UPALI MANAGEMENT SERTVICES LTD v. PONNAMPALAM

043-SLLR-SLLR-2004-V-1-UPALI-MANAGEMENT-SERTVICES-LTD-v.-PONNAMPALAM.pdf


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Upali Management Services Ltd. v Ponnampalam
(Bandaranayake, J.)
331
UPALI MANAGEMENT SERVICES LTD.v
PONNAMPALAMSUPREME COURTBANDARANAYAKE, J.
EDUSSURIYA, J. ANDJAYASINGHE, J.
SC APPEAL No. 63/2002
HIGH COURT No. HCA LT 51/2000
LT CASE NoyADDI/815/96
MAY 9, JULY 29 AND SEPTEMBER 12, 2003
Industrial Dispute – Constmctive termination or voluntary resignation – Penerseorder for payment of compensation – Duty of Labour Tribunal to make an equi-table order.
The respondent (the workman) was employed by the appellant (the employ-er) for 31 years. In 1972 he had accepted in writing (Rl) that his employment wason the basis that the age of retirement was 55 years. On 11.8.1995 he wasinformed that he would reach the age of retirement on 26.10.1995. He wasoffered gratuity for 31 years treating that his employment was unbroken thoughhe had resigned in 1988. He was offered Rs. 978.520 for 31 years after deduct-ing a loan of Rs. 290.000/= paid to him in 1984. The workman showed surpriseon his retirement and tendered a letter of resignation on 22.08.1995 to be effec-tive from 31.8.1995 as he was entitled to leave until 26.10.1995.
Thereafter the workman complained to the Labour Tribunal that he was com-pelled to resign and that his services were in fact wrongfully terminated.
Notwithstanding Rl (his consent in writing that he would retire at 55) and hisletter of resignation, the Labour Tribunal held that the termination of the work-man’s services was unlawful and forced and sought to give him compensationand gratuity etc., up to the year2000 on the basis the he was entitled to relief untilOctober2000 viz., up to the age of 60 years. The amount ordered by the Tribunalwas Rs. 6.085.378/=.
The High Court upheld the order of the Tribunal disallowing only the petrolallowance and entertainment allowance. The High Court reduced the compensa-tion to Rs. 4,243,378.00.
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Held:
In terms of section 31 B(4) of the Industrial Dispute Act (“The Act”) theLabour Tribunal had the power to grant equitable relief against harshterms imposed by the employer and that the Labour Tribunal had thepower to make just and equitable orders. It does not have “the free-dom of the wild ass"
The order of the Tribunal regarding compensation was perverse.
There was no constructive termination of the workman’s services bythe employer.
Cases referred to:
Walker Sons and Company Ltd v Fry – (1996) 68 NLR 73
National Union of Workers v Scottish Ceylon Tea Comp. Ltd, -(1975) 78NLR 133
Brook Bond Ceylon Ltd v Tea, Rubber, Coconut and General ProduceWorkers’ Union – (1975) 77 NLR 6
Jayasuriya v Sri Lanka State Plantations Corporation – (1995) 2 SRI LR379
APPEAL from the judgment of the High Court
Gamini Marapana, P.C. with Nandapala Wickramasooriya and Naveen Marapana
for appellant.
R.K.S. Suresh Chandra with V.Wimalarajah for respondent.
Cur.adv.vult
JANUARY 29, 2004
SHIRANI BANDARANAYAKE, J.This is an appeal from the judgment of the High Court of theWestern Province dated 08.05.2002. By that judgment the findings ofthe learned President of the Labour Tribunal, Colombo, that there wasan unjustifiable termination of the employment of the applicant-respondent-respondent (hereinafter referred to as the respondent)was affirmed. The respondent-appellant-appellant (hereinafterreferred to as the appellant) appealed and this Court granted specialleave to appeal.
The only question that has to be considered is, whether therespondent voluntarily resigned from the appellant company or
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Upall Management Services Ltd. v Ponnampalam
SC(Bandaranayake, J.)333
whether his services were constructively terminated by the appellant.
The facts in this appeal, albeit brief, are as follows:
The respondent made an application to the Labour Tribunal on30.01.1996 alleging constructive termination of employment andseeking inter alia, adequate compensation up to his 60th year for lossof his career in lieu of reinstatement. The appellant while denying anytermination of employment, constructive or otherwise stated that,
the respondent had accepted that he would have to retire atthe age of 55 which fell on 26.10.1995; ’
by letter dated 22.08.1995, the respondent tendered his res- 20ignation with effect from 31.08.1995;
the appellant by letter dated 22.08.1995 accepted such resig-nation with effect from 31.08.1995; and
the respondent on 22.08.1995 accepted a net sum ofRs. 858,845/- after deductions from the appellant Company.
After the inquiry learned President of the Labour Tribunal grantedthe relief prayed for by the respondent stating that there is no retire-ment rule in the appellant Company and that the said Company wasin error when it asked the respondent to leave employment on reach-ing his 55th year. The Labour Tribunal also granted the respondent a 30sum of Rupees Six Million Eighty Five Thousand and Three HundredSeventy Eight (Rs.6,085,378) as just and equitable relief. On appeal, .learned Judge of the High Court while affirming the order of theLabour Tribunal set aside the award of Rs.6,085,378/- and madeorder directing the appellant to pay the responaent a sum of Rs.4,243,378/-. as compensation.
The main contention of the appellant was that, both the LabourTribunal and the High Court had failed to consider the legal effect ofdocument marked R1 dated 31.03.1972 issued by the appellant to therespondent. Learned President’s Counsel for the appellant submitted 40that in the light of the said letter, it is abundantly clear that there wasno such termination of service of the respondent by the appellant, butthe appellant on his own volition resigned from his position.
The respondent had commenced his employment with the appel-lant Company as a clerk on 01.04.1964. At the time of his departure
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from the said Company he was holding the position of a Directorattached to Upali Management Services Ltd. and Upali ConfectionaryProducts Ltd., being appointed to such positions on 01.05.1990 and12.01.1993, respectively. The respondent contended that on11.08.1995(A2) he received a memo from the Group Finance Directorof the appellant Company which came to him ‘as a bolt from the blues’as that was the first time he was told that there was an age limit forretirement.
However, it appears that the appellant had issued the lettermarked R1 in March 1972 to the respondent. The. contents of the let-ter refers to the existing contract of employment between the appel-lant Company and the respondent and states that,
“Your placement on an improved scale of salary and the salaryincrement now granted do not alter the existing contract of employ-ment between you and the Company including the retirement ruleapplicable to all employees in the Company that they retire from ser-vice on completion of 55 years of age.
The Company however permits retirement at the request of anemployee after completion of 10 years continuous service. Likewisethe Company reserves the right to exercise the option to retireemployees if such necessity does arise.”
When this letter was sent in March/April 1972, it was necessary forthe recipient to acknowledge the receipt of it and to accept the pro-nounced terms. In fact the respondent has signed in acknowledgmentof the receipt of this letter and even had stated thereon that ‘I acceptsame’. Therefore, the respondent cannot be heard to say that he wasnot aware of the applicable rules for the employees of the appellantCompany as the aforementioned letter had very clearly stated thatthey have to retire from service on completion of 55 years of age.
It is not disputed that the respondent had reached the age of retire-ment on 26.10.1995.
It appears that the Group Finance Director of the appellantCompany had a discussion with the respondent on the retirement ofthe latter in or around August 1995. This is confirmed by the letter,dated 11.08.1995 where the Group Finance Director in his memoran-dum to the respondent (A2) had stated that,
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Upali Management Services Ltd. v Ponnampalam
(Bandaranayake, J.)
335
“I refer to the discussion I had with you and write to confirm thatyou will be reaching the date of normal retirement on 26th October1995.
As per the Group Chairman’s memo to you of 20th October 1993,your service is considered unbroken despite the fact that you resignedin 1988 and was paid your retiring gratuity amounting to Rs. 290,000/.
On this basis the current gross retirement gratuity entitlement is as fol-lows:
31 months and Rs. 40,920-Rs. 1,268,520.0090
less: Advance paid in 1984-Rs.290,000.00
Balance due-Rs.978,520.00
Please note that the above would be subject to the normal taxretention.
Since you are entitled to 42 days leave, this would have to be uti-lized prior to 26th October and the latest date on which you could pro-ceed on leave would be 26th August 1995…”
The respondent had shown complete surprise in response to theaforementioned letter and tendered his letter of resignation on22.08.1995, to be effective from 31.08.1995 as he had unutilized 100leave covering the period up to 26th October 1995 (A3 and A6). Thiswas accepted by the appellant Company (A7).
In his application to the Labour Tribunal, the respondent had how-ever made no mention of'the fact that he had decided to resign fromhis position rather than retiring from thq appellant Company. Therespondent at the Labour Tribunal has categorically stated that hisservices has been constructively terminated by the appellant, as hewas compelled to resign which fact has been accepted by the LabourTribunal.
However, it is abundantly clear that the respondent was a Director 110of the Company who had a total amount of 31 years of service. Wouldit be possible for a person of such stature and standing in the appel-lant Company to be compelled to tender his resignation? If for amoment, it is to be considered that a Group Director had compelledthe respondent to tender his resignation, what are the steps he shouldhave taken as a prudent man? There is no evidence to indicate that
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he had taken any steps to lodge a complaint with the Chairman or withthe Board of Directors of the appellant Company. The only step he•took was to make an application to the Labour Tribunal 5 months afterhis resignation indicating that this too was made as an afterthought. 120
The respondent had admitted not only that he had received thedocument marked R1, but also that he had signed the acknowledg-ment slip. On a consideration of the correspondence between therespondent and the appellant company it appears that the respondentdid not desire to wait until 26.10.1995 so that he could retire from theCompany, but wished to resign with effect from 31.08.1995(A6).
The Labour Tribunal has not taken notice of the fact, which wasabundantly clear that, the respondent had signed the documentmarked R1, accepting the terms and conditions of R1 which includedthe age of retirement to be 55 years of age. Ignoring this vital piece of 130evidence, President of the Labour Tribunal had come to the conclu-sion that,
“On an overall analysis of the evidence, I am constrained to thinkthat the applicant’s employment came to an end, not by a voluntaryact of his.”
It is also of considerable importance to note that the manner inwhich the Labour Tribunal had thought it fit to grant compensation tothe respondent.
As stated in his evidence, the respondent had asked for 2 monthssalary for each year of service as gratuity and compensation up to his 14060th year.
According to the Resolution passed by the Board of Directors on05.06.1986, only the Directors having continuous service for over tenyears was to be paid two months gross salary for each year of ser-vice. The respondent admittedly had been a Director of the appellantCompany only for about 5 years. Further, learned President’s Counselfor the appellant submitted that, the Company Directors are appoint-ed annually by the shareholders, and even assuming that the respon-dent was allowed to continue in service up to his 60th year, there wasno guarantee that the shareholaers would have re-elected him to hold 150office as a Director until 60 years of age.
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Upali Management Services Ltd. v Ponnampalam
(Bandaranayake, J.)
337
160
Irrespective of all these considerations, the Labour Tribunal hadsought to award compensation on the following basis.
(i) Compensation for 5 years up to 60 years reckoning 10% incre-ment. His salary according to A9 was Rs.40,920/-.
From October 1995 to October 1996 at the
rate of Rs. 40,920/- x 12From October 1996 to October 1997 at therate of Rs.45,012/-x 12From October 1997 to October 1998 at therate of Rs.49,513/- x 12From October 1998 to October 1999 at therate of Rs.54,464/-x 12From October 1999 to October 2000 at therate of Rs. 59,910/- x 12Total compensation
Gratuity at the rate of 2 months salary for each year of service
He was paid at the rate of one month’s salary for each year ofservice for 31 years (31 months).
Gratuity at the rate of 2 months salary for each year of service 170for the 5 year denied service at the last salary in reaching 60years (10 months)
Rs. 491,040.00
Rs. 540,144.00
Rs. 594,156.00
Rs. 653,568.00
Rs. 718.920.00Rs. 2.997.828.00
(ii)
Total gratuity payment
(a) + (b)
(31 + 10) x Rs. 59,910.0041 x Rs. 59,910.00Rs. 2,456,310.00
(iii) Petrol allowance for 5 years (60 months)Total petrol expenses – Rs.
– Rs.
12,000×60720,000.00
(iv) Entertainment allowance for 5 years (60 months)
Total entertainment expenses – Rs. 18,700×60
Rs. 1,122,000.00
Rs. 2,997,828.00Rs. 2,456,310.00Rs. 720,000.00Rs. 1,122,000,00Rs. 7,296,138.00
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Grand total
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less –
payment already received at the time of
cessation of employment-Rs.978,520.00190
ex-gratia payment already received by
the applicant-Rs.232,240.00
Total of (1) + (2)-Rs.1,210,760.00
Total balance due – Rs. 7,296,138.00 – Rs. 1,210,760.00
Rs. 6,085,378.00
Although the Labour Tribunal had granted the aforementionedamounts exceeding Rupees Six Million as compensation, no reasonsor basis had been adduced for the said decision.
Learned Judge of the High Court had only decided to reduce thepayment of petrol allowance and the entertainment allowance and 200ordered that a sum of Rs. 4,243,378.00 be paid as compensation.
While the learned President’s Counsel for the appellant submittedthat the manner in which the Labour Tribunal has sought to awardcompensation is totally perverse, learned Counsel for the respondentcontended that in terms of section 31(B)(4) of the Industrial DisputesAct, the Labour Tribunal has wide powers to grant relief notwithstand-ing anything to the contrary in the contract of employment. He reliedon the decision in Walker Sons & Co. Ltd. v Fry <1> and submitted thatSansoni, CJ., had interpreted section 31 (B)(4) to empower the LabourTribunal to give relief against any harsh terms the employer may have 210imposed in the contract. He also cited the decision in National Unionof Workers v Scottish Ceylon Tea Co.Ltc0 where it was held that thepower conferred on Labour Tribunals by section 31(B)(4) enabled aTribunal to disregard contractual terms relating to the assessment ofgratuity where it is'found legally due under a contract or under a set-tled scheme.
In terms of the provisions of the Industrial Disputes Act, where sec-tion 31(C) provides the Tribunal to make ‘such order as may appearto the Tribunal to be just and equitable’ admittedly a Labour Tribunalhas very wide powers. However it is to be noted that the Tribunal does 220not possess an unfettered authority. As observed by H.N.G.Fernando,
J. (as he then was) in Walker Sons & Co.Ltd. v Fry (Supra), a LabourTribunal does not have the ‘freedom of the wild ass’.
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Upali Management Services Ltd. v Ponnampalam
(Bandaranavake. J.)
339
Although there is no doubt that the Labour Tribunal has wide pow-ers it cannot be taken that such powers are beyond any kind of con-trol. As has been pointed out in Brook Bond (Ceylon) Ltd. v Tea,Rubber, Coconut and General Produce Workers’ Union (3) ‘consider-ations of justice and equity must necessarily control and limit the pow-ers of Labour Tribunals.’
Discussing the concept of what is termed as ‘perverse’Amerasinghe, J. in Jayasuriya v Sri Lanka State PlantationsCorporation (4) stated that,
“Perverse’ is an unfortunate term, for one may suppose obstina-cy in what is wrong, and one thinks of Milton and how Satan in theSerpent had corrupted Eve, and of diversions to improper use andeven of subversion and ruinously of wickedness. Yet, in my view in thecontext of the principle that the Court of Appeal will not interfere witha decision of a Labour Tribunal unless it is ‘perverse’, it means nomore than that the Court may intervene if it is of the view that, havingregard to the weight of evidence in relation to the matters in issue, theTribunal has turned away arbitrarily or capriciously from what is trueand right and fair in dealing even handedly with the rights and inter-ests of the workman, employer and in certain circumstances, the pub-lic. The Tribunal must make an order in equity and good conscience,acting judicially, based on legal evidence rather than on beliefs thatare fanciful or irrationally imagined notions or whims. Due accountmust be taken of the evidence in relation to the issues in the matterbefore the Tribunal. Otherwise, the order of the Tribunal must be setaside as being perverse (emphasis added).”
On the respondent’s own admission, at the time he resigned, hewas paid a sum of Rs.2,189,760/- which included a sum ofRs. 1,268,520/- as gratuity and a sum of Rs. 232,240/- as an exgratiapayment. He was permitted to purchase a car worth of Rs. 500,000/-for Rs.200,000/- which gave him a further monetary benefit of Rs.300,000/-. From the compensation computed by the Labour Tribunal,only a sum of Rs. 1,210,720/- has been taken into consideration,whereas the said amount should be Rs. 2,189,760/-.
On a consideration of the totality of the material placed before thisCourt, I am of the view that there was no Constructive termination ofservices of the respondent by the appellant Company. I am also of the
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view that the order of the Labour Tribunal regarding the payment ofcompensation is perverse.
For the aforementioned reasons this appeal is allowed. The orderof the Labour Tribunal dated 12.07.2000 and the judgment of the HighCourt dated 08.05.2002 are accordingly set aside. The appellant isentitled to costs in appeal in a sum of Rs.5000/- (Rupees FiveThousand).
EDUSSURIYA, J. – I agree.
JAYASINGHE, J.- I agree.
Appeal allowed.270