Tulip Star Hotels v. Union of Centaur-Tulip Employees & Ors.

29TH JUNE, 2010 Date of Pronouncing the Judgment: 7TH JULY, 2010 JUDGMENT :

The only aspect which is required to be considered in this Petition is the maintainability of the Petition filed by the Respondents challenging certain unfair labour practices under the Maharashtra Recognition of Trade Unions & Prevention of Unfair Labour Practices Act, 1971 (M.R.T.U. & P.U.L.P. Act) (the Act) before the Tribunal appointed under the Act for adjudicating unfair labour practices (ULP Court). This is upon the remand under the order of the Supreme Court in Civil Appeal No.2431/2007 dated 10th May 2007. The order calls upon this Court to 2 consider the applicability of 3 judgments mentioned therein as also the effect of part acceptance and the adjustment of the sums payable under a Voluntary Retirement Scheme (V.R.S.) agreement entered into between the parties. Judgments:-

The maintainability of the Petition came to be challenged on the ground that the Respondents were not the employees of the Petitioner. The Petitioner relied upon 3 judgments of the Apex Court which are now required to be considered for determining the maintainability of the Petition in the ULP Court.

In the case of Vividh Kamgar Sabha Vs. Kalyani Steels Ltd. (2001) 2 SCC 381 was a case of contract labour. The employee was not the direct employee of the Company in whose employment he claimed to be. He was the employee of the Contractor of the Company. It was held that he cannot therefore, maintain an application alleging unfair practices before the ULP Court when his employment in the Company

was disputed. He had to first prove that he was the employee of the Company whose employment benefits he sought in the Industrial Court. If he was held to be an employee of the Company he would be entitled to maintain an application alleging unfair labour practices before the ULP Court. This judgment came to be considered. In the case of Cipla Ltd. Vs. 3 Maharashtra General Kamgar Union & Ors. A.I.R. 2001 SC 1165 = 2001 3 SCC 101. The said judgment laid down the same law. In that case the employees contended that the contract was a camouflage and that he was actually the employee of the Company and not the Contractor. He applied under Schedule IV of the Act. It was held that unless it was undisputed or indisputable that there is an employer employee relationship between the parties, the question of unfair practice cannot be inquired into at all. If the employee was at any time indisputably an employee of the establishment and subsequently that was disputed, such question would be considered as an incidental question under Section 32 of the Act. In such a case the Petition under the ULP Act would be maintainable and the veil of the contract would be lifted.

In the case of Sarva Shramik Sangh Vs. Indian Smelting & Refining Co. Ltd. & Ors. (2003) 10 SCC 455 case of Cipla Ltd. (supra) was followed. It was held that if the employee sought a declaration that he was a workman of the principal employer and not the Contractor as the contract was merely camouflage, he had to get that aspect proved first in the Industrial Court, if disputed. It was observed that the pre-existing relationship of the employer – employee was a must and an essential pre-requisite to have the locus to make a complaint of ULP in the ULP Court failing which the Court would not have jurisdiction. That was the case in which the applicant prima facie accepted existence of the Contractor. He was required to establish that the arrangement or the agreement between the complainant and the contractor was sham and 4 bogus. Hence the declaration which he sought in that regard itself shows that his claim was disputed and not undisputed or indisputable and consequently the jurisdiction of the ULP Court was barred until he was held to be a direct employee of the principal employer.

It is contended on behalf of the Petitioner that it does not matter that the Respondents are not employees of the Contractor; the same principle applies. He contended that the Respondents opted for VRS. The Petitioner Company accepted their application. The Petitioner Company made payment as per the agreement in the VRS. Upon such payment being made the contract was complete and the Respondents ceased to be the employees of the Petitioner Company. The Respondents are required to be the employees on the date of the application made before the ULP Court. Mr. Cama laid much stress upon the verb (as emphasised above) in the case of Sarva Shramik Sangh (supra) and contended that on the date of the application the applicant must be an employee, if he alleged any ULP.. He cannot do so, if was an employee, but had ceased to be.

It may be mentioned that most of the ULPs would result in termination of the employment by one of the modes of termination and if the Act resulting in such termination of employment is challenged it cannot fall within the mischief of the special legislation for protection of the workers against those very practices, unfair though they would be, if the contention of Mr. Cama was to be accepted. In that case only those ULPs which would not result in termination of the employment before 5 such challenge could be challenged under that legislation. The contention would be absurd as the law which has been created to prevent or punish such mischief would be inapplicable in case of the grossest such mischief.

Considering all further judgments relied upon and sought to be interpreted essentially by Mr. Cama would set this innocuous position to rest.

In the Division Bench judgment of this Court in the case of Hindustan Coca Cola Bottling S/W Pvt. Ltd. & Anr. Vs. Bhartiya Kamgar Sena & Ors 2002 (3) B.C.R. 129 it has been held that mere denial of the status of the complainant that he was an employee cannot non-suit him in the ULP Court and such a complainant cannot be relegated to prove his status under an employer – employee relationship. Whilst holding that the employer – employee relationship must be established or indisputable, the Division Bench clarified that if such employer- employee relationship was recognised at some stage and thereafter was disputed, the jurisdiction of the ULP Court would not be barred and that aspect to be decided as an incidental issue under Section 42 of the Act. Consequently, that judgment which followed the case of Vividh Kamgar Sabha and Cipla (supra) (which are cases of contract labour) clarified that in other cases when it is alleged that an employee who once was such and was no longer an employee and his status as an employee was disputed later at the time of the filing of the Petition, he would not be relegated to prove that he continued as an employee and that he was 6 still an employee in the Industrial Court and the ULP Court would itself decide that issue upon assuming jurisdiction.

In 2 further judgments of this Court; in the case of Sarva Shramik Sangh Vs. Janprabha Offset Works & Anr 2007 (3) CLR 854 and in the case of Lokmat, Proprietors, Lokmat News Papers Ltd. Vs. Prabhakar Rambhauji Choudhari & Ors. 2003(1) CLR 550 the case of Cipla Ltd. and Hindustan Coca Cola Bottling Company (supra) came to be followed.

In the case of Manohar Dhaku Chavan Vs. Premier Limited & Ors. 2006 (3) CLR 449 a case of an employee who took VRS came to be considered. Mr. Cama argued that the position of the complainant as an employee was disputed as the complainant’s service stood terminated and he ceased to be an employee. There was, therefore, no master servant relationship on the date of the complaint and hence the complaint under the Act could not be maintained. Ms. Cox drew my attention to the fact that was a case of complainant who had accepted voluntary retirement. By such acceptance he is ceased to be an employee. Thereafter he challenged the act of certain benefits having been granted to other employees prior to his termination of service by voluntary retirement. Hence it was held that the application was misconceived as he was no longer the employee.

Similarly in the case of WMI Cranes Limited & Anr. Vs. Kush Sitaram Chavan & 41 Ors. 2007(1) CLR 1020 the employee accepted the VRS. 7 The acceptance would prove the cessation of the relationship. Thereafter his services were held not to have continued and his relationship of employer and employee was held to have snapped. Consequently, it was held that such an employee could not maintain a complaint after cessation of the relationship as an employee with the same employer.

There is a lot of substance in the argument of Ms. Cox that the whole difference between the cases of Manohar Dhaku Chavan and WMI Cranes Ltd. (supra) and the present case is that in this case the Respondents have not accepted the VRS. They have not accepted the cessation of their service. The employer and employee relationship is, therefore, not accepted to have snapped. They claim to continue as the employees. The Petitioner disputes that they are the employees. The Petitioner contends that they are bound by the VRS which constitutes an offer between the Petitioner and the Respondents upon the application being made by the Respondents as the employees of the Petitioner and it being accepted by the Petitioner as their employer. Hence the relationship of employer and employee snapped or ceased and the Respondents no longer remained the employees, and hence disentitled to maintain the application in ULP Court.

Consequently, Ms. Cox relied upon the Division Bench judgment of this Court in the case of Hindustan Coca Cola Bottling Company (supra) that if the relationship of employer and employee was at some stage recognised and thereafter disputed, the mere dispute cannot oust the 8 jurisdiction of the ULP Court. This stands to reason. Ms. Cox submits that mere denial may be a completely false denial. There would be nothing left undisputed if a mere denial were to oust the jurisdiction.

The 3 cases which were required to be considered under the remand order are wholly distinct. The further cases relied upon by Mr. Cama, as applicable to the facts of this case, are cases of admitted voluntary retirement and not upon mere denial. The judgment in the cases of Manohar Chavan and WMI Cranes are also distinguishable. The Division Bench judgment in the case of Hindustan Coca Cola Bottling Co., (supra) fully explains the position with regard to the jurisdiction, after considering the case of Vividh Kamgar Sabha and Cipla Ltd. (supra).

The jurisdiction of the ULP Court is, therefore, not ousted. The complaint is maintainable. The ULP Court shall have to proceed on merits.

Though no merits can be considered in this Petition, upon the mandate under the remand order the effect of part acceptance upon adjustment of the sums payable by the Petitioner to the Respondents under the VRS is required to be considered. Effect of part acceptance upon adjustment:-

The Respondents were admittedly the employees of the Petitioner. 9

The Respondents had taken certain housing loans from HDFC Bank and Apna Sahakari Bank Ltd.. An authority letter was issued by the Respondents inter alia authorising the Bank to deduct from the amount payable by the Respondents towards principal amount of the loan, interest, additional interest or otherwise from their terminal benefits.

The Petitioner issued a notice to the employees making an invitation to offer VRS on 1st October 2002. The Respondents applied for VRS under their respective cyclostyled applications dated 30th October 2003 making an offer as per the invitation to make such offer. They assured that they would not withdraw their applications and raise dispute about the scheme or its terms. This was accepted by the Petitioner. The contract was complete upon communicating the acceptance by the Petitioner’s letter dated 29th January 2004.

The Petitioner was to release the employees within 90 days from the acceptance of the offer of the VRS. The settlement of their accounts was to be processed also within that time. This would be by end of April

2004. The employees accepted these terms. They assured the Petitioner that they would not withdraw their applications and would not raise any dispute about the VRS or its terms.

They were not paid within 90 days. On 27th August 2004 they sought to withdraw from the scheme on the ground of delay by the management/Petitioner to release their final settlement amount. They 10 contended that the management itself repudiated the contract by nonpayment and hence the contract stood frustrated under Section 56 of the Indian Contract Act. They claim to continue in service. This was 4 months after the date on which their claims should have been settled.

They were being paid salaries for the period during which their final settlement remained pending.

The Petitioners sent their cheque for final settlement as also their last salary on 13th April 2005. This was about 4 months after the contract was completed and about a year after it was to be settled by payment.

The Respondents demanded splitting of the cheque for salary and for final settlement on 3rd May 2005, which was done by the Petitioner. Consequently, their salary was paid; their VRS remained with the Petitioner.

On 15th June 2005 the management/Petitioner sent the amounts required to be paid by the Respondents to the HDFC Bank upon the loan taken by them from HDFC Bank, which under the terms of the loan became due and payable upon the termination of their services. The entire remaining loan was accordingly wiped out. HDFC Bank issued its vouchers on 24th August 2006 to the Respondents showing full repayment of the loan. Similar vouchers have been sent to the Respondents on 14th August 2006 by Apna Sahakari Bank Ltd., showing full repayment of their loan also. 11

The Respondents brought to the notice of HDFC Bank on 21st September 2005 that this amount was directly paid by the Petitioner without their knowledge and consent and that earlier EMIs though deducted from their salary was not paid to them. They requested for the details of the payments made and to “solve” their problems.

The Bank replied to the Respondents on 28th November 2005 that the payment was in accordance with the authority letter given by the employees to the bank authorising their employer to deduct the principal amount of the loan, interest, additional interest etc., from the terminal benefits under their loan agreement with the Bank. Under that clause the employees irrevocably authorised the Bank to communicate with and receive the amounts of the outstanding loan from their employer directly. Hence the Bank clarified that they accepted the payment of the total outstanding loans and refunded the excess, if any, to the employees to close the loan accounts. The Bank clarified that if the excess amount paid by cheques was not collected by the employees, it would be refunded to the employer/Petitioner since the loan accounts were closed.

The part payments are not directly made by the Petitioner to Respondents. The part payments are not directly received by the Respondents from the Petitioner. The part payments, if any, are by way of adjustments of their liability towards their respective loans. The Respondents indeed received the benefits therefrom. Their loans were 12 repaid. Their loan accounts were closed. They had no further liability on the mortgaged/charged property which were their residential houses. They claim that this was paid without their knowledge and consent. They called upon HDFC Bank to “solve their problems”. HDFC Bank clarified that the amount was paid strictly as per their authorisation in their agreements with the Bank.

It is contended by Mr. Cama on behalf of the Petitioner that the Respondents are bound by the VRS in view of these part payments allotted by way of adjustments made by the Petitioner because it augurs for the benefit of the Respondents; their loans being wiped off. He contends that the Respondents are bound by the VRS in view of the part payments and if the Respondents want to rescind the VRS they must refund the amounts paid by the Petitioner on their behalf to the bank.

The Respondents contend that the payment was unilateral and without their knowledge and consent. Had it been otherwise it would tentamount to part payment made by way of adjustment. The liability towards the Bank was of the Respondents and not the Petitioner. It is for the Respondents to decide to discharge their liability as they deem appropriate. They would, of course, bear the consequences, but that the Petitioner could not have discharged the Respondents’ liability to the Bank unilaterally and much after the Respondents rescinded the VRS on the ground of frustration of the contract.

The admitted documents show that the Respondents sought to claim 13 that the contract was frustrated and hence stood revoked on 27th August 2004 and the Petitioner sought to pay off their loans in June 2005.

All the aforesaid documents are admitted documents. They need not be proved by direct oral evidence. They are required to be interpreted and considered. However, there may be further oral evidence as to the compliance of the VRS by the parties more specially clause 11 thereof. Oral evidence may be required on the question of a delay to see whether it was bona fide or mala fide. Oral evidence may further be required on the fact and extent of the salaries paid and received in the interregnum.

It is contended by the employees that the Petitioner unilaterally made payment to the Banks to show that part payment is received by the employees. The aspect of unilateral payment is not accepted by the Petitioner as the payment is made in strict compliance with the loan agreement entered into by the employees with the Bank. The bona fides or mala fides, if any, of such payment would also have to be seen upon oral evidence. The Respondents also claim that the EMIs required to be paid were not paid though deducted from their salaries. The aspect relating to the deduction of the EMIs from the salaries and the nonpayment to the Bank until after June 2005 would also have to be seen from the records and for which oral evidence of the parties would be required so that either of them can justify or explain their action or contention and can be appropriately cross examined. 14

Mr. Cama has relied upon the judgment in the case of Bank of India and Ors. Vs. O.P. Swarnakar & Ors. (2003) 2 SCC 721 in which it is held that when the employees accepted part of the benefit under the VRS they could not approbate or reprobate and therefore, cannot be permitted to resile from their earlier stand. In this case there is no earlier stand. The employees have not directly accepted the part of the benefit. The part payment is shown by way of adjustment. The adjustment is not shown to be without the knowledge and consent of the employees or by the employer. The adjustment is shown to be made unilaterally by the Petitioner. Hence, except if the oral evidence brings out any acceptance by the employees of the loan amount, the part payment contemplated in the judgment would not apply to this case.

In the case of Punjab and Sind Bank and Anr. Vs. S.Ranveer Singh Bawa AIR 2004 SC 2334 = 2004 AIR SCW 2730, it was held that the employees could not withdraw from the VRS if they have received the payments and utilised those payments. This was on the premise that the acceptance was upon knowledge and notice. The employees knowingly accepted the benefit and were therefore estopped from denying the binding effect of such benefit upon them.

In the case of State Bank of Patiala Vs. Romesh Chander Kanoji & Ors. (2004) 2 SCC 651 it was held that after the closure of the VRS the employees could not withdraw from it. This is upon the law of contracts. VRS constitutes a contract between the parties by the offer of 15 the employee and the acceptance by the employer. Once the acceptance is communicated, the contract is complete. The contract is contained in the terms of the VRS by which both parties are bound. Neither can resile therefrom.

In this case upon the aforesaid admitted facts as also upon further facts which may amen ate from the oral evidence of the parties it will have to be seen as to who repudiated the contract and whether repudiation was bona fide and valid in law. It would be upon such determination from the oral evidence that the rights to parties would be seen. Suffice it to say at present that the adjustment simplicitor cannot constitute part payment made or which is received, tacitly or otherwise by which the employees can be taken to be bound.

Since it is seen that the ULP Court has jurisdiction to try the complaint and to adjudicate upon the aspect of the payments made by the Petitioner to the Bank and its consequences on merits. The ULP Court shall consider oral evidence of the parties, the aforesaid admitted documentary evidence as also any further documentary evidence, if any that either party may produce in accordance with the applicable law.

Rule is made absolute accordingly.

The parties to appear before the ULP Court initially on 21st July 2010.

(SMT. ROSHAN DALVI, J.)