IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 20.11.2006 Coram The Honourable Mr.Justice P.D.DINAKARAN and The Honourable Mr.Justice P.P.S.JANARTHANA RAJA W.P.No.6743 to 6745, 6761, 8171 to 8186, 9592 to 9605 and 10438 to 10462 of 2000 and W.M.P.Nos.10078, 10080, 10084, 10099, 11937, 11940, 11943, 11946, 11949, 11952, 11955, 11958, 11961, 11964, 11966, 11969, 11973, 11976, 11979 and 11982 of 2000 W.P.No.6743 of 2000 The Management of Cruickshank & Company Ltd. 154, Thambu Chetty Street, Chennai-1. .. Petitioner in all the W.Ps. vs. 1. The Appellate Authority under Payment of Gratuity Act, 1992 and Regional Labour Commissioner, (Central), Shastri Bhavan, Chennai. 2. The Controlling Authority under Payment of Gratuity Act, 1992 and Assistant Labour Commissioner (Central), Shastri Bhavan, Chennai. 3. M/s.T.Arumaidorai 4. M/s.Indian Potash Limited, No.727, Ambal Building, Anna Salai, Chennai. 5. M/s.Shaw Wallace & Company Limited, 154, Thambu Chetty Street, Chennai. .. Respondents 1 to 5 in all WPs https://hcservices.ecourts.gov.in/hcservices/ K. Ganesan ...6th Respondent in WP no. 6743/00 M.Karunakaran ... 6th Respondent in WP 6744/00 V.Vadamalai 6th Respondent in WP 6745/00 V.Kothandapani 6th Respondent in WP 6761/00 K. Murugaiayah 6th Respondent in WP 8171/00 M. Lakshmanan 6th Respondent in WP 8172/00 K.Ranganathan 6th Respondent in WP 8173/00 Mohan 6th Respondent in WP 8174/00 K.Mohan 6th Respondent in WP 8175/00 S. Shankar 6th Respondent in WP 8176/00 S. Joseph 6th Respondent in WP 8177/00 M. Ramachandran 6th Respondent in WP 8178/00 M. Murthy 6th Respondent in WP 8179/00 P. Subramani 6th Respondent in WP 8180/00 R. Karuppiah 6th Respondent in WP 8181/00 R. Vellaisamy 6th Respondent in WP 8182/00 G. Mahalingam 6th Respondent in WP 8183/00 M. Kannan 6th Respondent in WP 8184/00 S. Sambandamurthy 6th Respondent in WP 8185/00 G. Ayyavo 6th Respondent in WP 8186/00 S.G. Raju 6th Respondent in WP 9592/00 S. Arumugan 6th Respondent in WP 9593/00 K. Arumugam 6th Respondent in WP 9594/00 T. Ponnusamy 6th Respondent in WP 9595/00 S. CHANDRAN 6th Respondent in WP 9596/00 G. NAGU 6th Respondent in WP 9597/00 M. NAGARAJAN 6th Respondent in WP 9598/00 K. SHANMUGAM 6th Respondent in WP 9599/00 A. KARUPPIAH 6th Respondent in WP 9600/00 P. SANTHANAM 6th Respondent in WP 9601/00 K. SOMU 6th Respondent in WP 9602/00 M. KRISHNAN 6th Respondent in WP 9603/00 V. SUBRAMANI 6th Respondent in WP 9604/00 K. VENKATESAN 6th Respondent in WP 9605/00 ELUMALAI 6th Respondent in WP 10438/00 M. RENGAN 6th Respondent in WP 10439/00 M. KALAMANI 6th Respondent in WP 10440/00 C. PERUMAL 6th Respondent in WP 10441/00 K. GOLIAPPA 6th Respondent in WP 10442/00 A. MUTHU 6th Respondent in WP 10443/00 M. THOMAS 6th Respondent in WP 10444/00 M. CHANDRAN 6th Respondent in WP 10445/00 C. SUKUMAR 6th Respondent in WP 10446/00 C. DURAISAMY 6th Respondent in WP 10447/00 I. VINSING JAYAPAUL 6th Respondent in WP 10448/00 M. VEERAIAH 6th Respondent in WP 10449/00 https://hcservices.ecourts.gov.in/hcservices/ P. Venkataprasad .. 6th respondent in WP.No.10450/2k P. Muniyandi .. 6th respondent in WP.No.10451/2k P. Ganesan .. 6th respondent in WP.No.10452/2k M. Omadian .. 6th respondent in WP.No.10453/2k S. Selvaraj .. 6th respondent in WP.No.10454/2k S. Mahadevan .. 6th respondent in WP.No.10455/2k M. Karuppiah .. 6th respondent in WP.No.10456/2k S. Arumughan .. 6th respondent in WP.No.10457/2k M. Paneerselvam .. 6th respondent in WP.No.10458/2k M. Mani .. 6th respondent in WP.No.10459/2k A. Murugesan .. 6th respondent in WP.No.10460/2k G. Chandran .. 6th respondent in WP.No.10461/2k A. Sathiah .. 6th respondent in WP.No.10462/2k Prayers in all WPs:- Petitions filed under Article 226 of the Constitution of India to issue a writ of certiorari to call for the records connected with the common order dated 29.2.2000 passed in PGA.Nos.13,5, 28, 4, 48, 3, 27, 31, 33, 37, 38, 39, 40, 41, 42, 44, 45, 47, 59, 60, 25, 57, 35, 34, 26, 29, 19, 18, 36, 14, 30, 32, 54, 53, 6, 49, 10, 61, 50, 7, 15, 9, 20, 43, 52, 23, 51, 22, 55, 16, 56, 17, 11, 57, 8, 12, 24, 26 and 46/77 on the file of the 1st Respondent Appellate Authority, confirming th order of the 2nd Respondent controlling Authority dated 19.8.1996 passed in G.A.Nos.75/94, 62/94, 8/94, 61/94, 23/95, 60/94, 67/94, 11/95, 13/95, 29/95, 2/95, 3/95, 4/95, 5/95, 6/95, 19/95, 20/95, 22/95, 71/94, 72/94, 55/94, 69/94, 15/95, 14/95, 56/94, 9/95, 49/94, 48/94, 16/95, 76/94, 10/95, 12/95, 17/95, 28/95, 63/94, 24/95, 57/94, 59/94, 25/95, 64/94, 77/94, 66/94, 50/94, 7/95, 27/95, 53/94, 26/95, 52/94, 18/95, 78/94, 68/94, 83/94, 73/94, 69/94, 65/94, 74/94, 54/97, 56/94 and 21/95 respectively and to quash the same. https://hcservices.ecourts.gov.in/hcservices/ For Petitioner in : Mr.R.Karthick all W.Ps. for M/s.S.Ramasubramanian Associates For Respondents in : Mr.S.Karthick for all W.Ps. M/s.T.S.Gopalan & Co. / R-4 : Mr.K.M.Ramesh for R-6 in all WPs COMMON ORDER I. - The issue Whether the entitlement of contract labourers for gratuity can be dislodged or denied on account of tussle between the principal employer, who engaged the service of the contract labourers and the contractor, who employed the contract labourers is the issue that is projected for our consideration in these batch of writ petitions. II. - Order under challenge 2. The petitioner has challenged the common order passed by the first respondent/Appellate Authority dated 29.2.2000 modifying the order of the second respondent/Controlling Authority, questioning the liability of the petitioner to the workmen, who are the contesting respondents herein, under the provisions of the Payment of Gratuity Act, under the following facts and circumstances of the case. 3. In this common order, the first and second respondent will be referred to as the appellate authority and the controlling authority respectively and the sixth respondent in each writ petitions will be referred to as 'the claimants' and the other parties will be referred to as the petitioner and respective respondents, for the sake of convenience. III. Backdrop of the case 4.1. The petitioner is a company doing business in fertilizers, pesticides and liquor among other business and it is a subsidiary company of the fifth respondent. Petitioner was engaged by the fourth respondent by way of a contract for handling muriate of potash, which also includes receipt of bulk cargo at the Port of Madras and its standardisation, packing, stocking and its delivery to various customers of the fourth respondent. Petitioner, in turn, engaged third respondent on a contract basis to carry out the work assigned by the fourth respondent and the third respondent employed the claimants for the job work on his own. The claimants were paid by the third respondent. https://hcservices.ecourts.gov.in/hcservices/ 4.2. After the termination of contract between the petitioner and the fourth respondent, the claimants filed application before the controlling authority claiming gratuity from the third respondent under the Payment of Gratuity Act. 4.3. Claimants filed common memo to implead the petitioner, fourth and fifth respondents, but before hearing them on the impleading memo, the controlling authority allowed the memo and issued notice of hearing to them. On contest, the petitioner filed counter stating that the claim is time-barred; that there was no claim against the petitioner in Form-N; that the claimants did not file any application for gratuity with the petitioner and that since the claimants were not employed by the petitioner, the claim of gratuity against the petitioner does not arise. 4.4. The controlling authority, after hearing the parties and on perusing the oral and documentary evidence, held that the claimants are 'employees' within the meaning of Section 2(e) of the Payment of Gratuity Act and hence, entitled to claim gratuity under Section 4 of the Payment of Gratuity Act. Initially, the second respondent held that the petitioner and the fourth respondent are jointly and severally liable to pay gratuity. But, later, the petitioner was directed to pay gratuity to the claimants with 10% simple interest from the date of termination of contract by the fourth respondent. In certain cases, the controlling authority also directed the petitioner to pay gratuity in excess of what has been claimed by the claimants themselves. 4.5. Petitioner, aggrieved by the order of the controlling authority, preferred appeals before the appellate authority, who insisted payment of gratuity, as directed by the controlling authority, for entertaining the appeals filed by the petitioner, against which, a writ petition was filed before this Court in W.P.No.1950 of 1997 and this Court, by order dated 21.6.99, directed the petitioner to deposit Rs.10 lakhs before the appellate authority and also directed the appellate authority to dispose of the appeals within two months from the date of deposit. 4.6. The petitioner deposited Rs.10 lakhs and in the meanwhile, 4th respondent also preferred appeals before the appellate authority against the order of the controlling authority. All the appeals were heard together and the appellate authority modified the order of the controlling authority by exonerating the fourth respondent from the liability on payment of gratuity to the claimants and held that the petitioner alone is liable to make the payment of gratuity. https://hcservices.ecourts.gov.in/hcservices/ IV. Relief sought for 5. In the above facts and circumstances, the present writ petitions have been filed for issuance of Writs of Certiorari to call for the records connected with the common order dated 29.2.2000 passed in the respective appeals on the file of the first respondent Appellate Authority, confirming the order of the second respondent Controlling Authority dated 19.8.1996 passed in the respective applications and to quash the same. V. - Grounds raised by the petitioner 6. The challenge made to the impugned order by the petitioner is on the following grounds: (i) There is no primitive of contract between the petitioner and the claimants, who were engaged by the third respondent and therefore, there is no employer-employee relationship within the meaning of Section 2(e) of the Payment of Gratuity Act, as the petitioner has not engaged the claimants at any point of time; (ii) The petitioner alone cannot be held responsible to discharge the liability of payment of gratuity to the claimants, as the ultimate beneficiary of the entire contract is the fourth respondent, who is the Principal Employer and hence, the fourth respondent as well as the third respondent, who engaged the claimants for the work assigned to him, should also be held responsible for discharging the liability; and (iii) In any event, the petitioner company had already become defunct and it is not in a position to discharge the liability fully as directed by the first respondent. VI. Contentions of contesting respondents 7. Per contra, Mr.K.M.Ramesh, learned counsel appearing on behalf of the claimants, argues for sustaining the order of the authorities below and has also filed memos dated 20.11.2006, the contents of which are common and the same read as follows:- https://hcservices.ecourts.gov.in/hcservices/ MEMO FILED ON BEHALF OF THE WORKMEN VIZ., 6TH RESPONDENT IN EACH OF THE ABOVE WP's. It is respectfully submitted that the 6th respondent in each of the above Writ Petitions being the workmen (Applicants before the Controlling Authority under the Payment of Gratuity Act) hereby agree to restrict their claim of gratuity to the sum of Rs.10,00,000/- (Rupees Ten Lakhs Only) being the amount deposited by the Writ Petitioner as per order dated 21/06/99 made in W.P.No.1950 of 1997 and WMP Nos.3259 of 1997, 25604 and 25605 of 1998 towards the impugned order passed by the original authority, viz., Controlling Authority under the Payment of Gratuity Act, 1972, the 2nd respondent herein. It is therefore prayed that this Hon'ble Court may be pleased to dispose of the above Writ petitions in the above terms and permit the workmen to withdraw the amount lying to the credit of the Controlling Authority with accrued interest if any towards full and final settlement in proportion to their respective claim and thus render justice. Dated at Chennai this the 20th day of November, 2006. sd/- Counsel for 6th respondent in all W.Ps. 8. Mr.S.Karthick, learned counsel appearing on behalf of the fourth respondent, submits that even though the writ petitioner was engaged by the fourth respondent through the fifth respondent, the service of the claimants was not availed of either by the fifth respondent or by the writ petitioner or by the fourth respondent continuously. The learned counsel contends that the appellate authority rightly held that the controlling authority had erred in fixing the responsibility jointly and severally on the writ petitioner and the fourth respondent. VII. - Points for Consideration 9. We have given our anxious consideration on the rival submissions and also perused the orders of the authorities below as well as other records. 10. While the issue that arise for consideration in these batch of writ petitions is whether the entitlement of contract labourers for gratuity can be dislodged or denied on account of tussle between the principal employer, who engaged the service of https://hcservices.ecourts.gov.in/hcservices/ the contract labourers and the contractor, who employed the contract labourers, incidentally, we are also constrained to decide the following issues: (i) Whether the finding as to the relationship between the claimants, the contractor and the principal employer already arrived at by the authorities below based on the materials placed before them can be interfered with by way of a judicial review under Article 226 of the Constitution of India ? and (ii)When the claimants are engaged under contract labour system, to what extent the principal employer is liable to pay the gratuity ? VIII. - Findings and Conclusions Part – I Issue: " Whether the finding as to the relationship between the claimants, the contractor and the principal employer already arrived at by the authorities below based on the materials placed before them can be interfered with by way of a judicial review under Article 226 of the Constitution of India ?." 11.1. In the instant case, the appellate authority, appreciating the agreement entered into between the fourth respondent and the writ petitioner, which is the subsidiary company of the fifth respondent and that of the agreement between the writ petitioner and the third respondent, contractor, held that the fourth respondent had engaged the petitioner after entering into a contractual agreement fixing the sole responsibility for handling of the potash imported by them and thus, they had not engaged any workmen by themselves to carry out the job assigned by them to the petitioner and in turn, it is the petitioner company who engaged the claimants for carrying out the job assigned to it by the fourth respondent, of course, by creating thin veils through the name of the third respondent, T.Arumaidurai, who employed the claimants. Ultimately, the appellate authority held that if at all, the fourth respondent is liable, they are liable for payment of wages and for providing for welfare facilities as stipulated under the Provisions of the Contract Labour Act and not for the payment of gratuity, etc. Thus, the appellate authority has reached a finding that the controlling authority has erred in fixing the responsibility jointly and severally on the alleged two employers, i.e., M/s.Cruick Shank Co. Ltd., the petitioner herein and M/s.Indian https://hcservices.ecourts.gov.in/hcservices/ Potash Ltd., the fourth respondent herein. The appellate authority had rendered a finding based on the materials available on record that the petitioner company alone engaged the claimants through the third respondent, contractor, for carrying out the job assigned to the petitioner and hence, the petitioner is the principal employer and thus, the petitioner alone is liable to settle the gratuity payable to the claimants. 11.2. In INDIAN OVERSEAS BANK v. I.O.B. STAFF CANTEEN WORKERS' UNION [(2000) 4 SCC 245], the Apex Court held as follows:- "... The findings of fact recorded by a fact-finding authority duly constituted for the purpose and which ordinarily should be considered to have become final, cannot be disturbed for the mere reason of having been based on materials or evidence not sufficient or credible in the opinion of the writ court to warrant those findings, at any rate,as long as they are based upon some material which are relevant for the purpose of even on the ground that there is yet another view which can reasonably and possible be taken." ... "The only course, therefore, open to the writ Judge was to find out the satisfaction or otherwise of the relevant criteria laid down by the Supreme Court, before sustaining the claim of the canteen workmen, on the facts found and recorded by the fact-finding authority and not embark upon an exercise of reassessing the evidence and arriving at findings of its own, altogether giving a complete go-by even to the facts specifically found by the Tribunal below." 11.3. It is, therefore, a settled law that the High Court cannot embark upon the serious disputed questions of fact, on which the Industrial Court had already reached a finding, vide STATE OF KARNATAKA v. KGSD Canteen Employees' Welfare Assn., [(2006) 1 SCC 567]. 11.4. Further, where the finding of the Labour Court that the dismissal of the workman from service by the management as justified, proper and lawful and the workman concerned was held to be not entitled to receive any benefit or relief was reversed by the High Court sitting in a writ jurisdiction, the Apex Court, while dealing with the scope of judicial review and interference in the award of Tribunal under Article 226 of the Constitution of India in AMRIT VANASPATI CO. LTD. v. KHEM CHAND [(2006) 6 SCC 325], held that the High Court while exercising powers under the writ jurisdiction cannot interfere with the factual findings of https://hcservices.ecourts.gov.in/hcservices/ the Labour Court, which are based on appreciation of facts adduced before it by leading evidence. 11.5. In view of the above settled proposition of law, once a finding had reached the finality before the authorities below, it may not be proper for this Court to scrutinise the employer- employee relationship existed between the petitioner and the third respondent or between the petitioner and the fourth respondent by way of a judicial review under Article 226 of the Constitution of India re-appreciating the evidence. IX. - Findings and Conclusions Part - II Main Issue: " Whether the entitlement of contract labourers for gratuity can be dislodged or denied on account of tussle between the principal employer, who engaged the service of the contract labourers and the contractor, who employed the contract labourers ? Incidental Issue: " When the claimants are engaged under contract labour system, to what extent the principal employer is liable to pay the gratuity ? 12.1. The above two issues are inter-related and hence, they are dealt with jointly. 12.2. Before proceeding further on the above two issues, it is apt to refer the legislative intention for enacting the Payment of Gratuity Act and the relevant provisions thereunder. 12.3. The Payment of Gratuity Act is intended to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto. The enactment of a Central law on the subject is to avoid different treatment to the employees of establishments having branches in more than one State when, under the conditions of their service, the employees are liable to transfer from one State to another. 12.4. The following definitions, as provided under Section 2 of the Payment of Gratuity Act, are relevant to be referred to. 2(e) - "employee" means any person (other than an apprentice) employed on wages, in any establishment, factory, mine, oilfiled, plantation, port, railway https://hcservices.ecourts.gov.in/hcservices/ 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." 2(f) - "employer" means, in relation to any establishment, factory, mine, oilfield, plantation, port, railway company or shop - (i) belonging to, or under the control of, the Central Government or a State Government, a person or authority appointed by the appropriate Government for the supervision and control of employees, or where no person or authority has been so appointed, the head of the Ministry or the Department concerned, (ii) belonging to, or under the control of, any local authority, the person appointed by such authority for the supervision and control of employees or where no person has been so appointed, the chief executive officer of the local authority, (iii) in any other case, the person, who, or the authority which, has the ultimate control over the affairs of the establishment, factory, mine, oilfiled, 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." 2(s) - "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance. 12.5. The Apex Court in the case of LALAPPA LINGAPPA v. LAKSHMI VISHNU TEXTILE MILLS, SHOLAPUR (1981) 2 S.C.C. 238, held that in terms of existing definition of "continuous service" in section 2(c) of the Act, the permanent employees were not entitled to payment of gratuity for the years they remained absent without leave and had actually worked for less than 240 days in a year, which resulted in denial of gratuity to a number of employees whose short term absence had remained unregularised due to lack of appreciation of its significance for the purpose of working out their entitlement to gratuity and therefore, the definition with regard to "continuous service" has to be amended. Accordingly, the https://hcservices.ecourts.gov.in/hcservices/ definition of "continuous service" has been amended as follows: "2-A. Continuous Service – For the purposes of this Act, - (1) An employee shall be said to be in continuous service for a period if he has, for that period, beein in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment, lay-off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act. (2) Where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer - (a) for the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than - (i) one hundred and ninety days, in the case of an employee employed below the ground in mine or in an establishment which works for less than six days in a week; and (ii) two hundred and forty days, in any other case; (b) for the said period of six months, if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than - (i) ninety-five days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and (ii) one hundred and twenty days, in any other case. [Explanation. - For the purposes of clause (2), the number of days on which an employee has actually worked under an employer shall include the days on which - (i) he has been