Workmen of Subong Tea Estate Vs. The
Outgoing Management of Subongtea Estate & ANR  INSC 235 (2 December
02/12/1963 GAJENDRAGADKAR, P.B.
GUPTA, K.C. DAS
CITATION: 1967 AIR 420 1964 SCR (5) 602
RF 1970 SC1334 (12,15)
Industrial Dispute-Retrenchment of
workmen-Validity-Industrial Disputes Act,1947 (14 of 1947), ss. 10(1) (d), 25F,
On the 12th January, 1959, respondent no. 1,
who managed the. Subong Tea Estate, agreed to transfer the aforesaid Estate of
respondent no. 2. This agreement was subject to the approval to the Reserve
Bank of India. The said approval was accorded on the 15th July, 1959, and the
conveyance was actually executed on the 28th December, 1959.
On the 17th February, 1959, the vendee i.e.
respondent no. 2 was put in possession of the tea garden. On the 31st August
1959, the manager of the vendor company, served notices on the 8 employees in
question intimating to them that their services would be terminated with effect
from the 1st October, 1959. The eight employees were also paid retrenchment
compensation. The Union representing the said employees, protested against the
retrenchment in question. The dispute in regard to the impugned retrenchment
was referred to the Industrial Tribunal, under s. 10(1) (d) of the Act.
The Tribunal held that the impugned
retrenchment had been validly effected by the vendor. It is against this award
that the appellants have come to this Court.
Held: (i) Section 25F of the Industrial
Disputes Act provides that no workmen employed in any industry who has been in
continuous service for not less than one year under an employer shall be
retrenched by that employer until one month's notice has been served on him as
prescribed by subs. (a); compensation paid to him as provided by sub-s. (b),
and notice in the prescribed form is served on the appropriate Government as
required by sub-s. (c). In other words, the three conditions prescribed by cls.
(a), (b) and (c) of s. 25F appear prima facie to constitute conditions
precedent before an industrial workman can be validly retrenched.
(ii) Section 25F prescribes the conditions
precedent for retrenchment, s. 25G prescribes the procedure for retrenchment
and s. 25H, recognises the right of retrenched workmen for re-employment.
(iii) The impugned retrenchment cannot,
therefore, be taken to attract the operation of s. 25FF at all. It is not
retrenchment consequent upon transfer it is retrenchment effected after the
transfer was made and it had been brought about by the transferee who, in the
meanwhile, had become the employer of the 603 retrenched workmen. The impugned
retrenchment being invalid in law, can-not be said to have terminated the
relationship of employer and employee between the vendee. respondent no.
2 and 8 workmen concerned. Therefore, the
Tribunal erred in law in holding that the impugned retrenchment had been
properly effected by the vendor and that the only relief to which the
retrenched employees were entitled was compensation and notice under s.25FF of
(iv) The acceptance of retrenchment
compensation by the 8 workmen should not be held to create a bar against them
in the present proceedings for the reason that such technical pleas are not
generally entertained in industrial adjudication.
(v) In the present case, if the retrenchment
effected by the vendor company is invalid because it had ceased to be the
employer, then it would follow that the retrenchment must be deemed to have
been effected by the vendee. The retrenchment effected by the vendee is invalid
for the reason that it has not complied with s. 25F or s. 25G of the Act. In
the present case no case has been made out for effecting any retrenchment at
all. The management can retrench its employees only for proper reasons. The
employer's right to retrench his employees can be validly exercised only where
it is shown that any employee has become surplus in the undertaking. Workmen
may become surplus on the ground of rationalisation or on the ground of economy
reasonably and bonafide adopted by the management or of other industrial trade
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 132 of 1963.
Appeal by special leave from the award date
July 5, 1961 of the Industrial Tribunal Assam Reference No. 39 / 59.
D. L. Sen, and Janardan Sharma, for the
Sankar Bannerjee, S.N. Mukherjee and B.N
Ghose, for respondent no. 1.
A.V. Viswanatha Sastri, B.P. Maheshwari an
P.K. Ghose, for respondent no.2.
December 2, 1963. The Judgment of the Court
was delivered by GAJENDRAGADKAR J. The industrial dispute which has given rise
to this appeal arose between the appellants, the workmen of Subong Tea Estate,
and the management of Subong Tea Estate represented by respondents 1 & 2.
1, M/s. Macneill 604 & Barry Ltd., who
managed the Subong Tea Estate, has transferred the said estate to respondent
No. 2, M/s.
Gungaram Tarachand otherwise known as
Hindusthan Tea Company. On the occasion of the retrenchment of the 8 employees
in question, respondent No. 1 has paid adequate retrenchment compensation to
them. The appellants, however, contended that at the relevant date when the 8
workmen were retrenched, respondent No. 2 was their employer, and so,
respondent No. 1 had no authority to pass the orders of retrenchment. It was
further their case that the impugned retrenchment is invalid and illegal
inasmuch as it is not justified under s. 25F of the Industrial Disputes Act,
1947 (No. 14 of 1947) (hereinafter called the Act), and has not been carried
out according to the principles prescribed by s. 25G of the said Act. That is
how the dispute in regard to the impugned retrenchment came to be referred by
the Governor of Assam for industrial adjudication to the Industrial Tribunal,
Assam, under s. 10(1) (d) of the Act.
Four issues were referred to the Tribunal for
its adjudication. The first issue was whether the impugned retrenchment of the
8 workmen was justified ; the second was whether respondent No. 2, the
transferee Co., was justified in refusing to maintain the continuity of service
and original terms and conditions of the workmen concerned;
under the third issue, the Tribunal was
required to consider whether the workmen concerned were entitled to
reinstatement and any other relief; the fourth issue which was added some time
later, required the Tribunal to decide whether the retrenched workmen were
entitled to any further relief in case their retrenchment was held to be valid.
The Tribunal has answered all these questions against the appellants, except in
regard to two employees Mr. G. C. Bhattacharjee and Mr. P. K. Sarma Chowdhury
in whose cases the Tribunal has recommended that respondent No. 1 should pay
them gratuity ex gratia in such sums as respondent No. 1 may consider
reasonable with due regard to compensation already paid to them. it is this
award which is challenged before us by the 605 appellants in the present appeal
which has been brought to this Court by special leave.
Before dealing with the points of law raised
in the present appeal by Mr. Sen Gupta on behalf of the appellants, it is
necessary to state the material facts in some detail. The agreement of transfer
between respondent No. 1 and respondent No. 2 (hereafter called the Vendor and
the Vendee respectively) was reached on the 12th January, 1959. It was agreed
between the parties that when the agreement was completed, it would take effect
from the 1st January, 1959.
This agreement was subject to the approval of
the Reserve Bank of India. The said approval was accorded on the 15th July,
1959, and the conveyance was actually executed on the 28th December, 1959.
Pending the execution of the conveyance, on the 17th February, 1959, the Vendee
was put in possession of the tea garden. These facts are not in dispute.
On the 31st August, 1959, Mr. Hammond, the
Manager of the Vender Co., served notices on the 8 employees in question
intimating to them that their services would be terminated with effect from the
1st October, 1959. The said employees were told that they would be paid the
salary for the month of September, but would not be required to work. They were
also informed that retrenchment compensation under s. 25F of the Act as well as
pro rata dues on account of leave wages earned on 31st August, 1959 would be
paid to them and their claims for Provident Fund dues would likewise be
In pursuance of these notices, the eight
employees were paid retrenchment compensation due to them on the 31st August,
1959. On the 1st September, 1959, the Union representing the said employees,
protested against the retrenchment in question. Mr. Bhattacharjee, the
Secretary of the Union, alleged in his communication to the Vender Co. that the
impugned retrenchment was invalid and that Mr. Hammond had no power to
terminate the services of the said employees.
The said employees 606 further complained
that they were compelled to take notices of retrenchment and receive the amount
of compensation, and that the acceptance of the said amount by them was without
prejudice to their claim for continuity of service and to their right to
challenge the validity of their retrenchment.
The case made by the Union and the retrenched
workmen in substance, was that on the 17th February, 1959, the tea garden had
been delivered over to the Vendee and that thereafter the Vendor had no right,
title or connection with the said garden and as such, it ceased to be the
employer of the employees working in the garden. This position was disputed by
the Vendee and that has ultimately led to the present dispute.
The decision of the main question about the
validity of the impugned retrenchment depends upon the applicability of s.
25FF of the Act to the facts of this case,
and that, in turn, will need an examination of the relevant facts in relation
to the transfer of title and management of the tea garden from the vendor to
the Vendee. In that connection, it would be useful to refer to the negotiations
that took place between the parties and the correspondence that passed between
them before the sale-deed was actually executed.
This evidence would give us an idea as to the
intention of the parties and their conduct which would have a material bearing
in deciding the question as to whether or not transfer of management had taken
place in favour of the Vendee prior to the date of the impugned orders of
On 24/26 of Dec., 1958, the Managing Agents
of the Vendor Co. wrote to the Vendee that the Vendor was agreeable, pending
the completion of the sale, to deliver possession of the estate to the Vendee
against the payments as specified in clause 10 of the vendor's letter of offer,
and they added that after the Vendee obtained possession, he would be precluded
from claiming avoidance of the contract on any ground whatsoever, save and
except on the ground of the Reserve Bank's sanction not being obtainable. The
letter further specified the consequences of the 607 delivery of possession of
the tea garden to the Vendee. One of the consequences thus enumerated was that
after the delivery of possession, the management and the operational control of
the estate would be in the hands of the Vendee, and the Garden Manager of the
Vendor would be allowed to continue to occupy the Bungalow in order to assist
the working of the estate under the management and control of the Vendee. It
appears that the Vendee was not prepared to continue the European employees and
members of the administrative staff, and so, the Vendor intimated to the Vendee
in this letter that from the date of the delivery of possession, the Vendee
will not have to pay the salary or remuneration of the Garden Manager and the
other European employees of the estate, but the entire Indian staff and
labourers would continue to be employed by the Vendee during the period that
the garden will remain in its possession pending the completion of the sale.
Clause 13 of this letter referred to the agreement that the sale was to take
effect from the 1st January, 1959, and added that the management and
operational control of the estate would be delivered over to the Vendee on its
taking possession of the tea estate.
On the 5th January, 1959, the Vendee replied
to the above letter, and so far as the statements in paragraphs 10 and 13 of
the Vendor's letter are concerned, the Vendee accepted them as correct. 0n the
30th January, 1959, M/s. Macneill & Barry Ltd wrote to the Vendee
expressing their regret that they could not make over possession of the tea
estate to the Vendee's Manager until they received the Vendee's acceptance of
the title in accordance with the terms and conditions of sale already agreed
upon between them. Correspondence followed between the parties and on the 11th
February, 1959, M/s. Macneill & Barry Ltd. wrote to the Vendee that
they,had duly received the Vendee's acceptance of the title of the Vendor.
Along with this letter, a provisional statement of account covering the running
expenses and 50 per cent of the value of the Stores, was sent to 608 the
Vendee. The letter further expressed the hope that the Vendor expected to
receive a cheque for a total sum of Rs.
1,70,000 to cover the items shown in the
accompanying statement. The letter further added that after the said cheque was
received, possession would be delivered over to the Manager of the Vendee.
Meanwhile, on the 9th February, 1959, M/s.
Macneill & Barry Ltd. wrote to the Vendee that they proposed to lay off all
workers and clerical staff members, other than those required for essential
works for a period of 45 days from the 18th February, 1959 and this decision
had been taken by them as an economy measure in respect of all the tea gardens
under their management. They, therefore, wanted the advice of the Vendee
immediately as to whether the Vendee desired that the proposed lay off should apply
to Subong Tea Estate which was being sold to the Vendee. The letter added that
if lay off was effected, it may give rise to an industrial dispute and that
whatever the decision in the said dispute would be, would bind the Vendee. At
this stage, we may add that the vendee ultimately told Macneill & Barry
Ltd. that it was not agreeable to declare a lay off and accordingly, no lay off
was declared in respect of the tea estate in question, though it appears that
lay off was declared by Macneill & Barry Ltd. in respect of the other tea
estates under their management.
On the 13th February 1959, Macneill &
Barry Ltd. wrote to the Vendee that they had received a cheque for Rs. 1,20,000
and thereafter had instructed their Manager telegraphically to deliver possession
of the garden to Mr. Gopiram Agarwalla, the Vendee's Manager on the 16th
February. The Vendor's Manager had also been instructed to deliver the Cash
Balance on the same day. In pursuance of this letter, Mr. Hammond, the Acting
Manager of the Vendor Co., handed over possession to the Manager of the Vendee
on the 17 February, 1959. And on the 21 st February, 1959, Mr. Hammond reported
to the Labour Officer that the new owners had decided not to lay 609 off the
workmen of the said garden. After delivering possession to the Vendee's
Manager, Mr. Hammond made a report in that behalf to Macneill & Barry Ltd.
He added that he had obtained a receipt from the Vendee in token of the
delivery of possession of the garden. He also informed his principal that the Vendee
had decided to continue and employ all workmen and not to declare any lay off,
and so, lay off notices had not been issued in respect of the employees of the
After the tea garden was delivered over to
the Vendee, on the 3rd March, 1959 Macneill & Barry Ltd. enquired from the
Vendee whether the tea chests which had already been ordered by the Vendor
would be needed by the Vendee, and the Vendee replied by saying that it would
make its own arrangement for getting the supply of tea chests, and that the
order under reference given by the Vendor in that behalf may be cancelled.
It appears that pending the formal execution
of the conveyance, the Controller of Licensing had called upon the Vendee to
produce the relevant documents in support of the transfer of the tea garden in
its favour. This communication was addressed by the Controller of Licensing to
the Vendee on the 4th May, 1959. The approval of the Reserve Bank was, however,
not received till the 15th July, 1959. Pending the receipt of the said
sanction, it was arranged between the Vendor and vendee that Mr. Hammond should
sign the necessary excise documents.
On the 28th August, 1959, the Vendee wrote to
Macneill & Barry Ltd. enquiring from them the name of the person to whom
the Vendee should submit its indent for the supply of Sulphate of Ammonia.
Apparently, the Vendee was experiencing some difficulty in securing the said
article and it wanted the assistance of the Vendor in that behalf.
While the tea estate was thus being managed
by the Vendee with the assistance, where necessary, of the Vendor, the Vendee
wrote to M/s. Macneill & Barry Ltd. on the 25th August, 1959, and informed
them that it had 1/SCI/64-39 already sent a list of the Indian staff whose
services it wished to retain, and had called upon the Vendor to terminate the
services of the surplus staff forthwith. This letter told Macneill & Barry
Ltd. that action should be promptly taken to terminate the services of the said
surplus staff as from the 1st September, 1959. In accordance with this letter,
notices were served by Mr. Hammond on the 8 workmen concerned on the 31st
August, 1959, and as we have already indicated, these workmen were paid their
retrenchment compensation and their services were terminated. Amongst these 8 workmen,
one was a Doctor engaged by the Vendor Co. in its Dispensary, two were
Pharmacists in the said Dispensary and the remaining five were members of the
This retrenchment led to a threat of strike,
and so, Macneill & Barry Ltd. wrote to the Vendee that for the strike which
was the result of retrenchment, the Vendor would not be responsible. As a
result of the retrenchment, the letter added, the medical staff had become
under-staffed and that naturally led to grievances on the part of the
employees. The letter further told the Vendee that it was not the duty of the
Vendor to ensure that the retrenched employees leave the tea estate and that it
was entirely the concern of the vendee to face the situation which may arise as
a result of the said retrenchment. On the 28th December, 1959, the sale deed
was eventually executed. The consideration for the transfer recited in the
saledeed is Rs. 3,75,000. By this sale-deed it was agreed that once the
conveyance was completed, the transfer was deemed to have taken effect from the
1st January, 1959, and the purchaser had covenanted by this sale deed that he
would be under obligation to every employee or labourer of the tea estate in
question (except the European management and any other member of the Company's
executive staff) either to continue his services on the same terms and
conditions of service as were applicable to him before the sale of the said tea
estate, or to pay him 611 compensation Prescribed by law, subject to the other
conditions specified in the document.
While these developments were taking place
between the Vendor and the Vendee, the Union of the appellants was making
efforts to make enquiries in regard to the transfer of the tea garden from the
Vendor to the Vendee. On the 13th January, 1959, the Secretary of the
appellants' Union wrote to Macneill & Barry Ltd. enquiring whether the
Vendor proposed to transfer the tea garden, and drew their pointed attention to
the requirements of s. 25FF of the Act. Since no reply was received, the same
query was repeated on the 17th April, 1959, and a copy of this query was
forwarded to the Labour Officer, Cachar and the Labour Commissioner, Assam.
When the Labour Officer addressed the same query to M/s. Macneill & Barry
Ltd., the latter replied to the Union on the 25th April, 1959 that when making
the transfer, they would bear in mind the requirements of s. 25FF of the Act.
They disputed the allegation of the
appellants that there was any collusion between the Vendor and the Vendee in
respect of the transfer under negotiation. Ultimately, when the retrenchment
was effected, the appellants protested and persuaded the State Government to
refer the dispute to the Industrial Tribunal for its adjudication. That, in
brief, is the background of the relevant and material facts in the light of
which the dispute between the parties has to be decided.
It is somewhat remarkable that when the
dispute was taken before the Industrial Tribunal, the Vendor did not accept its
liability for retrenchment, and seemed to suggest that the Vendee was really
concerned with it. From the date of delivery of possession of the tea estate
until the completion of the sale, the Manager of the Vendor continued to remain
in the estate in a supervisory capacity under the management and control of the
Vendee, and so, it was urged that the Vendee alone had the right to retrench
the workmen on the relevant date.
612 On the other hand, the Vendee contended
that on the date the impugned retrenchment took place, the Vendor was the
employer and the Vendee was in management of the garden as the Vendor's Agent.
That is why no claim could be made against the Vendee by the retrenched
employees, and the dispute in regard to the said retrenchment was one in which
the Vendee was not interested or concerned. The appellants challenged the
correctness of the Vendee's stand and, questioned the validity of the
retrenchment on the basis that the Vendee was their employer and the
retrenchment in question had contravened the provisions of s. 25F and s. 25G of
the Act, and was otherwise invalid in law.
The Tribunal has, in substance, upheld the
plea raised by the Vendee and it has accordingly come to the conclusion that
the retrenchment of the 8 workmen had been validly effected by the Vendor; the
said employees had been paid their proper retrenchment compensation and as
such, they were not entitled to any further relief in the present proceedings.
Mr. Sen Gupta for the appellants contends that these findings are erroneous in
The true legal position in respect of the
industrial law as to retrenchment is not in doubt or in dispute. Section 25F of
the Act prescribes the conditions precedent to a valid retrenchment of
industrial employees. It provides that no workman employed in any industry who
has been in continuous service for not less than one year under an employer
shall be retrenched by that employer until one Month's notice has been served
on him as prescribed by subsection (a);
compensation paid to him as provided for by
sub-section (b), and notice in the prescribed form is served on the appropriate
Government as required by sub-section (c). In other words, the three conditions
prescribed by clauses (a), (b) and (c) of s. 25F appear prima facie to
constitute conditions precedent before an industrial workman can be validly
613 Section 25G prescribes the procedure for
effecting retrenchment. In substance, this provision requires that in the
absence of any agreement between the employer and the workman, in effecting
retrenchment in regard to any category of workmen the employer shall ordinarily
retrench the workman who was the last person to be employed in that category,
unless for reasons to be recorded the employer retrenches any other workman.
This industrial principle is generally described as "the last come first
go" or, "the first come last go". Under s. 25H, a rule has been
prescribed for the re-employment of retrenched workmen.
This rule requires that after effecting
retrenchment, if the employer proposes to take into his employment any persons,
he shall give an opportunity to the retrenched workmen who offer themselves for
re-employment and these retrenched workmen shall have preference over new
applicants. Thus, s. 25F prescribes the conditions precedent for retrenchment,
s. 25G prescribes the procedure for retrenchment and s. 25H recognises the
right of retrenched workmen for reemployment.
In dealing with the question of retrenchment
in the light of the relevant provisions to which we have just referred, it is,
however, necessary to bear in mind that the management can retrench its
employees only for proper reasons. It is undoubtedly true that it is for the
management to decide the strength of its labour force, for the number of
workmen required to carry out efficiently the work involved in the industrial
undertaking of any employer must always be left to be determined by the
management in its discretion, and so, occasions may arise when the number of
employees may exceed the reasonable and legitimate needs of the undertaking. In
such a case, if any workmen become surplus, it would be open to the management
to retrench them. Workmen may become surplus on the ground of rationalisation
or on the ground of economy reasonably and bona fide adopted by the management,
or of other industrial or trade reasons. In all these cases, the man614 agement
would be justified in effecting retrenchment in its labour force. Thus, though
the right of the management to effect retrenchment cannot normally be
questioned, when a dispute arises before an Industrial Court in regard to the
validity of any retrenchment, it would be necessary for industrial adjudication
to consider whether the impugned retrenchment was justified for proper reasons.
It would not be open to the management either capriciously or without ,.any
reason at all to say that it proposes to reduce its labour force for no rhyme
or reason. This position can not be seriously disputed.
Having considered the general provisions
prescribed by the Act in regard to retrenchment, it is now necessary to look at
s. 25FF. Section 25FF deals with cases where the ownership or management of an
undertaking is transferred.
Such a transfer may be effected either by
agreement or by operation of law. The section provides that in all cases which
do not fall under the proviso to the section, on a transfer of ownership or of
management of an industrial undertaking, 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. 25F, as if the workman had been
retrenched. In other words, cases of transfer not covered by the proviso to s. 25FF,
attract the provisions of s. 25F and that proceeds on the basis that the
transfer in question brings about retrenchment of the employees to which the
It is on that basis that the employees of the
transferred undertaking become entitled to compensation and notice. The
appellants contend that in the present case, transfer of management took place
on the 17th February, 1959 when the Vendor delivered over to the Vendee
possession and management of the tea estate; and the argument is that it is
after the transfer of management thus took place that the retrenchment in
question was effected. It is not a case where workmen were paid compensation on
the 615 eve of transfer; it is a case where workmen of the transferred
undertaking continued to be employed by the Vendee after transfer of management
of the undertaking took place and as such, the retrenchment in question must,
in law, be deemed to have been effected by the Vendee and must satisfy the test
prescribed by s. 25F and s. 25G of the Act.
Mr. Sastri for the Vendee, on the other hand,
strenuously argues that on the date of retrenchment, the Vendee was not in law
concerned either with the' ownership or with the management of the undertaking.
According to him, the delivery of possession on which the appellants base their
case, cannot be said to amount to the transfer of the management of the
undertaking under s. 25FF. He contends that s. 25FF deals with the transfer of
the undertaking or the transfer of its management. The first relates to the
transfer of the title and the second to the transfer of management as distinct
from title. His case is that the.
transfer which is evidenced by the conveyance
executed between the parties on the 28th December, 1959 clearly shows that it
was subject to two conditions; it had to receive the sanction of the Reserve
Bank and the Vendee had made it clear that the staff whom the Vendee regarded
as surplus had to be retrenched by the Vendor before the Vendee could take over
the undertaking as an owner. Since these two conditions can be treated as
conditions precedent to the transfer, there can be no question of the transfer
of the undertaking having taken place before the date of retrenchment.
Then as to the transfer of the management,
Mr. Sastri's argument is that the transfer of management to which s. 25FF
refers cannot take in cases of delivery of possession of the kind that took
place between the parties to the present appears In the context, the transfer
of ownership and transfer of management refer to the transfer of ownership on
the one hand and transfer of management on the other, management and ownership
being disintegrated from each other. If any undertaking is under the management
of the Managing Agency and the rights 616 of the Managing Agency are
transferred, it would be possible to postulate that the transfer of the Managing
Agency amounts to the transfer of the management of the undertaking under s.
25FF; where management is transferred as an incident of the transfer of
ownership, it cannot be said that the incidental transfer of management
evidenced by the delivery of possession is the kind of transfer of management
which s. 25FF has in view.
Besides, Mr. Sastri urges that all that
happened in the present case on the 17th February, 1959 was that the Vendee
entered into possession, but continued to manage the estate as an Agent of the
Vendor; until the two conditions precedent were satisfied, the Vendee could not
have taken upon itself the task' of managing the estate as an owner.
If the sanction of the Reserve Bank had not
been obtained, the whole transaction would have fallen through and that is an
aspect of the matter which cannot be ignored in determining the effect of
delivery of possession in the present case. That is why Mr. Sastri has
supported the finding of the Tribunal that at the relevant date it was the Vendor
who was the employer and as such, s. 25FF came into play because the
retrenchment was effected in consequence of one of the terms of transfer by
which the Vendee refused to take over the surplus staff.
There is no doubt some force in the
contentions raised by Mr. Sastri, but in assessing the effect of these
contentions, it will be necessary to bear in mind certain other facts which are
of considerable significance. It is common ground that on the 15th July, 1959,
the approval of the Reserve Bank was obtained, and so, there can be no doubt
whatever that as from the 15th July, 1959, the essential condition precedent
having been satisfied, the Vendee became the owner of the property. We have
already noticed that the main stipulation in the conveyance was that whenever
the conveyance may be actually registered, it was agreed to take effect from
the Ist January, 1959. Even taking into account the fact 617 that the approval
of the Reserve Bank was a condition precedent, there can be no escape from the
conclusion that after the approval was obtained, the operative clause in the
conveyance came into play and the Vendee who had already obtained possession of
the estate became the owner of the property and his possession became the
possession of the owner. Therefore, whatever may be the character of the
Vendee's possession from the 17th February to the 15th July, 1959, as from the
latter date it would be impossible to accept the Vendee's case that it
continued to manage the property as the Agent of the Vendor. That is one
important point which cannot be ignored.
There are other aspects of this question
which are equally important. We have noticed that when M/s. Macneill &
Barry Ltd. had decided to declare a lay off in respect of all the tea estates
under their management, they did not take that action in respect of the present
tea estate, because on consulting the Vendee, they learnt that the Vendee was
opposed to the lay off. The terms on which Macneill & Barry Ltd. enquired
from the Vendee, what it thought about the proposed lay off, and the words in
which the Vendee communicated its decision, clearly suggest that the parties
treated the Vendee as the employer whose voice in the matter of lay off was
regarded as decisive. It is not disputed that the leave pay as well as the
wages from day to day were paid by the Vendee to all the employees including
the 8 retrenched workmen. The work done by the employees was controlled,
directed and supervised by the Vendee. the matter of purchasing fertilizer and
the tea chests, it is the Vendee who decided and in fact, the order given by
the Vendor for the supply of tea chests ha to be cancelled because the Vendee
was going to make its own arrangements in that behalf. It is true that Mr.
Hammond continued to stay in the Garden for some time, but as we have already
seen until the conveyance was executed, the necessary excise documents could
not be signed by the Manager of the Vendee and had to be signed by Mr Hammond
618 Thus, all the relevant facts in regard to the running of the tea estate and
its management after the estate was delivered over to the Vendee on the 17th
February, 1959, clearly and unambiguously show that the Vendee took charge of
the estate and in fact, became the employer of the employees who were working
in the estate. So far as the appellants are concerned, they were not parties to
the transfer and in fact, did not know on what terms the transfer was being affected.
So, in dealing with the technical question as to the effect of transfer, judged
in the light of the relevant conditions agreed to between the parties in that
behalf, we must bear in mind the factual position so far as the relations of
the workmen with the Vendee are concerned. If the Vendee on taking possession
of the estate intervened in the management and continued the management of the
estate on the basis that it was the employer in respect of the employees, then
it would be idle for the Vendee to suggest that as between it and the
employees, the relationship of employer and employee did not exist. We are,
therefore, satisfied that at least from the 15th July, 1959, the tea estate was
in the possession and management of the Vendee as an owner and that the conduct
of the parties clearly shows that the Vendee was the employer and the workmen
working in the garden including the 8 retrenched workmen were the Vendee's
employees. If that be so, whether or not the transfer of management took place
on the 17th February, 1959, there can be little doubt that after the 15th July,
1959, the Vendee accepted the employees as its workmen and became answerable to
them in that character. The impugned retrenchment cannot, therefore, be taken
to attract the operation of s. 25FF at all. It is not retrenchment consequent
upon transfer; it is retrenchment effected after the transfer was made and it
had been brought about by the transferee who, in the meanwhile, had become the
employer of the retrenched workmen. Therefore, we are satisfied that Mr. Sen
gupta is right in contending that the Tribunal erred in law in holding that the
impugned retrench619 ment had been properly effected by the Vendor and that the
only relief to which the retrenched employees were entitled was compensation
and notice under s. 25FF of the Act.
It is true that the notices for effecting the
retrenchment were issued by Mr. Hammond and it was Mr. Hammond who paid the
retrenchment compensation to the 8 employees. Mr. Sastri sought to make a point
against the appellants by suggesting that the employees had accepted
retrenchment compensation and should not now be permitted to question the
validity of the retrenchment. Apart from the fact that such technical pleas are
not generally entertained in industrial adjudication, we cannot overlook the
fact that after retrenchment compensation was paid to the employees on the 31st
August, 1959, the next day they complained that they had been forced to accept
the said compensation, because they were virtually told that if they did not
accept the compensation, they would not receive their wages for the month of
August. The notices issued by Mr Hammond and the payment of compensation made
by him, and the fact that the payment of wages for the month of August was made
by the Vendee's Manager, can all be explained on the basis that once the Vendor
and the Vendee agreed to retrench the 8 workmen, they decided to adopt the
course which would apparently comply with the provisions of s. 25FF. That being
so, we are not impressed by the argument that the acceptance of retrenchment
compensation by the 8 workmen should be held to create a bar against them in
the present proceedings.
It is not disputed that if we hold that the
retrenchment ostensibly effected by Mr. Hammond is invalid be cause the Vendor
Co. represented by Mr. Hammon had ceased to be the employer, then it would follow
that the retrenchment must be deemed to have been effected by the Vendee and in
that case, it is clearly invalid. It is conceded that if the retrenchment is
held to be effected by the Vendee, it has not complied with s. 25F or s. 25G of
the Act, and there can be 620 little doubt that failure to comply with s. 25F
would make the retrenchment invalid, and so would the failure to comply with s.
25G, because no reasons have been recorded by the Vendee for departing from the
rule prescribed by s. 25G. In fact, we ought to add that no case has been made
out for effecting any retrenchment at all, and as we have already emphasized,
the employer's right to retrench his employees can be validly exercised only
where it is ,shown that any employee has become surplus in the undertaking.
That being so, we must hold that the
retrenchment of the 8 workmen being invalid in law, cannot be said to have
terminated the relationship of employer and employee between the Vendee,
respondent No. 2 and the 8 workmen concerned.
They are accordingly entitled to
reinstatement with continuity of service; they would also be entitled to
recover their full wages for the period between the date of the retrenchment
and the date of their reinstatement. In this connection, it has been brought to
our notice that these 8 employees have been paid their retrenchment compensation.
The only direction we can make in that behalf is that when the Vendee
reinstates the said employees and pays them their backwages, appropriate
adjustments should be made taking into account the amount of retrenchment
compensation received by each one of them.
In the result, the appeal is allowed, the
award made by the Tribunal is set aside and respondent No. 2 is directed to
reinstate the 8 workmen without interruption of service and to pay them their
back wages as indicated in this judgment Respondent No. 2 will pay the costs of
the appellants in this appeal.