Private Hospitals Are Covered Under Payment Of Gratuity Act : Kerala HC [Read Judgment]

The High Court of Kerala has held that private hospitals are covered under the Payment of Gratuity Act, 1972.

The contention of the appellant before the Court, Lourdes Hospital, was that it did not come within the purview of the Kerala Shops and Commercial Establishments Act, 1960, being a charitable institution. The Gratuity Act is applicable to 'shops and establishments within the meaning of any law for the time being in force in relation to shops and establishments in a State', as per Section 1(3)(b). Since the hospital was out of the ambit of Shops and Establishments Act, it was not covered under Gratuity Act, contended the appellant.

However, the Division Bench of Justices P R Ramachandra Menon and N Anil Kumar did not agree. The Court held that whether an establishment made profit or not was immaterial. Following the SC precedent Management of Tata Iron and Steeel Co.Ltd vs Chief Inspecting Officer and others, the bench observed :

The Apex Court held that, if the activity is frequent, continuous and relating to business, whether it earns profit or not is irrelevant. Since the above ingredients were present in respect of the activities of the hospital, it was held as an establishment under Section 2(6) of the above Act.

The appellant also contended that the State Government had exempted private hospitals from the Shops and Establishments Act. But on scrutiny, the bench found that the exemption was only from the applicability of Section 10 of the Shops and Establishments Act, which fixed the working hours. The State Government had given exemption to private hospitals from the rigour of statutorily fixed working hours. Even otherwise, a subsequent exemption from the Shops and Establishments Act will not take an establishment out of the Gratuity Act, if it was covered under Gratuity Act at the commencement of the Act. The Court held :

Going by the scheme of of Gratuity Act, the shops and commercial establishments, which were covered under the Shops Act at the time of introduction of Gratuity Act would continue to be so covered under the said Act, irrespective of any amendment, repeal or exemption brought under the Shops Act. It cannot be said that the amendment of the Shops Act, if not brought into the Gratuity act, would make the Gratuity Act unworkable. For the same reason, a notification for exemption under the Shops Act would not apply to the Gratuity Act, as the power to grant exemption from the provisions of the Gratuity Act stands exclusively vested with the Central Government.

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