Gujarat High Court
M/S Kinjal Chemicals (Unit-3) vs The Labour Court on 28 April, 2025
NEUTRAL CITATION
C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 4406 of 2020
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2025
In R/SPECIAL CIVIL APPLICATION NO. 4406 of 2020
With
R/SPECIAL CIVIL APPLICATION NO. 4465 of 2020
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2025
In R/SPECIAL CIVIL APPLICATION NO. 4465 of 2020
With
R/SPECIAL CIVIL APPLICATION NO. 13084 of 2021
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2025
In R/SPECIAL CIVIL APPLICATION NO. 13084 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MRS. JUSTICE M. K. THAKKER
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Approved for Reporting Yes No
YES
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M/S KINJAL CHEMICALS (UNIT-3)
Versus
THE LABOUR COURT & ORS.
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Appearance:
MR.AMIT R JOSHI(6682) for the Petitioner(s) No. 1
DS AFF.NOT FILED (N) for the Respondent(s) No. 1
NOTICE UNSERVED for the Respondent(s) No. 3,4
THAKKAR AND PAHWA ADVOCATES(1357) for the Respondent(s) No. 2
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CORAM:HONOURABLE MRS. JUSTICE M. K. THAKKER
Date : 28/04/2025
COMMON ORAL JUDGMENT
1. Rule, returnable forthwith. Learned advocate Ms.Pahwa Page 1 of 13 Uploaded by M.M.MIRZA(HC01407) on Thu May 01 2025 Downloaded on : Thu May 01 23:53:21 IST 2025 NEUTRAL CITATION C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025 undefined waives service of notice of Rule on behalf of the respondent No.2.
2. As the issues involved in all petitions are identical, they are decided by this common judgment. The facts of Special Civil Application No.4406 of 2020 are taken for the purpose of adjudication.
3. These petitions are filed under Articles 226 and 227 of the Constitution of India, challenging the award dated 06.07.2019 passed by the Labour Court, Valsad, in Reference (LCB) No. 80 of 2008, whereby the petitioner was directed to reinstate respondent No.2 to his original post with 30% back wages and the termination order dated 06.02.2008 was held illegal.
4. It is the case of the petitioner that respondent No.2 was employed as an operator and was a permanent employee since 07.04.1997, drawing a monthly salary of ₹5,650/-. Respondent No.2 was initially engaged by respondent No.3, and his services were subsequently continued by respondent No.4 till 01.07.2007. As no work was assigned to respondent No.2 by respondent No.4 from 06.02.2008 onwards, he alleged oral termination of service and raised an industrial dispute before the Conciliation Officer.
5. It is alleged that petitioner, respondent Nos.3 and 4 are the same company as the respondent No.4 had changed the name by using the name of the present petitioner.
Page 2 of 13 Uploaded by M.M.MIRZA(HC01407) on Thu May 01 2025 Downloaded on : Thu May 01 23:53:21 IST 2025NEUTRAL CITATION C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025 undefined The said dispute was culminated into the Reference wherein the statement of claim was filed by the respondent No.2. The present petitioner appeared as party No.3 before the learned labour Court and filed written statement denying the relationship of employer- employee between respondent No.2 and the present petitioner. Respondent No.2 had given his oral evidence in support of his statement of claim, which was produced below Exhibit 20 admitting the fact that he had been appointed by respondent No.3 and 4 and on hearing through the relevant sources that respondent No.4 had changed the name by the name of present petitioner, the petitioner was joined as first party No.3. The learned Reference Court allowed the Reference filed by respondent No.2 by granting the relief of reinstatement to the original post along with 30% back wages, which is the subject matter of challenge before this Court.
6. Heard the learned advocate Mr.Joshi for the petitioner and learned advocate Ms.Sageeta Pahwa for the respondent No.2.
7. Learned advocate Mr. Joshi for the petitioner submits that respondent No.2 had last worked with respondent No.4 as an operator, and after the execution of the lease deed between the petitioner and respondent No.4, the petitioner was impleaded as FIRST party No.3. Learned advocate Mr. Joshi submits that there exist no employer- employee relationship between the petitioner and Page 3 of 13 Uploaded by M.M.MIRZA(HC01407) on Thu May 01 2025 Downloaded on : Thu May 01 23:53:21 IST 2025 NEUTRAL CITATION C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025 undefined respondent No.2. However, without examining this preliminary issue, the impugned order came to be passed. Learned advocate Mr. Joshi submits that the respondent No.2, in his statement of claim, admitted the employer-employee relationship with respondent No.4, and the same was established through the evidence adduced before the learned Labour Court.
7.1. Learned advocate Mr. Joshi submits that, without properly considering the ingredients of the definition of "industrial dispute" as defined under Section 2(k) of the Industrial Disputes Act, 1947 (hereinafter referred to as "the I.D. Act"), the petitioner was erroneously held liable along with respondent Nos.3 and 4.
7.2. Learned advocate Mr. Joshi submits that no retrenchment has been effected by the present petitioner under Section 25 of the I.D. Act, there exists no employer-employee relationship between the petitioner and respondent No.2. Learned advocate Mr. Joshi submits that the dispute had arisen between respondent Nos.2 and 4; however, the present petitioner was wrongly impleaded as a party based on false averments made in the statement of claim, alleging that the name of the employer was changed from M/s. Rupani Dyes Intermediates Private Limited to M/s. Kinjal Chemicals. Learned advocate Mr.Joshi points out that respondent No.2 himself admitted that he was lastly employed with respondent No.4, and the Page 4 of 13 Uploaded by M.M.MIRZA(HC01407) on Thu May 01 2025 Downloaded on : Thu May 01 23:53:21 IST 2025 NEUTRAL CITATION C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025 undefined legal proceedings were initiated in the year 2008, during which the present petitioner had no existence at the premises mentioned in the cause title of the Reference. Learned advocate Mr.Joshi submits that instead of examining these crucial facts regarding the employer-employee relationship, the learned Reference Court erroneously held the present petitioner liable along with respondent Nos.3 and 4.
7.3. Learned advocate Mr. Joshi submits that unless and until the relationship of employer and employee is established in light of the definition of "industrial dispute" under Section 2(k) of the I.D. Act, no order can be passed holding the present petitioner jointly and severally liable. Learned advocate Mr. Joshi submits that that the impugned award has been passed without assigning any cogent reasons, and therefore, the same deserves to be set aside. Learned advocate Mr. Joshi submits that the petitions are required to be allowed accordingly.
8. Per contra, learned advocate Ms. Sangeeta Pahwa, appearing for respondent No.2, submits that the case of the present respondent is covered under Section 25FF read with Section 18(3)(c) of the I.D. Act. Learned advocate Ms. Pahwa submits that these provisions are enforceable and binding upon the employer, or his heirs, successors, or assignees, thereby obligating them to comply with the award. Learned advocate Ms. Pahwa Page 5 of 13 Uploaded by M.M.MIRZA(HC01407) on Thu May 01 2025 Downloaded on : Thu May 01 23:53:21 IST 2025 NEUTRAL CITATION C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025 undefined further submits that the present petitioner, being an assignee and successor-in-interest, is bound by the award, which is evident from the lease deed executed between M/s. Rupani Dyes Intermediates Private Limited and the present petitioner, M/s. Kinjal Chemicals, on 08.10.2009. Learned advocate Ms. Pahwa also points out that an agreement to sell of chemical machinery was executed between the present petitioner and respondent No.4, and therefore, the petitioner is liable to comply with the impugned award.
8.1. Learned advocate Ms. Pahwa submits that the Gujarat Pollution Control Board ('the GPCB' referred hereinafter) had also effected a name transfer from M/ s. Rupani Dye Intermediates Pvt. Ltd. to M/s. Kinjal Chemicals vide communication dated 25.11.2009. It was further recorded in the said communication that since the petitioner had purchased the industrial unit from M/s. Rupani Dye Intermediates Pvt. Ltd. and submitted relevant documents pertaining to plot transfer from GIDC along with the sale deed, all responsibilities of compliance with the conditions stipulated in the order and under the provisions of the Water Act, the Air Act, and the Hazardous Waste Rules shall vest with M/s. Kinjal Chemicals, Unit No.3. The GPCB also clarified that all terms and conditions consolidated in the authorization order dated 06.06.2008 shall remain unchanged.
Page 6 of 13 Uploaded by M.M.MIRZA(HC01407) on Thu May 01 2025 Downloaded on : Thu May 01 23:53:21 IST 2025NEUTRAL CITATION C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025 undefined 8.2. Learned advocate Ms. Pahwa submits that, after considering all the documentary evidence placed on record, the learned Reference Court rightly held the present petitioner, along with respondent Nos.3 and 4, liable to reinstate respondent No.2 with 40% back wages. Therefore, no interference is warranted by this Court, and the petition is liable to be dismissed.
9. Having considered the arguments advanced by the learned advocates for the respective parties and the reasons assigned by the learned Reference Court, it emerges from the record that respondent No.2 was employed as an operator since 01.04.1997 with respondent No.3, namely M/s. Crystal Chemicals Industries, drawing monthly wages of Rs.5,650/-. On 01.07.2007, respondent No.2 was orally transferred to a sister concern, i.e., respondent No.4, M/s. Rupani Dyes Intermediates Private Limited. Respondent No.2 was subsequently terminated on 06.02.2008 by respondent No.4, leading to an industrial dispute being raised before the Conciliation Officer against respondent Nos.3 and 4.
9.1. During the conciliation proceedings, the present petitioner was joined as first party respondent No.3, pursuant to the order dated 28.12.2016. It is noted that, except for the present petitioner (first party No.3), respondent Nos.3 and 4 did not appear before the learned Reference Court. In support of his claim, Page 7 of 13 Uploaded by M.M.MIRZA(HC01407) on Thu May 01 2025 Downloaded on : Thu May 01 23:53:21 IST 2025 NEUTRAL CITATION C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025 undefined respondent No.2, in addition to his oral evidence, produced an Identity Card issued by respondent No.3, which indicates his date of joining as 01.04.1997.
9.2. It is alleged by respondent No.2 that the present petitioner has purchased the land as well as the plant and machinery, and has changed the name of the establishment, as reflected in the communication issued by the GPCB dated 25.11.2009. The sale deed was produced before the learned Reference Court and marked as Exhibit 19/3, along with the communication from the GPCB, also marked as Exhibit 19/3. It is further contended that the petitioner has purchased the land and assets belonging to respondent No.4 and has continued to carry on the same business at the same premises.
9.3. The moot question that arises for consideration before this Court is whether the petitioner can be considered a transferee or successor-in-interest of the business of respondent No.4, in light of the principles laid down under Section 25FF and Section 18(3)(c) of the I.D. Act. At this stage, reference of Section 25FF and 18(3)(c) of the I.D.Act. is required, which is reproduced hereinbelow:
[25FF. Compensation to workmen in case of transfer of undertakings.--Where the ownership or management of an undertaking is transferred, whether by agreement or Page 8 of 13 Uploaded by M.M.MIRZA(HC01407) on Thu May 01 2025 Downloaded on : Thu May 01 23:53:21 IST 2025 NEUTRAL CITATION C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025 undefined by operation of law, from the employer in relation to that undertaking to a new employer, every workman who has been in continuous service for not less than one year in that undertaking immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of section 25F, as if the workman had been retrenched:
Provided that nothing in this section shall apply to a workman in any case where there has been a change of employers by reason of the transfer, if--
(a) the service of the workman has not been interrupted by such transfer;
(b) the terms and conditions of service applicable to the workman after such transfer are not in any way less favourable to the workman than those applicable to him immediately before the transfer; and
(c) the new employer is, under the terms of such transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer."
"18(3)(c): where a party referred to in clause (a) or clause (b) is an employer, his heirs, successors or assigns in respect of the establishment to which the dispute relates."Page 9 of 13 Uploaded by M.M.MIRZA(HC01407) on Thu May 01 2025 Downloaded on : Thu May 01 23:53:21 IST 2025
NEUTRAL CITATION C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025 undefined
10. The test whether an entity is a successor-in-interest under the provisions of Section 25FF and Section 18(3)(c) of the I.D. Act is that whether the employees of a business continue to be entitled to all rights and privileges acquired by them by virtue of their past service, even after the transfer of the business, provided that there is continuity of service and identity of the business.
11. The correct test is not merely whether there is a succession to the business, but whether the business has been transferred without disturbing its identity and continuity. The concept of "identity" was discussed in detail by the Bombay High Court in the case of N.J. Chavan and Ors. vs. P.D. Sawarkar and Ors., reported in AIR 1958 BOM 133. In that judgment, the Court held that, for ascertaining the identity of the business, what is essential is that the same business which was carried out by the transferor must also be carried on by the transferee. It is not sufficient that the business is merely similar or of the same nature; mere similarity is not the decisive test. The business carried on by the transferee must, in substance and form, be the same business as that conducted by the transferor.
12. This Court has referred the decision of the Hon'ble Supreme Court in Anakapalla Co-operative Agricultural and Industrial Society Ltd. vs. Workmen, reported in AIR (1963) SC 1489, wherein it Page 10 of 13 Uploaded by M.M.MIRZA(HC01407) on Thu May 01 2025 Downloaded on : Thu May 01 23:53:21 IST 2025 NEUTRAL CITATION C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025 undefined is held that the importance of any single factor cannot be overstated, and the presence or absence of any one of them is not, in itself, decisive. Therefore, it is not necessary, for the purpose of determining whether a person is a successor-in-interest of a business, that the business ought to have been purchased as a going concern with all rights, obligations, and continuity of service for the workmen employed therein. A purchaser of the same business may still be considered a successor, depending on the surrounding facts and circumstances. A mere change in management does not affect the rights of the workmen. However, the purchaser cannot be held to be a successor-in-interest of the previous owner where the subject matter of the transfer does not comprise the entire business.
13. In the present case, to establish that the petitioner is carrying on the same business as the predecessor, the communication issued by the GPCB dated 25.11.2009 assumes significance. In the said communication, it is observed that GPCB had granted consolidated consent and authorization under the provisions of the Water Act, the Air Act, and the Hazardous Waste Rules to M/s. Rupani Dyes Intermediates Private Limited vide order dated 06.06.2008, which was valid up to 04.04.2013. Prior to the expiry of this permission, the present petitioner purchased the unit of M/s. Rupani Dyes Intermediates Private Limited and submitted relevant documents including the plot transfer from GIDC and the Page 11 of 13 Uploaded by M.M.MIRZA(HC01407) on Thu May 01 2025 Downloaded on : Thu May 01 23:53:21 IST 2025 NEUTRAL CITATION C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025 undefined registered sale deed. Subsequently, the petitioner requested for a change of name and transfer of the said consent in its favour.
14. From the uncontroverted averments made before the learned Reference Court, it further emerges that the Manager presently serving with the petitioner is the same individual who was earlier employed with respondent No.4. While it was contended that the present petitioner is a partnership firm and that M/s. Rupani Dyes Intermediates Private Limited is a company incorporated under the Companies Act, having different directors and a distinct constitutional structure, it is a settled legal position that a mere change in management or constitution is not a decisive factor in determining whether an entity is a successor-in-interest. As discussed above, such change alone does not negate the continuity of business operations. From the totality of evidence adduced before the learned Reference Court, it stands established that the petitioner is carrying on the same business as was being conducted by respondent No.4 and has also effected a name change before the GPCB accordingly.
15. In that background, this Court does not deem it appropriate to interfere with the findings recorded by the learned Reference Court, holding the petitioner jointly liable along with respondent Nos.3 and 4. However, considering the fact that the respondent No.2 was Page 12 of 13 Uploaded by M.M.MIRZA(HC01407) on Thu May 01 2025 Downloaded on : Thu May 01 23:53:21 IST 2025 NEUTRAL CITATION C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025 undefined terminated from service in the year 2008, and taking into account the length of service rendered by him, which is approximately 11 years, this Court is of the view that the interest of justice would be served by awarding compensation in lieu of reinstatement and back wages. Accordingly, a lump sum compensation of Rs.4,00,000/- (Rupees Four Lakhs only) is awarded to the respondent No.2, inclusive of back wages.
16. Resultantly, the petitions are partly allowed. The directions issued by the learned Reference Court are modified to the extent that the present petitioner, along with respondent Nos.3 and 4, shall jointly and severally pay a lump sum compensation of Rs.4,00,000/- (Rupees Four Lakhs only) to respondent No.2 towards full and final settlement of all claims arising out of the impugned award.
17. Rule is made absolute to the above extent.
ORDER IN CIVIL APPLICATION NOS.1 OF 2025.
In view of the common order passed in main petitions, Civil Applications do not survive and stands disposed of accordingly.
(M. K. THAKKER,J) M.M.MIRZA Page 13 of 13 Uploaded by M.M.MIRZA(HC01407) on Thu May 01 2025 Downloaded on : Thu May 01 23:53:21 IST 2025