Only Central, State Employees Fall Under Section 2(e) Gratuity Exclusion: Kerala HC [Read Judgment]

Kerala: The Kerala High Court has ruled that retired abkari workers of the Kerala State Beverages Corporation Ltd. (KSBC) are entitled to receive gratuity under the Payment of Gratuity Act, 1972, even if they have already received terminal benefits under the Kerala Abkari Workers Welfare Fund Act. The Court held that gratuity is a statutory right and cannot be denied in the absence of a valid government exemption.

The judgment was delivered by a Division Bench comprising Justice Sushrut Arvind Dharmadhikari and Justice Syam Kumar V.M. while deciding a batch of writ appeals led by WA No. 951 of 2024.

The appellants, all retired abkari workers of KSBC, had approached the High Court after the Corporation refused to pay gratuity on the ground that they had already received benefits under the Abkari Workers Welfare Fund. Their writ petitions were initially dismissed by a Single Judge, who held that allowing gratuity under the central law would amount to double payment and unjust enrichment.

Challenging this finding, the appellants argued that the Payment of Gratuity Act has overriding effect under Section 14 and that they were never exempted under Section 5 of the Act. They contended that merely receiving welfare fund benefits could not deprive them of their statutory entitlement to gratuity.

On the other hand, KSBC and the Welfare Fund Board argued that gratuity was already covered under the Abkari Workers Welfare Fund Scheme and that the workers were governed by a separate welfare legislation. It was further submitted that bilateral settlements with trade unions also governed their service benefits.

After examining the statutory scheme, the Bench held that the exclusion under Section 2(e) of the Gratuity Act applies only to those holding posts under the Central or State Government and governed by separate gratuity rules. Since KSBC employees do not fall under that category, the exclusion could not apply to them. The Court also observed that no exemption notification had been issued by the government under Section 5 of the Gratuity Act.

Rejecting the reasoning of unjust enrichment, the Court held that simultaneous receipt of welfare benefits and statutory gratuity cannot be treated as double benefit unless the government formally grants exemption. The Bench further clarified that gratuity, being a social welfare right, must be interpreted liberally in favour of employees.

Setting aside the Single Judge’s ruling, the High Court directed KSBC to release gratuity to all eligible appellants under the Payment of Gratuity Act and the relevant Service Rules within three months.

Case Title: Manoharan D. & Ors. v. Kerala State Beverages Corporation Ltd. & Ors.

[Read Judgment]