvement in the financial transactions relating to the welfare fund made him responsible for remitting these contributions. It was argued by the respondents that the legislative intent behind the Kerala Toddy Workers Welfare Fund Act, 1969, was to ensure that all persons involved in the management and operation of toddy shops contribute to the welfare fund.

Findings of the Court

It was found by the court that the petitioner was not a licensee of the toddy shops but was an employee of the licensees. It was noted that the employee was involved in assisting the licensees in the operation of the toddy shops. It was further observed by the court that the respondents failed to provide any evidence that the employee had the authority to employ other persons without the consent and approval of the licensees. It was noted that the employee did not possess the capacity to hire workers independently.

The definition of “employer” under Section 2(c) of the Kerala Toddy Workers Welfare Fund Act, 1969 was examined by the court. It was noted that the definition included any person who employs, directly or indirectly, other persons in the establishment. However, it was concluded by the court that the employee did not meet this definition since he was merely an employee and not in a position to employ others on his own behalf.

The Supreme Court's judgment in Joseph Joseph v. State of Kerala (2002 KHC 171), was relied upon by the court, which held that merely being associated with the conduct of a business does not make one an employer under the Act. It was found by the court that this precedent was applicable to the employee's case, reinforcing that he could not be held liable as an employer.

It was further noted by the court that the respondents did not provide substantial evidence to prove that the employee was in a position to hire other persons. It was concluded that the final determination orders dated December 11, 2007, were erroneous and unjust. It was found by the court that the orders incorrectly held the employee liable for welfare fund contributions without sufficient evidence of his capacity as an employer.

Based on the above findings, the writ petitions were allowed. The impugned orders that held the employee liable for the welfare fund contributions were set aside by the court. It was concluded that he was merely an employee and not an employer, as defined under the Kerala Toddy Workers Welfare Fund Act, 1969.

Case No. : WP(C) NO. 22691 OF 2013 and WP(C) NO. 23564 OF 2013

Case Name: C K Ssidharan v The Welfare Fund Inspector & Another

Citation: 2024 LiveLaw (Ker) 505

Counsel for the Petitioner : M.G. Karthikeyan and Nireesh Mathew

Counsel for the Respondents : Renil Anto, Joy George, and Santhosh Kumar