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of <h1>Court exempts petitioner from gratuity pre-management takeover. Impugned order quashed. Heirs may seek recovery.</h1> <h3>Maharashtra State Textile Corporation Limited Versus Gopal Balu Saikar</h3> The court found a break in service from 13th January, 1977, to 14th November, 1977, due to the winding-up order under Section 445 of the Companies Act. ... - Issues Involved:1. Whether there was a break in the service of Respondent No. 1 from 13th January, 1977 to 14th November, 1977.2. Whether Respondent No. 1 is entitled to have his gratuity computed as if he was in continuous service from 24th April, 1966 to 7th December, 1983.3. Interpretation of Section 445 of the Companies Act and Section 18FA of the Industries (Development and Regulation) Act, 1951.4. Interpretation of Section 10 of the Nationalisation Act No. XXXIII of 1982.Detailed Analysis:1. Break in Service:The primary controversy revolves around whether there was a break in the service of Respondent No. 1 from 13th January, 1977, the date of the winding-up order, to 14th November, 1977, when he was re-employed. The Authorities below did not treat this period as a break in service, considering it as continuous employment. The Petitioner argued that the winding-up order terminated the Respondent's employment under Section 445 of the Companies Act, and hence, there was a break in service. The Respondent contended that the subsequent order under Section 18FA of the Industries (Development and Regulation) Act, 1951, stayed the winding-up proceedings, negating any termination.2. Computation of Gratuity:The Respondent claimed gratuity for the period from 24th April, 1966, to 7th December, 1983, as if there was no break in service. The Controlling Authority held that the Respondent was in continuous service for 17 years, 7 months, and 14 days, entitling him to gratuity. The Petitioner disputed this, asserting that the period from 13th January, 1977, to 14th November, 1977, should be recognized as a break in service for computing gratuity.3. Interpretation of Section 445 of the Companies Act and Section 18FA of the Industries (Development and Regulation) Act, 1951:Section 445(3) of the Companies Act deems a winding-up order as notice of discharge to the company's officers and employees. The Respondent's counsel argued that the stay of winding-up proceedings under Section 18FA(10) of the Industries (Development and Regulation) Act should negate the termination. However, the court clarified that the stay is effective only during the period of management or control, commencing from the date of the order under Section 18FA (11th March, 1977), and not from the inception of the winding-up order (13th January, 1977). Thus, the termination on 13th January, 1977, was valid, and the stay did not retroactively negate it.4. Interpretation of Section 10 of the Nationalisation Act No. XXXIII of 1982:Section 10(1) of the Nationalisation Act ensures that employees continue with the same rights and privileges as to pension, gratuity, etc., after the appointed day (24th August, 1982). Section 10(2) specifies that liabilities arising from the continuance of employees are borne by the Corporation only from the date of taking over management under Section 18FA (10th March, 1977). The Appellate Authority's interpretation that Sub-section (2) does not apply to pension and gratuity was rejected. The court held that Sub-section (2) includes liabilities such as pension and gratuity, indicating the legislature's intent to limit the Corporation's liability to the period after taking over management.Conclusion:The court found the impugned order unsustainable as it imposed liability on the Petitioners for gratuity from April 1966 to December 1983. There was a clear break in service from 13th January, 1977, to 14th November, 1977, due to Section 445(3) of the Companies Act. Consequently, the Petitioner is not liable for gratuity for the period before 11th March, 1977, when they took over management. The Petition was allowed, and the impugned order was quashed. The heirs of Respondent No. 1 may seek recovery of gratuity from the Official Liquidator under the Nationalisation Act.Order:The Petition is allowed, the impugned order is quashed and set aside, and the rule is made absolute. No order as to costs. The heirs of Respondent No. 1 may pursue recovery of gratuity from the Official Liquidator.
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