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Central Inland Water Transport Corporation Ltd. Vs. Their Workmen [1975] INSC 122 (2 May 1975)

BHAGWATI, P.N.

BHAGWATI, P.N.

GOSWAMI, P.K.

CITATION: 1975 AIR 1639 1975 SCR 443 1975 SCC (4) 348

ACT:

Payment of Bonus Act, 1965--Section 16--newly set up establishment--Industrial Disputes Act--Section 25FF and 25FFF.

HEADNOTE:

The River Steam Nagivation Co. Ltd. carried passengers and cargo in Inland Waters. It also owned a dock called Rajabagan Dockyard, where it carried out repairs to its own vessels. Majority of the shares of the Company were purchased by the Government of India and considerable financial assistance was also given by the Government. In the year 1966, the financial position of the company became so precarious that an application "or winding up of the company was made by one of its creditors in the High Court of Calcutta. The Government of India put forward a scheme of ,arrangement and compromise, and made an application to the High Court in the winding up petition for sanction of the scheme. The appellant Corporation was incorporated and all the properties and assets of the Company stood transferred to and vested in the Corporation. As far as the liabilities are concerned, only some of them were transferred to the Corporation and the rest had to be discharged by the company. It was also provided in the scheme that the Corporation should take as many of the existing employees as possible. The scheme also provided that those employees who could not be taken over by the Corporation would be paid all legitimate and legal compensation by the Company. The Company was to stand closed. 8000 employees were working in the Company, out of when 5173 employees were given fresh appointments by the Corporation on new terms and conditions.

The workmen working in Rajabagan Dockvard demanded payment of bonus for the years 1967-68 and 1968-69 under the Payment of Bonus Act, 1965. The appellant raised a preliminary objection that the establishment of the Corporation in which the workmen were employed was a newly set up establishment since 5-6-1967 and the workmen were by reason of section 16 of the Payment of Bonus Act, not entitled to payment of bonus for the year 1967-68 and 1968-69, since the Corporation incurred losses during both these years.

The Industrial Tribunal held that the workmen were entitled to bonus on the ground that the appellant was the successor in interest of the company in respect of the business carried on in the establishment of Rajabagan Dockyard.

On appeal by special leave by the appellant, it was held The question which arises for determination is whether the Rajabagan Dockyard in the hands of the Corporation could be said to be an establishment newly set up since 5-6-1967.

The Industrial Tribunal erred in addressing itself to a wholly different question namely whether the Corporation was the successor in interest of the company. That was not a relevant .question. [448 F-G]

HELD FURTHER-The establishment of Rajabagan Dockyard was not a ,new establishment in the hands of the Corporation. It was the same establishment, the same manufacturing apparatus, which was operated by the cornpany prior to its taking over by the Corporation. The name of the establishment also continued to be the same. Its address remains the same and the registration number of the establishment under the Factories Act also remaintained the same. [451-H] 444

HELD-The workmen were entitled to be paid bonus for the two years, as the Rajabagan Dockyard was not a new establishment. Observed further The workmen who were taken over by the Corporation were given fresh appointments after 5-6-1967 with different scales of pay and different conditions of service and there was a break in their continuity of service. If certainty of service was to be decided to these workers, they should have been paid closure compensation under section 25FFF or at any rate compensation tinder section 25FF of the Industrial Dispute. [452-D-451EF]

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 179-180 of 1973.

Appeal by special leave from the Award dated the 28th July, 1972 of the Fourth Industrial Tribunal, West Bengal in case No. VIII-51 of 1972 ordered to be published in the Gazette by Notice dated the 10th August, 1972.

Jagdish Swarup, A.G. Meneses and K.J. John, for the appellant.

P.S. Khera, for respondent no. 1.

S. C. Agarwala, V. J. Francis and R. K. Garg, for respondent no. 2.

The Judgment of the Court was delivered by BHAGWATI, J., These two appeals, by special leave, arise out of an industrial dispute between the Central Inland Water Transport Corporation Ltd. (hereinafter referred to as the Corporation) and its workmen in regard to the payment of bonus for the years 1967-68. and 1968-69 under the Payment of Bonus Act, 1965. The industrial dispute was referred to the Industrial Tribunal for adjudication under S. 10 of the Industrial Disputes Act, 1947. The Corporation raised three preliminary objections, one of which was-and that is the only preliminary objection with which we are concerned in the present appeals--that the establishment of the Corporation in which, the workman were employed was newly set up since 5th June, 1967 and the workman were, therefore, by reason of s. 16 of the Payment of Bonus Act, 1964, not entitled to payment of bonus for the years 1967-68 and 1968

69. The Industrial Tribunal by an award dated 2nd March, 1971 rejected these preliminary objections and held interalia that the Corporation was not entitled to claim immunity from payment of bonus under s. 16 and directed that the hearing of the, reference should proceed on merits. The reference was then heard on the question of quantification of the amount of bonus and by art award dated 28th July, 1972, the Industrial Tribunal held that each workman was entitled to bonus at the rate of 4 per cent of the wage earned by him during each year or Rs. 40/whichever is higher. This second and final award is challenged in appeal No. 179 of 1973, while the first preliminary award is challenged in appeal No. 180 of 1973. It is not disputed on behalf of the Corporation that if its liability to pay bonus is established and its claim to immunity is negatived, the quantum of bonus payable to the workman would be what has been awarded by the Industrial Tribunal. The only question which, therefore, arises for consideration in these two appeals is as to the liability of the Corporation to pay bonus under the Payment 445 of Bonus Act, 1964. The Corporation claims to be free from liability to pay bonus by virtue of the provisions of s. 16.

Is this claim well founded ? To answer this question it is necessary to set out a few facts.

The River Steam Navigation Co. Ltd. (hereinafter referred to as the Company) was a limited liability company incorporated in England in 1914. It owned a fleet of vessels which it plied in inland waters for carrying passengers and cargo from Calcutta to different places in Assam and vice versa along rivers flowing through what was then East Pakistan.

It also owned a dock called Rajabagan Dockyard at 42, Garden Reach, Calcutta where it carried out repairs to its own vessels. A majority of shares of the Company were purchased by the Government of India and considerable financial assistance was given by the Goverment of India from time to time in view of the great strategic importance of keeping the river routes to, Assam open, but even so, the Company incurred losses in carrying on its operations. The climax came with the armed conflict between India and Pakistan towards the end of 1965 when river transport service had to be closed because the river routes passed through what was then East Pakistan and in fact, forty vessels belonging to the Company were seized by the Pakistan Government. This brought about total cessation of the principal business activity of the Company and in consequence, its financial position became so precarious that on 21st June, 1966 an application for winding up of the Company was made by one of its creditors in the High Court of Calcutta. it was realised by the Government of India that it was impossible to save the Company as its total liabilities amounted to over Rs. 8 crores, the main creditors being the Government of India in the sum of about Rs. 6.19 crores, the State Bank of India in the sum of Rs. 1.50 crores and the Chartered Bank in the sum of Rs. 1.60 crores. The Government of India, therefore, put forward a scheme of Arrangement and Compromise, under ss.

391 and 394 of the Companies Act, 1956 and made an application to the High Court in the winding up petition for sanction of such scheme. In anticipation of sanction, the Government of India incorporated, on 22nd February, 1967, the Corporation-a company wholly owned by it-for effectuating the Scheme of Arrangement and Compromise (hereinafter referred to as the Scheme).

The Scheme was sanctioned with some modifications by a Single Judge of the High Court by an order dated 3rd May, 1967. It may be pointed out that when the Scheme was before the learned Single Judge, the Inland Steam Navigation Workers Union appeared and made its submissions with a view to safeguarding the interests of the workers and it was after hearing the Union, that the learned Single Judge made the order sanctioning the scheme with certain modifications.

The Union was aggrieved by the order sanctioning the Scheme and it preferred an appeal before a Division Bench of the High Court The Division Bench, however, by an order dated 14th July, 1967, confirmed the order of the learned Single Judge sanctioning the Scheme.

447 was found that the machinery taken over from the Company was largely obsolete and antiquated and much of it was not usable and the Corporation could put to use only a part of the machinery worth about Rs. 13 lacs. The nature of the work having changed and its volume increased, the Corporation found it difficult to cope with the work with the existing plant and machinery and soon felt the need of purchasing new plant and machinery both by way of replacement and addition. In the meantime, a Development Committee was ,appointed by the Government of India to examine various questions relating to development of Rajbagan Dockyard and this Committee submitted its report in June 1968 making various recommendations which involved an outlay of about Rs. 3 crores in constructing new sheds and purchasing and installing new plant and machinery. It seems that the recommendations of the Development Committee were accepted by the Government of India and the necessary funds were made available according to a phased programme. The Corporation accordingly started construction of six industrial sheds in the premises of Rajabagan Dockyard and also purchased and installed new plant and machinery worth about Rs. 50 lacs. The Rajabagan Dockyard, however, continued to work at a loss and during the years 1967-68 and 1968-69, these being the years with which we are concerned in the present appeals, the losses of the Corporation from the operation of the Rajabagan Dockvard continued to mount.

Vide the First and Second Annual Reports of the Corporation for the years 1967-68 and 1968-69.

We are concerned in the present appeals with the workers in the Rajabagan Dockyard. They are represented by two Unions, namely, Central Inland Water Transport Corporation Ltd.

Mazdoor Sabha and Egra and Rajabagan Dockyard Workers Union.

These two unions made a demand for payment of bonus for the years 1967-68 and 1968-69 under the Payment of Bonus Act, 1965. The Corporation rejected the demand mainly on the ground that the establishment of Rajabagan Dockyard, as operated by it, was newly set up since 5th June, 1967 and no profit was derived by the Corporation from this establishment during the years 1967-68 and 1968-69 and therefore, the workers were not entitled to payment of bonus by reason of s. 16 of the Act. This led to the, making of a reference by the Government of West Bengal under s. 10 of the Industrial Disputes Act, 1947. The Industrial Tribunal, as already pointed out above, tried the issue as to the claim of the Corporation to exemption from payment of bonus under s. 16 of the Act, as a preliminary issue. The Corporation examined three witnesses on its behalf, namely, Krishnaswami Srinivasan, Joydev Basak and Girdharilal Makhija, while the workers examined only the Joint Secretary of one of the two unions, namely, Ashgar Hussain. Some documentary evidence was also produced on behalf of the parties. The Industrial Tribunal, on a consideration of the oral as well as documentary evidence came to the conclusion that the Corporation was the successor-in-interest of the Company in regard to the business of Rajabagan Dockyard which was taken over by it as a going concern and the establishment of Rajabagan Dockyard could not, therefore, Managements or undertakings and it is, therefore, not synonymous with ' undertaking' which has been defined, though in a different context, by this Court in Gymkhana Club Unon v. Management(1) to mean " any business or any work or any project which one engages in or attempts as an enterprise analogous to business or trade". The dictionary meaning of 'establishment' as given in Webstcr's International Dictionary includes inter-alia "an institution or place of business, with its fixtures and organised staff-; as, large establishment, a manufacturing establishment." 'Establishment' therefore means the whole trading, business or manufacturing apparatus with a separate identifiable existence. This apparatus which is used for the purpose of carrying on trade, business or undertaking may change hands and pass from one owner to another. The workers operating this apparatus and working in it may change; new workers may take the place of old or come as additional workers. When the ownership of the establishment, which is nothing but another name for this apparatus, is transferred from one person to another the establishment--remains the same:

merely its ownership is changed and it cannot be said to be a new establishment in the hands of the transferee. Now, though the transferee may become the owner of the establishment, be would not necessarily be a successor-in interest of the transferor in respect of the business carried on in the establishment. The question as to whether he can be held to be a successor-in-interest of the transferor would depend on consideration of several relevant facts. What should be the relevant facts to be taken into account in determining this question was explained by Gajendragadkar, J. in the following words : "Did the purchaser purchase the whole of the business ? Was the business purchased a going concern at the time of the sale transaction ? Is the business purchased carried at the same place as before ? Is the business carried on without a substantial break in time ? Is the business carried on, by the purchaser the same or similar to the business in the hands of the vendor ? If there has been a break in the continuity of the business, what 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 area ,he 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 mind in deciding the question as to whether the purchaser can be said to be successor-in-interest of the vendor for the purpose of industrial adjudication. It is hardly necessary to emphasise in this connection that though illustrations 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 of them is decisive of the matter one way or the other-The decision of the question must ultimately depend upon the evaluation of all the relevant factors and it cannot be reached by treating any one of them as of over-riding or conclusive significance." Vide Anakapalla Cooperative Agricultural and Industrial Society Ltd. v. Workmen.(2) (1) [1968] (1) SCR 742.

(2) [1963] Supp. 1 SCR 730.

450 Now in the present case the Industrial Tribunal concentrated only on the question as to whether the Corporation had become the sucessor-in-interest of the company in respect of the business carried on in the establishment of Rajabagan Dockyard and answered this question in the affirmative. We do not think that this was a correct fine of enquiry pursued by the Industrial Tribunal. The only limited question before the Industrial Tribunal was whether the establishment of Rajabagan Dockyard in the hands of the Corporation was a new establishment or it was the some old establishment which was owned by the company prior to its taking over by the Corporation. We shall presently turn to consider this question, but before we do so, we may point out that prima facie even in the view taken by it as regards the question whether the Corporation was the successor-ininterest of the Company, the Industrial Tribunal appears to have missed some material aspects. The Industrial Tribunal seems to have overlooked the following important and relevant considerations. The entire undertaking of the company including the business carried or. in the Rajabagan Dockyard had to be closed down owing to heavy loss. The Rajabagan Dockyard in fact became idle, on the commencement of the hostilities between India and Pakistan and the workers employed in the Rajabagan Dockyard had to be laid off. The notice of closure was put up by the company on 3rd May, 1967 pursuant to the order made by the High Court of Calcutta sanctioning the scheme. There was, therefore, no business which was being carried on in the Rajabagan Dockyard as a going concern when the Rajabagan Dockyard was taken over by the Corporation in terms of the scheme. So far as the workers in the Rajabagan Dockyard were concerned, it was specifically provided in the Scheme after hearing the Union that the Corporation shall take as many of the existing employees as possible and as can be reasonably taken-over but as to exactly how many can be employed was left entirely to the discretion of the Corporation. There was thus no obligation on the Corporation to take-over or absorb all the workers who were previously working the Rajabagan. Dockyard under the Company. Though the Corporation took-over the Rajbagan Dockyard on 3rd May, 1967 under the Scheme, the Corporation did not start operating it until 5th Julie, 1967. There was thus a fairly long break from the commencement of the hostilities between India and Pakistan up to 5th June, 1967 before the Rajabagan Dockyard started functioning again. Then again the business which was started by the Corporation in the Rajabagan Dockyard was to a large extent different in character from that carried on by the company. The principal activity which the Company carried on in the Rajabagan Dockyard was maintenance and repairs of its own fleet of vessels but the Corporation commenced not only ship building and ship repairing work but also general engineering work such as structural fabrication work, forging, casting and machining and also deep sea ship repairing and general engineering work comprised more than 80 per cent of the total work as against only a negligible fraction in the time of the Company and moreover a very substantial part of the work was done for outside parties.

It was also provided in the Scheme that the workers who were not taken-over by the Corporation would be paid "all legitimate and legal compensation." The workers who were taken-over by the Corporation were given fresh 451 appointments from and after 5th June, 1967 with different scales of pay and different conditions of service and there was a break in their continuity of service. The Industrial Tribunal observed that fresh letters of appointment were accepted by the workers under compulsion and duress arising on account of economic necessity but that is not the kind of compulsion or duress which deprives an action of its voluntary character and introduces an infirmity in it. It is indeed unfortunate that in our country there is so much poverty and there are so few job opportunities that the spectre of unemployment and economic want haunts our underprivileged segments of society and corrodes their freedom and choice of action and reduces them to a position where they can be easily dominated and exploited. But the remedy for this state of affairs is not in the hands of the Court, unless an industrial dispute is raised and the Court gets an opportunity of bringing about social justice through the machinery of industrial adjudication. Here, as the matter stands, there can be no doubt that the workers who were taken-over by the Corporation were given fresh employment on different scales 'of pay and different terms and conditions than those enjoyed by them under the Company and they suffered a break of more than a month in their continuity of service. One observation, however, we cannot fail to make and it is that, though the entire undertaking of the Company was closed on 3rd May, 1967, it is strange that no provision was made in the Scheme for payment of closure compensation to those workers who might subsequently be taken-over by the Corporation. If continuity of service was to be denied to these workers, then surely they should be entitled to closure compensation under section 25FFF or at any rate compensation under section 25FF of the Industrial Disputes Act, 1947. We hope and trust that, though no such provision is made in the Scheme, the Government of India will consider this aspect of payment of compensation under section 25FF or section 25FFF vis-a-vis those workers who were fortunate enough to be taken over by the Corporation but whose continuity of service was interrupted. That apart, these were some of the important and relevant considerations which ought to have been taken into account by the Industrial Tribunal but which the Industrial Tribunal apparently failed to do. How far this would vitiate the finding of the Industrial Tribunal on this question is a matter on which we do not wish to express any final opinion as it is not necessary to do so for the purpose of the present appeal. We leave the question open for adjudication as and when occasion may arise in future.

One thing 'is however clear that the establishment in Rajabagan Dockyard in the hands of the Corporation was not a new establishment. It was the same establishment-the same manufacturing apparatus-which was operated by the company prior to its taking-over by the Corporation. It is true that the Corporation purchased and installed new plant and machinery in substitution as also in addition and also added six new industrial sheds Within the premises of the Rajabagan Dockyard but that does not mean that it became a newly set up establishment. The establishment went by the same name of Rajabagan Dockyard; its address remained the same and some of 452 the old plant and machinery also continued to be used by the Corporation. The Registration number of the establishment under the Factories Act also remained the same. It is however not necessary to discuss this aspect of the case any further, as it was almost conceded by Mr. Jagdish Swaroop, learned counsel appearing on behalf of the appellants, that Rajabagan Dockyard could not be said to be an establishment newly set up by the Corporation within the meaning of section 16. His real grievance was against the finding of the Industrial Tribunal that the Corporation was the successor-in-interest of the company in respect of the business carried on in the Rajabagan Dockyard. That finding however cannot stand because as already pointed out by us, it was wholly unnecessary for the decision of the present question and moreover it failed to take into account diverse important and relevant considerations. So far as concerns the question which is directly before us for consideration, we take the view that the Rajabagan Dockyard was not an establishment newly set up by the Corporation from 5th June, 1967 as claimed by but was the same establishment as was owned by the Company prior to 3rd May, 1967. Section 16, sub-s. (1) was, therefore, not attracted and the Corporation was not entitled to claim immunity from payment of bonus under that provision.

We, therefore, uphold the claim of the workers for payment of bonus for the years 1967-68 and 1968-69 as awarded by the Industrial Tribunal and dismiss the appeals with costs.

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