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TMI Blog1962 (10) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... nd should be adjudicated upon by an Industrial Tribunal. That is how their demand for re-employment came to be referred under s. 10(1)(d). 2. It appears that the Company was an old Company which manufactured sugar. Its business, however, did not result in profits, because the supply of sugar-cane was insufficient and the management apprehended that it could not face the losses from year to year, and so, it thought of shifting its business to Yerravaram in East Godavari where it anticipated that the supply of sugar-cane was assured. This attempt of the management, however, did not succeed because of the local cane growers. The local cane growers decided to form a co-operative society themselves and to purchase the concern of the Company. Accordingly, the appellant Society was formed and the sale transaction was effected between the said concern and the appellant on October 7, 1959. It was agreed between the appellant and the Company that the Company should pay retrenchment compensation to its employees and terminate their services leaving the appellant full freedom to choose its own employees. Accordingly, ₹ 1,90,000/- were paid by the Company to its employees by way of ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant was that it was not a successor-in-interest of the Company and as such, under industrial law, the claim made by the respondents for re-employment of the permanent and the seasonal employees was not sustainable. The Tribunal has held that the appellant is a successor-in-interest of the Company and so, it has come to the conclusion that the demand for re-employment of the said specified employees was permissible under the industrial law. 5. The last argument raised by the appellant was that it had already employed a full complement of the labour force that it needed and so, there was no scope for the re-employment of any of the workmen on whose behalf the present dispute was raised. This contention has been rejected by the Tribunal and it has ordered the appellant to re-employ as many of the permanent employees out of 49 as were left out in favour of the new employees and to re-employ the remaining permanent employees as and when vacancies occur. In regard to the seasonal employees, it made a similar direction. This order requires the appellant to guarantee to the re-employed workmen continuity of service and one-fourth of the back wages. The Tribunal has, however, held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (1956) 2 L.L.J. 244. In that case, the Appellate Tribunal had to consider the effect of two transfers : (1) in favour of the Himabhai Mills Company Ltd., and (2) in favour of the New Gujarat Cotton Mills Company Ltd. The decision of the Appellate Tribunal was that the first transfer did not make the transferee a successor-in-interest, whereas the second one did. In regard to the first transfer, it was found that the transferee Company had not purchased the transferor Company as a going concern and had not accepted any liabilities of the old Company and had started a completely new business of its own. On the other hand, under the second transfer, the transferee had purchased not only all the tangible assets of the old Company, but the goodwill which was expressly valued in the sale-deed at a very large sum of ₹ 3 lakhs. It was also found that the transferee Company carried on the same business as the transferor Company in the result, the employees of the transferor Company in the first transaction were held not entitled to make a claim for re-employment by the transferee Company, whereas a claim made by the employees of the transferor Company in regard to the second transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is the nature of the break and what were the reasons responsible for it ? What is the length of the break ? Has goodwill been purchased ? Is the purchase only of some parts and the purchaser having purchased the said parts purchased some other new parts and started a business of his own which is not the same as the old business but is similar to it ? These and all other relevant factors have to be borne in mind in deciding the question as to whether the purchaser can be said to be a successor-in-interest of the vendor for the purpose of industrial adjudication. It is hardly necessary to emphasise in this connection that though all the facts to which we have referred by way of illustration are relevant, it would be unreasonable to exaggerate the importance of any one of these facts or to adopt the inflexible rule that the presence or absence of any one of them is decisive of the matter one way or the other. If industrial adjudication were to insist that a purchaser must purchase the whole of the property of the vendor concern before he can be regarded as a successor-in-interest, it is quite likely that just an insignificant portion of the property may not be the subject-matter o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a successor-in-interest of the Company. 11. That takes us to the question as to what would be the nature of the appellant's liability to the employees of the Company. Before s. 25-FF was introduced in the Act in 1956, this question was considered by industrial adjudication on general considerations of fairplay and social justice. In all cases where the employees of the transferor concern claimed re-employment at the hands of the transferee concern, industrial adjudication first enquired into the question as to whether the transferee concern could be said to be a successor-in-interest of the transferor concern. If the answer was that the transferee was a successor-in-interest in business, then industrial adjudication considered the question of re-employment to the light of broad principles. It enquired whether the refusal of the successor to give re-employment to the employees of his predecessor was capricious and unjustified, or whether it was based on some reasonable and bonafide grounds. In some cases, it appeared that there was not enough amount of work to justify the absorption of all the previous employees; sometimes the purchaser concern needed bonafide the assistance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nagement of the undertaking is so transferred is, under the terms of the transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment , compensation on the basis that his service has been continuous and has not been interrupted by the transfer. 13. 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 s. 25-F would apply. That is why s. 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 s. 25-F; that apparently was the scheme which the Legislature had in mind when it enacted s. 25-FF in the light of the definition of the word retrenchment prescribed by s. 2(oo) of the Act. 14. The validity of this assumption was, however, successfully challenged before this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case [1957]1SCR121 , was pronounced on November 27, 1956. 15. This decision led to the promulgation of an Ordinance No. 4 of 1957. By this Ordinance, the original s. 25-FF as it was inserted on September 4, 1956, was substantially altered. Section 25-FF as it has been enacted by the Ordinance reads thus :- Where the ownership or management of an undertaking is transferred, whether by agreement or by operation of law, from the employer in relation to that undertaking to a new employer, every workman who has been in continuous service for not less than one year in that undertaking, immediately before such transfer, shall be entitled to notice and compensation in accordance with the provisions of s. 25-F, as if the workman had been retrenched : Provided that nothing in this section shall apply to a workman in any case where there has been a change of employers by reason of the transfer, if (a) the service of the workman has not been interrupted by such transfer; (b) the terms and conditions of service applicable to the workman after such transfer are not in any way less favourable to the workman than those applicable to him immediately before the transfer; and (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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, s. 25-FF makes a reference to s. 25-F for that limited purpose, and, therefore, in all cases to which s. 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. 18. The scheme of the proviso to s. 25-FF emphasises 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of the correctness of this decision that s. 25-FF as amended has been enacted. Besides, on a construction of s. 25-FF itself, it is difficult to equate the termination of services with which it deals, with retrenchment covered by s. 25-F. As we have already indicated, s. 25-F is referred to in s. 25-FF to enable the assessment of compensation payable to the employees covered by s. 25-FF. The clause as if clearly shows the distinction between retrenchment under s. 2(oo) and termination of service under s. 25-FF. In this connection, we may refer to the decision of this Court in M/s. Hatisingh Manufacturing Co. Ltd. v. Union of India (1960)IILLJ1SC . In that case, this Court had to consider the effect of the words as if occurring in s. 25-FFF, and it has been held that by the use of the words as if the workmen had been retrenched under the said section, the Legislature has not sought to place closure of an undertaking on the same footing as retrenchment under s. 25-F. Therefore, the plea that s. 25-H applies to the present case cannot be accepted. 21. Mr. Chari then argued that though in terms s. 25-H may not apply to the present case, the general principle underlying th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... play and justice obviously mean fair play and social justice to both the parties. It would, we think, not be fair that the vendor should pay compensation to his employees on the ground that the transfer brings about the termination of their services, and the vendee should be asked to take them back on the ground that the principles of social justice require him to do so. In this connection, it is relevant to remember that the industrial principle underlying the award of retrenchment compensation is, as observed by this Court in the case of The Indian Hume Pipe Co. Ltd. v. The Workmen [1960] 2 S.C.R. 32, to give partial protection to workmen who are thrown out of employment for no fault of their own, to tide over the period of unemployment ; and in that sense, the said compensation is distinguishable from gratuity. Therefore, if the transferor is by statute required to pay retrenchment compensation to his workmen, it would be anomalous to suggest that the workmen who received compensation are entitled to claim immediate re-employment in the concern at the hands of the transferee. The contention that in cases of this kind, the workmen must get retrenchment compensation and re-emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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