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Dorab Pirojsha Siganporia Vs. the President and Appellate Authority of Industrial Tribunal, Bombay - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtMumbai High Court
Decided On
Case NumberW.P. No. 1500/81
Reported in(1985)87BOMLR426; (1986)IILLJ501Bom; 1986MhLJ409
ActsIndustrial Disputes Act, 1947 - Sections 2, 25F and 25FF; Payment of Gratuity Act, 1972 - Sections 1(3), 4 and 4(1)
AppellantDorab Pirojsha Siganporia
RespondentThe President and Appellate Authority of Industrial Tribunal, Bombay
.....establishment act (bom. lxxix of 1948), sections 2(8), 2(4)--office of legal practitioner whether commercial establishment--amended definition of 'commercial establishment' by amending act no. 64 of 1977--amendment being inclusive of establishment of legal practitioner whether violates article 14 of constitution--pre-amendment definition of 'commercial establishment' whether includes advocate's or solicitor's office--office of partners changing into office of sole proprietor--partial change of management whether terminates employment of earlier employees--partnership act (ix of 1932), section 39--bombay shops and establishments (amendment) act (mah. act lxiv of 1977), section 2(b).;the word 'establishment' in section 1(3)(b) of the payment of gratuity act, 1972 means an 'establishment'..........shops and establishments act, 'establishment', to the extent relevant here, means'....... a shop, commercial establishment........ to which this act applies and includes such other establishment as the (state) government may, by notification in the official gazette, declare to be an establishment for the purpose of this act.'under s. 2(4) of the bombay shops and establishments act, 'commercial establishment' to the extent relevant here means'.... an establishment which carries on, any business, trade or profession or any work in connection with, or incidental or ancillary to, any business, trade or profession...'thus, the word 'establishment' in s. 1(3)(b) of the act means an 'establishment' as defined in s. 2(8) of the bombay shops and establishments act and consequently includes a.....

1. This petition under Article 226 of the Constitution arises out of proceedings under the Payment of Gratuity Act. 1972.

2. The petitioner is a practising Advocate and Solicitor. Prior to 1st April, 1936 one Framji M. Vachha was practising as a Solicitor in the name and style of M/s Vachha & Co. as its sole proprietor. The said Framji Vachha and respondents Nos. 4 and 5 (who also are solicitors) constituted a partnership firm under the name and style M/s Vachha & Co. In August 1947 respondent No. 2 (hereafter 'the employee') joined this firm as a clerk. In April 1959, Framji Vachha expired but the firm M/s Vachha & Co. continued with the two surviving partners. On 1st April, 1965 the petitioner joined this firm as a partner. By mutual consent this firm was dissolved with effect from 31st August, 1977. Under clause 15 of the dissolution deed :

'The staff of Messrs. Vachha & Co. has been taken over by Framrose and Rustomji (respondents Nos. 4 and 5 respectively) from 1st September, 1977 and they alone shall be liable and responsible for payment of their salaries from that day onwards.'

As a member of the staff, the employee - respondent No. 2 thus continued in service of respondents Nos. 4 and 5 who, as partners, continued to carry on their legal profession as before in the same premises and in the same name M/s Vachha & Co. The employee also is still in the same service.

3. In June 1979, the employee while still in the said service, made an application under S. 4 of the Payment of Gratuity Act. 1972 (hereinafter the Act) for determination of gratuity purported to be due and payable to him by the petitioner and respondent Nos. 3, 4 and 5. In reply, a contention was raised that the Act did not apply and, even otherwise the application was barred by limitation. The Controlling Authority held that the Act applied and that the claim was not barred by limitation. The application was consequently allowed and the petitioner and respondents Nos. 3, 4 and 5 were directed to pay to the employee the amount of gratuity in question. The petitioner's appeal against this order failed. Hence this petition.

4. Mr. Bharucha, learned Counsel for the petitioner, contended firstly that the Payment of Gratuity Act did not apply to the present case and secondly, assuming it applied, the application was even on merits not maintainable. Both these contentions are refuted by Mr. Naphade, learned counsel for the second respondent.

5. The payment of Gratuity Act applies to -

'every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months.' (vide S. 1(3)(b) of the Act).

Under S. 8(2) of the Bombay Shops and Establishments Act, 'establishment', to the extent relevant here, means

'....... a shop, commercial establishment........ to which this Act applies and includes such other establishment as the (State) Government may, by notification in the Official Gazette, declare to be an establishment for the purpose of this Act.'

Under S. 2(4) of the Bombay Shops and Establishments Act, 'commercial establishment' to the extent relevant here means

'.... an establishment which carries on, any business, trade or profession or any work in connection with, or incidental or ancillary to, any business, trade or profession...'

Thus, the word 'establishment' in S. 1(3)(b) of the Act means an 'establishment' as defined in S. 2(8) of the Bombay Shops and Establishments Act and consequently includes a 'commercial establishment'. And a 'commercial establishment' as defined in S. 2(4) of the Bombay Shops and Establishments Act means inter alia an establishment which carries on any profession.

6. Short question then is whether the partnership firm here M/s Vachha & Co. is a commercial establishment because only if it is so, the Payment of Gratuity Act will apply. In this behalf we have at the outset a Division Bench ruling of the Nagpur Bench in Sakharam Narayan Kherdekar v. City of Nagpur Corporation 1963 M.L.J. 533 holding thus :

'The profession of law carried on by any Advocate or a legal practitioner in any manner or to any extent cannot be said to partake a commercial character or to be a commercial activity. Unless the trade, business or profession carried on also partakes of a commercial nature or venture the premises in which such activities are carried on will not attract the provisions of Shops and Establishments Act. The activity of an Advocate carrying on profession of law is radically distinguished from any other commercial activity. The role of an Advocate in practising and discharging his duties is participation in administration of justice, which is a legal function of the State.'

We also have a ruling of a learned Single Judge of this Court in R.S. Deshpande and another v. Municipal Corporation of Greater Bombay : (1975)IILLJ45Bom wherein also, after considering the definition of 'establishment' and 'commercial establishment' in S. 2(3) and 2(4) respectively of the Bombay Shops and Establishments Act, it was held inter alia that the office of an advocate is not a commercial establishment within the meaning of the said Act. In this context the following observations are reproduced :

'... Let us take the instance of the legal profession. There are well settled standards of conduct and etiquettes prescribed for the legal profession in India, England, United States and several other countries. An Advocate is required to comport himself in a manner befitting the status as an officer of the Court, a privileged member of the community, and a gentleman. He owes a duty to the Court consistent with his independence, a duty to his client consistent with his duty to the Court and to the opponent and his advocate. The advocate also owes a duty to his profession and his colleagues who are its members. There are restrictions on his taking up other employment and a high professional rectitude is expected of him. The Bar Council of the State and the Bar Council of India are the professional organisations which control the admission to, the discipline in and punishment for misconduct in the profession. There is an appeal to the Supreme Court of India...'

7. It was, however, contended by Mr. Naphade learned Counsel for the employee, that whatever be the earlier position emerging from the aforesaid authorities, the same no longer holds good after the Amending Act viz., Act No. 64 of 1977 amending inter alia the definition of 'commercial establishment' under S. 2(4) of the Bombay Shops and Establishments Act so as to include :

'... establishment of any legal practitioner, medical practitioner, architect, engineer, accountant, tax consultant or any other technical or professional consultant.'

Ex-facie this amendment clearly supports the contention of Mr. Naphade and without anything else it would have been extremely difficult for the petitioner's counsel to get over this amendment save and except by a possible contention that this amendment would not apply to the present case which arises out of the facts and circumstances long prior thereto. Unfortunately, however, for Mr. Naphade there is a Division Bench decision of this Court in the case of Narendra Keshrichand Faladi and another v. State of Maharashtra : (1985)IILLJ24Bom , striking down the aforesaid amendment in so far as it relates to the establishment of a legal practitioner on the ground that it violates Art. 14 of the Constitution. And, as the rule of precedent goes, this ruling binds us all. This petition has, therefore, to be considered de hors the said amendment. And so considered, the pre-amended definition of 'commercial establishment' does not as already noticed, include an advocate's or a solicitor's office.

8. Mr. Naphade contended that a lawyer's or solicitor's firm is an industry within the meaning of S. 2(j) of the Industrial Disputes Act. In support he relied upon the Supreme Court decision in Bangalore Water Supply and Sewerage Board v. Rajappa and others : (1978)ILLJ349SC . Now, this ruling is not an authority directly relating to a lawyer's or a solicitor's office. On the other hand there is a direct ruling of the Supreme Court on the question whether a solicitor's office is an industry vide National Union of Commercial Employees and another v. M. R. Meher, Industrial Tribunal, Bombay and others : (1962)ILLJ241SC . Observations in the context here are as follows : at p. 245. 246.

'A solicitors' firm carrying on the work of an attorney does not satisfy the test mentioned above and is not and 'industry' within the meaning of S. 2(j). Superficially considered, the solicitors' firm is, no doubt, organised as an industrial concern would be organised. There are different categories of servants employed by a firm, each category being assigned separate duties and functions. But it must be remembered that the service rendered by a solicitor functioning either individually or working together with partners is service which is essentially individual; it depends upon the professional equipment, knowledge and efficiency of the solicitor concerned. Subsidiary work which is purely of an incidental type and which is intended to assist the solicitor in doing his job has no direct relation to the professional service ultimately rendered by the solicitor. The work of the clerk who types correspondence or that of the accountant who keeps accounts has no direct or essential nexus or connection with the advice which it is the duty of the solicitor to give to his client. There is no doubt, a kind of co-operation between the solicitor and his employees, but that co-operation has no direct or immediate relation to the professional service which the solicitor renders to his client.

... ... ... ... A person following a liberal profession does not carry on his profession in any intelligible sense with the active co-operation of his employees and the principal, if not the sole, capital which he brings into his profession is his special or peculiar intellectual and educational equipment. That is why on broad and general considerations which cannot be ignored, a liberal profession like that of an attorney must be deemed to be outside the definition of 'industry' under S. 2(j).'

9. Submission of Mr. Naphade, however, is that this ruling stands overruled by virtue of the ruling in Bangalore Water Supply case. In this context Mr. Bharucha, learned Counsel for the petitioner, invited this Court's attention to yet another ruling of the Supreme Court in V. Sassidharan v. M/s. Peter and Karunakar and others : (1984)IILLJ385SC wherein precisely the same question arose and as here, in that case also, the ruling in Bangalore Water Supply case was relied upon. It is now best to quote the Supreme Court observations verbatim : vide page 388.

'An argument was strongly pressed upon us on the basis of the decision of this Court in Bangalore Water Supply and Sewerage Board v. A. Rajappa : (1978)ILLJ349SC . The High Court has rightly observed that the question which arose in that case was entirely different, namely, the sweep of the meaning of the word 'industry'. The ratio of that decision is that the term 'industry' covers any activity which is systematically or habitually undertaken for the production or distribution of goods or for rendering material services to the community at large with the help of employees. The question which arises in this appeal is basically different, namely, whether a lawyer's office or the office of a firm of lawyers is a commercial establishment. Considerations which were germane to the determination of the question in the Bangalore Water Supply case are foreign to the decision of the question before us.'

This squarely meets and answers the contention of Mr. Naphade based on the ruling in Bangalore Water Supply case (supra).

10. The petitioner's learned Counsel Mr. Bharucha, also contended that even if one were to assume the Payment of Gratuity Act to be applicable to the instant case, the employee's application was on merits also not maintainable. There is considerable substance in this submission. Under S. 4(1) of the Payment of Gratuity Act, gratuity is payable to an employee.

'.... on the termination of his employment after he has rendered continuous service for not less than five years :

(a) on his superannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease :'

The employee here does not fall in any of these categories. His employment has not in the least stood terminated either by way of his superannuation or retirement or death or resignation or disablement due to accident or disease. Indeed, the employee is admittedly still very much in service and it is the same service as before. It has been at all relevant times a continuous and uninterrupted service. At the highest, the management has only partly change but without in the least interrupting the service of the employee and without in the least affecting the terms and conditions of service applicable to him and without in the lest rendering the same in any manner less favourable to him than before. As observed by the Calcutta High Court in Alex A. Apcar (Jr.) and Co. v. M. N. Gan and other : AIR1960Cal14

'A change of partnership by inclusion or retirement of Partner, although legally changes the constitution of the firm, does not mean a change of business or employer within the meaning of Ss. 25F and 25FF.

When therefore plural proprietors become a single proprietor there is no change in the 'employer' within the meaning of S. 25F and S. 25FF of the Industrial Disputes Act, provided the business remains the same. When S. 25FF speaks of transfer of undertaking, it does not introduce a case of changing constitution of partnership firm or its dissolution to convert it into a sole proprietorship.'

The position thus emerging and the net result is, indeed, in favour of the employee himself. A break in service would, perhaps, have had an adverse impact on the quantum of gratuity payable to him as and when due on the basis of his continuous service without any interruption.

11. Mr. Naphade submitted that by letter dated 18th December, 1978 respondents Nos. 4 and 5, as partners of respondent No. 3, informed the staff that their services 'have been taken over' by respondent No. 3-firm from 1st September, 1977 and 'does not consider as continuous'. I do not see how mere such letter can affect the otherwise favourable position of the employee. Besides, this very letter contains a categorical admission that the services of the staff have been taken over. A further statement therein that this is not considered as continuous is, after all, a mere inference or ipse dixit which cannot in the least affect the legal rights of the employees. In this view of the matter and even if one were to assume that the Payment of Gratuity Act is applicable to the present case, the instant application is as at this stage while the employee is still in service not maintainable.

In the result, this petition succeeds and the same is allowed. The impugned orders dated 30th September, 1981 (Exhibit B) and 8th May, 1981 (Exhibit A) are set aside and quashed. Rule is made absolute but, in the circumstances, with no order as to costs.

Pursuant to an interim order of this Court, the total amounts of gratuity deposited with the Controlling Authority was transferred to this Court. From the said amount, the employee has already withdraw 70 per cent. thereof. There is no dispute that the remaining 30 per cent. is the amount equivalent or corresponding to the petitioner's share in the firm of which he was the partner. This amount the petitioner would now be at liberty to withdraw. The Prothonotary and Senior Master to act on the certified copy of the minutes of this order.

At the request of Mr. Naphade, the final orders on this petition are stayed till and inclusive of 30th September, 1985.

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