Patna High Court
Bihar State Financial Corporation vs Jute Mill Mazdoor Sabha And Ors. on 15 December, 1994
Equivalent citations: 1995(43)BLJR795, (1999)IIILLJ1505PAT
Author: A.K. Ganguly
Bench: K. Venkataswami, A.K. Ganguly
JUDGMENT A.K. Ganguly, J.
1. This Letters Patent Appeal has been filed by the Bihar State Financial Corporation (hereinafter referred to as the said Corporation) impugning the judgment dated September 1, 1989 passed in C.W.J.C.No. 2159 of 1988.
2. Briefly stated the facts of the case are as follows:--
Jute Mill Mazdoor Sabha, Katihar, a registered body having registration No. 1242 had filed the writ petition along with some workers of Katihar Jute Mill (hereinafter referred to as the said Mill) with a prayer for a direction upon the respondents including the appellant herein for making payment of the wages of the workmen and for payment of further dues of the E.S.I. Corporation and also with a further prayer for starting production and making available the raw materials and other items for saving the said mill from becoming a sick one.
3. The appellant was respondent No. 2 in the writ petition.
4. The said Jute Mill, incorporated under the Indian Companies Act was run privately by the Chamarias of Calcutta. As the said Jute Mills ran into financial trouble, it took loans from the said Corporation to the extent of about Rs. 24.15 lacs.
The said Jute mill was also financed by the Industrial Finance Corporation of India, Central Bank of India, Bihar State Industrial Development Corporation and the Government of Bihar. The said Jute Mill defaulted in making re-payment of the loans of the said Corporation. A lock out was also declared in the said Jute Mill with effect from July 5, 1982 and from that day the said Jute Mill suspended its operation.
5. As despite repeated legal notices, the said Jute Mill did not repay the loans, the said Corporation decided to take over the possession of the said Jute Mill for realising the loan amount. Pursuant to the aforesaid decision, the possession of the said Jute Mill was taken over on September 27, 1983 by the said Corporation in exercise of its power under Section 29 the State Financial Corporations Act, 1951 (hereinafter referred to as the said Act).
6. As the said Corporation could not sell the said Jute Mill, the said Jute Mill was given on ten years' lease to the Bihar State Industrial Development Corporation (hereinafter referred to as the BSIDC) (Respondent No. 3 in the writ: petition). The said BSIDC tried its best to run the said Jute Mill but as it failed to do so, it purported to surrender the lease on March 15, 1989.
7. It is an admitted position that the workers were paid their salary upto the month of January 1, 1988.
8. Clauses 6 and 16 from the said lease deed are set out below :--
"(6) That during the subsistence of these presents BSIDC shall not be liable for payment of any dues, aid/claim to be outstanding against KJM for the period prior to the date of execution of these presents.
(16) It is agreed that the employees of KJM on their pay roll on the date of take over of BSFC shall be treated to be on the pay roll of Katihar Jute Mills Ltd. and they or such of them as may be employed afresh by the lessee in connection with the revival and operation of the plant of KJM shall be paid their current salaries and wages and other benefits to which they may be legitimately entitled to by the lessee."
On a perusal of the aforesaid clause it is clear that BSIDC cannot be made liable for payment of any dues or outstanding against the said Mill for the period prior to the date of execution of the said lease deed. It also appears from perusal of Clause 16 that the employees on the pay roll of the said Mill will be treated to be on the pay roll of the said Mill even after the execution of the said lease and such of them will be employed in connection with the revival and operation of the plant of the said Mill and shall be paid their current salary and wages and other benefits to which they may be entitled to by the lessee.
9. It is, therefore, clear from the aforesaid lease deed that there is no employer and employee relationship between the employees and the appellant. The said Mill was locked out in 1982 and thereafter suspended its operation and only pursuant to the lease deed of 1984 the said Mill was again opened. Even thereafter production had been stopped from the month of December, 1987, admittedly the workers were paid upto January, 1988.
10. In the background of these facts the question of claim of the Workers for being paid by the said Corporation is to be considered by this Court.
11. The learned Judge of the first Court proceeded on the basis of a mis-conception that the appellant is the owner of the said Mill. In fact, the appellant was merely a financing institution. It appears from a perusal of the said Act that the said Financial Corporation cannot, nor it is obliged to run the said Mill. Section 29 of the said Act enumerates the rights of the said Corporation to take certain steps in case of default by any Industrial Undertaking in repayment of loans. Provisions of Section 29 of the said Act are set out below:--
"29. Rights of Financial Corporation in case of default.-- (1) Where any industrial "concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligation in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concern, as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.
(2) Any transfer of property made by the Financial Corporation, in exercise of its powers under Sub-section (1), shall vest in the transferee all rights in or to the property transferred as if the transfer had been made by the owner of the property.
(3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods.
(4) Where any action has been taken against an industrial concern under the provisions of Sub-section (1), all costs, charges and expenses which in the opinion of the Financial Corporation have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.
(5) Where the Financial Corporation has taken any action against an industrial concern under the provisions of Sub-section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of the concern."
12. An argument has been made by the learned counsel for the writ petitioner that since under Section 29(5) of the said Act, the said Corporation has been deemed to be the owner of the industrial concern in question, it is the liability of the said Corporation to run the industrial concern which in this case is the said mill and pay the salary of the employees.
13. It is well known that legislature often deem things to be what they are not. The intention of a deeming provision in laying down an hypothesis is, as observed by FRANCIS BENNION in 'STATUTORY INTERPRETATION', 2nd Edition, BUTTERWORTHS, at page 664 'that the hypothesis shall be carried as far as necessary to achieve the legislative purpose, but to no further'.
14. In the instant case, the deeming provision has been introduced only for limited purpose of a suit being filed by or against the Industrial Undertaking in question Therefore, the concept of ownership introduced under Section 29(5) of the said Act must be a limited one as is intended by the legislative mandate. Having regard to the legislative mandate under Section 29(5) of the said Act, we hold that the said Corporation cannot be treated as the owner of the said Mill, Here we respectfully differ from the learned Judge of the first Court.
15. It appears clearly from the provisions of the said Act, particularly Section 29 of the said Act that the purpose behind taking over management or possession or both of the Industrial concern by the said Corporation is to secure and realise the loan advanced to it. The said take over of either management or the possession is not for the purpose of running the industrial concern nor is such take over intended for the purpose of allowing the said Corporation to step into the shoes of the owner of the said industrial undertaking,
16. Section 25-FF of the Industrial Disputes Act, 1947 is set out below :--
"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 services 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."
17. From the provisions of Section 29 of the said Act as also clauses of the lease deed set out hereinbefore, it is clear that there is no transfer of ownership of the undertaking in question nor has the employer of the Workmen been changed, In any event the appellant cannot be called a new employer in respect to the workmen of the said Jute Mill. In that view of the matter, the provisions of Section 25-FF of the Industrial Disputes Act; are not attracted in the facts of this case. In this connection reference is made to the decision in Workmen of P.S.B.B. v. Haryana S.B.B. 1981 Lab I.C. 1586. While construing the provisions of Section 25-FF of the Industrial Disputes Act, Hon'ble Mr. Justice M.M. PUNCHHI, as his Lordship then was, pleased to hold as follows :
"It goes without saying that on transfer of an undertaking without the undertaken obligation of the transferee to retain the workmen, the employment of the workmen with the transferor comes to an end giving rise to their claim for retrenchment compensation. And if that is so, the transferee, despite being the successor-in-interest, as commonly understood, would not be a successor to the liability to pay the same wages to the workmen in case of re-employment. The continuity of service and the link having been broken, the transferee cannot by any means be termed such a successor-in-interest under the liability to re-employ the workmen and in that event to pay them the same wages as were being paid by the transferor."
18. In this case, the continuity of service has long been broken by virtue of the lock out declared by the then management of the said Jute Mill. Strictly speaking, the appellant also cannot be called a successor-in-interest of the management of the said Jute Mill. The appellant has come in by way of statutory provision of a different Act enacted for different purpose, namely, realisation of loan advanced to a sick company. As such in the context of the provisions of the said Act and the undisputed facts of this case, namely, there is no 'undertaken obligation' of the appellant to retain the employees of the said Jute Mill, we are compelled to hold that the provisions of Section 25-FF of the Industrial Disputes Act do not apply to the facts of this case.
19. By reason of the view taken by us, we are not deciding the question of the effect of liquidation proceeding in respect of the said Jute Mill in the present case.
20. Though this Court has a great deal of compassion and sympathy for the workers, but this Court is unable to erect legal principles out of compassion and sympathy and as such is unable to hold that the workers are entitled to the relief claimed for. Consequently the judgment under appeal cannot be sustained.
21. For the reasons aforesaid, the judgment under appeal is set aside in so far as it relates to the direction upon the appellant to pay the wages to the workers of the said Jute Mill. The instant writ petition is also dismissed in so far as it is directed against the appellant. This appeal is, thus, allowed to the extent indicated above. There will be no order as to cost.
K.Venkatswami, C.J.
22. I agree.