053-SLLR-SLLR-2002-V-2-KOTAGALA-PLANTATION-LTD-v.-KULARATNA-AND-OTHERS.pdf
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KOTAGALA PLANTATIONS LTD
v.KULARATNA AND OTHERS
COURT OF APPEALFERNANDO, J. ANDAMARATUNGA, J.
CA (PHC) APN NO. 52/2000HC REV. NO. 47/99MC MATUGAMA NO. 76221FEBRUARY 02, 2001DECEMBER 20, 2001JUNE 11 AND 20, 2002
Employee of estate managed and controlled by Sri Lanka State Plantation Corporation(SLSPC) – Conversion of public Corporations and Government Owned BusinessUndertakings into Public Companies Act, No. 23 of 1987 – S. 2 (2), 3 (1), and3 (2) (b) – Liability of company to pay gratuity to the Employees – Payment ofGratuity Act, No. 41 of 1983 – S. 5 (1), 8 (1) – Amending Act No. 41 of1990 – S. 7 A (1) – Deeming provisions.
The workman was an employee of 'U' estate managed and controlled by theSLSPC. By virtue of an Order published by the Registrar of Companies in termsof section 2 of Act No. 23 of 1987 a company was formed (petitioner) to takeover the functions and carry on the business of the SLSPC in the said 'U' estate.
On a complaint made by the employee, that his gratuity has not been paid theMagistrate Court held that the petitioner company was liable to pay the amountclaimed. The SLSPC was discharged.
Held:
The petitioner company came into existence on 22. 06. 1992. Prior to thatdate 'U' estate was managed by the SLSPC. The employee's services wereterminated on 31. 01. 1992 prior to the petitioner company coming intoexistence. Therefore, in terms of s. 5 (1) of Act No. 12 of 1983, the liabilityto pay gratuity was on the SLSPC.
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However, in terms of s. 3 (2) (b) of Act No. 23 of 1987, all liabilities ofthe Corporation subsisting on the date immediately orecedino the appointeddate and specified in the order, shall be deemed to be liabilities of thecompany.
By the use of the word 'deemed' the statute has made the company liableto pay gratuity.
Per Amaratunga, J.
"Under section 8 (2) a certificate is issued not against the 'employer' butagainst the 'defaulter', this latter term is wider in meaning than the termemployer. Accordingly, a company liable under s. 3 (2) (b) of Act No. 23 of1987 is liable to be brought to Court by way of a certificate issued unders. 8 (1) of the Payment of Gratuity Act, No. 12 of 1983.”
APPLICATION in Revision of the Order of the High Court of Kalutara.
Case referred to :
1. Jinawathi v. Emalin – 1986 2 Sri LR 121.
Gomin Dayasiri for petitioner.
Ms. B. Jayasinghe Tilakaratne. DSG for 1st respondent.
Cur. adv. vult.
July 04, 2002
GAMINI AMARATUNGA, J.
The workman named G. Suppiah was an employee of the USK Valley iEstate, Baduraliya, managed and controlled by the Sri Lanka StatePlantations Corporation (SLSPC). He ceased to be an employee ofthe said estate with effect from 31. 01. 1992. By virtue of an orderdated 22. 06. 1992, published by the Registrar of Companies, in termsof section 2 of the Conversion of Public Corporations and Government-Owned Business Undertakings into Public Companies Act, No. 23 of1987 declaring the formation of a company to take over the functionsand carry on the business of the SLSPC in the said USK Valley Estate,
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the functions and the business of the said estate was vested in thepetitioner company with effect from 22. 06. 1992.10
On a complaint made by the workman that his gratuity has notbeen paid, the 1st respondent Assistant Commissioner of Labour fileda certificate in terms of section 8 (1) of the Payment of Gratuity Act.No. 12 of 1983 as amended in the Magistrate's Court of Matugamaagainst –
The Superintendent of the USK Valley Estate;
Sri Lanka State Plantations – Corporation; and
Kotagala Plantations Company Limited (the petitioner) for the
recovery of a sum of Rs. 12,624/54 as gratuity payable toworkman Suppiah.20
The petitioner, Kotagala Plantations Limited, took up the positionthat it was never the employer of workman Suppiah and that it wasnot liable to any gratuity to the workman. The fact that the workmanconcerned was not an employee at any time under the petitionercompany and that Suppiah had been employed by the SLSPC wasnever in dispute. However, having taken into account the order madeby the Registrar of Companies under section 2 (2) of the Conversionof Public Corporations and Government-Owned Business Undertakingsinto Public Companies Act, No. 23 of 1987 and published in theGovernment Gazette dated 22. 06. 1992, the learned Magistrate held 30that the petitioner company was liable to pay the amount set out inthe certificate and made order accordingly. The SLSPC was dischargedfrom the proceedings.
A revision application filed by the petitioner in the High Court,Kalutara, against the decision of the Magistrate was dismissed by theHigh Court. On an application made on behalf of the petitioner forleave to appeal to the Supreme Court, the learned High Court Judgegranted leave to appeal on 08. 06. 2000. However, subsequently the
Kotagala Plantations Ltd. v. Kularatna and Others
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petitioner having discovered that he had a right to prefer a direct
appeal to the Court of Appeal from an order made by the ProvincialHigh Court in the exercise of its revisionary jurisdiction had preferredthis revision application to this Court as it was out of time to preferan appeal against the order of the learned High Court Judge.
When this application came up before this Court, we inquired fromthe learned counsel for the petitioner whether the erroneous view heldby the petitioner that leave to appeal was necessary to prefer anappeal to the Supreme Court against the order of the learned HighCourt Judge when in fact a direct appeal to this Court was availableas a matter of right, is an exceptional circumstance warranting theexercise of revisionary powers of this Court. On this question bothparties have filed written submissions. However, in view of the importantquestion of law raised in this application we have decided to dealwith the merits of the application without dealing with the preliminaryquestion.
According to section 5 (1) of the Payment of Gratuity Act, No. 12of 1983 it is the employer who is liable to pay gratuity to its workmanupon the termination of the latter's services. The petitioner companycame into existence on 22. 06.1992. Prior to that date the USK ValleyEstate was managed by the SLSPC. The workman's services wereterminated on 31. 01. 1992, prior to the petitioner company cominginto existence, and at all times relevant SLSPC was the employerof Suppiah. Therefore, under section 5 (1) of the Payment of GratuityAct the liability to pay gratuity was on the SLSPC.
In terms of section 3 (1) of Act No. 23 of 1987, with effect fromthe date of publication of an order under section 2 (2) in the GovernmentGazette, the Corporation or a part thereof shall absolutely vest in thecompany referred to in the order. Section 3 (1) (b) states that thecorporation means all rights, privileges and interests arising in or outof such property and all the liabilities of that corporation. This provisionthus sets out the general effect of an order made under section 2(2). Section 3 (2) (b) of Act No. 23 of 1987 enacts that without prejudice
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to the generality of subsection (1) "all liabilities of the corporation. . . subsisting on the date immediately preceding the appointed dateand specified in the order made under section 2 (2) shall be deemedto be liabilities of the company with effect from the relevant date.
According to this section, for the liabilities of the corporation tobecome liabilities of the company two conditions must be satisfied.Firstly, the liability of the corporation must be a liability subsistingon the date immediately preceding the relevant date. The relevantdate means the date of publication of the order under section 2 (2) 80in the Gazette, [vide section 3 (1)]. In this instance the corporation'sliability to pay gratuity to Suppiah subsisted on the date immediatelypreceding the relevant date. Therefore, the first condition is satisfied.Secondly, it has to be a liability specified in the order made undersection 2 (2). Item (d) in part I of the schedule to the order madeunder section 2 (2) specified 'All liabilities of the estate specified inpart II of the schedule including gratuities payable to labour in respectof services provided prior to the relevant date' as a function of thecorporation to be taken over by the company. This satisfied the 2ndcondition. Accordingly, by the operation of section 3 (2) (b) liability 90to pay gratuity to labour in respect of services provided prior to therelevant date is deemed to be a liability of the company.
The meaning of the word 'deemed' was considered and explainedby Ranasinghe, J. at 130 – 131 (as he then was) in Jinawathie v.Emalirf’> in the following words : "In statutes, the expression deemedis commonly used for the purpose of creating a statutory function sothat a meaning of a term is extended to a subject-matter which itproperly does not designate. . . Thus, where a person is deemedto be something it only means that whereas he is not in reality thatsomething, the Act of Parliament requires him to be treated as if he 100were'. Ranasinghe, J. went onto explain the legal effect andconsequences of such a legal fiction in the following terms: "Thus,where in pursuance of a statutory direction a thing has to be treatedas something which in reality it is not or an imaginary state of affairsis to be treated as real, then not only will it have to be treated so
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during the entire course of the proceedings in which such assumptionis made but all attendant consequences and incidents, which if theimagined state of affairs had existed would inevitably have flowed fromit have also to be imagined or treated as real", (p 130).
By the use of the word 'deemed' the statute has made the company noliable to pay gratuity which in reality it is not liable to pay. Accordingly,the company cannot contend that it is not liable to pay gratuity toworkman Suppiah as the company was not his employer within themeaning of the Payment of Gratuity Act. The petitioner's writtensubmissions do not in anyway deal with the legal liability imposedon it by section 3 (2) (b) of Act No. 23 of 1987.
Another submission made on behalf of the petitioner is that sincesection 8 (1) of the Payment of Gratuity Act confers jurisdiction onthe Magistrate to recover the payment from the "employer" proceedingsby way of a certificate in terms of section 8 (1) of the Payment of 120Gratuity Act cannot be initiated against the petitioner. (Paragraph 3.12of the written submissions of the petitioner). However, under section8 (2) a certificate is issued not against the 'employer' but against thedefaulter. This latter term is wider in meaning than the term employer.According to section 5 (2) of the Payment of Gratuity Act when theemployer is dead, his legal representative is liable to make thepayment. His failure to discharge his liability would make him adefaulter though he was not the employer. Any other person who isalso under a legal duty to pay would become a defaulter if he failsto make payment. Accordingly, a company liable under section 3 (2) 130(£>) of Act No. 23 of 1987 is liable to be brought to Court by wayof a certificate issued under section 8 (1) of the Payment of GratuityAct if such company fails or neglects to make the payment.
The petitioner has submitted that even if the petitioner is liableto pay gratuity to Suppiah, the proper procedure is to proceed underthe provisions of the Industrial Disputes Act without invoking thespecial procedure set out in section 8 (1). In view of what I havestated above, I am unable to accept this argument.
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Section 7 A (1) brought into the Payment of Gratuity Act by amendingAct No. 41 of 1990 is not relevant to the present case as the new 140section is applicable in respect of workmen who become workmenof the company by virtue of the order made under section 2 (2) ofAct No. 23 of 1987.
The Memorandum dated 18.01.1993 issued by the Chief ExecutiveOfficer of the Plantation Restructuring Unit of the Ministry of Finance(marked 'C' in the Magistrate's Court) dealing with the question asto who should pay gratuity payment due to employees who had leftemployment prior to the date of formation of Regional PlantationCompanies is also not relevant to the issue before Court. Arrangementsset out in such memoranda may operate as internal arrangements isobut cannot operate to limit or to vary the legal obligation created bysection 3 (2) (b) of Act No. 23 of 1987.
In view of what has been set out above I hold that the petitionercompany is liable to pay gratuity to employee Suppiah for his servicesunder the SLSPC in USK Valley Estate before the appointed dateand the Assistant Commissioner has the power to issue a certificateunder section 8 (1) of the Payment of Gratuity Act to enforce payment.Accordingly, I affirm the order of the learned Magistrate, Matugama,dated 11. 12. 1998 and the order of the learned High Court Judgeof Kalutara dated 01. 06. 2000 and dismiss this application. 160
It was agreed by the parties that the decision of this case will applyto CA (Revision) Applications No. 54/2000 and 55/2000. Accordingly,those two applications are also dismissed. In view of the questionof law involved in this application I make no order for costs.
FERNANDO, J. – I agree.
Application dismissed.