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Consolidated Coffee Limited vs Uthaman on 6 November, 1978

Kerala High Court
Consolidated Coffee Limited vs Uthaman on 6 November, 1978
Author: K Thommen
Bench: K Thommen


JUDGMENT

Kochu Thommen, J.

1. Every employee engaged in a factory is entitled to be paid gratuity in terms of Section 4 of the Payment of Gratuity Act, 1972 (35 of 1972). The 1st respondent is admittedly an employee in a factory belonging to the petitioner. The question is whether the 1st respondent is entitled to gratuity at the full rate of 15 days’ wages for every completed year of service or part thereof in excess of six months, as mentioned under the main part of Sub-section (2) of Section 4. If the petitioner’s contention is accepted, i.e., the employee is engaged in a seasonal establishment, the employee would be entitled to only the rate mentioned in the second proviso to that sub-section, viz., 7 days’ wages for each season of the year. In other words, the question really is whether the petitioner’s factory can be considered to be a seasonal establishment vis-a-vis the 1st respondent.

2. The authorities under the Act have held that the factory is not a seasonal establishment insofar as the 1st respondent is concerned and he is, therefore, entitled to gratuity at the full rate of 15 days’ wages. According to the petitioner, the factory is a seasonal establishment and, therefore, an employee in that factory, irrespective of the period during which he works in a year, is entitled to receive gratuity only at the rate of 7 days’ wages.

3. The relevant portions of Section 4 read as follows:

(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,–

(a) on his superannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease;

* * * *

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days’ wages based on the rate of wages last drawn by the employee concerned:

* * * *

Provided further that in the case of an employee employed in a seasonal establishment, the employer shall pay the gratuity at the rate of seven days’ wages for each season.

* * * *

4. It is admitted that the 1st respondent works in the petitioner’s factory throughout the year. It is a coffee curing factory. It would appear that under Ext. P5 memorandum of settlement dated 6-11-1973 the factory is treated as a seasonal industry where off-season employment is not guaranteed. Petitioner’s counsel Shri K.A. Nayar rightly points out that a coffee curing factory is, for the purpose of the Employees’ State Insurance Act, 1948, as well as the Employees’ Provident Funds Act, 1952, and the Scheme, treated as a seasonal establishment. Counsel, in my view, is right in submitting that the petitioner’s factory is a seasonal establishment. That being the position counsel contends that an employee working in a seasonal establishment is entitled to gratuity only at the rate of seven days’ wages as mentioned in the second proviso to Section 4(2). It does not make any difference, according to counsel, that the petitioner works throughout the year. Counsel says that the factory being a seasonal establishment, the rate is uniformly applicable to all its employees, irrespective of the duration of their work in a year.

5. A “seasonal establishment” is not defined under the Payment of Gratuity Act. Nor is “seasonal establishment” defined as such under the Employees’ State Insurance Act or the Employees’ Provident Funds Act, although under those two enactments a coffee curing factory, among others, is specifically mentioned as a seasonal establishment. The meaning of a seasonal establishment has, therefore, to be understood in the popular sense. Any factory which only works during certain seasons of the year, and not throughout the year, is a seasonal establishment.

6. The second proviso to Sub-section (2) of Section 4 mentions a rate for each season during which a person is employed. If an employee is employed only in one season he would get gratuity at the rate of seven days’ wages for that season. Likewise, if he has been employed for more than one season, he would get gratuity at that ate for each of those seasons.

7. It would, therefore, appear that the rate has to be determined for the purpose of gratuity with reference to the period of employment of an employee in a particular establishment. An establishment may be seasonal insofar as its seasonal employees are concerned, but vis-a-vis persons working throughout the year it is not a seasonal establishment. It has been found by the authorities that 36 employees work throughout the year in the factory whereas 160 employees work only during seasons. The factory is a seasonal establishment in respect of those persons who are employed seasonally, and it is a non-seasonal establishment in respect of the others who are engaged throughout the year.

8. Petitioner’s counsel says that a coffee curing factory, having been treated as a seasonal establishment for the purpose of the Employees’ Provident Funds Act as well as the Employees’ State Insurance Act, has to be so treated for the Payment of Gratuity Act as well. It is true–and as seen from Ext, P5 memorandum of settlement–that the petitioner’s factory is a seasonal establishment. One purpose of classifying a factory as a seasonal establishment is to allow the employer to apply the lesser rate in respect of an employee employed only seasonally. But the employer cannot take advantage of the reduced rate for persons employed throughout the year.

9. I am of the view that, having found that the 1st respondent works throughout the year in the factory, the authorities were well justified in treating him as a non-seasonal employee, and the factory vis-a-vis him as a non-seasonal establishment, for the purpose of allowing him gratuity at the higher rate of fifteen days wages.

10. The petition is accordingly dismissed.

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