The Kerala High Court has ruled that an employee cannot approach a consumer dispute redressal forum to recover gratuity dues from an employer, holding that such disputes do not fall within the ambit of the Consumer Protection Act, 2019.

Justice Ziyad Rahman AA observed that an employer cannot be regarded as a "service provider" and an employee cannot be considered a "consumer" under the Consumer Protection Act. The Court emphasised that the relationship between an employer and an employee is fundamentally distinct from that of a consumer and a service provider.

"As far as an employer is concerned, he cannot be treated as a service provider and the employee cannot be treated as a person who availed the services from the employer," the Court held.

The Court further explained that, in an employment relationship, it is the employee who renders services to the employer in exchange for wages, while the employer is the recipient of those services. Consequently, disputes relating to service conditions, including statutory retirement benefits such as gratuity, cannot be treated as consumer disputes.

The observations were made while allowing an appeal filed by the Tirur Service Co-operative Bank and setting aside an order of the Malappuram District Consumer Disputes Redressal Commission (DCDRC), which had directed the bank to pay gratuity arrears along with compensation and litigation costs to a retired employee.

The dispute arose after a former employee of the bank, who retired in March 2016 after 38 years of service, approached the consumer commission claiming unpaid gratuity. Although the bank had paid him ₹10 lakh as gratuity, he contended that he was entitled to ₹12.20 lakh under the Payment of Gratuity Act, 1972, and sought recovery of the balance amount of ₹2.20 lakh through a consumer complaint.

The DCDRC allowed the complaint and also awarded ₹25,000 as compensation and ₹10,000 towards litigation costs.

Challenging the order, the bank argued before the High Court that the consumer commission lacked jurisdiction to adjudicate disputes arising out of an employment relationship.

Agreeing with the bank, the High Court relied on the Supreme Court's decision in Jagmittar Sain Bhagat & Ors. v. Director, Health Services, Haryana & Ors., which held that disputes concerning service conditions and retirement benefits cannot be adjudicated under the Consumer Protection Act.

The Court also highlighted the distinction between a "contract of service" and a "contract for service." While consumer law may apply to disputes arising out of a contract for service, an employer-employee relationship is governed by a contract of service. Since gratuity is a statutory service benefit flowing from such a relationship, consumer forums have no jurisdiction to entertain claims relating to it.

Accordingly, the High Court set aside the consumer commission's order.

Advocates Arjun Raghavan and TR Harikumar appeared for the bank, while Advocates Thareeq Anver, KS Salma Jennath, K Shamsudheen, Arun Chand, Rassal Janardhanan A and Moyin KP represented the retired employee.

Case Title : The Tirur Service Co-operative Bank Ltd v. Moideen M