Case Note & Summary
The case involves a writ appeal filed by the President and Secretary of the Family Planning Association of India against an order of a Single Judge of the High Court of Karnataka. The Single Judge had directed the appellants to pay gratuity to respondent Nos. 3 and 4 (employees) from the date of their initial appointment till 9.10.2003 with interest at 10% per annum. The respondents were appointed as Family Planning Feed Worker and Auxiliary Nursery Midwives at Urban Family Welfare Centre No.2, Dharwad, run by the appellant No.1. The establishment was later transferred to the Indian Red Cross Society (respondent No.1). The core legal issue was whether the appellants, as transferor, were liable to pay gratuity for the period after the transfer. The court analyzed Section 2(s) of the Payment of Gratuity Act, 1972, which defines 'continuous service' and the effect of transfer of establishment. The court held that upon transfer, the liability for gratuity for the period after transfer shifts to the transferee. The appellants were only liable for the period up to the date of transfer. The court allowed the appeal, setting aside the Single Judge's order to the extent it directed payment for the post-transfer period.
Headnote
A) Gratuity - Transfer of Establishment - Liability of Transferor - Section 2(s), Section 4, Payment of Gratuity Act, 1972 - The issue was whether the transferor employer is liable to pay gratuity for the period after the transfer of the establishment. The court held that under Section 2(s) of the Act, when an establishment is transferred, the liability to pay gratuity for the period after transfer shifts to the transferee. The transferor is only liable for the period up to the date of transfer. The court allowed the appeal and set aside the order of the Single Judge directing the appellants to pay gratuity for the entire period. (Paras 1-10)
Issue of Consideration
Whether the appellants (transferor employer) are liable to pay gratuity to the respondents (employees) for the period after the transfer of the establishment to another entity.
Final Decision
The appeal is allowed. The order of the Single Judge in W.P.No.104050/2014 dated 24.7.2014 is set aside to the extent it directs the appellants to pay gratuity to respondent Nos. 3 and 4 for the period after the transfer of the establishment. The appellants are liable only for the period up to the date of transfer.
Law Points
- Gratuity liability
- Transfer of establishment
- Section 2(s) Payment of Gratuity Act
- 1972
- Section 4 Payment of Gratuity Act
- Continuous service
- Employer's obligation
Case Details
2015 LawText (KAR) (12) 41
Writ Appeal No.100121/2015 (L-PG)
S. Abdul Nazeer, Budihal R.B.
Sri Prakash S. Udikeri (for appellants), Sri Mahesh Wodeyar (for R1), Sri S.L. Matti (for R2 & R3), Sri M.B. Kanavi (for R4 & R5)
The President, Family Planning Association of India, Dharwad Branch and The Secretary, General Family Planning Association of India, Mumbai
Indian Red Cross Society, Dharwad Branch; Basavaraj; Mani Mahindralal Nayyar; Appellate Authority under Payment of Gratuity Act and Regional Labour Commissioner, Central; Controlling Authority under Payment of Gratuity Act and Asst. Labour Commissioner
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Nature of Litigation
Writ appeal against order of Single Judge directing payment of gratuity
Remedy Sought
Appellants sought to set aside the order of the Single Judge directing them to pay gratuity to respondent Nos. 3 and 4 from the date of initial appointment till 9.10.2003 with interest
Filing Reason
Appellants challenged the Single Judge's order on the ground that they were not liable to pay gratuity for the period after the transfer of the establishment
Previous Decisions
Single Judge in W.P.No.104050/2014 dated 24.7.2014 directed appellants to pay gratuity to respondent Nos. 3 and 4 from date of initial appointment till 9.10.2003 with interest at 10% per annum
Issues
Whether the appellants are liable to pay gratuity for the period after the transfer of the establishment to the Indian Red Cross Society
Submissions/Arguments
Appellants argued that upon transfer of the establishment, the liability to pay gratuity for the period after transfer shifts to the transferee under Section 2(s) of the Payment of Gratuity Act, 1972.
Respondents argued that the appellants were liable for the entire period of service.
Ratio Decidendi
Under Section 2(s) of the Payment of Gratuity Act, 1972, when an establishment is transferred, the liability to pay gratuity for the period after transfer shifts to the transferee. The transferor is only liable for the period up to the date of transfer.
Judgment Excerpts
This appeal is directed against the order in W.P.No.104050/2014 dated 24.7.2014 whereby the learned Single Judge has directed the appellants to pay gratuity to respondent Nos.3 and 4 from the date of their initial appointment till 9.10.2003 with interest at 10% per annum.
Procedural History
The Single Judge in W.P.No.104050/2014 dated 24.7.2014 directed the appellants to pay gratuity to respondent Nos. 3 and 4. The appellants filed this writ appeal under Section 4 of the High Courts Act to set aside that order.
Acts & Sections
- Payment of Gratuity Act, 1972: Section 2(s), Section 4
- High Courts Act: Section 4
