Hari Raj H. vs Shaw Wallace Co. Ltd. and Others

Sathasivam, J.—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.

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 u/s 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.

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.

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.

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 u/s 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 Vs. Dy. Commr. of Labour and

Others, . 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.

I have carefully considered the rival submissions.

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

u/s 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 u/s 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.

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.

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:

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:

xxx

xxx

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 Vs. D.T.C. Mazdoor Congress and Others, (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 u/s 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.

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 u/s 41(1) of the Act with reference to similar agreement as in our case has concluded thus:

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 u/s 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 u/s 41 of the Act. Hence, I am not able to appreciate and accept the first contention of the learned counsel for the petitioner.

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 u/s 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 u/s 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 u/s 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.

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 Management of Blue Star and Co. Ltd Vs. The Asst. Commissioner of Labour, Madras-

6, . 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.

Net result, the Writ Petition is allowed as prayed for. No costs.