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Since both the Corporation and the Nigam are Government concerns as learned counsel for the Corporation tell us that this was the under standing, we direct the Nigam to continue the 149 workmen in employment on the same terms and conditions as were applica ble to them when the Corporation was the agent for collection o... |
The list of the 149 workmen is not on record. PRE |
Learned counsel for the applicants has undertaken to provide the list within 24 hours. Ratio |
" There was no doubt an understanding in this case but even without this, counsel says, the position would be the same. Ratio |
It appears that the broad issue as to the rights of such workmen against a successor inbusiness was raised but not decided in Workmen vs Dahingeapara Tea Estate, [1958] II L.L.J. 498, a case which came up before a five judge Bench of this Court. Ratio |
The High Court has, however, referred to decision of this Court in Anakapala Coop Agricultural and Industrial Society Ltd. vs Its Workmen, [1963] Supp. 1 S.C.R. 730 and taken the view that the principle enunciated in the judgments quoted earlier is not valid after the enactment of section 25FF of the Act. PRE |
This section provides that where there is a transfer of an undertaking by agreement or operation of law, an employee who loses his job because of such transfer will have a right to compensation from the predecessor, except where he gets the benefit of uninter rupted service with the new employer on no less favorable te... |
It has been construed in the Anakapalla Society case to say that in such a situation the employee can at best claim retrenchment compensation from the predecessor on the basis of a notional 385 retrenchment but will have no right to claim re employment, much less on the same conditions as before, from the successor. PR... |
It is necessary to extract here certain observations from judgment in the Anakapalla case (supra) which, if we may say so with respect, clinch the issue. PRE |
Gajendragadkar, J., speaking for a five Judge Bench of the Court summed up the earlier legal position thus: "That takes us to the question as to what would be the nature of the appellant 's liability to the employees of the Company. PRE |
Before section 25 FF was introduced in the Act in 1956, this question was considered by industrial adjudication on general considerations of fair play and social justice. PRE |
In all cases, where the employees of the transferor concern claimed re employment at the hands of the transferee con cern, industrial adjudication first enquired into the ques tion as to whether the transferee concern could be said to be a successor in interest of the transferor concern. PRE |
If the answer was that the transferee was a successor in interest in business, then industrial adjudication considered the question of re employment in the light of broad principles. PRE |
It enquired whether the refusal of the successor to give re employment to the employees of his predecessor was capri cious and unjustified, or whether it was based on some reasonable and bona fide grounds. PRE |
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 bona fide the assistance of better qualified and different type of workers; conceivably, in some cases, the purchaser has previous commitments for which he ... |
In such a case, it was obvious ly impossible to lay down any hard and fast rules. PRE |
Indeed, experience of industrial adjudication shows that in resolv ing industrial disputes from case to case and from time to time, industrial adjudication generally avoids as it should to lay down inflexible rules because it is of the essence of industrial adjudication that the problem should be resolved by reference ... |
386 It was in this spirit that industrial adjudication ap proached this problem until 1956 when section 25 FF was intro duced in the Act. PRE |
Sometimes, the claim for re employment was allowed, or sometimes the claim for compensation was considered. PRE |
But it is significant that no industrial decision has been cited before us prior to 1956 under which the employees were held entitled to compensation against the vendor em ployer as well as re employment at the hands of the purchas er on the ground that it was a successor ininterest of the vendor. PRE |
" The Court then referred to the insertion of section 25 FF in 1956, the inadequacy of its language in view of Hariprasad vs Divikar, [1957] SCR 121, the effect of its retrospective amendment in 1957 and then concluded: . . and, therefore, in all cases to which section 25FF applies; the only claim which the employees o... |
No claim can be made against the transferee of the said concern. PRE |
By amending section 25FF, the legislature has made it clear that if industrial undertakings are trans ferred, the employees of such transferred undertakings should be entitled to compensation, unless, of course, the continuity of their service or employment is not disturbed and that can happen if the transfer satisfies... |
" The Supreme Court was dealing with a case of genuine transfer between two parties a predecessor and a successor at arms ' length where the principles of the law of contracts clearly held the field. Ratio |
The employees of the predecessor had no privity of contract with the successor and could make no claims against him. Ratio |
The industrial law, however, safeguarded his interests by inserting section 25FF and giving him a right to compensation against his former employer on the basis of a notional retrenchment except in cases where the successor, under the contract of transfer itself, adequately safeguard ed them by assuring them of continu... |
In the result he can get compensation or continuity but not both. Ratio |
The present case before us raises an allied, but sometimes more important issues as to whether there cannot be situations in which the court or 387 industrial adjudicator, should, in the interests of justice, fairplay and industrial peace, hold the employee entitled to continuity with the successor without being compel... |
The Supreme Court itself has visualised such a case and made it clear that if a transfer is fictitious or benami section 25FF has no application at all. Ratio |
Of course, in such a case, "there has been no change of ownership or management and despite an apparent transfer, the transferor employer continues to be the real employer and there has to be continuity of service under the same terms and conditions of service as before and there can be no question of compensation". Ra... |
A second type of cases which comes to mind is one in which there is form, and perhaps also in law, a succession but the management contin ues to be in the hands of the same set of persons organised differently such as in Bombay Garage Ltd. vs Industrial Tribunal, and Artisan Press vs L.A.T., [1954] II L.L,.J. 424. Rati... |
In such cases, the transferee and transferor are virtually the same and the over riding prin ciple should be that no one should be able to frustrate the intent and purpose of the law by drawing a corporate veil across the eyes of the court. Ratio |
(see, Palmer, Company Law, 23rd Edn., pages 200 201, paras 8 and 10 and the decision in Kapur vs Shields, , cited therein). Ratio |
These exceptions to the above rules, we think, would still be operative. Ratio |
But it is not necessary here to decide whether this principle will help us to identify the corporation with the State Government in the present case for the present purposes, particularly as there is a catena of cases which do not approve of such identification (see Accountant and Secretarial Services P. Lid: vs Union,... |
Leaving this out of account then, we may turn to a third category of cases, which we think would also fail as an exception to the principle behind section 25FF. Ratio |
This is where, as here, the transferor and/or transferee is a State or a State instrumentality, which is required to act fairly and not arbitrarily (see the recent pronouncement in Mahabir Auto Stores vs Indian Oil Corporation, [1990] 3 S.C.C. 752 and the Court has a say as to whether the terms and conditions on which ... |
We think that, certainly, in such circumstances it will be open to this Court to review the arrangement between the State Government and the Corporation and issue appropriate directions. Ratio |
Indeed, such directions could be issued even if the elements of the transfer in the present case fall short of a complete succession to the business or undertaking of the State by the Corporation, as the principle sought to be applied is a constitutional principle flowing from the contours of article 14 of the Constitu... |
We are making this observa tion because it was attempted to be argued on behalf of the State and the Corporation that only certain assets of the State 'industry ', viz. the tubewells, were taken over by the latter and nothing more. Ratio |
We do not quite agree with this contention but, in view of the approach we propose to adopt, this aspect is not very material and need not be further discussed. Ratio |
Looking at the facts of this case in the above perspec tive, it appears to us that the State Government has acted arbitrarily towards the appellants. Ratio |
It is true that the State Government was incurring losses and decided to trans fer the tubewells to the Corporation. Ratio |
This decision would have been the most unexceptionable, prudent and perhaps the only decision that the Government could have taken, if it had decided to completely cut itself off thereafter from any responsibility or liability arising out of the operation of the tubewells. Ratio |
But that the Government did not do. Ratio |
As point ed out earlier, the State Government, although transferring the tubewells, undertook to recoup any losses that the Corporation might incur as a result of the transfer. Ratio |
The result, therefore, was that, despite the transfer of tube wells to the Corporation the Government continues to bear the losses arising from this activity. Ratio |
But, while doing so, it has abridged the rights of the appellants by purporting to transfer only the tubewells and retrenched the appellants from service as a consequences. Ratio |
A grievance has been made that, while several other members of staff belonging to the irrigation department such as engineers, clerks, etc. have been sent on deputation to the Corporation, the State has only chosen to retrench the service of as many as 498 tube well operators. Ratio |
This differential treatment may not amount to discrimination as contended by the appellants because those others belonged to categories of Government staff which could come back to Government service in the event of the Corporation finding their services unnecessary at a future date, for one reason or another as they w... |
The tubewell operators, however, could not have been sent on deputation because there was no possibility at all of their being fitted into the irrigation branch later, in case the Corporation could find no use for them because, once the tubewells had been transferred for good to the Corporation, the Government could fi... |
While, therefore, we do not agree with the appellant that the State Government discriminated against the appellants as compared with the other members of the staff by sending them on deputation but not the appellants, we think that this treat ment meted but to the other staff shows that the Government did not hesitate ... |
while serving on deputation which would only augment the losses, if any, that the Corporation would incur by operating the tubewells. Ratio |
But when it came to the case of the appellants, the Govern ment has considered it fit to retrench their services, simultaneously making some arrangement or issuing some directions enabling the Corporation to absorb them as if they were fresh recruits. Ratio |
The assurance that they would be paid according to their original scales of pay and at their original leaves of pay came as a later development only because of the pending litigation. Ratio |
It was very fair on the part of the State Government to decide that, as the tube wells would be operated by the Corporation, it would be prudent to run them with the help of the appellants rather than recruit new staff therefore and that the Government should bear the burden of any losses which the Corporation might in... |
Such a step would have preserved to the appel lants their rightful dues and retirement benefits. Ratio |
The conduct of the Government in depriving the appellants of substantial benefits which have accrued to them as a result of their long service with the Government, although the tubewells continue to be run at its cost by a Corporation wholly owned by it, is something which is grossly unfair and inequitable. Ratio |
This type of attitude designed to achieve nothing more than to deprive the employees of some benefits which they had earned, can be understood in the case of a private employer but comes ill from a State Government and smacks of arbitrariness. Ratio |
Acting as a model employer, which the State ought to be, and having regard to the long length of service of most of the appellants, the state, in our opinion, should have agreed to bear the burden of giving the appellants credit for their past service with the Government. Ratio |
That would not have affected the Corporation or its employees in any way except to a limited extent indicated below and, at the same time, it would have done justice to the appellants. Ratio |
We think, therefore, that this is something which the State ought to be directed to do. Ratio |
We would, however, like to clarify that the sole purpose and object of our above direction is that the appellants should be entitled to count their past service with the Government for the purpose of computation of their salary, length of service and retirement benefits with the Corporation. Ratio |
This, however, should not result in the appellants ' claiming any seniority over the staff which the Corporation has otherwise engage right from its commencement in 1970. Ratio |
To permit 390 such a claim would result in injustice to those employees whose seniority is based on their terms and conditions of service with the Corporation which had been entered into a long time before the present transfer proposal came to be implemented. Ratio |
Though, as we have mentioned earlier, seniority in service is not of much importance in this case as there is no avenue of promotion to tubewell operators, the ques tion of seniority still becomes crucial in case the Corpora tion should close down any of the tubewells or decide on the retrenchment of its staff by reorg... |
In such an event, if the appellants are given the benefit of their length of service with the Government for all purposes, some of the present employees of the Corpora tion may become liable to be retrenched as junior in length of service to some of the appellants. Ratio |
Clearly, this should not be allowed to happen and the Corporation staff should not suffer merely because the appellants, who have been subsequently inducted into the Corporation, are given all the benefits of the length of their service with the Govern ment. Ratio |
There can be no question of any of the appellants being considered senior to such operators on the Corpora tion 's establishment. Ratio |
In fact we cannot give such a direc tion without giving such operators an opportunity of being heard. Ratio |
We would, therefore, like to make it clear that, while the appellants will have, for purposes of computation of their salary, length of service and retirement benefits the advantage of counting the period of their service with the Government, this will not enable them to claim any seniority over the former employees of... |
At the same time there is the apprehension of the appel lants that if they are treated as juniors to all the Corpo ration 's employees, they may be sent out first in case there is any retrenchment. Ratio |
It is prayed that it should be ensured that such an eventuality does not affect the present appel lants as a result of their being treated as juniors to the former employees of the Corporation. Ratio |
We are told that this eventuality is not merely hypothetical but real. Ratio |
This is a situation that cannot be helped, being one in which the equities in favour of the appellants will be counter weighed by those in favour of the Corporation 's direct employees, The only solution to this difficulty which we can see in for the Corporation not to retrench the services of any of the appellants as ... |
We are informed that a circular was issued by the Corporation on 13.7.87 and 19.8.87, directing, inter alia, that no fresh appointments of tubewell operators will be made in the Corporation against vacancies caused due to retrenchment, resignation or death of an exist 391 ing incumbent. Ratio |
Such a direction became necessary because many of the tubewells of the Corporation had been installed in the fifties and they had out lived their optimum lives and it became necessary to cut down on the staff. Ratio |
The continued adoption of this policy for some more time will help the appellants tide over the crisis envisaged above. Ratio |
We have already pointed out that most of the appellants, who have now joined the Corporation, have rendered long years of service with the Government and will be retiring from serv ice in the next few years. Ratio |
The Corporation can perhaps manage to continue them i. service without retrenching any of them on the ground that some of the tubewells have to be closed down or that some of these operators for some other reason have become surplus for its needs. Ratio |
If this could be done, it will be most equitable as it will achieve the following ends: (1) it will enable the present appellants to continue in service till they retire in normal course; (2) it will protect the interests of the erstwhile operators of the Corporation who have been serving in the Corporation from the be... |
For the reasons discussed above, we declare that the appellants will be entitled to add their service in the Government to their length of service in the Corporation for purposes of computation of their salary, length of service and retirement benefits. Ratio |
The Corporation is also directed to ensure, as far as possible, that none of the appellants are retrenched as surplus on account of any closure of tubewells or other like reason until they retire or leave the service of the Corporation voluntarily for any reason. Ratio |
To sum up, even before the insertion of section 25FF in the Act, the employees of a predecessor had no right to claim re employment by the successor in business save in excep tional circumstances. Ratio |
Even where available, that claim was not a matter of absolute right but of discretion, to be judicially exercised, having regard to all the 392 circumstances. Ratio |
An industrial tribunal, while investigating such a claim, had to carefully consider all the aspects of the matter. Ratio |
It had to examine whether the refusal to give re employment was capricious and industrially unjustified on the part of successor in business or whether he could show cause for such refusal on reasonable and bona fide grounds such as want of work, inability of the applicant to carry out the available work efficiently, l... |
This discretion given to industrial courts is no longer generally available because of the insertion of section 25 FF. Ratio |
But in a case where one or both of the par ties is a State instrumentality, having obligations under the Constitution, the Court has a right of judicial review over all aspects of transfer of the undertaking. Ratio |
It is open to a court, in such a situation, to give appropriate direc tions to ensure that no injustice results from the change over. Ratio |
In the present case, the parties to the transfer are a State on the one hand and a fully owned State Corporation on the other. Ratio |
That is why we have examined the terms and condi tions of the transfer and given appropriate directions to meet the needs of the situation. Ratio |
We, therefore, direct the State Government and the Corporation which is but a wholly owned State instrumentality bound to act at the behest of the State to carry out our directions above, the Corpora tion being at liberty to amend its rules and regulations, if necessary, to give effect to the same. Ratio |
We have been given to understand that none of the appel lants has taken the compensation amounts tendered by the State and that the monies are now in deposit with the Corporation. Ratio |
We have already pointed out that the appellants can claim either compensation or continuity of service but not both. Ratio |
We should, therefore, like to make it clear that in case any of the appellants have been paid any compensation, that amount will have to be refunded by them before this order can be given effect to qua them. Ratio |
The appeals stand disposed of accordingly. RPC |
There will be no order regarding costs. RPC |
R.S.S. Appeals disposed of. RPC |
: Criminal Appeal No.490 of 1985. FAC |
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