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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