M/S Fairwood Infra and Services Pvt. Ltd. v. Deputy Labour Commissioner and Ors.

1. The present petition has been filed challenging the impugned order dated 27 Prathiba M. Singh, J. th January, 2021 passed by the Respondent No.1/Deputy Labour Commissioner (hereinafter “Authority”) under The Delhi Shops and Establishments Act, 1954 (hereinafter “DSE Act, 1954”) in Ref. No. SE/ED/131/2020/5964 titled Sh. Atif Ali v. M/s. Fairwood Infra & Services Pvt. Ltd. & Anr. By the impugned order, the Authority under the Act has held that, in view of the fact that the Claimant/Respondent No.3 herein was drawing his salary from the registered office of the Petitioner Company situated in Delhi, so also considering the Consultancy Agreement dated 18th May, 2018, the jurisdiction in the matter would continue with the Authority under the DSE Act, 1954. 2021:DHC:3185

2. The Petitioner - M/s Fairwood Infra and Services Pvt. Ltd. (hereinafter “Petitioner Company”) is a company having its registered office at M-304, Dharma Apartment, Plot No.2, I.P. Extension, New Delhi- 110092, and is engaged in providing architectural services. The case of Respondent No.3/Mr. Atif Ali (hereinafter “Employee”) was that he was engaged to render services to the Petitioner Company as a Consultant in respect of Design and Architecture, vide Consultancy Agreement dated 18th May, 2015. Under the said Agreement, a monthly fee of Rs.48,000/- was to be paid to the Employee. He was appointed as an architect on 19th July, 2015 with the Petitioner Company. His remuneration was fixed at Rs.50,000/- per month. After serving a probationary period of three months, the Employee had secured a permanent position with the Petitioner Company. However, his grievance was that even after he was permanently appointed, the Petitioner Company did not make payments of salary as agreed upon, and kept delaying the same on one pretext or the other. On 16th

3. In response to the Employee’s claim petition, the Petitioner Company took an objection of territorial jurisdiction on the ground that the establishment where the Employee was working is located in Noida, Uttar Pradesh and registered under the Uttar Pradesh Shops and Commercial Establishments Act, 1962. It was averred that the Petitioner Company may have its registered office in Delhi, but since the establishment where the Employee is working is located in Noida, the DSE Act, 1954 would not December, 2020, the Respondent No.3/Mr. Atif Ali (hereinafter “Employee”) filed an application under Section 21 of the DSE Act, 1954 with the Authority praying for payment of arrears of salary in respect of outstanding dues of Rs.25,49,148/-. apply. It was also further argued that the case of the Employee would not be liable to be entertained by the Authority located in Delhi and the claim has to be rejected. Reliance was placed upon the judgment of this Court in Bhandari Builders Pvt. Ltd. v. M.K. Seth & Anr. [(1988) ILR 1 Delhi 64]. Before the Authority, the Employee relied upon the Governing Law and Dispute Resolution Clause of the Consultancy Agreement dated 18th May, 2015 which stipulated that any dispute arising from or in relation to the said Agreement shall be submitted to the jurisdiction of the competent courts in New Delhi. The Authority rejected the Petitioner Company’s objection to territorial jurisdiction by holding that since the Consultancy Agreement provides that the jurisdiction shall rest with the competent courts in New Delhi. It is this order dated 27th January, 2021 that has been challenged before this Court. Submissions of the Parties:

4. Mr. Ujjawal Jha, ld. Counsel appearing for the Petitioner Company has made the following submissions: i) That it is clear from a reading of paragraph 3 of Employee’s claim petition itself, that after the Consultancy Agreement dated 18th May, the Employee was given a permanent job at the post of architect, vide Appointment Letter dated 19th ii) That a cogent reading of provisions under Section 1, Section 2(5) & Section 2(9) of the DSE Act, 1954 makes it clear that that every place where the company would have an office would be a separate establishment. Since the office where the Employee was working was situated in Noida, the DSE Act, 1954 would not have July, 2015. Thus, the said Consultancy Agreement was no longer applicable. any applicability, inasmuch as the said Act does not extend beyond the Union Territory of Delhi. iii) Reliance is heavily placed upon the judgment in Bhandari Builders (supra) as also The Union Cooperative Society Limited vs. R.K. Bahal [(1976) ILR 1 Delhi 862 to argue that these two cases clearly lay down the principle that though the company may be the same, the establishment would be different, depending upon the place where the Employee is working. iv) That even if the Consultancy Agreement is taken into consideration, the application of the DSE Act, 1954 cannot be extended to the establishment located in Uttar Pradesh. v) That since the DSE Act, 1954 is a special Act, the general provisions of law under The Code of Civil Procedure, 1908 or under the Industrial Disputes Act, 1947 would have no applicability. vi) He concedes to the fact that the salary slips issued to the Employee mention the registered office of the Petitioner Company situated in Delhi, but clarifies that it is merely for the purpose of reporting to tax authorities, and has nothing to do with the Employee or the establishment under the DSE Act, 1954.

5. Mr. Abdullah Tanveer, ld. Counsel appearing for Respondent No.3/Employee submits as under: i) That Section 2(5) would have to be read with Section 43 of the DSE Act, 1954, which clearly stipulates that the employer in respect of any employee for the purpose of the Act would be the owner of the establishment or the association of individuals or one of the partners. Thus, these two provisions, if read together, would mean that the employer for the Employee in the present case would be based in Delhi, owing to the fact that the registered office of the Petitioner Company is situated in Delhi. ii) That the registration of the Noida office of the Petitioner Company under the Uttar Pradesh Shops and Establishments Act, 1962 is irrelevant as the same was granted to the Petitioner only on 1st December, 2016, whereas the Employee had joined the Petitioner Company as a Consultant on 18th May, 2015 and, thereafter, as a permanent employee at the post of architect on 19th ii) Reliance is placed upon Sections 2(5), 2(7), 2(8), 2(9) and 2(17) of the DSE Act, 1954 to emphasise that the definitions of commercial establishment, employee, employer, establishment, and occupier are broad enough to confer jurisdiction upon the July, 2015 itself, that is, prior to the said registration. Thus, the said registration would be of no avail in this matter. iii) That the registered office of the Petitioner Company is situated in Delhi, the salary slips issued to the Employee mention the Delhi office, as also the Employer is based in Delhi. Thus, for all the aforementioned reasons, the DSE Act, 1954 would be applicable.

6. Mr. Gautam Narayan, ld. ASC for GNCTD has submitted that, at the outset, the Authority under the DSE Act, 1954 situated in Delhi, would have jurisdiction in the present case. He further submits as under: i) That the Authority at the place of registration of establishment cannot be the only Authority which can exercise jurisdiction. Authority situated in Delhi, over the Petitioner Company which has its registered office in Delhi. He also relies upon Section 5(1) which deals with registration of establishment and Section 34 which provides for furnishing of letter of appointment to employees by the employer. iii) That the Consultancy Agreement dated 18th May, 2015 makes it abundantly clear that the corporate office of the Petitioner Company may be in Noida, but the registered office is in Delhi. iv) That the Employee was not restrained from rendering services in any particular geographical location. v) That clause 9 of the Consultancy Agreement, that is, the Governing Law and Dispute Resolution clause, clearly states any dispute arising from or in relation to the said Agreement shall be submitted to the jurisdiction of the competent courts in New Delhi. vi) Insofar as the subsequent Appointment Letter dated 19th viii) That the Board Resolution dated 2 July, 2015 is concerned, the same not being on record and Clause 9 of the Consultancy Agreement having not been challenged in any manner, the jurisdiction rests with the competent courts in New Delhi. vii) That the TDS certificates and the salary slips also clearly mention the Delhi office of the Petitioner Company. nd July, 2020 mentions that the registered office of the Petitioner Company is admittedly in Delhi. ix) That the registration of the Noida office under the Uttar Pradesh Shops and Establishments Act, 1962 on 15th

7. Ms. Roy, ld. Counsel appearing for the Employee submits that the June, 2019 would not in any manner take away the fact that the Petitioner Company would be subject to the jurisdiction of the competent courts in Delhi. x) That in the reply to the Petitioner Company’s application for rejection of the Employee’s claim before the Authority, the categorical stand of the Employee was that he had not been hired merely for the Noida office, and various addresses of the Company having been mentioned including Noida, Mumbai etc. Since the Petitioner Company is carrying on projects in various jurisdictions, as also has its offices and establishments in different jurisdictions, the Authorities in all these jurisdictions would be entitled to pass orders in respect of the Petitioner Company. xi) That the facts in the present case are completely distinguishable from Bhandari Builders (supra). In the said case, the employee was specifically recruited only to work in Iraq. Various facts in the said judgment are referred to, in order to emphasise that there was a categorical clause to the effect that the employee was not in employment in India. xii) Reliance is also placed upon the principles as laid down in ABC Laminart Pvt Ltd v. AP Agencies, Salem, (1989) 2 SCC 16 and Morgan Stanley Mutual Fund v Kartick Das, (1994) 4 SCC 225 to contend that the Authority under DSE Act, 1954 would have jurisdiction. intention of the parties was always was to submit any disputes arising between the parties from or in relation to the Consultancy Agreement to the courts of competent jurisdiction in New Delhi, inasmuch as the same is contained in Clause 9 of the Consultancy Agreement. Reliance is placed upon M/s. Swastik Gases Pvt. Ltd. v. Indian Oil Corp. Ltd. [2013] 7 S.C.R. 581 to contend that even if the word “exclusive” is not used in the Dispute Resolution clause, the intent of the parties has to be seen. She also emphasises that, vide Letter dated 30th September, 2020, the amount of unpaid salary is admitted to the extent of Rs.12,11,934/-.

8. In rejoinder, Mr. Ujjwal Jha, ld. Counsel for the Petitioner Company, relies upon paragraph (g) at page 49 of the reply to the Petitioner Company’s application for rejection of the employee’s claim before the Authority, to argue that the Employee has admitted that he is working at the Noida office, and the registered office is in Delhi. He further submits that all shops and establishments have to adhere to the provisions of the respective Acts, which are applicable to them in their respective jurisdictions. Thus, the registration of the establishment is not a sine qua non for filing claims, and what would be relevant is the place where the Employee is working.

10. The Employee was engaged as a Consultant in respect of Design and Architecture, vide Consultancy Agreement dated 18 Analysis and Findings:

9. The short question that has been arisen in this matter is whether the Authority under the Delhi Shops and Establishments Act, 1954 can exercise the jurisdiction to decide the claim of the Employee. th May, 2015 entered into between the Employee, who was shown to be a resident of Delhi, and the Petitioner Company, whose Corporate office is shown to be located at 7th Floor, Tower-D, Logix Techno Park, Sector-127, Noida (U.P.) – 201301, Certain clauses of this agreement are relevant in the present case, and are set out below: “RECITALS: The Consultant is engaged in providing various consultancy services and has proposed to provide his/her services to the Company and the Company has agreed to avail services of the Consultant. The parties therefore wish to execute this Agreement in order to record their respective rules and responsibilities relating to the above. NOW, THEREFORE, in consideration of the activities undertaken and services rendered by the parties as stated hereinabove, the Parties agree and these present witnesses as follows: “Scope of work- The Consultant shall provide various services in respect of Design and Architecture. Monthly fee- The Company shall pay to the Consultant a fix monthly fee of Rs. 48000/- Rupees per month only) plus applicable Service Tax. The fee shall be paid within 10 days of receipt of invoice. Withholding tax- All payments to the Consultant shall be subject to deduction of withholding tax as per applicable laws. Governing law and dispute resolution- This agreement shall be governed by the laws of India. Any dispute arising from or in relation to this Agreement shall be submitted to the jurisdiction of the competent court in New Delhi. Tenure – This agreement shall be effective or a period of one month from the effective date and may be renewed for such further period and on such terms as mutually agreed between the parties.”

11. After the Consultancy Agreement was entered into on 18th May, 2015, an Appointment Letter dated 19th July, 2015 was also issued to the Employee appointing him at the post of Architect with the Petitioner Company. It is the case of the Petitioner Company that after the Agreement engaging him as a Consultant, he became a regular employee w.e.f. 19th July, 2015. It is averred that the Consultancy Agreement stands superseded by the Appointment Letter dated 19th

14. The Petitioner Company has challenged the jurisdiction of the Authority under the Delhi Shops and Establishments Act, 1954 on the July, 2015, and therefore, the Dispute Resolution Clause contained in the former would have no bearing upon this matter. However, the said Appointment Letter has not been placed on record. Thus, for all practical purposes the only agreement which is on record is the Consultancy Agreement.

12. There is, thus, no other agreement between the Employee and the Petitioner company. The term of the Consultancy Agreement was extendible by mutual agreement of parties. The said Agreement was not terminated and would continue to govern the parties in the absence of any further agreement to the contrary. The jurisdiction clause in the agreement is clear and categorical i.e., the competent court located in Delhi was to decide any dispute arising under the agreement. The services of the Employee were to be rendered to the `Company’ and the Agreement did not stipulate any specific place of work.

13. It is also the admitted position on record that the Petitioner Company has its registered office in Delhi. TDS certificates which were issued to the Employee were issued with the Delhi address of the company. The salary slips of the Employee also bear the Delhi address of the registered office. ground that the Employee worked only for the Noida office. However, there is no evidence on record to this effect. Considering that the Petitioner is a company which is engaged in a large number of real estate projects, and the Consultancy Agreement clearly states that the Employee has proposed to provide services to the ‘Company’ and the ‘Company’ has agreed to avail services of the Consultant, the logical corollary would be that the Employee was rendering services across various offices of the Company. There is also no clause in the Consultancy Agreement which restricts his employment to the Noida office.

15. The judgment in Bhandari Builders (supra) is clear to the effect that the Delhi Shops and Establishments Act, 1954 is a social welfare legislation which was meant to provide a quick remedy to those employees who may be wishing to seek outstanding wages from their employers. The observations of the Court in Bhandari Builders (supra) are as under: