P.S. Jayaraman vs The Presiding Officer, Labour Court, Coimbatore and another

Palaniswamy, J.—The petitioner, who was employed under Messrs. Hariharan and Co. Coimbatore, second respondent, a partnership firm,

after resigning his job on 26th December 1967, applied under S. 33-C (2) of the Industrial Disputes Act, 1947, to the Labour Court, Coimbatore,

first respondent, claiming computation of gratuity for 27 years and leave wages for 30 days, amounting to Rs. 2,827-50. He claimed that he was

employed from the year 1941 under Hariharan, a deceased partner of the Second respondent firm, that there waft a system in vogue in the second

respondent''s firm of paying gratuity at the rate of 15 days'' salary for one year''s service if the employee resigns or his services are terminated by

the employer and that he was entitled to computation on that basis. He also contended that he had accumulated leave for 30 days and that he was

entitled to salary for that period of 30 days. The management contended that the second respondent firm was started only in the year 1955, that

the petitioner was not entitled to claim computation from the year 1941, that there was no scheme for payment of gratuity, that there was also no

system of paying gratuity to any employee either oh resignation or on dismissal and that, therefore the petitioner was not entitled to any relief. The

petitioner gave up his claim for leave salary before the Labour Court and restricted his claim only to gratuity. He gave evidence in support of his

plea about the prevalence of practice in the second respondent''s management of paying gratuity. The management examined two witnesses to

controvert that position. On a consideration of the evidence, the Labour Court found that the petitioner had not established either practice or

custom of paying gratuity and that as there was no scheme for payment of gratuity, the petitioner was not entitled to gratuity. This writ petition is

directed against the order of the Labour Court dismissing the application of the petitioner. The first point that arises for consideration is as to the

period of service that could be taken into account in calculating gratuity if the petitioner is entitled to the relief. He claims computation from the year

1941 when he was employed under Hariharan, who along with others formed a partnership in the year 1955 under the name of Messrs. Hariharan

and Co. The evidence of the petitioner is that no notice was given to the employee when the partnership was formed, that at the time when the

partnership was formed, the same employees were retained in service without settling their claims, that there was no change in the business and that

the same business was continued. The salesman of the management, John, examined as M.W. 2, admitted that the business of the second

respondent firm was continued in the same premises in which Hariharan was previously conducting the business. Placing reliance upon these

circumstances, it is contended on behalf of the petitioner that even, though the partnership was formed for the purpose of continuing the business

from the year 1955, it should be deemed that the employees like the petitioner were continued in service without break and that the petitioner is,

therefore, entitled to ask computation of benefit from the year 1941, when he was first employed under Hariharan. The evidence, of M.W. 2 is that

the proprietary concern of Hariharan was closed in July 1953 due to financial difficulty. In cross-examination he says that the business was dull and

it was almost closed and that, therefore, the employees did not settle their benefits when the partnership was formed. There are are two

circumstances which support this version. It is not as though the petitioner was unaware of the formation of the partnership. On 1st June, 1955, he

applied under Ex. M-1 to the partnership firm requesting that he may be appointed in the newly started business. On that application, the firm

passed the order Ex. M-2 appointing the petitioner on certain terms. It does not say that the petitioner shall be deemed to be continued in service

taking into account the service put in under Hariharan. The petitioner unambiguously admits in his evidence that he signed the application, Ex. M-1

knowing its contents. In re-examination he attempted to belittle that admission by saying that similar applications were obtained from other

employees and that such applications were obtained even though the business of Hariharan was going on. This version cannot be believed. Having

signed the application knowing its implications, it is hardly open to him now to say that no effect should be given to Ex. M-1. It is well to remember

that it happened in the year 1955. According to the petitioner, some employees left the services of the second respondent-firm on receiving

gratuity. But he has not proved that as regards these employees also computation of the benefit was made from the time of their entry into service

under Hariharan.

Where there is a mere change in the partnership the business remaining the same there will be no change in the employment and it would be

open to the employees to contend that their services should be treated as continuous notwithstanding the clause in the partnership. If a firm is

dissolved and if the employees in the firm are retained in the same business continued by one or more of the partners of the dissolved firm, no

transfer of ownership is involved and it will be open to the employees to contend that there is no break in the service. But where an employee

working under an individual considers that his services have come to an end and applies for appointment to the firm even though the previous

employer is taken as one of the partners of the firm the employee is not entitled to claim the benefit of the services put in by him under the individual

employee before the formation of the partnership. In this view, the petitioner is not entitled to claim the benefit of computation from the year 1941.

He is entitled to claim benefit only from the year 1955 when he was appointed by the second respondent-firm.

The next question is whether the petitioner has satisfactorily established the practice of payment of gratuity to employees leaving the service on

resignation or on termination of service by dismissal. It is conceded that there is no scheme providing for payment or gratuity.

[The discussion of facts is omitted-Ed.] The Labour Court should have called upon the petitioner to examine Muthiah and should have also

examined the accounts of the second respondent to see if there are entries similar to Ex. No. 3 as regards other employees who had resigned. This

not having been done, the matter cannot be satisfactorily imposed of on the available evidence, which is vague and inconclusive. In the interest of

justice. I feel the matter should go back to the Labour Court for fresh disposal after giving an opportunity to both parties to adduce evidence in

support of their respective contentions. In this view, the order of the Labour Court is quashed. The matter is remitted to the Labour Court for fresh

disposal in the light of the foregoing observations. No order as to costs.