Case Note & Summary
The appeal arose from an industrial dispute where Respondent No. 1, originally employed in the appellant-firm's factory at Kamptee, was later directed to work at the firm's head office, also located at Kamptee. The factory and head office were treated as separate entities, registered under the Factories Act and the C.P. & Berar Shops and Establishments Act, 1947 respectively. After about six years of work at the head office, Respondent No. 1 was dismissed by the head office's munim. Aggrieved, he filed an application under Section 16 of the C.P. & Berar Industrial Disputes Settlement Act, challenging the dismissal as incompetent and illegal. The Assistant Commissioner of Labour dismissed the application, holding that at the time of dismissal, Respondent No. 1 was an employee of the head office, not the factory, based on attendance registers, salary payment, and separate governing laws. The Industrial Court dismissed the revision application, treating the matter as a question of fact. Respondent No. 1 then filed a writ petition under Article 226 of the Constitution before the Bombay High Court (Nagpur Bench). The High Court observed that unless it was established that the employment with the factory was legally terminated, it could not be assumed that mere direction to work at the head office changed his employment and substituted the head office as his employer. Since the Assistant Commissioner's order was not clear on this point, the High Court set aside the orders and remanded the case for fresh disposal. The appellant-firm appealed to the Supreme Court by special leave, contending that the High Court made out a new case, that the facts justified treating Respondent No. 1 as an employee of the head office, and that he had given implied consent to the change. The Supreme Court held that a contract for service is incapable of unilateral transfer; a transfer from one employer to another requires a tripartite agreement terminating the original contract and creating a new one. So long as the original contract subsists, the employee remains in the employment of the original employer, even if directed to work for another. The right of dismissal vests with the original employer, not the hirer. On the facts, the pleadings showed that Respondent No. 1 had raised the issue of incompetence of the head office to dismiss him before the lower authorities, so there was no new case. The Assistant Commissioner and Industrial Court had not examined whether the contract with the factory was legally terminated. Therefore, the High Court's remand order was correct. The appeal was dismissed, affirming that the case must go back for a finding on whether the original contract had been terminated and a fresh contract with the head office created.
Headnote
A) Labour Law - Transfer of Employment - Unilateral transfer of service contract impermissible - Industrial Disputes Settlement Act, 1947 (C.P. & Berar) - Employee originally employed in a factory was directed to work in the head office of the same employer, but both were treated as separate establishments registered under different Acts; the head office dismissed the employee. Held, that a contract of service cannot be transferred unilaterally; such transfer requires a tripartite agreement terminating the original contract and creating a new one. Unless the original contract is terminated, the employee continues in the employment of the original employer, and the hirer cannot dismiss him. The High Court correctly remanded the matter for a finding on whether the original contract was terminated. (Pages 279-281)
Issue of Consideration
Whether an employee originally employed in one establishment can be dismissed by another establishment where he was directed to work, without termination of the original contract of service and creation of a new contract?
Final Decision
The Supreme Court dismissed the appeal, upholding the High Court's order of remand. It held that a contract of service cannot be transferred unilaterally; a valid transfer requires a tripartite agreement terminating the original contract and creating a new one. As the lower authorities had not determined whether the original contract with the factory was terminated, the High Court was correct to remand the case. The appellant's contentions were rejected as the pleadings showed the issue was raised earlier and no implied consent could substitute a legal termination of the original contract.
Law Points
- Legal points not extracted
- A contract for service is incapable of transfer unilaterally
- Transfer of service from one employer to another can only be effected by tripartite agreement
- Without termination of original contract employee continues in employment of original employer
- When employer orders employee to do work for another the employee still continues in his employment
- Right of dismissal vests with the employer not the hirer
