Addison Paints And Chemicals Ltd vs Joint Commissioner Of Labour on 28 February, 2011

Madras High Court
Addison Paints And Chemicals Ltd vs Joint Commissioner Of Labour on 28 February, 2011




DATED:   28.02.2011



W.P.No.21409 of 2004,
WPMP.No.25867 of 2004 and
WVMP.No.305 of 2005

Addison Paints and Chemicals Ltd.,
Huzur Gardens,
Sembium, Chennai  600 011. 	...Petitioner


1.Joint Commissioner of Labour,
  (Appellate Authority)
  Payment of Gratuity Act,
  D.M.S.Buildings, VI Floor,
  Teynampet, Chennai -6.

2.The Controlling Authority,
  Payment of Gratuity Act,
  Teynampet, Chennai -6.

3.S.Nagarajan 	...Respondents

Prayer :Petition under Article 226 of the Constitution of India praying for a Writ of Certiorari, to call for the records from the file of the first respondent herein in P.G.A.No.8/2004 on its file and to quash its order dated 08.06.2004 confirming the order passed by the 2nd respondent herein in P.G.No.29 of 2003 dated 14.08.2003 and also to quash the same.

		For Petitioner  :  Mr.H.Balaji
		For Respondents :  Mr.R.Murali,G.A.
					    For R1 and R2
					    Ms.C.Monika for
					    Mr.S.Vaidyanathan for R3


The petitioner is an employer. They have come forward to challenge an order passed by the first respondent Appellate Authority under the Payment of Gratuity Act made in P.G.A.No.8 of 2004 dated 08.06.2004. By the impugned order, the first respondent rejected the appeal filed by the petitioner against the order passed by the second respondent Controlling Authority made in P.G.Case No.29 of 2003 dated 14.08.2003.

2. The writ petition was admitted on 26.07.2004. Pending the writ petition, this Court granted an interim stay. The third respondent employee filed a vacate stay application in WVMP.No.305 of 2005 together with supporting counter affidavit dated 17.11.2004, but the matter was not taken up.

3. Heard the arguments of Mr.H.Balaji, learned counsel for the petitioner, Mr.R.Murali, learned Government Advocate appearing for respondents 1 and 2 and Ms.C.Monica, representing Mr.S.Vaidyanathan, learned counsel for the third respondent.

4. The facts leading to the filing of the writ petition are as follows:-

The third respondent was appointed as a Chemist with effect from 25.05.1962. After 40 years of service, he got superannuated on 11.06.2002. After his retirement on 11.06.2002, by a letter dated 09.07.2002, the petitioner Management informed him that he was not entitled to get gratuity for the period from 25.07.1988 to 06.03.1996, which was rounded off to eight years and his gratuity was computed at Rs.89,220/-. When the said amount was paid to the third respondent, he received the same without prejudice to his benefits enured under Award made in I.D.No.83/84. While the third respondent was working in the petitioner Management, on 25.07.1988, he was transferred from the post of Chemist which is a workman category to that of a Sales Representative, which is a non-workman category. The third respondent did not accept the transfer. The Trade Union, to which the third respondent belonged viz., Addison Paints and Chemicals Ltd., Assistants’ Association raised an Industrial Dispute regarding the illegal transfer. The State Government referred the dispute by G.O.Ms.No.2242 Labour and Employment Department, dated 22.12.1989.

5. The Labour Court was directed to find out whether the transfer of the third respondent from the post of Chemist to that of Technical Representative was justified and whether the demand of wages with effect from 25.07.1988 was justified. The said dispute was taken by the Labour Court, Chennai as I.D.No.1193 of 1989. The Labour Court by its final Award dated 07.02.1992, held that the transfer was not due to any malafide action and it was made due to exigencies prevailing in the Department. It was also held that the transfer was made within the city, but to a different post, but the Management had guaranteed that he will get the same wages and allowances. It was the third respondent who refused to accept the transfer and therefore, the Management was not liable to pay any wages.

6. As against the said Award, the Trade Union in which the third respondent was a member, filed W.P.No.14291 of 1992. The learned Judge of this Court dismissed the writ petition on 23.04.1993 confirming the Award of the Labour Court dated 07.02.1992. Aggrieved by the same, the Trade Union filed writ appeal being W.A.No.708 of 1993. The writ appeal was allowed by an order dated 06.03.1996. The Division Bench, in paragraph 9, held as follows:-

“9. …However, as the employer and employee relationship has not been snapped, we are of the view that in the facts and circumstances of the case and weighing the rival submissions, the ends of justice would be met by directing payment of 25 per cent of the wages payable from 25.07.1988 to the employee Nagarajan…

….iii. The respondent/Management shall pay 25 per cent of the wages calculated for the period from 25.7.1988 till the date of Nagarajan joining duty as Sales Representative within two weeks from the date of his joining duty.”

7. As against the order passed by the Division Bench, both the Management and the Union preferred Civil Appeal in Civil Appeal No.392 of 1997 and Civil Appeal No.410 of 1997 respectively before the Supreme Court. Both the Civil Appeals were dismissed by the Supreme Court on 12.12.2000. In the operative portion, the Supreme Court observed as follows:-

“We have heard the parties, read the impugned Judgment as well as the Judgment of the Single Judge and the Award of the Tribunal. In our view, there is no infirmity either in the Award or in the Judgment of the Single Judge or in the Judgment of the Division Bench. The employee Nagarajan had refused to accept the transfer order and refused to report for duty after his transfer. We see no substance in the contention that he was entitled not to join. In our view the dispute could have been raised and agitated even after joining. There was no justification for not reporting for duty. In spite of Nagarajan not having worked he has been awarded 25% of back wages. This was within the discretion of the Court and we see an reason to interfere. At the request of the Appellants in C.A.No.392 of 1997, they are granted time of eight weeks from today to pay 25% of the back wages.”

8. During the pendency of the Civil Appeal before the Supreme Court, the workman joined the services. In the amount of 25% backwages paid to the third respondent pursuant to the direction issued by the Division Bench, the Management for computing the wages, calculated all wages including basic wages, Dearness Allowance, interim payments, H.R.A., incentive bonus and annual bonus and PF contribution on the said amount was also deducted. Though the Management was not willing to allow the worker to have benefits under Section 89 of the Income Tax Act, subsequently, the matter was taken up by the Assistant Commissioner of Income Tax, Chennai and the entire payment was treated as arrears of wages and tax was deducted at source accordingly.

9. Since the Management did not pay gratuity for the period of eight years, the third respondent sent an application for gratuity under the Payment of Gratuity Act to the second respondent. The said application was taken as P.G.Case No.29 of 2003 and notice was issued to the petitioner Management. They filed counter statement and an additional counter statement.

10. The main contention raised by the petitioner Management was that merely because the employer employee relationship was not snapped, that period cannot be recognized for the purpose of computing gratuity. Since the third respondent had disobeyed the order of transfer, that period cannot be computed for the purpose of gratuity.

11. Before the second respondent Controlling Authority, 5 documents were filed by the third respondent and were marked as Exs.A1 to A5. On the side of the petitioner Management, 6 documents were filed and were marked as Exs.R1 to R6.

12. The Controlling Authority by his order dated 04.08.2003 rejected the stand of the Management. He held that the term continuous service is defined under Section 2A of the Payment of Gratuity Act. The non-employment period of the third respondent did not come under any one of the categories listed therein. Therefore, he computed the gratuity for the entire length of service of the workman on the basis of his last drawn pay, which was Rs.4,832.77. The total gratuity thus calculated to Rs.1,11,525/-. After giving credit to the amount of Rs.89,220/- already paid, the balance amount of gratuity of Rs.22,305/- was directed to be paid to third respondent.

13. Aggrieved by the same, the petitioner preferred an appeal under Section 7(7) of the Act, before the Appellate Authority. The said appeal was taken on file as P.G.Appeal No.29 of 2003 and notice was issued to the third respondent. He also filed a counter statement on 01.04.2004. The first respondent Appellate Authority after hearing both sides and on the basis of the records held that the Award of the Labour Court was confirmed by this Court and the Supreme Court. While confirming the Award, the Division Bench had recorded that during the period of non-employment, employer employee relationship was not snapped and therefore 25% of the backwages was ordered. In so long the matter was pending before the Courts, the Management did not declare that there was break in service and during the interregnum period, annual increments and performance increments were also given. Hence, the Appellate Authority held that the period from 25.07.1988 to 06.03.1996 should be taken as basis for calculating the gratuity. The Management during the pendency of the appeal had deposited the amount including 10% of the interest which is a condition precedent for maintaining the appeal. It is against this order dated 08.06.2004, the writ petition came to be filed as noted already.

14. Under Section 4(2) of the Act, an employee is entitled for gratuity for every completed year of service at the rate of 15 days’ wages based on the rate of wages last drawn by an employee concerned. In the present case, it was not in dispute that the third respondent reached the age of superannuation and that he was drawing salary till the date of supernannuation.

15. The only question to be decided is whether the period of non employment, viz.,the third respondent’s refusal to accept the transfer order, should be treated as non-service. Fortunately, under Section 2A of the Act, the term Continuous service has been defined. This amendment was brought into force by Act 26 of 1984. The said definition includes both Continuous service as well as discontinuous service. It is only in cases where absence from duty without leave for which a specific order for break in service was passed by the employer in accordance with the standing order, the period can be treated as discontinuous service.

16. In the present case, the Division Bench of this Court has held that there was no break in service and that the employer employee relationship had continued and 25% of the backwages was also directed to be paid. Hence, it is not a case where the Employer can take advantage of the non-employment of the period and totally exclude the service for the computation of gratuity.

17. In view of the above, the writ petition lacks in merits. Accordingly, the writ petition stands dismissed. In view of the dismissal of the writ petition, the third respondent is entitled to withdraw the amount lying in deposit with the second respondent. No costs. Consequently, connected miscellaneous petitions are closed.


1.Joint Commissioner of Labour,
(Appellate Authority)
Payment of Gratuity Act,
D.M.S.Buildings, VI Floor,
Teynampet, Chennai -6.

2.The Controlling Authority,
Payment of Gratuity Act,
Chennai 6

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