Madras High Court
Spencer Consumer Products And Service ... vs Presiding Officer, Industrial ... on 1 March, 1995
Equivalent citations: (1996)IILLJ852MAD
ORDER Jayasimha Babu, J.
1. The petitioner is aggrieved by the common award of the Industrial Tribunal dated May 31, 1994 in I.D. Nos. 88 and 37 of 1993 by which the petitioners have been directed to reinstate the workmen with continuity of service, back wages and other attendant benefits.
2. The disputes referred to the Tribunal in I.D. No. 37/1993 was whether the stoppage of work at Vishwardarshan Distributors Private Limited. Rajakulam for December, 1991 is justified and what relief the workers are entitled. The disputes referred to in I.D. No. 88/1993 was whether the transfer of the Aerated Water Factory at Rajakulam along with the workers employed therein involving change of conditions of service of the workmen, by the management of Spencer Consumer Products and Services Limited, Madras-2 to the Management of Vishwardharshan Distributors Private Limited from July 10, 1991 is justified and if not to what relief the workers are entitled?
3. The factual background to these references may be set out briefly. The petitioner company was incorporated in the year, 1979 and is a subsidiary of Spencer and Company Limited. Four Divisions of Spencer and Co., Ltd., namely, the Aerated Water Factory, Bakery, Sales and Maintenance were transferred to this subsidiary company in the year, 1981, and workmen engaged in those divisions became employees of the petitioner company. The divisions so transferred, along with other divisions of Spencer and Co., continued to function at the same location at Anna Salai, Madras-2.
4. In November, 1989, the petitioner company entered into a settlement under Section 18(1) of the Industrial Disputes Act with union of its workmen in which under heading "conveyance allowance" it was set out that the management would be shifting the Aerated Water Factory shortly from Anna Salai to Rajakulam because of shortage of water and space and in view of the construction of Spencer Plaza. The Company agreed to pay supplementary conveyance allowance of Rs. 30/- per month to such of those employees who are required to work at the new location to which the Aerated Water Factory is shifted on and from the date they are required to work at the new location, and also agreed to provide free to and fro transport from the Spencer and Co., Offices premises situated in Anna Salai. Some of the employees working in the Aerated Water Factory had been transferred to that factory from the other departments of the petitioner company prior to that settlement.
5. In the year, 1991, the machineries of the Aerated Water Factory were shifted to Rajakulam. The land on which the factory was built at Rajakulam is apparently owned by the third respondent who was a distributor for the soft drinks and aerated Water manufactured by the petitioner company. In June, 1991 employees working in the Aerated Water Factory were asked to attend work at Rajakulam and they commenced working at the new location.
6. On June 9, 1991, one of the unions of workmen addressed a letter to the company wherein it was also stated that the employees apprehend that they have to work under third respondent at the new location and that the employer should give notice under Section 9-A of the I.D.Act; that Rajakulam was nearly 65 Kms. away from Madras and that the employees must be assured that the company will assume legal and moral responsibility for anything happening to the employees during their journey. The same union filed a petition before the Labour Officer on June 10, 1991 in which it is mentioned that the employees had learnt from reliable sources that they would have to work at new location under the control of Vishwardharshan Distributors Private Limited, Rajakulam. It was asserted in that petition that there was no provision in the standing order to compel an employee to work at any place other than at Madras and that therefore the transfer to Rajakulam was illegal, motivated and bad in law.
7. On July 10, the company issued a notice to all its employees working in the Aerated Water Factory in which it was stated that consequent to the transfer of the undertaking of the Aerated Water Factory of the company to M/s. Vishwardharshan Distributors Private Limited from the mid-night of July 10, 1991, the employees would become the employees of the transferee company and in order to enable that to be effectuated, the workmen would cease to be the employees of the petitioner from the mid-night of July 10, 1991 and would be in the services of the transferee company without any interruption in their services and terms and conditions of service which would not be in any way less favourable than those applicable prior to the transfer; and further that the third respondent had agreed that in the event of retrenchment of any employee, compensation would be paid on the basis that their services were continuous and had not been interrupted by the transfer.
8. On the date of which this notice was issued to the workmen, the petitioner and the third respondent entered into an agreement captioned "sale of undertaking" whereby it was agreed that the petitioner had agreed to sell with effect from July 10, 1991, its undertaking pertaining to the manufacture of aerated soda, sweet drinks and non-aerated fruit juices etc. at its factory located at Rajakulam together with the assets including plant and machinery all liabilities and employees but excluding the trade mark mentioned in the agreement. The agreed consideration for the sale was Rs. 25 lakhs which had been paid by the third respondent to petitioner as early as on May 12, 1989 - Clause 7 of that agreement provided that the buyer had irrevocably agreed to absorb in its employment all the employees and workmen employed in the undertakings as per the list of employees indicated in Annexure II on such terms and conditions not less favourable to such employees, and the workmen would be deemed to be in continuous and uninterrupted service, and further that in the event of retrenchment of such employees and workmen to pay compensation as per the law on the basis that the services of such employees and workmen has been continuous and their past services in the transferor company would be taken into account. It was further agreed that the salary/wages for the month of July 1991, shall be paid by the buyer and bonus would be paid for the year, 1990-91 as per the agreement with the workmen/union. An-nexure III to that agreement captioned "List of employees" lists the names of 170 workmen.
9. On the same day, viz., July 10, 1991 the transferee company also issued a notice wherein it was stated that with effect from that day, the workmen would become the employees of the transferee company. The assurance regarding the terms and conditions etc. given by the transferor company were reiterated and an ex gratia payment of Rs. 500/- was also offered to each of the workmen as a gesture of goodwill. The workmen refused to receive the amount offered as ex gratia but continued to work at Rajakulam.
10. On October 30, 1991 the third respondent submitted a petition under Section 25(O) of the Act seeking permission to close down the undertaking. The number of workmen employed by the third respondent in the factory at Rajakulam at that time, according to the third respondent was 154. The Labour Commissioner by his order dt. December 30, 1991 rejected the application of the third respondent and declined to grant permission to close down the undertaking.
11. The Union filed a suit in the City Civil Court, Madras, in O.S. 8638/91 seeking a declaration that the agreement dt. July 10, 1991 between the petitioner and third respondent company as void. In December, 1991 the union made a demand for payment of bonus for the year, 1990-91 and also asserted that the workmen had been illegally transferred from the services of the petitioner company to that of the third respondent company.
12. The workmen having commenced an agitation against the petitioner, the petitioner filed a suit in C.S. No. 22 of 1992 on the file of this Court seeking permanent injunction against the workmen, their officer members etc., from in any manner obstructing or preventing persons from entering or leaving the office and for other reliefs.
13. The union then approached the Government to refer the dispute regarding transfer of the undertaking for adjudication which request was rejected by the Government on January 3, 1992. Another request made by the union relating to the transfer of workers which was alleged to be illegal was also declined by the Government on April 10, 1992.
14. After the Labour Commissioner, declined to grant permission for the third respondent to close down the undertaking, the Government referred the dispute regarding the denial of the work by the third respondent to the workers by its order dated April 26, 1993. That dispute was numbered as I.D. 37/1993. On the Union having renewed their request for their referring the dispute regarding the alleged illegal transfer of the employees, the Government reconsidered its earlier order of rejection and decided to refer the dispute regarding the justifiability of the transfer of the factory as also the transfer of the services of the workmen for adjudication, on October 7, 1993. That dispute was numbered as I.D. 88 of 1993.
15. During the pendency of these references the union filed W.P. 15742/93 in which, the petitioner as also the third respondent were parties along with the Stale. The learned single Judge who decided the petition on November 12, 1993 directed the third respondent to open the factory on or before November 19, 1993 failing which to pay wages to the workmen for the future. That order having been taken up in appeal to the Division Bench of this Court in W.A.1354/93 the Court by its order dated March 17, 1994 held that the rights of the workmen and the liability of the third respondent would depend upon the award to be passed in I.D. 37 of 1993 and it was further held that the reference regarding the transfer of factory and the employees has to be heard along with I.D. No. 37 of 1993 and decided together. The Division Bench also directed the Tribunal to decide the two references together within a period of two months and directed the third respondent to pay one month's pay to all the workmen numbering 170.
16. As directed by this Court, the two references were tried together by the Tribunal and the Award was made on May 31, 1994. The Tribunal first considered I.D.No. 88 of 1993 and having answered the reference in favour of the workmen, held that though the third respondent was not justified in stopping the work in the factory, the workmen are not entitled to any relief in I.D. No. 37 of 1993 against the third respondent, in view of the relief having been granted to the workmen in I.D. No. 88 of 1993 against the petitioner.
17. Mr. Sanjay Mohan, learned counsel for the petitioner submitted that the Tribunal by failing to consider the materials on record, has erroneously held that the workmen had not consented to the transfer of their services to the third respondent; that on a proper construction of Section 25FF of the Act, the consent of workmen for transfer is not necessary; that the relief of reinstatement granted to the workmen in any event is wholly unsustainable in view of the undisputed fact that the Aerated Water Factory is now admittedly owned by the third respondent and the petitioner does not own any other Aerated Water Factory, and there are no posts under the petitioner into which the workmen can be reinstated. It was also submitted that the relief of reinstatement is wholly outside the purview of Section 25FF of the Act which is a provision dealing with transfer of undertaking and that it was not the case of the workmen at any time, that there was any breach of Section 25F of the Act. Learned counsel further submitted that the Tribunal having found that the transfer was not illegal, and the workmen having failed to establish that the transfer was benami, the only relief that could be claimed by the workmen under Section 25FF of the Act was notice pay and retrenchment compensation, and the reliefs granted by the Tribunal were therefore unsustainable.
18. Mr. N.G.R. Prasad learned counsel for the second respondent/workmen on the other hand, submitted that the Award was not liable to be interfered with as the same was based upon materials placed before the Tribunal all of which had been duly considered and that there was no error of law or jurisdiction on the part of the Tribunal in holding that the transfer was not justified and directing reinstatement. He also submitted that the petitioner company being a subsidiary of Spencer and Co. has a large number of branches and departments; that many of the workmen had been working in Spencer and Co. which has a large number of branches and departments; that many of the workmen had been working in Spencer and Co. before being transferred to the petitioner company and therefore the workmen can be reinstated and accommodated at or in other divisions or branches of Spencer and Company Limited without any difficulty.
19. Counsel submitted that proper provisions to be applied in this case is Section 25F as the consent of the workmen had not been obtained prior to their transfer and continued denial of work by the petitioner to those workmen would amount to retrenchment.
20. As regards the applicability of Section 25FF to the facts of the case, the submission by the learned counsel for the workmen was that this section is not at all attracted to the facts of this case as what was transferred was not the undertaking but a section of the same even while undertaking continued. The transfer of industrial undertaking being the condition precedent for applying Section 25FF of the Act, it was urged, the petitioner cannot be heard to say that the transfer of the machineries effected by the petitioner company would amount to transfer of undertaking and on that ground to limit its liability to the payment of monetary benefits on the basis of notional retrenchment, while not disputing the fact that the workmen had not specifically pleaded that the sale of machineries would not amount to transfer of undertaking, it was submitted for the workmen, that the onus was upon the petitioner to show the justification for the transfer of the workmen and it was for the petitioner to show by positive evidence that all conditions which are required to be fulfilled for applying Section 25FF had in fact been fulfilled in this case. The evidence on record, it was submitted, would show that there was a transfer of employment of the workmen among different divisions of the petitioner company and that all the divisions were located at one place for several decades and it was only just prior to the date of sale of the machineries that the workmen were asked to work at Rajakulam and even thereafter, the workmen continued to contend that the transfer was illegal. It was therefore submitted that the evidence on record would show (hat what was transferred was not the undertaking and the petitioner cannot invoke and rely upon Section 25FF of the Act.
21. Mr. R.N. Narasimhamurthy learned Senior counsel for the third respondent submitted that the transfer of the workmen was without their consent and this is evident from the fact that the workmen had not been intimated prior to the transfer that they should give consent for being employed henceforth by the third respondent; that it is settled law that a contract of personal services is incapable of being transferred as no man can be compelled to work against his will under another employer; that even by statute, the services of an employee cannot be transferred under compulsion of law to another employer if the employee does not wish to accept such a transfer; that an employer does not have inherent right to transfer an employee and that right of transfer has to be found in the terms of contract of service and if the contract does not provide for such transfer, the employee cannot be transferred even to a new unit of the same employer. The workmen in this case at no time had given their written consent for their transfer and by their conduct had not accepted the transfer even at the time of sale of machineries. The employees had refused to accept the offer of the third respondent to pay Rs. 500/- as a gesture of good will. Even thereafter, the employees, persisted in making repeated demand against the petitioner claiming to be the employees of the petitioner. It was also urged that the employees have not co-operated with the third respondent and such non-co-operation was one of the reasons for the third respondent seeking permission to close down the factory.
22. Learned counsel also submitted that in view of the clear stand of the workmen that they had not consented for the transfer and for becoming the employees of the third respondent they continued to be the employees of the petitioner; that even though the Tribunal has found that the stoppage of work by the third respondent was not justified, nevertheless, no relief can be granted to the workmen as the question of reinstatement in the services of the third respondent would not arise and the Tribunal has rightly held that the workmen are not entitled to any relief under the Act from the third respondent. Learned counsel urged that the Award of the Tribunal in I.D.No. 37/93 had become final by reason of the fact that the workmen had not challenged the same and the petitioner's challenge to that award could not be entertained and has necessarily to be dismissed.
23. The matter referred for adjudication in I.D.No. 88/93 was to whether the transfer of the factory along with the workers employed therein by the petitioner company to the third respondent was justified. The order of the reference also states that such transfer involved change of condition of service of the workmen. The Tribunal had not gone into the question as to whether there was any change in the conditions of service. Neither of the parties to the reference adduced any evidence regarding the same.
24. The substantial issue in that reference was justifiability of the transfer of the factory along with the employees. The Tribunal has found that the transfer itself was not illegal. The workmen did not contend nor was any evidence let in to the effect that the transfer was benami and despite transfer, the petitioner company continued to run the factory. It must therefore he held that the transfer of the factory was in fact effected and that the management of the factory vests with the third respondent after such transfer. The Tribunal's finding that the transfer was not illegal has to be understood in that sense.
25. As regards, the transfer of the workmen employed in the factory and the justification therefor, the fact that express consent of the workmen was not obtained is not in dispute. The fact that the workmen had not even been told that the transfer was in contemplation and that the object of shifting the machineries to Rajakulam was a part of arrangement of the transfer of the Aerated Water Factory to the third respondent is evident from the copy of the notice issued on July 10, 1991, in which it is stated that from the midnight of July 10, 1991 the workmen are transferred to the third respondent as its employees of the factory at Rajakulam. The recitals in the agreement between the petitioner and the third respondent show that the transfer of the factory to the third respondent was contemplated as early as in 1989 in which year, the consideration for the transfer was paid and such payment was made around the same time when the settlement was arrived at between the petitioner and the unions under Section 18(1) of the Act wherein it was set out that the factory will be shifted to Rajakulam. Two years later, when actual shifting was done, it was shifted not to the land belonging to the petitioner but to the land owned by the third respondent as has been mentioned in some of the documents filed in this case and even at that time, the workers were not told that the workers are transferred to a new employer. The workers, on the other hand, were given the promise that free transport would be provided from Anna Salai to Rajakulam by the petitioner. About a month after the shifting, the workmen were abruptly informed that transfer had been effected. Even when the workmen had intimated the petitioner that there were rumours of transfer of such factory, the petitioner did not choose to confirm that the transfer was being effected shortly and the consent of the workmen for being transferred to the services of the third respondent was not sought. It is therefore abundantly clear that the transfer was without consent of the employees.
26. It is not possible to regard the conduct of the workmen in working for several months under the third respondent as signifying their implied consent for their transfer in view of their continuing protests against the transfer and the various steps initiated by them to challenge the same.
27. In the case of Hamdard Dawakhana etc. v. Union of India AIR 1969 SC 554 at 561 it was held that in the absence of any express condition in the term of employment the employer does not have an implied right to transfer the workmen to a new concern started by the same employer subsequent to the date of employment of the workmen.
28. In the case of the Manager Pyarchand Kesarimal Porwal Bidi Factory v. Omkar Laxman Thenge (1970-I-LLJ-492)(SC) it was held that when an employer lends the services of its employee to a third person, the employee continues to be in the employment of his original employer and that the third party cannot terminate the services of the employee. The Supreme Court further held that a contract of service being incapable of transfer unilaterally a transfer of service from one employer to another can only be effected by a tripartite agreement between the employer, the employee and the third party, the effect of which would be to terminate the original contract of service and to make a new contract between the employee and the third party. So long as the contract of service is not terminated, a new contract is not made and the employee continues to be in the employment of the original employer.
29. In the case of Jawaharlal Nehru University v. Dr. K.S. Jawatkan (1989-II-LLJ-586)(SC) it was held that when the Manipur University Act provided for the transfer of the services of the staff working at the Centre of Postgraduate studies, Imphal, to employment in the Manipur University, it must be construed as a provision enabling such transfer of employment but only on the assumption that the employee concerned is a consenting party to such transfer, notwithstanding the provision in the Manipur University Act, that the Centre at Imphal established by Jawaharlal Nehru University would become a part of Manipur University and the order made by the Governor providing that the members of the faculty of the post graduate staff would become the members of the staff of Manipur University on the same terms and conditions of services as at Jawaharlal Nehru University. The court further held that the contract of services entered into by the respondent was a contract with the appellant university and no law can convert that contract into a contract between the respondent and the Manipur University without simultaneously making it, either expressly or by necessary implication subject to the respondent's consent. The court observed that the position of law is clear that no employee can be transferred without his consent from one employer to another. The consent may be express or implied.
30. The Tribunal has therefore rightly held that the transfer of the workmen purported to have been effected by the petitioner by issuing notice dt. July 10, 1991 transferring their services from that of the petitioner to that of the third respondent, without obtaining the consent of the workmen, is not justified.
31. The question as to applicability of Section 25FF to the facts of the present case may now be considered. Before doing so it is useful to ascertain the scope of that provision. Section 25FF reads as follows:
"Compensation to workmen in case of transfer of undertakings:
Where the ownership or management of an undertaking is transferred, whether by agreement or 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 employer 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."
32. In the case of Anakapallee Co-operative Agricultural and Industrial Society Limited v. Workmen (1962-II-LLJ-621) a Constitution Bench of the Supreme Court considered the scope of Section 25FF of the Act which had been substantially altered in the year 1967. The Supreme Court considered the scope of Section 25FF at paragraphs 16 and 17 of the Judgment. It is useful to set out relevant portions of the same.
"The Solicitor General contends that the question in the present appeal has now to be determined not in the light of general principles of Industrial adjudication, but by reference to the Specific Provisions of Section 25FF itself. He argues, and we think rightly, that the first part of section postulates that on a transfer of the ownership or management of an undertaking the employment of workmen engaged by the said undertaking comes to an end, and it provides for payment of compensation to the said employees because of the said termination of their services, provided, of course, they satisfied the test of the length of the service prescribed by the section. The said part provides the manner in which and the extent to which the said compensation has to be paid. The workmen would be entitled to notice and compensation in accordance with the provisions of Section 25FF. Since section says 'as if' they had been retrenched. The said clause clearly provides that the termination of the employee does not in law amount to retrenchment, and that is consistent with the decision of this Court in Hariprasad's case AIR 1957 SC 121. The Legislature however wanted to provide that though such termination may not be retrenchment technically so-called, as decided by this Court, nevertheless, the employees in question whose services are terminated by the transfer of the undertaking should be entitled to compensation and Section 25FF provides that on such termination compensation would be paid to them as if the said termination was retrenchment. The words 'as if bring out the legal distinction between retrenchment defined by Section 2(oo) as it was interpreted by this Court and termination of services consequent upon transfer with which it deals. In other words, the section provides that though termination of services on transfer may not be retrenchment, the workmen concerned are entitled to compensation as if the said termination was retrenchment. This provision was made for the purpose of calculating the amount of compensation payable to such workmen; rather than provide for the measure of compensation over again, Section 25FF makes a reference to Section 25F that limited purpose, and therefore in all cases to which Section 25FF applies, the only claim which the employees of the transferred concern can legitimately make, is a claim for compensation against their employers. No claim can be made against the transferee of the said concern".
33. The Court further held that if the transfer is fictitious or benami, Section 25FF has no application at all because there was no change of ownership or management despite the fact that the employer continues to be real employer and there can be no question of compensation.
34. In the Court of that Judgment, the Court emphasised that the right conferred under Section 25FF and the benefits referred to the proviso to Section 25FF are in the alternative and are not cumulative. The Court observed at para 20 of the Judgment that as soon as the transfer is effected under Section 25FF all employees are entitled to claim compensation unless, of course, the case of the transfer falls under the proviso. The Court observed that Fair Play and justice obviously mean fair play and Social justice to both the parties. It would, we think, not be fair that the vendor should pay compensation to the employees on the ground that the transfer bringing about the termination of their services and the vendee should be asked to take them back on the ground that the principles of Social Justice require him to do so.
35. That both benefits re-employment and compensation cannot be claimed by the workmen in case of genuine transfer was again emphasised in the case of Gurmail Singh v. State of Punjab (1991-II-LLJ-76) wherein at para 22, of the Judgment the Supreme Court observed at page 92.
"We have already pointed out that the appellants can claim either compensation or continuity of service but not both". The Court also held that in a case where one or both of the parties is a State instrumentality, having obligations under the Constitution, the Court has a right of judicial review over all aspects of transfer of the undertaking and in such situation, it is open to a court to give appropriate directions to ensure that no injustice results from the changeover.
36. It is therefore clear that in case to which Section 25FF is applicable the right of the workmen is limited to claiming compensation on the basis of notional retrenchment from the transferor/Original employer. The legal effect of genuine transfer of an undertaking thus is termination of the employment of the workmen in that undertaking and on such termination brought about by reason of the transfer of undertaking, employees would become entitled to receive compensation form their original employer as if they had been retrenched. The transferor is relieved of the obligation to pay such compensation to the workmen who accept employment under the transferee and if the terms of such employment include all the terms specified in the proviso to Section 25FF. The original employer cannot transfer the employees with the undertaking to the transferee, without the consent of the employees. The decision to accept or not to accept employment under the transferee is clearly with the employee and even if the workmen accept employment under the transferee, they can nevertheless claim compensation on the basis of notional retrenchment from the original employer, if the terms of the employment under the transferee do not provide for all the terms and conditions specified in the proviso to Section 25FF.
37. If it is established that Section 25FF is attracted to the facts of the case on hand, it is clear that the workmen would have to limit their claim against the petitioner to compensation on the basis of notional retrenchment. Section 25FF deals with consequences flowing from genuine transfer of undertaking and does not create any vested right in the employer to transfer the undertaking or to avoid paying compensation by requiring the transferee to extend the benefits set out in the proviso to Section 25FF of the Act.
38. In this connection learned counsel for the petitioner referred to the decision of the Supreme Court in the case of Workmen of Dewan Tea Estate v. Their Management (1964-I-LLJ-358) and to the case of Workmen of Firestone Tyre and Rubber Co. of India (P) Ltd. v. Management of Firestone Tyre and Rubber Co. of India Ltd., (1973-I-LLJ-278). In the first of these decisions the Supreme Court held that Section 25C does not recognise any common law right in the employer to declare lay off. In the latter case, it was held that the definition of lay off under Section 2(KKK) does not confer any right on the employer to declare lay off.
39. According to the respondents, what was transferred was not the undertaking of the petitioner and therefore Section 25FF is not applicable. The word 'undertaking' has not been defined in the Act. As observed by the Supreme Court in the case of S.G. Chemicals ana Dyes Trading Employees Unions v. S.G. Chemicals and Dyes Trading Limited and Anr. (1986-I-LLJ-490) the term 'UNDERTAKING' though it occurred in several Sections of the Industrial Disputes Act, for instance Sections 25FF, 25FFA and 25FFF is not defined anywhere in the Act, even the new Clause (Ka) which was inserted by Section 2 by the Industrial Disputes (Amendment) Act, 1982 defines the expression 'Industrial Establishment or Undertaking' and not the term 'undertaking' simpliciter. It would appear from the opening words of Clause (Ka) namely 'Industrial establishment or undertaking' means establishment or undertaking in which any industry is carried on, and that the term' undertaking' in that definition applies to an Industrial undertaking. It would thus appear that the words 'undertaking' wherever it occurs in the Industrial Disputes Act, unless a Special definition is given that term is to be understood in its ordinary meaning.
40. In the case of Management of Hindustan Steels Ltd. The Workmen the Court considered the scope of term 'undertaking' and observed that: "The word undertaking as used in Section 25FF seems to have been used in its ordinary sense connecting thereby any work, enterprise, project or business undertaking and is not intended to cover the entire industry or business of the employer, as was suggested by the respondent. Even closure or stoppage of a part of the business or activities of the employer would seem in law to be covered by this Section and the question has indeed to be decided on the facts of each case.
41. In the case of Management of R.S. Madho Ram and Sons (Agencies) Private Limited v. The Workmen as represented by Madho Ram and Sons employees' Union a decision in which great reliance was placed by the respondent's counsel the employees contended that the transfer of a single division out of several divisions in the business which formed part of the business carried on by the employer did not amount to transfer of undertaking and, therefore, notwithstanding the fact that the workmen had been offered re-employment under the transferee, they continued to be the employees of the transferor. The Supreme Court examined the question as to whether Section 25FF applied to the fact of that case and observed that the first and foremost condition for the application of Section 25FF is that the ownership or management of an undertaking is transferred from the employer in relation to that undertaking to a new employer. What the Section contemplates is that either the ownership or the management of an undertaking should be transferred. Normally, this would mean that the ownership or the management of the entire undertaking should be transferred before Section 25FF comes into operation. If an undertaking conducts one business it would normally be difficult to imagine that its ownership or management can be partially transferred to invoke the application of Section 25FF. A business conducted by an industrial undertaking would ordinarily be an integrated business and though it may consist of different branches or departments they would generally be inter-related with each other so as to constitute one whole business. In such a case, Section 25FF would not apply if a transfer is made in regard to a department or branch of the business run by the undertaking and the workmen would be entitled to contend that such a partial transfer is outside the scope of Section 25FF of the Act. The Court observed:
"It may be that one undertaking may run several industries or businesses which are distinct and separate. In such a case, the transfer of one distinct and separate business may involve the application of Section 25FF, The fact that one undertaking runs these businesses would not necessarily exclude the application of Section 25FF solely on the ground that all the businesses or industries run by the said undertaking have not been transferred. It would be clear that in all of this character the distinct and separate business would normally be run on the basis that they are distinct and separate employees would be separately employed in respect of the said business and their terms and conditions of service may vary according to the character of the business in question. In such a case it would not be useful to have one muster roll for all the employees and the organisation of employment would indicate clearly the distinctive and separate character of different business. If that be so, then the transfer by the undertaking of one of its businesses may attract the application of Section 25FF of the Act".
42. The Supreme Court therein found that the company had one muster roll for all the employees of the business run by the transferor, the terms and conditions of service of employees in all its divisions were the same and that the employees could be transferred from one department run by the transferor company to another department. The Court re-emphasised the law laid down in the case of Anakappellee Sugars case (supra) "that..... the question as to whether a transfer has been effected so as to attract Section 25FF must ultimately depend upon the evaluation of all relevant factors and it cannot be answered by treating any one of them as of overriding or conclusive significance."
43. Learned Counsel for the workmen relying on the decision of the Supreme Court in the case of Tandur and Navandgi Stone Quarries (P) Ltd., Basheerabad A.P. v. Their Workmen (1964-I-LLJ-737) submitted that in industrial adjudication the law of pleadings in all its strictness is not to be applied and even though the workmen had not taken a specific plea in their claim statements that what was transferred was not the undertaking and there was no issue with regard to the question, if on the basis of the evidence already adduced by the employer, it can reasonably be held that the employer had failed to show that what was transferred was not the undertaking, the employer should not be allowed to rely upon Section 25FF to limit its liability to the payment of compensation on the basis of notional retrenchment.
44. It is the case of the respondent workmen that the transfer of the Aerated Water Factory by the petitioner is not transfer of an undertaking but is only of a part of the undertaking. It has contended that the factory was but one of the four divisions that were carried on by the petitioner company and unless the entire business of the petitioner was transferred, it could not be said that there was a transfer of undertaking. Learned counsel relied on the evidence given by the workmen, to the effect that some of the employees had been transferred from other divisions to the factory which evidence had not been challenged in the cross- examination, and the evidence of the management witness who had also admitted that such transfer had been effected. The Tribunal adverted to this at para 32 pf the Award but did not record any finding, as in its view that absence of consent for the transfer was sufficient to direct reinstatement of the workmen in service.
45. Learned Counsel for the petitioner on the other hand submitted that in the absence of any pleading regarding the applicability or otherwise of Section 25FF, even though the reference was regarding the justifiability of the transfer, and no issue also having been framed regarding the applicability of Section 25FF, attention was not focussed on this aspect by any of the parties, before the Tribunal. The evidence adduced by the parties, it was submitted, does not establish that what was transferred was not an undertaking. Counsel submitted that the factory was a distinct division with its own Standing Orders and constituted a separate undertaking.
46. The reference made to the Tribunal does not refer to Section 25FF. However, the subject matter of the reference is the transfer of the factory as well as the transfer of the employees. Even if the transfer of the factory is found to be legally valid, the question that would still require consideration would be as to whether the factory so transferred could be regarded as undertaking for the purpose of Section 25FF, or whether on account of the transfer of the employees being invalid for want of consent, the employees would continue to be the employees of the transferor notwithstanding the transfer of the factory.
47. Prima facie when what was transferred had an identity of its own constituted a distinct business venture, and was a business which could be continued or carried on by another, without the aid of the business or division not transferred, it cannot be said that the employer even in the absence of any plea on the part of the workmen that what was transferred was not an undertaking and consequently, there was no issue with regard to the same should have offered evidence to prove that what was transferred was an undertaking. Though the law of pleading may not be applied with strictness, in industrial adjudication, nevertheless, the rules of fair play are very much applicable, and parties to the disputes are not to be placed at a serious disadvantage by reason of the relevant pleas not having been raised either in pleadings or at least in the evidence tendered before the Tribunal.
48. It was not pleaded by the workmen in their claim statement that the Aerated Water Factory was not an undertaking. Apart from stating that some of the workmen had been transferred to this division from other divisions, no evidence was placed to show that despite the factory prima facie being a distinct business of the petitioner, it did not constitute an undertaking. The precise extent to which this business was separate and distinct from other divisions of the petitioner is not known except, that some employees were transferred from one division to another. Though this business was carried on for a long time in the same locality along with several other divisions, at the time of transfer, the location had been changed. The fact that some of the workers had been transferred earlier, though a relevant fact, that fact by itself is wholly insufficient to hold that the factory was not an 'undertaking'.
49. In these circumstances justice requires that the parties to the dispute be given another opportunity to establish as to whether what was transferred was an 'undertaking' for the purposes of Section 25FF. Without disturbing the findings of the Tribunal, that the Transfer of the factory was not legal but that the transfer of the employees was without their consent, the matter is remitted back to the Tribunal to record its findings as to whether the Aerated Water Factory transferred by the petitioner to the third respondent constitutes an 'undertaking' for the purpose of Section 25FF. As the pleadings as they stand are inadequate with regard to this question, opportunity is given to the parties to file supplemental statements and also lead evidence on this point. The direction given by the Tribunal in I.D.88/93 for reinstatement with back wages and consequential benefits is therefore set aside. The findings recorded are not disturbed.
50. As regards the award made by the Tribu nal in I.D. 37/1993, the findings of the Tribunal that the stoppage of work by the third respondent with effect from December 1991 was not justi fied has not been challenged by any one and that finding is conclusive.
51. The Tribunal declined to grant any relief to the workmen in I.D.37/1993 only because relief had been granted to the workmen in I.D.88/93 as against the petitioner herein. The petitioner herein was also a party to I.D.No. 37/1993. The exoneration of the third respondent from liability was only an account of that liability having been placed upon the petitioner. The petitioner in these circumstances is entitled to challenge the award in I.D.37/1993. The fact that the workmen and the third respondent have not challenged that award docs not preclude the petitioner from challenging the award. Without disturbing the finding of the Tribunal that the stoppage of work by the third respondent was not justified, that portion of the award declining to grant relief to the workmen is set aside.
52. The Tribunal shall decide the nature and extent of the reliefs to be granted to the workmen as against the petitioner and/or the third respondent in these two I.Ds. 88 and 37 of 1993, after recording its findings on the question as to whether the Aerated Water Factory constituted a separate undertaking for the purpose of Section 25FF. The Tribunal is directed to consider this question and make its award within a period of three months from today. The parlies shall file their supplementary statements before the Tribunal within three weeks from today, and adduce evidence on the question immediately thereafter.
53. These petitions arc allowed in part and to the extent indicated above. Parties to bear their respective costs.