Karnataka High Court
Kempsons Foundry vs Industrial Tribunal, Bangalore And ... on 18 April, 1991
Equivalent citations: 1991(2)KARLJ239, (1992)IILLJ344KANT
JUDGMENT M. Rama Jois, J.
1. In this petition presented by the management of Kempsons Foundry, the petitioner has prayed for quashing the award made by the Industrial Tribunal, Bangalore, to the effect that the workmen of Kempsons Foundry are entitled to the service conditions as applicable to the employees of the NGEF with effect from April 9, 1980, the date of reference.
2. Brief facts of the case are these :
The NGEF is an undertaking of the State Government. It was established in the year 1961. At the initial stages, it was engaged in the manufacture of electrical transformers and switch gears. In the year 1964 the NGEF started manufacturing of electrical motors. For the purpose of manufacture of electrical motors, it became necessary for the NGEF to secure castings, which forms the body of electrical motors. In a nearby place, a foundry, under the name and style "Kempsons Foundry" had been established which belonged to a partnership firm known as Kempsons Industries. They began to supply castings to the NGEF required for the manufacture of electrical motors. The aforesaid Kempsons Industry was taken over by K. S. Gowder and Company, which was a partnership firm. The said firm continued to supply the castings to the NGEF. In the course of transaction between Gowder and Company and the NGEF, by the year 1972, Kempsons Foundry became indebted to the NGEF in an amount of Rs. 36 lakhs in the circumstances. In order to enable the NGEF to recover the heavy amount due to it from Kempsons Foundry, an arrangement was made between NGEF and Gowder and Company. The arrangement was formulated in the form of lease executed by Kempsons Foundry and its successor-in-interest, K. S. Gowder and Company, in favour of the NGEF Limited.
(ii) The summary of the agreement is as follows : Equitable mortgage by way of deposit of title deeds relating to buildings and other property of Kempsons Foundry and also a deed of hypothecation in favour of the NGEF in order to secure repayment of Rs. 36 lakhs due to the NGEF from Kempsons Foundry. The duration of the lease in the first instance was in the for a period of 14 years commencing form June 1, 1972 to May 31, 1086. The lease deed also stipulated that if within that period the NGEF was unable to recoup the entire amount, the period of lease had to be extended at the option of the NGEF upto a maximum of 20 years from the date of commencement of the agreement, that is, June 1, 1992. Annual rental payable by the lessee to the lessor was to be Rs. 80,000,00 plus additional rent to be calculated as provided in Schedule-I to the Deed. The lessees were entitled to be in possession of the entire property and they would be entitled to all rights relating to licences, quotas, permits, etc. The NGEF was entitled to install such plants, machineries and other accessories, as they considered necessary, at their own cost, which they were entitled to remove on the expiry of the lease period.
(iii) As regards the workmen who were employed in the foundry, all the liabilities upto the date of commencement of the lease was to be met by the firm. The NGEF was entitled to make its won recruitment of workmen and technicians for carrying on the work of Kempsons Foundry after the takeover of Kempsons Foundry by the NGEF.
(iii a) In terms of the above agreement, the management of Kempsons Foundry was assumed by the NGEF. Fresh recruitment was made for the foundry and the NGEF fixed the wages payable to the workmen. After about six years after the assumption of management of the Kempsons Foundry by the NGEF, there was an agreement in the course of conciliation proceedings under Section 12(3) of the Industrial Disputes Act between Kempsons Foundry Employees' Association and the management of Kempsons, dated December 31, 1978. This agreement related to pay scales and terms and conditions of employment of persons employed in the Kempsons Foundry.
(iv) Sometime in the year 1979-80, the workmen of Kempsons Foundry raised an industrial dispute to the effect that they were entitled to conditions of service similar to those applicable to the employees of the NGEF on the ground that Kempsons Foundry was part and parcel of the NGEF and there was great disparity in the conditions of service particularly in the matter of pay-scales between the employees doing similar work in the NGEF and Kempsons Foundry and there was absolutely no justification to subject the employees of Kempsons Foundry to a very low pay-scale. As the conciliation resulted in failure, the state Government by its order dated April 9, 1980, referred the following points of dispute for industrial adjudication to the Industrial Tribunal Bangalore :
"1. Are the workmen of Kempsons Foundry represented by the Kempsons Foundry Employees Association, 24,(upstairs), Lakshmanamudaliar Street, Bangalore - 560001, justified in demanding that the service conditions as applicable to the employees for the NGEF Limited should be made applicable to them ?
2. If not, to what relief(s) the workmen are entitled ?"
(v) Before the Industrial Tribunal, the respondent-workmen, in support of their demand, in their claim statement stated thus : The foundry originally belonged to a partnership firm, namely K. S. Gowder and Company. The business of foundry was leased to NGEF by means of a lease deed dated August 16, 1972. Pursuant to the lease deed the management of Kempsons Foundry totally vested in the NGEF. The erst-while management were terminated and fresh recruitment was made by the NGEF. All the work relating to castings and foundry, for the purpose of manufacture of motors by the NGEF, was being done by the workman of Kempsons Foundry so recruited by the NGEF. Even so, the wages paid to them in comparison to the wages paid to the employees of the NGEF, was very low and unsatisfactory. The workmen also pleaded that in all other industrial establishments, who were having foundry division better wages were paid for the employees of the foundry division. The Memorandum of Settlement entered into on December 31, 1978 was without prejudice to the contention of the workmen that they were entitled to parity in the matter of conditions of service extended to them and the employees of the NGEF. There has been functional integrality between the NGEF and Kempsons Foundry. There was unity of control, unity of finance, unity of geographical location. The NGEF, for the purpose of manufacture of electrical motors, depends upon the castings manufactured and supplied by Kempsons Foundry and that the entire castings manufactured by Kempsons Foundry are taken by the NGEF only and therefore, there was on justification to deny the workmen of Kempsons Foundry the benefits that were enjoyed by the workmen of the NGEF.
(vi) The claim of the respondent-workmen was resisted by the management thus : The demand for similar conditions of service as applicable to the NGEF by the workmen of Kempsons Foundry was not justified. The conditions of service applicable to the workmen of Kempsons Foundry are set out in the standing orders framed by the company and duly signed by the competent authority. The NGEF has got separate certified standing orders. The NGEF and Kempsons Foundry are two different and separate legal entities. Kempsons Foundry has separate accounts and balance sheet, there was no inter-transferability of employees of the two establishments. For all practical purposes the two establishments were separate and distinct and there was no functional integrality ever though Kempsons Foundry was being managed by the NGEF by taking it on lease. The lease period was in the first instance for 14 years. The management of Kempsons Foundry had been indebted to the NGEF to the tune of Rs. 36 lakhs and in order to recover the said amount, the NGEF took Kempsons Foundry on lease and was maintaining it as a separate unit and there was no financial adequacy for Kempsons Foundry to meet the demands of the workmen as it was running under loss. The fact that employees of the NGEF, which was employing about 5,500 employees, were getting higher pay-scales was no basis to demand equal wages for the employees of Kempsons Foundry which was a small establishment employing about 150 employees.
(vii) On the aforesaid pleadings, oral and documentary evidence were adduced by both the parties.
(viii) In order to show that Kempsons Foundry was part of the NGEF, learned counsel for the respondent relied on the following documentary evidence :
(1) Exhibits W-1 to W-5 which are the Time Cards issued to the workmen of Kempsons, on which the word the NGEF is printed.
(2) Exhibits W-6 to W-11 which are the Stores Cards on which it is boldly printed as the NGEF/Stores Card.
(3) Exhibit W-12 the letter dated August 22, 1975 which shows that Kempsons was a foundry division of the NGEF.
(4) Exhibits W-13 and W-14 which are similar to Exhibit W-12.
(5) Exhibit W-15 a communication by M/s. Hindustan Steel Limited dated August 10, 1976 addressed to the NGEF offering to sell pig iron at Rs. 900 per tonne, required for the castings sat Kempsons, under which the NGEF purchased 200 tonnes of pig iron, which clearly shows that purchasing customer was the NGEF.
(6) W-16, another purchase order which is similar to W-15.
(7) W-20, letter from Coal India dated December 14, 1981 regarding supply of coke required for Kempsons, which reads :
"M/s. Coal India Ltd., No. 12., Kasturba Road, Bangalore - 560 001.
: CIL/BIR 26 CII./81, 1st December, 1981, 14th December, 1981 : 10382/81 : Programme for movement of coke by rail.
Dear Sirs, We acknowledge with thanks the receipt of letter cited above and wish to state that we have already taken up the issue with sponsoring authorities viz., D.G.T.D. for issue of letter identification. D.G.T.D. has forwarded our papers with their recommendation to energy officer.
We are expecting the letter of identification by December 21, 1981. As soon as this is received, we will get in touch with you for submitting programme for movement of coke by rail on our behalf.
Thanking you, Yours faithfully, for NGEF LTD.
Sd.
(V. KRISHNAMURTHY), Special Officer, Foundry Division."
(8) W-24, the 16th Annual Report and Account for 1980-81.
Coming to oral evidence, WW-1, Secretary of the respondent, has stated thus :
"I am working in the foundry division of NGEF, I am the General Secretary of the I party union. I am in semi-skilled 'B' grade. There are 200 employees in the foundry. The Kempsons Foundry was taken over by the NGEF. The former employee of Kempsons Foundry are now the employees of NGEF only.
The foundry carried on the work of manufacturing motor bodies. Moulding, casting, decoring and fettling work is done in the foundry. The castings go to the motor factory section of NGEF after fettling.
In foundry division the workers have to work in more heat then in the motor factory section. The salary for the workers in the foundry is given form the NGEF casts section. The officers in the foundry division and other division of NGEF are inter-transferred. One Ramdas who was a Commercial Officer in the foundry division is now transferred as the C.O.D. in NGEF." (underlining by us) WW-2, who was the General Secretary of the NGEF Employees' Association in his evidence before the Tribunal, Stated thus :
"I am the General Secretary of the NGEF Employees' Association. The NGEF has motors division, transformers division, switch gears, converters, general shops and foundry division. There are some more division also. The standard of skill and qualification required for the employees in different divisions are the same, depending upon the nature of work of each job. The work in a general shop and foundry division and sand blasting and plating section is more hazardous. The requirements of motor division are get form the foundry division and if some more than the capacity of the foundry division is required it would be got from other sources. The castings of the foundry division only. Castings would be sandblasted in the motor division and ..... machining would be sold to the customers. The working hours for all the divisions are the same. There are a number of settlements with the management. Exhibits W-22 and W-23 are the two settlements with the NGEF management and the NGEF Employees' Association. These settlements are not applicable to the workers of the foundry division and the branch offices situated outside Bangalore. The employees in the foundry are paid less then the employees in the NGEF at Bangalore. There is one Finance Controller and one Labour Officer and one Personnel Manager for all the divisions. The officers of foundry division and other divisions are changed to the other division and intertransferred. ..
The Kempsons Foundry employees are not the members of the NGEF Employees' Association. We have not given any charter of demands of those employees. There is a separate union of Kempsons Foundry workers even now. I am not an officer bearer of that union. I am aware of one settlement with the Kempsons Foundry management even after the said lease to the NGEF. I do not know if there were two other settlements. One Krishnamurthy is the Chief Executive of Kempsons Foundry now. I dot know if he was deputed by the NGEF to that post. But, I know that he was an officer of the NGEF. I do not know whether the Personnel Manager of the NGEF is not looking after the workers of the Kempsons Foundry, or if the Labour Officer is also not looking after those employees. It is not correct to say that the posts in the NGEF and Kempsons are not inter-transferable. I do not know if the employees in the foundry are employed by the Kempsons Foundry management itself." (underlining by us) WW-3 President of the Staff Association of HAL as also of the Kempsons Foundry Employees' Association in his evidence said that the balance sheet of the NGEF covers the Kempsons also.
As against the evidence given by the workmen MW-1 who was earlier working as Chief Executive of Kempsons Foundry, in his evidence, stated thus :
"I am working in the NGEF since the last 21 years. I am now working as Regional Manager, Calcutta, of the sales office of the NGEF. I was working as Chief Executive of Kempsons Foundry up to 1981, from 1872. The NGEF posted me to that post. I am aware of the demand of the workmen. ..
The NGEF factory is at Byappanahalli and Kempsons Foundry is located at Dooravaninagar within four kms. away form Byappanahalli. The accounts are independently maintained and the balance-sheets and profit and loss accounts are also prepared separately. Exhibits M-2 and M-3 are the balance sheets and profit and loss accounts for the period 1972 and 1976 and 1978 and 1979. The copies of them are given to the workmen at the time of bonus settlement. There is no interchangeability of the workmen as between the two factories or transfer. However, one or two persons from the NGEF are posted to Kempsons for safeguarding the interests of the NGEF financially. One Ramdas was working in Kempsons industry earlier to the lease in favour of the NGEF and he was continued. He was an employee of the NGEF and was posted there in order to safeguard there financial interest of the NGEF. He continues to be the employee of the NGEF even today.
The I party workmen were recruited by the Kempsons Foundry. They are not the workers of the NGEF. There is no functional integrality between the Kempsons Foundry belonging to the Kempsons industry and the NGEF. The NGEF produces motors, transformers, switch gears, etc. Kempsons Foundry produces castings. The wages paid to the workmen of the Kempsons Foundry in the year 1979 works out nearly to the tune of 25 per cent of the turnover of that year and so it cannot been the additional burden in case of increase in wages of the workmen. The Kempsons Foundry wages are relatively higher than that paid in other foundries of similar capacity. The service condition are also better when compared to other similar foundries. Certain forms which are uneconomical to get printed are supplied by the NGEF to Kempsons Foundry. Raw materials to the Kempsons Foundry will be got through the NGEF as permits, licence and quotas are involved and they are in the name of the NGEF. We had issued letters to the Railway authorities to release the materials in the NGEF letterheads as the Kempsons Foundry collects the materials on their behalf. Exhibits W-12 to W-20 relate to that supply. Kempsons Foundry and the NGEF do not have the same form for appointment. For appointment to Kempsons Foundry the application forms of the NGEF are used by cutting off the NGEF name at the top as it was found economical to do so. Appointment orders for employers of Kempsons Foundry are issued by Kempsons Foundry itself. There are about 150 people in Kempsons Foundry, Kempsons Foundry is not known as the NGEF division. The NGEF has no foundry of its own. They are buying casting from outside and Kempsons Foundry also supplies in addition to other foundries."
In his cross-examination, he said thus;
"I was recruited in the NGEF in the year 1962. My posting to Kempsons Foundry was on deputation. It is by an order in writing. I have not produced it. No special allowance was provided for deputation. The NGEF and the Kempsons have one Central Sales Tax and Karnataka Sales Tax number.
The cheques to be issued are signed by me and the Finance Controller of the NGEF jointly in respect of the payments to be made on behalf of the Kempsons Foundry. Some cheques are signed by the officer of the NGEF also against our accounts."
MW - 2, Chief Executive of the NGEF, in his evidence in examination-in-chief, said thus :
"I am the Chief Executive of the II party since two years. I was employed by the NGEF. I joined the NGEF in 1962. I was the Works Manager there. I succeeded one Mallesharaj in Kempsons Foundry. The balance sheets of the II party for the years 1980-81 and 1981-82 are at exhibit M-5 and exhibit M-6.
The balance sheet for 1982-83 is still to be prepared. For 1982-83, the II party suffered a loss of Rs. 3.3 lakhs.
There are 144 employees in Kempsons Foundry. The staff employees are fourteen. The wage bill of workmen is Rs. 1.16 lakhs. The additional burden on the II party, if the NGEF scale is adopted for the employees based on minimum in the scale would be Rs. 3 lakhs per year. The NGEF is giving other benefits like house building loan, LTC, death relief fund, cycle purchase advance, subsidised transport and subsidised canteen. The II party will not be able to bear the additional burden.
If the service condition including the salary of the NGEF is made applicable to Kempsons Foundry the additional burden for the II party will work out to Rs. 8.76 lakhs per annum. I have prepared a statement as per exhibit M-8 consisting of four sheets. Kempsons Foundry is not capable of bearing this additional burden. The wage bill for the Kempsons Foundry for 1982-83 was Rs. 22 lakhs. During January, 1983 the last settlement has taken place with the I party as per exhibit M-9. As per this settlement the increase of the salary works our to be 30 per cent to 35 per cent."
In his cross-examination, he said as follows;
"Exhibit W-24 is a printed a printed annual report for the period 1980-81. I am not aware the figure shown in the balance sheet, exhibits M-5 and M-6, is appearing in the balance-sheet contained in exhibit W-24. As per the direction of the NGEF, we sent the balance-sheet since the NGEF are the lessees. During my period all the castings prepared at Kempsons were sold to the NGEF. I am not aware of the pricing policy adopted by the NGEF for the produce supplied by the Kempsons." (Underlining by us).
On appreciation of the evidence on record and in particular the oral and documentary evidence set our above, the Tribunal recorded a finding and passed an award, the relevant portion of which reads;
"The crucial question that required to be answered in the background of the facts and circumstances enumerated above is as to who is the controlling authority of the Kempsons Foundry after it was leased to the NGEF. On a perusal of the copy of the lease deed, exhibit M-4 the NGEF has taken the building and machinery on lease excluding the workmen. It is in the evidence of MW-1 that only two to the employees of erstwhile Kempsons industry continued to work after the NGEF became lessee, and it obviously means that a fresh recruitment was made to run this foundry by the NGEF by continuing the name 'Kempsons' and adding 'foundry'. A separate certified standing orders was prepared and got certified for this foundry. All these factors go to show that the NGEF has started a new foundry for the purpose of running its main industry and also for adjusting the outstanding loan form Kempsons Industry. Since a running concern was not taken on lease it is too much for the NGEF to contend that Kempsons Foundry is a distinct and separate legal entity in the eye of law.
The overall conclusion that can be reached on the basis of evidence both oral and documentary adduced in this case clearly shows that for some administrative purposes this foundry is continued in the original name controlling its affairs by the NGEF. Added to this, the managing director as a representative of the NGEF Ltd., is the leasee which shall mean and include the successors, assigns and legal representations. It is also in evidence that all the materials manufactured in this foundry is directly taken by the NGEF for its manufacturing activities the raw materials required for this foundry is being obtained by the NGEF in the quota given to them and a separate account is maintained for the cost of those materials and for the castings supplied to the NGEF. All those factors go to show that the Kempsons Foundry is an integral part of the NGEF. Added to this the NGEF is deputing all the top officers to supervise the affairs of this foundry. The affairs of this foundry are controlled exclusively by the NGEF pertaining to all the matters, such as negotiations, settlements through their nominee like executive director etc..
AWARD The workmen of Kempsons Foundry represented by their Association are entitled to the service conditions as applicable to the employees of the NGEF with effect from April 9, 1980 the date of this reference. There is no order as to costs." (Underlining by us).
3. Aggrieved by the award, the petitioner has presented this petition.
4. Sri M. R. Narayanaswamy, learned counsel for the petitioner, contended that the award made by the Tribunal suffers from patent error of law, in that the Tribunal erred in holding that there was functional integrality between the NGEF and the Kempsons foundry and that the workmen of Kempsons Foundry were entitled to similar conditions of service as were made available to the employees of the NGEF. Elaborating his submission learned counsel stated as follows : The undisputed fact is that Kempsons Foundry was taken on lease for a limited period of 14 years in the first instance and contained thereafter for another six years. The whole object of taking the foundry on lease was for recovering a sum of Rs. 36 lakhs due from Kempsons Foundry to the NGEF. The racital in the lease deed makes it clear that the partnership firm continues to be the owner of the foundry building, plant and equipments and on the expiry of the period, the factory premises and to be surrendered to the management of Kempsons Foundry. The Kempsons Foundry was entirely a separate and independent establishment because of the following facts. The work force of Kempsons Foundry was district and separate from that of the NGEF. There was no interchangeability or transfer of workmen from Kempsons Foundry and the NGEF and vice versa. The balance-sheet and the profit and loss account of the Kempsons Foundry and the NGEF were separate. The two establishments had separate certified standing orders. There was no functional integrality, in that the position was not that one establishment cannot function without the other. The evidence on record establishments that the Kempsons Foundry and the NGEF are functioning as distinct and separate establishments even after 1872, that is, after the commencement of the lease. The identity of the two establishments were kept separate even after the lease and, therefore they cannot claim parity in the matter of conditions of service including pay scales of employees of the NGEF.
5. In support of the contention, learned counsel relied on a few judgments of the Supreme Court. They are :
(i) Pratap Press v. Their Workmen (1960-I-LLJ-497). In the said case, the question for consideration before the Supreme Court was, when the same employer carried on two business, under what circumstances they could be treated as part of one industrial unit for the purpose of determining the claim made by the workmen employed in one of such business for bonus on the basis of profits of both the business put together. In the said case, the precise question for consideration was, whether for purposes of computing available surplus profits, the profit of the Pratap Press alone had to be taken or the loss incurred by the Vir Arjun newspaper, which was owned by the same person and which was also being printed at the Pratap Press, should be taken into account. The Supreme Court held thus (at pp. 498-500);
"The question whether the two activities in which the single owner is engaged are one industrial unit or two distinct industrial units is not always easy of solution. No hard and fast rule can be laid down for the decision of the question and each case has to be decided on its own peculiar facts. In some cases the two activities each of which by itself comes within the definition of 'industry' are so closely linked together that no reasonable man would consider them as independent industries. There may be other cases where the connection between the two activities is not by itself sufficient to justify an answer one way or the other, but the employer's own conduct in mixing up or not mixing up the capital, staff and management may often provide a certain answer."
In Associated Cement Companies Ltd. v. Their Workmen, (1960-I-LLJ-1), this court had to consider the question whether the employer's defence to a claim for lay-off compensation by the workers of the Chaibasa Cement Works that laying off was due to a strike in another part of the establishment, viz. limestone quarry at Rajanka, was good. In other words the question was whether the limestone quarry of Rajanka formed part of the establishment, known as the Chaibasa Cement Works within the meaning of Section 25-E(iii) of the industrial Disputes Act. While pointing out that it was impossible to lay down any one test as an absolute and invariable test for all cases, it observed that the real purpose of those tests would be to find out the true relation between the parts, branches, units etc. This Court, however mentioned certain tests which might be useful in deciding whether two units form part of the same establishment. Unity of ownership, unity of employment and unity of functional 'integrality' were the tests which the Court applied in that case. It is obvious there is an essential difference between the question whether the two units form part of establishments for the purpose of Section 25-E(iii) and the question whether they from part of one single industry for the purposes of calculation of the surplus profits for distribution of bonus to workmen in one of the units. Some assistance can still nevertheless be obtained from the enumeration of the tests in that case. Of all these tests the most important appears to us to be that of functional 'integrality' and the question of unity of finance and employment and of labour. Unity of ownership exists ex hypothesis. Where two units belong to a proprietor, there is almost always likelihood also of unity of management. In all such cases, therefore, the Court has to consider with care how far there is 'functional integrality' meaning thereby such functional interdependence that the one unit cannot exist conveniently and reasonably without the other and on the further question whether in matters of finance and employment the employer has actually kept the two units distinct or integrated.
Coming now to the facts of present appeals, we find that the functions of the press and the Vir Arjun Paper cannot be considered to be so interdependent that one cannot exist without the other. That many presses exist without any paper being published by the same owner is common knowledge and is not seriously disputed. Nor is it disputed that an industry of publishing a paper may well exist without the same owner running a press for the printing of the paper. The very fact that the Daily Pratap owner by a partnership firm was being printed at the Pratap Press belonging to Sri Narendra itself shows this very clearly. It cannot, therefore, be said that there is such functional interdependence between the press unit and the paper unit that two should reasonably be considered as forming one industrial unit.
The position, therefore, is that the activities of the press are independent of the activities of the paper unit and there is no record from which it can be ascertained how the employer himself treated these two units. When in this position of things we find the employer himself making a statement that 'there are two institutions, the Vir Arjun and the press, the account books are kept separately' and that 'there are two cashiers', the conclusion reached by the Tribunal that the press and the Vir Arjun paper are distinct and separate industrial units, appears to be reasonable and cannot be successfully challenged.
Once this conclusion is reached the question of what bonus if payable depends on a proper calculation of the available surplus of the Pratap Press itself without taking into consideration the loss incurred by the Vir Arjun. No objection has been taken before us to the calculation made by the Tribunal on that basic. As the only point raised in this appeal., viz that the Vir Arjun and the Pratap form one industrial unit, fails, the appeal is dismissed with costs."
Learned counsel submitted that, as can be seen from the above judgment, after laying down the tests to find out as to whether more than one business carried on by an employer can by regarded as one business unit, for the purpose of determining the quantum of bonus, on the evidence available in the said case, the Supreme Court held that the business of printing press and the newspaper run by the same employer cannot be treated as one industry and must be treated as separate and distinct units.
(ii) Indian Cable Co. Ltd. v. Their workmen, (1962-I-LLJ-409). In the said case, the question for consideration by the Supreme Court was, whether limited company carrying one business at different place in the country having separate establishment at each place, should be regarded as one unit or each of the branches should be regarded as one units for the purpose of effecting retrenchment applying the principle embodied in Section 25-G of the Industrial Disputes Act. The Supreme Court held that the workmen were recruited for a particular branch office and they were not liable to be transferred and, therefore, each of the branches of the company should be regarded as a separate industrial establishment for the purpose of Section 25-G of the Industrial Disputes Act. The Supreme Court held that, on balance-sheet was prepared for all branches or that the employees were treated alike for the purpose of provident fund, gratuity and conditions of service, could not lead to the conclusion that all the branches should be treated as one unit for the purpose of Section 25-G of the Act.
(iii) Fine Knitting Co. Ltd. v. Industrial Court (1962-I-LLJ-275). In the said case, the question for consideration before the Supreme Court was, whether a company carrying on the business of manufacture of hosiery, and the spinning unit established by it with the object of ensuring suitable and regular supply of yarn for its hosiery manufacture, could be regarded as one industry or two different industries under Section 11 of the Bombay Industrial Relations Act, 1946, that is, one as cotton textile industry and the order as hosiery industry. The Supreme Court held that in view of the facts and circumstances of the case, the finding recorded to the effect that the spinning and hosiery sections of the appellant therein were two distinct and separate undertakings was justified and correct. The relevant portion of the judgment reads (at page 279) :
"If the spinning department produces yarn which is not useful or necessary for, and which cannot be used by, the hosiery section the only inference is that the spinning department is working on its own and is producing yarn to be sold in the market. Yhat being so, the argument of functional interdependence or integrality cannot be treated as valid."
(iv) Isha Steel Treatment v. Association of Engineering Workers (1987-I-LLJ-427). In the said case, the question for consideration was, in a case where an industrial establishment was having two separate and distinct units, whether for the purposes of termination of service, the entire staff of both the units should be taken as one unit or whether the two units could be regarded as separate, for the purposes of applying Section 25-G of the Act. In the said case, the Supreme Court found that the two units though situated only at a distance of 200 meters from each other, still they were two separate and independent units and for the purpose of Section 25-G of the Act, both the units could not be treated as one unit.
(v) D. C. M. Chemical Works v. Its Workmen, (1962-I-II-388). In this case, a limited company was running different kinds of businesses. The company treated each of the units as separate and distinct for the purpose of sales, recruitment of labour and service conditions of the workmen. The question for consideration was, whether the overall financial capacity of all the companies should be taken into consideration in fixing the wages structure or whether each of the units should be taken separately. The Supreme Court held that having regard to the fact that each line business was entirely different and unconnected with the other, there was neither functional integrality nor interdependence and, therefore, the overall financial capacity of all the units should not be taken as the basis for fixing wage structure. The relevant portion of the judgment reads (at pages 392-393) :
"On the other hand there are certain features which have been pointed out by the Tribunal and which are not in dispute which go to show that the company has been treating its various units as independent concerns in actual practice. Each unit has separate books of account and separate profit and loss account showing how each particular business is fairing. Each unit has separate muster rolls for its employees and transfers from one unit to the other, even where such transfers are possible considering the utterly different kinds of businesses that the company is carrying on, usually take place with the consent of the employees concerned. Further each unit has got its own separate wages and separate dearness allowance and other different allowances and bonus is also paid differently in each concern. Further even where sales take place from one unit to another, they take place at market rate and not at cost price and are adjusted on this basis in the books of account. Lastly, though there is a common board of directors and a common managing agency of the company, each unit has its own separate management as it is bound to be for the business carried on by different units is in many cases utterly different..
The three main lines of business which the company is carrying on are sugar, textile and chemicals. It is obvious that there is nothing common between these three different lines of business and there can be no question of one depending upon the other and there cannot be functional integrality generally specking between these three lines of business. There might be some connection between the chemical works and the textile mills of the company inasmuch as some of the chemicals might be used in the textile mills; but the evidence shows that a very small proportion of the chemicals produced in the chemical works is used in the textile mills and that most of the production is sold in the open market. It cannot, therefore, be said that the chemical works as it now exists is there for the purposes of the textile mills and is thus integrated with the textile mills. Even in the matter of employment, the evidence is that there is separate recruitment of labour for the different units and each unit has separate muster-rolls of employees and this is quite natural considering that different skill is required for the three lines of business carried on by the company. It cannot also be said that there is any essential dependence of the chemical works or the textile units or that one cannot be operated without the other. Further, the way in which the company has been dealing with different units in the past also shows that they have been treated as independent units. Each unit has its own separate labour union and separate agreements are entered into between the company and its unions with respect to the conditions of service which are also different for different units. Even in the matter of bonus, there are difference between the different units and these differences sometimes arose out of the different agreements between the various units and their unions. It appears that even in the case of units carrying on the same business, as for example, textile, the workmen themselves contended in an earlier adjudication that the Delhi Cloth Mills and Swatantra Bharat Mills were two distinct and separate units of company. In any case whatever may be said as to the units in the same line of business, it is in our opinion perfectly clear that there is no nexus of integration between different lines of business carried on by the company on the facts which have been proved in this case. We are of the opinion, therefor, that the ratio of the decision in the Fine Knitting Co.'s cases, (1962-I-LLJ-275), applies to the facts of this case and it must be held and the chemical works is an independent unit and, therefore, in fixing the wage structure, etc., we have to look to the position of the chemical works only and cannot integrate it with other units and consider its wage structure, etc., on the basis of such integration."
6. Learned counsel for the petitioner heavily relied on the above decision and submitted that in the present case also the financial capacity of the NGEF and the Kempsons Foundry should be taken separately for the purposes of wage structure and if so taken, though the NGEF has been making profit all these years, the Kempsons Foundry has been running under loss and had no financial capacity to pay wages at the rates paid to the corresponding employees of the NGEF.
7. Relying on the above decisions, learned counsel contended that in the present case the two units were separate and distinct as there was no common work force, there was no functional integrality and the balance-sheets were separate and distinct and, therefore, the award of the Industrial Tribunal was liable to be set aside.
8. Sri K. Subba Rao, learned counsel for the workmen, per contra, contended that the facts and circumstances of the case are such that except for making a show that Kempsons Foundry was not part of the NGEF and it was entirely a separate unit, in truth and substance the Kempsons Foundry was part and parcel of the NGEF, and, therefore, there was no justification to subject the employees of the Kempsons Foundry to a disadvantage in the matter of conditions of service and in particular regarding pay scales. In support of the submission, learned counsel submitted that the evidence on record establishes the following facts :
(i) The Foundry is merged with the NGEF and such merger was complete and total.
(ii) There was unity of management, there was unity of control, there was unity of geographical location, there was functional integration, unity of finance, unity of accounts. There was only on bank account, one sales tax account, one provident fund account and in fact, it was treated in action as part of the NGEF Ltd. Learned counsel, in particular, pointed out that all the castings manufactured by the Kempsons Foundry were being consumed by the NGEF for manufacturing electrical motors for which the castings constitute the body. He submitted that though the management has stated that it was maintaining separate accounts and preparing separate balance-sheet, no evidence has been proceed in support of the same. On the other hand, WW-3, Mahadevan, had clearly sated in his evidence that there was only one balance sheet for the NGEF and the Kempsons Foundry and this statement has remained uncontroverted. Learned counsel also pointed out that if there were to be stoppage of manufacture and supply of castings from the Kempsons Foundry, production of electrical motors in the NGEF would come to a standstill and that another important factor to be taken into account was that the management had not come forward with the evidence as to whether the price said to be paid by the NGEF to the Kempsons Foundry for the castings manufactured by the Kempsons Foundry was at market rate or at cost price. He submitted that the entire castings manufactured by the Kempsons Foundry were for captive consumption by the NGEF and the only inference that could be drawn from this undisputed fact was that the Kempsons Foundry was not separate and distinct and that there was relationship of employer and employee between the NGEF and the workmen of the Kempsons Foundry and in any event there was no justification for subjecting the employees to lower wages;
9. In support of the contention, learned counsel relied on the judgment of the Supreme Court in the case of Associated Cement Companies Ltd. v. Their Workmen, (supra), in which the question for consideration before the Supreme Court was, whether the limestone quarry from which limestones were being quarried and supplied to the cement factory and the cement factory could be regarded as one establishment in the context of Section 25-E(iii) of the Industrial Disputes Act which provides that no compensation is payable to a workman who has been laid off, if such lying off was due to a strike or slowing down of production on the part of the workmen in another part of the establishment. The Supreme Court, on the evidence on record, held that limestone quarry must be held to be part of the establishment of cement factory within the meaning of Section 25-E(iii) of the Act and that as in that case, the lay-off of workmen in the factory was due to the non-supply of limestone quarry by reason of strike by the workmen in the limestone quarry, the workmen of the factory were not entitled to compensation under Section 25-E(iii) of the Industrial Disputes Act. The relevant portion of the judgment has been quoted in the case of Pratap Press, (supra), extracted earlier. Learned Counsel submitted that applying the ration of the aforesaid decision, there was no alternative than to hold in the present case that the Kempsons foundry which supplies castings to the NGEF, used in the manufacture of motors by the latter, was part of the NGEF.
10. Learned counsel next relied on the judgment of the Supreme Court in the case of Karam Chand Thapar and Bros. Ltd. v. Their Workmen, (1964-I-LLJ-429). In the said case the question for consideration was, whether employees appointed by a company which was functioning as managing agents for a number of other companies, could be regarded as employees of the managing company or of the managed companies for whom they were working as common employees. The Supreme Court upheld the finding of the Industrial Tribunal to the effect that all the employees were workmen of the managing agent and not of the respective companies, on the ground that there was one common provident fund scheme applicable to all the employees and the managing company exercised full administrative control over all of them.
11. The next decision relied on for the respondent was that of Royal Talkies v. ESI Corporation, (1978-II-LLJ-390). In the said case, the question for consideration by the Supreme Court was, whether the owner of a cinema theatre could be regarded as principal employer in respect of the employees employed for cycle stand and canteen run by the cinema theatre for the purpose of being covered by the provisions of the Employees' State Insurance Act and the Scheme framed thereunder. The Supreme Court held thus (at pages 395-396) :
"The primary test in the substantive clause being thus wide, the employees of the canteen and the cycle stand may be correctly described as employed in connection with the work of the establishment. A narrower construction may be possible but a larger ambit is clearly imported by a purpose-oriented interpretation. The whole goal of the statute is to make the principal employer primarily liable for the insurance of kindred kind of employees on the premises, whether they are there in the work or are merely in connection with the work of the establishment. ....
No one can seriously say that a canteen or cycle stand or cinema magazine booth is not even incidental to the purpose of the theater. The cinema gores ordinarily find such work an advantage, a facility, an amenity and sometimes a necessity. All that the statute requires is that the work should not be irrelevant to the purpose of the establishment. It is sufficient if it is incidental to it. A thing is incidental to another if it merely appertains to something else as primary. Surely, such work should not be extraneous or contrary to the purpose of the establishment but need not be integral to it either. Must depends on time and place, habits and appetites, ordinary expectations and social circumstances. In our view, clearly the two operations in the present case, namely, keeping a cycle stand and running a canteen are incidental or adjuncts to the primary purpose of the theater."
Relying on the ration of the above judgment, learned counsel contended that the Kempsons foundry was an activity incidental to the manufacture of the electrical motors by the NGEF and, therefore, the former cannot be treated as a separate and independent unit.
12. Learned counsel for the workmen also relied on the decision in Cemindia Co. Ltd. v. Radchubai N. Raval, (1988-I-LLJ-138). In the said decision, the question for consideration was, whether the employees of a workshop for repairing machines and tools by a construction industry, could be regarded as an independent establishment or part of the establishment of the construction industry, for the purposes of the Employees' Provident Funds and Miscellaneous Provisions Act. The Supreme Court held that both should be regarded as one unit. The relevant portion of the judgment reads (at pages 141-142) :
"In the instant case, there is no dispute that the work that in being carried on at the appellant's workshop at Bombay is the work of maintaining and repairing of the equipment belonging to the appellant only. The appellant is not earning any income or profit by carrying on the work of any other establishment at the said workshop. In the above situation, we find it difficult to agree with the High Court that the workshop established by the appellant at Bombay is an independent establishment of engineers and engineering contractors which is not exclusively engaged in building and construction industry. The High Court was in error in treating the workshop in question as a separate establishment of purposes of determining whether the Act is applicable to the appellant or not. It should have taken all the business operations carried on by appellant in their totality into consideration in order to ascertain whether the appellant is engaged exclusively in building and construction industry or not. If the High Court had approached the case from the above angle, it would not have committed the error of declaring the workshop at Bombay alone as an establishment governed by the Act. By splitting up several operations carried on by the appellant in connection with the building and construction industry into separate units and thereby treating the workshop alone as a separate establishment, the High Court mislead itself into thinking that the workshop of the appellant at Bombay was governed by the Act. We agree with the decision of the Calcutta High Court that such a workshop in which works connected with the business of building and construction industry were being carried on in connection with such business of the owner cannot be construed as a separate establishment for purposes of the Act. We, therefore, set aside the judgment of the High Court and quash the impugned notice issued by the regional Provident Fund Commissioner, Bombay, calling upon the appellate to comply with the provisions of the Act and the Scheme made thereunder in respect of the workmen employed at its workshop at Bombay."
Learned counsel submitted that on the facts and circumstances of the case and the evidence on record, the finding of fact recorded and the award made by the Tribunal was unassailable.
13. From the ration of the decisions on which both the learned counsel rely, it is clear that the question as to whether two or more industrial units should be regarded as one or separate, might arise in different contexts and the answer to such a question has to be found having due regard to the facts and circumstances of the case and the evidence available in each case with reference to the relevant criteria to be applied in the context in which the question arises for consideration. The question may arise regarding equality of wages as in this case or for the purpose of applying the principle of "last come first go" incorporated in Section 25-G in effecting retrenchment, or in the matter of application of the provisions of the ESI Act or the provisions of the Provident Funds Scheme and the like. The Supreme Court has observed in the case of Associated Cement Co. Ltd., (supra), that it was impossible to lay down and apply any one or common test as applicable to all cases and that in one case unity of ownership, management and control may be an important test and in another, functional integrality might be an important test and in still other cases, the important test might be the unity of employment. Therefore, it is clear that the Court should find out as to what is the appropriate criteria which should be applied. In the present case, the main claim of the employees of the Kempsons Foundry is that they are to the same wage structure which is made available to the employees of the NGEF which is managing the Kempsons Foundry, though they also claimed other service benefits as made available to the employees of the NGEF.
14. We will now proceed to consider the validity of the rival contentions in the light of the criteria required to be applied in order to find out whether employees of the Kempsons Foundry are entitled to claim party in wage structure and other conditions of service with the employees of the NGEF and whether the Tribunal was justified in making the impugned award.
15. As stated earlier, the Kempsons foundry is situated in the same locality in which the NGEF is situated though there is a little distance between the two. The Kempsons Foundry began to supply castings to the NGEF in the year 1964, when the NGEF began to manufacture electrical motors. Subsequently, in the year 1972, when motors. Subsequently, in the year 1972, when the Kempsons foundry become heavily indebted to the NGEF in a sum of Rs. 36 lakhs, a lease deed dated 1st June, 1972, was entered into. A reading of the contents of the lease agreement would indicate that under the lease the NGEF was entitled to assume and did assume the management of the Kempsons Foundry and actually it is being managed by the NGEF, in that the Chief Executive of the Kempsons Foundry and the other important managerial staff are appointed by the NGEF. Learned counsel for the petitioner pointed out to the following facts :
(i) Recruitment to the Kempsons Foundry was made and is being made separately;
(ii) Though the Chief Controlling authority of the Kempsons Foundry was appointed by the NGEF, after appointment he manages the Kempsons Foundry as a separate unit;
(iii) There are separate certified standing order for the NGEF and the Kempsons Foundry;
(iv) There is no interchangeability or transfer of workmen from the NGEF to the Kempsons foundry and vice versa;
(v) Identity of the two establishments are kept separate;
(iv) Though the profit and loss figures in respect of the Kempsons foundry was being project in the balance-sheet of the NGEF, actually a separate account was being maintained for the Kempsons Foundry.
16. Learned counsel for the respondent, however, pointed out that the Kempsons Foundry was treated by the NGEF itself as it Foundry Division. In support of this submission, learned counsel referred to the Time Cards (exhibits W-1 to W-5), Stores Cards (exhibits W-6 to W-11) of the NGEF being used for the Kempsons Foundry, exhibits W-12 to W-14 which are letters written on behalf of the Kempsons foundry in which it is described as "Foundry Division" of the NGEF. In our opinion, though the facts on which the petitioner relies support its contentions, and the documents on which the workmen rely support the stand of learned counsel for the workmen, they are not sufficient to answer the issue arising for consideration. Learned counsel for the workmen, however, relied on a strong circumstance which according to him was sufficient to substantiate the claim of the workmen and to uphold the award. He submitted that the entire quantity of castings manufactured by the Kempsons foundry was for captive consumption, that is, for the manufacture of electrical motors by the NGEF and this circumstance was sufficient to conclude that there is functional integrality and interdependence between the Kempsons Foundry and the NGEF and, therefore, the employees of the Kempsons Foundry are entitled to claim wages at a rate equal to those paid to the employees of the NGEF.
17. In our opinion, the ratio of the decision of the Supreme Court in D.C.M. Chemical Works, (supra), is sufficient to resolve the controversy arising for consideration in this case. As can be seen from the judgment of the Supreme Court in D.C.M. Chemical Works, (supra), the precise question for consideration in that case was, whether the financial capacity of different businesses under the same management should be taken together for the purpose of fixing the wage structure in each of the businesses or the financial capacity of each of the business should be taken into account. The Supreme Court negatived the claim of the workmen on the following grounds :
(i) Each of the businesses was different and entirely unconnected with the other;
(ii) The goods manufactured in one unit was not taken by the other unit for its own use;
(iii) Even when there was sale of goods produced by one unit to another, the sale was taking place at market rate and not at the cost price.
It is in view of these established facts, the Supreme Court held that there was neither interdependence nor financial integrality between different businesses under the same management. The Supreme Court also indicated that the position may be different, if different units are in the same line of business. In the present case, the following facts are not in dispute :
(i) The two businesses are not unconnected, as was the case in D.C.M. Chemical Works, (supra)
(ii) The Kempsons Foundry unit is complementary to the NGEF for the reason that the Kempsons Foundry manufactures castings which constitutes the body for the electrical motors which the NGEF has been manufacturing.
(iii) The entire quantity of castings manufactured by the Kempsons Foundry are utilised by the NGEF for manufacturing electrical motors. In other words, all the castings manufactured by the Kempsons Foundry are for captive consumption by the NGEF under whose management the Kempsons Foundry is functioning;
(iv) No evidence is adduced to the effect that the NGEF was paying market price for the castings. On the other hand, MW-2, the Chief Executive of the NGEF who gave evidence before the Tribunal, in his cross-examination, to a specific question as to whether the NGEF was paying market price or cost price for the castings manufactured in the Kempsons Foundry, replied that he was not aware of the pricing policy. The only inference that could be down from this coupled with non-production of any evidence by the petitioner on the question as to whether the NGEF was paying market price or cost price for the casting manufactured by the Kempsons Foundry is that the NGEF is only paying cost price as contended by the petitioners.
These facts clearly establish that there is functional integrality and interdependence between the NGEF and the Kempsons Foundry. In fact, the very object and purpose of taking Kempsons on lease by the NGEF was to secure its retirement of castings for the manufacture of electrical motors. Thus, in effect, this a case converse to the case of D.C.M. Chemical Works, (supra) in which each of the business was entirely in a different line and even when the product manufactured in one of the units was sold to another, it was done for market price. Therefore, the very reasoning given by the Supreme Court in the case of D.C.M. Chemical Works, (supra) to hold that each of the businesses concerned in the said case should be treated as separate unit for wage structure, is sufficient to hold that in the present case both the NGEF and the Kempsons Foundry should be treated as one unit for the purposes of wages structure. If at least the petitioner had shown that the NGEF was purchasing the castings from the Kempsons Foundry at the market rates, in that price at the market rate was being credited to the account of the Kempsons Foundry, that would have constituted a ground for the petitioner to contend that there was either functional integrality nor interdependence. No evidence has been adduced by the petitioner to show that the price which the NGEF has been paying by way of book adjustment to the Kempsons Foundry in respect of the castings supplied/utilised was market price. On the other hand, as stated above, MW-2, in answer to a specific question in his cross-examination as to whether castings were taken for cost price or for market price, said he was not aware of this, which is difficult to believe. This answer coupled within non-production of evidence in respect of castings produced and supplied by the Kempsons Foundry and utilised by the NGEF in the manufacture of electrical motors, are sufficient to hold that castings produced by the Kempsons Foundry under the management of the NGEF is for the captive consumption by the NGEF. Further, unless the market price was paid for the castings, the Kempsons Foundry was bound to suffer loss, as has happened. After giving careful consideration to the criticism against the finding recorded by the Tribunal that there exists functional integrality and interdependence between the NGEF and the Kempsons Foundry, we find no infirmity in it, which calls for interference in a petition under Article 226 of the Constitution of India.
18. Learned counsel for the petitioner also produced a communication from the Assistant Provident Fund Commissioner dated 26th July, 1989, which shows that he also regards the Kempsons Foundry as the Foundry Division of the NGEF. The letter reads :
"Please refer to your letter cited above.
The rate of contribution applicable to the NGEF Ltd. is also applicable to your establishment, since the establishment has been taken over by the NGEF Ltd. on lease. Since it is a unit of the NGEF Ltd. and accounts are being merged with the accounts of the NGEF Ltd. the loss of the unit will not be considered.
Hence, you are advised to remit contributions at the rate of 10 per cent. with effect from June 1, 1989, immediately to avoid peal action."
The above document also supports the view that there is functional integrality and interdependence between the NGEF and the Kempsons Foundry.
19. As far as the disparity in wages between the Kempsons and the NGEF, who are doing similar kind of work, there is no dispute that there has always been disparity. Regarding the latest position, a statement has been filed by the petitioner. The figures as disclosed from the statement are :
Minimum wages (For fresh recruitee in Wage Grade I) |----------------|-----------------|---------------|--------------| |Particulars | Existing in | Existing in | Proposed in | | | Kempsons | NGEF | Kempsons | | | Foundry | | Foundry | |----------------|-----------------|---------------|--------------| |Minimum | | | | |total wages | | | | |as 1-1-1989 | | | | |(Basic | | | | |+ PP + DA + HR | Rs. 1,124-30 | Rs. 1,435-75 | Rs. 1,212-40 | |A + OCA) | | | | |for Wage | | | | |Grade I | | | | |----------------|-----------------|---------------|--------------| Thus it may be seen that even after the wages proposed for wage Grade - I is extended to the workmen of the Kempsons Foundry, there would still be a disparity of Rs. 223.35. Similar disparity at all levels and grades is not disputed. In view of our conclusion that there is functional integrality and interdependence between the NGEF and the Kempsons Foundry, the claim of the workmen of the Kempsons Foundry for equal wages is unexceptionable.
20. Learned Counsel for the workmen had also contended that apart from the various tests laid down in various judgments of the Supreme Court on which he relied, all of which relate to private industries, the NGEF was a public sector industry of the State Government and was "State" under Article 12 of the Constitution Learned counsel, therefore, submitted that equal pay for equal work was part of the fundamental right guaranteed under Articles 14 and 16 of the Constitution and, therefore, the NGEF which is "State", cannot discriminate between employees doing similar work in the Kempsons and in the main factory in the matter of wages and there was no rational basis for subjecting the employees of the Kempsons Foundry to a discriminatory treatment.
21. In our opinion, there is considerable force in the above submission of learned counsel, for, even assuming that the two units are distinct and separate, so long as the employees do similar kind of work and are similar in all respects, any disparity in the matter of pay scales would be violative of the right to equality guaranteed under Article 14 of the Constitution and equality of opportunity in matters relating to employment under the State under Article 16(1) of the Constitution. This question, however, was not raised before the Industrial Tribunal and, therefore, we decline to decide this contention.
22. Learned counsel for the workmen also contended that on the basis of the wages paid to the workmen employed in foundries in the region also, the workmen were entitled to higher pay scale. It is unnecessary to consider this point also.
23. Learned counsel for the petitioner, however, contended that from the beginning the Kempsons was running under loss and it was because of consistent loss, the Kempsons became indebted in an amount of Rs. 36 lakhs even by 1972, which necessitated the taking over of the management of the Kempsons by the NGEF with the object of recovering the amounts due to the NGEF and even after 19 years, it has not been possible to wipe out the debt due to the NGEF and that payment of equal pay scale to the employees of the Kempsons Foundry at the rate of wages that are being paid to the employees of the NGEF would throw an unbearable burden on the management. A Statement showing the extra financial burden per annum has been filed. In the last column of the statement, the additional liability figures are furnished. The figures are as below :
---------------------------------------------------------
Year Total additional liability per
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1980-81 1,64,077
1981-82 2,98,291
1982-83 3,02,343
1983-84 2,40,936
1984-85 2,78,435
1985-86 4,01,135
1986-87 8,30,803
---------
25,16,020
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Learned counsel also submitted that apart from the back wages as above, the NGEF would also become liable to pay various other benefits such as bonus, encashment of leave, LTC, etc., which would be an unbearable burden on the NGEF, for, the NGEF together with the Kempsons has not been making profit and on the other hand they are running under loss. He further pointed out that the workmen who got themselves recruited to the Kempsons were fully aware of the financial position of the Kempsons and they had got themselves recruited at a lower pay scale with their eyes wide open and they cannot subsequently turn round and demand equal pay scale as is paid to the employees of the NGEF.
24. The fact that the Kempsons Foundry taken as a separate unit has been running under loss, is not in dispute, though partly it may be due to non-payment of market price for the castings Further, the fact that the workmen got themselves recruited to the Kempsons Foundry on the pay scale offered to them which was lower than in the NGEF is also not in dispute. The persons who joined service at the Kempsons Foundry unit did so with the full knowledge that they would not be given a pay equal to what was being paid to the corresponding workmen in the NGEF as also other benefits extended to them.
25. In our opinion, the above considerations are relevant for denying a portion of back wages and other benefits for the past period and not for denying equal pay scale and other conditions of service in future. It is also relevant to note that the NGEF is a public sector industry, that is, an instrumentality of the State, and it cannot be said that they were indulging in any unfair labour practice. They believed that they could fix lower pay scale for the employees of the Kempsons, though it is now found to be not permissible in law. After giving careful consideration to all the facts and circumstances of the cases and the fervent plea made by learned counsel for the petitioner that the award had imposed a very heavy burden on the petitioner, it appears to us that it is not just expedient to reopen the question of bonus, encashment of leave, LTC benefits, etc, for the anterior period and, therefore, it is just and expedient to modify the award made by the Tribunal by restricting the claim for the back period only to wages and only to the extent of 50 per cent of the wages and to full wages from the date of the award and all other benefits from the current financial year.
26. Learned counsel for the petitioner lastly submitted that if we were to take the view that there is functional integrality and interdependence between the NGEF and the Kempsons Foundry and, consequently, the award of the Labour Court should be upheld, it would lead to a situation in which the employees of the Kempsons Foundry can claim a right to continue in service of the NGEF and for application of the principle of Section 25-G of the Industrial Disputes Act by treating the employees of the NGEF and the Kempsons Foundry as one unit, after the termination of the lease period on May 31, 1992. This apprehension of the petitioner, in our opinion, is on a wrong assumption. As stated by us earlier, for answering the question whether the employees of different units or branches under the same management should be treated equally in respect of any matter and in particular for the purpose of the wages structure or whether Section 25-G of the Industrial Disputes Act should be obeyed, different considerations and tests have to be applied. The test applied for wages structure cannot ipso facto be applied to find out whether the employees have a right to continue in service when one unit or branch is closed or for application of Section 25-G of the Industrial Disputes Act, because it is always open to the management of an industry having more than one unit to close down, for valid reasons, one of the units and effect retrenchment of the services of the employees of that unit, complying with Section 25-F or other relevant provision of the Act, if the employees of that unit fall into a distinct and separate category. Sri K. Subba Rao, learned counsel for the workmen, also did not dispute that on and from the date on which the management of the NGEF over the Kempsons Foundry comes to an end, the tenure of service of the employees of the Foundry also come to an end and all that they will be entitled to is retrenchment compensation. In our opinion, learned counsel for the workmen was right in the stand taken by him. As the employees are specifically recruited for the Kempsons Foundry and the nature of work for the doing of which they were recruited is also separate, the moment the management of the NGEF over the Kempsons comes to an end, there is no question of the employees of the Kempsons Foundry claiming the right to continue on the establishment of the NGEF or demanding the application of Section 25-G of the Act by treating the employees of the NGEF and the Kempsons Foundry as one unit. Therefore, we make it clear that the fact that we are holding that on account of functional integrality and interdependence between the NGEF and the Kempsons, the employees of the Kempsons Foundry are entitled to the same wage structure as those made applicable to the corresponding employees of the NGEF, does not in any way confer any right on the employees of the Kempsons Foundry to continue in the service of the NGEF on and after the date on which the management of the NGEF over the Kempsons Foundry comes to an end.
27. In the result, we make the following order :
(i) The writ petition is partly allowed;
(ii) The award of the Industrial Tribunal in so far as it directed the extending of all the conditions of service applicable to the employees of the NGEF to the employees of the Kempsons Foundry with effect from the date of reference, is set aside and in its place we direct as follows :
(a) That only pay at the rate paid to the corresponding workmen/employees of the NGEF, be fixed to the workmen/employees of the Kempsons Foundry with effect from the date of reference, that is, April 9, 1980, subject to the condition that between April 9, 1980, the date of reference, and January 13, 1987, the date of the award, the workmen shall be paid fifty per cent of back wages;
(b) The amount payable to each of the workmen under the award, as modified by this order, shall be distributed for the respective financial year for the purposes of computing the liability to pay income-tax;
(c) All services benefits other than pay, which are made available to the workmen/employees of the NGEF shall be extended to the workmen/employees of the Kempsons Foundry only from the financial year commencing from April 1, 1991.
(iii) In other respects, the writ petition is dismissed."