Management,
Mettur Beardsell Ltd. Vs. Workmen of Mettur Beardsell Ltd. & Anr [2006] Insc
240 (26 April 2006)
Arijit
Pasayat & Tarunchatterjee
With
CIVIL APPEAL NOS. 2258 OF 2006 (Arising out of SLP (C) NO. 22724 OF 2004) AND
CIVIL APPEAL NO. 2259 OF 2006 (Arising out of SLP (C) NO. 5071 OF 2005) And
CIVIL APPEAL NO. 7152 OF 2003 ARIJIT PASAYAT, J.
Leave
granted in SLP (C) Nos. 22724 of 2004 and 5071 of 2005.
These
appeals have a common matrix. By the impugned judgment rendered by a Division
Bench of the Madras High Court three appeals were disposed of. Writ Appeal
No.761 of 1992 was against order dated 22.7.91 passed in Writ Petition No.11956
of 1987 passed by a learned Single Judge, while Writ Appeal No.760 of 1997 was
against the order dated 24.2.1997 in Writ Petition No.1063 of 1988 passed by a
learned Single Judge. The third appeal before the Division Bench was Contempt
Appeal No.13 of 1992 directed against order dated 11.12.1992 in Contempt
Application No.336 of 1992 passed by learned Single Judge.
Factual
background as highlighted by the appellant- Management of Mattur Beardsell Ltd.
is as follows :
Mettur
Beardsell Ltd. started business in 1936 and conducted operations successfully
till 1970, when it faced financial problems. On 19.5.1977 a Resolution was
passed to hive off its textile operation by entrusting it to its wholly owned
subsidiary which was to be formed. In fact on 19.12.1981, Mettur Textile Pvt.
Ltd. was formed. On 21.6.1982 at the Annual General Meeting of Mettur Beardsell
Ltd. shareholders authorized entering into of an arrangement on behalf of Mettur
Beardsell Ltd. and Mettur Textile Pvt. Ltd. For the sake of convenience they
are described as Beardsell and Textile hereinafter.
The
workers were informed about the transfer. On 9.2.1982 information about
Integrated Textile Division consisting of manufacturing and marketing divisions
of the Textile Division in all locations including Madras with necessary support staff was
given. On 22.9.1982 notice to workers was given that E.D.P. Department will
also be treated as a part of the Integrated Textile Division. The E.D.P.
Department
was to continue to operate from 49, Rajaji Road where the Integrated Division was situated. The office of Beardsell
was on 47 Bose Road which is different address. On
29.11.1982 individual letters/notices were sent to employees, who have been in
the Textile Division, that they were being treated as part of the Integrated
Textile Division with unaltered terms and conditions of work. On 30.11.1982
circular was sent to the employees that employees' allocation has been
completed, Beardsell was to become a partner of new formed subsidiary
"Textile" to ensure that Textile Division could be treated
separately. On 14.12.1982 a partnership firm called "Mettur Textiles"
was formed between the Textile and Beardsell evidenced by a partnership deed.
On 3.3.1983 an agreement was entered into amongst Beardsell, Textile and one Rukmini
Investments Pvt. Ltd. (in short 'Rukmini'). Beardsell was paid Rs.1,74,00,000/-
by Rukmini Investments for divesting all rights and assets in the Integrated
Textile Division. Later Rukmini took over entire partnership business and
incorporated it as Mettur Textile Industries Ltd. On 25.1.1983 employees of the
Integrated Division were informed individually about the arrangement and their
absorption with effect from 01.01.1983 without change in the conditions of
service. On 31.1.1983 employees were informed that their services would be
absorbed by Textile and that terms and conditions which would be uninterrupted
would cover salary, wages, benefits, retrenchment and retirement. On 24.3.1983
notices were sent to the workmen informing them that Beardsell had retired from
partnership and that the terms and conditions of work would not be any way less
favourable than the prevailing situation. On 13.5.1983 letters were written by
the respondent-Employees Association to Beardsell admitting the transfer to Mettur
Textile and requested for an option for retention/retransfer to the rolls of Beardsell.
Their claim was that they ought to have been a Memorandum of Settlement under
Section 12(3) of the Industrial Disputes Act, 1947 (in short the 'Act'). On
17.6.1983 the respondent-workmen through their Association wrote a letter to
the Labour Officer that they may be taken back as on the date of transfer of
the partnership by Beardsell. On 22.6.1983 several unions entered into
settlement under Section 12(3) of the Act agreeing to continue as employees of
Textile and not of Beardsell. On 16.7.1983 Beardsell wrote a letter to the Labour
Officer informing him that all the employees working in the Integrated Textile
and Thread Division had become employees of Textile and indicated that the said
employees have left its service on 31.12.1982. Thereafter certain letters
appear to have been written to the Provident Fund Commissioner. The workmen
have objected to consideration of these documents on the ground that they were
not before the Labour
Court or the High
Court. On 6.4.1984 Mettur Beardsell Employees Association wrote to Labour
officer contending that they were employees of and paid by Mettur Textile
Industries ltd. from July, 1983.
I.D.
Case No.8 of 1984 was registered on the basis of grievance by the
respondent-workmen asserting that they continued to be workmen of Beardsell. By
an Award dated 5.12.1986 Industrial Tribunal rejected the claims of the
workmen. A Writ Petition No.11956 of 1987 was filed by the respondents- workmen
against the Award in I.D. No.8 of 1984. By judgment dated 22.7.1991, the Writ
Petition was allowed holding that the workmen should be treated as employees of
Beardsell with all consequential benefits. Writ Appeal No.761 of 1992 was filed
by the appellant which has been dismissed by the impugned judgment. In the
meantime the Contempt Petition No.366 of 1992 was filed by respondent-workmen
alleging that the direction by the learned Single Judge on 22.7.1991 to the
effect that the workers should be treated as employees with all consequential
benefits had not been complied with. By order dated 11.12.1992 learned single
judge hold that there was contempt and sentenced the Managing Director of Beardsell
to two weeks' imprisonment and fine of Rs.2,000/-. Contempt Appeal No.13 of
1992 was filed against the order of learned single judge and the contempt
matter was stayed. However, by the impugned judgment the Contempt Appeal was
dismissed. On 12.4.1984 a letter was sent by Mettur Textile Industries Ltd.
intimating each workman that he was being retrenched. On 23.4.1984 employees
replied that they may be continued in service of Mettur Textile Industries Ltd.
On 14.11.1984 respondents raised I.D. 89 of 1984 challenging the retrenchment.
By its award dated 19.6.1987 Industrial Tribunal rejected the claim.
Respondent-workman filed writ petition No.1063 of 1988 against the said Award.
By order dated 24.2.1997 learned Single Judge dismissed the writ petition. Writ
Appeal No.760 of 1997 was filed by the respondent-workmen. By the impugned
judgment the High Court allowed the Writ Appeal. It appears that a claim
petition under Section 33 (C)(2) of the Act for the period 1984 to 1992 was
filed which was numbered as C.P. No.2242 of 1991. The Labour Court directed payment of Rs.44.5 lacks.
By order of this Court dated 16.11.2004 the direction of the Labour Court for payment was stayed. The sole
basis of learned Single Judge coming to the conclusion that the workmen
continued to be the employees of Beardsell is founded on Ex.22 i.e. voucher of Beardsell
used for payment subsequent to the claim of transfer of employees. The explanation
offered by Beardsell as to why the same cannot be utilized for forming any
opinion has been discarded by learned Single Judge and the Division Bench
without indicating any reason affirmed the findings overlooking evidence led by
the Beardsell to show that there was nothing illegal in the transfer. Learned
Single Judge and the Division Bench proceeded as if the ultimate objective of
the transfer was to target the concerned 27 workmen out of whom 9 have
withdrawn from the dispute and was confined to only 18 workmen. Both learned
Single Judge and the High Court lost sight of the fact that more than 2500
workmen were involved and all of them accepted transfer and did not raise any
dispute. It was, therefore, utterly fallacious on the part of the learned Single
Judge and the Division Bench to hold that the entire arrangement of transfer
was with oblique motives.
Further
claim petition under Section 33(C)(2) of the Act has been adjourned by the Labour Court notwithstanding pendency of these
cases.
According
to learned counsel for the Beardsell, both learned Single Judge and the
Division Bench completely misconceived the scope of the dispute raised. There
was no dispute regarding the genuineness of the transfer. However, learned
Single Judge as well as the Division Bench proceeded on the basis as if there
was a dispute as regards genuineness of the transfer. A bare reading of the
reference made to the Industrial Tribunal makes the position clear that there
was no such dispute. Additionally, learned Single Judge introduced a concept of
consent which is foreign to Section 25FF of the Act.
The
Division Bench not only erred in affirming the conclusions of the learned
Single Judge, but also without any challenge before the Tribunal or before
learned Single Judge referred to certain materials which were not brought on
record by the workmen and Beardsell had no opportunity to meet those materials.
Conclusions of fraud were arrived at when the workmen have not established and mala-fides
and fraud.
Learned
counsel for the respondents-workmen on the other hand submitted that though the
plea of illegality of transfer was not spelt out in so many words in the
reference that was the core issue; and, therefore, no infirmity can be attached
to judgment of the learned Single Judge and the Division Bench. Reference was
made to several decisions to contend that consent is inbuilt in any transfer in
service jurisprudence.
At
this juncture, in view of rival contentions it is to be noted that the
reference itself did not relate to legality of transfer. The reference as was
made by the Government of Tamil Nadu under Section 10(1)(b) of the Act in its
G.O. Ms. No.202 dated 19.1.1984 of the Labour Department reads as follows :
"The
dispute coming on for final hearing on Wednesday, the 29th day of October, 1986
upon perusing the reference, claim and counter statements and all other
material papers on record and upon hearing the arguments of Thiru A.L. Somayaji
for Thiruvalargal Aiyar and Dolia and Miss G. Devi, Advocate appearing for the
workmen and of Thiru S. Jayaraman, Advocate for management No.2 and this
dispute having stood over till this day for consideration.
The
basic issues involved in the cases are as follows:
-
Was there a
transfer of undertaking under Section 25FF of the Act?
-
Was this
transfer vitiated by fraud?
-
Is consent of
the employees required in a case of transfer of undertaking under Section 25FF?
The second and third issues are being considered on the basis of stands
presently raised, though there was no such plea forming foundation of the
reference made to the Industrial Tribunal.
Elaborate
arguments were advanced on the question as to whether an employee's consent is
a must under Section 25FF of the Act. The common law rule that an employee
cannot be transferred without consent, applies in master- servant relationship
and not to statutory transfers. Though great emphasis was laid by learned
counsel for the respondent on Jawaharlal Nehru University v. Dr. K.S. Jawatkar
and others (1989 (Supp.) 1 SCC 679), a close reading of the judgment makes it
clear that the common law rule was applied. But there is not any specific
reference to Section 25FF or its implication. There is nothing in the wording
of Section 25FF even remotely to suggest that consent is a pre-requisite for
transfer. The underlying purpose of Section 25FF is to establish a continuity
of service and to secure benefits otherwise not available to a workman if a
break in service to another employer was accepted. Therefore, the letter of
consent of the individual employee cannot be a ground to invalidate the action.
The
scope and ambit of Section 25FF of the Act needs to be delineated.
In Maruti
Udyog Limited v. Ram Lal And Others. (2005 (2) SCC 638) it was observed as
follows:
"How
far and to what extent the provisions of Section 25F of the 1947 Act would
apply in case of transfer of undertaking or closure thereof is the question
involved in this appeal.
A
plain reading of the provisions contained in Section 25FF and Section 25FFF of
the 1947 Act leaves no manner of doubt that Section 25F thereof is to apply
only for the purpose of computation of compensation and for no other.
The
expression "as if" used in Section 25FF and Section 25FFF of the 1947
Act is of great significance. The said term merely envisages computation of
compensation in terms of Section 25F of the 1947 Act and not the other
consequences flowing therefrom. Both Section 25FF and Section 25FFF provide for
payment of compensation only, in case of transfer or closure of the
undertaking. Once a valid transfer or a valid closure comes into effect, the
relationship of employer and employee takes effect. Compensation is required to
be paid to the workman as a consequence thereof and for no other purpose".
In D. R.Gurushantappa
v. A.K. Anwar & Ors. (1969 (1) SCC 466) this Court noted as follows:
"So
far as the first point is concerned, reliance is placed primarily on the
circumstances that, when the concern was taken over by the Company from the
Government there were no specific agreements terminating the Government service
of Respondent No.1 or bringing into existence a relationship of master and
servant between the Company and respondent No.1. That circumstance, by itself,
cannot lead to the conclusion that Respondent No.1 continued to be in Government
service.
When
the undertaking was taken over by the Company as a going concern, the employees
working in the undertaking were also taken over and since, in law the Company
has to be treated as an entity distinct and separate from the Government, the
employees, as a result of the transfer of the undertaking, became employees of
the company and ceased to be employees of the Government. This position is very
clear at least in the case of those employees who were covered by the
definition of workmen under the Industrial Disputes Act in whose cases, on the
transfer of the undertaking, the provisions of Section 25-FF of that Act would
apply. Respondent No.1 was a workman at the time of the transfer of the
undertaking in the year 1962, because he was holding the post of an Assistant
Superintendent and was drawing a salary below Rs.500 per mensem. As a workman,
he would, under Section 25-FF of the Industrial Disputes Act, become an
employees of the new employer, viz., the Company which took over the undertaking
from the Mysore Government which was the previous employer. In view of this
provision of Law, there was in fact, no need for any specific contract being
entered into between the Mysore Government and respondent No.1 in terminating
his Government service, nor was there any need for a fresh contract being
entered into between the Company and Respondent No.1 to make him an employee of
the Company".
Again
in Management of R. S. Madhoram And Sons Agencies (P) Ltd. v. Its Workmen.
(1963 (5) SCR 377), the position was highlighted as follows:- "Section
25FF of the Act provides, inter alia, that 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 new employer, every
workman who satisfies the test prescribed in that section shall be entitled to
notice and compensation in accordance with the provisions of S. 25FF as if the
workmen had been retrenched. This provision shows that workmen falling under the
category contemplated by it, are entitled to claim retrenchment compensation in
case the undertaking which they were serving and by which they were employed is
transferred. Such a transfer, in law, is regarded as amounting to retrenchment
of the said workmen and on that basis S. 25FF gives the workmen the right to
claim compensation.
There
is, however, a proviso to this section which excludes its operation in respect
of cases falling under the proviso. In substance, the proviso lays down that
the provision as to the payment of compensation on transfer will not be
applicable where, in spite of the transfer, the service of the workmen has not
been interrupted, the terms and conditions of service are not less favourable
after transfer than they were before such transfer, and the transferee is bound
under the terms of the transfer to pay to the workmen, in the event of their
retrenchment compensation on the basis that their service had been continuous
and had not been interrupted by the transfer. The proviso, therefore, shows
that where the transfer does not affect the terms and conditions of the
employees, does not interrupt the length of their service and guarantees to
them payment of compensation, if retrenchment were made, on the basis of their
continuous employment, then S. 25FF of the Act would not apply and the workmen
concerned would not be entitled to claim compensation merely by reason of the
transfer. It is common ground that the three conditions prescribed by Cls. (a),(b)
and (c) of the proviso are satisfied in this case, and so, if S. 25FF were to
apply, there can be little doubt that the appellant would be justified in
contending that the transfer was valid and the 57 employees can make no
grievance of the said transfer. The question, however, is : Does Section 25FF
apply at all? It would be noticed that the first and foremost condition for the
application of S. 25FF is that the ownership or management of an undertaking is
transferred from the employer in relation to that undertaking to a new employer.
What the section contemplates is that either the ownership or the management of
an undertaking should be transferred; normally this would mean that the
ownership or the management of the entire undertaking should be transferred
before S. 25FF comes into operation. If an undertaking conducts one business,
it would normally be difficult to imagine that its ownership or management can
be partially transferred to invoke the application of S. 25FF. A business
conducted by an industries undertaking would ordinarily be an integrated
business and though it may consist of different branches or departments they
would generally be interrelated with each other so as to constitute one whole
business. In such a case, S. 25FF would not apply if a transfer is made in regard
to a department or branch of the business run by the undertaking and the
workmen would be entitled to contend that such a partial transfer is outside
the scope of S. 25FF of the Act.
It may
be that one undertaking may run several industries or business which are
distinct and separate. In such a case, the transfer of one distinct and
separate business may involve the application of S. 25FF. The fact that one
undertaking runs these business could not necessarily exclude the application
of S. 25FF solely on the ground that all the business or industries run by the
said undertaking have not been transferred. It would be clear that in all cases
of this character the distinct and separate businesses would normally be run on
the basis that they are distinct and separate, employees would be separately
employed in respect of all the said businesses and their terms and conditions
of service may vary according to the character of the business in question. In
such a case it would not be usual to have one muster-roll for all the employees
and the organization of employment would indicate clearly the distinctive and
separate character of the different businesses. If that be so, then the
transfer by the undertaking of one of its businesses may attract the
application of S. 25FF of the Act.
But
where the undertaking runs several allied business in the same place or places,
different considerations would come into play.
In the
present case, the muster-roll showing the list of employees was common in
regard to all the departments of business run by the transferor-firm. It is not
disputed that the terms and conditions of service were the same for all the
employees and what is most significant is the fact that employees could be
transferred from the department run by the transferor-firm to another
department, though the transfer conducted several branches of business which
are more or less allied, the services of the employees were not confined to any
one business, but were liable to be transferred from one branch to another. In
the payment of bonus all the employees were treated as constituting one unit
and there was thus both the unity of employment and the identity of the terms
and conditions of service.
In
fact, it is purely a matter of accident that the 57 workmen with those transfer
we are concerned in the present appeal happened to be engaged in retail
business which was the subject-matter of the transfer between the firm and the
company. These 57 employees had not been appointed solely for the purpose of
the retail business but were in charge of the retail business as a mere matter
of accident. Under these circumstances, it appears to us to be very difficult
to accept Sri Setalvad's argument that because the retail business has an
identity of its own it should be treated as an independent and distinct
business run by the firm and as such, the transfer should be deemed to have
constituted the company into a successor-in-interest of the transferor firm for
the purpose of S. 25FF. As in other industrial matters, so on this question
too, it would be difficult to lay down any categorical or general proposition. Whether
or not the transfer in question attracts the provision of S. 25FF must be
determined in the light of the circumstances of each case. It is hardly
necessary to emphasize that in dealing with the problem, what industrial
adjudication should consider is the matter of substance and not of form. As has
been observed by this Court in Anakapalle Co-operative Agricultural and
Industrial Society v. Its workmen and others [1962 - II L.L.J. 621] the
question as to whether a transfer has been effected so as to attract S. 25FF
must ultimately depend upon the evaluation of all the relevant factors and it
cannot be answered by treating any one of them as of overriding or conclusive
significance. Having regard to the facts which are relevant in the present
case, we are satisfied that the appellant cannot claim to be a
successor-in-interest of the firm so as to attract the provisions of S. 25FF of
the Act.
The
transfer which has been effected by the firm in favour of the appellant does
not, in our opinion, amount to the transfer of the ownership or management of
an undertaking and so, the tribunal was right in holding that S. 25FF and the
proviso to it did not apply to the present case".
The
views according to us reflect the correct position in law.
Section
25FF of the Act provides, inter-alia, that 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 new employer, every
workman who satisfies the test prescribed in that section shall be entitled to
notice and compensation in accordance with the provisions of Section 25FF as if
the workmen had been retrenched. This provision shows that workmen falling
under the category contemplated by it, are entitled to claim retrenchment
compensation in case the undertaking which they were serving and by which they
were employed is transferred. Such a transfer, in law, is regarded as amounting
to retrenchment of the said workmen and on that basis Section 25FF gives the
workmen the right to claim compensation.
There
is, however, a proviso to this section which excludes its operation in respect
of cases falling under the proviso. In substance, the proviso lays down that
the provision as to the payment of compensation on transfer will not be
applicable where, in spite of the transfer, the service of the workmen has not
been interrupted, the terms and conditions of service are not less favourable
after transfer than they were before such transfer, and the transferee is bound
under the terms of the transfer to pay to the workmen, in the event of their
retrenchment compensation on the basis that their service had been continuous
and had not been interrupted by the transfer. The proviso, therefore, shows
that where the transfer does not affect the terms and conditions of the
employees, does not interrupt the length of their service and guarantees to
them payment of compensation, if retrenchment were made, on the basis of their
continuous employment, then S. 25FF of the Act would not apply and the workmen
concerned would not be entitled to claim compensation merely by reason of the
transfer. It is common ground that the three conditions prescribed by Cls. (a),
(b) and (c) of the proviso are satisfied in this case, and so, if Section 25FF
were to apply, there can be little doubt that the appellant would be justified
in contending that the transfer was valid and the 57 employees can make no
grievance of the said transfer. The question, however, is : Does Section 25FF
apply at all ? It would be noticed that the first and foremost condition for
the application of Section 25FF is that the ownership or management of an
undertaking is transferred from the employer in relation to that undertaking to
a new employer.
What
the section contemplates is that either the ownership or the management of an
undertaking should be transferred;
normally
this would mean that the ownership or the management of the entire undertaking
should be transferred before Section 25FF comes into operation. If an
undertaking conducts one business, it would normally be difficult to imagine
that its ownership or management can be partially transferred to invoke the
application of Section 25FF. A business conducted by an industries undertaking
would ordinarily be an integrated business and though it may consist of
different branches or departments they would generally be interrelated with
each other so as to constitute one whole business. In such a case, Section 25FF
would not apply if a transfer is made in regard to a department or branch of
the business run by the undertaking and the workmen would be entitled to
contend that such a partial transfer is outside the scope of Section 25FF of
the Act.
It may
be that one undertaking may run several industries or businesses which are
distinct and separate. In such a case, the transfer of one distinct and
separate business may involve the application of Section 25FF. The fact that
one undertaking runs these businesses could not necessarily exclude the
application of Section 25FF solely on the ground that all the businesses or
industries run by the said undertaking have not been transferred. It would be
clear that in all cases of this character the distinct and separate businesses
would normally be run on the basis that they are distinct and separate,
employees would be separately employed in respect of all the said businesses
and their terms and conditions of service may vary according to the character
of the business in question. In such a case it would not be usual to have one
muster-roll for all the employees and the organization of employment would
indicate clearly the distinctive and separate character of the different
businesses.
If
that be so, then the transfer by the undertaking of one of its businesses may
attract the application of Section 25FF of the Act.
It was
submitted by the learned counsel for the respondent that fraud was involved.
The conclusions of the learned Single Judge and the Division Bench proceeded on
the premises as if the 27 employees in question were targeted. In order to
establish fraud there has to be specific averments or materials adduced to
establish the same. In the instant case there was no specific averment in that
regard and in any event no evidence was led. The High Court seems to have lost
sight of the fact that huge amount of money had already been paid.
It has
not established that the purpose was to target the 27 employees and for that
purpose the appellant spent huge amount of money. Undisputedly the employees
were informed of the transactions at all relevant points of time. It is also
not disputed by learned counsel for the respondent that nearly 2500 employees
have accepted that the transfer is genuineness and out of 27 employees who
originally pressed their grievances, nine are not pursuing it. The Tribunal had
rightly noted these aspects. Unfortunately learned Single Judge and the
Division Bench made out a new case of fraud and the transaction to be "sham".
The solitary material on which decisions of learned Single Judge and the
Division Bench was founded is one receipt showing payment for one month. The
explanation given in that regard does not appear to have been considered in its
proper perspective by the High Court.
On the
question of fraud few decisions need to be noted.
In Shrisht
Dhawan (Smt.) v. M/s Shaw Brothers (1992 (1) SCC 534), it was noted as follows:
"20.
But fraud in public law is not the same as fraud in private law. Nor can the
ingredients which establish fraud in commercial transaction be of assistance in
determining fraud in Administrative Law. It has been aptly observed by Lord Bridge in Khawaja
that it is dangerous to introduce maxims of common law as to effect of fraud
while determining fraud in relation to statutory law." The warning by Venkatachaliah
J in G.B. Mahajan and Ors. v. Jalgaon Municipal Council and Ors. (1991 (3) SCC
91) on the use of concept of reasonableness was founded on the following
passage quoted from Tiller v. Atlantic Coast, (1942) 3189 US 54.
"A
phrase begins life as a literary expression; its felicity leads to its lazy
repetition; and repetition soon establishes it as a legal formula, undiscriminatingly
used to express different and sometimes contradictory ideas." In Shrisht Dhawan's
case (supra) it was further observed as follows:- "xx xx xx xx xx If a
statute has been passed for some one particular purpose, a court of law will
not countenance any attempt which may be made to extend the operation of the
Act to something else which is quite foreign to its object and beyond its cope.
Present day concept of fraud on statute has veered round abuse of power or mala
fide exercise of power. It may arise due to overstepping the limits of power or
defeating the provision of statute by adopting subterfuge or the power may be
exercised for extraneous or irrelevant considerations. The colour of fraud in
public law or administrative law, as it is developing, is assuming different
shades. It arises from a deception committed by disclosure of incorrect facts
knowingly and deliberately to invoke exercise of power and procure an order
from an authority or tribunal.
It
must result in exercise of jurisdiction which otherwise would not have been
exercised. That is misrepresentation must be in relation t the conditions
provided in a section on existence or non-existence of which power can be
exercised. But non-disclosure of a fact not required by a statute to be
disclosed may not amount to fraud. Even in commercial transactions non-disclosure
of every fact does not vitiate the agreement." A sham transaction is one
which was always intended and devised to be a fraud of a provision of the
concerned statute in relation to which it is alleged to be a fraud.
That
being so the orders of the learned Single Judge and the Division Bench cannot
be maintained and are, therefore, set aside.
It
appears that taking serious note of the fact that the orders were not complied
with, contempt proceedings were initiated and orders have been passed. It is
not in dispute that a part of the amount payable was deposited in this court
and has been disbursed. In view of the fact that the orders of learned Single
Judge and the Division Bench are being set aside, the question of consequential
action under Section 33(C)(2) of the Act does not arise. At the same time it
cannot be lost sight of the fact that orders of the learned Single Judge and
the Division Bench were not complied with. Since a sum of Rs.10 lakhs has
already been deposited and Rs.5 lakhs have also been disbursed, in the peculiar
circumstances of the case, we direct that the balance money be disbursed to the
employees on the basis of their entitlements. This exercise shall be done by
the Tribunal. Appeals are accordingly disposed of. No costs.
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