Andhra HC (Pre-Telangana)
Bharat Coca-Cola Bottling South East ... vs Government Of Andhra Pradesh And Ors. on 26 April, 2001
Equivalent citations: 2002(1)ALD103, AIRONLINE 2001 AP 18
Author: S.B. Sinha
Bench: S.B. Sinha, N.V. Ramana
JUDGMENT S.B. Sinha, C.J.
1. These two writ applications being inter related were heard together and are being disposed of by this common judgment.
In Writ Petition No.7640 of 1999, the petitioner seeks a writ of mandamus quashing the G.O.Rt.No.506 dated 23.3.1999 and G.O.Rt.No.507, dated 23.3.1999. In W.P. No. 13056 of 1999, the petitioner seeks a writ in the nature of mandamus declaring the provisions of Section 10-B of the Industrial Disputes Act, 1947 inserted by Amendment Act 32 of 1987 as unconstitutional.
2. The basic fact of the matter is not in dispute. The petitioner which is a private limited company incorporated under the Companies Act, 1956 entered into a Business Purchase Agreement with respondent No.6 whereby and whereunder it acquired the business undertaking of the respondent No.6 situated at Ramavarappadu, Vijayawada in terms whereof services of 78 permanent employees were taken over by the petitioner. The petitioner has set up a manufacturing unit at the village Atmakur, Vijayawada with a view to meeting the exacting quality standards of its beverages. The fifth respondent Union filed a complaint before the Assistant Commissioner of Labour on 14.11.1998 and the same was taken up for conciliation proceedings under the Industrial Disputes Act. A writ petition marked as W.P.No.34032 of 1998 was filed by the 5th respondent Union during the pendency of the said proceedings before this Court for a direction against the petitioner herein for absorption of its 61 members who were admittedly piece rated and casual workers.
3. In the said writ petition No.34032 of 1998, by a judgment dated 13.12.1998, a learned single Judge of this Court recorded the memorandum of understanding dated 24.1.1998 filed before the Conciliation Officer which reads as follows:
It is not the intention of the company to get some of the people out of employment. Hence, to provide them with alternate employment the company has considered various options and is left with following two options as given below:
(i) Those of such people who have been working on casual basis, be it piece rate/time rate can now work in the new premises of Vijayawada Bottling Company limited at Gosala village, Bunder Road, Krishna district.
(ii) They could also work under Vijayawada Bottling Company Limited at the Bharat Coca Cola premises at 3/131-A, Eluru Road, in similar working conditions if they so desire but would continue to be part of the Vijayawada bottling company limited, wherein we become the work contractors.
Alternatively, the employees have also been given the option of leaving the services upon which the company shall pay the dues to them including gratuity and all other benefits as applicable under Section 25 Ff. The Company is willing to pay the compensation as per the section quoted, though Section 25 E(i) recommends that no compensation is payable, when an alternate employment is provided. After the settlement they have the liberty to work wherever they intend to and the company shall not be liable in any way.
4. The learned single Judge having regard to the understanding reached between the parties in terms of the said letter directed:
In the right of the understanding reached during the course of hearing, I need not go into all these questions as the Transferor company in unequivocal terms, declared that without altering the status of the workers it is prepared to continue their services and the question of retrenchment does not arise. The letter dated 24.11.1998 filed by respondent No.5 company before the Conciliation Officer to that effect was also produced before the Court.
The undertaking 'given by respondent No.5-company is recorded and the writ petition is closed, leaving open all the questions of law for future adjudication, if necessary.
It is finally observed that if any need arises for retrenchment of the workers, the parties may approach appropriate forum under the Industrial Disputes Act. I hope, that situation would not arise.
5. Despite the fact that the said judgment was binding between the parties, an industrial dispute was raised. The State of Andhra Pradesh being the appropriate Government by an order in G.O.506 dated 23.3.1999 in exercise of its power conferred upon it under Section 10(l)(c) of the Industrial Disputes Act referred for adjudication the following dispute to the Labour Court:
Whether the management of M/s. Vijayawada Bottling Company Limited, 3/131-A, Eluru Road, Ramavarappadu, Vijayawada is justified in contending that they transferred their bottling unit to M/s. Bharat Coco Cola Bottling South Elst (P) Ltd., by selling the Plant and machinery and transferring 79 time rated workers only and that 61 piece rated and casual employees continue to be in their employment, If not, to what relief the 61 piece rated and casual workers are entitled?
6. In the said industrial dispute, only the petitioner and the respondent No.5 Union had been impleaded. The transferor company had not been impleaded therein and in the recital portion of the orders of the said G.O.Rt.No-506 dated 23.3.1998, and even no reference has been made that the concerned workmen were the workmen of the transferor company. On the same day, an order had been issued by G.O. Rt. No.507, dated 23.3.1999 directing the petitioner which reads thus:
Whereas the workmen of M/s Bharat Coco cola South East Private Limited, Vijayawada are disputing their discontinuance of employment by their management.
And whereas, the industrial dispute exists between the management of M/s Bharat Coco Cola Bottling South East Private Limited, Vijayawada and their Workmen represented by the General Secretary, Vijayawada Bottling Company limited workers Union, R.G. No.3399 Vijayawada on certain demands and whereas the demands of the Union have been referred for adjudication to the Industrial Tribunal cum Labour Court, Vishakapatnam vide G.O. Rt.No-506 dated 23.3.1999 of Labour, Employment, Training and Factories (Lab. l) Department.
Now, therefore, in exercise of powers conferred by Sub-section (1) of Section 10(B) of the Industrial Disputes Act, 1947 the Governor of Andhra Pradesh, hereby orders that the status of the 61 piece rated and casual workers shall be under the employment of M/s Bharat Coca Cola South East Private Limited, till the disposal of the Industrial Dispute referred for adjudication vide G.O.Rt.No.506, dt-23.3.1999 of Labour, Employment, Training and Factories (Lab. 1) Department.
7. The petitioner in the aforementioned situation not only questioned the reference made for adjudication and the order passed by the State Government under Section 10(B) of the Act, but also questioned the Constitutionality thereof.
8. Mr. C.R. Sridharan, learned counsel appearing on behalf of the petitioner would submit that by reason of the Section 10(B) of the said Act, an unfettered and uncanalised power has been conferred and the same is ultra vires. In any event, Mr. Sridharan would urge that having regard to the provisions of Section 25F and 25 FF of the Industrial Disputes Act, appropriate Government had no jurisdiction to make the said reference particularly having regard to the fact that even the transferor company was not impleaded as a party respondent therein. The learned counsel contended that for exercising the power under Section 10 of the Act, there must exist an individual dispute between an employer and the workmen and as admittedly there existed no such relationship between the parties, the impugned order of reference must be held to be illegal. Reliance in this connection has been placed on WESTERN INDIA MATCH CO. LTD. V. WORKERS UNION, 1970 (2) LLJ 256.
9. Mr. Sridharan further submitted that having regard to the provisions of Section 25-FF of the Industrial Disputes Act, the workmen of the transferor Company had no right to become employees of the petitioner company, as 'they do not' come within the purview of the proviso appended thereto, the impugned reference must be held to be wholly illegal. Strong reliance in this connection has been placed on ANAKAPALLA COOP. AGRL. & INDUSL. SOCIETY V. ITS WORKMEN, 1962 (2) LLJ 621. BOARD OF DIRECTROS OF S.A.E.D. CO., LTD. v. N.K.MOHD.KHAN, 1970 (21) FLR 174, D.I. WATER TRANSPORT CORPN. v. WORKMEN, 1974 (29) FLR 56, NTC (SOUTH MAHARASHTRA) LTD., v. RASHTRIYA MILL MAZDOOR SANGII, .
10. As regards the power of appropriate Government to pass an order under Section 10(B) of the Industrial Disputes, reliance has been made on B.G.SAMPAT v. STATE OF WEST BENGAL, 2001 (1) LLN 616.
11. Kum. G. Rohini, learned Government Pleader appearing on behalf of the official respondents in her usual fairness submitted that she cannot justify the order passed under Section 10(B)of the Act.
12. Mr.Surender Rao, learned counsel appearing on behalf of the respondents as also applicants in the implead petition submitted that Section 10(B) of the Industrial Disputes Act is an independent provision and the order impugned in these writ applications was passed for maintaining employment and industrial peace. According to the learned counsel, the State has the power to issue a direction in a situation of this nature, as the Government has to safeguard the interest of all concerned. According 'to the learned counsel even humane consideration would be relevant for the purpose of passing such order. As regards the validity of the reference, the learned counsel would urge that such a question can be raised before the Industrial Tribunal.
13. As indicated hereinbefore, the basic fact of the matter is not in dispute. The petitioner herein is the purchaser of the bottling plant from the respondent company. In terms of Section 25 FF, the liability to retain its employees was upon the transferor.
14. Having regard to the fact that there may not be sufficient work for the workmen of the transferor, a beneficial provision has been made by the Parliament while enacting the said provision. A legal fiction has been created therein as a result whereof the retrenchment would be presumed entitling the workmen to claim compensation in accordance with the provisions of Section 25(F) of the Act. Clause (c) of the proviso appended thereto would apply only in the event where there has been a change of employer by reason of the transfer, if 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 had been continuous and had not been interrupted by reason of such transfer.
15. The change of the employer therefore must be by reason of the terms of transfer or otherwise which would include acts of volition on the part of the transferee to take over the employees of the establishment. Section 25-FF of the Act thus clearly postulates that the relationship between the workmen and the transferor Companies and the same is terminated by reason of deemed retrenchment and consequent payment of compensation in terms of Section 25-F thereof. If the subsequent transferee in the absence of any conditions of transfer or otherwise, did not take the services of the employees, no relationship of the employer and the employee comes into being. In other words, no change of employer takes place by reason of such transfer.
16. Section 2(k) of the Act defines 'Industrial dispute' to mean:
"Industrial dispute" 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.
17. If under no circumstances, the relationship of employer and the employee can be presumed, an industrial dispute will not be maintainable.
18. In ANAKAPALLA COOP. AGRL. & INDUSL. SOCIETY v. ITS WORKMEN (supra), P.D.Gajendragadkar.J. (as he then was) held:
It may be relevant to add that this section conceivably proceeded on the assumption that if the ownership of an undertaking was transferred, the cases of the employees affected by the transfer would be treated as cases of retrenchment to which 5.25 F would apply. That is why, Section 25 FF begins with a non-obstante clause and lays down that the change of ownership by itself will not entitle the employees to compensation, provided the three conditions of the proviso are satisfied. Prima facie, if the three conditions specified in the proviso were not satisfied, retrenchment compensation would, be payable to the employees under Section 25-F; that apparently was the scheme which the legislature had in mind when it enacted Section 25 FF in the tight of the definition of the word 'retrenchment' prescribed by Section 2 (cc) of the Act.
19. The learned Judge further held:
The words "as if" bring out the legal distinction between retrenchment defined by Section 2 (cc) as it was interpreted by this Court and termination of services consequent upon transfer with which it deals. In other, words, the section provides that though termination of services on transfer may not be retrenchment, the workmen concerned are entitled to compensation as if the said termination was retrenchment. This provision has been made for the purpose of calculating the amount of compensation payable to such workmen; rather than provide for the measure of compensation over again, Section 25-F makes a reference to Section 25 F for that limited purpose, and therefore, in all cases to which Section 25FF applies, the only claim which the employees of the transferred concern can legitimately make is a claim for compensation against their employers. No claim can be made against the transferee of the said concern.
The scheme of the proviso to Section 25 FF emphasizes 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 re-employment against the transferee of the undertaking.
20. In BOARD OF DIRECTROS OF S.A.E.D. CO., LTD. v. N.K.MOHD. KHAN (supra), it was observed:
The principal clause of this section clearly confers a right on every workman, who has been employed continuously for not less than one year in any undertaking, to receive retrenchment compensation in accordance with the provisions of Section 25-F of the Act as if the workman had been retrenched wherenever the ownership or management of the undertaking is transferred, whether by agreement or by operations of law,
21. It was further observed:
It appears to us that the language of that principal by a Labour Court. It appears to us that the language of that principal clause makes it perfectly clear that, if the right to retrenchment compensation accrues under it, it must be a right to receive that compensation from the previous employer who was the owner upto the date of transfer. It is implicit in the language of that clause. The clause lays down that every workman mentioned therein shall be entitled to notice and compensation in accordance with the provisions of Section 25 F as if the workman had been retrenched. Obviously, in such a case, the dates of, the deemed retrenchment would be the date when the ownership or management of the undertaking stands transferred to the new employer.
22. Yet again, in CENTRAL INLAND WATER TRANSPORT CORPORATION LTD. v. WORKMEN AND ANR., 1974 (29) FLR 56, the Apex Court held:
The first part of the section postulates that on a transfer of the ownership or management of an undertaking, the employment engaged by the said undertaking comes to an end and compensation is made payable because of such termination. In all cases to which Section 25-FF applies the only claim which the employees of the transferred concern can legitimately make is a claim for compensation against their employers. No claim can be made against the transferee of the said concern.
By the present Section 25FF, 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.
Since Section 25-FF provides for payment of benefit on the basis that the services of the employees stand terminated, neither fair play nor social justice would justify the claim of the employees that they ought to be reemployed by the transferee. That being the position in law under Section 25-FF, the former employees of the company who were not absorbed by the Corporation can hardly make out a claim against the transferee Corporation either for compensation on termination of their service following the transfer or for re-employment.
23. Yet again, in NTC (SOUTH MAHARASHTRA) LTD., v. RASHTRIYA MILL MAZDOOR SANGH (Supra), the Apex Court held:
The three conditions under which the workman becomes ineligible to the notice and retrenchment compensation under Section 25-F further make it abundantly clear that by itself neither Section 25-FF nor the transfer of the undertaking as such, puts an end to the contract of employment. In fact, the Section envisages the continuation of employment, and makes provision for the compensation, only if the transfer results in the termination of the contract of employment. These provisions show that where the employment continues in spite of the transfer of the undertaking, the workmen would not be entitled to notice and retrenchment compensation under Section 25-F from the transferor -employer. It is only if there is a transfer of the undertaking and the said three conditions are not satisfied that a workman would be entitled to such notice and retrenchment compensation from the transferor-employer.
It is, therefore, more than clear that neither Section 25-FF nor the transfer by itself has the effect of putting an end to the contract of employment of the workmen.
24. Tracing the history of Section 25FF, the Apex Court observed:
The reading of Section 25FF as a whole, therefore, shows that unless the transfer falls under the proviso, the employees of the undertaking concerned are entitled to claim compensation against the transferor and they cannot make any claim for re-employment against the transferee of the undertaking. In other words, when the transfer falls under the said proviso, the transfer does not result in the termination of the contact of employment. A reference in this connection may be made to the decision of this Court in Ankapalle Co-operative Agri. And Indl. Society Ltd., v. Workmen.
In the case before the Supreme Court, in INLAND STEAM NAVIGATION WORKS' UNION v. UNION OF INDIA (2000 (I) SCC 47), the workmen/appellants contended that the unabsorbed workmen of the Company are entitled to payment of compensation by the successor Company. This issue was considered by the Supreme Court in the light of its earlier judgment in CENTAL INLAND WATER TRANSPORT CORPORATION LIMITED v. WORKMWN . The Honourable Supreme Court rejected the said contention and dismissed the appeal. In that context the Supreme Court held:
"Even assuming that on such investigation, conclusion could be drawn that the Corporation is a successor the matter will not be settled because, the transferee, even as a successor would be liable neither to pay compensation nor to re-employ the workmen whose employment stood automatically terminated on the transfer. Where by Operation of law the employment of workmen stands terminated, it may be difficult to sustain it on the basis of a term in a settlement prohibiting retrenchment, though statutorily binding on the transferee as a successor. Therefore, the view taken by the Tribunal that the Corporation is not liable to pay either compensation or to absorb the workmen in question is unexceptionable".
25. It is therefore evident by reason of the decisions of the Apex Court, which is the law of the land in terms of Article 141 of the Constitution that the reference suffers from non-application of mind on the part of the appropriate Government. The transferor Company is not made a party whose liability it is to pay and continue to pay the concerned employee for the services. In the absence of necessary party, reference was not maintainable. In any event, the petitioner herein has no statutory, or contractual liability to take the workmen of the transferor in its service. The petitioner has agreed to take over 73 permanent workmen and their liability is confined only to the said extent. Further more, on the basis of judgment of this Court passed in W.P.No.34032 of 1998, dated 30.12.1998, it is absolutely clear that the parties are bound by the memorandum of understanding arrived at between the transferor and the workmen.
26. So far as second writ petition is concerned, we are of the opinion in the facts and circumstances of the case, it is not necessary to go into the question of vires and the constitutionality thereof. Section 10(B) confers wide power on the State and the same has to be therefore applied with due care and caution. Section 10(B) cannot be held to have conferred upon the State an unfettered and uncanalised power. The power can be exercised by the State only on a satisfaction based on objective criteria. The object of power of the said provision although may be laudable, recourse thereto must be made in exceptional situations. While passing the said order, the State must apply its mind properly and arrive at a conclusion on the basis of the materials placed before it and thereupon apply the objective criterion. If there has been no relationship between the employer and the employee and in any event, there exists a dispute relating thereto, the casual employees could not have been thrust upon the petitioner by reason of an ex parte interim order, particularly when an industrial dispute had been raised and referred for adjudication before a Tribunal. It is doubtful whether even the Tribunal can pass such order having regard to its incidental power under Section 10(4) of the Act. Such action cannot be said to be either in the interest of the employment and in the interest of maintenance of industrial peace as there never existed any relationship of employer employee between the parties. The State cannot exercise its power in fastening the liability upon the petitioner as regards whereto the workmen even do not have a semblance of right. In a given situation, it may also be necessary to comply with the principles of natural justice which has not been done in the instant case. The statutory functionary before exercising its discretionary power must pose with itself the right question so as to acquaint itself with the correct state of affairs with a view to reach a right conclusion failing which it would be guilty of committing misdirection in law.
27. A Division Bench of the Calcutta High Court in SANTINIKETAN SOCIETY v. STATE, 2001 (1) ICC 449, has noticed what would constitute an error of law thus:
In De Smith, Woolf and Jowell on Judicial Review of Administrative Action, 5th Edn page 286, it is stated:
The concept of error of law includes the giving of reasons that are bad in law of (where there is a duty to give reasons) inconsistent, unintelligible or substantially inadequate. It includes also the application of wrong legal test to the facts found, taking irrelevant considerations into account and failing to take relevant considerations into account, exercising a discretion on the basis of any other incorrect legal principles, misdirection as to the burden of proof, and wrongful admission or exclusion of evidence, as well as arriving at a conclusion without any supporting evidence. Error of law also includes decisions' which are unreasonably burdensome or oppressive. Thus whether or not the drawing of an inference from the primary facts, or the application of a statutory term to the facts and inferences drawn therefrom, is held or assumed to be a matter of fact (or fact and degree) or a matter of law, the Court may still hold the decision erroneous in points of law if any of the above defects is present.
This aspect of the matter has also been considered in Sushil Kumar Sasmal v. State of West Bengal, reported in 1999(1) CHN 92, wherein it has been held:
If a statutory authority takes into consideration irrelevant fact and fails to take into consideration relevant fact, an error on the fact of the record is committed )see De Smith's Judicial Review of Administrative Action, 4th Edn page 136). It is further well known that a statutory authority must pose unto himself the correct question so as to acquaint himself with the fact of the matter with a view to answer the jurisdictional question, failing which he would be guilty of commission of misdirection in law.
28. In SECRETARY OF STATE v. TAMESIDE, 1976 (3) All.ER 665, it was held:
Had there been factual foundation on the basis of which reasonable conclusion could be arrived at that the petitioners were guilty of actual misappropriation, it would have been a different matter. Merc it appears that the authority passing the impugned order did not ask itself the right question and take reasonable step to acquaint itself with the relevant information to enable it to answer it correctly. This amounts to misdirection in law.
29. Although it is not exactly on the point, but we may refer to a Full Bench decision of Calcutta High Court in B.C. Sampat (supra), wherein the Court while considering the provisions of Section 15(2)(b) of the Industrial Disputes Act as amended by State of West Bengal, considered the limitation of the power despite the benevolent provisions in the statute. In the said decision, the Full Bench referred to the observations of Apex Court in DENA BANK v. KIRITIKUMAR T.PATEL, 1998 (I) LLN 375, which read thus:
Since the amount is not refundable or recoverable in the event of the award being set aside, it would result in the employer being required to give effect to the award during the pendency of the proceedings challenging the award before the High Court or the Supreme Court without his being able to recover the said amount in the event of the award being set aside. We are unable to construe the provisions contained in Section 17(B) to cast such a burden on the employer. In our opinion, therefore, the words full wages last drawn must be given their plain and material meaning arid they cannot be given the extended meaning as given by the Kaniataka High Court in Visveswaraya Iron and Steel Ltd., (1994 (1)LLN 165) or the Bombay High Court in CORONA SAHU CO., LTD. (1994 (2) LLN 830).
30. For the reasons aforementioned, the impugned orders in G.Os.506 and 507 dated 23.3.1999 passed by the appropriate Government in exercise of its jurisdiction under Clause (c) of Section 10(1) as also under Section 10(B) of the Industrial Disputes Act respectively cannot be upheld and are quashed accordingly. For the reasons aforementioned, these writ petitions are allowed permitting the workmen to pursue their remedies before appropriate forum.
31. However in the facts and circumstances of the case, there shall be no order as to costs.