Court : Chennai High Court
Brief : However, I have already observed that the provisions of the Tamil Nadu Shops and Establishments Act are applicable to the petitioner's case and in view of the Notification of the Government of Tamil Nadu at the relevant time, the petitioner was a "person employed" as defined in Section 2(12) of the Act. Accordingly, if the respondents 1 and 2 want to determine the service of the petitioner, they have to do the same only in terms of Section 41(1) of the Act. In other words, it is not open to the respondents to determine the services of the petitioner merely on the basis of the agreement without reference to Section 41(1) of the Act.
Citation : Hari Raj H. vs Shaw Wallace Co. Ltd. And Ors. on 13/1/1999
ORDER
Sathasivam, J.
1. Aggrieved by the order of the Appellate Authority under Tamil Nadu
Shops and Establishment Act, 1947, in T.S.E.No. 27/94, the petitioner
has filed the above Writ Petition.
2. The brief facts are as follows: He joined M/s. Shaw Wallace and
Company Limited at Madras, first respondent herein as Sales
Representative during 1984 and subsequently he was promoted as Sales
Executive with effect from February 1, 1991. While so, he received an
order dated January 25, 1994 terminating his services with immediate
effect from the close of Office hours on January 25, 1994. It was also
referred in the order that the determination of services has been done
as per Memorandum of Agreement dated April 28, 1991. Aggrieved by the
said order, he issued Lawyer's noticed dated February 10, 1994 and
requested for reinstatement of service with all attendant benefits. The
first respondent sent a reply dated March 10, 1994 confirming the order
of termination of services. Against the said order of termination, he
preferred appeal before the third respondent under Section 41 of the
Shops and Establishments Act and prayed for setting aside the order of
termination and to order reinstatement with all attendant benefits. The
said appeal was dismissed by the third respondent by Order dated
September 25, 1995 and the same was served on him only on December 20,
1995. Since he has no other alternative remedy, he has filed the
present Writ Petition as stated above.
3. On behalf of respondents 1 and 2, General Manager (Finance) of Shaw
Wallace and Company Limited has filed counter affidavit disputing
various averments made by the petitioner. It runs as follows: The
petitioner joined the respondent-Company on August 9, 1984 as a Sales
Representative and was promoted as a Sales Executive from February 1,
1991. At that point of time, the petitioner entered into an agreement
with the respondent on the terms and conditions of his service, which
also provided for bringing an end to the petitioner's service, by way
of one month's notice or payment of one month's salary in lieu thereof,
by either party. It is not true that the petitioner was discharging his
duties to the satisfaction of his superiors. The petitioner's service
was brought to an end invoking the terms of the agreement referred to
above. Aggrieved by this, the petitioner raised a dispute before the
authority under the Tamil Nadu Shops and Establishments Act. The
authority, after considering both the rival claims, dismissed the
petition filed by the petitioner on the grounds that the termination of
the petitioner as per Clause-11 of the agreement dated April 28, 1991
is for reasonable cause only. This clause provides for termination or
resignation of the petitioner, on either side giving notice or one
month's salary in lieu of notice. It is only in confirmation with this
agreement, the services of the petitioner were terminated. The
agreement entered into by the petitioner with the respondent is
perfectly valid and the petitioner after enjoying the benefits that
accrued to him under the agreement, while in service, cannot now
question the validity of the agreement and that too after a lapse of so
many years. Clause 11 of the agreement stipulates giving one month's
notice or a month's wages in lieu of such notice, it is not repugnant
to the provision of Section 41(1) of the Tamil Nadu Shops and
Establishments Act, 1947, which compels one month notice in writing or
wages in lieu of such notice. Besides under the Contract Act also
unless an agreement is a fraud etc., the same is valid. In this case
also, it is not the case of the petitioner that the agreement by which
his services were terminated, was obtained by fraud. An agreement
between employer and his employee regarding the terms of employment is
not forbidden by law. Since the Appellate Authority, third respondent
is justified in dismissing the appeal, there is no merit in the Writ
Petition; accordingly prayed for dismissal of the same.
4. In the light of the above pleadings, I have heard Mr. G.
Rajagopalan, learned counsel for the petitioner, Mr. Sanjay Mohan,
learned senior counsel for respondents 1 and 2, learned Government
Advocate for third respondent.
5. After taking me through the relevant provisions from the Tamil Nadu
Shops and Establishments Act, 1947 (hereinafter referred to as "the
Act"), more particularly, with reference to Section 41(1) of the Act,
Mr. G. Rajagopalan, learned counsel for the petitioner, would contend
that in the light of the said provision, termination of the service of
the petitioner without a reasonable cause and merely on the basis of
Clause 11 of the agreement cannot be sustained. He also contended that
the statutory provision referred to above over-rides the agreement
entered into between the parties, when the said enactment is applicable
to the parties concerned; accordingly failure to comply with the
provision under Section 41(1) of the Act vitiate the order of
termination. In addition to the above contention, he very much relied
on a decision reported in State Bank of Travancore v. Deputy
Commissioner of Labour (198I-I-LLJ-393) (Mad) and also another decision
reported in Air France v. Deputy Commissioner of L,abour and Ors.
(1993-II-LLJ-614) (Mad). Per contra, Mr. Sanjay Mohan, learned counsel
appearing for respondents 1 and 2, after taking me through the
Memorandum of Agreement entered into between the petitioner and the
respondent- management, more particularly, drawing my attention to
Clause 11 of the said agreement, would contend that inasmuch as the
said agreement is valid in law, the action of the respondents 1 and 2
terminating the service of the petitioner on the basis of the said
agreement cannot be faulted with. He also contended that the
termination, which was based on valid agreement, would satisfy the
expression "reasonable cause" mentioned in Section 41(1) of the Act. He
also contended that the respondent's-company complied with the notice
pay in lieu of one month's notice; accordingly he prayed for dismissal
of the Writ Petition, since all the above aspects have been duly
considered by the Appellate Authority, third respondent herein.
6. I have carefully considered the rival submissions.
7. There is no dispute that the petitioner joined the respondent-
company at Madras as Sales Representative during 1984 and thereafter he
was promoted as Sales Executive with effect from February 1, 1991. It
is also not disputed that by order dated January 25, 1994, his services
were terminated with immediate effect from the close of office hours on
January 25, 1994 as per the Memorandum of Agreement dated April 28,
1991 entered into between the petitioner and the respondent-company.
Now, it is the case of the petitioner that irrespective of the
agreement entered into in view of the fact that the Act is applicable
to the petitioner's case, respondents 1 and 2 have to satisfy the
conditions prescribed in Section 41(1) of the Act. In other words,
according to him, only for reasonable cause, it is open to them to
terminate his services. Even though exemption under Section 4(b) of the
Act have been granted to the persons, whose work involves travelling,
the Government by virtue of Section 5, issued a Notification applying
the provisions of the Act even for persons whose work involves
travelling. The Notification is as follows:
"Notification under Section 5 of the Act: Application of certain
provisions of Tamil Nadu Shops and Establishments Act to persons
whose work involves travelling.
(G.O. Ms. No. 722, Industries, Labour and Housing (Labour), February
24, 1967)
II-I No. 2253 of 1967, In exercise of the powers conferred by
Section 5 of the Madras Shops and Establishments Act, 1947 (Madras
Act XXXVI of 1947), the Governor of Madras hereby directs that the
provisions of Chapters VI, VII, IX and X of the said Act shall apply
to the persons employed in shops and establishments whose work
involves travelling".
Accordingly, it is clear that all the provisions of the Act are
applicable to the petitioner's case.
8. Section 2(12) of the Act defines the words "person employed". As per
Clause (iii) to Sub-section (12) of Section 2, the petitioner is
entitled to invoke the provisions of the Act, and it runs as follows:
"Section 2(12) "person employed" means (iii) in the case of a
commercial establishment other than a clerical department of a
factory or an industrial undertaking, a person wholly or principally
employed in connection with the business of the establishment, and
includes a peon".
Therefore, the petitioner, who had occupied a management cadre post,
was a person employed in terms of the said provision. Accordingly, the
appeal filed before the third respondent is maintainable.
9. In the light of the above position, now I shall consider whether the
respondents 1 and 2 have satisfied the conditions prescribed in Section
41(1) of the Act before passing the order of termination. Section 41 of
the Act is as follows:
"41. Notice of dismissal: (1) No employer shall dispense with the
services of a person employed continuously for a period of not less
than six months, except for a reasonable cause and without giving
such person at least one month's notice or wages in lieu of such
notice, provided however, that such notice shall not be necessary
where the services of such person are dispensed with on a charge of
misconduct supported by satisfactory evidence recorded at an enquiry
held for the purpose.
(2) The person employed shall have a right to appeal to such
authority and within such time as may be prescribed either on the
ground that there was no reasonable cause for dispensing with his
services or on the ground that he had not been guilty of misconduct
as held by the employer.
(3) The decision of the Appellate Authority shall, be final and
binding on both the employer and the person employed".
It is clear from the said provision that it is not open to the employer
to dispense with the services of a person employed without a reasonable
cause and without giving one month's notice or wages in lieu of such
notice. No doubt, no such notice need be issued when the services of
such person are dispensed with on a charge of misconduct supported by
satisfactory evidence recorded at an enquiry held for the purpose. At
this stage Mr. Sanjay Mohan brought to my notice that at the time of
appointment, an agreement was entered into between the petitioner and
the respondents-company. As per the terms of the agreement, he said
that it is open to either party to determine the services on giving one
month's notice in writing. He very much relied on Clause 11 of the
agreement which is as follows:
" Shaw Wallace and Company Limited, 154, Thambu Chetty Street,
Madras-600 001.
August 8, 1984.
Mr. Hari Raj, Vapery, Madras - 600 112.
Dear Sir,
Employment
We are pleased to appoint you as a Sales Representative in our
Liquor Division on the following terms and conditions:
1. xxx
2. xxx
11. Notwithstanding anything herein contained this Agreement may be
determined by the Company on giving to the Employee either at least
one month's notice in writing or one month's salary in lieu of such
notice, and by the Employee by giving at least one month's notice,
and the Company on one month's salary in lieu of such notice".
It is true that as per Clause 11 of the agreement, it is open to the
respondents/ management to determine the services of the petitioner by
giving one month's notice in writing or one month's salary in lieu of
such notice. Likewise, it is also possible for the petitioner to
determine his services by issuing the same notice as stated above. By
pointing out the said clause, Mr. Sanjay Mohan would contend that
inasmuch as the agreement (marked as Ex-A-6 before the third
respondent) is not repugnant to the provisions of the Indian Contract
Act, the same is enforceable; hence they satisfy the first condition,
namely, "for reasonable cause" prescribed in Section 41(1) of the Act.
It is true that the agreement of similar nature is not opposed to the
provisions of the Indian Contract Act and if that is so, it is open to
the parties to invoke the same and determine their service in terms of
the agreement. However, I have already observed that the provisions of
the Tamil Nadu Shops and Establishments Act are applicable to the
petitioner's case and in view of the Notification of the Government of
Tamil Nadu at the relevant time, the petitioner was a "person employed"
as defined in Section 2(12) of the Act. Accordingly, if the respondents
1 and 2 want to determine the service of the petitioner, they have to
do the same only in terms of Section 41(1) of the Act. In other words,
it is not open to the respondents to determine the services of the
petitioner merely on the basis of the agreement without reference to
Section 41(1) of the Act. No doubt, Mr. Sanjay Mohan after pointing out
the decision reported in (1) Delhi Transport Corporation v. D. T. C.
Mazdoor Congress (1991- I-LLJ-395) (SC) (2) Uptron India Ltd. v. Shammi
Bhan (1998-I-LLJ-1165) (SC) and (3) Kasthuri Mills Ltd. v. R.M.
Veerappan 1978-II-M.L.J.-289 contended that the said principle is
applicable only for persons working in public sector undertakings and
not for company like the respondents. In the light of the definition,
namely, person employed as defined in Section 2(12) and in view of the
Notification of the Government issued under Section 5 of the Act (G.O.
Ms. No. 722), Industries, Labour and Housing (Labour) dated Feburary
24, 1967), I am unable to countenance the argument of Mr. Sanjay Mohan.
Likewise, the contrary view taken by the Appellate Authority, third
respondent herein, cannot be sustained.
10. Apart from the above conclusion, as pointed out Mr. G. Rajagopalan,
two decisions of this Court directly support the petitioner's
contention. In State Bank of Travancore v. Deputy Commissioner of
Labour (supra) NAINAR SUNDARAM, J. (as His Lordship then was), while
construing the very same issue under Section 41(1) of the Act with
reference to similar agreement as in our case has concluded thus:
"2. Mr. S. Jayaraman, the learned counsel for the petitioner urges
two grounds for invoking the writ jurisdiction of this Court to
quash the said order. The first ground is that the proceedings under
Section 41 of the Act before the first respondent are incompetent
because the petitioner has passed the order of termination against
the second respondent under paragraph 522(1) of the Sastri Award.
His submission is not tenable because it cannot be disputed that so
far as the employment in question is concerned, the provisions of
the Act are definitely attracted. The petitioner satisfies the
definition of an employer and the second respondent satisfied the
definition of a person employed within the meaning of the Act and
any contract between the employer and the person employed cannot
override the express provision of the Act, or, in particular Section
41 thereof. The learned counsel for the petitioner is not in a
position to cite any direct authority that wherever there is a
contract governing the relationship between the employer and the
person employed, the provisions of the Act will have to be ignored
and there is no necessity to adhere to and satisfy the formalities
laid down under Section 41 of the Act. Hence, I am not able to
appreciate and accept the first contention of the learned counsel
for the petitioner.
3. The second ground urged by the learned counsel for the petitioner
is that even otherwise the petitioner has dispensed with the
services of the second respondent for a reasonable cause and there
has been strict compliance with the first limb of Sub-section (1) of
Section 41 of the Act, in the sense, the second respondent has been
paid more than a month's wages in lieu of the notice contemplated.
In the instant case, a memo was issued to the second respondent on
May 11, 1976 and an explanation was obtained on June 10, 1976. The
order of termination dated March 17, 1977 does not disclose as to
whether the explanation was accepted or not and the factors which
weighed with the petitioner to pass the order of termination on the
basis of reasonable cause. If the termination is to be on the ground
of reasonable cause, it is incumbent on the part of the employer to
disclose the reasonable cause in the order of the termination and in
the absence of a disclosure, it is not possible for any Authority,
and in particular, the Appellate Authority under Section 41(2) of
the Act, to determine as to whether the grounds putforth by the
employer can be stated to constitute a reasonable cause and as to
whether the order of termination has been passed bona fide. The
necessity to disclose the reasonable cause in the order of
termination has been stressed by a Bench of this Court in Tata Iron
and Steel Co. Ltd., (1950-II-LLJ-1043) (Mad). Yet another ground
which definitely has compelled the first respondent to interfere, in
the exercise of the powers under Section 41(2) of the Act is that
the petitioner having chosen to issue a memo containing all the
charges and having called for an explanation from the second
respondent ought to have in fairness proceeded with the formality of
an enquiry and must have come to a decision one way or the other on
merits. Having chosen to frame charges, it will not be stated to be
a fair and bona fide action on the part of the petitioner to drop
them and pass a bare order of termination merely referring to
paragraph 522 of the Sastri Award. As stated above, the order of
termination does not disclose the reasonable cause for termination.
A similar situation was dealt with by RAMAPRASADA RAO, J., as he
then was in Associated Corporation of Industries v. Additional
Commissioner for W, C. (1972-I-LLJ-108) (Mad) and the following
observations of the learned Judge sums up the position, in my
opinion succinctly:
"No doubt, it is for the employer to decide for himself subjectively
as to whether his employee's services have to be terminated or not.
Even such subjective appraisal must depend upon cogent material
which has to be placed before an independent Tribunal like the
Appellate Tribunal constituted by the statute under Section 41(2) of
the Act, who in the ultimate analysis should agree with the employer
that there was such reasonable cause for termination. On the other
hand, if vituperative epithets are recorded in writing and
communicated to him, and he in turn refutes such allegations made
against him and ultimately the employer decides to terminate his
services on such accusations, it would be idle to contend that the
dispensation of the service of the employee in those circumstances
was for a reasonable cause.
If the above principles are kept in mind, I find that no exception
could be taken to the order passed by the first respondent in the
instant case. Accordingly, I find that the Writ Petition lacks
merits and the same is dismissed".
The view expressed by NAINARSUNDARAM, J., following the Division Bench
judgment in (1950-II-LLJ-1043) (Mad) as well as the decision of
RAMAPRASADA RAO, J., (as he then was) in (1972-I-LLJ-108) (Mad) is an
answer to our case and by applying the same, I hold that the
respondents 1 and 2 have not assigned any reasonable cause for
dispensing with the services of the petitioner.
11. In Air France v. Deputy Commissioner of Labour and Ors. (supra)
A.R. lAKSHMANAN, J. while construing the validity of Section 5 of the
Act, had held that the employer is bound to disclose the reasons for
termination in the order of termination itself and failure to do so
would render the order invalid and non-est. The learned Judge had also
referred to the Division Bench decision of this Court reported in The
Tata Iron and Steel Co., Ltd. (supra) the decision of NAINARSUNDARAM,
J. in State Bank of Travancore v. Deputy Commissioner of Labour,
Coimbatore (supra) and the decision of shANMUKHAM, J., in The Assistant
Management of Blue Star and Co. Ltd., v. The Commissioner, Madras 6
(1989-I-LLJ-233) (Mad). The above referred decisions are directly on
the point and the same are binding on me. Accordingly, in view of the
fact that the provisions of the Tamil Nadu Shops and Establishment Act
are applicable to the petitioner's case, irrespective of Clause 11 in
the agreement, the employer, namely, respondents 1 and 2 is bound to
disclose the reason/reasons for termination in the order of termination
itself and failure to do so would render the order of termination void
and non-est. Merely complying with the second part, namely, payment of
one month's salary in lieu of one month's notice would not be
sufficient compliance. In the light of the above conclusion, the
contrary view taken by the third respondent is liable to be quashed.
12. Net result, the Writ Petition is allowed as prayed for. No costs.
