IRCTC liable for contract worker’s gratuity despite successive contractors, Calcutta High Court rules

Respondent No. 4, Dinanath Rana, claimed gratuity for service from 7 February 2002 to 12 June 2020 at IRCTC, successively deployed through three contractors.

The Controlling Authority treated IRCTC as his employer for purposes of the Payment of Gratuity Act, 1972 and awarded gratuity; the Appellate Authority upheld the award and directed IRCTC to pay ₹1,87,650 with interest.

IRCTC challenged both orders, contending that Rana was employed and paid by independent contractors and that no employer–employee relationship existed between him and IRCTC.

Rana maintained that he worked continuously for IRCTC under its supervision and control.

Whether a principal employer may be held liable to pay gratuity to a contract worker who served continuously at its establishment through successive contractors.

Whether, after paying gratuity, the principal employer may recover the amount from the contractor.

Section 2(e) of the Payment of Gratuity Act, 1972 defines “employee” to include a person employed for wages in or in connection with the work of a covered establishment.

Section 21(4) of the Contract Labour (Regulation and Abolition) Act, 1970 requires the principal employer to pay contract labour wages where the contractor defaults or makes a short payment, with a right to recover the amount from the contractor; the judgment considered this provision alongside the definition of “wages” in Section 2(h) of the CLRA and Section 2(vi) of the Payment of Wages Act, 1936.

The Court also referred to the employer–employee relationship factors in Bharat Heavy Electricals Ltd. v. Mahendra Prasad Jakhmola, Balwant Rai Saluja v. Air India Ltd., and Hussainbhai, Calicut v. Alath Factory Thezhilali Union.

The Court also referred to Superintending Engineer, Mettur Thermal Power Station v. Appellate Authority on gratuity under the CLRA wages definition.

The judgment states that a principal employer bears responsibility for employee welfare and may recover gratuity paid from the contractor.

The Court noted that Rana’s service at IRCTC continued despite successive changes in contractors and that the authorities had found his service period and last-drawn wages established.

It treated the principal employer’s statutory responsibilities under Sections 20 and 21 of the CLRA as extending to dues of workers engaged through contractors, and concluded that IRCTC could not avoid payment merely because contractors had deployed and paid the worker.

It preserved IRCTC’s ability to recover the gratuity from the contractor.

It also stated that IRCTC would be at liberty to recover gratuity paid from the contractor.