Bombay HC: Employee Situs Not Sole Factor for Labour Court Jurisdiction, 'GlaxoSmithKline' Impliedly Overruled

In a landmark judgment poised to reshape the landscape of labour litigation in Maharashtra, the Bombay High Court has ruled that the location of an employee is not the sole determinant for establishing the territorial jurisdiction of Labour and Industrial Courts under state law. The Division Bench of Justice M.S. Sonak and Justice Advait M. Sethna held that the seminal 2008 decision in GlaxoSmithKline Pharmaceuticals Ltd. Vs. Abhay Raj Jain , which established the "situs of employee" test, has been impliedly overruled by subsequent Supreme Court precedents.

The ruling, delivered in a batch of petitions including Nicholas Employees Union vs M/S. Piramal Healthcare Ltd. , resolves a contentious 15-year-old debate that has left numerous employees in a jurisdictional limbo. The court’s comprehensive analysis clarifies that factors such as the location of an employer's head office, where crucial decisions like transfers and terminations are made, are sufficient to establish that a "part of the cause of action" arises within Maharashtra, thereby granting jurisdiction to the state's labour courts.

The Core Jurisdictional Dilemma

The central issue before the High Court was a recurring problem in modern employment: Can an employee posted outside Maharashtra file a complaint of unfair labour practice under the Maharashtra Recognition of Trade Unions & Prevention of Unfair Labour Practices Act, 1971 (MRTU Act) in a Maharashtra court, simply because the employer's head office is in the state and the adverse decision originated from there?

For over a decade, the prevailing law, as laid down by a Division Bench in GlaxoSmithKline , was a firm "no." That judgment held that the cause of action arises where the employee is situated and feels the impact of the employer's decision (e.g., at the place of posting or transfer). The location of the corporate headquarters was deemed irrelevant.

This principle was consistently challenged by employees and unions, who argued that it forced them to litigate in distant states, often at great expense, while the "nerve centre" of the corporate decision-making remained untouched in Maharashtra. They contended that employers were leveraging this jurisdictional hurdle to tire out employees and evade scrutiny under the state's robust labour protection laws. As the court noted in its judgment, "The employees have been clamoring for an adjudication on the merits of their unfair labour practice case for the past 15 to 18 years, as the issue of territorial jurisdiction remains unresolved."

The Doctrine of Implied Overruling: Nandram and Rakesh Kumar Verma

The turning point in the employees' argument rested on two critical Supreme Court judgments: Nandram Vs. Garware Polyester Limited (2016) and Rakesh Kumar Verma Vs. HDFC Bank Ltd. (2025). The petitioners successfully argued that these decisions, while not explicitly mentioning GlaxoSmithKline , established a legal principle so contradictory to it that the Bombay High Court precedent could no longer be considered good law.

In Nandram , the Supreme Court held that the Labour Court in Aurangabad, Maharashtra, had jurisdiction to hear the complaint of an employee terminated in Pondicherry. The apex court reasoned that because the decision to close the Pondicherry unit and terminate the employee was taken at the company's Aurangabad office, a "part of the cause of action has arisen at Aurangabad."

The Bombay High Court observed that the facts in Nandram were materially indistinguishable from GlaxoSmithKline . It noted that the High Court order reversed by the Supreme Court in Nandram was itself based entirely on the GlaxoSmithKline precedent. Therefore, the Supreme Court’s reversal effectively dismantled the foundation of the "situs only" test.

The court definitively stated:

"Upon a meaningful comparison of the material facts in both cases, we are unable to accept the argument that the Hon'ble Supreme Court's decision in Nandram is distinguishable on the facts... The diametrically contrary view taken by the learned Single Judge, relying entirely on GlaxoSmithKline , was thus reversed."

Further bolstering this conclusion was the 2025 Supreme Court ruling in Rakesh Kumar Verma . In that case, concerning an exclusive jurisdiction clause in an employment contract, the Supreme Court held that the courts in Mumbai had jurisdiction because the decisions to appoint and terminate employees posted in Patna and Delhi were made in Mumbai. This reinforced the principle that the place where administrative decisions are made is a valid ground for establishing jurisdiction, drawing sustenance from Section 20 of the Code of Civil Procedure (CPC).

Rejection of the "Sole Situs" Test

The Division Bench systematically dismantled the employers' arguments that the situs of employment must remain the sole governing factor. Employers contended that the MRTU Act has no extra-territorial application and that allowing complaints in Maharashtra for employees working elsewhere would create chaos and render orders unenforceable.

The court rejected these fears, clarifying that the issue was not one of extra-territorial application of the law. Instead, it was about determining if a sufficient part of the cause of action had occurred within Maharashtra. "Suppose the cause of action has indeed accrued or even partly accrued within Maharashtra... In that case, there is neither any extension of the MRTU Act to territories outside Maharashtra nor any issue of extra-territoriality," the bench opined.

The judgment holds that while the situs of employment can be a relevant factor, it cannot be the only factor. Other crucial elements include: - The location of the employer’s registered or head office. - The place where the decision to transfer, terminate, or commit an alleged unfair labour practice was made. - The office from which such orders were issued. - The "nerve centre" from which the employee's service is controlled.

The court concluded that where these factors point to Maharashtra, the state's labour courts have concurrent jurisdiction, and the employee has the right to choose the forum.

Implications for Legal Practice and Corporate Employers

This judgment marks a significant shift in labour law jurisprudence in Maharashtra. 1. Empowerment of Employees: It provides a crucial procedural advantage to employees of Maharashtra-based companies who are posted across the country. They can now challenge alleged unfair labour practices in the state where the corporate decisions are made, leveling the playing field against financially stronger employers. 2. End of a Jurisdictional Defense: Employers can no longer rely on the GlaxoSmithKline precedent to summarily dismiss complaints on grounds of territorial jurisdiction. They will now have to defend actions on their merits in Maharashtra courts. 3. Clarity on "Cause of Action": The ruling brings industrial adjudication under the MRTU Act in line with the broader civil law principles on "cause of action" as enshrined in the CPC, promoting legal consistency. 4. Strategic Litigation: Corporate legal teams will need to reassess their litigation strategy for labour disputes, anticipating that challenges to transfers, terminations, and other service conditions of out-of-state employees will now be filed in Maharashtra.

By declaring that GlaxoSmithKline "must yield and be held to have been impliedly overruled," the Bombay High Court has not only provided relief to the petitioners in this long-drawn-out litigation but has also set a clear, forward-looking precedent for thousands of similar cases. The focus of labour disputes will now rightly shift from procedural skirmishes over jurisdiction to substantive adjudication on the merits of the alleged unfair labour practices.