Posted On by &filed under Bombay High Court, High Court.


Bombay High Court
Govinddas W. Shah vs Administrator, Saswad Mali … on 25 August, 2000
Equivalent citations: 2001 (88) FLR 377, (2002) IVLLJ 281 Bom
Author: V Daga
Bench: V Daga


JUDGMENT

Vijay Daga, J.

1. This petition is directed against the order of the learned Member, Industrial Court, Pune dated July 31, 1984 passed in Appeal (I.C/P.N.) Nos. 19, 20 and 21 of 1983 under the provisions of Bombay Industrial Relations Act, 1946 (hereinafter referred to as the “Act” for short).

Background Facts:

The brief facts as set out in the petition are as under:

The petitioner was employed in the year 1965 by respondent No. 2 Saswad Mali Sugar Factory Limited (hereinafter referred to as the “Company” for short) as Electric Foreman on the terms and conditions set out in the order of appointment dated January 2, 1965.

2. On March 31, 1971, respondent No. 2 entered into an agreement of lease with respondent No. 1 Saswad Mali Sahakari Sakhar Karkhana Limited, a co-operative society (hereinafter referred to as the “first agreement” for short) and the management of respondent No. 2 was transferred to respondent No. 1 for a period of two years commencing from August 1, 1971. The petitioner at that time of agreement was holding post of Electric Incharge with the establishment of respondent No. 1. Upon transfer, respondent No. 1 had taken over services of all the employees of respondent No. 2 on loan with continuity of service. The relevant clause of the agreement dealing with the said aspect of the matter reads as under:

“(6) The Lessor shall give on loan services and make available to the Lessee the lessor’s entire or such permanent, seasonal and temporary staff as would be mutually agreed upon for the period of the lease, provided however the terms and conditions of service and the emoluments which they were drawing on July 31, 1971 and their rights to yearly increments and different types of leave shall not be altered to their disadvantage. Provided further that the Lessee shall contribute the employer’s share to the Provident Fund as per rules and regulations and also recover from the employees’ salaries their provident fund contribution in the usual way.”

3. On August 1, 1976, there was another agreement between respondent No. 1 and respondent No. 2 under which the lease was extended more or less on the same terms and conditions except Clause (6) for a period of 30 years (hereafter referred to as the “second agreement” for short). The Clause No. 6 of the first agreement extracted hereinabove was substituted. The modified Clause (6) was as under:

“6. The Lessees agree that all members of the staff and workmen whether seasonal or non-seasonal formerly in the employment of the Lessors whose services have been taken over by the Lessees on loan from August 1, 1971 have become the employees of the Lessees for all purposes from the said dates and the Lessors shall not have any claim over their services. The Lessees agree to bear all responsibilities under the various Industrial Laws in respect of such employees from the date of the Lessees taking over their services on the basis of their continued employment without break and to pay the amount of gratuity, bonuses, workmen’s compensation and other dues on the lessees’ own responsibility and at their own cost.”

The above modified Clause (6) of the second agreement had an effect of modifying and/or superseding the effect of Clause (6) of the first agreement. In the first agreement, under Clause (6) the services of the employees were taken over on loan; whereas under modified Clause (6) of the second agreement, the employees whose services were taken over by the lessee, on loan, from August 1, 1971, were made the employees of the lessee for all purposes and lessor had no claim over their services.

4. On June 6, 1980, the services of the petitioner were terminated by respondent No. 1, whose employee he had by then become. He challenged his order of termination from services by filing Application (B.L.R.) No. 20 of 1980 in the Labour Court at Solapur under Section 78 of the Act. While this application was pending before the Labour Court, on July 30, 1981, the lease agreement between respondent Nos. 1 and; 2 was revoked by deed of surrender of lease dated July 30, 1981 and upon execution thereof the management of respondent No. 1 was reverted to respondent No. 2 with immediate effect. So far as the employees in the employment of respondent No. 1 were concerned, it was agreed therein that the lessee i.e. respondent No. 1 would be responsible for all the liabilities under the various Industrial Laws in respect of such employees from the date of the lessee taking over their services on the basis of their continued employment without break and pay their gratuity, bonuses, workmen’s compensation and other dues on the lessee’s own responsibility and at its own cost.

5. The petitioner impleaded both respondent Nos. 1 and 2 as parties to the application before the Labour Court. The Labour Court on trial found that the order of termination passed against the petitioner dated June 6, 1980 was illegal, invalid and liable to be set aside. By the order dated June 18, 1983, the Labour Court directed reinstatement of the petitioner but denied him the claim for back wages.

6. Both the respondents challenged the direction as to the reinstatement by way of separate appeals before the Industrial Court. At the same time, the present petitioner also filed appeal challenging the said order of the Labour Court to the extent it denied back wages to him. All the three appeals were registered as Appeal (IC/PN) Nos. 19 and 21 of 1983 and Industrial Appeal No. 20 of 1983 respectively.

7. The Industrial Court, in appeals, after appreciating the documentary and oral evidence brought on record held that respondent No. 1 had transferred the factory to respondent No. 2 under the deed of surrender of lease with effect from July 30, 1981 and further held that since respondent No. 1 had undertaken all the liabilities arising prior to July 30, 1981, it was the liability of respondent No. 1 who was liable to reinstate the petitioner. The Industrial Court then considered that in view of the fact that after July 30, 1981, the management of the factory was no longer vested in respondent No. 1, the first respondent could only be directed to implement an order of reinstatement and held that, if the petitioner had continued with respondent No. 1 he would have continued only upto July 30, 1981. The Industrial Court relying upon the provisions of Section 25-FF of the Industrial Disputes Act, 1947 (hereinafter referred to as the “I.D. Act” for short) and held that the only relief to which the petitioner would be entitled to was the payment for notice period and retrenchment compensation from respondent No. 1 and directed respondent No. 1 to pay the back wages for that period from June 6, 1980 till the date of surrender of lease i.e. July 30, and in addition thereto ordered payment of retrenchment compensation according to law.

Rival Contentions:

8. Shri A.V. Anturkar, learned counsel for the petitioner challenged the aforesaid judgment of the Industrial Court and contended that the petitioner who was employed by respondent No. 2 ought to have been reinstated in services of respondent No. 2. He further contended that in view of Clause (6) of the first agreement of lease dated March 31, 1971, the lessor had given the services of employees on loan to the lessee on the same terms and conditions, which were existing prior to the date of the said agreement. Consequently, in his submission, the petitioner ought to have been reinstated in the services of respondent No. 2. He further contended that Section 25-FF of the I.D. Act uses the words “as if the workman had been retrenched”, therefore, according to him, this legal fiction created by Section 25-FF is only to calculate the amount of money payable to the workman and not to put an end to the services of the workman. In other words, Section 25-FF does not contemplate termination of services of the workman on account of such transfer. It only stipulates that on account of such transfer, it will be notionally assumed that there is retrenchment and that assumption is only for limited purpose of computing compensation that would be payable to the workman. He further contended that if Section 25-FF is interpreted to mean the automatic termination of service, then the provisions of Section 18(3)(b) of the I.D. Act shall become otiose. Therefore, in his submission, Section 25-FF should not be interpreted to mean that there is automatic termination on account of transfer. He sought to place reliance on the decision of the Supreme Court in N.T.C. v. Rashtriya Mill Mazdoor Sangh, in support of his submissions.

9. None appeared for respondent No. 1. The learned counsel appearing for respondent No. 2, in reply, contended that in the similar facts and circumstances of the case, this Court in Suresh B. Bhandare v. S.M.S. Sakhar Karkhana, 1995-III-LLJ (Suppl)-270 (Bom) has already taken a view that Section 25-FF provides that the services of the employee shall be deemed to have come to an end on the date of transfer and the workman shall be entitled to notice and compensation under Section 25-F, as if he has been retrenched, subject to compliance of three conditions mentioned in the proviso to Section 25-FF. She, therefore, prayed for dismissal of petition with cost. The learned counsel for the petitioner, in reply, contended that the above judgment needs reconsideration in the light of his above submissions.

Point for Consideration:

10. On the basis of above submissions, the following issue arises for any consideration:

“Whether the petitioner was entitled for relief against respondent No. 2 notwithstanding the transfer of management of respondent No. 2 to respondent No. 1 and back on the face of provisions of Section 25-FF of the I.D. Act.?”

Consideration:

11. The basic assumption on the basis of which submissions were made by the learned counsel appearing for the petitioner that the services of the employees were given on loan by the lessor to the lessee under the first agreement dated March 31, 1971 with continuity, operated till the execution of the surrender deed dated July 31, 1981 itself, were factually incorrect. The first agreement dated March 31, 1971 though postulated that the services of the employees were given on loan by the lessor to lessee on the same terms and conditions which stood applicable on March 31, 1971 came to be modified by Clause (6) of the second agreement of lease dated July 30, 1976 whereunder the lessee has taken over the services of all the employees of lessor whose services were taken on loan from August 1, 1971 had become the employees of the lessee for all purposes with effect from July 30, 1976 and the lessor had no claim over their services, meaning thereby, that all the employees whose services were taken on loan by the lessee prior to July 30, 1976 became the employees of the lessee with all liabilities under various Industrial Laws in respect of such employees. All those employees having become the employees of the lessee had snapped all their ties with lessor then in that event it was not open to contend that they continued to be the employees of respondent No. 2, Once it is concluded that they became the employees of respondent No. 1 Karkhana, a co-operative society with effect from July 30, 1976, then the question needs consideration is the effect of surrender deed, whereby, respondent No. 1 I transferred its factory to respondent No. 2 with effect from July 30, 1981. Turning to the terms and conditions of the surrender deed dated July 30, 1981, it would be clear that the lessee, a co-operative society had surrendered all its interests in the leasehold properties to the : lessor/company with effect from the end of July 30, 1981. The said deed further stipulated that the employees desiring to take fresh employment with the lessor shall take fresh employment with lessor/respondent No. 2. The lessor was entitled to take over essential staff of lessee on fresh employment basis and all industrial and other obligations in connection with their previous services with the lessee up to July 31, 1981 were to be of lessee. exclusively. Thus, it was clear that respondent No. 1 had undertaken all liabilities arising for the period prior to July 30, 1981 and the agreement of surrender was to bring an end to the terms of employment of the employees. The finding of the Industrial Court that Clause (2) of the deed of surrender of lease dated July 30, 1981 has not been challenged in the petition by the petitioner.

12. In the aforesaid backdrop, it is necessary to see how the provisions of Section 25-FF will operate and what would be the nature of liability of respondent No. 2 towards the employees of respondent No. 1. The first part of Section 25-FF postulates that on a transfer of ownership or management of an undertaking the employment of workmen engaged by the said undertaking comes to an end and it provides for payment of compensation to the said employees because of the said termination of their services provided, of course, they satisfy the test of length of service as prescribed by the said section. It further provides the manner in which the compensation is to be paid. The workmen shall be entitled to notice and compensation as noted in Section 25-F, as if they had been retrenched. The last clause clearly brings out the fact that the termination of services of the employees does not in law amount to retrenchment. The Legislature, however, wanted to provide that if the industrial undertakings are transferred, the employees, nevertheless the employees in question whose services were terminated by transfer, shall be entitled to compensation, as such Section 25 provides that on such termination, compensation would be paid to them as if such termination was a retrenchment. Section 25-FF, as it stands, absolutely makes it clear that if industrial undertakings are transferred, the employees of such transferred under takings should be entitled to compensation, unless, of course, the continuity in their service or employment is not disturbed and that can happen if the transfer satisfies the three requirements of the proviso.

13. The same view has been taken by the learned single Judge of this Court in Suresh B. Bhandare v. S.M.S. Sakhar Karkhana, (supra) relying on the judgment of the Supreme Court in Anakapalle Co-operative Agricultural and Industrial Society Ltd. v. Workmen, and in Central Inland Water Transport Corporation Ltd. v. Workmen, .

14. In view of the clear position of law, I am unable to accept the submissions canvassed by the learned counsel for the petitioner. The judgment relied upon by him in N. T. C, v. Rashtriya Mill Mazdoor Sangh (supra), is not applicable in the facts and circumstances of the present case and the very basic assumption that the petitioner continued in employment of respondent No. 2 company itself is incorrect in view of Clause (6) of the second agreement and, therefore, the Industrial Court was perfectly justified in directing payment of compensation in lieu of retrenchment since respondent No. 1 has taken all the liabilities arising prior to July 31, 1981. I do not find any fault with the order passed by the Industrial Court and also do not find any reason to differ with the view already taken by the learned single Judge of this Court in Suresh B. Bhandare v. S.M.S. Sakhar Karkhana (supra).

15. In the result, the petition fails and is hereby dismissed. Rule discharged. No order as to costs.


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