• Case No: CA-WRT-312/2023
• Petitioner: Lanka Milk Foods (CWE) PLC, a company engaged in the production and distribution of dairy products.
• Respondents:
  1. B.K. Prabhath Chandrakeerthi – Commissioner General of Labour.
  2. H.K.R. Perera – Assistant Commissioner of Labour, Ja-Ela.
  3. T.M.I. Lakmali – Assistant Commissioner of Labour, Ja-Ela.
  4. K.L.D.V. Rathnakumari – Assistant Commissioner of Labour, Ja-Ela.
  5. T.B.G. Silva – Former employee (Sales Representative) of Lanka Milk Foods.

Background of the Case

This case emerged from a grievance over the forfeiture of gratuity payments due to allegations of fraud and misappropriation involving the 5th Respondent, an employee terminated by Lanka Milk Foods. The core issue was whether the forfeiture of gratuity was valid under the Payment of Gratuity Act, No. 12 of 1983, and if the Labour Commissioner had overstepped their jurisdiction in ordering payment without referring the matter to the Labour Tribunal.

Chronology of Events

1. Employment and Termination:
   • The 5th Respondent was employed as a Sales Representative from June 1, 2005, to January 28, 2019.
   • Termination occurred due to his involvement in fraudulent activities, including aiding Area Sales Managers in misappropriating company funds and goods.
2. Claims for Gratuity:
   • Post-termination, the 5th Respondent filed a claim with the Labour Commissioner under the Gratuity Act, asserting his entitlement to gratuity.
3. Labour Commissioner’s Actions:
   • After an inquiry, the Labour Commissioner directed Lanka Milk Foods to pay Rs. 281,385 as gratuity, rejecting the forfeiture claim.
   • This decision was challenged as exceeding the Commissioner’s jurisdiction since Section 13 of the Gratuity Act allows forfeiture for fraud or misappropriation.
4. Legal Proceedings:
   • Lanka Milk Foods filed a writ application, seeking a Writ of Certiorari to quash the Labour Commissioner’s decisions and prohibit further actions.

Key Legal Issues

1. Entitlement to Gratuity:
   • Is an employee terminated for fraud entitled to gratuity under the Payment of Gratuity Act?
2. Forfeiture of Gratuity:
   • Was the forfeiture decision by the employer lawful under Section 13 of the Gratuity Act?
3. Jurisdiction of Labour Commissioner:
   • Did the Labour Commissioner act ultra vires by deciding on the forfeiture without referring the matter to the Labour Tribunal?

Legal Framework

1. Gratuity Act, No. 12 of 1983:
   • Section 5: Mandates gratuity payment to employees with at least five years of service.
   • Section 13: Permits forfeiture of gratuity if termination arises from fraud, misappropriation, or willful damage.
2. Industrial Disputes Act (IDA):
   • Section 31B(1)(c): Grants Labour Tribunal jurisdiction to decide on the correctness of gratuity forfeiture.
3. Judicial Precedents:
   • Independent Industrial and Commercial Employees’ Union v. CWE: Established gratuity as a legitimate post-retirement benefit for faithful service.
   • Lanka Milk Foods (CWE) PLC v. B.A. Mahinda: Reinforced the Labour Tribunal’s authority in adjudicating forfeiture disputes.

Court’s Analysis and Findings

1. On Forfeiture Grounds:
   • The Court found substantial evidence supporting the Petitioner’s claim of fraud and misappropriation by the 5th Respondent, justifying his termination and forfeiture under Section 13.
2. On Labour Commissioner’s Actions:
   • The Commissioner lacked jurisdiction to adjudicate on forfeiture disputes involving fraud, which are exclusively within the Labour Tribunal’s purview.
3. Final Judgment:
   • The Court quashed the Commissioner’s decisions (documents P2 and P16(d)) through a Writ of Certiorari.
   • Directed the 5th Respondent to seek redress from the Labour Tribunal for a detailed inquiry into the forfeiture claim.

Implications of the Judgment

1. Clarity on Jurisdiction:
   • Reinforces the Labour Tribunal as the correct forum for disputes involving fraud-related gratuity forfeitures, ensuring fairness in adjudication.
2. Employer Protections:
   • Validates the employer’s right to withhold gratuity in cases of substantiated misconduct.
3. Administrative Limitations:
   • Highlights the limitations of Labour Commissioners in cases involving complex legal issues like fraud and misappropriation.

Recommendations

1. For Employers:
   • Document all evidence of employee misconduct comprehensively.
   • Engage legal counsel promptly to ensure proper representation in Labour Tribunal proceedings.
   • Follow procedural safeguards under the Gratuity Act to avoid adverse rulings.
2. For Employees:
   • Understand the legal provisions regarding gratuity entitlements and forfeiture.
   • Seek Labour Tribunal intervention for disputes to ensure an impartial hearing.
3. For Labour Authorities:
   • Adhere strictly to jurisdictional limits, referring contentious cases to the Labour Tribunal as mandated by law.

Conclusion

This case serves as a significant precedent for the proper adjudication of gratuity disputes, reinforcing the Labour Tribunal’s role in cases involving allegations of fraud. It balances the rights of employees to post-retirement benefits against the employer’s right to protect against financial losses due to misconduct.

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