Bommidala Brothers Ltd. vs Authority, Payment of Gratuity Act and Others

Sardar Ali Khan, J.—W.P. No. 2409/87 is filed by M/s. Bommidala Poor-naiah, represented by his power of attorney holder-Sri Talluri Venkateswara Rao, Guntur, W.P. No. 12479/87 is filed by M/s. Bommidala Brothers Limited, Mangalagiri Road, Guntur, represented by its Director B. Kasiviswanatham. In both the writ petitions common question of payment of gratuity to the female-respondent-workers is involved. There are common questions of law and fact involved in both the cases which are fit to be disposed of by a common judgment.

The basic facts of the case, as given in W.P. No. 2409/87, can be taken into consideration for a decision in both the matters.

The averments in the affidavit filed in support of W.P. No. 2409/87 are that a concern by name M/s. Bommidala Poornaiah, a partnership firm at Guntur, was functioning in which the petitioner is a partner. The said concern was registered under the Indian Partnership Act. The firm ceased to exist from December, 1970 onwards and the services of the workmen, who were engaged in the company, were terminated by giving one month''s notice in November, 1970. Thereafter the machinery and other facilities to carry on grading and redrying operations were leased to M/s. Bommidala Brothers Limited, which was originally a Private Limited Company incorporated under the Companies Act, 1956. The said company commenced its operations in June, 1971 and the workers, who were employed initially by the partnership firm under the name and style of M/s. Bommidala Poor-naiah, continued to be the workers in the said M/s. Bommidala Bros. Limited. Respondents 4 to 15, who are all female workers, appear to have resigned from the service of M/s. Bommidala Brothers Limited in 1986 and their accounts were fully and finally settled by the said M/s. Bommidala Brothers Limited. The workers, viz., respondents 4 to 15 in W.P. No. 2409/87 filed an application before the Controlling Authority stating that they were in continuous employment under the concern M/s. Bommidala Poor-naiah & Co., and claiming payment of gratuity from the said company.

The main contention of the petitioner in this case is that M/s. Bommidala Poornaiah, which was a partnership firm, ceased to exist and went out of the provisions of P.P. Act. In its place, a new company, under the name and style of M/s. Bommidala Brothers Limited was allotted the same number by the Provident Fund Authorities. Respondents 4 to 15 have settled their accounts with the original partnership firm M/s. Bommidala Poornaiah and later on joined M/s. Bommidala Brothers Limited and again resigned around April, 1986. Therefore, their contention that they have been continuously working in the same concern from 1962 till 1986 is false and they cannot, therefore, claim any gratuity under the Payment of Gratuity Act, 1972.

In W.P. No. 12479/87, which runs parallel to the earlier Writ Petition No. 2409/87, the legal and the factual position in sum and substance is the same. The petitioner in W.P. No. 12479/87 is M/s. Bommidala Brothers Limited and respondents 7 to 98 are the female workers who have been engaged by these concerns in their grading and redrying operations. They have filed applications for payment of gratuity under the Payment of Gratuity Act on the ground that they have been continuously working for over a period of 24 years from 1962 onwards uptill 1986. The primary contention of the petitioner in W.P. No. 12479/87 is that it is a company duly incorporated under the Companies Act in 1970. It has taken over the machinery and equipment from the partnership firm M/s. Bommidala Poornaiah in the year 1971. The said firm, as stated earlier, has gone out of business and is not carrying out any work in the factory of the petitioner at Mangalagiri Road at Guntur. The claim of respondents 7 to 98 in this case are resisted, inter alia, on the ground that even if the workmen are entitled to the gratuity for the period during which they worked in the firm, M/s. Bommidala Poornaiah, the claims are time barred as they are being made 16 years after the winding up of the business of the partnership firm. The basic contention, however, raised in both the writ petitions is that the workers have no right to claim gratuity as the firm M/s. Boomidala Poornaiah ceased to exist and a new company under the name and style of M/s. Bommidala Brothers Limited incorporated under the Companies Act has come into existence. 1 am afraid that his argument does not stand to reason. The petitioners initially entered the business under the name and style of M/s. Bommidala Poornaiah, which happened to be a registered partnership firm, then converted this into M/s. Bommidala Poornaiah Tobacco Exporters, which was also a partnership firm and have now assumed the garb of a limited company under the name and style of M/s. Bommidala Brothers Limited incorporated under the Companies Act. In other words, it is the same employer who has been masquerading under the name and style of M/s. Bommidala Brothers Limited. This has been done mainly with a view to defeat the just and legal claims of the illiterate female respondent workers who were in the petitioner''s establishment over a period of 24 years. In so far as W.P. No. 2409/87 is concerned, the original authority under the Payment of Gratuity Act upheld the claims of the respondent-workers for payment of gratuity on the ground that mere change in the nomenclature of the petitioners cannot absolve them from the responsibility of payment of gratuity to the respondent-workers herein. The matter was carried up in appeal to the court of the appellate authority under Payment of Gratuity Act, 1972 which upheld the order passed by the original authority on mistaken terms. It may be mentioned that in W.P. No. 12479/87 the original authority under the Payment of Gratuity Act, moved by the respondents, similarly upheld the claims of the respondents but the petitioners have not carried the matter in appeal and have straight away filed the writ petition in this court. Both the authorities have given the well considered finding that the change in the nomenclature of the employers or conversion of a partnership firm into that of a limited company incorporated under the Companies Act cannot defeat the just and legal claims of the respondent-workers for payment of gratuity to them in accordance with law. To hold to the contrary would amount to arming unscrupulous commercial elements for wriggling out of their responsibility by resorting to change of nomenclature from partnership firm to a limited company and may be from a single limited company to a group of companies incorporated under Companies Act. One is tempted to employ the phraseology of "Tearing the veil of incorporation" as propounded by Professor L.C.B. Cower in a different context in this case and to apply the principle to see whether there is any real change in the setup of the establishment of the management by transferring themselves from a partnership firm to a limited company incorporated under the Companies Act which may result in the variation in the conditions of service of the workers in such organisations. This is a clear case of an employer applying devious methods and thereby dodging its legal liability arising under the Payment of Gratuity Act and 1 have no hesitation in dismissing these writ petitions on that ground. The learned Government Pleader, Sri Gulani Mohammed, has fairly stated that the Government is sailing with the respondent-workers in this matter.

Both the writ petitions are dismissed, but in the circumstances of the case, there will be no order as to costs. Advocate''s fee Rs. 250/- in each.