1. Case Details  Madulsima Plantations PLC v. B.K. Prabath Chandrakeerthi and Others, a Writ Application (CA/Writ/345/2021) filed in the Court of Appeal of Sri Lanka. The case involves a dispute over gratuity payments under the Payment of Gratuity Act, No. 12 of 1983, and whether the petitioner, Madulsima Plantations PLC, was liable to pay additional gratuity to the third respondent, B.P. Dharmasena.

2. Background of the Case The third respondent was employed by the petitioner company, initially joining its predecessor on October 1, 1973, as a Clerk and later rising to the position of Financial Controller. Upon reaching the optional retirement age of 55 in 2003, the respondent continued employment through extensions until reaching the compulsory retirement age of 60 in 2008. Subsequently, he was engaged under multiple fixed-term contracts until 2018.

3. Key Legal Issues The case revolves around the following legal questions:

• Whether the third respondent’s employment from 1973 to 2018 constituted uninterrupted service under the Payment of Gratuity Act.
• Whether the multiple fixed-term contracts post-2008 should be considered separate employment periods or a continuation of service.
• Whether the decisions of the 1st and 2nd respondents (Labour Commissioner and Assistant Commissioner) were legally valid in demanding additional gratuity payments from the petitioner.

4. Arguments Presented

• Petitioner’s Argument:
  • The respondent formally retired in 2008 and was paid gratuity as per the Act.
  • The post-2008 contracts were fresh contracts, breaking continuity of service.
  • The respondent knowingly accepted new contracts without claiming gratuity.
  • The demand for additional gratuity payment was unreasonable and beyond legal entitlement.
• Respondents’ Argument:
  • The respondent’s employment continued without interruption from 1973 to 2018.
  • The fixed-term contracts were extensions of employment rather than fresh contracts.
  • As per Section 5(1) and Section 20 of the Payment of Gratuity Act, gratuity should be calculated for the entire period.

5. Court’s Findings and Decision

• The Court observed that:
  • The third respondent had accepted gratuity in 2008 and agreed to fresh contracts thereafter.
  • The fixed-term contracts lacked the minimum service period required for additional gratuity entitlement.
  • The Labour Commissioner’s decision was arbitrary, irrational, and ultra vires.
• The Court referred to Bogawanthalawa Tea Estates PLC v. Commissioner General of Labour and Brown and Company Limited v. Commissioner of Labour, emphasizing that an employee who accepts gratuity upon retirement cannot later claim further gratuity for post-retirement contracts.
• The Court ruled in favor of the petitioner, granting Writs of Certiorari to quash the impugned orders (P31, P35, and P39) and held that the petitioner was not liable for additional gratuity payments.

6. Conclusion This case reaffirms the legal distinction between retirement and re-employment under fixed-term contracts. The ruling clarifies that employees who accept gratuity payments at retirement cannot claim additional benefits for subsequent contractual engagements. The decision underscores the importance of employer-employee agreements and upholds the legal framework governing gratuity payments in Sri Lanka.

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