Gujarat High Court
Apar Industries Ltd. vs Natwarsinh Naharsinh Sindha on 26 September, 2003
Equivalent citations: (2003)3GLR2701, (2004)IILLJ282GUJ
Author: P.B. Majmudar
Bench: P.B. Majmudar
JUDGMENT P.B. Majmudar, J.
1. Since the point involved in this group of Special Civil Applications is common and since all these petitions are filed against the common Award passed by the Labour Court, Vadodara, all these petitions, filed under Article 226/227 of the Constitution of India, are decided by this common judgment.
2. The point which is involved in these petitions is in connection with the status of the employees, who have been transferred from one Undertaking / Company to another Company, by an Agreement, and, ultimately, the effect of cancellation of such agreement. The concerned workmen were, initially, appointed by Apart Private Limited, a Private Limited Company, incorporated under the provisions of the Companies Act, 1956. At the relevant time, they were discharging their duties in the Welding Electrodes Division of the said Company. In the year 1987, an Agreement was entered into between the said Apart Private Limited and one Lotherme Electrodes (India) Private Limited, by which an Agreement to Sell was entered into between the transferor and transferee in connection with the land and buildings belonging to Apart Private Limited to Lotherme Electrodes (India) Private Limited. Since at the relevant time, the present set of employees were working at the Welding Electrodes Division of the transferor Company, i.e. Apart Private Limited, it was agreed between the transferor and the transferee that such employees are to be continued in the employment of the transferee company and for that purpose, the transferee Company agreed to give them the benefit of past service, etc., which they were entitled to in the transferor company. So far as the Agreement to Sell, dated 18th July, 1987, is concerned, the same is produced at Annexure 'A' to the petition. The Agreement is described as "Agreement for Sale-cum-Lease of the Land and Buildings at Baroda". At the relevant time, 134 employees, who were serving in the Welding Electrodes Division of Apart Private Limited, were transferred to the Transferee Company. In the original agreement, a clause was incorporated, being Clause 9 in connection with the aforeaid 134 employees. At present, I am not going into the details about the said Clause 9. The same shall be dealt with later on. However, it is not in dispute that, by virtue of the aforesaid agreement, the aforesaid 134 employees were transferred at the disposal of Lotherme Electrodes (India) Private Limited and they were continued as such. However, difficulty arose subsequently in the year 1989, when the aforesaid Agreement of 1987 was cancelled by a separate agreement, and, at that time, the transferee Company offered Voluntary Retirement Scheme to the aforesaid employees. At that time, out of the aforesaid 134 employees, except 42 employees, with which we are concerned, rest opted for such V.R.S. offered by the Transferee Company, being Lotherme Electrodes (India) Private Limited. But, so far as the present set of employees, on whose behalf the Industrial Dispute was raised, is concerned, they did not accept the said benefit. Thereafter, on 13.1.1990, the transferee Company gave closure notice of three months, offering retrenchment compensation, and, ultimately, closed the said unit (the unit which was transferred to it) on 20th April, 1990. Subsequently, these 42 workmen also filed Recovery Applications against the transferee company, i.e. Lotherme Electrodes (India) Private Limited, invoking the provisions of Section 33C(2) of the Industrial Disputes Act, and it seems that the State also initiated prosecution against the transferee company against alleged illegal closure. It is pointed out to this Court that during the pendency of the recovery application, Apart Private Limited was also joined in the said recovery proceedings. It has been pointed out by the learned Advocates for both the sides that the said recovery proceedings are still pending. Subsequently, the workmen raised an industrial dispute against the transferor Company, who, according to the workmen, is the real employer in view of the cancellation of the said agreement and the Assistant Labour Commissioner, Vadodara, by his order dated 17th June, 1996, referred the said dispute to the Labour Court No.2, Vadodara. The dispute, which was referred, is in connection with the prayer of the workmen to the effect that they are required to be reinstated with back wages. Along with the terms of reference, a Schedule, incorporating the names of workmen, was also forwarded. The dispute was accordingly referred to the Labour Court, Vadodara, and it was subsequently numbered as Reference (LCV) No.603 of 1996 to 644 of 1996. The dispute which is referred is between Apart Private Limited and the concerned workmen. The name of the Company was described as "Apart Private Limited", as it was pointed out that, initially, it was a Private Limited Company, which, ultimately, got the status of Public Limited Company and, therefore, it was described as "Apart Industries Limited", instead of "Apart Private Limited".
3. Before the Labour Court, on behalf of the employees, following demand was raised :-
That the workmen have been appointed on the post of Welder on the permanent post with effect from 7.8.1976 on the basis of payment of a particular amount of wages and that Electrodes Division was transferred to Lotherme Electrodes (India) Private Limited on lease basis with effect from 31.8.1987 for a period of 48 months and since Lotherme Electrodes (India) Private Limited has closed the said Unit within 36 months, the said transaction has not come into effect and, accordingly, the concerned employees are required to be treated as permanent employees of Apart Industries Limited and, therefore, they are required to be reinstated by Apar Industries Limited by paying benefits for the intervening period. The particulars about the recovery cases, etc., are mentioned in the demand.
Ultimately, it is prayed by the workmen that the company in question, i.e. Apart Industries Limited, be directed to reinstate the workmen and it is further prayed to direct the Company to re-start its Welding Electrodes Division, which is illegally closed by the Company and that the Company be directed to give back wages to the concerned workmen with effect from 5.4.1994. In their demand, they have also stated that the workmen be treated as the permanent employees of the Welding Electrodes Division of the Company and since they were permanent employees of the said Company, the present set of workmen is also required to be reinstated, with continuity of service.
4. On behalf of the Company, the demand on behalf of the workmen was resisted by filing reply, which is at page 167. On behalf of the Company, the demand was resisted on the ground that the Reference is not maintainable and that the Labour Court has no power to hear such reference. It is also averred in the reply that there is no relationship of employer and employee, i.e. between Apar Industries Limited, and the workmen, on whose behalf, the reference was made, and, therefore, the reference is required to be rejected. A contention was also taken in the reply that the transferee Company, i.e. Lotherme Electrodes (India) Private Limited, is a necessary party and in its absence, the Reference is not maintainable. Regarding the main issue, about the transfer of the Undertaking, it is averred in paragraph 5 of the reply that so far as the Welding Electrodes Division of the Company is concerned, the same is transferred to Lotherme Electrodes (India) Private Limited by way of an Agreement, which has been executed in the year 1987, and all the employees who are serving in the Welding Electrodes Division of the Company have been transferred to Lotherme Electrodes (India) Private Limited, with continuity of service and that the concerned Union also agreed to such arrangement and under the circumstances, the relationship of master and servant between the present respondents and the petitioner had come to an end. It is also further averred that since the transferee Company has accepted the liability of these workmen and the concerned workmen were getting salary also from Lotherme Electrodes (India) Private Limited, Apart Industries Limited, is, in no way, connected with the dispute in any manner and that since no reference is maintainable against it, its name may be deleted from the Reference. The claim of the workmen is also denied on various grounds in the reply. It was also averred in the reply that if Lotherme Electrodes (India) Private Limited has closed the Company, Apar Industries Limited cannot be held responsible for the same and that Apart Industries Limited has no relationship worth the name with Lotherme Electrodes (India) Private Limited in any manner and that, for their action, the present Company cannot be held liable in any manner. It is also averred that since the Welding Electrodes Division of the Company is not in existence, no order of reinstatement can be made in any manner. On these and such other averments in the reply, the reference of the workmen was resisted by the Company, i.e. Apart Industries Limited.
5. The matter was heard by the Presiding Officer, (Special), Labour Court, Vadodara. The Labour Court, Vadodara, consolidated all the references, since individual references have been made, and disposed of all these references by a common order. The Labour Court framed various issues which are at page 208 in the compilation. One of the issues, which was framed in connection with the merits of the demand, is to the effect whether such reference is in accordance with law and whether the same is just and proper. The Court also framed specific issue whether there is any relationship of master and servant and whether the same has been established between the parties to the dispute. Issue was also framed to the effect whether the action of the First Party to the Reference, i.e. the Company, in not reinstating the concerned workmen from 5.4.1994, and by giving work to other junior employees of the concerned workmen, is justified. Other issues were also framed by the Labour Court in connection with the demand of the workmen as well as in view of the reply of the Company.
The Labour Court thereafter recorded the evidence of the parties to the reference and, thereafter, after considering the oral and documentary evidence on record, partly allowed the reference instituted by the aforesaid 42 workmen. The Labour Court found that the reference is legally maintainable. The Labour Court also found that, in view of the cancellation Agreement dated 11.9.1989, the concerned workmen are entitled to be reinstated in service in view of the restoration of the original position. The Labour Court also granted 25% back wages to the concerned workmen with effect from 9.4.1994. The Labour Court also ordered that the Company should reinstate these workmen either in its Division / Unit, and / or subsidiary sister concern. The Labour Court also passed an order to the effect that out of 42 employees, those who have reached the age of superannuation as well as those workmen, who are not willing to be reinstated in any of the undertakings of the petitioner-Company, may be given the benefit of VRS, which is given by the Company to its workmen as per the scheme framed in the year 2000. The Labour Court has also granted injunction in connection with transferring or alienating the properties, viz., Plant, Building, Machinery, etc., of the Welding Electrodes Division of the Company, till these 42 workmen have been given their dues as well as reinstatement, as ordered in the judgment.
The Labour Court also awarded costs, as quantified in paragraph 7 of the order.
6. Being aggrieved by the aforesaid Award of the Labour Court dated 1.12.2001,the present petitioner has filed this group of petitions, comprising of 42 petitions.
So far as the original Award is concerned, the same is passed in the reference filed against Apart Private Limited and these petitions have been filed in the name of Apart Industries Limited. On this ground, of course, a point was raised by the respondents to the effect that the petition is not filed by the same party, which was before the Labour Court. In this behalf, learned Advocate for the petitioner pointed out that in view of the change of constitution, now Messrs. Apart Industries Limited is managing the affairs and it is the same legal entity and, ultimately, therefore, whatever may be the order of the Labour Court, is required to be implemented by the petitioner, subject to the order of this Court and, therefore, the petitioner is the only party concerned with the controversy in question.
7. Mr.V.B. Patel, learned Senior Counsel, along with Mr.D.G. Chauhan, argued the case of the petitioner-Company, and the Award of the Labour Court is attacked by Mr.V.B. Patel on various grounds.
8. Mr.Sinha, who is appearing for the concerned workmen, on the other hand, has submitted that the Award in question is perfectly justified and that the Labour Court has considered all the facts and circumstances of the case and in the light of the provisions of the Industrial Disputes Act, the Labour Court has thought it fit to grant appropriate relief for rendering justice to the workmen, and, therefore, this Court may not interfere with the order of the Labour Court, as, ultimately, on the basis of appreciation of evidence, the impugned Award is passed by the Labour Court.
9. Mr.V.B. Patel, learned Senior Counsel, appearing for the petitioner-Company, has attacked the award of the Labour Court on the following grounds :-
(i) That the Reference in question is not maintainable against the petitioner-Company, as relationship of master and servant did not subsist between the petitioner and the respondent and, therefore, the Labour Court had no jurisdiction to proceed with the said reference;
(ii) That the Labour Court has gravely erred in not deciding the preliminary point whether the reference in question is maintainable against the petitioner-Company or not; instead, the Labour Court decided the entire matter and that is how the Labour Court has committed grave error of law and jurisdiction;
(iii) No order of reinstatement can be made against a closed company;
(iv) Since the concerned workmen were not employees of the petitioner, there was no relationship of master and servant between them and that there is no journal relationship of employer and employee between the parties;
(v) In view of the transfer agreement dated 18.7.1987, the concerned workmen no longer remain in the employment of transferor as the transferee has undertaken liability of past services of the concerned workmen and, therefore, the reference against the transferor company was not maintainable;
(vi) There was no industrial dispute capable of being referred for adjudication and that there is a delay of about six years in raising the industrial dispute;
(vii) That the transferor-Company has complied with the provisions of Section 25FF of the Industrial Disputes Act and so far as the subsequent development of cancellation of the agreement to sell is concerned, it has no effect so far as the employees, who have been already transferred by such agreement are concerned and such cancellation may have only civil consequences between the parties in connection with the property, movable or immovable, as the case may be;
(viii) In any case, so far as the reliefs granted by the Labour Court are concerned, no such reliefs could have been granted against the petitioner in any manner and that the Court has no jurisdiction to direct reinstatement in any of the sister concerns of the petitioner-Company and no comparison could have been made between the contract labourers of the Company, along with the present set of employees, as the present set of employees stand on an entirely different footing;
(ix) The transferee company having given the benefit of VRS to the transferred workmen, this set of workmen, who have not accepted the said benefit, has no right to raise an Industrial Dispute against the original transferor, i.e. the present petitioner-Company;
(x) Even after the transfer, necessary industrial licences, provident fund account, etc., were transferred in favour of the transferee company and even the closure notice was given by the transferee company, which shows that relationship of master and servant did not subsist or continue between the petitioner and the respondents after the said transfer;
(xi) No reference can be made against an ex-employer for reinstatement;
A n d
(xii) The Labour Court has decided an entirely new case between the parties, which was never pleaded before it.
Mr.V.B. Patel also submitted that, in any case, there can also be other mode of transfer of employees dehors Section 25-FF of the Act.
On the aforesaid points, it is argued by Mr.V.B. Patel, learned Senior Counsel, that the Award in question is required to be quashed and set aside.
10. Mr.Sinha, who is appearing for the respondent-workmen, in his turn, has submitted that in view of cancellation of the agreement to sell, the original position is required to be restored and that, in view of the cancellation of the agreement, the transferred employees are required to be treated as the employees of the transferor Company, as, execution of sale deed between the parties has not taken place and till registration of the sale deed takes place, the transferred employees should have been treated as workmen of the principal employer, i.e. the petitioner-Company. It is submitted by Mr.Sinha that necessary issues have already been framed and the reference is also validly made for adjudication. It is submitted that the Labour Court has considered whether the reference is maintainable or not or whether it is legal or not. It is also submitted that the so-called closure notice given by the transferee is of no consequence, because, till a valid title vests with the transferee, it has no right even to issue closure notice because the Unit never belonged to them legally and validly and simply because some employees, out of sheer need, accepted a meagre amount offered by the transferee company, is no ground for not considering the claim of the rest of the workmen, who have decided to raise appropriate demand as per law against the transferor company.
It is also argued by Mr.Sinha that the application preferred by the workmen for recovery under Section 33C(2) against the transferee is also no ground for denying the benefit of reinstatement against the principal employer, because, the workmen are not required to know, in view of the nature of transactions which have taken place between the employer and employee, as to who is the real employer. He submitted that, in any case, subsequently, the petitioner-employer is also joined in the recovery proceedings. Mr.Sinha, therefore, submitted that in view of the evidence on record, both oral and documentary, the order of the Labour Court is absolutely justified and the same is required to be upheld by this court in the present petitions.
Mr.Sinha also relied upon Section 54 of the Transfer of Property Act to substantiate his contention that ale can be effected only by way of registered document and when no registration of the sale deed has taken place between the transferor and the transferee, the transferee cannot be said to have acquired legal title and that it cannot be said that any legal title has vested in the transferee.
11. Mr.K.M. Patel, learned Advocate, who is appearing for the transferee company, i.e. Lotherme Electrodes (India) Private Limited, respondent No.2, has supported the arguments of Mr.Sinha. Mr.K.M. Patel submitted that the transferee Company initially decided to purchase land and building of Electrodes Division of the Transferor Company with high hope that it will be able to manage the new assignment in a proper manner. He submitted that, however, the transferor company did not cooperate fully and, ultimately, it was impossible for the transferee company to fulfil its obligation by accepting the so-called transaction finally. Under the circumstances, both the transferor and the transferee mutually agreed to cancel the original Agreement to Sell of 1987 and in view of this cancellation, the entire liability of the employees are required to be restored to the principal employer, i.e. Apar Industries Limited. Mr.K.M.Patel further submitted that even at the time of transfer of Electrodes Division of the transferor company, only land and building were transferred and so far as the machinery is concerned, the said machinery was never transferred to the transferee company as they were transferred to some sister concern of the transferee company by a separate agreement. It is submitted by Mr.K.M. Patel that the concerned workmen were serving on a particular machinery belonging to the Electrodes Division of the Company and that the present petitioner-Company can take the same with it, for which it has no objection. Mr.K.M. Patel, vehemently, submitted that in view of the cancellation of the agreement, now, it is the liability of the petitioner-employer to reinstate the concerned workmen and if the original unit, in which they were working, is not in existence, it is their duty to absorb them in any of their undertakings. Mr.Patel submitted that, in any way, the transferee company is not concerned with the dispute in question, as the same is between the transferor, i.e., Apar Industries Limited and its workmen.
As regards the contention of Mr.K.M. Patel that the machinery was never transferred to the transferee company and the same were transferred to the sister concern of the transferee company, it is required to be noted that, as such, it is not in dispute that the machinery has never been transferred to the transferee company and the same was transferred to the sister concern of the transferee company.
12. I have heard all the learned Advocates in great detail and I have also gone through the voluminous record, both documentary and oral. I have also gone through the very lengthy judgment recorded by the Labour Court.
13. The main questions, which are required to be decided in the present group of petitions, are whether the employees who have been transferred by way of an agreement, to another concern, remains the employees of the transferor till the completion of such transfer by way of appropriate conveyance and so far as the agreement is concerned, what would be the effect of such employees, whether an order of reinstatement can be awarded by the Labour Court, whether the Labour Court could have validly and legally made the order in favour of the workmen and against the employer, who has agreed to sell the undertaking, which agreement is subsequently canceled and, ultimately, is not in existence.
14. So far as the first contention of Mr.V.B. Patel about the competence of the reference is concerned, it is required to be noted that the demand of the workmen is that, originally, they were employed by Apar Private Limited and by virtue of the agreement in the year 1987, they were transferred. It is their specific case that in view of the cancellation of that agreement, which is in the nature of lease-cum-sale, they are required to be re-posted to their original position, as, by virtue of cancellation of agreement, the original position is required to be restored and that, for all practical purposes, they are the employees of the transferor company. There is a specific averment in this behalf and, ultimately, the Government has made a reference whether these employees are entitled to reinstatement against the petitioner-Company herein. Whether such relief is required to be granted or not is a different issue altogether, but, considering the nature of the dispute and the claim, in my view, it cannot be said that this is a reference against an ex-employer and, therefore, such reference is not competent. From the documentary and other evidence on record, it is required to be decided whether the petitioner-company has still retained its status as an employer so far as the concerned workmen are concerned and that is the main issue which is required to be decided in the present controversy. This is not a case in which there is an admitted fact by both the sides that the petitioner is the ex-employer, and, if that be so, naturally, reference against the petitioner is not competent. However, the status of the petitioner-Company is yet required to be decided in the present dispute. Simply because the petitioner may assert that, by virtue of the agreement to sell, the relationship between the workmen and the employer has come to an end, is itself not sufficient, as, in view of the cancellation of the agreement, the status of the employees is required to be found out and for that, the Court has to examine evidence on record and such question is required to be decided in accordance with law. Under these circumstances, in my view, it cannot be said that the reference in question is not maintainable simply because by virtue of the agreement to sell, the concerned workmen have become their ex-employees. In fact, that is the main controversy which is referred for adjudication of the Labour Court. Ultimately, on appreciation of evidence, if the Court comes to the conclusion that by virtue of the so-called transfer or by subsequent event, the transferor no longer remains as the employer, the same may stand on a different footing, but, here, considering the controversy in question, in my view, it cannot be said that the respondents have no right to claim reinstatement against the present petitioner, as they are asserting their rights in view of the cancellation of the original agreement itself. Looking to the demand in question, it cannot be said that the reference is not competent. It is the assertion of the employees that the petitioner is the real employer for all practical purposes in view of the subsequent development which has taken place and the same is not in dispute, i.e., cancellation of the first agreement. It is, therefore, not possible for me to accept this submission of Mr.V.B. Patel that the reference itself is not competent and that the Labour Court has no jurisdiction to proceed with the reference in any manner. I, therefore, negative the first contention raised by Mr.Patel.
So far as the second point urged by Mr.V.B. Patel, which is in connection with non-framing of preliminary issue, is concerned, it is required to be noted that the Labour Court has framed various issues, which, according to Mr.Patel, has been framed only at the time of passing the order and not in advance. Framing of such issue cannot be treated to be a point for determination. It seems that, issues were not framed in advance and all these points have been considered only at the time of passing the final order. but, so far as point No.1 or issue No.1 is concerned, the same is in connection with the validity of reference, viz., whether such reference is valid in law or not. On dealing with this issue, the Court has also considered the facts and circumstances of the case as well as various documentary evidence on record. Mr.V.B. Patel, however, strenuously argued that even though a specific plea was taken by the so-called employer that the said issue is required to be decided as a preliminary issue, the Labour Court has committed a grave error in not deciding the same. When it relates to the jurisdiction of the Court, the Court should have decided the said issue as a preliminary issue. However, it is required to be noted that, now, when all these points have been decided along with the main reference, and when parties have led evidence on such issues, this point raised by Mr.V.B. Patel is of mere academic interest. It is not a case where at an interim stage, the employer has come to this Court, complaining that the Labour Court should be directed to decide the maintainability of the reference as a preliminary point; instead, both the sides led appropriate evidence and, ultimately, on the basis of the documentary evidence on record, the Labour Court has pronounced its Award. Mr.V.B. Patel, however, submitted, that the Labour Court had not framed issues at an earlier point of time and such issues are finding place only at the time of passing the final order. Even if that be so, in my view, since the parties have argued the matter on all the counts before the Labour Court and, ultimately, the Labour Court has delivered its judgment after considering the facts and circumstances of the case, and after considering the arguments of the parties, it cannot be said that any prejudice is caused to the present petitioners simply because the Court has not addressed itself on the preliminary point whether the reference in question is maintainable. In any case, when the Labour Court has, now, after considering the evidence on record, come to the conclusion that in view of the subsequent development the petitioner herein has continued to be the employer of the workmen, it cannot be said that the Labour Court has committed any error in deciding all the points in controversy together at the time of giving final judgment.
It is required to be noted that while deciding the matter finally, the Court has considered all the points, including the point about maintainability of reference as well as the legality of such reference.
15. So far as the contention of Mr.Patel that order of reinstatement could not have been passed against a closed company is concerned, point Nos. 3, 4 and 5 are required to be considered together in this behalf at this stage. It is not in dispute that the concerned workmen were originally appointed by Apar Private Limited (the undertaking which is now in control of the present petitioner). The concerned workmen continued in the service of the said Company for a pretty long time, but because of some financial difficulty, as pointed out by the learned counsel for the petitioner at the time of hearing of this petition, its Electrodes Unit was decided to be sold to Lotherme (India) Private Limited, respondent No.2. An agreement to that effect was executed in July, 1987. By the said Agreement, the Company decided to sell its land and building to the transferee company on various conditions. So far as the terms about the transfer of movable and immovable properties are concerned, we are not concerned much with the same in the present petition. However, Clause 9 of the said agreement is of some importance as the same has bearing with the concerned workmen, who were also transferred with transfer of the aforesaid Unit. Clause 9 of the aforesaid agreement reads as under :-
" ... ... ...
9. As aforesaid, the Vendors have in their employment 134 daily rated workmen and 43 monthly rated staff at the Baroda Unit and on account of the intended sale of the Baroda land and building and the sale of the plant and machinery as referred to aforesaid, to the sister concerns and the lease of D.G. Set and Power pack to the Purchasers, these workmen and staff would have to be employed by the purchasers. The Purchasers require the services of these workmen and staff, and, as contained in this Agreement they shall be bound to offer to these workmen, employment on the terms and conditions not in any manner detrimental or prejudicial than the existing terms and conditions of service or employment. In respect of these workmen and staff, it is expressly agreed and declared by and between the Vendors and the Purchasers as follows :-
(a) that in the first instance the parties shall endeavour to transfer the employment of such workmen and staff to the Purchasers on the footing of continuity of service and in respect of which, the Vendors and the Purchasers and the duly authorised representatives of the workmen may negotiate for an agreement. The parties shall endeavour to take a decision in respect thereof prior to handing over of possession of the Baroda land and buildings as provided under this Agreement. In the event of the parties arriving at a satisfactory arrangement on this basis and the consent of the workmen and staff being obtained along with the necessary approvals required, then the Purchasers shall take over and accept the responsibility of payment of workmen and staff of their total dues, including any terminal benefits and compensation including gratuity liability since the date of their joining employment with the Vendors and the Purchasers shall fully indemnify the Vendors in that behalf. In any event, the liability of the prior period shall be exclusively that of the Purchasers.
(b) That in the event of satisfactory arrangement in accordance with sub-clause (a) not being arrived at then the services / employment of such workmen and staff shall notionally be terminated on the date of handing over of possession by the Vendors to the Purchasers of the Baroda Land and Building and the liability if any in respect of the same, including the prior and the subsequent period shall exclusively be that of the Purchasers.
... ... .... "
In the aforesaid clause, there is reference about the "intended sale" of the land and building and the sale of the plant and machinery. As per the said clause, it is clear that the purchaser required the services of these workmen and staff in view of the aforesaid purchase. By virtue of the said agreement, these employees were sent and transferred to the transferee company and they worked, as such, till the transferee company was forced to close down the aforesaid undertaking. As pointed out earlier, subsequently, in the year 1989, the entire agreement of 1987 is cancelled, though, it is, no doubt, true that after such cancellation, the concerned workmen were continued for the time being by the transferee company and during which period, they even offered VRS to them. It is also true that the employees also initiated recovery proceedings against the transferee company. Yet, in my view, the question which is required to be considered is whether the aforesaid steps taken by the employees can be pleaded as an estoppel against them from raising the present Industrial Dispute. The basic issue, as pointed out hereinabove, which is required to be decided here is the effect of the cancellation agreement. So far as the cancellation agreement is concerned, the said agreement provides as under :-
" ... ... ...
2. As a consequence of the agreement of cancellation as agreed to and as recorded in clause 1 hereinabove, the party of the Other Part hereby delivers to the party of the One Part the vacant and peaceful possession of land being lying and situate at Baroda and described in Second Schedule to the said agreement dated 18th July, 1987 which is the same as the schedule hereunder written together with buildings and structures standing thereon (being the property agreed to be sold by the party of the One Part to the Party of the Other Part under the said agreement dated 18th July, 1987) and the party of the One Part accepts and acknowledges receipt of vacant and peaceful possession of the said property from the party of the Other Part. The party of the Other Part hereby agrees, records and declares that thereafter the party of the Other Part has no right, title, interest or claim of any nature whatsoever in respect of the said claim of any nature whatsoever in respect of the said land and buildings, the possession whereof has been handed over by the party of the Other Part to the party of the One Part as recorded herein and the Party of the One Part shall hold, possess and enjoy the said land and buildings as full and absolute owners thereof without any hindrance and or objection from the party of the Other Part.
3. The party of the Other Part hereby further declares and states that between 31st August, 1987 (being the date of possession of receipt of property by the party of the Other Part) and the date hereof, the party of the Other Part has not created any third party rights of any nature whatsoever in respect of the said property and the said land and building were exclusively in possession of the party of the Other Part and used by it for its manufacturing activities only. The party of the Other Part hereby agrees to indemnify and keep indemnified the party of the One Part against and in respect of any claims and / or demands that may be raised by third parties in respect of the said property as also against any loss, costs, damages, charges and expenses that may be incurred by the party of the One Part in respect thereof.
4. It is hereby recorded that the party of the Other Part has handed over to the party of the One Part, the original agreement dated 18th July, 1987 duly cancelled.
... ... ...."
Considering the aforesaid aspect, in my view, it cannot be said that the court has no power to examine whether the transfer in question has taken effect fully or that during its finalisation, ultimately, if it is cancelled, whether the employees have right to ask for reinstatement against the original employer. It cannot be said that by virtue of an Agreement to Sell, from that very moment, relationship between the employer and employee has come to an end. Under the circumstances, it is not possible to accept the say of the petitioner that the reference is not maintainable and that such reference is made against an ex-employer. It cannot be said that no order of reinstatement can be passed against a closed company, because, as rightly pointed out by Mr.Sinha, since the transferee company did not have any valid title and since it has not become owner legally, naturally, it has no right to close the concerned undertaking and that right was available only with the transferor, with whom ownership legally still vested. At the cost of repetition, it is required to be stated that, even otherwise, the transferee had no right to close the undertaking because that undertaking never belonged to it and one cannot close something which does not belong to it.
16. Now, at this stage, reference is required to be made to Section 25FF of the Industrial Disputes Act. Section 25FF of the Act provides as under :-
" ... ... ...
25-FF. 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 25-F, 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.
... ... ...."
Before the Labour Court, arguments were advanced by both the sides in connection with Section 25FF of the Act and the Labour Court has also considered the question of effect of cancellation of the original agreement of 1987.
Both the sides have relied upon the decision of the Apex Court in Workmen of Subong Tea Estate v. The Outgoing Management of Subong Tea Estate and another, AIR 1967 SC 423. In the said case, the Apex court considered the provisions of Section 25FF of the Industrial Disputes Act. In the aforesaid case, an industrial dispute was raised by the workmen of one Subong Tea Estate and the Management of Subong Tea Estate. The said Subong Tea Estate had transferred its estate to one Messrs. Gangaram Tarachand, which was also known as Hindusthan Tea Company. At the relevant time, i.e. at the time of retrenchment of 8 employees, on whose behalf the dispute was raised, the Subong Tea Estate had paid adequate retrenchment compensation. On behalf of the workmen, a dispute was raised at that time, contending that when the 8 workmen were retrenched, the Subong Tea Estate had no authority to pass the order of retrenchment. The Apex Court, after considering the rival contentions, has observed as under :-
" ... ... ...
20. Having considered the general provisions prescribed by the Act in regard to retrenchment, it is now necessary to look at s. 25FF. Section 25FF deals with cases where the ownership or management of an undertaking is transferred. Such a transfer may be effected either by agreement or by operation of law. The section provides that in all cases which do not fall under the proviso to the section, on a transfer of ownership or of management of an industrial undertaking, 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 s. 25F, as if the workman had been retrenched. In other words, cases of transfer not covered by the proviso to s. 25FF, attract the provisions of s. 25F and that proceeds on the basis that the transfer in question brings about retrenchment of the employees to which the section applies. It is on that basis that the employees of the transferred undertaking become entitled to compensation and notice. The appellants contend that in the present case, transfer of management took place on the 17th February, 1959 when the Vendor delivered over to the Vendee possession and management of the tea estate; and the argument is that it is after the transfer of management thus took place that the retrenchment in question was effected. It is not a case where workmen were paid compensation on the eve of transfer; it is a case where workmen of the transferred undertaking continued to be employed by the Vendee after transfer of management of the undertaking took place and as such, the retrenchment in question must, in law, be deemed to have been effected by the Vendee and must satisfy the test prescribed by s. 25F and s. 25G of the Act.
21. Mr. Sastri for the Vendee, on the other hand, strenuously argues that on the date of retrenchment, the Vendee was not in law concerned either with the ownership or with the management of the undertaking. According to him, the delivery of possession on which the appellants base their case, cannot be said to amount to the transfer of the management of the undertaking under s. 25FF. He contends that s. 25FF deals with the transfer of the undertaking or the transfer of its management. The first relates to the transfer of the title and the second to the transfer of management as distinct from title. His case is that the transfer which is evidenced by the conveyance executed between the parties on the 28th December, 1959 clearly shows that it was subject to two conditions; it had to receive the sanction of the Reserve Bank and the Vendee had made it clear that the staff whom the Vendee regarded as surplus had to be retrenched by the Vendor before the Vendee could take over the undertaking as an owner. Since these two conditions can be treated as conditions precedent to the transfer, there can be no question of the transfer of the undertaking having taken place before the date of retrenchment.
22. Then as to the transfer of the management, Mr. Sastri's argument is that the transfer of management to which s. 25FF refers cannot take in cases of delivery of possession of the kind that took place between the parties to the present appears. In the context, the transfer of ownership and transfer of management refer to the transfer of ownership on the one hand and transfer of management on the other, management and ownership being disintegrated from each other. If any undertaking is under the management of the Managing Agency and the rights of the Managing Agency are transferred, it would be possible to postulate that the transfer of the Managing Agency amounts to the transfer of the management of the undertaking under s. 25FF; where management is transferred as an incident of the transfer of ownership, it cannot be said that the incidental transfer of management evidenced by the delivery of possession is the kind of transfer of management which s. 25FF has in view.
23. Besides, Mr. Sastri urges that all that happened in the present case on the 17th February, 1959 was that the Vendee entered into possession, but continued to manage the estate as an Agent of the Vendor; until the two conditions precedent were satisfied, the Vendee could not have taken upon itself the task of managing the estate as an owner. If the sanction of the Reserve Bank had not been obtained, the whole transaction would have fallen through and that is an aspect of the matter which cannot be ignored in determining the effect of delivery of possession in the present case. That is why Mr. Sastri has supported the finding of the Tribunal that at the relevant date it was the Vendor who was the employer and as such, s. 25FF came into play because the retrenchment was effected in consequence of one of the terms of transfer by which the Vendee refused to take over the surplus staff.
24. There is no doubt some force in the contentions raised by Mr. Sastri, but in assessing the effect of these contentions, it will be necessary to bear in mind certain other facts which are of considerable significance. It is common ground that on the 15th July, 1959, the approval of the Reserve Bank was obtained, and so, there can be no doubt whatever that as from the 15th July, 1959, the essential condition precedent having been satisfied, the Vendee became the owner of the property. We have already noticed that the main stipulation in the conveyance was that whenever the conveyance may be actually registered, it was agreed to take effect from the Ist January, 1959. Even taking into account the fact that the approval of the Reserve Bank was a condition precedent, there can be no escape from the conclusion that after the approval was obtained, the operative clause in the conveyance came into play and the Vendee who had already obtained possession of the estate became the owner of the property and his possession became the possession of the owner. Therefore, whatever may be the character of the Vendee's possession from the 17th February to the 15th July, 1959, as from the latter date it would be impossible to accept the Vendee's case that it continued to manage the property as the Agent of the Vendor. That is one important point which cannot be ignored.
... ... ...."
So far as the facts of the present case are concerned, here it is not in dispute that the vendor has never received full consideration, as agreed in the Agreement to Sell, and the entire amount has not been paid by the vendee, which resulted into taking the possession back of even land and building. Under these circumstances, it can safely be said that title or legal ownership has never vested in the transferee in any manner. If that be so, the transaction in question remained only at an "agreement stage" and if that be so, it cannot be said that simply because, by virtue of the aforesaid arrangement, if the employees were placed under the services of the transferee, they remained, as such, as employees of the transferee for all time to come. It would have been a different thing altogether if the said transaction was completed by execution of necessary conveyance or otherwise. On the contrary, the facts of the case are otherwise, i.e. the transaction was admittedly cancelled by virtue of the second agreement. Under the circumstances, even if the workmen were under the impression that they have become employees of the transferee, it cannot change the position of law so far as vesting of title in the transferee is concerned. In my view, therefore, it cannot be said that this is a reference against an Ex-employer or against a closed undertaking and that the same is not maintainable. It would have been a different matter if the transaction in question was completed and thereafter, the transferee closed the undertaking. In such an eventuality, naturally, the workmen could not have initiated any proceedings against the present petitioner as the present petitioner could have safely been treated as an ex-employer. In the instant case, the entire transfer of the undertaking as well as the transfer of the employees had taken place in view of the agreement of 1987. If that agreement is retrospectively cancelled, naturally, the original position is required to be restored in toto. That would restore the status of the employees also with retrospective effect. It is not in dispute that the transfer of the said employees had taken place by virtue of the agreement of 1987, and not otherwise. In that view of the matter, it is difficult to accept the say of Mr.V.B. Patel that the transaction of Agreement to Sell land and building has nothing to do with the transfer of employees to the transferee undertaking, or that, so far as the cancellation of the agreement is concerned, that will have a connection with the civil liability between the parties. It is, therefore, difficult to accept the aforesaid contentions, as canvassed by Mr.Patel. In fact, the question about the Agreement for Sale-cum-Lease and the subsequent cancellation of the said Agreement is so interwoven that the cancellation of the Agreement cannot be taken into account in isolation.
17. Mr.V.B. Patel, however, submitted that Section 25FF does not contemplate transfer of ownership, as, according to him, even if there is no transfer of ownership; yet, management of an undertaking can be transferred, and, in that eventuality, Section 25FF will apply. He submitted that, even in a given case, there can be transfer of employees dehors the aforesaid provisions of Section 25FF. In my view, even if it is believed that there can be transfer of employees from one undertaking to another with the consent of the employees dehors Section 25FF, the petitioner has never resisted the demand of the concerned workmen on the ground that it was a transfer dehors Section 25FF. The entire proceedings before the Labour Court have been undertaken on the basis of Section 25FF of the Act. Not only that, even the undertaking by the Management about continuing the past services of the employees is also in consonance with the proviso to Section 25FF of the Act. In that view of the matter, it is not possible to accept the aforesaid say of Mr.Patel that this is a case, wherein employees have been transferred dehors Section 25FF of the Act.
In the instant case, certain facts are not in dispute, and the same are as under :-
(i) The workmen in question were originally appointed by the present petitioner-Company. They continued for a considerable period in the employment of the petitioner-Company. Subsequently, one of the Units of the Company had been transferred to the transferee Company, i.e. respondent No.2, Lotherme Electrodes (India) Private Limited, with certain understanding. As per the agreement, the transferee was required to pay particular amount towards consideration. The transferee has not paid the full amount and, therefore, the entire transaction was cancelled;
(ii) The concerned employees were transferred in view of the transfer of plant and building, as well as the transfer and sale of machinery. If the aforesaid assets were not to be transferred, there was no question of transferring these employees to the transferee company;
(iii) In view of the cancellation agreement, in the year 1989, the transferor took back possession of the land and building, and no part of the assets which were transferred, remained with the transferee in view of the cancellation of the agreement;
A n d
(iv) The Agreement to Sell in question had never taken the final shape by execution of the sale deed.
Considering the aforesaid factual aspect, which are not in dispute, in my view, the employees, who were transferred along with the land and building and other machinery of transferor Company, are entitled to continue to serve with their original employer and their intervening service with the transferee cannot be considered as employment with the transferee-company for all time to come. Before the Labour Court, parties have led evidence whether the workmen are entitled to get any relief against the transferor Company. In that connection, arguments were advanced, the Court has considered the arguments and, has, ultimately, given the Award. As pointed out earlier, if, ultimately, the transaction has taken its full effect by way of appropriate conveyance, naturally, the workmen had no right to ask for reinstatement against the transferor, because, no valid title remained with the transferor in view of such eventuality, but, so far as the facts of the present case are concerned, subsequently, the original foundation of transfer of undertaking itself vanishes in view of the cancellation of the original agreement. Even in a given case if a workman is able to prove that the so-called transfer agreement is sham or bogus and is executed only to deprive the workmen the benefits of the industrial law, the Court may even refuse to give effect to such an agreement, though, of course, in the instant case, it is nobody's case that the agreement was not genuine or bona fide. However, its cancellation later on, with retrospective effect, is very much relevant for deciding the dispute in question. Considering the said facts of the case, the transferor company now cannot be permitted to say that it is not liable to take back the workmen by restoring the position prevailing before the execution of the agreement in question. If such contention is upheld, as canvassed by Mr.V.B. Patel, the purpose and provisions of Section 25FF would be made nugatory. While examining the case, the Court has to examine whether the agreement is bona fide or whether it has been given complete effect and for that purpose, evidence on record, documentary and oral, are required to be taken into account. Considering the aforesaid aspects of the matter, in my view, it cannot be said that the present workmen are the ex-employees of the petitioner and that no master and servant relationship continues between the present petitioner and the workmen or that the reference is not competent or that it is made against a closed company.
18. Mr.V.B. Patel, however, strongly argued that the Labour Court has not formulated the points properly and has allowed to make out an altogether new case, which was not pleaded by the parties. It is submitted that the Labour Court has committed procedural error by not even framing appropriate issue or even the preliminary issue. In this connection, he has relied on the decision of the Apex Court in The Bharat Bank Ltd. v. The Employees of the Bharat Bank Ltd., AIR 1950 SC 188. The Apex Court has held that the Tribunal is deemed to be a civil court for certain purposes and that it has to follow certain procedure while deciding the industrial disputes. Mr.Patel has cited the aforesaid judgment in order to substantiate his say that the Labour Court has committed procedural irregularity in not deciding the question whether the reference is maintainable or not and that the Court should have decided it as a preliminary issue first before proceeding with the matter. However, as discussed in the earlier part of this judgment, once the Court has decided the entire matter, whether a particular issue was required to be decided first or not, is of no consequence. In fact, the Labour Court, in view of the demand of the workmen, has decided the controversy about validity of the Reference and, ultimately, the Labour Court has come to the conclusion that the agreement in question was not bona fide or genuine. It cannot be said that the Labour Court has committed any procedural irregularity in any manner. It is equally not possible to believe that the Labour Court has made out a new case of its own. It is, no doubt, true that, at the time of making reference, there was no demand specifically by the employees on the point that in view of the cancellation of the agreement of 1987, they are required to be reinstated in service. However, it is required to be noted that, in any case, when the matter was heard by the Court and the parties have led evidence, attention of the parties was focussed to this particular point and ultimately, even arguments were advanced, and, considering the totality of the facts and circumstances of the case, the Labour Court has come to the conclusion that since the agreement is cancelled, the employees are entitled to be reinstated by the original employer. The original employer, i.e. Apar Limited, never became ex-employer in any manner and that status would have been available to it only when the transaction was completed and not otherwise. Till the matter was at an agreement stage, it cannot be said that the relationship between the employer and the employee came to an end and, in my view, therefore, the Labour Court is perfectly justified in coming to the conclusion that in between it has to infer that the employees, who were serving with the transferee-Company, were working on behalf of the original employer. Even otherwise, the Labour Court has all the powers to give appropriate relief, as deemed fit, looking to the facts and circumstances of the case.
19. At this stage, further reference is also required to be made to the arguments of Mr.V.B. Patel that no reference can be made against a closed industry. For this, he has relied upon the decision of the Apex Court in P.S. Mills Limited v. P.S. Mills Mazdoor Union, AIR 1957 SC 95. In the aforesaid judgment, while considering the question about "industrial dispute", as defined under the Act, the Apex Court has observed as under in paragraphs 6 and 7 :-
" ... ... ...
(6) xxx xxx xxx An "industrial dispute' as defined in S.2(k) Industrial Disputes Act, 1947 (14 of 1947) - and by force of S.2 that definition applies to the Act means any dispute or difference between employers and employers or between employers and workmen or between workmen and workmen, which is connected with the employment or non-employment or the terms of employment or with the conditions of labour, of any person." Now, the contention of the appellant is that it is a condition precedent to the exercise by the State of its power under S.3 of the Act that there should be an industrial dispute, that there could be no industrial dispute according to this definition, unless there is a relationship of employer and employee; that in the present case, as the appellant sold its Mills, closed its business and discharged the workmen on 21.3.1951, paying to them in full whatever was due in accordance with the standing orders, there was thereafter no question of any relationship of employer and employees between them, that accordingly there was no industrial dispute at the date of notification on 16.11.1951 and it was therefore incompetent. Reliance was placed in support of this position on the observation in Indian Metal and Metallurgical Corporation v. Industrial Tribunal, Madras, AIR 1953 Mad 98 at p.102(A) that the definition of an "industrial dispute" presupposes the continued existence of the industry, and on the decision in K.M. Padmanabha Ayyar v. State of Madras 1954-1 Lab L.J. 469 (Mad) (B), that there could be no industrial dispute with regard to a business, which was not in existence.
(7) It cannot be doubted that the entire scheme of the Act assumes that there is in existence an industry and then proceeds on to provide for various steps being taken, when a dispute arises in that industry. Thus, the provision of the Act relating to lock out, strike, lay off, retrenchment, conciliation and adjudication proceedings, the period during which the awards are to be in force have meaning only if they refer to an industry which is running and not one which is closed.
... ... ...."
In the instant case, it cannot be said that the relationship between the employer and employee was not existing at the time when the dispute was raised nor can it be said that the petitioner-employer has closed its undertaking as required by the provisions of Section 72 and Section 25-O of the Industrial Disputes Act. It, therefore, cannot be said that this is a case where the reference is made against a closed undertaking / Company.
At this stage, Mr.Sinha has relied upon Section 25-O(6) of the I.D. Act, which reads as under :-
" ... ... ...
25-O. Procedure for closing down an undertaking xxx xxx xxx (6) Where no application for permission under sub-section (1) is made within the period specified therein, or where the permission for closure has been refused, the closure of the undertaking shall be deemed to be illegal from the date of closure and the workmen shall be entitled to all the benefits under any law for the time being in force as if the undertaking had not been closed down.
... ... ...."
However, it may be true that reference is only qua 42 employees and not 100, but, it is not in dispute that so far as the petitioner-company is concerned, it has never declared any closure in any manner. However, the point which requires consideration is that when the status of present employees is to be considered as if they are the employees of the petitioner-Company and if the petitioner-Company has offered VRS to some and that benefit is not given to this set of employees, they are naturally entitled to all the reliefs available to them under the I.D. Act against the principal employer and it cannot be said that they are without any remedy worth the name. Even in a given case, the Court has power to grant compensation in lieu of reinstatement.
20. Mr.V.B. Patel then relied upon the decision of the Apex Court in Workmen of the Indian Lea Tobacco Development Co. Ltd. v. The Management of Indian Leaf Tobacco Development Co. Ltd., AIR 1970 SC 860. The Apex Court has considered the question about the jurisdiction of the Tribunal in connection with the decision of the Company to close down some of its depots and the Apex Court has observed as under in paragraphs 4, 5, 6, 7 and 8 :-
" ... ... ...
4. The decision given by the Tribunal in the interim award, holding that the reference covered by issue No. 1 was not competent, has been challenged by learned counsel for the appellants on the ground that the closure of a depot does not amount to closure of business in law and, since the same business was continued by the Company at at least 13 other depots, the closure of the 8th depots in question was unjustified. For the proposition that the closure of the depots did not amount to closure of business, learned counsel rolled on the views expressed by this Court in Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor Union, where the Court explained the reason for the decision given by the Labour Appellate Tribunal in the case of Employees of Messrs. India Reconstruction Corporation Limited, Calcutta v. Messrs. India Reconstruction Corporation Ltd., Calcutta. It, however, appears to us that this question raised on behalf of the appellants is totally immaterial insofar as. the question of the jurisdiction of the Tribunal to decide the first part of issue No. 1 is concerned. The closure of the 8 depots by the Company, even if it is held not to amount to closure of business of the Company, cannot be interfered with by an Industrial Tribunal if, in fact, that closure was genuine and real. The closure may be treated as stoppage of part of the activity or business of the Company. Such stoppage of part of a business is an act of management which is entirely in the discretion of the Company carrying on the business. No Industrial Tribunal, even in a reference under s. 10(1)(d) of the Industrial Disputes Act, can interfere with discretion exercised in such a matter and can have any power to direct a Company to continue a part of the business which the Company has decided to shut down. We cannot possibly accept the submission made on behalf of the appellants that a Tribunal under the Industrial Disputes Act has power to issue orders directing a Company to reopen a closed depot or branch, if the Company, in fact, closes it down.
5. An example may be taken of a case where a Bank with its headquarters in one place and a number of branches at different places decides to close down one of the branches at one of those places where it is functioning. We cannot see how, in such a case, if the employees of that particular branch raise an industrial dispute, the Bank can be directed by the Industrial Tribunal to continue to run that branch. It is for the Bank to decide whether the business of the branch should be continued or not, and no Bank can be compelled to continue a branch which it considers undesirable to do.
6. In these circumstances, it is clear that the demand contained in the first part of Issue No. 1 was beyond the powers and jurisdiction of the Industrial Tribunal and was incorrectly referred for adjudication to it by the State Government.
7. Of course, if a Company closes down a branch or a depot, the question can always arise as to the relief to which the workmen of that branch or depot are entitled and, if such a question arises and becomes the subject-matter of an industrial dispute, an Industrial Tribunal will be fully competent to adjudicate on it. It is unfortunate that, in this case, when dealing with the preliminary issue, the Tribunal expressed its decision in the interim award in general words holding that Issue No. 1 as a whole was beyond its jurisdiction. If the reasoning in the interim award is taken into account, it is clear that the Tribunal on that reasoning only came to the conclusion that it was not competent to direct reopening of the 8 depots which had been closed, so that the Tribunal should have held that the first part of Issue No. 1 only was outside its jurisdiction.
8. So far as the second part of that issue is concerned, as we have said above, it was competent for the Tribunal to go into it and decide whether the claim of the workmen that they should not be retrenched was justified. On an examination of the interim award and the final award, we, however, find that the Tribunal in fact did do so. The case reported in Pipraich Sugar Mills Ltd. was also concerned only with the question as to the relief that can be granted to workmen when there is closure of a business. No question arose either before the Court, or in the cases considered by the Court, of an Industrial Tribunal making a direction to the employers to continue to run or to reopen a closed branch of the business. The Labour Appellate Tribunal in the case of Employees of Messrs India Reconstruction Corporation Ltd., Calcutta was dealing with the question of retrenchment compensation as a result of the closure of one of the units of the company concerned, and it held that the workmen were entitled to retrenchment compensation in accordance with law. This Court, in the case of Pipraich Sugar Mills Ltd., only explained why the Labour Appellate Tribunal was justified in granting retrenchment compensation in that case. The opinion expressed by the Court was that, though there is discharge of workmen both when there is retrenchment and closure of business, the compensation is to be awarded under the law not for discharge as such but for discharge on retrenchment and if, as is conceded, retrenchment means in ordinary parlance discharge of the surplus, it cannot include discharge on closure of business. It was in this context that the Court went on to add that in the case of Employees of M/s. India Reconstruction Corporation Ltd., Calcutta what had happened was that one of the units of the Company had been closed which would be a case of retrenchment and not a case of closure of business. It may be noted that, at the time when this decision was given, section 25FF and section 25FFF had not been introduced in the Industrial Disputes Act, and the only right to retrenchment compensation granted to the workmen was conferred by section 25F. It was in the light of the law then prevailing that the Court felt that the decision of the Labour Appellate Tribunal in the case of Employees of M/s. India Reconstruction Corporation Ltd. granting retrenchment compensation. could be justified on the ground that the services of the workmen had not been dispensed with as a result of closure of business, but as a result of retrenchment. That question does not arise in the case before us. Since then, as we have indicated above, s. 25FF and s. 25FFF have been added in the Industrial Disputes Act, and the latter section specifically lays down what rights a workman has when an undertaking is closed down. In a case where a dispute may arise as to whether workmen discharged are entitled to compensation under s. 25F or s. 25FFF it may become necessary to decide whether the closure, as a result of which the services have been dispensed with, amounts to a closure in law or not. In the case before us, it was admitted by learned counsel for both parties that the workmen, who have been discharged as a result of the closure of the 8 depots of the Company, have all been paid retrenchment compensation at the higher rate laid down in s. 25F, so that, in this case, it is not necessary to decide the point raised on behalf of the workmen.
... ... ...."
Relying upon this judgment, it is vehemently argued by Mr.Patel that the reference in question was beyond the powers and jurisdiction of the Labour Court. However, as discussed earlier, if, during the intervening period, when the respondents were allowed to serve with respondent No.2, and it has closed its operation of business, then, naturally, the petitioner has to consider their claim either to absorb them in whatever other sister concern or to give them the same benefit, which was given to other set of employees, who were working on the said establishment. This set of employees cannot be given a different treatment, once it is established that they continued with the present petitioner in its employment and if that be held, they have to be given similar treatment given to other employees.
21. Mr.Patel has thereafter relied upon the decision of the Apex Court in M/s. Parry and Co. Ltd. v. P.C. Pal, AIR 1970 SC 1334. In the aforesaid decision, the Supreme Court has observed as under in paragraphs 12, 13 and 18 :-
" ... ... ...
12. In D. Macropollo & Co. v. Their Employees' Union this Court held that if a scheme of reorganisation has been adopted by an employer for reasons of economy or convenience and it has been introduced in all the areas of its business, the fact that its implementation would lead to the discharge of some of the employees would have no material bearing on the question as to whether the scheme was adopted by the employer bona fide or not. In the circumstances, an industrial tribunal considering the issue relating to retrenchment, should not attach any importance to the consequences of reorganisation. The resulting discharge and retrenchment would have to be considered as an inevitable, though unfortunate, consequence of such a scheme. It also held that where the finding of a tribunal is based on wrong and erroneous assumption of certain material facts, such a finding would be perverse. A recent decision in Ghatge & Patil Concern's Employees' Union v. Ghatge & Patel (Transport) (P) Ltd. was a case of an employer reorganising his business from conducting a transport business himself through employees engaged by him to conducting it through a contract system where under he let out his motor trucks to persons who, before this change, were his employees. Admittedly, this was done because he could not implement some of the provisions of the Motor Transport Workers Act, 1961. The change over to the contract system was held by the Tribunal not to have been effected for victimising the employees. The employees had voluntarily resigned and hired the employer's trucks on contract basis. It was held that a person must be considered free to so arrange his business that he avoids a regulatory law and its penal consequences which he has, without the arrangement, no proper means of obeying. In Workmen Subong Tea Estate v. The Outgoing Management of Subong Tea Estate. this Court laid down the following propositions: that the management can retrench its employees only for proper reasons, which means that it must not be actuated by any motive of victimisation or any unfair labour practice, that it is for the management to decide the strength of its labour force, for the number of workmen required to carry out efficiently the work in his industrial undertaking must always be left to be determined by the management in its discretion, if the number of employees exceeded the reasonable and legitimate needs of the undertaking it is open to the management to retrench them, workmen may become surplus on the ground of rationalisation or economy reasonably or bona fide adopted by the management or on the ground of other industrial or trade reasons, and the right to effect retrenchment cannot normally be challenged but when there is a dispute about the validity of retrenchment the impugned retrenchment must be shown as justified on proper reasons, i.e., that it was not capricious or without rhyme or reason.
13. Since this is an appeal arising from a writ petition for certiorari we also would not interfere with the conclusions arrived at by the Tribunal except on grounds on which the High Court could have done. Mr. Gupte's contention was that the findings of the Tribunal were beyond its jurisdiction, that they were unwarranted by evidence on record and were based either on wrong assumptions or mere conjectures without any foundation in the evidence, and therefore, this is a fit case for our interference. It is not in dispute that the company gave up 11 out of its 21 agencies in Calcutta, that is, more than half of its agency business was given up during the years 1960 and 1961. There was clear and unchallenged evidence that certain agencies were likewise given up in other places including Madras. The manager gave evidence that this was done in pursuance of the policy decision taken by the company to reorganise its business by concentrating more on its manufacturing side than its agency business as the company found the agency business unprofitable on account of import restrictions and other reasons. The Tribunal, however, rejected this evidence on the ground that the policy decision being the function of the Board of Directors, the manager was not competent to depose about it and that if the company wanted to establish it it should have produced a resolution of the Board and on that ground held that the company had failed to prove the said policy. In the first place we fail wholly to appreciate the Tribunal's view that the said policy could not be proved through the manager. In the second place, in the very first letter of the union to the Deputy Labour Commissioner, as also during the conciliation proceedings, it was assumed that the company had taken such a decision, that consequently retrenchment was apprehended and that therefore that officer should intervene. In these circumstances, the finding that the company had failed to establish its policy was not only beyond the scope of the enquiry before the Tribunal but totally invalid. As held in J.K. Iron and Steel Co. v. Iron and Steel Mazdoor Union, the Tribunal had to confine itself to the pleadings and the issues arising therefrom and it was, therefore, not open to it to fly off at the tangent disregarding the pleadings and reach any conclusions that it thought as just and proper.
xxx xxx xxx
18. We have no doubt in our mind that some of the findings arrived at by the Tribunal and which influenced its verdict were beyond its competence. The rest were either speculative or contrary to the evidence on record and were consequently liable to be set aside in a writ petition for certiorari. The Division Bench of the High Court, therefore, was not correct in its view that the learned Single Judge could not interfere with those findings or that such findings did not fall under one or the other recognized grounds justifying the High Court's interference.
... ... ...."
Relying upon this judgment, it is argued by Mr.Patel that it is within the managerial discretion of the employer to organise its business, in the manner he thinks fit. However, in the ordinary course of business, if such transaction has taken place, and, ultimately, if the transferee has undertaken the liability of the employees of the transferor, it stands entirely on a different footing. As a matter of act, even the employees have no choice at the time of transfer of such undertaking whether to join with the transferee company, as, reading Section 25F, moment the undertaking is transferred and if the transferee undertakes to give benefit as per the proviso, wish of the employee is not material. But, in the instant case, the matter is required to be decided on the facts and evidence on record and this Court cannot lose sight of the subsequent development of cancellation of agreement. So far as the aforesaid ruling is concerned, it hardly assists the petitioner for contending that moment they have transferred this set of employees, now they are not required to take them back or that it is in their discretion or managerial function to transfer them. Such type of eventuality is not existing in the instant case.
22. Mr.Patel, thereafter, has argued the matter regarding some procedural lapse, for which he has cited certain judgments. However, since the Labour Court has given full opportunity to both the sides to argue their case and lead appropriate evidence, it cannot be said that any procedural lapse is committed by the Labour Court in any manner. Even otherwise, in my view, no prejudice is caused to any side in any manner on the Labour Court adopting a particular procedure.
Mr.V.B. Patel further argued that the Labour Court has discussed his own philosophy in the judgment and that, incorporating such personal philosophy, ultimately, the impugned Award is passed. He submitted that the Labour Court should have confined itself to the arguments and the points in issue and should not have burdened his judgment by incorporating various things, which would not be relevant. However, the observations of the Labour Court are in connection with the dispute in question. Maybe, certain observations may or may not be necessary for the purpose of deciding the reference strictly in accordance with law, but, by that itself, it cannot be said that the Award of the Labour Court is bad in any manner. However, it is true that, normally, the Court should confine itself to the points involved in the matter and it may not be necessary to incorporate certain things, which may not have any bearing for deciding the facts and law involved in the matter. In any case, even if the Court has stated something more in the judgment, it may be treated as some personal views of the Judge, but that by itself will not vitiate the order, as, ultimately, effect is required to be given to the final decision rendered in the reference after taking into consideration the point of law and evidence on record.
23. Mr.Patel has also produced on record written submissions along with certain documents, which, according to him, are part and parcel of the original proceedings. It is submitted by Mr.Patel that by virtue of clause 9 of the Agreement to Sell, all licences, viz., Industrial Licence, Factory Licence, etc., and P.F. number, were changed and that, in view of that, there is a complete transfer of business along with the workmen. However, in view of my reasoning in the earlier part of the judgment, this fact itself will not be of any help to the present petitioner, because, if, during the intervening period, the transferee was permitted to run the business, transfer of such licence, P.F. number, etc., is to be considered only for a temporary period. By such transfer, the fact that the agreement was, ultimately, cancelled cannot be lost sight of.
Similarly, so far as the argument that on 26.12.1989, the transferee sponsored voluntary retirement scheme and the same was accepted by some of the employees, except the present 42 workmen, is concerned, it is required to be noted that simply because some employees accepted the benefit of Voluntary Retirement Scheme floated by the transferee company, it cannot be said that the present workmen, who are not willing to accept the said scheme, are not entitled to raise industrial dispute, asserting their rights against the original employer. However, it when it is held that relationship between the original employer and the present employees continues and that the employer and employee relationship continues, the workmen have all the rights to raise appropriate Industrial Dispute for their rightful demand, including the demand for reinstatement and other consequential benefits. Similarly, even if the transferee company has given closure notice, the same also cannot change the position, because, ultimately, the transferee company itself has taken the point that legal ownership has never been transferred and vested in it and that it is the liability of the original owner to reinstate and give work to the present set of workmen. Even this stand is taken before this Court by the transferee company, through Mr.K.M.Patel, its Advocate.
It is, no doubt, true that, in the instant case, there is no reference regarding closure of the undertaking. The demand of the workmen is that since the relationship of master and servant between the petitioner and the workmen never came to an end, they are entitled to be reinstated and the same benefit is required to be given to them, which is given to other junior employees, viz., the so-called contract employees. So far as the matters under the Industrial Disputes Act are concerned, the Court has to strike a just balance, keeping in mind the provisions of the Act and the object of the Act. Considering the aforesaid aspect of the matter, it is not possible for me to accept the say of Mr.V.B. Patel that moment the agreement of 1987 was executed, the relationship between the present petitioner and its workmen came to an end and that the subsequent cancellation of the aforesaid agreement is not required to be taken into consideration or that the reference is incompetent or not tenable, on the ground that the petitioner has become the ex-employer, or that since the unit in question is closed, no relief can be granted to the present workmen. Even if for a temporary period, the Management was placed or handed over to respondent No.2, this Court cannot lose sight of the subsequent development which has taken place and discussed earlier at length, i.e. cancellation of the original agreement of 1987.
24. Mr.Sinha, who is appearing for the concerned workmen, has vehemently argued that the transferee company had no right to offer any VRS at all. He submitted that very meagre amount was offered by the transferee company and, therefore, the present workmen did not accept the said benefit. He submitted that since the transferee company had not legally become the employer, there was no question of accepting any VRS from the transferee company. Mr.Sinha submitted that, ultimately, if it is held that the agreement is fraudulent, the Court cannot give effect to such agreement. Mr.Sinha also submitted that the Court is required to consider, while deciding the dispute, whether the agreement in question is completed by final conveyance and if the agreement is not resulting into a final sale, whether the transferee acquires any right by way of ownership by virtue of such transfer. Mr.Sinha submitted that if the agreement in question is a conditional agreement and if the condition is not fulfilled, naturally, this Agreement cannot thereafter be said to be subsisting. Mr.Sinha has also further submitted that the Vendee can be said to have become owner of the undertaking only after the execution of appropriate conveyance between the parties. He has further submitted that after the transaction is completed, naturally, the vendee cannot have any right against the vendor in any manner. He also further submitted that when the agreement itself has vanished in view of its cancellation, the proviso to Section 25FF cannot remain in existence. It is also argued by Mr.Sinha that the agreement in question is also in the nature of lease agreement and till the same takes effect by execution of final sale deed or conveyance, it remains as an agreement of lease, and not beyond that. He submitted that the agreement itself provided about "intended sale". It is also submitted that when the agreement is cancelled, it is cancelled in toto except the saving part provided in the said agreement. For that purpose, he has relied upon one of the paragraphs provided in the cancellation agreement (at page 100 of the compilation), which reads as under :-
" ... ... ...
8. The parties herein hereby agree, declare, and record that save and except what is recorded herein neither party has any claim against the other and save and except as recorded herein, the parties hereto relieve and discharge one another of their respective rights and obligations as recorded in the said agreement dated 18th July, 1987.
... ... ...."
It is submitted that except what is saved in the agreement, rest of the agreement is required to be discharged. In view of this, it is submitted that so far as the contract of employment is concerned, no such saving clause is provided in the same and the entire agreement as per Clause 8 is cancelled. It is, therefore, submitted that in view of this new agreement of 1989, the entire agreement of 1987 has been given a go-by. The effect of the same, accordingly, is that the agreement of 1987 never came into force. He submitted that the new agreement of 1989 nullifies the entire agreement of 1987, in toto.
Mr.Sinha has relied upon the decision of the Apex Court in Anakapalle Cooperative Agricultural and Industrial and Industrial Society Ltd. v. Workmen and others, AIR 1963 SC 1489. The Apex Court has considered the question as to whether a purchaser of an industrial concern can be held to be the successor-in-interest of the vendor, and held that the said question will have to be decided on a consideration of several relevant facts. It has been observed as under by the Apex Court in paragraphs 6, 9, 17 and 18 :-
" ... ... ...
6. The first question which falls to be considered in this appeal is whether the appellant is a successor-in-interest of the Company. The learned Solicitor General contends that the agreement of sale under which the appellant has arrived on the scene, clearly shows that it cannot be treated as a successor-in-interest of the Company. The terms of the agreement of sale show that the appellant has left with the Company a part of its land, its investments to the tune of Rs. 19 lakhs and its liability to the tune of Rs. 27 lakhs. 4,000 bags of processed sugar have also been left with the Company at the time of the transaction. Clause 8 of the agreement provides that the Company will be entitled to withdraw and appropriate to itself all advances, part payments and deposits made by it either in cash or security and the Society shall have no right over them. Clause 13 similarly provides that the Company will pay all its liabilities, secured and unsecured, determined or to be determined, and the Society will not be liable to pay the same. Under cl. 11, the godown in which the stocks of sugar were stored Was to continue in the possession of, the Company free of rent or compensation until the entire stock was released and delivered. The Company had also agreed to terminate the services of its employees on or before October 9,1959. and, cls. 7, which deals with this topic, has provided, that: whatever, claims are to be paid to such, employees on account of such termination will be paid; by the Company; The appellant has also not purchased the goodwill of the Company. The argument, therefore, is that though the work of the Company was, in a sense, going concern when it was purchased by the appellant, the appellant had not purchased the entire concern including the goodwill; and so, it would be inappropriate to describe the appellant as the successor-in-interest of the Company.
xxx xxx xxx (9) The question as to whether a purchaser of an industrial concern can be held to be a successor-in-interest of the vendor will have to be decided on a consideration of several relevant facts. Did the purchaser purchase the whole of the business ? Was the business purchased a going concern at the time of the sale transaction ? Is the business purchased carried on at the same place as before ? Is the business carried on without a substantial break in time ? Is the business carried on by the purchaser the same or similar to the business in the hands of the vendor ? If there has been a break in the continuity of the business, what is the nature of the break and what were the reasons responsible for it ? What is the length of the break ? Has goodwill been purchased ? Is the purchase only of some parts and the purchaser having purchased the said parts purchased some other new parts and started a business of his own which is not the same as the old business but is similar to it ? These and all other relevant factors have to be borne in mind in deciding the question as to whether the purchaser can be said to be a successor-in-interest of the vendor for the purpose of industrial adjudication. It is hardly necessary to emphasise in this connection that though all the facts to which we have referred by way of illustration are relevant, it would be unreasonable to exaggerate the importance of any one of these facts or to adopt the inflexible rule that the presence or absence of any one of them is decisive of the matter one way or the other. If industrial adjudication were to insist that a purchaser must purchase the whole of the property of the vendor concern before he can be regarded as a successor-in-interest, it is quite likely that just an insignificant portion of the property may not be the subject-matter of the conveyance and it may be urged that the exclusion of the said fraction precludes industrial adjudication from treating the purchaser as a successor-in-interest. Such a plea, however, cannot be entertained for the simple reason that in deciding this question industrial adjudication will look at the substance of the matter and not be guided solely by the form of the transfer. What we have said about the entirety of the property belonging to the vendor concern, will apply also to the goodwill which is an intangible asset of any industrial concern. If goodwill along with the rest of the tangible property has been sold, that would strongly support the plea that the purchaser is a successor-in-interest; but it does not follow that if good will has not been sold, that alone will necessarily The decision of the question must ultimately depend upon the evaluation of all the relevant factors and it cannot be reached by treating any one of them as of overriding or conclusive significance. xxx xxx xxx (17) The scheme of the proviso to s. 25-FF emphasises the same policy. If the three conditions specified in the proviso are satisfied, there is no termination of service either in fact or in law, and so, there is no scope for the payment of any compensation. That is the effect of the proviso. Therefore, reading section 25-FF as a whole. it does appear that unless the transfer falls under the proviso, the employees of the transferred concern are entitled to claim compensation against the transferor and they cannot make any claim for reemployment against the transferee of the undertaking. Thus, the effect of the enactment of s.25-FF is to restore the position which the Legislature had apparently in mind when s. 25-FF Was originally enacted on September 4, 1956. By amending s. 25-FF, the Legislature has made it clear that if industrial undertakings are transferred, the employees of such transferred undertakings should be entitled to compensation, unless, of course, the continuity in their service or employment is not disturbed and that can happen if the transfer satisfies the three requirements of the proviso.
(18) In this connection, it is necessary to point out that even before s.25-FF was introduced in the Act for the first time, when such questions were considered by industrial adjudication- on general grounds of fair play and social justice, it does not appear that employees of the transferred concern were held entitled to both compensation for termination of service and immediate re-employment at the hands of the transferee. The present position which results from the enactment of s.25-FF, as amended, is, therefore, substantially the same as it was at the earlier stage. It is common ground that if a transfer is fictitious or 'benami' s. 25-FF has no application at all. In such a case, there has been no change of ownership or management and despite an apparent transfer, the transferor employer continues to be the real employer and there has to be continuity of service under the same terms and conditions of service as before and there can be no question of compensation.
... ... ...."
Relying upon this judgment, it is argued by Mr.Sinha that it cannot be said that the services of the concerned workmen with the petitioner have come to an end in any manner and that they continue in the employment of the petitioner, especially when the entire agreement of 1987, under which they were placed under the transferee-company, was completely wiped out by a subsequent agreement of 1989. It is also argued by Mr.Sinha that it is not in dispute that by virtue of cancellation, whatever property was transferred to the transferee was already taken back by the transferor. So, no part of the land, building, or machinery remained with the transferee and even on that ground, the transferee is not bound to continue the present workmen in its employment.
Mr.Sinha also further submitted that when there is a conditional transfer, Section 25FF will have no application and it will apply when there is a complete transfer of ownership and not for interim transfer, as, according to him, till the transaction is finalised, it should be treated only as a tentative transfer and not permanent.
25. Mr.Sinha has also relied upon the definition of 'undertaking' as provided in Section 2(ka), which provides as under :-
" ... ... ...
2. Definitions.-In this Act, unless there is anything repugnant in the subject or context,-
xxx xxx xxx (ka) "industrial establishment or undertaking" means an establishment or undertaking in which any industry is carried on :
Provided that where several activities are carried on in an establishment or undertaking and only one or some of such activities is or are an industry or industries, then,-
(a) if any unit of such establishment or undertaking carrying on any activity, being an industry, is severable from the other unit or units of such establishment or undertaking, such unit shall be deemed to be a separate industrial establishment or undertaking;
(b) If the predominant activity or each of the predominant activities carried on in such establishment or undertaking or any unit thereof is an industry and the other activity or each of the other activities carried on in such establishment or undertaking or unit thereof is not severable from and is, for the purpose of carrying on, or aiding the carrying on of, such predominant activity or activities, the entire establishment or undertaking or, as the case may be, unit thereof shall be deemed to be an industrial establishment or undertaking;
... ... ...."
26. Mr.Sinha has also relied upon the decision of the Apex Court in The Management of R.S. Madho Ram and Sons (Agencies) Private Ltd. and another v. The Workmen, AIR 1964 SC 645. Considering the scheme of Section 25-FF, the Apex Court has considered the question of transfer of ownership or management of undertaking. In the said judgment, the Apex Court observed as under in paragraphs 9, 10, 11, 12 and 13 :-
" ... ... ...
9. Section 25FF of the Act provides, inter alia, that 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 satisfies the test prescribed in that section shall be entitled to notice and compensation in accordance with the provisions of s. 25FF as if the workman had been retrenched. This provision shows that workmen falling under the category contemplated by it, are entitled to claim retrenchment compensation in case the undertaking which they were serving and by which they were employed is transferred. Such a transfer, in law, is regarded as amounting to retrenchment of the said workmen and on that basis s. 25FF gives the workmen the right to claim compensation.
10. There is, however, a proviso to this section which. excludes its operation in respect of cases falling under the proviso. In substance, the proviso lays down that the provision as to the payment of compensation on transfer will not be applicable where in spite of the transfer, the service of the workmen has not been interrupted. The terms and conditions of service are not less favorable after transfer than they were before such transfer, and the transferee is bound under the terms of the transfer to pay to the workmen in the event of their retrenchment, compensation on the basis that their service had been continuous and had not been interrupted by the transfer. The proviso, therefore, shows that where the transfer does not affect the terms and conditions of the employees, does not interrupt the length of their service and guarantees to them payment of compensation, if retrenchment were made, on the basis of their continuous employment, then s. 25FF of the Act would not apply and the workmen concerned would not be entitled to claim compensation merely by reason of the transfer. It is common ground that the three conditions prescribed by clauses (a) (b) and (c) of the proviso are satisfied in this case and so, if s. 25FF were to apply, there can be little doubt that the appellant would be justified in contending that the transfer was valid and the 57 employees can make no grievance of the said transfer. The question, however, is: does s. 25FF apply at all?
11. It would be noticed that the first and foremost condition for the application of s. 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 s. 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, s.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 s. 25FF of the Act.
12. 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 s. 25FF. The fact that one undertaking runs these businesses would not necessarily exclude the application of s. 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 cases of this character the distinct and separate businesses would normally be run on the basis that they are distinct and separate; employees would be separately employed in respect of all the said businesses 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 usual to have one muster roll for all the employees and the Organisation of employment would indicate clearly the distinctive and separate character of the different businesses. If that be so, then the transfer by the undertaking of one of its businesses may attract the application of s. 25FF of the Act.
13. But where the undertaking runs several allied businesses in the same place or places, different considerations would come into play. In the present case, the muster roll showing the list of employees was common in regard to all the departments of business run by the transferor firm. it is not disputed that the terms and conditions of service were the same for all the employees and what is most significant is the fact that the employees could be transferred from one department run by the transferor firm to another department, though the transferor conducted several branches of business which are more or less allied, the services of the employees were not confined to any one business, but were liable to be transferred from one branch to another. In the payment of bonus all the employees were treated as constituting one unit and there was thus both the unity of employment and the identity of the terms and conditions of service. In fact, it is purely a matter of accident that the 57 workmen with whose transfer we are concerned in the present appeal happened to be engaged in retail business which was the subject-matter of the transfer between the firm and the company. These 57 employees had not been appointed solely for the purpose of the retail business but were in charge of the retail business as a mere matter of accident. Under these circumstances, it appears to us to be very difficult to accept Mr. Setalvad's argument that because the retail business has an identity of its own it should be treated as an independent and distinct business run by the firm and as such, the transfer should be deemed to have constituted the company into a successor-in-interest of the transferor firm for the purpose of s. 25FF. As in other industrial matters, so on this question too, it would be difficult to lay down any categorical or general proposition. Whether or not the transfer in question attracts the provisions of s. 25FF must be determined in the light of the circumstances of each case. It is hardly necessary to emphasise that in dealing with the problem, what industrial adjudication should consider is the matter of substance and not of form. As has been observed by this Court in Anakapalla Cooperative Agricultural and Industrial Society v. Workmen and others, the question as to whether a transfer has been effected so as to attract s. 25FF must ultimately depend upon the evaluation of all the relevant factors and it cannot be answered by treating any one of them as of overriding or conclusive significance. Having regard to the facts which are relevant in the present case, we are satisfied that the appellant cannot claim to be a successor-in-interest of the firm so as to attract the provisions of s. 25FF of the Act. The transfer which has been effected by the firm in favour of the appellant does not, in our opinion, amount to the transfer of the ownership or management of an undertaking and so, the Tribunal was right in holding that s. 25FF and the proviso to it did not apply to the present case.
... ... ...."
Relying upon the said judgment, it is argued by Mr.Sinha that it cannot be said that the ownership or management cannot be partially transferred and, therefore, this cannot be treated as a `transfer', as contemplated by Section 25FF. However, so far as the aforesaid point is concerned, in my view, since the so-called transfer is already cancelled by virtue of subsequent agreement, it is not necessary to examine, in detail, whether transfer of Welding Unit can be said to be a transfer of undertaking or transfer of ownership or management of such undertaking, as contemplated by Section 25FF of the I.D. Act.
27. Mr.Sinha has also relied upon the judgment of the Apex Court in Gurmail Singh and Ors v. State of Punjab and Ors., 1991 II LLJ 76. Considering the scheme of Section 25-FF of the I.D. Act, it has been held by the Supreme Court that when transfer is fictitious or benami, Section 25FF of the Act has no application and the workmen can claim continuity of service. The relevant observations of the Apex Court in the said judgment are as follows ;-
" ... ... ...
16. The Supreme Court was dealing with a case of genuine transfer between two parties - a predecessor and a successor - at arms' length where the principles of the law of contracts clearly held the field. The employees of the predecessor had no privity of contract with the successor and could make no claims against him. The industrial law, however, safeguarded his interests by inserting S.25FF and giving him a right to compensation against his former employer on the basis of a notional retrenchment except in cases where the successor, under the contract of transfer itself, adequately safeguarded them by assuring them of continuity of service and of employment terms and conditions. In the result, he can get compensation or continuity but not both. The present case before us raises an allied, but sometimes more important issue, as to whether there cannot be situations in which the Court or industrial adjudicator, should, in the interest of justice, fairplay and industrial peace, hold the employee entitled to continuity with the successor without being compelled to be satisfied with compensation from the predecessor. The Supreme Court itself has visualised such a case and made it clear that if a transfer is fictitious or benami, S.25FF has no application at all. Of course, in such a case, "there has been no change of ownership or management and despite an apparent transfer, the transferor employer continues to be the real employer and there has to be continuity of service under the same terms and conditions of service as before and there can be no question of compensation." A second type of case which comes to mind is one in which there is in form, and perhaps also in law, a succession but the management continues to be in the hands of the same set of persons organized differently such as in Bombay Garage Ltd. v. Industrial Tribunal, (1953-I-LLJ-14) and Artisan Press v. L.A.T., (1954-I LLJ-424). In such cases, the transferee and transferor are virtually the same and the overriding principle should be that no one should be able to frustrate the intent and purpose of the law by drawing a corporate veil across the eyes of the Court. ... ... ... These exceptions to the above rules, we think, would still be operative. But it is not necessary here to decide whether this principle will help us to identify the Corporation with the State Government in the present case for the present purpose, particularly as there is a catena of cases which do not approve of such identification. ... ... ... Leaving this out of account then, we may turn to a third category of cases, which we think would also fall as an exception to the principle behind S.25FF. This is where, as here, the transferor and / or transferee is a State or a State Instrumentality, which is required to act fairly and not arbitrarily ... .. ... and the Court has a say as to whether the terms and conditions on which it proposes to hand over or takeover an industrial undertaking embody the requisite of "fairness in action" and could be upheld. We think that, certainly, in such circumstances, it will be open to this Court to review the arrangement between the State Government and the Corporation and issue appropriate directions. Indeed, such directions could be issued even if the elements of the transfer in the present case fall short of a complete succession to the business or undertaking of State by the Corporation, as the principle sought to be applied is a constitutional principle flowing from the contours of Article 14 of the Constitution which the State and Corporation are obliged to adhere to. We are making this observation because it was attempted to be argued on behalf of the State and Corporation that only certain assets of the State 'industry', viz., the tubewells, were taken over by the latter and nothing more. We do not quite agree with this contention, but, in view of the approach we propose to adopt, this aspect is not very material and need not be further discussed.
... ... ...."
Relying upon the said judgment, it is argued by Mr.Sinha that, ultimately, if the transfer itself no longer remains by virtue of cancellation, the same analogy and principle will apply, which would be applicable in the case of fictitious or benami transfer.
It is argued by Mr.Sinha and Mr.K.M. Patel that, considering the nature of the agreement and subsequent development, the Court can ensure, in such cases, that no injustice results from such change over. It is argued that, in the instant case, such change was only for a limited period and that the Labour Court is entitled to consider the nature of the transaction and is entitled to give appropriate relief, which is, ultimately, given in the Reference.
28. Relying upon the aforesaid judgments, Mr.Sinha submitted that in view of the cancellation of the agreement as well as in view of the fact that the original agrement is not found to be in existence, the original position is required to be restored and it cannot be said that the workmen in question are without any remedy simply because the petitioner-Management has applied the so-called closure of its unit. Considering the entire material on record as well as considering the agreement and cancellation of such agreement and the terms of such agreement, in my view, the Labour Court is absolutely justified in coming to the conclusion that the present set of workmen is entitled to be reinstated with the principal employer and they are required to be given the same benefit as they were given with the original employer at the relevant time when the employer has offered VRS to the employees, who are similarly situated. Simply because the present workmen were sent to the transferee for an interim period, will not change the situation, because, for all practical purposes, now, it has to be presumed that they were also in the employment of the present petitioner at the relevant time, when such benefit was given to other employees as referred by the Labour Court. It is also required to be noted that Section 25FF has application only when there is a transfer of ownership, which, necessarily, is a 'transfer', as contemplated by ordinary law. Ultimately, if there is no transfer, there is no question of application of Section 25FF at all. Similarly, so far as the transfer of Management is concerned, that point is raised by Mr.V.B. Patel for the first time before this Court, and no such point was raised before the Labour Court in any manner. Even if it is presumed that there is only a transfer of Management and not of ownership, the said transfer is also cancelled by virtue of the second agreement, and such transfer was never completed and it remained only at an 'agreement' stage.
29. At this stage, argument of Mr.K.M. Patel, who is appearing for the transferee Company, is also required to be taken into account. Mr.K.M. Patel submitted that, in view of the second agreement of cancellation of the first agreement, his Company is discharged from its liability towards the workmen of the petitioner-company. It is submitted that by virtue of cancellation of the first agreement, the transferee company has no obligation, which is required to be performed towards the workmen in question. He submitted that, no reference against a transferee company is competent at all in view of the agreement of cancellation and so far as the so-called transfer period from the date of agreement till the date of cancellation only, i.e. for a limited period, the transferee Company was required to take care of the concerned workmen in view of the agreement in question, but moment the agreement was cancelled, no relation between the transferee company and such workmen continued any further and, that, therefore, the transferee company was wrongly joined in the aforesaid reference.
Mr.K.M. Patel also submitted that, on the one hand, the transferor has taken away all the assets, which were transferred to the transferee, including land and building and no part of the assets remained with the transferee company in any manner after the cancellation, which took place in the year 1989. Under these circumstances, there is no legal obligation on the part of the transferee to pay any compensation or any benefit to the workmen, which, according to him, is required to be restored to the original employer.
26th September, 2003.
It is accordingly submitted by Mr.K.M. Patel that it is the liability of the original employer to take care of this set of employees and that the Award of the Labour Court is not required to be interfered with by this Court, as, after considering the facts and circumstances of the case, the Labour Court has passed the aforesaid order.
30. At this stage, reference is required to be made to the decision of the Apex Court in N.T.C. (South Maharashtra) Limited v. Rashtriya Mill Mazdoor Sangh and others, (1993) 1 SCC 217. In the said judgment, it has been held by the Apex Court that Section 25FF itself does not effect termination of contract of employment of workmen of the undertakings and only provides for compensation to be paid to the workmen if such transfer results in the termination of the contract of employment. In considering the facts of that case, it is observed as under by the Apex Court in paragraph 22 :-
" ... ... ...
22. On the facts of that case it was found that the State Government had acted arbitrarily towards the employees and had abridged their rights by purporting to transfer only the tubewells and had retrenched the employees as a consequence thereof. The tubewells had further continued to be run at the cost of the State since the Corporation was wholly owned by it. That was something which was grossly unfair and inequitable since it had deprived the employees of substantial benefits which had accrued to them as a result of their long service with the State Government. It was in these circumstances that the Court had directed the employment of the retrenched employees on certain conditions. The case does not advance the contention of the appellants in any manner.
... ... ...."
Reference is also required to be made to the decision of the Apex Court in Pottery Mazdoor Panchayat v. The Perfect Pottery Co. Ltd. and another, AIR 1979 SC 1356, wherein it has been held by the Apex Court that the Tribunal cannot go beyond the terms of reference. Mr.V.B. Patel placed strong reliance on this decision, wherein the Apex Court has considered the nature of the transaction and has held as under :
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11. Having heard a closely thought out argument made by Mr. Gupta on behalf of the appellant, we are of the opinion that the High Court is right in its view on the first question. The very terms of the references show that the point of dispute between the parties was not the fact of the closure of its business by the respondent but the propriety and justification of the respondent's decision to close down the business. That is why the references were expressed to say whether the proposed closure of the business was proper and justified. In other words, by the references, the Tribunals were not called upon by the Government to adjudicate upon the question as to whether there was in fact a closure of business or whether under the pretence of closing the business the workers were locked out by the management. The references being limited to the narrow question as to whether the closure was proper and justified, the Tribunals by the very terms of the references, had no jurisdiction to go behind the fact of closure and inquire into the question whether the business was in fact closed down by the management.
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Here, in the instant case, so far as the reference is concerned, it has already been discussed earlier that the reference is in connection with the demand for reinstatement with the petitioner-Company. Taking into account the demand of the workmen, the Labour Court has considered the facts and circumstances of the case, and has passed the impugned Award. The entire controversy is in connection with the agreement of transfer and cancellation of agreement and in the light of the aforeaid documents, after considering the evidence on record, the impugned Award is passed. It cannot be said that the Labour Court has travelled beyond the terms of the reference.
31. Considering the various case law on the subject and considering the provisions of Section 25FF as well as considering both the agreements, i.e. transfer and cancellation, and considering Clause 9 of the first Agreement for Sale-cum-lease of the Land and Building, in my view, the workmen, who were transferred along with the land and building, as well as machinery, are now required to be continued with the employment of the principal employer in view of the subsequent development, because, that agreement has never come into light finally and it has fallen apart in view of the cancellation. Once it is held that the status of the employees depends upon the nature of the transaction and the agreement, and when such agreement is, ultimately, cancelled, they are required to be conferred with the original status of being employees of the original employer.
32. On behalf of the workmen, a "settlement" arrived at under Section 2(p) of the I.D. Act is placed on record, which is part and parcel of the original record. The said settlement is arrived at between the employer and employees and the period, during which the settlement is to remain in force, is mentioned as between 1.3.1987 and 28.2.1990. The names of the parties mentioned in the Settlement are Apar Private Ltd. and Lotherme Electrodes (India) Private Ltd. Mr.Sinha submitted that if the relationship between the petitioner and the respondents is stated to have come to an end in view of the Agreement of Sale-cum-Lease of 1987, it was not necessary for the petitioner herein to bind itself by settling the dispute upto 1990. It is also not in dispute that it is also signed by the Chairman of the petitioner on 27.8.1987.
33. Mr.V.B. Patel, however, vehemently submitted that there is no question of reinstating the concerned workmen, as the Unit, on which they were serving before transfer is no longer in existence. It is, however, required to be noted that so far as the transferee Company is concerned, whatever proceedings it might have initiated regarding closing the undertaking etc. is of no relevance, because, since no ownership has vested in it, it has no power to give any retiral dues to any of the employees. Even if any closure notice is given by the said Company, it is also of no consequence as it has no right to give such notice. However, in view of the fact that since the Unit now is not at all in existence physically, appropriate relief is now required to be given in favour of the workmen.
34. It is also required to be noted that, as such, the order of reference made by the State Government is not under challenge in these petitions and the petitions are filed with a prayer for setting aside the Award of the Labour Court. The Labour Court, after appreciating the evidence and considering the documentary evidence, in question, has passed the aforesaid order. Powers of this Court in such type of cases are very limited and, in my view, it cannot be said that the Labour Court has committed any error of law or of jurisdiction in passing the impugned order. It cannot be said that the Labour Court has no jurisdiction to decide the reference, which is referred to it by the Government. It also cannot be said, as stated earlier, that it is a reference against a closed company or against the ex-employer. In my view, in view of the subsequent event of cancellation of the original agreement dated 18.7.1987, original position is required to be restored and, accordingly, the demand of the workmen is found to be just and proper and, accordingly, they are entitled to reinstatement.
It is also required to be noted that the Labour Court has found in paragraph 34 that the petitioner-Company has closed its business at Vadodara and transferred its machinery at other places. It seems that in February, 2000, the petitioner-Company floated voluntary retirement scheme and it is also submitted that all the employees of the Company, who were serving in the company, at the relevant time, were given such benefit of VRS.
35. In view of the detailed discussion hereinabove, points (i) to (xii) raised by Mr.V.B. Patel for the consideration of the Court are appropriately dealt with and answered accordingly.
36. Accordingly, considering the facts and circumstances of the case, and while confirming the Award of the Labour Court in so far as it relates to the reinstatement of the workmen on the original post, the petitioner-Company is directed to give similar benefit to the present workmen, on whose behalf references are made, by giving them the same benefit of VRS given by the petitioner, in the year 2000, to other employees. If the workmen already serving in the Company at the relevant time were given the VRS, naturally, the present respondents also are entitled to get benefit like others and accordingly, the said benefit of VRS is required to be given as per the scheme floated by the petitioner-Company and the same be given to the present workmen also. Since the Unit in which the respondents were working is not in physical existence now, the Award of the Labour Court is partly modified and, accordingly, it is directed that the said benefit of VRS which is given by the petitioner-Company in February, 2000, be given to the present respondents. Accordingly, the said benefits may be given to the concerned workmen, in view of this judgment, within a period of two months from today. In case any of the employees has expired, such benefits may be given to the heirs of such workmen. This direction is required to be given in view of the submission of the petitioner that all the three units are different units and the Labour Court has committed an error in directing the absorption of the concerned workmen in other undertakings. 37. So far as the payment of back wages is concerned, considering the fact that the workmen waited for a considerable period of about six years in approaching the Authority for making reference, in my view, instead of 25% back wages, they would be entitled to only token amount by way of back wages and, hence, the award is accordingly modified by directing payment of 10% back wages. This direction is given in view of the fact that the petitioner-company is in financial difficulty, though, of course, Mr.Sinha argued that, all throughout, the workmen were litigating against the transferee and in such type of matters, if some time is taken by the workmen, it cannot be said that there is no justification for such delay.
38. The Award of the Labour Court is modified to the aforesaid extent, as indicated above. All these petitions are partly allowed to the aforesaid extent, with no order as to costs. Rule is accordingly made absolute. The Award of the Labour Court is accordingly substituted, with the directions contained in this judgment.
Till the payment, which is required to be made as per this order, is made, the injunction granted by the Labour Court shall continue to operate.
The order of the Labour Court is accordingly modified and now, the concerned workmen will be entitled to the benefits as per the judgment of this Court.