THE MANAGEMENT OF M/S LE MERIDIEN BANGALORE V. M/S KARNATAKA STAR HOTELS EMPLOYEES UNION

WP/41013/2011

AI Insights

The case involves the management of M/s. Le Meridien Bangalore, owned by M/s. Mac Charles (I) Ltd., and the Karnataka Star Hotels Employees Union, along with the Deputy Labour Commissioner and the Additional Labour Commissioner. The dispute centered on the closure of the hotel and the subsequent termination of services of the employees, along with the non-payment of certain dues. The parties reached a settlement which was presented to the court, agreeing on the terms of closure and compensation. The court's decision was influenced by precedents set by the Supreme Court regarding the spread over of payments and non-deduction of income tax on such settlements.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 722264 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 18-03-2020
• Assessment Year: misc
• Other Referred Cases: Workmen of American Express International Banking Corporation vs. Management of American Express International Banking Corporation and Others, Murari Mohan Deb vs. The Secretary to the Government of India and Others
• Laws Referred To: Industrial Employment (Standing Orders) Act, 1946, Payment of Gratuity Act, Income Tax Act, 1961, Industrial Disputes Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K B NARAYANASWAMY; C N MAHADESHWARAN
• Assessee Lawyers: B S SATYANANDA
• Keywords: Ex-gratia payment; Income tax exemption; Settlement; Termination of service; Writ petition; Closure of Hotel
• Section: 89; 226; 18(5); 227; 2(p)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18TH DAY OF MARCH, 2020 BEFORE THE HON’BLE MR.JUSTICE G.NARENDAR W.P.NO.41013 OF 2011 (L-RES) BETWEEN THE MANAGEMENT OF M/S. LE MERIDIEN BANGALORE OWNED BY M/S. MAC CHARLES (I) LTD., A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT : P.B. NO. 174, NO.28, SANKEY ROAD, BANGALORE– 560 052. REPRESENTED BY ITS : COMPANY SECRETARY AND VP – FINANCE : MR. M.S.REDDY. …PETITIONER (BY SRI.B.S.SATYANANDA, ADV.) AND 1. M/S. KARNATAKA STAR HOTELS EMPLOYEES UNION HAVING ITS OFFICE AT : NO.1705, KOTHARI COMPLEX, DR. RAJKUMAR ROAD, RAJAJI NAGAR, BENGALURU – 560 010. REPRESENTED BY ITS PRESIDENT. 2. THE DY. LABOUR COMMISSIONER & CERTIFYING OFFICER, UNDER THE INDUSTRIAL EMPLOYMENT (STANDING ORDERS) ACT, 1946 REGION – I, KARMIKA BHAVAN, 2 BANNERGHATTA ROAD, BENGALURU – 560 029. 3. THE ADDL. LABOUR COMMISSIONER (ADMN.) & APPELLATE AUTHORITY UNDER THE INDUSTRIAL EMPLOYEMNT (STANDING ORDERS), ACT, 1946 KARMIKA BHAVAN, BANNERGHATTA ROAD, BENGALURU – 560 029. …RESPONDENTS (BY SRI.K.B.NARAYANASWAMY, ADV. FOR R1; SRI.C.N.MAHADESHWARAN, AGA FOR R2 AND R3.) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE IMPUGNED ORDERS DT.31.12.08, PRODUCED AT ANN-F, PASSED BY THE R2 I.E., THE DY.LABOUR COMMISSIONER & CERTIFYING OFFICER, UNDER THE INDUSTRIAL EMPLOYMENT (STANDING ORDERS) ACT 1946 ETC. THIS WRIT PETITION COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING: ORDER Heard the learned counsel for petitioner, learned counsel for respondent No.1 and learned counsel for respondent Nos.2 and 3. 2. The matter was listed yesterday. Learned counsel for the petitioner had filed into the Court the Joint Memo whereby the employer and the employees had agreed to give a quietus to the disputes pending 3 before various forums in terms of the memo of settlement arrived at between the parties, which terms have been reduced to writing and also filed with the Principal Secretary, Department of Labour, which terms reads as under:- ‘TERMS OF SETTLEMENT 1. CLOSURE OF THE HOTEL: It is agreed by and between the parties that the closure of the Hotel with effect from 31.10.2019 has attained finality and the closure has become in fact and real as contemplated under the statutory provision. The services of confirmed workmen on the rolls of the Hotel on the date of closure stood terminated and have been paid salary in lieu of notice and compensation in accordance with law and other the terminal dues like leave encashment, gratuity in accordance with Payment of Gratuity Act, bonus etc., have been paid. The workmen and the Union have no grievance or claim in respect of the same. 4 2. EX-GRATIA PAYMENT CONSEQUENT TO CLOSURE AND TERMINATION OF SERVICE OF THE EMPLOYEES ON THE ROLLS OF THE COMPANY ON THE DATE OF CLOSURE. 2.1 It is agreed by and between the parties that in addition to the salary in lieu of notice and compensation at the rate of 15 days’ salary for each completed year of continuous service or part thereof in excess of 6 months which is already paid along with the termination order dated 31-10-2019 the workmen concerned will be paid the following amount as ex- gratia. a) All the 91 workmen on the rolls will be paid (i) a sum of Rs. 3500/- per month (Three Thousand Five Hundred Only) from 01.04.2005 to the date of termination of service and (ii) 15 days’ salary for every completed year of continuous service or any part thereof in excess of 6 months. b) The management had entered into settlement in accordance with Section 2 (p) read with Section 18 5 (1) of the Industrial Disputes Act during the period 2005 to 2008, 2008 to 2011 and 2011 to 2014 respectively. Under the settlement for the relevant period the workmen who had signed the settlement have been paid ex- gratia as described below: i. Rs. 10,000/- (Rupees Ten Thousand only) under the settlement with the individual workmen for the period from 2005 to 2008. ii. Rs. 10,000/- (Rupees Ten Thousand only) under the settlement with the individual workmen for the period from 2008 to 2011. iii. Rs. 15,000/- (Rupees Fifteen Thousand only) under the settlement with the individual workmen for the period from 2011 to 2014. 2.2 It is agreed by and between the parties that the workmen who had not signed the settlement for the relevant period 6 will be paid ex-gratia as under for each period of the settlement as agreed below: i. Rs. 10,000/- (Rupees Ten Thousand only) to the workmen who had not signed the settlement for the period from 2005 to 2008. ii. Rs. 10,000/- (Rupees Ten Thousand only) to the workmen who had not signed the settlement for the period from 2008 to 2011. iii. Rs. 15,000/- (Rupees Fifteen Thousand only) to the workmen who had not signed the settlement for the period from 2011 to 2014. 2.3 It is further agreed that the workmen who were on the rolls of the Hotel as on 01.04.2005 and who were not on the rolls of the Hotel on the date of closure of the Hotel i.e., 31.10.2019 shall be paid a sum of Rs. 3,000/- PM (Rupees Three Thousand only) on the basis of the completed years of service during the period from 01.04.2005 to 31.10.2019. 2.4 It is agreed by and between the parties that the payment of ex-gratia as agreed 7 under clauses 2.1&2.2 will be made to the workmen after the closure of all the disputes and the disputes pending for adjudication before the Industrial Tribunal and also disposal of the Writ Petition/Appeal pending before the Hon’ble High Court of Karnataka either filed by the management or the workmen. The parties further agree that the Joint Memo will be filed before the Adjudicating Authority and the High Court for closure of the reference / dispute and disposal of the Writ Petition / Appeal and such memo shall be filed immediately and the payment of ex- gratia will be made after disposal of the dispute and cases in terms of the settlement one week thereafter, on submission of the letter as per the succeeding clause. 2.5 The benefits agreed to under clauses 2.1, 2.2 & 2.3 will be paid on the basis of the request submitted by the workmen in the format attached to this settlement as Annexure-1. 2.6 The workmen who are eligible to withdraw their PF may make an application in the prescribed from which 8 will be forwarded by the management of the hotel to the Provident Fund Office for consideration. 2.7 It is further agreed that the workmen who are eligible to receive the benefits under the settlement and who has expired, his legal heirs will be extended the benefit available under the settlement subject to verification of the personal records of the workmen concerned by the management and after satisfying that the legal heirs or the nominee as the case may be and subject to their submission of the representation requesting for the benefits. 2.8 It is agreed by and between the parties that the individual workmen may file the Form-10E to the Income Tax Department to avail the benefit of income tax in respect of compensation, retrenchment benefits and other payments made in accordance with this settlement read along with the provisions of the ID Act. 2.9 It is agreed by and between the parties that this settlement fully and finally settles all the claims of the workmen in 9 respect of their employment in the hotel and with the payment of amount as agreed under this settlement, nothing shall be due to the workmen from the Hotel. It is further agreed that the workmen individually or collectively or through their union will not raise any dispute or claim on the management of the hotel before any forum, court or authority as this settlement full and finally settles all their claims in respect of their service in the hotel. 2.10 It is agreed by and between the parties that the parties will file the joint memo in the following matters pending before the Hon’ble High Court of Karnataka and or Industrial Tribunal/ Labour Court. • Writ Petition No.-WP. No-(L-RES) 41013 & 41014 of 2011 pending before the Hon’ble High Court of Karnataka in the matter of amendment to standing orders. • Writ Petition No.-WP. No.-(L-RES) 22983 of 2012 challenging the award of the Industrial Tribunal passed in ID No-118/2006. 10 • Writ Petition No.-WP No.-(L-RES) 11274 of 2012 challenging the Govt. notification referring the matter for adjudication in respect of the charter of demands submitted by the union for the year 2011 to 2014 and the reference registered as ID No.- 93/2012 pending before the Industrial Tribunal Bengaluru. Joint memo shall also be filed in ID No.- 93/2012 pending before the Industrial Tribunal Bengaluru for passing an award in terms of the settlement. • Writ Appeal No.- 2 of 2018: Writ Appeal filed by the union challenging the order of the single judge of High Court of Karnataka quashing the reference relating to charter of demands for the year 2014 to 2017. • ID. No.209/2019: The dispute relates to charter of demands dated 06-09-2018 for increase in wages and other benefits for the period from 2017 to 2020. The dispute has been referred to by the Government 11 of Karnataka for adjudication before The Industrial Tribunal Bengaluru. 3. It is further agreed between the parties that the ex-gratia amount as agreed to be paid as per clause-2 above is payable to each of the workmen subject to submission of Annexure-1 as per clause 2.5 above and submission of Annexure-2 as per clause 4 below. 4. The union has requested vide their letter dated 08.01.2020 to allow the facility of deducting union contribution from the amount payable to each of the workmen under this settlement. It is further stated that workmen will execute individual authorization letter to the management for deduction towards union contribution at the rate decided by the union, to facilitate smooth closure of all the court cases. After discussion between the parties it is agreed that certain amount will be deducted out of the amount payable to each of the workmen on the basis of the authorization given by each of the workmen in the format given in the Annexure-2 and the total amount so deducted will be sent to 12 the union by way of DD/cheque drawn in favour of the union. 5. The parties agree to jointly forward the copies of this settlement to the Authorities prescribed under Rule 59 of the Industrial Dispute (Karnataka) Rules.” 3. Learned counsel for the petitioner would submit that the settlement is being arrived at after a prolonged period i.e., since 2005. That the dues are in respect of the period commencing from 01.04.2005 to till date and that respondent - workmen have not been paid any emoluments by way of DA etc. That these amounts were required to be paid over the years but have not been paid and hence, learned counsel would pray that the amount to be spread over in the previous years and exemption under the Income Tax Act, 1961 in terms of Section 89 be made applicable to the case of the respondent - workmen. 4. Learned counsel places reliance on the ruling of the Hon’ble Apex Court in the case of Workmen of American Express International 13 Banking Corporation vs. Management of American Express International Banking Corporation and Others reported in 1987 (Supp) SCC 590, wherein, the Hon’ble Apex Court was pleased to order as under:- ‘Learned counsel appearing for both the parties informs us that the matter has been settled. The workman Ravi Chandran will forthwith tender his resignation. In addition to the amount of Rs. 81,000 already paid to the workman, he will be paid a sum of Rs.1,06,500 (Rs.One lakh six thousand five hundred) only in full and final settlement of all his claims against respondent management of American Express International Banking Corporation within two months. The management will not deduct any amount of income tax from this amount. This amount will be spread over in previous years under the provisions of Section 89 read with Rule 21-A of Income Tax Act, 1961 in terms of the judgment of this Court in Sant Raj v. O. P. Singla. The appeal is disposed of accordingly. No costs.’ 14 5. Further, reliance is also placed on the ruling of the Hon’ble Apex Court in the case of Murari Mohan Deb vs. The Secretary to the Government of India and Others reported in 1985 AIR 931, wherein, the Court was pleased to hold as under: ‘Once the order of compulsory retirement is set aside, the appellant continues to be in service. He has reached the age of Superannuation as on December 6 , 1978 as pointed out in the affidavit and not controverted. Therefore, it is not permissible to direct his reinstatement in service. He would be entitled to backwages from the date of compulsory retirement on October 16, 1962 till the date of his superannuation on December 6, 1978. C Before we determine the amount payable as backwages, we must make it distinctly clear that while computing the amount we have kept in view the meagre monthly salary which the appellant would have received for the years 1962 to 1974 when the pay scale of his post was revised. In any year if he had received full salary, he 15 was not liable to pay income-tax at the rates then in force. Even the revised salary with the exemption limit of income-tax going up would have not been assessable to income-tax. And this lowest grade class IV servant, we were informed had no other source of income. Now that the amount is payable in one lump sum, presumably the Government may resort to Sec. 192 of the Income Tax Act. But let it be made distinctly clear that the appellant is entitled to the benefit of Sec. 89 and Rule 21A of the Income Tax Rules and he is entitled to relief under Sec. 89. Therefore, while computing the total amount, we have kept the spread over in view and in no year any income-tax is deductible from the meagre salary of this low paid class IV employee. If therefore, any deduction is made towards income-tax while making the payment, it is incombent upon the Tripura administration to take all necessary steps to obtain the relief for the appellant under Sec. 89 of the Income-Tax Act read with Rule 21A of the Income Tax Rules.’ 16 6. In view of the above, this Court is of the considered opinion that respondent – workmen, who have been waging a battle over the last decade and more be entitled to a similar benefit as extended by the Hon’ble Apex Court in the cases referred to above. Therefore, while computing the dues, amount received by the respondent – workmen, the same has to be spread over the period commencing from 01.04.2005 to till date and thereafter, the calculation shall be made if tax is payable in terms of Section 89 of the Act. Accordingly, the petition stands disposed off. In view of the disposal of the main petition, I.A.No.1/2012 and I.A.No.2/2012 do not survive for consideration. Hence, disposed of. Sd/- JUDGE dn/- CT-HR "