Safiya Malik

The Calcutta Hihg Court has disposed a Writ Petition challenging the orders passed by the Controlling Authority under the Payment of Gratuity Act, 1972, and the Appellate Authority. The petitioner contested the findings that it was liable for gratuity payments to contract workers engaged through various contractors. The court modified the Appellate Authority’s order to allow the petitioner to recover gratuity payments from the contractor when employment cessation occurs. The judgment recorded, “as and when the petitioner has to make the payment of gratuity Act, when the employment ceases, he shall be at liberty to recover the said amount from the contractor (respondent no. 3) herein.”

The petitioner, Hindustan Petroleum Corporation Limited (HPCL), filed the writ petition against the order dated August 15, 2023, issued by the Controlling Authority under the Payment of Gratuity Act, 1972, and the subsequent appellate order dated July 29, 2024. The dispute concerned the gratuity claims of workers employed through a contractor at HPCL’s premises.

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HPCL contended that the workers were engaged through M/s. NIS Management Limited under Purchase Order No. 18000260-OP-11600 dated February 7, 2019, for housekeeping services, valid until November 30, 2020. The contract stipulated that the contractor was responsible for compliance with statutory provisions, including the Payment of Gratuity Act, the Contract Labour (Regulation and Abolition) Act, 1970, the Minimum Wages Act, and other labor laws.

The private respondents, identified as workers, claimed gratuity under the Payment of Gratuity Act, 1972. Initially, they had filed FORM-I applications with the contractor, M/s. NIS Management Limited. However, they subsequently filed FORM-N applications against HPCL. The Controlling Authority, through an order dated May 15, 2023, held that the workers were employees of HPCL for the purpose of the Payment of Gratuity Act.

Aggrieved by this finding, HPCL challenged the order before the Appellate Authority, which upheld the Controlling Authority’s decision. The Appellate Authority recorded, "the workers working for the organization through various contractors have been doing so continuously with the Principal Employer remaining the same. Therefore, it is only logical and prudent that the responsibility to make the payment of Gratuity (Gratuity being a social legislation) rests upon the Principal Employer only."

The High Court examined whether HPCL, as the principal employer, was liable for gratuity payments under the Payment of Gratuity Act, 1972, and whether the contractors’ role in engaging workers absolved HPCL of this liability. The court referred to various judicial precedents, including Bharat Heavy Electricals Ltd. v. Mahendra Prasad Jakhmola & Ors., where the Supreme Court laid down tests for determining an employer-employee relationship. The judgment noted, "the relevant factors to be taken into consideration to establish an employer-employee relationship would include, inter alia: (i) who appoints the workers; (ii) who pays the salary/remuneration; (iii) who has the authority to dismiss; (iv) who can take disciplinary action; (v) whether there is continuity of service; and (vi) extent of control and supervision i.e. whether there exists complete control and supervision."

The court also referred to Hussainbhai, Calicut v. The Alath Factory Thezhilali Union, Kozhikode & Ors., where the Supreme Court observed, "The true test is where a worker or group of workers labour to produce goods or services and these goods or services are for the business of another, that other is, in fact, the employer. He has economic control over the workers' subsistence, skill, and continued employment."

The court examined the contractual terms between HPCL and the contractor and recorded that while the workers were engaged through a contractor, they continued working at HPCL’s establishment over a prolonged period. The judgment stated, "The workers though working under one contractor after another, were with the same principal employer, the writ petitioner herein."

The High Court referred to Section 21(4) of the Contract Labour (Regulation and Abolition) Act, 1970, which provides that if a contractor fails to pay wages, the principal employer is liable to make such payments. The court recorded, "Under Section 21(4) of the Contract Labour (Regulation and Abolition) Act, 1970, the principal employer is to pay the wages of the contractor. Under Section 2(h) of the said Act, wages have been assigned the same meaning as given to it by Clause (vi) of Section 2 of the Payment of Wages Act, 1936. Wages includes gratuity under Section 2(vi)(d) of the said Act."

The court also cited Subramaniam S. Arjun & Ors. v. Oil & Natural Gas Corporation Ltd., where the Bombay High Court held that the principal employer remains liable for gratuity payments to contract workers. The judgment recorded, "Petitioners rendered services as contract workmen to ONGC in excess of 15 years, on an average. The petitioners’ services were so utilized through different contractors. The contractors changed but the principal employer remained constant."

The High Court modified the Appellate Authority’s order, stating that while HPCL remains liable to pay gratuity, it has the right to recover the amount from the contractor. The court ordered, "as and when the petitioner has to make the payment of gratuity Act, when the employment ceases, he shall be at liberty to recover the said amount from the contractor (respondent no. 3) herein."

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The court upheld the orders of the Controlling Authority and the Appellate Authority, stating, "The order dated 15.8.2023 passed by the Controlling Authority under the Payment of Gratuity Act,1972 and Assistant Labour Commissioner (Central), Kolkata and the order of the Appellate Authority dated 29.7.2024, being in accordance with law requires no interference."

The writ petition was disposed of with the court directing, "WPA 25774 of 2024 is disposed of. All connected applications, if any, stand disposed of. Interim order, if any, stands vacated."

Advocates Representing the Parties

For the Petitioner: Mr. Ranjay De, Senior Advocate, Mr. Basabjit Banerjee, Mr. A.A. Bose, Advocates

For the Respondent No. 3: Mr. Santanu Talukdar, Advocate

Case Title: Hindustan Petroleum Corporation Limited v. The Appellate Authority under the Payment of Gratuity Act, 1972 & Ors.
Case Number: WPA 25774 of 2024
Bench: Justice Shampa Dutt (Paul)

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