Karnataka High Court
Management Of Samyuktha Karnataka ... vs T.S. Ranganna And Ors. on 28 March, 1995
Equivalent citations: 1995(3)KARLJ258, ILR1995KAR1663
JUDGMENT
1. An issue of far reaching consequence has arisen for determination in this set of writ petitions. It basically, centres around the simple question as to whether service benefits accruable to an employee can be nullified by following an age old business gimmick defined under the omnibus umbrella of "change of management". In other words, whether such changes whereunder it is contended that the previous concern has become extinct and that the new one has commenced and virtually started with a clean slate, will obliterate the accrued benefits of the employees. Service law prescribes that quite apart from the salary, D.A. etc, that are payable from month to month or annually, that certain other monetary benefits accrue to an employee who has completed the prescribed period of time in an organisation and it is at the stage when the employment comes to an end that these amounts are disbursable. Until that period of time, they are virtually paper entries or a build up of credit. If over a period of time, for reasons that the Court is not unfamiliar with and in circumstances that are invariably plead financial stringency etc., the management undergoes a change by virtue of a take or any other methodology, the question that arises is as to whether the obligation to pay the accrued benefits remains intact or whether it can be obliterated. A specific example is the situation that is pleaded in the present set of petitions wherein, the contention is raised that the present petitioners have come on the scene after three such changes and they therefore contend that they are liable only for payments in relation to periods that commence from the date on which they have taken over. The implication of this contention is that as far as the gratuity payable to the employee is concerned, it is contended that this management can only be held liable for the small period of time that has elapsed after it has taken over from the previous ones and that none of the amounts that had accrued during the tenure of the earlier managements are payable by the present one. The real question is as to whether such a situation is either permissible or whether it can be sanctioned and the answer is an emphatic no. If the law were to permit such gimmicks, it would open the flood gates of disaster because the Courts are required to take cognizance of business ingenuity that is often resorted to for purposes of denying employees their rightful dues and the Courts are therefore required to interpret the law in order to prevent any attempts to frustrate an employee from receiving what the law entitles him to. Unless this is done, the moment a contention is raised that the management has changed, the old one having departed and the new one disclaiming its liability, the accrued benefits would evaporate. The law unfortunately does not sanction such unjust enrichment and the Courts will continue to uphold and enforce the statutory provisions and protect the rights of the employee to whom the amounts are due. A brief narration of the facts is necessary.
2. The petitioners are the management of the Samyuktha Karnataka Group of Publications. The respondents are different categories of employees who have put in relatively long periods of service with the publication. The paper was established in 1933 and a trust was founded under the name of Loka Shikshana Trust in the year 1935. On November 21, 1974 the paper was taken over by a private company namely Karnataka Pathrika Private Limited. Thereafter, on December 12, 1977 the paper was taken over by another Company namely Jaya Karnataka Newspapers Private Limited. The agreements provide that all assets and liabilities would be taken over by the new concern.
3. On January 31, 1980 the Bangalore Edition of the paper was closed down and on December 19, 1980 it was restarted by the Charity Commissioner. In August 1981 the Government took over the publication and appointed an administrator. In 1983, this High Court quashed the ordinance and appointed a receiver. Thereafter, the High Court constituted a fresh trust for running the paper with effect from March 10, 1986 and it is this Board of Trustees who took over the management from March 10, 1986. On March 28, 1986 a notice was issued to all concerned including the employees to the effect that the new trust was not responsible for any of the commitments, obligations, liabilities or commissions and omissions of the previous management and it is the contention of the petitioners that this notice was not challenged by anybody.
4. There is one more interesting development namely that on January 31, 1980 the management of Jaya Karnataka Newspapers Private Limited issued a notice of closure and that the services of the employees stood terminated with effect from January 31, 1980. The workmen were also offered salary and compensation as per Section 25FF of the Industrial Disputes Act, 1947. Effectively by virtue of the aforesaid chain of events it was contended by the present management who are the petitioners, that their liability to pay gratuity under the provisions of the Payment of Gratuity Act, 1972 commences only from March 10, 1986 and that they cannot be held liable for any earlier periods. Some of the aggrieved employees applied to the Assistant Labour Commissioner and Controlling Authority under the Payment of Gratuity Act at Bangalore for an order directing the payment of the gratuity to them for their entire period of service. The application was contested and the authority allowed the application. The matter was thereafter taken in appeal to the appellate authority who is the Deputy Labour Commissioner who by two orders dated March 31, 1993, passed after hearing the parties dismissed the appeals and held the management liable to pay the gratuity for the entire period along with interest accrued thereon.
5. The present petitioners who represent the management of the publication have filed this set of five writ petitions which are directed against the aforesaid two orders. A seemingly profound contention was raised to the effect that there is a cessation of responsibility as soon as the management changes in so far as the subsequent management must be treated as a new employer and that as a necessary consequence, it must be deemed that there is a fresh contract of employment between this employer and the employees whereunder, past liabilities in respect to occurred service benefits cannot be claimed. A rather embarrassing question as to who is liable to pay those amounts and more importantly, as to what happens to those amounts is left hanging in the air and the petitioners seek to challenge the imposition of the earlier liability on the ground that the present management cannot be made to pay for a period of time in respect of which it was not in office. The respondents are old and infirm, one of them is lying in hospital battling for his life and they cannot even afford the services of a professional. They are represented by their power-of-attorney holder one Mr. Stephen, himself, a person of advanced years and an application was made to this Court almost out of desperation, that the petitions be heard which was why, they were listed for out of turn hearing. I have heard the petitioners' learned advocate at considerable length as also Mr. Stephen represents the respondent-employees.
6. The principal submission that has been advanced on behalf of the appellants by their learned advocate is that this is not a case where the change of management is questionable, motivated or done under suspicious circumstances which may require the Court to decide as to whether at all a new entity has come into the picture. The appellants' learned advocate has taken me through the documents at each stage and he points out that when the concerned changed hands that it was a total transfer of ownership which was why, a provision was made that the assets and liabilities are taken over. Thereafter, he demonstrates that it was under the orders of this Court that a Board of Trustees was nominated and the present management with whom we are concerned admittedly assumed charge only from February 28, 1986. Appellants learned advocate then proceeds to rely on the notices dated March 10, 1986 and particularly, the one dated March 28, 1986 wherein the trustees had given clear notice of the fact that no past liabilities would be met by them. It is therefore contended that the employees were put on notice of the fact that whereas for a variety of reasons the concern had been virtually staggering from time to time and thereafter stood revived, that the present management would only accept, responsibilities for everything that arose after the date on which they assumed office.
7. As far as this head of argument is concerned, I am unable to either accept it or place any reliance on it for the reason that the present trustees who represent the management have been invested with the overall control of the publication which assumes that they have full powers in respect of all assets that belong to it, they are required to run it and that they are required to discharge the obligations in that regard. The obligation to pay the salary of the employees is co-extensive with the obligation to settle the dues of those employees who leave, retire or resign and so long as a liability is outstanding against the publication, it will have to be discharged by the present management regardless of the point of time when it assumed office. The aspect of giving notice to the employees is irrelevant and of no consequence because a statutory liability such as one to pay taxes or to pay bonus under the Payment of Bonus Act is legal duty from which one cannot be absolved merely by giving notice. This Court therefore cannot and will not take any cognizance of any such notices.
8. The next head of argument proceeds on the footing that the appellant company has in fact been under the administrative control of different sets of persons and that this is not one of the cases where a sham transfer is indulged in only for purposes of avoiding one's liability. I do not dispute the fact that there have been such changes of management or even for that matter, that the present management came into the picture under the orders of this Court under a scheme. What is in fact overlooked in such a submission is the all important fact that in law the continuity that is taken cognizance of happens to be continuity of service and not the continuity in the management. In brief, such changes are therefore irrelevant in so far as it is the uninterrupted tenure of service that is the determining factor under Section 2-A of the Payment of Gratuity Act. Continuous service has been defined in Section 2-A and an examination of this record clearly indicates to me that the employees in question have been in uninterrupted employment and that they would therefore qualify for the payment of gratuity that has been awarded to them by the authorities.
9. The last argument that was very strenuously urged is that in January 1980, a decision had been taken and a notice Annexure-G was served on the employees which was never disputed, whereunder they were clearly informed that their services stood terminated and that their dues admissible under the Industrial Disputes Act would be paid to them. It is argued that this constitutes a break in service. I have examined the present record and I find that even though this decision was taken and conveyed to the then employees, that it was never implemented and that the employees continued to work without any interruption to their contract of employment. This argument therefore does not avail the appellants.
10. Another limb of the same argument that was advanced proceeds on the footing that a contract of service is co-extensive with the tenure of a management and that when a management changes, it is effectively a new employment and therefore for purposes of computation of length of tenure, that it is not one uninterrupted period. This contention, if adopted would have dangerous consequences mainly because, having regard to the level of ethics or lack of it, that is prevalent in the business world and the frequent changes in the management both of small and big business concerns for no fault of the employees, their period of service is liable to be decimated. The flaw in this argument is that a contract of service is between the institution and the employee and not the persons or organisations who administer the institution but only act as agents for the execution of that contract. Under these circumstances, where it can be demonstrated that the complexion of the employer or the institution has effectively remained unchanged regardless of cosmetic aspects such as the change of name, structure etc. and that the tenure of service has remained uninterrupted, the liability would be absolute.
11. The definition of employer under Section 2-F (iii) of the Act takes into account the person or authority which has ultimate control over the affairs of the establishment .... and therefore, to my mind regardless of the change of personalities the liability devolves vis-a-vis the institution who is really the employer and if this situation is clarified, any number of changes down the line would be of no consequence.
12. It is essential that this Court clarifies that the liability to pay gratuity under the Act is that of the employer and arises out of years of continuous service. The last question is as to whether the present petitioners are liable for the payment covering the entire period of time. The answer is obvious in so far as when the present petitioners assumed control of the publication, they took charge of it as a composite whole which encompassed the assets and the liabilities. To that extent, having regard to the definition of the term 'employer' which takes note of the fact that the liability devolves on the person who has control over the affairs of the establishment, the liability is absolute as far as the present petitioners are concerned. The position would be simplified when one takes a clearer view of the situation which indicates that it is the liability that has accrued vis-a-vis the institution and that the present trustees may only be the persons who are administering it and are therefore required to disburse the payment on behalf of the institution which they are managing. The change of persons or personalities or the length of time during which they have been in office is not a criterion for payment of gratuity under the Act.
13. The petitions accordingly fail and stand dismissed. The petitioners are directed to deposit with the trial Court, within eight weeks from today the full amount awarded to each of the respondents less what has been received by them along with interest at the same rate as has been awarded by the authority on the unpaid amount up to the date of payment. The respondents shall be at liberty to withdraw this amount from the trial Court. In the event of any delay or default in payment the petitioners shall be liable to pay interest at the rate of 18% per annum compounded quarterly on the whole of the unpaid amount quite apart from such other steps that the respondents are entitled to take for purposes of execution of the order. Having regard to the complexion of the case, to my mind the challenge in these petitions is totally devoid of substance and considering the status in life of the respondents and their ages, the petitioners shall be liable to pay costs of the respondent-employees in each case quantified at Rs. 1000/- per petition. Petitions disposed of.
The petitioners' learned advocate Sri B. C. Prabhakar states that the entire amount has been deposited in the trial Court and that some part of it has already been paid to the respondents. In view of the order passed in these petitions, the trial Court shall forthwith release the balance amount to the respondents.