Anakapalla Co-Operative Agricultural and
Industrial Socie Vs. Workmen  INSC 294 (23 October 1962)
23/10/1962 GAJENDRAGADKAR, P.B.
GUPTA, K.C. DAS AYYANGAR, N. RAJAGOPALA
CITATION: 1963 AIR 1489 1963 SCR Supl. (1)
CITATOR INFO :
R 1964 SC 645 (13) D 1967 SC1559 (5) F 1968
SC 514 (18) RF 1969 SC 590 (4) E 1974 SC1604 (18,20) RF 1975 SC1639 (8)
Industrial Dispute-Transfer of
undertaking-When transferee is successor-in-interest of transferor-Payment of
compensation by transferor-Reinstatement claimed against transferee-Whether
claim sustainable-Industrial Disputes Act, 1947 (14 of 1947), ss.25F, 25FF,
A company, running a sugar mill was suffering
losses every year due to insufficient supply of sugarcane and wanted to shift
the mill. The cane-growers formed a cooperative society and purchased the mill.
As agreed between the company and the society, the company terminated the
services of the employees and paid retrenchment compensation to them under s
25FF of the Industrial Disputes Act, 1917. The society employed some of the old
employees of the company but did not, employ 49 permanent and 103 seasonal
employees out of them. The dispute arising out of the refusal of the society to
absorb these workmen was referred for adjudication. The 'Tribunal, by its
award, directed the appellant society to re-employ with continuity of service
as many of old employees as were left out in favour of new employees, aid to
re-employ the remaining employees as and when vacancies occurred, The society
contended that it was not a successor-in-interest of the company and the claim
for reemployment was riot sustainable and that the services of the employees
having, been terminated upon payment of compensation by the company under s.
251, F no claim could be made against the transferee of the company Held, that
the appellant society was the successor-ininterest of the company. The question
as to whether a purchaser of an industrial concern is a successor-ininterest of
the vendor has to be decided on a consideration of several relevant facts such
as-, whether the purchaser purchased the whole of the business; was the
business purchased is a going 731 concern; is the business carried on the same
or similar as that carried on by the vendors is it carried on at the same
place; is the business carried on without a substantial break in continuity;
has goodwill been purchased; is the purchase of all the parts or only of some
etc. The decision of the question depends 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.
In the present case the society purchased the
concern for the purpose of manufacturing sugar and carried on the same
business, at the same place without any appreciable break.
Ramjilal Nathulal v. Himabhai Mills Co. Ltd.,
(1956) 11 L. L J. 244, New Gujarat Cotton, Mills Ltd. v.' Labour Tribunal,
(1957) 11 L. I,. J. 194 and A n tony D' Souza v. Sri Motichand Silk Mills,
(1954) 1 L. L. J. 793, referred to.
Held, further that the claim of the employees
for reinstatement was not sustainable. In all cases falling under s.25FF of the
Act, if the transfer does not come within the proviso, the employees of the
transferred concern are entitled to claim compensation against the transferor
but they cannot make any claim for re-employment against the transferee. The
employees were not entitled to both compensation for termination of service and
immediate reemployment at the hands ,of the transferee. Section 25H was not
applicable to the case as the termination of service upon transfers or closure
is not retrenchment properly so called. Termination of service with which s.
25FF deals cannot be equated with retrenchment covered by s. 25 F. The words
"as if" in s. 25FF clearly distinguish between retrenchment under
s.2(00) and termination of service under s.25FF. Nor could the principles
underlying, s. 25H be applied to the case. The general principles of social
justice and fair play did not justify the claim for reemployment simultaneously
with the payment of retrenchment compensation.
Hariprasad Shiv, Shankar Shukla v. A. D,
Divakar,  v.Union of India,  3 S. C.R. 528 and Indian Hume Pipe Co.
Ltd. v. The Workmen.  2 S.C.R. 32, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 224 of 1962.
Appeal by special leave from the award dated
June 6, 1961, of the Industrial Tribunal, Andhra 732 Pradesh, Hyderabad in
Industrial Dispute No. 13 of 1960.
C. K. Daphtary, Solicitor General of India,
K. Sirinivasamurthi and Naunit Lal for the appellant.
B. P. Maheshwari for respondent No, 1 A.S.R.
Chari, M. K . Ramamurthy, R. K. Garg and T. S. Venkatraman, for the respondent
1962. October 23. The judgment of the Court
was delivered by GAJENDRAGADKAR, J The principal question which arises in this
appeal has relation to the scope and effect of s. 25-FF of the Industrial
Disputes Act, 1947 (14 of 1947) (hereinafter called the Act). An industrial
dispute between the appellant, Anakapalla Co-operative Agricultural &
Industrial Society, and the respondents, its workmen, was referred by the
Governor of Andhra Pradesh. for adjudication to the Industrial Tribunal,
Hyderabad, under s. 10(1)(d) of the Act on December 7, 1960. The respondents
who were in the employment of Vizagapatnam Sugar and Refinery Ltd..
(Hereinafter called the Company) claimed that
they were entitled to re-employment in the said concern which had been
purchased by the appellant, and since their demand for reemployment by the
appellant was not accepted by it, they represented to the State Government that
the said demand 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).
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 733 to Yerravaram in East 'Godavari where 'it
anticipated that the supply of sugarcane 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: cooperative' 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, Rs.
1,90,000/were paid by the Company to its
employees by way of retrenchment compensation. Before the completion of this
transaction, however, the employees had suggested that their Union could itself
purchase the concern, but the Union could not manage to effect the proposed
sale transaction. It, however, suggested that the compensation of Rs.1,90,000/which
the Company had to pay to its employees may be credited to the account of the
Society and the employees paid the said amount by instalments, but this
suggestion was not accepted and as a result of the sale transaction, the
appellant took over the concern and employed such persons as it needed
according to the recommendations of a committee appointed by the appellant in
that behalf. It appears that on the rolls of the Company, there used to be 800
workmen in all ; of these 329 were permanent workmen, whereas 471 workmen
joined the Company as seasonal workmen. The appellant has employed 678
employees in all, 248 of whom arc permanent and the rest seasonal employees.
Out of 248 employees who are engaged on a permanent basis, 220 are from amongst
the employees of the Company and about 28 have been newly appointed. In the
result, about 49 permanent employees and 103 734 seasonal employees of the
Company have not been absorbed by the appellant and the demand which has been
referred for adjudication in the present proceedings is that these permanent
and seasonal employees should be absorbed by the appellant.
The appellant disputed this claim on three
grounds. It urged that the dispute referred to the adjudication of the Tribunal
was not an industrial dispute and so, the reference was incompetent. This
argument was based on the allegation that the Thummapala Sugar Workers Union
which had sponsored the present demand was not a representative Union. On its
roll, a very small number of the appellant's present employees were shown as
members. The bulk of its membership consisted of the previous employees of the
Company. The appellant's employees have formed a separate Union of their own
and this latter Union has not only not sponsored the present demand, but it
seeks to resist it. The Tribunal considered the evidence bearing on this point
and held that the sponsoring Union was, in law, competent to raise the present
industrial dispute, and so, it rejected the appellant's contention about the
invalidity of the reference.
The next contention raised by the appellant
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.
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 735 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 that if the Society has employed less workers, then only as
many old workers should be reinstated as the new workers appointed in their
place., In that case, the old workers will be absorbed in the order of
It is against this order that the appellant
has conic to this Court by special leave.
The first question which falls to be
considered in this appeal is whether the appellant is a successor interest of
the Company. The learned Solicitor General contends that the agreement of sale
under which the appellant has arrived on the scene, clearly shows that it
cannot be treated as a successor-interest of the Company. The terms of the
agreement of sale show that the appellant has left with the Company a part of
its land, its investments to the tune of Rs. 19 lakhs and its liability to the
tune of Rs. 27 lakhs.
4,000 bags of processed sugar have also been
left with the Company at the time of the transaction. Clause 8 of the agreement
provides that the Company will be entitled to withdraw and appropriate to
itself all advances, part payments and deposits made by it either in cash or
security and the Society shall have no right over them. Clause 13 similarly
provides that the Company will pay all its liabilities, secured and unsecured,
determined or to be determined, and the Society will not be liable to pay the
same. Under cl. 11, the godown in which the stocks of sugar were 736 stored Was
to continue in the possession of , the Company free of rent or compensation
until the entire" stock was released gold and delivered. The Company; had
also agreed to (terminated the services of its employees on or before October
9,1959. and, cls. 7, which deals with this topic,, has provided, that:
whatever, claims are to be paid to such, employees on account of such
termination will be paid; by the Company; The appellant has also not purchased
the goodwill of the Company. The argument, therefore, is that though the work
of the Company was, in a sense, going concern when it was purchased by the
appellant, the appellant had not purchased the entire concern including the
goodwill; and so, it would be inappropriate to describe the appellant as the
successer-in-interest of the Company.
In support of his argument, the learned Solicitor-General
has relied on the decision of the Labour Appellant Tribunal in the case
of.Ramjilal Nathual v. Himabhai Mills Company Ltd. (1). In that case, the
Appellate Tribunal had to consider the effect of two transfers : (1) in favour
of the Himabhai Mills Company Ltd., and 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-im-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 Rs. 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 (1) (1956) II L. L. J. 244.
737 transaction were held not entitled to
make a. claim for reemployment by the transferee Company, whereas a claim made,
by the employees of the transferor Company in regard to the second transfer was
held to be sustainable in law. ,It appears that this decision was challenged by
a writ petition before the., Bombay High Court, and the High Court took the
view that in view of the relevant findings recorded by the Labour Appellate
Tribunal in respect of the transfer in favour of the New Gujarat cotton Mills
Ltd., there would be no justification to interfere under Art. 226 of the
Constitution, vide New Gujarat Cotton Mills Ltd. v. Labour Tribunal(1).
The learned Solicitor-General has also
referred to another decision of the Labour Appellate Tribunal in the case of
Antony D'Souza v. Sri Motichand Silk Mills(2). The question which fell for the
decision of the Appellate Tribunal in that case was whether the purchaser could
be said to be successor-in-interest within the meaning of s. 114 of the Bombay
Industrial Relations Act, and it was held that the purchaser was not a
successor-in-interest, because the transaction was a purchase of only plant,
machinery and accessories and not of a going concern or running business.
We ought, however, to add that the decision
in this case was substantially, if not entirely, based on the fact that the
workmen of the transferor Company had executed a document in which specific and
unambiguous demands had been made which supported the purchaser's claim that
the transfer did not make the purchaser a successor-in-interest of the vendor.
This question was sought to be raised before
this Court in the case of Workmen of Dahingeapara Tea Estate v.
Dahingeapara Tea Estate(3 ) as well as in the
case of Keys Constructions Co. (Private) Ltd. v. Its Workmen(4), but on both
the occasions, the Court thought it unnecessary to decide it.
The question as to whether a purchaser of an
industrial concern can be held to be a successor-in-interest (1) 1957 11 I. L.
(3) A. I. R. (1959), S. C. 1026.
(2) (1954) 1 L. L. J. 793.
(4) A. I. R. (1959) S, C. 208.
738 of the vendor will have to be decided on
a consideration of several relevant facts. 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 on 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 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 in
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 of the conveyance and it may be
urged that the exclusion of the said fraction precludes industrial adjudication
from treating the purchaser as a successor-in-interest. Such a plea, however,
cannot be entertained for the simple reason that in deciding this question
industrial adjudication will look at the substance of the matter 739 and not be
guided solely by the form of the transfer. What we have said about the entirety
of the property belonging to the vendor concern, will apply also to the
goodwill which is an intangible asset of any industrial concern. If goodwill
along with the rest of the tangible property has been sold, that would strongly
support the plea that the purchaser is a successor-in-interest; but it does not
follow that if good will has not been sold, that alone will necessarily 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.
It is in the light of this legal position
that the question about the character of the appellant vis-a-vis the vendor
company has to be judged. It would be recalled that the vendor company sold the
concern to the appellant because it was faced with the problem of recurring
losses, and so, the appellant, in purchasing the concern, was not prepared to
have both the advances and the outstandings included in the sale transaction.
The appellant Society has been formed by the local cane growers with the object
of manufacturing sugar which would suit each, one of them in turn and so, the
purchaser was not particularly interested in including the goodwill of the
Company in the sale transaction. The exclusion, of 4,000 bags of processed
sugar shows that the purchaser wanted to accommodate the Company in that
On the other hand, the appellant has carried
on the business of the Company without an appreciable break; the business thus
carried on is the same as that of the Company, the place of business is the
same, and. the very object of entering into the sale transaction was to enable
the local cane growers to carry on the business of the Company.
Therefore, we are inclined to take the view
that having regard to all the relevant facts in this case, 740 the Tribunal was
right in law in coming to the conclusion that the appellant is a successor
in-interest of the Company.
That takes us to the question as to what
would be the nature of the appellants’ liability to the employees of the
Company. Before s. 25-FF was introduced in the Act in 1956, this questions
considered by industrial adjudication on general considerations of fair play
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 'in 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 of better qualified and different type of workers;
conceivably, in some cases, the purchaser has previous commitments for which he
is answerable in the matter of employment of labour; and so, the claim of reemployment
made by the employees of the vendor concern had to be weighed against the pleas
made by the purchaser concern for not employing the said employees and the
problem had to be resolved on general grounds of fair play and social justice.
In such a case, it was obviously impossible to lay down any hard and fast
rules. Indeed, experience of industrial adjudication shows that in resolving
industrial disputes from case to case and from time 741 to time, industrial
adjudication generally avoidsas it should-to lay down inflexible rules because
it is of the ossence,of industrial adjudication that the problem should, be
resolved by reference to the facts in each case so, as to do justice to both
the parties. It was in this spirit that industrial adjudication approached this
problem until 1956,when s. 25-FF was introduced in the Act. Sometimes, the
claim for reemployment was allowed, or sometimes the claim for compensation was
considered. 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 employer as well as re-employment at the hands
of the purchaser on the ground that it was a successor-in-interest of the
It was in the background of this broad
position which had evolved out of industrial adjudications that the Legislature
enacted s. 25-FF on September 4,1956. As it was 'then inserted, s. 25-FF read
thus :"Notwithstanding anything contained in section 25-F, no workman
shall be entitled to compensation under that section by reason merely of the
fact that there has been a change of employers in any case where the ownership
or management of the undertaking, in which he is employed is transferred
whether by agreement or by operation of law, from one employer to another
Provided that-' (a) the service of the workman has not been interrupted by
reason of the 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 742 (c) the employers to whom the ownership or management 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." 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
The validity of this 'assumption was,' however,
successfully challenged before' this Court in the case of Hariprasad
Shivshankar Shukla v. A. Divikar(1). In that case, this Court Was called upon
to consider the true scope and effect of the concept of retrenchment as defined
in s. 2 (oo) and it held that the said definition had to be read in the light
of the accepted connotation of the word, and as such. it could have no wider
meaning than the ordinary connotation of the word, and according to this connotation,
retrenchment means the discharge of surplus labour or Staff by the employer for
an reason whatsoever, otherwise than as a punishment inflicted by way of
disciplinary action, and does not include termination of services (1) 
743 of all workmen on a bonafide closure of
industry or on change of ownership or management thereof. In other words, the
effect of this decision was that though the definition of the word
"retrenchment" may perhaps have included the termination of services
caused by the closure of the concern or by its transfer, these two latter cases
could not be held to fall under the definition because of the ordinary accepted
connotation of the said word. This decision necessarily meant that the word
"retrenchment" in s. 25FF had to bear a corresponding interpretation.
In that case, the employees of the Barsi Light Railway Company, Ltd. had made a
claim for retrenchment compensation under s. 25-FF against the purchaser of the
Railway Co., and the employees of the Shri Dinesh Mills Ltd. had made a similar
claim against their employer on the ground that the Mills had been closed.
These claims had been allowed by, the Bombay High Court and the employers had
come to this Court in appeal.
This Court having held that the word
"retrenchment" necessarily postulated the termination of the
employees' services on the ground that the employees had become surplus,
allowed the appeals preferred by the employers and held that the employees'
claim against the purchaser in one case and, against the employer who had
closed his business, it, the other, could not be sustained. Thus, is a result
of this decision, it. was realised that if the object of the legislature in
introducing section 25-FF was to enable the employees of the transferor concern
to claim retrenchment compensation unless the three conditions of the proviso
to the said section were satisfied it could not be carried, out any longer. The
decision of this Court in Hariprasad's case(1) was pronounced on November 27,
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 (1) S.C.R. 121.
744 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, pew 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) the new employer 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." In due course, this Ordinance was followed
by Act 18 of 1957 on June 6, 1957: By 'this Act, s. 25 FF as it was enacted by
the Ordinance has been introduced in the parent Act. It would be noticed that
the Ordinance came into force retrospectively as from December 1, 1956, that is
to say, three 'days after the judgment of this Court was Pronounced in
Hariprasad's case (1).
(1)  S.C.R. 121.
745 The Solicitor-General contends that the
question in the present appeal has now to be determined not in the light of
general principles of industrial adjudication., but by reference to the
specific provisions of s. 25-FF itself. He argues., and we think rightly, that
the first part of the section postulates that on a transfer of the ownership or
management of an undertaking, the employment of workmen engaged by the said
undertaking comes to an end, and it provides for the payment of compensation to
the said employees because of the said termination of their services, provided,
of course, they satisfied the test of the length of service Prescribed by the
section. The said part further provides the manner in which and the extent to
which the said compensation has to be paid. Workmen shall be entitled to notice
and compensation in accordance with the provisions of S. 25-F, says the
section,. as if they had been retrench ed. The last clause clearly brings out
the fact that the termination of the services of the employees does not in law
amount to retrenchment and that is consistent with the decision of this Court
in Hariprasad's case (1). The Legislature, however, wanted to provide that
though such termination may not be retrenchment technically so-called, as
decided by this Court nevertheless the employees in question whose services are
terminated by the transfer of the undertaking should be entitled to
compensation, and so, S. 25-FF provides that on such termination compensation
would be paid to them as if the said termination was retrenchment. The words
"as if " bring out the legal distinction between retrenchment defined
by s. 2(oo) as it was interpreted by this Court and termination of services
consequent upon 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 (1)  S.C.R. 121.
746 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-FFapplies, 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.
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
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 claim compensation against the
transferor and they cannot make any claim for reemployment against the
transferee of the undertaking. Thus, the effect of the enactment of s.25-FF is
to restore the position which the Legislature had apparently in mixed when s.
25-FF Was originally enacted on September 4, 1956. By amending s. 25-FF, the
Legislature has made it clear that if industrial undertakings are transferred,
the employees of such transferred undertakings should be entitled to
compensation, unless, of course, the continuity in their service or employment
is not disturbed and that can happen if the transfer satisfies the three
requirements of the proviso.
In this connection, it is necessary to point
out that even before s.25-FF was introduced 'in the Act for the first time,
when such questions were considered by industrial adjudication on general grounds
of fair play and social justice, it does not appear that employees of the
transferred concern were held entitled to both compensation for termination of
service and immediate re-employment at the hands 747 of the transferee. The
present position which results from the enactment of s.25-FF, as amended, is,
therefore, substantially the same as it was at the earlier stage. It is common
ground that if a transfer is fictitious or 'benami' s. 25-FF has no application
at all. 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.
Mr. Chari, however, urges that the present
case ought to be government by the provisions of s. 25-H of the Act. This'
argument proceeds on the assumption that the case of termination of service
resulting from the transfer of ownership or management of an undertaking to
which s. 25-FF applies is a case of retrenchment properly so-called. In our
opinion, this assumption is clearly not well-founded.
The first difficulty in accepting the correctness
of this assumption is the decision of thisCourt in Hariprasad's case (1) to
which we have already referred. The decision of this Court in that case clearly
shows that the termination of services resulting from transfer or closure is
not retrenchment, and it is on the basis 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 Q. 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(2). In that case, (1)  S.C.R. 121.
(2)  3 S. C. R. 528, 748 this Court had
to consider the effect of the words " as if" occurring in s. 25-FF,
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
Mr. Chari then argued that though in terms s.
25-H may not apply to the present case, the general principle underlying the
provisions of the said section should be invoked in dealing with the claim made
by the respondents against the appellant. His argument is that too much
emphasis should not be placed on the identity of the individual employer in
dealing with the present question and be, suggested that what is important to
bear in mind is the identity of the undertaking which was run by the vendor
before and which is run by the vendee now. If the undertaking is the same,
there is no reason why the workman should not be entitled to claim continuity
of service in the said undertaking, In our opinion this argument is
misconceived. , Once we reach the conclusion that in the case of a transfer of
any undertaking the Legislature has by s. 25-FF provided for payment of
compensation to the employees on the clear and distinct basis that their
services have been terminated by such transfer, it is difficult to see how any
questions of fair play or social Justice would justify the claim by the resents
that they ought to be re-employed by the, appellant.
It is true that in cases falling under s.
25-F, workmen may get retrenchment compensation and they may yet be able to
claim re-employment under s. 25-H and in that sense, some workmen may get both
retrenchment compensation and reemployment. That is no doubt the effect of
reading s.25,F and s. 25-H together. But it must be borne in mind that in the
case of retrenchment, the undertaking continues and only 749 some workmen are
discharged as surplus and it is the problem of re-employment of this small
number of discharged workmen.
that is tackled by s. 25-H. Besides, under s.
25-H, a discharged workman may not be entitled to claim reemployment
immediately after retrenchment or even soon thereafter. It is only if the
employer who discharged him as surplus requires additional' workmen that his
opportunity may occur. In the present case, however, the position is entirely
different. As soon as the transfer is effected under s. 25 FF, all employees
ate entitled to claim compensation, unless, of course, the case of transfer
falls under the proviso ; and if Mr. Chari is right, these workmen who have
been paid compensation are immediately entitled to claim re-employment from the
transferee. This double benefit in the form of payment of compensation and
immediate re-employment cannot be said to be based on any considerations of
fair play or justice. Fair 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 or, 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 (1), " 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 it 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 (1)  2. S. C. R. 32.
750 that in cases of this kind, the workmen
must get retrenchment compensation and re-employment al most simultaneously is
inconsistent with the very basis of the concept of retrenchment compensation..
We are therefore, satisfied that the general principles of social justice and
fair play on which this alternative argument is based, do not justify the claim
made by the respondents.
In the result, the appeal it allowed and the
award is set aside. There would be no order as to costs.