A Research Note on Transfer, Place of Posting, and the Employer’s Contractual Power to Reassign Marketing Personnel Across Territories Without a Physical Establishment

1. Introduction and Scope of the Problem

A business that sells throughout the nation does not set up an office in every town where it sells. An enterprise whose base is Ahmedabad would just appoint an individual for Dehradun, Patna, or Lucknow instead of setting up an office and appointing staff there. The appointment letter issued to the individual tends to use the jargon of an office; it refers to the Dehradun as the “headquarters” of the employee, even though there is no office at Dehradun. This piece looks into the function of the term used in such an agreement, its reliability, and the rights and duties of the employees.

The practice we describe is not a rarity. It has developed in response to the nature of the sales and marketing business across various states of India where the workforce is inherently mobile and the infrastructure of the business is concentrated in a few locations. The question the note raises, however, is narrower than it might appear at first. It does not raise the general question whether an employer can even operate in this manner, and the answer is in affirmative. However, what this note does ask is whether a mere change in the terminology from “territorial assignments” to “headquarters work” in any way changes the employer’s legal position.

2. Can a Territory Be Called a “Headquarters” Without an Office There?

The law on contracts and labour in India does not mandate that the term ‘headquarters’ be used to refer to any physical location. It is up to the parties in the contract to determine what their terms shall mean and the employer is perfectly at liberty to include the phrase “headquarters: Dehradun” in a letter of appointment when there is no property, premises, or establishment registered in the city by the employer. The term serves merely to indicate the location from which the employee is supposed to coordinate field visits and make reports, among others.

The problem with the label approach is that it cannot create a legal fiction where none exists. To call Dehradun the “headquarters” of your company is simply not going to be enough to give rise to a branch office, place of business or an establishment, as contemplated by the various pieces of legislation, namely the Shops and Establishments Acts, Industrial Disputes Act, 1947, GST registration requirements or registration for provident funds, among others. The relevant statutes require the existence of a place of business where the employer operates the business, employs workers or conducts supervision – and these are not going to be replaced by mere labeling in a private letter. The jurisprudence of labor courts in relation to the issue of jurisdiction in labor disputes has always paid more attention to the actual facts rather than labeling. This principle was confirmed in Paritosh Kumar Pal v. State of Bihar, a case decided by the Patna High Court, where a sales representative was hired and worked in Bihar even though the headquarters of the company were in Calcutta. Even more would be true in the case of a company-issued label for a location where the company has never been physically present.

Therefore, the response to the first research question is that this designation is permissible from a drafting point of view, but it is a description and not a prescription. The company uses the label to tell the worker where he needs to be based. It does not establish the location of a business premises and cannot do so through such an assumption alone without additional evidence.

3. Enforceability of the Clause Under Contract and Employment Law

The clause conferring a territorial base and enabling transfers to and from such bases, in its own right, is an entirely usual and valid term of the employment contract. The Indian courts, in a well-settled line of jurisprudence mainly concerning the government and the public servants but readily applicable to private sector employment as well, view the power of transfer as incidental to service rather than having to be justified every time it is exercised. In Union of India v. S.L. Abbas, the Supreme Court has ruled that an order of transfer is both incidental and conditional to service, and the decision about where a person is to be posted lies with the employer alone and not with the court. In Gujarat Electricity Board v. Atmaram Sungomal Poshani and Mrs Shilpi Bose v. State of Bihar, this is essentially what was reiterated: a person serving in a transferable position does not have any vested right to be posted somewhere, and a transfer cannot be questioned except for being contrary to the statute or made in bad faith.

None of the above considerations suggests that the clause should not be enforceable per se in all cases. There are at least two doctrines that can operate to the contrary and must be considered on a par. The first doctrine is Section 27 of the Contract Act that renders unenforceable any agreement restraining someone from trade, profession, or business. Although the territorial headquarters clause cannot be equated to a non-compete provision, a clause that provides for unreasonable wide territorial scope or unreasonable pressure exerted to implement a mobility clause may, in an exceptional case, qualify as an agreement restraining trade. The second doctrine, which is relevant in this context, is the unconscionability doctrine developed in Central Inland Water Transport Corporation v. Brojo Nath Ganguly. According to this doctrine, the use of a standard form contract, in which the other party has no ability to bargain and in which certain clauses serve to oppress such person rather than to protect a valid business interest of the contracting party, may be treated as opposed to public policy and voided according to Section 23 of the Contract Act.The clause succeeds the test in case it is employed for a commercial objective; otherwise, it fails the test.

The recent Supreme Court judgment in Rakesh Kumar Verma v. HDFC Bank Ltd. and the concurrent appeal of HDFC Bank Ltd. v. Deepti Bhatia is very useful in this regard despite the fact that it pertains to exclusive jurisdiction clause and not transfer clause. The Court has held that a clause, which binds any dispute to the courts at the bank’s head office at Mumbai, succeeds in case the relevant decision, i.e. framing of charge and approval of termination, have been really taken at such an office. The case demonstrates that a clause mentioning “head office” succeeds in case there is reality behind the mention of the same; otherwise, it does not succeed.

4. Does “Headquarters” Mean Something Different From “Place of Posting” or “Establishment”?

There is no single definition of “headquarters” in Indian labor legislation in the way there is, for example, “workman” in the Industrial Disputes Act or “establishment” in the state Shops and Establishments Acts. The regulations of Central Civil Services and some public sector service manuals provide a special meaning of “headquarters”. As is pointed out in the article of Patra’s Law Chambers on the law of transfer in government service, the movement beyond the headquarters of an employee is what constitutes his transfer in the first place, and any movement of duties within the same headquarters cannot be regarded as a transfer. It can be noted here that headquarters is nothing but the point of reference for the purpose of measuring transfer, and its meaning is determined according to the employer’s own rules/orders and not a building.

Terms like “place of posting” and “workplace” are more flexible in their meaning than headquarters, as courts have used them as interchangeable terms while considering the concept of headquarters functionally. The former terms refer to the place at which an employee works presently but imply neither ownership nor occupancy of the place by the employer. However, the term “establishment” has an established meaning under various acts and laws. As per the Shops and Establishments Acts and Sections 2 of several other related Acts, “establishment” requires a fixed place from which the business is being operated, trade is done, or people are supervised. An entity operating in Dehradun through the services of a single field employee does not have an “establishment” there, irrespective of the designation it gives to the city.

Therefore, the practical explanation would be that in such an employment letter “headquarters” is being used functionally and in the sense of law of services and not in the legal sense of an establishment or place of business which the statute would require. These two concepts must not be confused, and an employee (or the employer) who wishes to impose the statutory implications on the use of the word “headquarters” will surely receive an answer that the word cannot carry that burden.

5. Validity of Transfer Between Territorial Headquarters With No Office at Either End

If the clause is valid in itself, as mentioned earlier, then a transfer made under such a clause, like from “Dehradun Headquarters” to “Patna Headquarters,” will not render the transfer invalid simply because there is no office of the company in either of the two cities. The very essence of a territorial marketing function lies in the fact that the base of the employee changes along with the function, and not vice versa. State of U.P. v. Gobardhan Lal considers a transfer from one transferable post to another as a usual event in the services of an employee which in itself does not change the conditions of the employee’s services. There is nothing in this ruling depending upon whether there is any physical presence of either the old post or the new post.

There are still two precautions, and these apply more rigorously, precisely due to the absence of an office around which to ground the transfer in anything tangible. The first is that the transfer should not amount to a colourable device – a description the industrial relations field and the Global Legal Insights guide to employment law in India employ to refer to transfers masquerading as mere administrative acts while in reality designed to punish, promote demotion, or even resignation. Since there is no office around which to make the transfer, it would be easier, not harder, for the employer to abuse the right to make transfers since a transfer between two fictional “headquarters” requires no effort on the part of the company whatsoever.

Second, statutory protection for employees in the relevant class remains applicable irrespective of the lack of a physical establishment. The marketing and sales staff discussed in the background section above are almost certainly covered under the Sales Promotion Employees (Conditions of Service) Act, 1976. This was the finding made by the Allahabad High Court in its 2023 judgment on the case of Nicholas Piramal India Ltd., wherein the Sales Promotion Employees (Conditions of Service) Act, 1976 was interpreted to include field workers without any permanent place of work in workman status and thereby confer on such field workers Industrial Disputes Act protection as well. It follows, then, that the lack of an establishment at the designated headquarters is of no legal significance here.

6. Judicial Treatment: Upheld or Struck Down?

None of the Indian judgments cited appears to discuss the issue of the “territorial headquarters” clause of this kind, namely, a clause that clearly identifies a city with no office of the company as the employee’s headquarters. It is significant that there are no judicial pronouncements on this very specific matter because it is indicative of the fact that no litigation has been triggered by the practice because courts have always looked into the matter from the perspective lower than the one suggested by the label and discussed where the person was working, the necessity of the transfer and the operation of any statutory provisions.

One is the transfer jurisprudence that runs from Union of India v. S.L. Abbas, Gujarat Electricity Board v. Atmaram Sungomal Poshani, Mrs Shilpi Bose v. State of Bihar, and N.K. Singh v. Union of India, all of which support the employer’s right to transfer but do not interfere where there is no mala fide and no violation of statute. The other is the jurisdictional jurisprudence of Paritosh Kumar Pal v. State of Bihar, V.G. Jagdishan v. Indfos Industries, Eastern Coalfields Ltd. v. Kalyan Banerjee, and finally, Rakesh Kumar Verma v. HDFC Bank Ltd., all of which do not bother about what name the company has decided to give to a place but focus on where the true nature of the employment relationship lies. Together, these two streams imply that while the former will respect the latter’s clause when it acts in good faith, the latter will not mind what name the former has given it.

7. Challenging the Clause as Arbitrary, Mala Fide, or a Colourable Exercise of Power

Certainly, it is here that the practical conflict concerning these provisions is conducted. While an employee will not be able to claim invalidity of the provision just on the basis of its loose use of term ‘headquarters’, for the reasons mentioned above, an employee will indeed be able to show that a specific transfer effected pursuant to that provision did not have anything to do with genuine business needs. The case of Seshrao Nagorao Umap v. State of Maharashtra is the perfect example – the Bombay High Court invalidated the transfer which had been made specifically in order to facilitate another person’s promotion, emphasizing that power of transfer cannot be utilized for granting favours. The case of Om Prakash Midha v. Union of India outlines the outer test which is always used when such a challenge is brought forward – a transfer can only be interfered with if it contravenes any statute, or is made with malafide intention, or is so arbitrary as to shock the judicial conscience.

The following fact situations have been observed in case laws and can warrant an employee’s attention should they be used as grounds for contesting a territorial headquarters transfer of employment: transfers occurring shortly after an employee has complained of discrimination and/or made complaints about their treatment at work, as well as transfers which show no legitimate requirement on the part of the employer, such as posting the replacement of the transferred employee even before the actual transfer takes place; transfers wherein no opportunity for compliance on the part of the employee is actually present, thus making the employee decide between relocation in a short period of time or going without pay, as pointed out in the Law.asia commentary on Indian transfers of employees; and repeated transfers of the same employee despite the absence of changed circumstances within the business.

None of these scenarios is concerned with the nature of “headquarters” – whether physical or nominal – at either end, but with the intention and consequences of the move. In cases where these are applicable, the proper course of action is not to reject the transfer itself, lest one be accused of abandoning one’s services like in Shiv Singh v. M/s Ansal Properties & Infrastructure Ltd. or Y.P. Sarabhai v. Union Bank of India, but to accept the transfer, if need be, even as one takes up the matter in an industrial dispute.

8. Table of Relevant Judgments and Authorities

The following table highlights the key decisions and laws discussed in this paper, going roughly from general transfer law principles to jurisdictional issues, and finally to field marketing and sales force in particular.

9. Reasoned Opinion

Putting the six questions together, my view is as follows.

9.1 On the designation itself

There can be no problem with the description of a location as a “headquarters” in the appointment letter where there is no office in that location. The term can simply be a convenient designation of the location from which the employee has been assigned to work; it is neither possible nor appropriate to use the term as a substitute for the proof of the existence of a branch office, establishment, or place of business for any statutory purpose. Anyone who would attempt to do so will have to independently establish the underlying fact in addition to relying on the term.

9.2 On enforceability

The provision is enforceable as a regular condition of employment, in accordance with the well-established principle that transfer is an incident of service. It does not become void merely because it applies to territories which have no physical existence, for it is nothing more than the nature of field marketing in every part of India. It becomes susceptible to attack, however, not because of what it contains but because of how it is being used; an unconscionable or mala fide use of the clause can be questioned under Section 23 of the Contract Act and transfer law outlined above.

9.3 On the limits of employer power

The power of the employer under the clause cannot be said to be limitless in spite of what it appears to say. Its limit is defined by three elements. The first element is the necessity of good faith and genuine purpose either administrative or commercial. Second is the statutory protection available to the class of employment in question, and for the marketing and sales employees, there are the Sales Promotion Employees (Conditions of Service) Act, 1976 and the Industrial Disputes Act, irrespective of whether there is no office at the headquarters where the employee is being assigned.

9.4 Practical recommendation

The safe way for an employer to go would be to honestly disclose the nature of the clause in the appointment letter, i.e., to call it either “territory of posting” or “base location for field operations” without trying to dress it up in the language of the non-existent headquarters, and always keep the record of the business necessity for any transfer, since this record, not the wording of the clause, will decide whether the transfer is legal. As for an employee, the use of the term “headquarters” in the appointment letter does not, in itself, give rise to controversy; the important thing here is to find out if the particular decision to transfer someone is based on a legitimate business necessity or if it looks more like an attempt to make life difficult for the employee, to demote or even dismiss him/her. This is where the law steps in, and this is the time for controversy.

10. Concluding Note

The territorial headquarters provision is, ultimately, neither a special doctrinal category nor something other than the general law of transfer as applied to a group of employees who did not even have a physical workplace in the first place. The Indian courts have had no reason to develop any new doctrine regarding it because the doctrine of transfer and unconscionability and territorial jurisdiction is sufficient to answer all the issues arising, given that the form and substance are separated, which is precisely what the courts have done.

Select Bibliography

Indian Contract Act of 1972, sections 23, 27, 28

Industrial Disputes Act of 1947

Sales Promotion Employees (Conditions of Service) Act of 1976

Code of Civil Procedure of 1908, section 20

Union of India v. S.L. Abbas, AIR 1993 SC 2444

Gujarat Electricity Board v. Atmaram Sungomal Poshani, 1989 (2) SLR 684

Mrs Shilpi Bose v. State of Bihar, 1991 Supp (2) SCC 659

N.K. Singh v. Union of India, AIR 1995 SC 423

State of U.P. v. Gobardhan Lal, (2004) 11 SCC 402

Central Inland Water Transport Corporation v. Brojo Nath Ganguly, AIR 1986 SC 1571

Rakesh Kumar Verma v. HDFC Bank Ltd; HDFC Bank v. Deepti Bhatia, Civil Appeal Nos. 2282 & 2286 of 2025 (SC, 8 April 2025)

V.G. Jagdishan v. Indfos Industries Pvt Ltd, 2022 INSC 433

Paritosh Kumar Pal v. State of Bihar, Patna High Court (15 February 1984)

Nandram v. Garware Polyester Ltd, (2016) 6 SCC 290

Bikash Bhushan Ghosh v. Novartis India Ltd, (2007) 5 SCC 591

Eastern Coalfields Ltd. v. Kalyan Banerjee, (2008) 3 SCC 456

Seshrao Nagorao Umap v. State of Maharashtra, Bombay High Court

May & Baker (India) Ltd. v. Their Workmen, Supreme Court of India

M/s Nicholas Piramal India Ltd. (medical representative status), Allahabad High Court (2023)

Shiv Singh v. M/s Ansal Properties & Infrastructure Ltd., 2024 DHC 1741

Om Prakash Midha v. Union of India, Delhi High Court