Jurisdiction Under Service Contract - CiteHR
Dinesh Divekar
Business Mentor, Consultant And Trainer
Umakanthan53
Labour Law & Hr Consultant
Saswatabanerjee
Partner - Risk Management
+1 Other

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We are having a manufacturing industry in Rajasthan and branch/marketing offices in different states. The keyman or Manager is appointed by Manufacturing place also called Headoffice. Head Office employs Branch Managers with service contract. One term of contract is that Jurisdiction of any dispute will be at law court of Headoffice. In one case a Manager employed at Bangalore with whom we had service contract which expired in 2009 continued in service till relieved. His PF, ESI,and Gratuity etc were paid out from H.O. After seven months he filed an appeal in Labour court of Bangalore claiming that since he was working in Bangalore his jurisdiction is also at Bangalore. He claimed compensation under section 34 of Shop and Establishment Act asking reinstatement,back wages and others.

My question is 1. Whether jurisdiction is at law court of place of H.O. or Bangalore in above situation though service contract expired but service continued till relieved.

2. Whether employee (Manager) can sue under Shop and Establishment Act of Karnataka after seven month of termination of service.?

3.As we had treated him as employee under Factory Act and accordingly given all facilities as per Act and cleared his gratuity etc.can still he sue us under Shop and Establishment Act of Karnataka.

MD
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The simple answer is that contracts does not decide matters pertaining to labor law. There is always a clause in each statue that says any contract in abrogation to the law is void. Contract Act is read supplementary and not in derogation of other statues. So jurisdiction cannot be limited. See this clause 2 of section 39 of Karnataka Shops and Establishment Act
"An employee removed or dismissed under sub-section (1) shall have a right of appeal to such officers having jurisdiction over such areas or such classes of employees as may be prescribed on the ground that there was no reasonable cause for the removal or dismissal or that he has not been guilty of misconduct as held by the employer"
So he can complaint in Bangalore. For details see site below.
If he is working in an office, the shop and establishment act will apply irrespective of what you want to apply
He is not in the factory, his general place of work is not in the factory, how can you apply factory act and rules ?
He is working in Karnataka. Head office is some other state. How can you apply rules of that state to him ?
It's wrong in law.
He can sue you under shop and establishment act
He can sue you in Karnataka because your contract terms can't override what is provided in law with regard to jurisdiction. In any case the courts will have a right to over rule the terms of a contract if they believe necessary and any contact made will not have validity of the work he is doing is of an employee under the act
Rest, the merits and your lawyers skills will determine
Dear Mr MD Modi,

You have linked two unrelated issues. One is about expired contract and second one is litigation. Nevertheless, you have not understood the cause of the litigation itself.

As far as contract is concerned, why your office did not renew the contract after expiry? Anyway, expiry of the contract does not have bearing on the litigation as such.

Secondly, if you have branch office in Bangalore then it must have been registered under Karnataka Shops & Establishment Rule, 1963. Therefore, which law should apply to him? The very office in which he worked all along or a remote factory where production took place? The employee was recording the attendance under the provisions of local law and not under Factory Act.

Lastly, litigation arises out of perceived violation of principles of natural justice. Application of shops and establishment act or factory act apart, what matters is whether the same employee was removed after the due process of law was followed. What was the cause of removal? Did he commit some misconduct? On discovery of the misconduct, rather than ordering Domestic Enquiry, did your office camouflage removal with his voluntary resignation? Well gentleman, there cannot be smoke without fire. The petitioner must have some evidence of violation of his rights.

Rather than focusing on whether the due process of law followed or not, your concentration is more on jurisdiction. Suppose for a while, Bangalore court tells the petitioner to file a case in Rajasthan. Now court in Rajasthan finds respondent (employer) guilty for not following the principles of natural justice and accepts the claims of the back wages. In that case what would be your position? You will be defeated on your own turf! Defeat is a defeat whether it is on home ground or somewhere else.

The last sentence of your post says that you have cleared Gratuity of the employee under the provisions of Factory Act. Have you checked whether the disbursement of gratuity takes place under the provision of Gratuity Act or Factory Act? Can former override the latter?

Thanks,

Dinesh Divekar
Mr.Modi,
In labour jurisprudence, place of work determines the jurisdiction in the matter of employment disputes. Therefore, the aggrieved employee's filing an appeal under Karnataka Shops and Estt Act before the Appellate Authority at Bangalore is sustainable.
Under Shops and Estts Acts all employees including managers are persons employed for the purpose of appeal against wrongfull termination of their employment. Filing of appeal after seven months lapse is a matter subject to the discretion of the Appellate Authority under the Act on hearing the interlocutary application filed by the appellant regarding delay condonation if so prescribed.
When the place of employment/work of the individual is other than the factory or its precincts thereof, he can not be construed as a worker under the Factories Act,1948 nor the settlement of his dues including gratuity can preclude his preferring an appeal against his wrongful termination under any other applicable Act.
The replies of Dinesh and umakantha brings me to another important discrepancy
You say he was employed under a service contract
Then you say you have paid his gratuity
And you are treating him as employee under factory act
If he on contract of service, why did you need to pay him gratuity ?
By doing so you have shown he is an employee and that the services contract is a sham. Therefore him being an employee he is free to take refuge under the provisions of the shop and establishment act. He is not a contractor but and employee. Therefore existence, expiry and renewal status is now immaterial
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