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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
Judges
Acts
  • Force Act, 1950, the Army Act, 1950, or the Navy Act, 1957.5. Section 2-A
  • S. 40(1) of the Andhra Pradesh Shops and Establishments Act, 1966
  • ANDHRA PRADESH SHOPS AND ESTABLISHMENTS ACT
  • Section 2(e) of the Payment of Gratuity Act
  • S. 7(4) of the Payment of Gratuity Act.
  • S. 7(7) of the Payment of Gratuity Act
  • S. 2-A of the Payment of Gratuity Act.
  • S. 4(1). Section 2(b)
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
Judges
Acts
  • Force Act, 1950, the Army Act, 1950, or the Navy Act, 1957.5. Section 2-A
  • S. 40(1) of the Andhra Pradesh Shops and Establishments Act, 1966
  • ANDHRA PRADESH SHOPS AND ESTABLISHMENTS ACT
  • Section 2(e) of the Payment of Gratuity Act
  • S. 7(4) of the Payment of Gratuity Act.
  • S. 7(7) of the Payment of Gratuity Act
  • S. 2-A of the Payment of Gratuity Act.
  • S. 4(1). Section 2(b)
Smart Summary

Factual and Procedural Background

The writ petition challenges an order dated 31 December 1986 in P.G Appeal No. 58 of 1986. The third respondent was appointed as a salesman on 23 December 1977 and assigned to the thread division. On 1 January 1983, Mettur Textiles (Private) Ltd. became Mettur Textiles, making the third respondent an employee of Mettur Textiles from that date. The petitioner contends that the third respondent ceased to be an employee of Mettur Textiles Ltd. effective 31 December 1982. The third respondent resigned on 31 January 1983 and was earning Rs. 1,335 monthly. He claimed gratuity on 3 March 1983 from Mettur Textiles, asserting his basic salary crossed Rs. 1,000 on 10 November 1982. After failing to obtain gratuity, he made a claim on 14 February 1985 against the petitioner, which was resisted on grounds that he was not employed for five years on wages not exceeding Rs. 1,000. The second respondent dismissed the claim on 15 April 1986, holding the third respondent did not meet the five-year employment requirement under the Payment of Gratuity Act. The third respondent appealed to the first respondent, who allowed the appeal on 31 December 1986, finding that continuous service under Section 2-A amounted to five years. The petitioner filed this writ petition under Article 226 of the Constitution of India to quash that order.

Legal Issues Presented

  1. Whether the third respondent completed five years of continuous service under the Payment of Gratuity Act, despite his wages exceeding Rs. 1,000 during the period.
  2. Whether the transfer of service from Mettur Beardsell Ltd. to Mettur Textiles affected the continuity of the third respondent's employment.
  3. The applicability and interpretation of the deeming provisions under Section 2-A of the Payment of Gratuity Act regarding continuous service.
  4. The relevance of salary thresholds and the qualifying period for gratuity entitlement under the Payment of Gratuity Act.

Arguments of the Parties

Petitioner's Arguments

  • The third respondent ceased to be an employee of Mettur Textiles Ltd. on 31 December 1982.
  • The third respondent was not employed for five years on wages not exceeding Rs. 1,000, which is a prerequisite for gratuity under the Payment of Gratuity Act.
  • The petitioner-company ceased to exist after merging with Mettur Beardsell Ltd. from 1 January 1983, and no undertaking was taken from employees to continue employment with the new entity.
  • Relied on a precedent under the Andhra Pradesh Shops and Establishments Act, 1966, where service less than five years did not qualify for gratuity.

Third Respondent's Arguments

  • Produced documentary evidence showing wages below Rs. 1,000 from 23 November 1977 to 4 November 1982.
  • Contended that the five years qualifying period does not require calendar years but continuous service as defined under the Act.
  • Argued that the transfer of service from petitioner to Mettur Textiles did not interrupt or cut his length of service.
  • Asserted that his resignation was accepted only by the petitioner, supported by documentary evidence (Exhibit P5).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Surendra Kumar Verma v. Central Government Industrial Tribunal-cum-Labour Court, New Delhi [1980 (2) L.L.N 456] Deeming provision that continuous service of 240 days in a year qualifies as one year of service for purposes of employment-related claims. The Court applied the principle that continuous service of 240 days in a year is sufficient to be deemed as one year of continuous service under Section 2-A of the Payment of Gratuity Act.
P. Raghavulu and Sons v. Additional Labour Court [1985 (1) L.L.N 612] Interpreted the qualifying period for gratuity under the Andhra Pradesh Shops and Establishments Act, 1966, distinguishing between fractions of a year exceeding or not exceeding six months. The Court found this precedent inapplicable as it related to a different statute and did not address the deeming provisions under the Payment of Gratuity Act.

Court's Reasoning and Analysis

The Court examined the definitions and provisions of the Payment of Gratuity Act, particularly Section 2(e) defining "employee" and Section 2-A defining "continuous service." The Court emphasized that continuous service for 240 days in a year is deemed as one year of service, as supported by Section 2(b) and judicial precedent. The third respondent's actual service of 4 years, 10 months, and 18 days, with the last period exceeding 240 days, was sufficient to be deemed as five years continuous service. The Court rejected the petitioner's argument relying on the Andhra Pradesh Shops and Establishments Act precedent, noting the difference in statutory definitions and the inapplicability of that decision. Furthermore, the Court found the petitioner's contention that the merger terminated the employment relationship untenable, as no undertaking was taken from employees regarding cessation of employment. The acceptance of the third respondent's resignation only by the petitioner further supported the continuity of service. Considering these factors, the Court was not convinced by the petitioner's contentions and dismissed the writ petition.

Holding and Implications

The writ petition is dismissed. The Court upheld the view that the third respondent completed five years of continuous service under the Payment of Gratuity Act, entitling him to gratuity. The decision confirms the applicability of the deeming provision in Section 2-A for calculating continuous service and clarifies that service continuity is not interrupted by the merger of companies absent explicit undertakings. No new precedent was established beyond the direct effect of affirming the third respondent's gratuity claim and dismissing the petitioner's challenge.

    Mettur Beardsell, Ltd. v. Regional Labour Commissioner (Central)

    1. This writ petition is for a writ of certiorari to quash the order, dated 31 December, 1986, in P.G Appeal No. 58 of 1986 on the file of the first respondent. The case of the petitioner is that on 23 December, 1977 the third respondent was appointed as salesman and he was assigned to the thread division. From 1 January, 1983, Mettur Textiles (Private), Ltd., came to be known as Mettur Textiles. Thus the third respondent became an employee of the Mettur Textiles from 1 January, 1983. According to the petitioner, he ceased to be an employee of Mettur Textiles, Ltd, with effect from 31 December, 1982. On 31 January, 1983 me third respondent resigned from the services and relieved on the said date. He was getting Rs. 1,335 as monthly salary. Since, according to the third respondent, his basic salary crossed Rs. 1,000 with effect from 10 November, 1982, he made a claim on 3 March, 1983 for gratuity from Mettur Textiles. Having failed in his attempt to get gratuity from Mettur Textiles, he preferred a claim on 14 February, 1985 against Mettur Beardsell, the petitioner herein. The claim was after a delay of two years and one month. The claim was resisted by the petitioner on the ground that he ceased to be an employee with them from 31 December, 1982. Further, he was not employed for a period of five years on a wage not exceeding Rs. 1,000. Hence, on these grounds the claim of the third respondent must be rejected. The claim was entertained by the second respondent in P.G Application No. 49 of 1985 under S. 7(4) of the Payment of Gratuity Act. But it was dismissed on 15 April, 1986 on the ground that he was not an employee for a period of not less than five years on wages not exceeding Rs. 1,000 within the meaning of explanation 2(e) of the Payment of Gratuity Act.

    2. As against the said order, the third respondent preferred an appeal to the first respondent under S. 7(7) of the Payment of Gratuity Act in P.G Appeal No. 58 of 1986. On 31 December, 1986 the first respondent passed orders holding that the third respondent's wages crossed Rs. 1,000 only on 10 November, 1982 and he had put in four years 10 months and 18 days service. Hence there was continuous service under S. 2-A of the Payment of Gratuity Act. He must be deemed to have completed continuous service of five years. In the said view the first respondent allowed the appeal of the third respondent. Therefore, the petitioner has preferred this writ petition under Art. 226 of the Constitution of India

    3. The third respondent filed a counter. In the counter he has mainly stated that he has produced documentary evidence to show that from 23 November, 1977 to 4 November, 1982 he was paid less than Rs. 1,000 and the contention that five years calendar service is necessary is untenable. He also contended that the transfer of service from the petitioner to Mettur Textiles did not cut his length of service. Further his resignation was accepted only by the writ-petitioner, as is evidenced by Exhibit P5.

    4. Now 1 will examine the contentions raised by the learned counsel for the petitioner. Section 2(e) of the Payment of Gratuity Act was as follows, before the amendment.

    “‘employee’ means any person (other than an apprentice) employed on wages, not exceeding one thousand rupees per mensem, in any establishment, factory, mine, oil field, plantation, port, railway company or shop, to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied, but does not include any such person who is employed in a managerial or administrative capacity, or who holds a cavil post under the Central Government or a State Government, or who is subject to the Air Force Act, 1950, the Army Act, 1950, or the Navy Act, 1957”.

    5. Section 2-A defines continuous service. According to this section, if an employee renders continuous service for a period of 240 days in a year he will be deemed to have continued in service for one year. This deeming provision contained in S. 2-A must be applied in interpreting the period of five years mentioned in S. 4(1). Section 2(b) also supports this interpretation because as per the said section completed year of service means continuous service for one year. Therefore, these provisions are emphatic in stating that if an employee serves continuously for a period of 240 days in a year, he must be deemed to have continuously served for one year. In this case admittedly the third respondent has served for 4 years, 10 months and 18 days. 10 months and 18 days service is definitely more than 240 days. Therefore when the third respondent was relieved from service he has thus completed five years of service. In the decision reported in Surendra Kumar Verma v. Central Government Industrial Tribunal-cum-Labour Court, New Delhi. [1980 (2) L.L.N 456], their Lordships have observed as follows, in Para. 13, at page 462:

    “… It is sufficient for the purpose of S. 25-B(2)(a)(ii) that he has actually worked for not less than 240 days. It is no longer necessary for a workman to show that he has been in employment during a preceding period of twelve calendar months in order to qualify within the terms of S. 25-B …”

    The learned counsel for the petitioner relied upon a case reported in P. Raghavulu and Sons v. Additional Labour Court, [1985 (1) L.L.N 612]. A Single Judge of the Andhra Pradesh High Court has held that service rendered for 4 years and 11 months and 10 days will not enable an employee to avail gratuity. The said case arises under the Andhra Pradesh Shops and Establishments Act, 1966 The question was whether as per Cl. (d) of explanation to S. 40(1) of the Andhra Pradesh Shops and Establishments Act, 1966, providing for treating a fraction of a year exceeding six months as a year and a fraction of a year less than six months as not a year. The contention that was accepted by the learned Judge was that the aforesaid explanation applies only for calculating the period for which gratuity is payable and not applicable to the qualifying period of years. The learned Judge has probably relied upon the words, “for which gratuity is to be given,” in S. 40(1) of the Andhra Pradesh Shops and Establishments Act, 1966 But this decision is not applicable to our case because as stated above the definitions of “one year”. “completed year,” “continuous year,” under Ss. 2(a), 2(b) and 2(c) go to show that whenever year is mentioned in the enactment, it must be taken as the year defined in the aforesaid provisions. Another contention raised by the learned counsel for the petitioner is that the petitioner-company ceased to exist after it was merged with Mettur Beardsell, Ltd., with effect from 1 January, 1983 But this contention is untenable because at the time of entering into partnership the petitioner has not taken any undertaking from the employees that they will become employees of the new partnership firm Mettur Textiles, and cease to be employees of the Mettur Beardsell, Ltd. But as found earlier, the third respondent was relieved only by the petitioner. Therefore, I am not convinced with the contentions raised by the learned counsel for the petitioner. Hence the writ petition fails and it is dismissed. However, there will be no order as to costs.

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    Mettur Beardsell, Ltd. v. Regional Labour Commissioner (Central)
    (Jun 12, 1996)