Noor Mohammed Abdul Rehman Mulla v. BCJ Hospital an Asha Parekh Research Center

1. Rule.

2. Rule is made returnable forthwith. With the consent of parties, petition is taken up for final hearing.

3. By this petition, Petitioner challenges judgment and order dated 26 March 2021 passed by the Industrial Court, Mumbai in Appeal No.55 of 2019. The appeal was filed by Respondents under the provisions of Section 7(vii) of the Payments of Gratuity Act 1972 challenging the judgment and order dated 26 July 2019 passed by the Controlling Authority & Labour Court, Mumbai (Controlling Authority), by which Petitioner was held to be entitled to receive gratuity of Rs.2,69,165/- alongwith interest at the rate of 10%. By judgment and order dated 26 March 2021 impugned in the present petition, the Industrial Court has proceeded to allow the appeal of Respondents and has set aside Controlling Authority’s order dated 26 July 2019. Aggrieved by the judgment and order dated 26 March 2021 of the Industrial Court Petitioner has filed the present petition.

4. Briefly stated, facts of the case are that Petitioner was an employee of Bombay Mercantile Co-operative Bank and held the post of Regional Manager. Respondent No. 1 is the hospital run by the Santacruz Residents’ Association. Considering Petitioner’s expertise in valuation and procurement of machines, Respondents decided to utilize his services. Petitioner claims to have joined services of Respondent hospital with effect from 26 November 2007 as Director and Administrator and worked with them for 9 years and 02 months until his retirement on 01 February 2017. Since he was not paid gratuity by the Respondent hospital, Petitioner filed application dated 01 August 2017 before the Controlling Authority under the Payment of Gratuity Act claiming gratuity. The Respondent hospital filed its written statement on 08 November 2017. Petitioner and Respondents led their respective evidence. The Controlling Authority passed judgment and order dated 26 July 2019 partly allowing the Petitioner’s application held him entitled to receive gratuity amount of Rs.2,59,165/- with interest at the rate of 10% per annum with effect from 02 February 2017 till the date of payment.

5. Respondents challenged the order of the Controlling Authority dated 26 July 2019 by filing appeal (PGA) No.55 of 2019 before the Industrial Court. By its judgment and order dated 26 March 2021, the Industrial Court has reversed the decision of the Controlling Authority while allowing Respondents’ appeal and has set aside the same. Petitioner has accordingly filed present petition challenging judgment and order dated 26 March 2021 passed by the Industrial Court.

6. Appearing for Petitioner, Mr. Peerzada the learned counsel would submit that Petitioner was engaged as an employee of the Respondent hospital. That he was given designation as Director- Administrator. He was also allotted a cabin in the Respondent hospital and that he was reporting to the trustees. That he was assigned clerical work during the course of his service with the hospital. He would also submit that the Controlling Authority considered the evidence on record and arrived at a finding that Petitioner was an employee of the Respondent and rejected their theory of Petitioner’s engagement as professional consultant. He was paid salary of Rs.50,000/- per month at the time of association of his employment as professional or consultant. That the Industrial Court erred in reversing the order of the Controlling authority. Mere filing of return in a particular Form or reflection of amounts received under various headings could not be a reason for the purpose of coming to the conclusion that Petitioner’s engagement with the Respondent-Hospital was of professional basis. That payment of fixed salary every month, accord of designation and provision of cabin, Petitioner had proved beyond any iota of doubt that Petitioner was an employee of Respondent-Hospital. He would submit that Trial Court has erroneously reversed the order of the Controlling Authority and would therefore pray for setting aside the order passed by the Industrial Court.

7. Per contra Mr. Naidu the learned counsel appearing for Respondents would oppose the petition and support the order passed by the Industrial Court. He would submit that Petitioner was engaged only for the purpose of advising the management for purchase of various machinery considering his expertise in procurement of machinery. That Petitioner was never appointed on any post by the Respondent-Hospital and no appointment order or retirement order was issued. That the income tax returns filed by Petitioner would indicate that he was receiving additional income through his consultancy profession. That designation was accorded to Petitioner only for the purpose of communication with the supplier of machinery. That a fixed amount was being paid to Petitioner every month as a consultancy services and not as salary. That Petitioner filed his returns in Form 16A, which shows receipt of professional income. That he did not filed returns in Form 16 which would indicate that he was not a salaried employee. That Petitioner gave several admissions in his cross examination which would clearly indicate that he was engaged by the Respondent-Hospital merely on professional and consultancy basis and not in capacity as an employee. He would refer to definitions of ‘employee’ and ‘wages’ under the Payment of Gratuity Act in support of his contention that neither Petitioner comes within the definition of employee nor the amount paid to him as consultancy charges fall within the term ‘wages’.

8. Mr. Naidu would further submit that the Industrial Court has considered entire documents and evidence on record and has recorded a finding of fact that Petitioner was employed on professional basis. That this Court, in exercise of power of judicial review, cannot interfere with the said finding in absence of any manifest error being demonstrated by Petitioner. In support of his contention he would rely upon judgment of Union of India Vs. M/s. Mustafa & Najibai Trading Co., AIR 1998 SC 2526.

9. I have given my anxious consideration to rival submissions canvassed by the learned counsel and have considered pleadings, evidence and documents on record. The short issue that arises for determination before the Controlling Authority and the Industrial Court and which again arises for my consideration is whether Petitioner can be termed as an ‘employee’ within the meaning of Section 2(e) of the Payment of Gratuity Act. The term is defined under Section 2(e) of the Act is under: “[2(e) ‘employee’ means any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of work, manual or otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway company, shop or other establishment to which this Act applies, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity;]”

10. As per the definition, the terms of employment can be either be express or implied. Admittedly, no appointment order was issued by Respondent-Hospital appointing Petitioner. Therefore the Petitioner is drawing an inference that he is an employee. It was also necessary for Petitioner to demonstrate that he was employed for wages. The term ‘wages’ is defined under Section 2(s) of the Act as under: “2(s) ‘wages’ means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages nd any bonus, commission, house rent allowance, overtime wages and any other allowance.”

11. It is Respondent’s case that Petitioner was being paid fixed sum every month towards consultancy charges whereas the Petitioner terms the same as salary.

12. It is common ground that though no appointment order was issued in favour of Petitioner he was designated as Director- Administration in the Respondent-Hospital. He was also allotted cabin in the office of the Hospital. He was reporting to Trustees and was receiving a fixed sum every month. These facts are admitted by Respondent in the written statement. Therefore in ordinary course of things, the combined effect of these factors may imply that Petitioner was an employee. However, there are other factors, which are also required to be taken into consideration for determining the issue.

13. Respondents have taken a defence that petitioner was engaged as a professional or a consultant and not as an employee. They have relied upon income tax returns filed by him. There is no dispute to the position that the income tax returns have been filed in Form 16A and that the said Form is meant for professionals. It is Respondent’s contention that if Petitioner was an employee, income tax returns ought to have been filed in Form 16. The Petitioner on the other hand has contended that choice of the ITR Form by Petitioner would not be conclusive factor to decide nature of his engagement. Mr Peerzada has gone to the extent of contending that Petitioner erroneously filed returns in Form 16A. I therefore momentarily ignore the type of Form, in which returns were filed by Petitioner for the purpose of deciding nature of his engagement with Respondents. In income tax returns for the year 2007- 08, Petitioner has shown income from business / profession through ‘M/s. Grand International Corp – CONSULTANCY - Consultancy Services’ under the heading ‘net profit as per profit loss account’ of Rs.2,68,072. The said firm is Petitioner’s consultancy firm. In every subsequent years, Petitioner has filed income tax returns showing receipt of professional income. At the time of termination of his association with Respondents, Petitioner was drawing an amount of Rs.50,000/- per month from the Respondent-Hospital. However the amount shown as professional fees receipts in his income tax returns exceed the said amount paid by the Respondent-Hospital during relevant years. This would show that Petitioner was engaged in providing consultancy services to other establishments. To make things worse, there is specific admission on the part of Petitioner in his cross examination that ‘my another income source in that period was agricultural as well as my consultancy services’. Thus there is a specific admission on the part of Petitioner that his services were not restricted to Respondent-Hospital alone and that he was providing consultancy service to other establishments as well. This would rebut the presumption sought to be raised by Petitioner that he was an employee of Respondent-Hospital.

14. It also appears that Petitioner admitted during the course of his cross examination that he never signed any muster register or wage register. He also admitted that other employees of the hospital were receiving Form 16 from the hospital but he never received the same. These admissions would further contribute to the conclusion that Petitioner was engaged merely as a consultant by the Respondent- Hospital and his engagement was not in the capacity as an employee.

15. The Industrial Court has appreciated the material placed on record and has recorded following findings-