Gratuity Rights of Daily Wagers: Supreme Court Rules in Favor of Long-Term Employee

The case of Netram Sahu v. State of Chhattisgarh & Anr. is a significant ruling concerning the gratuity rights of daily wage employees and work-charge employees under the Payment of Gratuity Act, 1972. The Supreme Court of India overturned the Chhattisgarh High Court’s decision and ruled in favor of the appellant, Netram Sahu, affirming his right to gratuity after 25 years and 3 months of service.

Background of the Case

The appellant, Netram Sahu, was initially appointed as a daily wage worker in the Water Resources Department of the State of Chhattisgarh on April 1, 1986. He was attached to the office of the Sub-Divisional Officer (E/M), Light Machinery Tubewell & Gage Sub-Division, Sakri, District Bastar.

After serving as a daily wage worker for 22 years, his services were regularized on a work-charge basis on May 6, 2008. He continued working in this capacity until his retirement on July 30, 2011.

Following his retirement, Netram Sahu applied for gratuity under the Payment of Gratuity Act, 1972. However, the State Government denied his claim, arguing that his daily wage service should not be counted for gratuity eligibility.

Orders Passed by Lower Authorities

The appellant approached the Controlling Authority under the Payment of Gratuity Act, which ruled in his favor and directed the State to pay him gratuity for his entire service period. The authority held that he had rendered continuous service as defined under the Act.

The State Government, dissatisfied with the ruling, filed an appeal before the Appellate Authority, which upheld the Controlling Authority’s order.

However, the State then challenged the decision before the Chhattisgarh High Court. The Single Judge of the High Court allowed the State’s plea, setting aside the previous orders. The appellant filed a writ appeal, but the Division Bench dismissed it, leading him to approach the Supreme Court.

Petitioner’s Arguments

The appellant, Netram Sahu, argued that:

• He had worked continuously for 25 years and 3 months, and under Section 2A of the Payment of Gratuity Act, his entire service period should be considered.
• The Act does not differentiate between a daily wage worker and a regular employee when determining gratuity eligibility.
• Since his services were regularized before his retirement, his previous daily wage employment should also be counted.
• The State’s reliance on State of Karnataka & Ors. v. Umadevi (3) was misplaced, as that case dealt with regularization and not gratuity rights.
• As per the welfare objectives of the Payment of Gratuity Act, his service should not be broken into parts to deny him benefits.

Respondent’s Arguments

The State of Chhattisgarh contended that:

• The appellant had worked as a daily wage employee for 22 years, and gratuity could not be claimed for this period.
• Only regular service should be considered for gratuity under the Act.
• Since he was regularized only in 2008, he did not complete five years of continuous regular service before retirement.
• The High Court correctly applied the principle that daily wage work does not count toward pensionable or gratuity service.

Supreme Court’s Observations

The Supreme Court disagreed with the High Court’s ruling and made the following observations:

1. Continuous Service Under the Payment of Gratuity Act

The Court reaffirmed that ‘continuous service’ under the Act does not differentiate between daily wage and regular employees.

“It is not in dispute that the appellant has actually rendered the total service for a period of 25 years and 3 months. The Act does not make a distinction between daily wage and regular employment while computing continuous service.”

2. Regularization Before Retirement

The Court emphasized that once the appellant was regularized before retirement, he was entitled to claim gratuity for his entire service period.

“The State cannot deny gratuity benefits when it took 22 years to regularize his employment while extracting continuous service throughout.”

3. Misinterpretation of Umadevi Judgment

The Court ruled that the High Court erred in applying the Umadevi case, stating:

“The decision in Umadevi applies to regularization but does not prevent an employee from claiming statutory benefits such as gratuity once regularized.”

4. Welfare Legislation Must Be Interpreted Liberally

The Court reiterated that gratuity laws should be interpreted in favor of employees:

“The Act is a social welfare legislation, and the State must voluntarily pay gratuity rather than forcing employees to litigate their rightful claims.”

Supreme Court’s Final Verdict

The Supreme Court ruled as follows:

• The appeal was allowed, and the High Court’s ruling was set aside.
• The orders of the Controlling Authority and the Appellate Authority were restored.
• The State of Chhattisgarh was directed to pay the appellant’s gratuity within three months.
• The State was also ordered to pay Rs. 25,000 as costs.

Key Takeaways

• The Supreme Court upheld the gratuity rights of long-term daily wage workers.
• Continuous service under the Payment of Gratuity Act includes daily wage employment.
• Regularization before retirement ensures eligibility for gratuity for the entire service period.
• The judgment prevents states from denying gratuity benefits by delaying regularization.
• The ruling strengthens social security measures for low-income workers.

Conclusion

This Supreme Court judgment reinforces the legal principle that gratuity benefits should be extended to long-serving employees, including daily wage workers whose services are later regularized. The decision sets a precedent that protects employees from being denied benefits due to bureaucratic delays and administrative loopholes.

The ruling ensures that workers who have dedicated years of service to public institutions receive their rightful dues, emphasizing the welfare objectives of labor laws in India.

Petitioner Name: Netram Sahu
Respondent Name: State of Chhattisgarh & Anr.
Judgment By: Justice R.K. Agrawal, Justice Abhay Manohar Sapre
Place Of Incident: Chhattisgarh
Judgment Date: 23-03-2018

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