M/S Kundan Sugar Mills Vs. Ziyauddin
& Ors  INSC 18 (9 February 1960)
GUPTA, K.C. DAS
CITATION: 1960 AIR 650 1960 SCR (2) 918
Industrial Dispute-Rights of employer to
transfer a workmanif implicit in every contract of service.
The General Manager of the appellant Mills
ordered the transfer of four workmen from the appellant mill to a new mill,
which had been purchased subsequently. The only connection between the two mills
was the identity of ownership and, but for it, one had nothing to do with the
other. The concerned workmen protested to the said order of transfer and did
not accede to the request, thereupon they were served with notice for
disobedience of standing orders and were called upon for explanation which the
workmen did and thereafter they were dismissed from service. The Labour
Appellate Tribunal found that the management had no right to transfer the
workmen to the new factory and therefore the order dismissing them was illegal.
The appellants came up by special leave before the Supreme Court and contended
that the right to transfer an employee by an employer from one of his concerns
to another is implicit in every contract of service. The question is whether a
person employed in a factory can be transferred to some other independent
concern started by the same employer at a stage subsequent to the date of the
Held, that apart from any statutory
provision, the right of an employee and an employer are governed by the terms
of contracts between them or by the terms necessarily implied there from; but
in the absence of an express agreement between the employer and employees it
cannot necessarily be implied that the employer has the right to transfer the
employee to any of its concerns in any place, and that the employee has a duty
to join the concern to which he may be transferred.
In the instant case, it was not a condition
of service of employment of the concerned workmen either express or implied that
the' employer had the right to transfer them to a new concern started by the
employer subsequent to the date of the employment.
Alexandre Bouzourou v. The Ottoman Bank,
A.I.R. 1930 P.C.
118, Mary (Anamalai Plantation Workers'
Union) v. Selali arai Estate, (1956) I.L.L.J. 243 and Bata Shoe Company, Ltd v.
Ali Hasan, (1956) I.L.L.J. 278, discussed.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 136 of 1958.
Appeal by special leave from the decision
dated April 30,1956, of the Labour Appellate Tribunal of India at Lucknow in
Appeeal No. III-45 of 1956, lip 919 arising out of the award dated February 6,
1956 of the State Industrial Tribunal, Allahabad, in reference No. 96 of 1955.
Ram Lal Anand, I.M. Lal and S. S. Sukla, for
B. D. Sharma, for respondents Nos. 1 to 5.
C.P. Lal and G. N. Dikshit, for respondent
1960. February 9. The Judgment of the Court
was delivered SUBBA RAO, J.-This is an appeal by special leave against the
order of the Labour Appellate Tribunal of India setting aside the award of the
Industrial Tribunal, Allahabad, and directing the reinstatement of the workers
in Kundan Sugar Mills at Amroha. " Kundan Sugar Mills " is a
partnership concern and owns a sugar mill at Amroha. The respondents I to 4 were-employed
by the appellant as seasonal masons in the year 1946. In 1951 the partners of
the appellant-Mills purchased the building machinery and other equipment of
another sugar mill at Kiccha in the district of Nainital.
They closed the said mill at Kiccha and started
it at Bulandshahr. The new factory was named Pannijee Sugar & General
Mills, Bulandshahr. On January 19, 1955, the General Manager of the
appellant-Mills ordered the transfer of the respondents I to 4 from the
appellant-Mills to the new mill at Bulandshahr. The said respondents through
their representative, the fifth respondent, protested to the General Manager
against the said transfer. But the General Manager, by his letter dated January
22/24, 1955, insisted upon their joining the new mill at Bulandshabr. But the
said respondents did not accede to his request. On January 28, 1955, the
General Manager served a notice on the respondents 1 to 4 stating that they had
disobeyed his orders and thereby committed misconduct under Standing Order No.
L(a). They were asked to submit their explanation as to why action should not
be taken against them under the Standing Order. The Labour Union, by its letter
dated January 31, 1955, denied the charges. On February 2, 1955, the General
Manager made an order dismissing the respondents 1 to 4 from service on the
ground that 117 920 they had disobeyed his order of transfer and thus they were
guilty of misconduct under Standing Order No. LI(a).
The Labour Union thereafter raised an
industrial dispute and the Government of U.P. by its notification dated
November 7, 1955, referred the following issue for decision to the State
Industrial Tribunal for U, P. at Allahabad:
" Whether the employers have wrongfully
and/or unjustifiably terminated the services of Sarva Shri Zia Uddin,
Raisuddin, Shafiquddin and Ahmed Bux for refusal to obey the orders of transfer
to M/s. Pannijee Sugar and General Mills Co., Bulandshahr. If so, to what
relief are the workmen entitled." The State Industrial Tribunal by its
order dated February 6, 1956, made its award holding that the management was
within its rights and that, as the respondents 1 to 4 had disobeyed the order
of the management, they were properly dismissed by the management. The said
respondents through their Union, respondent No. 5, preferred an appeal to the
Labour Appellate Tribunal of India and the said Appellate Tribunal held that
the management had no right to transfer the respondents 1 to 4 to the new
factory and therefore the order dismissing them was illegal. The management has
preferred the present appeal against the said order of the Labour Appellate
Learned counsel for the appellant raised
before us the following two questions: (1) The right to transfer an employee by
an employer from one of his concerns to another is implicit in every contract
of service; (2) the State Industrial Tribunal having held that both the
concerns, i.e., the mills at Amroha and the mills at Bulandshahr, formed one
unit, the Appellate Tribunal had no jurisdiction to set aside that finding
under s. 7(1) of the Industrial Disputes (Appellate Tribunal) Act, 1950.
To appreciate the first contention, it is
necessary to notice the undisputed facts in this case. It is true that the
partners of the Sugar Mills at Amroha own also the Sugar Mills at Bulandshahr;
but they were proprietors of the former Mills in 1946 whereas they purchased
the latter mills only in the year 1951 and 921 started the same in Bulandshahr
in or about 1955. The respondents 1 to 4 were employed by the owners of the
appellant-Mills at the Sugar Mills at Amroha at a time when they were not
proprietors of the Sugar Mills at Bulandshahr.
It is conceded that it was not an express
term of the contract of service between the appellant and the respondents I to
4 that the latter should serve in any future concerns which the appellant might
acquire or start.
It is also in evidence that though the same
persons owned both the Mills they were two different concerns. In the words of
the Appellate Tribunal, the only connection between the two is in th identity
of ownership and, but for it, one has nothing to do with the other. It is also
in evidence that an imported workman at Amroha is entitled to houserent, fuel,
light and travelling expenses both ways, while at Bulandshahr the workmen are
not entitled to any of these amenities. The workmen at Amroha are entitled to
benefits under the Kaul Award while those at Bulandshahr are not so entitled.
The General Manager, E.W.1, in his evidence stated that the interim bonus of
the Bulandshahr factory as ordered by the Government in November 1955 was Rs. 1
1,000 while for Amroha it: was nearly 1-1/2 lacs ". He also stated that
"the bonus for last year at Amroha would be probably equal to II months'
wages and at Bulandshahr equal to about 4 or 5 days' wages." It is also in
evidence that apart from the disparity in the payment of bonus, the accounts
are separately made up for the two mills. It is clear that the two mills are
situated at different places with accounts separately maintained and governed
by different service conditions, though they happened to be under the common
management; therefore, they are treated as two different entities.
The question of law raised in this case must
be considered in relation to the said-facts. The argument of the learned
counsel for the appellant that the right to transfer is implicit in every
contract of service is too wide the mark.
Apart from any statutory provision, the
rights of an employer and an employee are governed by the terms of contracts
between them or by the terms necessarily implied there from. It is 922 conceded
that there is no express agreement between the appellant and the respondents
where under the appellant has the right to transfer the respondents to any of
its concerns in any place and the respondents the duty to join the concerns to
which they may be transferred. If so, can it be said that such a term has to be
necessarily implied between the parties ? When the respondents 1 to 4 were
employed by the appellant, the latter was running only one factory at Amroha.
There is nothing on record to indicate that at that time it was intended to
purchase factories at other places or to extend its activities in the same line
at different places. It is also not suggested that even if the appellant had had
such an intention, the respondents I to 4 had knowledge of the same. Under such
circumstances, without more, it would not be right to imply any such term
between the contracting parties when the idea of starting new factories at
different places was not in contemplation.
Ordinarily the employees would have agreed
only to serve in the factory then in existence and the employer would have
employed them only in respect of that factory. The matter does not stop there.
In the instant case, as we have indicated, the two factories are distinct
entities, situated at different places and, to import a term conferring a right
on the employer to transfer respondents I to 4 to a different concern is really
to make a new contract between them.
The decisions cited at the Bar do not in the
least sustain the appellant's broad contention. In Alexandre Bouzourou v. The
Ottoman Bank (1) the appellant was an employee of the respondent-bank. The bank
transferred him from one branch to another branch of the bank situated in different
As he refused to comply with the order of
transfer, he was dismissed. Thereafter, he filed a suit to recover damages from
the bank for wrongful dismissal. It was argued before the Judicial Committee
that under the terms of his contract of service the sphere of his employment
included only the head office and not the branches of the bank. The evidence in
that case showed that transfer was one of the ordinary incidents of the bank's
employment, being usually concurrent with an (1) A.T.R.  P.C. 118, 119.
923 increase of salary and responsibility,
and suggest no more than that the bank considered their officials convenience
where possible. Indeed the appellant therein did not even suggest in his
correspondence that the transfer was a breach of his contract. On these
circumstances the Judicial Committee observed as follows at p. 119:
" From the point of view of proper
organization of their staff it is difficult to assume that the Bank would
willingly agree that their employees should not be bound to serve outside the
place where the contract was made except with their consent, and, in their
Lordships' opinion such a condition of the contract would require to be clearly
established." The essential distinction between that case and the present one
is that there the bank with its branches was one unit and the records clearly
indicated that transfer was one of the ordinary incidents of service in the
Bank. In such circumstances when a person joined such a service, the Privy
Council found it easy to imply a term of transfer. That decision is therefore
not of any relevancy to the present case. In Mary (Anamalai Plantation
'Workers' Union) v. Seliparai estate (2), labour was recruited in the
plantations without any differentiation being made between factory and field
workers and it had been the common practice prevailing for several years to
transfer the factory workers to the field and vice-versa, according to the
exigencies of work. A worker who had been appointed in such a plantation was
transferred, owing to mechanisation in the factory, from the factory to the
field. The Labour Appellate Tribunal of India held that in the circumstances of
the case the liability to be so transferred must be deemed to be an implied
condition of service. So too in Bata Shoe Company, Ltd. v. Ali Hasan
(Industrial Tribunal, Patna & Ors.) (3) transfer of an employee in the
circumstances of that, case from one post to another was held not to be an
alteration of any service condition within the meaning of s. 33 of the Industrial
Disputes Act. That was a case of a management employing a worker in one concern
and transferring him from one post to another. In such a case it was possible
to imply the condition of right of the management to transfer the employee from
one post to another. S. N. Mukherjee v. Kemp & Co. Ltd. (4) was a case
arising out of s. 23 of the Industrial Disputes (Appellate Tribunal) Act, 1950.
The complaint there was that an employee was transferred by the management with
a view to victimize him and that it amounted to alteration in the conditions of
employment. It was held that if an employer employed a person it was implicit
in the appointment that he could be transferred to any place where the business
of the employer in the same line was situated, unless there was an express
condition to the contrary in the contract of employment. In that case the
worker was employed by Kemp & Co., Limited, which had branches in different
places. The decision assumed that the business was one unit and that the only
question raised was that he should not be transferred to a place different from
the place where he was actually discharging his duties.
These observations must be limited to the
facts of that case.
It is not necessary to multiply the citation,
for the other decisions relied on by the learned counsel for the appellant
pursue the same reasoning followed in the aforesaid cases.
We have referred to the decisions only to
distinguish them from the present case, and not to express our opinion as to
the correctness of the decisions therein. It would be enough to point out that
in all the said decisions the workers had been employed in a business or a
concern and the question that arose was whether in the circumstances of each
case the transfer from one branch to another was valid or amounted to
victimization. None of these decisions deals with a case similar to that
presented in this appeal, namely, whether a person employed in a factory can be
transferred to some other independent concern started by the same employer at a
stage subsequent to the date of his employment. None of these cases holds, as
it is suggested by the learned counsel for the appellant, that every employer
has the inherent right to transfer his employee to another place -where he
chooses to start (4)  L.A.C. 903 925 a business subsequent to the date of
the employment. We, therefore, hold that it was not a condition of service of
employment of the respondents either express or implied that the employer has
the right to transfer them to a new concern stared by him subsequent to the
date of their employment.
The respondents also relied upon a Government
Order No. 6122 (ST)/XXXVI-A-640(S)-T-1953 in support of their contention that
the order of transfer was bad. By this Order the Government of U. P. had
directed that the employment of seasonal workmen in all vacuum pan sugar
factories in the Uttar Pradesh should be governed by the rules contained in the
annexure thereto. Rule I in the said annexure is to the following effect:
" A worker who has worked or but for
illness or any other unavoidable cause would have worked in a factory during
the whole of the second half of the last preceding season will be employed in
this season in such factory." This rule has no relevancy to the question
raised in the present case. This rule only enjoins upon an employer to employ a
worker in the circumstances mentioned therein in the same factory in which he
was working in the previous season during the next season also. This does not
prevent the employer to transfer an employee if he has the right to do so under
the contract of service or under any statutory provisions. We have already held
that the employer in the present case has no such right.
Lastly it is said that the Appellate Tribunal
had no jurisdiction to set aside the finding of the State Industrial Tribunal,
as it did not give rise to any substantial question of law within the meaning
of s. 7(1) of the Industrial Disputes (Appellate Tribunal) Act, 1950. The
question raised was one of law, namely, whether the appellant had the right to
transfer the respondents 1 to 4 from one concern to another. A substantial
question of law involved between the parties and that raised also an important
principle governing the right of an employer to transfer his employees from one
concern to another of his in the circumstances of this case. We, therefore,
hold that 926 a substantial question of law arose in the case and that it was
well within the powers of the Labour Appellate Tribunal to entertain the
In the result the appeal fails and is
dismissed with costs.