Case Note & Summary
The judgment involves cross petitions filed by Mercedes-Benz India Pvt. Ltd. (employer) and its ex-employee, Mr. Noshir Nani Desai, challenging an order of the Appellate Authority under the Payment of Gratuity Act, 1972. Mr. Desai served Mercedes-Benz from 1996 to 2004, after which he was posted on a foreign assignment with Daimler AG in Germany (Host Company) under an Agreement of Assignment of Contract of Appointment. He resigned on 5 April 2012 and was relieved on 25 June 2012. The dispute concerns gratuity for the entire period from 1996 to 2012. Mr. Desai filed an application before the Controlling Authority, which allowed his claim for Rs. 16,51,652. Mercedes-Benz appealed, and the Appellate Authority partly allowed the appeal, setting aside the Controlling Authority's order and remanding the matter for determination of the exact gratuity payable, holding that the two spells of service were continuous and the cap of Rs. 10 Lakh applies. Mercedes-Benz challenged the finding of continuity, while Mr. Desai challenged the setting aside of the Controlling Authority's order. The High Court analyzed the Agreement of Assignment, which stated that Mr. Desai's services were placed with the Host Company but he remained an employee of Mercedes-Benz. The court held that the continuity of service was established, and the employer is liable for gratuity for the entire period. The court dismissed both petitions, upholding the Appellate Authority's order of remand.
Headnote
A) Gratuity - Continuity of Service - Foreign Assignment - Payment of Gratuity Act, 1972 - The court considered whether an employee's service during a foreign assignment with a group company is continuous with the original employer for gratuity calculation. The court held that the Agreement of Assignment of Contract of Appointment clearly indicated that the employee remained in the service of the original employer, and thus the two spells of service were continuous. (Paras 1-10) B) Gratuity - Calculation - Cap on Gratuity - Payment of Gratuity Act, 1972, Section 4 - The court held that the cap of Rs. 10 Lakh under the Gratuity Act applies, and the employer is liable to pay gratuity for the entire period of service, including the foreign assignment, subject to the statutory cap. (Paras 3-10) C) Gratuity - Remand - Determination of Exact Amount - Payment of Gratuity Act, 1972 - The court upheld the Appellate Authority's order remanding the matter to the Controlling Authority for determination of the exact amount of gratuity payable, as the employer had already paid Rs. 5,59,292 and the exact entitlement needed to be computed. (Paras 1-10)
Issue of Consideration
Whether the service rendered by an employee during a foreign assignment with a group company constitutes continuous service with the original employer for the purpose of gratuity calculation under the Payment of Gratuity Act, 1972.
Final Decision
Both writ petitions are dismissed. The order of the Appellate Authority dated 4 October 2021 is upheld. The matter is remanded to the Controlling Authority for determination of the exact amount of gratuity payable to Mr. Desai.
Law Points
- Continuity of service
- gratuity calculation
- foreign assignment
- employer liability
- Payment of Gratuity Act
- 1972
