Calcutta High Court Directs Mother Dairy To Pay Gratuity | Holds Continuous Service Through Contractors Makes Principal Employer Liable | Orders Payment With Statutory Interest
Sanchayita Lahkar
The High Court of Calcutta Single Bench of Justice Shampa Dutt (Paul) allowed a writ petition challenging the decisions of the Controlling Authority and Appellate Authority under the Payment of Gratuity Act, 1972. The Court directed the principal employer to pay gratuity to the petitioner, who served through multiple contractors for over two decades. Noting that the petitioner "continued to provide his service to the OP1 till his superannuation," the Court set aside the impugned orders and mandated payment with statutory interest within thirty days, while allowing the company liberty to recover the amount from the contractors in accordance with law.
The petitioner was employed as a security guard from January 1, 1997, continuously working through different contractors at a unit operated by the respondent company, Mother Dairy. Upon his superannuation on August 1, 2019, he filed an application for gratuity under Form I of the West Bengal Payment of Gratuity Rules, 1973. Despite the claim, no gratuity was paid.
Subsequently, the petitioner filed Gratuity Case No. G-02/2020 before the Controlling Authority under the Payment of Gratuity Act, 1972. The case was disposed of on November 16, 2022, denying the gratuity claim on the ground that the petitioner did not complete five years of continuous service under the last contractor, General Security Services Pvt. Ltd., having worked only for 2 years and 1 month under that particular contractor.
The appellate authority upheld the decision on February 28, 2024, stating the petitioner was not an employee of Mother Dairy but rather of the contractor during the time of superannuation. The petitioner then filed the writ application.
According to the petitioner, although his direct employment was under different contractors, his uninterrupted service at the same unit for more than 22 years constituted continuous service under the principal employer. He submitted that he was entitled to gratuity as per Section 7(2) and Section 4(1) of the Payment of Gratuity Act, 1972.
The respondents contested the petition, asserting the absence of an employer-employee relationship between the petitioner and the principal employer. Mother Dairy stated that it neither issued any appointment nor superannuation letter to the petitioner. They relied on a tripartite settlement dated May 14, 2010, where it was stated that "there will be no retirement benefits at this stage."
General Security Services Pvt. Ltd., the last contractor, argued that the petitioner served under them for only two years and one month, failing to meet the five-year continuous service requirement stipulated under Section 4(1) of the Payment of Gratuity Act.
The petitioner relied on several judicial precedents to support his claim, including Madras Fertilisers Ltd. vs Controlling Authority under Payment of Gratuity Act and Suryakand D. Lad & Ors. vs Oil and Natural Gas Corporation Ltd.
Mother Dairy, in turn, cited Panther Security Services Pvt. Ltd. vs Employees Provident Fund Organisation, where the Supreme Court held that private security agencies are subject to the Employees' Provident Funds and Miscellaneous Provisions Act if they meet the criteria of being an employer.
The Court also considered a previous judgment passed in WPA 6006 of 2009, which applied the Supreme Court decision in Steel Authority of India Limited vs. Workmen, where workers engaged through contractors were entitled to service benefits including gratuity, even without regularization.
Additionally, the Court referred to other judgments establishing employer-employee relationships based on the continuity of work, economic control, and extent of supervision, including Hussainbhai vs The Alath Factory Thezhilali Union, Bharat Heavy Electricals Ltd. vs Mahendra Prasad Jakhmola, and Subramaniam S. Arjun vs ONGC Ltd.
The Court stated "From the materials on record, it is evident that the petitioner joined the unit of the O.P.1 on 01.01.1997 as a security guard and worked through different contractors and since then he worked continuously, till he superannuated on 01.08.2019."
"The OP 1 (mother diary) is the principal employer, and the petitioner discharged his duties for the benefit of the OP1 (mother diary) only through different contractors engaged by the OP1 from time to time."
"He served the company (mother diary) for 22 years without any interruption."
"The contractors kept changing but he continued to provide his service to the OP1 till his superannuation."
"In the subscriber's annual statement of account under The Employees Provident Fund Scheme, 1952 issued by the Regional Provident Fund Commissioner in FORM - 23 the name of the employer of the petitioner is written as Mother dairy Calcutta."
The Court recorded that Mother Dairy did not issue an appointment letter but admitted to having engaged the petitioner through contractors.
Addressing the defence under the tripartite settlement, the Court noted: "Being a party to the said tripartite agreement the petitioner applicant has already reaped the benefit of the said settlement. Thus now the applicant cannot claim the gratuity from his principal employer."
The Court distinguished the factual circumstances and legal responsibilities of the contractor and principal employer under the Payment of Gratuity Act, 1972, and the Contract Labour (Regulation and Abolition) Act, 1970.
Referring to Section 21(4) of the CLRA, the Court noted: "The principal employer is liable to pay gratuity to contract employees if the contractor fails to pay."
The Court further stated: "Gratuity, payable under the Payment of Gratuity Act, 1972, is a gratuitous payment required to be made by an employer to his employee at the time of termination of services of the employee or upon such employee's death."
"The principal employer is liable to pay gratuity if the contract employee works for multiple contractors."
"The Contract Labour (Regulation and Abolition) Act, 1970 (CLRA) and the Payment of Gratuity Act, 1972 govern the payment of gratuity to contract employees."
The Court set aside the orders of the Appellate Authority dated February 28, 2024, and the Controlling Authority dated November 16, 2022. It held: "The order of the Appellate Authority dated 28.02.2024 which is under challenge and the order dated 16.11.2022 of the Controlling Authority are set aside being not in accordance with law."
The Court issued a clear direction: "The respondent no. 4/mother diary is directed to make the payment of gratuity as due to the petitioner within 30 days from the date of this order along with statutory interest till payment and the company (respondent no. 4)/mother diary shall be at liberty to recover the said amount, from the contractors including the respondent no. 5, proportionately, in accordance with law."
"WPA 3503 of 2025 is allowed."
"All connected applications, if any, stand disposed of."
"Interim order, if any, stands vacated."
Advocates Representing the Parties:
For the Petitioner: Mr. Bikash Shaw, Mr. Sk. Saad Islam
For the Respondents: Mr. Bhaskar Prasad Vaisya, ld. AGP, Mr. Nilay Baran Mandal, Ms. Soni Ojha
Case Title: Shibaprasad Sutradhar vs. The State of West Bengal & Ors.
Case Number: WPA 3503 of 2025
Bench: Justice Shampa Dutt (Paul)
