Karnataka High Court
Sri Ganeshwar Textile Mills Ltd. vs Appellate Authority Under Payment Of ... on 17 November, 2000
Equivalent citations: (2001)IILLJ718KANT, 2001 AIR - KANT. H. C. R. 810, 2001 CLC 583, (2001) 2 LABLJ 718, (2001) 2 LAB LN 557
JUDGMENT T.N. Vallinayagam, J.
1. Both the writ petitions are connected in as much as both are against the common order dated February 21, 1994, and the letter dated April 25, 1996, bearing No. ALCD/PGA /CR-6/92-93 and the order, dated November 30, 1995, bearing No. FGA-G/Gratuity/ Appeal/CR- 4/94-95, Annexures C, E and D respectively.
2. In Writ Petition No. 14248 of 1996 one Sri Ganeshwar Textile Mills Ltd., is the petitioner in the third respondent Siddeswara Textile Mills (Private) Ltd., is the petitioner in the other writ petition, i.e., WP.No. 14420 of 1996. The employee of the said companies one Y.M. Basavaraj is the 4th respondent in both the writ petitions and the first and second respondents are again common as appellate authority and Controlling Authority under the Payment of Gratuity Act, 1972.
3. The common facts that have led up to the above two writ petitions are that the petitioners are two textiles companies established under the Companies Act. It is claimed that they are separate legal entities having a separate registered office at Davangere and they have been managed by separate Board of Directors having maintained separate accounts, balance sheet and muster-roll of their employees. The 4th respondent Y.M. Basavaraj joined Sri Ganeshwar Textile Mills Ltd. (the mills will be referred by their name for the purpose of convenience and easy reference). The 4th respondent joined in Sri Ganeshwar Textile Mills Ltd., as Assistant Spinning Master from November 11, 1958. On June 26, 1962 he resigned the post and on December 7, 1966 he joined the same company as spinning master on a consolidated payment of Rs. 1,000 per month. His pay was increased from time to time. Finally in 1980 he was appointed as Chief Executive and Factory Manager with a pay scale of Rs. 2,800 per month and he worked in the said capacity till September 2, 1984, that is, date of his resignation. At the time of his resignation he was drawing a salary of Rs. 2,500 per month. It is further case of the petitioners that from the date of appointment till date of his resignation the wages of the 4th respondent was above the limits prescribed by the Payment of Gratuity Act and the nature of work he was performing was managerial-administrative. As he was not entitled in law to any gratuity at the time of his resignation, he was informed about the same. After a lapse of nearly eight years from the date of his resignation, the fourth respondent on May 18, 1992 filed an application before the second respondent controlling authority claiming gratuity under Section 4 of the Payment of Gratuity Act against both the mills. Though the preliminary objection was raised regarding joint application filed against both the mills, it was not considered but it was directed to be taken at the time of final disposal. Ultimately, on February 21, 1994 an order was passed directing Sri Ganeshwar Textiles Mills to pay the gratuity of Rs. 15,579 together with interest at the rate of 5 per cent per annum from October 6, 1984 to February 20, 1994 and interest at the rate of 10 per cent from February 20, 1994 till date of payment. The second respondent herein gave a finding that the gratuity is payable from January 1, 1958 to June 30, 1980 for a period of 18 years and an appeal was preferred therefrom to the first respondent which was dismissed on November 30, 1995. However, it is claimed that the petitioner was not aware of such dismissal till a letter was issued on April 25, 1996 calling upon them to pay the interest. Thus, the writ petition came to be filed to quash the said order.
4. It is the case of the other petitioner Sri Siddeshwara Textile Mills Ltd., that the fourth respondent joined the petitioner's company on June 20, 1962 and he was working as a Spinning Master till December 4, 1966 when he submitted his resignation. The total period of service was less than five years and on the date of termination of his employment, the Payment of Gratuity Act was not in force. Subsequently only, he joined the other company and joined the post of Chief Executive and Factory Manager in the year 1984. This petition also alleged about filing of the joint petition and the orders passed excepting that the appeals before the first respondent are different and the management is separate and under different principals, all other facts are same. To question that order, the present writ petition came to be filed.
5. It is contended by Sri Mahesh R. Uppin, the learned counsel appearing for both the companies that Sri Ganeshwar Textile Mills Ltd., is a public limited company and Siddeswara Textile Mills Ltd., is a private limited company and they are different and distinct entities registered under the Companies Act, so far as the employment under the Ganeshwar Textiles Mills Ltd., from January 1, 1958 to June 20, 1962 is concerned, it was only for a period of four years and as on the date, the Payment of Gratuity Act (hereinafter referred to as Act) was not in force. When he joined Sri Siddeswara Textiles Mills, Ltd., he discharged his duties as a manager in the administrative office and the payment received by him during the two periods was above the limit prescribed by the Act and therefore, he is not an employee under Section 2(c) of the Act. It is further submitted that Section 7 of the principal Act was amended with effect from 1987 and on the date when the alleged cause of action arose, there was no provision in the Act for imposing interest. The finding of the Authorities that both the mills are under the control of single management is contrary to the evidence on record and it is perverse. In fact in the letter, dated September 11, 1984, accepting the resignation, the 4th respondent has made it clear that he was not entitled to any gratuity as per Rule 10 of the Payment of Gratuity Act (sic). The 4th respondent ought to have filed his application within 90 days from the date of said rejection. The application was filed after a lapse of eight years and no application was filed for condonation of delay under Article 137 of the Limitation Act. Therefore, the claim is barred by limitation. So far as the other writ petition is concerned, it was submitted by the learned counsel that the second mill is a private limited company and the status of the company could not be considered by the authorities. Here again the total period of employment was only four years and it is not a question of re-appointment but it is a fresh appointment. The Act was not in force during the relevant period and consequently, the claim of the fourth respondent is not maintainable. The other grounds urged in the other petition is also reiterated.
6. Though statement of objection was not filed by the fourth respondent, the employee in both the writ petitions, the statement of objection for IA, for direction alone was filed along with some annexures. The contention raised therein on the main petition was that on September 5, 1984 a letter was addressed by the employee, the fourth respondent herein to Sri Ganeshwar, Textile Mills, Ltd., when he claimed that he joined the mills, in 1956 as a trainee and later he was appointed as Assistant Spinning Master from January 1, 1958. It was further contended that on June 20, 1982 as decided by the mills, and as the mills wanted his service at Siddeswara Textiles, he resigned from Sri Ganeshwar Textile Mills, Ltd., and was taken in Sri Siddeswara Textile Mills as a Spinning Master on a scale of Rs. 750-50-1000. But he was paid only Rs. 525 per month and as the mill assured to pay the difference in the same later. Again on December 5,1966, the Ganeshwar Textile Mills Ltd., wanted his service and accordingly he resigned from Siddeswara Textile Mills and was taken as a Spinning Master in Sri Ganeshwar Textile Mills Ltd. on December 7, 1966. On April 4, 1978 Sri Ganeshwar Textile Mill asked him to look after the factory affairs of Sri Siddeswara Textiles in addition to Ganeshwar Textiles. Accordingly, he was serving in both the companies and he was promoted as Chief Executive and Factory Manager of Sri Ganeshwar Textile and Factory Manager of Sri Siddeswara Textiles. However, as decided by the Ganeshwar Textiles, he tendered his resignation with a heavy heart from both the concerns which was required to be accepted. It was further represented that he had devoted his most of his life/service in both the companies for a period of nearly 28 years and therefore he may be granted the entire benefits namely:
(1) Three months' notice pay (S.G.T.M. Ltd., & S.S.T.M. (P) Ltd.) (2) Compensation at 15 days per year of service (S.G.T.M. Ltd. & S.S.T.M. (P) Ltd.) (3) Leave Salary (S.G.T.M. Ltd. & S.S.T.M. (P) Ltd.) (4) Pay towards about 342 extra hours worked (S.G.T.M. Ltd.) (5) Bonus etc., (6) Gratuity : From November 1, 1958 to Septembers, 1984 of S.G.T.M. Ltd., 2. From April 4, 1978 to September 5, 1984 of S.S.T.M. (P)Ltd., :
(7) Difference of amount to the extent of Rs. 12,500 which he was assured to pay by both the companies at the rate of appointed scale to actually paid (S.S.T.M. (P) Ltd., from June 20, 1962 to December 5, 1966).
7. Annexure R2 was filed as reply from Sri Ganeshwar Textile Mills Limited, wherein the following passage was found:
"Your resignation letter dated September 5, 1984.
Your resignation is hereby accepted. We would however state that your resignation was entirely voluntary.
The various claims listed in your above letter are being examined and we shall revert to the subject as soon as possible."
8. In respect of the statement made in the said letter, "he resigned voluntarily," a reply was given by the employee on September 15, 1984 is as follows:
"I am in receipt of your letter referred above and shocked to go through your statement that I have resigned voluntarily on my own account. This is not a fact. I have resigned as desired by you. If you still say that I have resigned voluntarily, I am prepared to continue to serve you as before. Please reply.
In case you do not want my services, please be kind enough to pay all demands raised in my previous letter which are legally due to me.
Thanking you."
This has to be taken as his objection statement in so far as to main writ petition is concerned as no separate objection statements are available in the bundle. Sri H. Neelakanta Rao, learned counsel appearing for the employee reiterated the above contentions and he claimed that the order passed by the authorities are correct and no interference is called for.
9. I have considered the submissions made by the respective counsel. The question that is raised in these writ petitions are:
(1) Whether both the companies are one and the same or distinct identities.
(2) Whether the gratuity is payable to the employee when the Payment of Gratuity Act is not in force at the relevant point of time.
(3) Whether the petitioner is entitled to payment of gratuity when he was drawing a salary more than that fixed under the Act.
(4) Whether the order of the authorities is sustainable.
10. Let us consider the legal position in the matter by referring to the various authorities cited before this Court. The Payment of Gratuity Act, 1972, came into force with effect from August 21, 1972 (Act No. 39/1972). Prior to 1972, the gratuity was paid under specific awards and agreements. The proposal for settled legislation on gratuity was discussed in the Labour Ministers Conference held in New Delhi on August 24/25, 1971 and the definition of the Act is to be looked into. The Payment of Gratuity Act is a Social Welfare Legislation and self contained in content. The statement of objects and reasons of the Act have to be taken note of.
2(c) Continuous service means uninterrupted service and includes service which is interrupted by sickness, accident, leave, lay-off, strike or a lockout or cessation of work not due to any fault of the employee concerned, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act.
2(e) Employee means any person (other than an apprentice) employed on wages, not exceeding (two thousand and five hundred rupees per mensem or such higher amount as the Central Government may having regard to the general level of wages, by notification specify) 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, (and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any Rules providing for payment of gratuity).
Explanation. In the case of an employee, who having been employed for a period of not less than five years on wages not exceeding the amount for the time being specified by or under Clause (e) is employed at anytime thereafter on wages exceeding (that amount) gratuity, in respect of the period during which such employee was employed on wages not exceeding (that amount) shall be determined on the basis of the wages received by him during that period:
2(e) 'Employer' means in relation to any establishment, factory, mine, oil field, plantation, port, Railway company or shop.
(i) and (ii) ....
(iii) ... In other case, the person who, or the authority which, has the ultimate control over the affairs of the establishment, factory, mine, oil field, plantation, port, railway company or shop and where the said affairs are entrusted to any other person, whether called a manager, Managing Director or by any other name, such person:
STATEMENT OF OBJECTS AND REASONS There is at present no Central Act to regulate the payment of gratuity to industrial workers except the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955. The Government of Kerala enacted legislation last year for payment of gratuity to workers employed in factories, plantations, shops and establishments. The West Bengal Government promulgated an Ordinance on June 3, 1971 prescribing a similar scheme of gratuity. This Ordinance has since been replaced by the West Bengal Employees Payment of Compulsory Gratuity Act, 1971, enacted by the President on August 28, 1971. Gratuity is also being paid by some employers to their workers under awards and agreements.
The proposal for Central legislation on gratuity was discussed in the Labour Ministers' Conference held at New Delhi on August 24 & 25, 1971 and also in the Industrial Labour Conference at its session held on October 22 & 23, 1971. There was general agreement at the Labour Ministers' Conference and the Indian Labour Conference that Central Legislation on payment of gratuity might be undertaken as early as possible. It is accordingly proposed to undertake such legislation.
The Bill provides for payment of gratuity to employees drawing wages up to Rs. 750/per month in factories, plantations, shops establishments and mines, in the event superannuation retirement, resignation and death or total disablement due to accident or disease. The quantum of gratuity payable will be 15 days' wages based on the rate of wages last drawn by the employees concerned for every completed year of service or part thereof in excess of six months subject to a maximum of 15 months' wages. The term "wages" will mean basic wage plus dearness allowance.
This Act was further amended in the year 1984 so far as "wages" are concerned in the following fashion:
(i) The coverage of the Act is proposed to be extended to persons drawing wages up to Rs. 1,600 per mensem in view of the revision in the wage levels on account of increase in the cost of living.
(ii) Persons employed in administrative or managerial capacity on wages not exceeding Rs. 1,600 per mensem are also proposed to be brought within the purview of the Act as it would be anomalous to deny them the benefit of gratuity while allowing the same to workmen drawing similar wages.
(iii) It is proposed to treat the employees of seasonal establishment on par with similar employees of non-seasonal establishments and allow gratuity at the rate of 15 days' wages per annum.
The amendment Act of 1987 is to the following effect:
The coverage of the Act is being extended to persons drawing wages up to Rs. 2,500 per month and an enabling provision is being made for raising the wage limit for coverage from time to time.
Section 6 of the Payment of Gratuity (Second Amendment) Act, 1984 (Central Act 26 of 1984) not incorporated in the principal Act reads as follows:
"6. Validation. The amendments made in the principal Act by Section 3 and Section 4 shall be deemed to have been made with effect from February 11, 1981 and accordingly action or thing taken or done or purporting to have been taken or done under the principal act on or after the said day and before the commencement of this Act shall, notwithstanding anything contained in any judgment, decree or order of any Court, Tribunal or other authority, be deemed to be, and to have always been, for all purposes, as validly and effectively taken or done as if the said amendments had been in force at all material times".
It is also seen that in case of an employee worked for five years continuously and his salary is less than Rs. 2,500 per month, he will be eligible for gratuity under the Payment of Gratuity Act. He will be eligible for gratuity for the past service and even at the time of his termination or resignation if he was drawing a salary more than Rs. 2,500 per month.
11. On the question of limitation, in Binny Ltd., Bangalore v. H.K. Madaiah 1986 (2) L.L.N. 530, a single Judge of this Court has held as follows:
21. Therefore, the rule making power conferred under Section 15(1) is not only confined to the procedure of the controlling authority but to all other provisions of the Act including Section 7(4)(b). One more provision which brings out the intention of the Legislature to prescribe a period of limitation is found in Section 7(7) of the Act. Under Section 7(7) of the Act, a person aggrieved by an order under Sub-section (4) i.e., the controlling authority may within 60 days from the date of receipt of the order may prefer an appeal to the appellate authority. When the Legislature has prescribed a period of limitation for preferring an appeal from the order of the controlling authority there is no good ground to take the view that the Legislature did not have the intention to prescribe a period of limitation before the controlling authority. That apart, the power to condone the delay in filing the appeal under Section 7(7) of the Act is limited to a further period of 60 days as prescribed under first proviso to Section 7(7). In the circumstances, it is not possible to accept the contention of Sri Subba Rao that the decision of the Supreme Court in Rohtas Machines Ltd. v. Union of India. (1983) 13 I.T.R. 309. In that decision the power of the Central Board of Revenue to make a rule under Section 295 of the Income-tax Act was questioned before the Supreme Court. Section 295 of the Income-tax Act reads as under:
'The Board may, subject to the control of the Central Government, by notification in the Gazette of India, make rules for the whole or any part of India for carrying out the purposes of this Act.' This section is followed by Section 296 which reads as under:
'The Central Government shall cause every rule made under this Act and every notification issued under Sub-clause (iv) of Clause 23 C of Section 10 to be laid as soon as may be after the rule is made or the notification is issued before each House of Parliament. while it is in session for a total period of thirty days, which may be comprised in one session or in two or more successive sessions, and, if before the expiry of the sessions immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or notification or both Houses agree that the rule or notification should not be made or issued, that rule or notification shall thereafter have effect, only in such modified form or be of no effect, as the case may be; So, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule or notification.' The provisions of Section 296 in my view, are in pari materia with the provisions of Section 15(1) of the Gratuity Act. The Supreme Court dealing with the validity of the notice issued in exercise of the power under Section 295 read with Section 296 of the Income-tax Act ruled as under:
'Under Section 296 of the Income Tax Act, 1961, every rule made under the Act as required to be laid before each House of Parliament so that both Houses of Parliament have an opportunity of knowing what the rule is and considering whether any modification should be made in the rule or the rule should be made or issued and if both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made or issued, then the rule would thereafter, have effect only in such modified form or have no effect at all, as the case may be. Parliament has thus not parted with its control over the rule-making authority and it exercises strict vigilance and control over the rule making power exercised by the Board. This is a strong circumstance which militates against the argument based on excessive delegation of legislative power.
22. It is not the case of Sri Subba Rao that the rules made by the Central Government in exercise of the power under Section 15(1) of the Act were not placed before both the Houses of Parliament and, therefore, this Court has to proceed on the basis that Rule 10 was considered by both the Houses of Parliament as required under Section 15(1) of the Act.
23. The relevance of delay should also be understood from the point of view of fairness in the judicial proceedings.
Where the Court considers that there has been undue delay in applying for judicial review it may refuse to grant leave to make the application or any relief sought if it considers that the granting of the relief sought would be likely to cause substantial hardship to or substantially prejudice the right of any person or would be detrimental to good administration.
The above observation would equally be applicable to the facts of the case on hand where the petitioner-employer has to monitor the claims of thousands of workmen under the Act and inordinate delay in preferring the claims before the controlling authority against the management would result in undue hardship to it in carrying on its operation in a proper and business like manner."
12. On the question of delay, the learned counsel appearing for the employee relied upon the dictum of Ukkali, Musmat v. Kishori Sahu 1988 21 Reports (Ori) 1999, to the following effect:
"The plain language of Order 41, Rule 3A(2), CPC, leaves no room for doubt that the question of limitation is to be decided before the appeal is heard under Order 41, Rule 11, CPC, for admission. Thus, the appellate Court has no jurisdiction to defer the question of limitation to be considered at the time of hearing and to admit the appeal."
And again the dictum of this Court in Manjunatha Rao v. Rukminiyamma I.L.R. 1986 (1) Kar. 327, was relied upon to the following effect:
The Supreme Court, in Mata Din v. A. Narayanan , referring to the circumstances in which a party is saved from the consequences of the mistakes of his counsel said:
"The law is settled that mistake of counsel may in certain circumstances be taken into account in condoning delay although there is no general proposition that mistake of counsel by itself is always a sufficient, ground. It is always a question whether the mistake was bona fide or was merely advice (devise-Ed) to cover an ulterior purpose such as laches on the part of the litigant or an attempt to save limitation in an underhand way."
Adverting to the considerations relevant to the matter that should weigh Court observed:
"It is quite clear that the limitation for the appeal to the High Court was three times as much as it was for the District Court. When the appeal was filed, the litigant had as much as two months in hand to file the same in the High Court. Further, he did not attempt to save Court-fee on the appeal but paid the same Court-fee which would have been payable in the High Court. It does not appear that he had an underhand motive for filing appeal, in the District Court. Therefore, the filing of the appeal must be attributed entirely to the advice of the counsel.... No doubt, the counsel was one with some experience and ought to have known that an appeal above Rs. 5,000 must be filed in High Court and not the District Court and therefore, we have to see whether he was genuinely under a mistake or not."
To find out whether the counsel was genuinely under mistake or not, what becomes relevant is whether the circumstances contributing to the mistake were such that even a counsel with a reasonable degree of professional competence was likely to be misled into believing that the advice he was tendering at the time was correct or not. There is no general doctrine which saves the parties from the result of wrong advice. In Banwarilal v. Union of India , the Delhi High Court took the view that a mistaken advice of a counsel of standing and ability contrary to a widely known point of law could not be said to be bona fide. In Brij Bhushan v. Madan Mohan , it was held that a failure on the part of counsel to ascertain the value of the subject- matter of the suit for purposes of jurisdiction in order to decide the choice of the appellate forum was considered attributable to want of reasonable skill and the counsel could not, in such circumstances, be held to have acted in good faith. By these standards, the mistake of Counsel in this case would perhaps incur a similar criticism. But as the question of saving the parties from the consequences of wrong legal advice the pronouncements of the Supreme Court suggest an approach which is somewhat less strict and exacting. It has been held that if the mistake of counsel was not tainted by mala fides or actuated by oblique motives the parties, who acted on that advice bona fide and diligently are to be saved from the consequences of the mistake.
13. The dictum in Collector, Land Acquisition, Anantnag v. Katiji also relied upon to the following effect at p. 501 of LLJ:
"Every day's delay must be explained does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? Then doctrine must be applied in a rational commonsense pragmatic manner.
When substantial justice and technical considerations are pined against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay."
The principles concerning to limitation laws is evaluated in the case of G. Ramegowda, Major v. Special Land Acquisition Officer , which is to the following effect:
"The expression 'sufficient cause' in Section 5 must receive a liberal construction so as to advance substantial justice and generally delays in preferring appeals are required to be condoned in the interest of justice where no gross negligence or deliberate inaction or lack of bona fides is imputable to the party seeking condonation of the delay. As is implicit in the reasoning of the High Court, the unarticulated thought, perhaps was that in the interest of keeping the stream of justice pure and clean the award under appeal should not be permitted to assume finality without an examination of their merits. The Supreme Court though in the circumstances of this case, it should also decline to interfere."
14. On the question of resignation the dictum in Moti Ram v. Param Dev was relied upon to the following effect at pp. 636 and 637 of LLJ:
"(i) He may resign only from the office of the Chairman of the Board. In such a case if the resignation is in praesenti it would take effect from the date of communication of the resignation to the Head of the Department in the Government of Himachal Pradesh it would take effect from the date as indicated in the said resignation if the resignation is prospective to be operative from a future date.
(ii) He may resign only from the office of the Member of the Board. This resignation would take effect from the date the resignation is notified in the Official Gazette by the Government of Himachal Pradesh, and with effect from the said date the Chairman would cease to be a member of the Board. Since a person cannot continue as Chairman of the Board after he has ceased to be a member of the Board, he would also cease to be the Chairman of the Board from the date of his resignation as Member of the Board is notified in the Official Gazette by the Government of Himachal Pradesh.
(iii) He may resign both from the office of Chairman of the Board as well as from the office of Member of the Board. In such a case, his resignation from the office of Chairman of the Board would take effect from the date of communication to the Head of the Department in the Government of Himachal Pradesh if it is in praesenti or from the date indicated therein if it is prospective to be operative from future date. He would, however, continue to be a Member of the Board, till his resignation from the office of member is notified in the Official Gazette by the Government of Himachal Pradesh under Section 7 of the Act."
On the question whether the wages though fixed are same or different the dictum of Supreme Court reported in 1962-I-LLJ-388 Management of DCM Chemical Works and Their workmen and Vice Versa was relied upon which is to the following effect at pp. 392 and 393 of LLJ:
"It is on these facts that we have to see whether the chemical works can be said to be so integrated with the other units of the company so as to justify the conclusion that it is part of the same business, and the entire business carried on by the company is one establishment and, therefore, it would not be right to have different wage-structure, dearness allowance, etc. in the same establishment. This matter was considered by this Court in connection with lay-off in Associated Cement Companies Ltd., Chaibassa Cement Works, Jhinkpani v. Their workmen where tests were laid down for determining whether a particular unit is part of a bigger establishment. These tests included geographical proximity, unity of ownership, management and control, unity of employment and conditions of service, functional integrality and general unity of purpose. But it was pointed out that it was impossible to lay down any one test as an absolute and invariable test for all cases and the real purpose of these tests was to find out the true relation between the parts, branches, units. If in their true relation they constitute one integrated whole then the establishment is one; if on the contrary they do not constitute one integrated whole, each unit is then a separate unit. How the relation between the units will be judged must depend on the facts proved. Thus in one case the unity of ownership, management and control may be the important test, in another case functional integrality or general unity may be the unity of employment. It was pointed out that in a large number of cases several tests may fall for consideration at the same time and the difficulty of applying these tests arises because of the complexities of modern industrial organization. The matter was considered again by this Court in Pratap Press v. Workmen ; Pakshiraja Studios v. Workmen Honorary Secretary, South India Mill Owners' Association v. Secretary, Coimbatore District Textile Workmen Union and Fine Knitting Company Ltd. v. Industrial Court, Bombay, 1962-I-LLJ-275. In the case of Fine Knitting Company this Court was considering one limited company but it was held in the circumstances that even though there was unity of ownership, management and control of the two parts of the same concern were different units as there was no functional integrality between them. It is on the basis of these tests that we have to consider whether the Tribunal was right in its conclusion that the Chemical works has to be treated as an independent unit".
The common features which have been emphasised on behalf of the respondents are in our opinion clearly capable of explanation on the ground that the company is a limited concern and carries on different kinds of business. But as in law under the Companies Act, the company being a limited concern is one legal entity, the common features on which the respondents rely upon follow from that one single circumstance, namely that the company is a limited concern governed by the company law. It would therefore in our opinion be not right to emphasize these common features and to hold on their basis only that the various business Carried on by the Company have to be treated as one integrated whole for the purpose of wage-structure, etc. But on question of gratuity, this is what the Apex Court has observed:
"Lastly we come to the gratuity scheme sanctioned by the Tribunal. It is true that in this concern there is already a provident fund scheme in force. But it is no well settled that both gratuity as well as provident fund schemes can be framed in the same concern if its financial position allows it. It is true that the financial position of the chemical works has not been found to be good and stable enough to warrant an incremental wage-structure; but gratuity is a long term provision, and there is no reason to suppose that in the long run the appellant will not be in a flourishing condition. As to the burden of the scheme, we do not think that, looking at it from a practical point of view and taking into account the fact that there are about 800 workmen in all in the concern, the burden per year would be very high, considering that the number of retirements is between three to four per centum of the total strength. Further we find that in this very concern there is a gratuity scheme for clerks who number between 100 and 200 and are part of the labour force. We can see under the circumstances no reason why a similar gratuity scheme should not be framed for the rest of the workmen. We therefore see no reason to interfere with the order of the Tribunal in this respect."
15. In the case of Management of Winger and Co. v. Their workmen , the question as to whether the establishment connected with the same employment is one and the same separately came to be considered and held as follows:
"The test of functional integrality or the test whether one unit can exist without the other though important in some cases, cannot be stressed in every case without having regard to the relevant facts of that case. Hence the absence of functional integrality and the fact that the two units, viz., the restaurant and the wine shop can exist, one without the other does not necessarily show that where they exist they are necessarily separate units and do not amount to one establishment. The Tribunal was therefore not in error in holding that the wine shop and restaurant form part of the same industrial establishments.
The question as to whether industrial establishments owned by the same management constitute separate units or one establishment has been considered by this Court on several occasions. Several factors are relevant in deciding this question. But it is important to bear in mind that the significance or importance of these relevant factors would not be the same in each case; whether or not the two units constitute one establishment or really two separate and independent units, must be decided on the facts of each case. Sri Pathak contends that the Tribunal was in error in holding that the restaurants cannot exist without the wine shop and that there is functional integrality between them. It may be conceded that the observation of the Tribunal that there is functional integrality between a restaurant and a wine shop and that the restaurants cannot exist without wine shops, is not strictly accurate or correct. But the test of functional integrality or the test whether one unit can exist without the other though important in some cases, cannot be stressed in every case without having regard to the relevant facts of that case, and so, we are not prepared to accede to the argument that the absence of functional integrality and the fact that the two units can exist one without the other necessarily show that where they exist they are necessarily separate units and do not amount to one establishment. It is hardly necessary to deal with this point elaborately because this Court had occasion to examine this problem in several decisions in the past, vide Associated Cement Companies. Ltd. v. Their workmen ; Pratap Press v. Their workmen (supra) Pakshiraja Studios v. Its workmen (supra); South India Mill Owners' Association v. Coimbatore District Textile Workers Union (supra); Fine Knitting Co. Ltd. v. Industrial Court (supra) and D. CM. Chemical Works v. Its workmen (supra).
Let us then consider the relevant facts in the present dispute. It is common ground that whenever the employer runs a restaurant and a wine shop the persons interested in the trade are the same partners. The capital supplied to both the units is the same. Prior to 1956, wine shops and restaurants were not conducted separately, but after 1956 when partial prohibition was introduced in New Delhi wine shops had to be separated because wine cannot be sold in restaurants. But it is significant that the license for running the wine shop is issued on the strength of the fact that the management was running a wine shop before the introduction of prohibition. In fact L-11 license to run wine shops has been given in many cases to previous restaurants on condition that the wine shops are run separately according to the prohibition rules. It is true that many establishments keep separate accounts and independent balance-sheets for wine shops and restaurants; but that clearly is not decisive because it may be that the establishments want to determine from stage to stage which line of business is yielding more profit. Ultimately, the profits and losses are usually pooled together. Thus, generally stated, there is unity of ownership, unity of finance, unity of management and unity of labour; employees from the restaurants can be transferred to the wine shop and vice versa. Besides, it is significant that in no case has the establishment registered the wine shops and the restaurants separately under Section 5 of the Delhi Shops and Establishments Act, 1954 (No. VII of 1954) in fact when Sri Nirula, the Secretary of the Employers Association was called upon to register his wine shop separately, he protested and urged that separate registration of the several departments was unnecessary; and that clearly indicated that wine shop was treated by the establishments as one of its departments and nothing more. The failure to register a wine shop as separate establishment is, in our opinion, not consistent with the employers' case that wine shops are separate and independent units. Having regard to all the facts to which we have just referred, we do not think it would be possible to accept Sri Pathak's argument that the Tribunal was in error in holding that the wine shops and restaurants form part of the same industrial establishment."
16. The learned counsel appearing for the respondent filed the Directors report of Sri Ganeshwar Textile Mills Ltd and that of Sri Siddeswara Textile Mills (Private), Ltd. He referred to the fact that one Setru Sangappa and Sri Patel Halappa were the Directors and the same Halappa was also Director of Sri Siddeswara Textile Mills. He referred to the following resolutions of Sri Ganeshwar Textile Mills Ltd. :
Subject No 8: Sri Y.M. Basavaraj is a graduate of Mysore University and has passed B.Sc. (Textiles) in 2nd class during the year 1955-56. His age is 25 years. He has undergone practical training also. He is working in the mills without any remuneration for the last ten months. He is fit to be appointed as an Assistant Spinning Master on a graded salary of Rs. 250-20-350-25-450 per month. He is young and energetic and is willing to work and has also applied for a post in the Mills. He is the son of Sri Y.M. Doddappa, a Director of the Company. He is also related to the Managing Agents as being the brother-in-law of Sri G.M. Halappa, eldest son of Sri G. Mahadevappa, brother of Sri G. Siddalingappa and Sri G. Muppanna. On account of this relationship a resolution of the general body is necessary although he is otherwise fit to be appointed by the reason of his qualifications.
He also referred to the resolution pertaining to Sri Siddeswara Textile Mills (Private), Ltd., to the following effect:
'RESOLVED that Sri Y.M. Basavaraju B.Sc. (Textiles) be and is hereby appointed as Spinning Master of the company on a monthly consolidated graded salary of Rs. 750-50-1,000 service commencing from the date on which he joined duty.' Sri Y.M. Basavaraja, B.Sc. (Textiles) is an experienced Spinning Master of about eight years standing. As he happens to be a relative of one of the Managing Directors namely, Sri G.M. Halappa in being his brother-in-law and the remuneration proposed to be paid to him exceeds the limit prescribed under Section 314 of the Companies Act 1956, special resolution is required.
The above two resolutions were marked before the authorities also. The first subject is found in the notice issued in the annual general body meeting for the year ended March 31, 1957 and the second is found in the same type of notice for the meeting to be held on September 28, 1963. Referring to the fact that he applied to both the Mills it was the contention that both the Textile Mills were one and the same and consequently, the finding of the Authorities is correct.
17. The Tribunal in its order referred to the deposition of the employees that though Sri Y.M, Basavaraj was brother-in-law of Sri Halappa, his service came to an end on September 5, 1984 upon the resignation demanded by Sri Shivanandappa and Halappa. The deposition of L. Shivappa and S. Kotrabasappa who are employees is to the effect that both the units are one and the same was also relied upon to come to the conclusion that both the units are one and the same. But the said inference cannot be drawn merely upon the oral evidence given by the co-employees who are naturally interested in their co-employee. This legal prohibition has got to be looked into.
18. The definition of company under Section 5(iii) of the Companies Act has been considered by the Tribunal which reads as follows:
Private company means a company which by its articles:
(a) restricts the right to transfer its shares if any;
b) limits the number of its members to fifty not including-
(i) persons who are in employment of the company; and
(ii) Person who having been formerly in the employment or were members of company.
While in that employment and have continued to be members after the employment ceased ;and
(c) prohibits any invitation to the Public to subscribe for and shares in or debentures of the company provided where two or more persons held one or more shares in a company jointly, they shall for the purposes of this definition, be treated on a single member.
(iv) Public company means a company which is not a private company.
The finding that because the managing agents are common and Managing Directors are common the company should be the same and because offices are in one premises and administration is common and nature of products and work is common, two companies are one is not legally sustainable. Both the companies are textile mills. The Managing Directors are not the same. In the writ petition, Sri Siddeswara Textile Mills (Private), Ltd. is represented by its Managing Director, G.H. Rajashekar and earlier Sri Halappa was the Managing Director and now the Managing Director is shown G.H. Rajashekar. There is no reference to the Managing Director of Sri Ganeshwar Textile Mills has to be the same man. Therefore, the finding that the Managing Director is common is not correct. Both the mills being textiles mills, nothing wrong in having common managing agents. The nature of manufacture has to be common and that does not make both the companies as one unit. The rules have to be followed as per law between the management and employees. The said reasoning is not acceptable. Thus, the reasoning given by the Tribunal in coming to the conclusion that both the units are one and the same is not correct. It is not seen from the decision of the Apex Court that the question is one of fact the test applied or declared in D.C.M. Chemical Works v. Their Workmen (supra), have not been satisfied in this case nor the principles declared by the Supreme Court in the Management of companies cases has been fully proved in this case. In fact, the Supreme Court has held that even wine shop and restaurant cannot be considered to be formed under the same establishment. In the light of the above reasons, the finding that both the companies are one and the same unit has to be set aside.
19. The next question to be considered is whether the delay of 18 years to claim said gratuity can be condoned. On the question of delay, the Tribunal relied upon Section 4 of the Payment of Gratuity Act which reads as follows:
"(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years-(a) on his superannuation ; or
(c) On his death or disablement due to accident or disease:
Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement.
(1) An employee who is eligible for payment of gratuity under the Act or any person authorized, in writing, to act on his behalf shall apply, ordinarily within thirty days from the date gratuity became payable in Form No. 1 to the employer:
Provided that where the date of superannuation or retirement of an employee is known, the employee may apply to the employer before thirty days of the date of superannuation or retirement."
20. The only consideration made by the Tribunal that the letter was addressed on September 5, 1984 and in the reply of the management wherein it has been stated that his request should be considered. Therefore, the question of limitation does not arise. This is a wrong approach. The Act is very clear that an employee who is eligible for payment of gratuity under the Act should apply ordinarily within 30 days from the date the gratuity became payable in Form No. 1. There is a proviso in respect of payment of gratuity payable to an employee on the termination of his employment on his superannuation or on his death or disablement due to accident or disease are none, they, the employee may apply to the employer before 30 days of the said superannuation or retirement. In the present case, it is a case of resignation. So far as the first resignation is concerned, it is not in dispute that then first resignation was made on June 20, 1962 and having joined Sri Ganeshwar Textiles on January 1, 1958, he cannot make an application for payment of Gratuity before the authorities on May 18, 1962. This aspect has not been considered by the Tribunal and prima facie it must be held that the claim of gratuity is clearly and hopelessly barred by limitation and such a claim is not entertainable. The second claim relates to the period from December 7, 1966 (i.e., four and half years after his earlier resignation) till September 2, 1984 when he resigned from Sri Siddeswara Textile Mills. There is a large gap of nearly four and half years and if really both the companies are one and the same as contended by the respondents, then such a long gap need not be there and should not be there. This inordinate delay in the claim has not been explained by the respondent either by way of objection to the writ petitions or otherwise, excepting the statement of objection filed for the LA. The second resignation having been taken on September 2, 1984 atleast after coming into force of the Payment of Gratuity Act, it is not possible to appreciate the delay in filing of application for gratuity of nearly eight years as the application has been filed only in the year 1992. Even if it is taken for the purpose of arguments that the company had not replied from September 11, 1984, that does not mean that the petitioner can sleep over his right for more than eight years. In fact while considering the delay in the case of Binny Ltd. v. H.K. Madhaiah (supra) this Court held that under Rule 10 of the Payment of Gratuity Rules, the Legislature has fixed the period of limitation obviously because it was their view that all claims for gratuity should be claimed within a reasonable time after the employer denies the liability to pay the Gratuity. The Courts will have to take into consideration the limitation prescribed under Rule 10. When the legislation prescribed the period of limitation for preferring an appeal from the order of controlling authority, there is no good ground to take the view as the legislation did not have the intention to prescribe a period of limitation before the controlling authority. Of course, this Court further held that the relevance of delay should also be understood from the point of view in all fairness in a judicial proceedings where the employer has to monitor the claim of thousands of workmen under the Act. The inordinate delay, in preferring such claim before the controlling authority against the management would result in undue hardship to such employer in carrying his operation in a proper and business like manner. A statement made that the delay in filing the petition should be condoned on the ground of mistake of the counsel. For that the case of Manjunath referred to above was relied upon. That does not have application on the facts of this case. The other cases referred to on the question of delay are concerned with the delay by counsel and the principles evolved thereunder have no application to the facts of this case.
21. In this view, it must be held that the claim of the respondent, i.e., clearly and hopelessly barred by limitation and on this ground also the order of the Tribunal has to be quashed.
22. Coming to the eligibility to the person who is getting minimum salary fixed under the Act, the Tribunal has come to the conclusion that the appeal was filed during the period in which said limitation was not there and therefore, he shall be paid the said gratuity. Again here is the question as to whether the employment is a managerial or supervisory capacity. A specific allegation has been made in the writ petition that the employee was performing the managerial or administrative duties. The contention is therefore he cannot be construed as a workmen. By the resolution of December 1957 the employee "was appointed as Assistant Spinning Master and the job of an Assistant Spinning Master is certainly that of a managerial and that of administrative. In fact later he was appointed as Spinning Master. The labourers are working under him and he was in charge of Spinning Section of the Textile Mills. By no stretch of imagination, it can be construed that he is workmen and the very nature of work and the normal duties attached to the post clearly establishes that he has been working in a managerial/supervisory capacity and there is no denial of the averments in the writ petition regarding the capacity or the work of the employee.
23. In this view, I hold that the employee Y.M. Basavaraj was employed in the managerial/supervisory capacity and consequently not entitled to the benefit of the Gratuity Act as wrongly held by the authorities. In fact, the object and reasons and statement of objects and reasons given in the 1972 Act, maintenance of Payment of Gratuity to the employees drawing wages of Rs. 750 per month. On the other hand, even in 1962 he was drawing a salary of Rs. 1000 per month in the first amendment made under the Act 25/1984 to this Act was extended even to persons drawing Rs. 1,600 per month in administrative or managerial capacity. Here again the salary of the employee was Rs. 2,800 per month during December 7, 1966 to September 2, 1984 and he was in the capacity of Chief Executive and Factory Manager and in fact this position was admitted by the employee himself in his letter head itself filed as Annexure R4, dated October 5, 1984, where he has described himself as "Chief Executive and Factory manager" of the first mill, i.e., Sri Ganeshwar Textile Mills Ltd., and Factory Manager of the second mills. Even the description in the letter head is contradictory as he cannot work in both the mills at the same time. Evidently, the letter is printed afterwards that too subsequent to the imaginary claim: The 3rd amendment by Act 1987 was extended to a person drawing a salary of Rs. 2,500 per month. But even if this Act is to apply only for the persons are drawing a salary of more than Rs. 2500 in 1984, it is significant to note that these principles are suppressed in the application filed for grant of Gratuity before Authorities and not specifically pleaded. Therefore, taking the salary into consideration, the 4th respondent cannot claim any benefit under the Payment of Gratuity Act. The rulings relied upon by the petitioners touching the above aspects do not apply to the facts of the present case and they have been rendered on a different context and on different circumstances.
24. In this view, I answer all the questions raised above in favour of the petitioners. Both the writ petitions are allowed and the impugned orders are quashed. Rule is made absolute. There shall be no order as to costs.