21 March 2024 Employee Related >> Corporate Law   |   Employment contract >> Corporate Law   |   Employment, Labor & Service >> Corporate Law  

In a significant decision for employers, the Supreme Court of India has upheld a company's authority to transfer employees across its establishments within the country. The case, titled [Cipla Ltd. vs. Divgi Metal Wares Employees Association], centered on a dispute between a pharmaceutical company, Cipla Ltd., and its workmen represented by the employee association.

Facts:

Cipla Ltd. operates manufacturing facilities in both Pune and Sirsi, India. The company's Standing Orders, a document outlining the terms of employment, contained Clause 20, permitting employee transfers within the company across India. Furthermore, individual employment contracts explicitly stated that employees' services were transferable to any department or office of the company. Citing reduced workload, Cipla transferred 66 workmen from its Sirsi facility to the Pune unit in 1998. However, the transferred employees contested the move, arguing its illegality.

Legal Contention and Procedural History:

The workmen's association relied on a 1999 modification to the Standing Orders that removed the transfer clause. Cipla challenged this modification, ultimately prevailing on appeal in 2001.

Supreme Court's Reasoning:

The Supreme Court, in a judgement bolstering employers' rights, validated the transfers on the following grounds:

• Contractual Terms Prevail: The Court emphasized the primacy of contractual terms. The wording in the appointment letters explicitly allowed transfers throughout India, superseding any potentially conflicting provisions in the Standing Orders.
• Standing Orders Respect Contractual Rights: Clause 31 of the Standing Orders safeguards existing rights arising from the contract of service, which in this instance included the transfer provision established in the appointment letters.
• Invalid Modification: The 1999 modification purporting to remove the transfer clause was deemed ineffective due to the pending appeal filed by Cipla. As a result, the original Clause 20 authorizing transfers remained in force.
• Prior Judicial Precedent: The Court bolstered its decision by citing its own precedent in Cipla Ltd. (1999), which upheld transfers based on similar contractual language.

Conclusion:

The Supreme Court's judgement effectively reversed a lower court ruling in favor of the workmen. The transfer of employees from Sirsi to Pune was deemed lawful.

Unresolved Issue:

The Supreme Court specifically refrained from addressing the broader legal issue of the Certifying Officer's authority to incorporate a transfer clause within the Standing Orders. This question remains a potential point of future legal contention.