1990 (8) TMI 406 - HC - Indian Laws

Summary

Issues Involved:
1. Legality of the transfer of ownership of the first respondent to the third respondent.
2. Continuity of service for the workers of the first respondent company.
3. Applicability of Section 25-FF of the Industrial Disputes Act.
4. Status of the first respondent under Article 12 of the Constitution of India.

Detailed Analysis:

1. Legality of the transfer of ownership of the first respondent to the third respondent:
The petitioner, the General Secretary of the Employees Union of Karnataka Agro Proteins Ltd. (K.A.P.L.), sought a writ of mandamus directing the respondents to transfer the ownership of the first respondent to the third respondent, subject to the third respondent absorbing and continuing the service of the workers. The first respondent, a body corporate under the Companies Act, 1956, was declared a 'Relief Undertaking' by the Government of Karnataka to ensure continuous operation and provide relief against unemployment. Due to significant financial losses, the first respondent was declared a sick industrial company by the Board for Industrial and Financial Reconstruction (BIFR), which suggested winding up the company or transferring ownership.

2. Continuity of service for the workers of the first respondent company:
The petitioner argued that the respondents were not justified in selling the assets of the first respondent to the third respondent without ensuring the continuity of service for the workers, as required under the proviso to Section 25-FF of the Industrial Disputes Act. The petitioner emphasized that the main purpose of declaring the first respondent as a 'Relief Undertaking' was to ensure continuous operation and provide relief against unemployment.

3. Applicability of Section 25-FF of the Industrial Disputes Act:
The court examined Section 25-FF, which provides that upon the transfer of ownership or management, every workman who has been in continuous service for not less than one year is entitled to notice and compensation as if retrenched under Section 25-F. The court referred to the Anakapalle Co-operative Agricultural and Industrial Society Ltd. v. Their Workmen case, which clarified that the termination of services due to transfer does not amount to retrenchment, but employees are entitled to compensation as if it were retrenchment. The court reiterated that the only claim employees can make is for compensation against their employers, not for re-employment against the transferee.

4. Status of the first respondent under Article 12 of the Constitution of India:
The first respondent contended that it was not an instrumentality or agency of the State and thus outside the purview of Article 12. The third respondent, a co-operative society, also argued that it was not an 'authority' under Article 12, as neither the State nor the Central Government had contributed any capital. The court concluded that the petitioner had no legal right to compel the respondents to transfer the assets with the condition of absorbing the workmen, as the law does not support such a condition.

Conclusion:
The court dismissed the writ petition, stating that the law does not support the petitioner's claim for a special direction to transfer ownership subject to the third respondent absorbing and continuing the services of the workmen. The court emphasized that the employees' legitimate claim is for compensation against their employers, not for re-employment against the transferee. The petition was dismissed with no order as to costs.