Ex-Employee Claiming Gratuity Does Not Qualify As "Consumer": Kerala High Court Quashes Consumer Commission Order Citing Lack Of Jurisdiction

The Kerala High Court held that an ex-employee claiming statutory gratuity does not qualify as a "consumer" under Section 2(7) of the Consumer Protection Act, 2019, as the underlying relationship is a "contract of service" rather than a "contract for services."

The Court quashed the impugned order directing a co-operative bank to pay balance gratuity arrears and compensation.

The Court also said that an employer cannot be treated as a service provider, and the employee cannot be treated as a person who availed the services from the employer.

The Bench of Justice Ziyad Rahman AA held, "Thus, I have no doubt in my mind that, the jurisdiction exercised by the District Commission in this case, was without any jurisdiction, as the respondent herein, under no stretch of imagination, would come within the definition of “consumer” as per section 2(7) of the Consumer Protection Act, 2019. Even though various other contentions have been raised with regard to the disqualification of the respondent in raising the claim on the ground of limitation, I am not entering into any finding with respect to the same, since I found that the decision taken by the District Commission was without any authority."

Advocate Arjun Raghavan appeared for the Petitioner, while Advocate Thareeq Anver appeared for the Respondent.

Brief Facts

The petitioner, a Primary Agricultural Credit Society registered under the Kerala Co-operative Societies Act, 1969, challenged an order passed by the District Consumer Disputes Redressal Commission, Malappuram. The underlying complaint was filed before the District Commission by a retired employee (the respondent), who had served the society for over three decades. Upon his retirement, the respondent claimed a specific total amount as statutory gratuity under the Payment of Gratuity Act. However, the petitioner society disbursed a lesser, capped amount.

Alleging a deficiency in service for non-payment of the remaining balance, the retired employee approached the consumer forum, which subsequently allowed the complaint, ordering the society to pay the balance gratuity along with compensation and legal costs. The society filed a writ petition before the High Court to quash this order.

Contentions of the Parties

The Petitioner (Co-operative Society) contended that the writ petition was maintainable despite the availability of an alternative statutory appeal because the consumer forum's order was fundamentally without jurisdiction and a total nullity. It said that a retired employee does not fall within the definition of a "Consumer," and an employer cannot be termed a "Service Provider" under the Consumer Protection Act, 2019.

It was also submitted that the dispute arose out of a "contract of service" (employer-employee relationship), which is explicitly excluded from the ambit of consumer laws. The claim was a purely statutory service benefit under the Payment of Gratuity Act, for which specific remedies exist before the Controlling Authority, rendering the consumer forum completely incompetent to entertain the matter.

The Respondent (Ex-Employee) argued that the retiral benefits and pensionary claims of co-operative employees could be maintained before consumer forums, drawing parallels to cases where contributory pension funds are managed by boards or employers.

Observations of the Court

The Court observed that the rule of exhaustion of alternative remedies is a rule of discretion and policy, not an absolute bar. Since the challenge touched upon a pristine question of law regarding a total lack of jurisdiction, the writ petition under Article 226 of the Constitution was fully maintainable.

The Court noted that to qualify as a "consumer," a person must hire or avail of a service for consideration. In an employer-employee dynamic, service is rendered by the employee to the employer for a salary, not the other way around.

The Court highlighted the fundamental legal distinction between a "contract for services" and a "contract of service", ruling that the latter is entirely excluded from consumer law jurisdiction.

"In this case, the important aspect noticed is that, there is no dispute that, the respondent was an employee of the petitioner and therefore the nature of relationship between them is that of an employer-employee relationship, which is distinct from a person availing the services of another, who is a service provider. More importantly, in a case of employer-employee, the service is being rendered by the employee to the employer in return of a specified remuneration in the form of salary and other allowances, and not vice versa. Therefore, 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 said.

It was held that statutory gratuity is a non-contributory service benefit forming part of employment conditions. It vastly differs from contributory schemes where an employer or board acts as a service provider by managing employee funds.

The Court held, "In the matter of service benefits relating to gratuity, the question of managing the funds of the employees, as is done in the case of managing the contributions towards pension fund, does not arise."

Concluding that the District Commission had completely usurped jurisdiction without any legal foundation, the High Court allowed the writ petition and quashed the consumer forum's order, reserving the respondent's right to approach the appropriate legal forum.

Cause Title: The Tirur Services Co-operative Bank Ltd. v. Moideen M [Neutral Citation: 2026:KER:47052]

Appearances:

Petitioner: Advocate Arjun Raghavan, Advocate T. R. Harikumar.

Respondents: Advocate Thareeq Anver, Advocate K. Salma Jennath, Advocate K. Shamsudheen, Advocate Arun Chand, Advocate Rassal Janardhanan A., Advocate Moyin K.P.

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