Bombay HC Dismisses IIT Bombay's Appeal Against Payment Of Gratuity To Contract Workers

Background facts

Petitioner, IIT-Bombay, is a premier educational institute in technology and engineering disciplines and established under the provisions of the Institute of Technology Act, 1961. Petitioner has employed regular staff for conducting various study and academic programs. Various projects undertaken by Petitioner are implemented by itself or through collaboration of private or government organisations. To maintain the infrastructure and 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.

According to Petitioner, the Respondents were few such contract labourers provided by various contractors engaged by it for execution of various work at the campus as well as on projects undertaken by IIT, Bombay. The Respondents complained before the Controlling Authority about the non-payment of gratuity by the Petitioner. The Controlling Authority issued notices, and the Petitioner filed its reply denying existence of any employer-employee relationship as well as responsibility to pay gratuity to the Respondents. The Controlling Authority, however, held that Petitioner was liable to pay gratuity to Respondents and further directed Petitioner to pay simple interest @10% per annum on the amounts w.e.f. the dates of retirement of each of the Respondents, till the date of actual payment.

The Petitioner filed Appeal before the Appellate Authority challenging the orders passed by the Controlling Authority and deposited the principal amount of gratuity with the Appellate Authority. Appellate Authority, however, dismissed Petitioner's Appeal causing them to file the present Petitions challenging the orders passed by the Controlling and the Appellate Authority.

The Petitioners argued 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. They further highlighted that they did not control or supervise the Respondents. They relied upon judgment of Bombay HC in Cummins (I) Ltd. V/s. Industrial Cleaning Services and Others, 2017 (3) Mh.L.J. 294 to support of their contention that obligations under the Contract Labour (Regulation and Abolition) Act 1970 cannot be superimposed under the PG Act. In Cummins (I) Ltd. it was 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.

The Petitioners claimed that the Competent Authority has misinterpreted Section 2(f)(i) of the PG Act to erroneously hold that they are the employer just because the Director of IIT was seen to have ultimate control over the affairs of the establishment. Further, they submitted that the Appellate Authority erroneously hold the same. Under the Work Orde r executed with contractors also, the contractor alone was responsible for payment of gratuity.

The Respondents, on the other hand, submitted that there have been different contractors, under whom they have worked; moreover, the definition of the term 'employer' under the PG Act is broad while the Cummins (I) Ltd was delivered taking into consideration the narrow definition in the unamended Act. Thus, the ratio of the judgement has no application in the present case. Further, the Respondents themselves relied on the judgment of the Apex Court in State of Punjab Vs. Labour Court, Jullundur and Ors. 1979 AIR 1981, claiming that the Controlling Authority can determine the issue of existence of employer-employee relationship as PG Act is a complete code.

Work Orders where no condition had been imposed on the contractor for payment of gratuity were referred to. Further Respondents argued that filing multiple claims against several contractors is not feasible. Moreover, they cannot be punished for non-impleadment of contractors IIT, Bombay failed to provide such list of contractors even after a specific application was filed asking for same. They contended that considering officials of IIT gave instructions for performance of work, the Authorities have rightly inferred that Petitioner is the real employer.

Findings of the Court

Justice Sandeep V. Marne considered it not necessary to delve into the exact authority who appointed the Respondent but found it necessary to consider the nature of services rendered. - The Bench highlighted that Respondents did not travel with their contractors to different organisations during the tenure of their long service but rather, continued with IIT. Since there were multiple contractors and services of Respondents did not terminate after end of contract, no occasion arose for them to claim gratuity from previous contractors.

The Bench noted that after the retirement, if Respondents had raised a demand for payment of gratuity from the last contractor, for the entire services rendered by them, the request would have been rejected as the contractor had no liability for the period where there was no 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.

Any person, employed for service for the performance 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.

It was further held that Controlling Authority can conduct preliminary determination of employer-employee relationship issue, though such determination may not bind outside the scope of PG Act. Cummins (I) Ltd. has unique and cannot be applied to the present case as the contractor could not have posted the workers either at his own premises or in the factory of the company.

The Bench noted that in the present case, despite being total absence of any contract between contractors for continuation of services of same workers, Respondents continued to serve at the campus of the IIT. Their services are thus rendered on the establishment of IIT and not on the establishment of the new contractors. Thus, the Court decided that for the limited purpose of payment of gratuity, Respondents are required to be treated as employee of Bombay

Therefore, Justice Sandeep V. Marne rejected the petition and upheld the decision of Controlling and Appellate Authorities to hold IIT, Bombay liable to pay gratuity to the Respondents. Legal heirs of one deceased Respondent were declared permitted to withdraw the entire deposited amount of gratuity before the Appellate Court.

Advocates who appeared in this case :

For Petitioner(s): Mr. Arsh Mishra

For Respondent(s): Ms Gayatri Singh, Senior Advocate with Ms Sudha Bhardwaj i/b. Ms Shreya Mohapatra

Case Title: Indian Institute of Technology by its Registrar vs Dadarao Tanaji Ingle and Ors.

Click Here To Read/Download Order