MANAGER, M/S. PYARCHAND KESARIMAL PONWAL BIDI FACTORY versus OMKAR LAXMAN THANGE & ORS.

Citation: [1969] 2 S.C.R. 272 · Decided: 27-09-1968 · Supreme Court of India · Bench: J.M. SHELAT · Disposal: Dismissed

Cited by 3 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

MANAGER, M/S. PYARCHAND KESARIMAL PONWAL 
A 
BIDI FACTORY 
v. 
OMKAR LAXMAN THANGE & ORS. 
September 21, 1968 
[J. M. SHELAT AND V. BHARGAVA, JJ.J 
Industrial Dispute-Transfer of employment. from one employer to 
another-Such transfer 1nust be preced.id by termination of employ1nent 
with first employer and a new contract-Establishment to Whom services 
of employee are lent by employer has no right to dismiss employee from 
service. 
The appellant-firm had a number of factories including one at Kamptee 
in Vidharba. 
ltS head office was also situated there. The factory at 
Kamptee and the head office were treated as separate establishments. the 
factory being registered under the Factories Act and the Head Office 
under the C.P. and Berar Shops and Establishments Act, 1947. Res-
pondent No. 1 was originally employed at the aforesaid factory but later 
he was directed to work at the head office. When the, Head Offiee dis· 
missed him from service he challenged the order of dismissal by an 
application ·under s. 16 of the C.P. & Berar Industrial Disputes Settlement 
Act. The Assistant Commissioner dismissed the application holding that 
Respondent No. 1 at the material time was not an employee of the factory 
but was employed in the Head Office. The Industrial Court refused, in 
revision, to interfere with the Assistant COmmissioner's order. 
Respon~ 
dent No. 1 filed a writ petition under Art. 226 of the Constitution. The 
High Court observed that unless it was established that the employment 
of Respondent No. 1 in the factory was legally terminated it could not 
be assumed merely because he was directed to work in the head office, 
that his employment was changed and the head office was substituted as 
his employer in place of the said factory. 
As the order passed by the 
Assistant Commissioner was not clear on this question the High Court 
remanded the case for disposal according to law. The firm appealed to 
this Court. 
HELD : (i) A contract-for service is incapable of transfer unilaterally. 
Such a transfer of service from one employer to another can only be 
effected by a tripartite agreement between the employer, the employee and 
the third party, the effect of which would be to terminate the original con-
tract of service by mutual consent and to make a new contract between 
the employee and the third party. So long as the contr~ct of service is 
not terminated, a new contract 1s not 
made as afo'fesa1d, and the em~ 
ployee continues to be in the employment o'f the employer. 
Therefore, 
when an employer orders him to do certain work for another person the 
employee still continues to be in his employment. The only thing that 
happens in such a case is that he carries out the orders of his master. 
The employee has the right to claim his wages from the employer and not 
from the third party to whom his services are lent or hired. It may be 
that such a third party may pay his wages during the time that he has 
hired his s,ervices, but that is because of his agreement with the employer. 
That does not preclude the employee from claiming his wages from the 
employer. The hirer may also exercise control and direction in the do-
ing of the thing for which he is hired or even the manner in which it is 
to be done. But lf the employee fails to carry out his direction he cannot 
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PYARCHAND v. OMKAR LAXMAN (Shelat, J.) 
273 
A 
dismiss him and can only complain to the employee. 
The right of dis-
missal vests with the employer. [279 C-F] 
B 
c 
Such being the position in law, in the present case the High Court 
was right in setting aside the order of the Assistant Commissioner and the 
Industrial Court on the ground that unless a finding was reached on the 
facts of the case that the contract of service with the said factory came 
to an end and a fresh contract with the head office came 
into being, 
Respondent No. 1 continued to be in the employment of the factory and 
the head office therefore was not competent to dismiss him. [281 FJ 
Mersey Docks and Harbour Board v. Coggins & Griffith (Liverpool) 
Ltd. [1947] A.C. 1 at 17, Century Insurance Co. Ltd. v. Northern Ireland 
Road Transport Board, [1942] A.C. 509, Quarman v. Burnett, ( 1840) 6 
M. & W. 499, Jones v. Scullard, [1898] 2 Q.B. 565, Nokes v. Doncaster 
Amalgamated Collieries, Ltd. [1940] 3 AU England Law Reports 549 and 
Denham v. Midland Employees Mutua

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