Jurisdiction Dilemma: Can a Manager Sue in Bangalore Despite Head Office Contract?

We have a manufacturing industry in Rajasthan and branch/marketing offices in different states. The keyman or Manager is appointed by the manufacturing place, also called the Head Office. The Head Office employs Branch Managers with a service contract. One term of the contract is that the jurisdiction of any dispute will be at the law court of the Head Office.

In one case, a Manager employed in Bangalore, with whom we had a service contract that expired in 2009, continued in service until relieved. His PF, ESI, and Gratuity, etc., were paid out from the H.O. After seven months, he filed an appeal in the Labour Court of Bangalore, claiming that since he was working in Bangalore, his jurisdiction is also in Bangalore. He claimed compensation under section 34 of the Shop and Establishment Act, asking for reinstatement, back wages, and others.

Questions Regarding Jurisdiction and Legal Rights

1. Whether the jurisdiction is at the law court of the place of the H.O. or Bangalore in the above situation, even though the service contract expired but service continued until relieved?

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

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

Jurisdiction and Labor Law: Understanding the Basics

The simple answer is that contracts do not decide matters pertaining to labor law. There is always a clause in each statute that states any contract in abrogation of the law is void. The Contract Act is read as supplementary and not in derogation of other statutes. Therefore, jurisdiction cannot be limited.

Clause 2 of Section 39 of the Karnataka Shops and Establishment Act

"An employee removed or dismissed under sub-section (1) shall have the right to 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."

Therefore, he can file a complaint in Bangalore. For details, visit the site below.

Jurisdiction and Applicable Laws for Employees in Different States

If he is working in an office, the Shop and Establishment Act will apply irrespective of what you want to enforce. If he is not in the factory, and his general place of work is not in the factory, how can you apply the Factory Act and its rules? He is working in Karnataka, while the head office is in some other state. How can you apply the rules of that state to him? It's wrong in law. He can sue you under the Shop and Establishment Act. He can sue you in Karnataka because your contract terms can't override what is provided in law regarding jurisdiction.

In any case, the courts will have the right to overrule the terms of a contract if they believe it necessary, and any contract made will not have validity if the work he is doing is that of an employee under the act. The merits and your lawyers' skills will determine the outcome.

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

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

Secondly, if you have a branch office in Bangalore, then it must have been registered under the 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 the local law and not under the Factory Act.

Lastly, litigation arises out of the perceived violation of the principles of natural justice. The application of the Shops and Establishment Act or the 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 the discovery of the misconduct, rather than ordering a Domestic Enquiry, did your office camouflage the removal with his voluntary resignation? Well, gentleman, there cannot be smoke without fire. The petitioner must have some evidence of a violation of his rights.

Rather than focusing on whether the due process of law was followed or not, your concentration is more on jurisdiction. Suppose for a while the Bangalore court tells the petitioner to file a case in Rajasthan. Now, the court in Rajasthan finds the 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 the Gratuity of the employee under the provisions of the Factory Act. Have you checked whether the disbursement of gratuity takes place under the provisions of the Gratuity Act or the Factory Act? Can the former override the latter?

Thanks,

Dinesh Divekar

In labor jurisprudence, the place of work determines the jurisdiction in employment disputes. Therefore, the aggrieved employee's filing an appeal under the Karnataka Shops and Establishments Act before the Appellate Authority in Bangalore is sustainable.

Under the Shops and Establishments Acts, all employees, including managers, are considered persons employed for the purpose of appealing against wrongful termination of their employment. Filing an appeal after a lapse of seven months is a matter subject to the discretion of the Appellate Authority under the Act, upon hearing the interlocutory application filed by the appellant regarding delay condonation if so required.

When the place of employment or work of an individual is other than the factory or its precincts, they cannot be construed as a worker under the Factories Act, 1948. Nor can the settlement of their dues, including gratuity, preclude them from preferring an appeal against their wrongful termination under any other applicable Act.

Discrepancy in Employment Status

The replies from Dinesh and Umakantha highlight another important discrepancy. You mentioned he was employed under a service contract, yet you also stated that you paid his gratuity and treated him as an employee under the Factory Act. If he is on a contract of service, why did you need to pay him gratuity? By doing so, you have indicated that he is an employee and that the service contract is a sham. Therefore, as he is an employee, he is entitled to seek protection under the provisions of the Shop and Establishment Act. He is not a contractor but an employee. Thus, the existence, expiry, and renewal status of the contract are now immaterial.