Skip to content


Swadeshi Cotton Mills Thozhilalar Shemanala Padukappu Union Represented by Its President T. Santhalingam Vs. National Textiles Corporation Limited, the Authorised Agent of Swadeshi Cotton Mills Represented by Its Chairman and ors. - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtChennai High Court
Decided On
Reported in(1984)1MLJ228
AppellantSwadeshi Cotton Mills Thozhilalar Shemanala Padukappu Union Represented by Its President T. Santhali
RespondentNational Textiles Corporation Limited, the Authorised Agent of Swadeshi Cotton Mills Represented by
Cases ReferredD. P. Kelkar v. Ambadas
Excerpt:
- .....urged that the second respondent-mills is an industry carried on by and under the authority of the central government and hence the appropriate government to appoint the conciliation officer is the central government and the third respondent, who is admittedly not a conciliation officer appointed by the central government, was incompetent to conciliate the dispute and as such the settlement arrived at in the course of the conciliation before the third respondent on 18th november, 1980 is null and void and it cannot be enforced against the workmen of the mills this contention put forth on behalf of the petitioner was counter-acted by the mills by stating that the second respondent is not an industry either carried on by or under the authority of the central government, so that the.....
Judgment:

Nainar Sundaram, J.

1. Swadeshi Cotton Mills Tozhilalar Shemanala Padukappu Union, represented by its President, the petitioner in W.P. No 2756 of 1981, is the appellant in this writ appeal. The respondents herein are the respondents in the writ petition. For the sake of convenience, the parties shall be referred to in this judgment as they stood arrayed in the writ petition. A dispute arose in 1979 between the second respondent Mills, hereinafter referred to as the Mills, and its workmen on the question of bonus for the year 1978-79. The Mills had paid an advance bonus at 20 per cent. of the earnings to its workmen. A settlement was reached in the course of conciliation on 18th November, 1980 under section. 12 (3) of the Industrial Disputes Act XIV of 1947, hereinafter referred to as the Act, under which it was agreed that the bonus could be only at 12 par cent and the Mills were conferred the right to recover the excess of bonus paid in advance. This settlement was arrived at before the third respondent At the time of the settlement, the petitioner was not even formed. To this settlement over 20 unions, representing the workmen of the Mills, were parties. This settlement is not being accepted by the petitioner and the petitioner has chosen to challenge the same by filing the writ petition with a prayer for the issue of a writ of mandamus restraining respondents 1 to 3 from effecting recovery of the bonus paid for the year 1978-79 in enforcement of this settlement dated 18th November, 1980. The writ petition was heard by Padmanabhan, J. Before the learned Judge, it was urged that the second respondent-Mills is an industry carried on by and under the authority of the Central Government and hence the appropriate Government to appoint the Conciliation Officer is the Central Government and the third respondent, who is admittedly not a Conciliation Officer appointed by the Central Government, was incompetent to conciliate the dispute and as such the settlement arrived at in the course of the conciliation before the third respondent on 18th November, 1980 is null and void and it cannot be enforced against the workmen of the Mills This contention put forth on behalf of the petitioner was counter-acted by the Mills by stating that the second respondent is not an industry either carried on by or under the authority of the Central Government, so that the appropriate Government to appoint the Conciliation Officer could be held to be the Central Government, alone, and, in any event, the settlement, until and unless It is set aside in accordance with law, is binding on all the workers, past and future. Padmanabhan, J., repelled the contentions put forth on behalf of the petitioner and upheld the validity of the settlement dated 18th November, 1980 and as a result, dismissed the writ petition Hence this writ appeal by the petitioner.

2. Before us, the very same contentions that were advanced before the learned single Judge were put forth by Mr. T. Fenn Walter, learned Counsel appearing for the petitioner. That there was a conciliation before the third respondent in the course of which the settlement dated 16th November, 1980, was arrived at between the Mills and its workmen, represented by various Unions, is not in dispute Equally so, the fact that at that time the petitioner was not even formed is not in dispute Under Section 2(d) of the Act, 'Conciliation Officer' means a Conciliation Officer appointed under the Act. Section 4 of the Act speaks about the appointment of Conciliation Officers by the appropriate Government. Section 2(a) (i) of the Act defines 'appropriate Government' in relation to any industrial dispute concerning any industry carried on by or under the authority of the Central Government ... ... ...'as the Central Government. If it is to be held that the Mills is an industry carried on by or under the authority of the Central Government within the meaning of Section 2(a) (/) of the Act, then, the third respondent would be incompetent to conciliate and any settlement arrived at before him cannot legally fit in with Section 12(3) of the Act, since admittedly, he is not a Conciliation Officer appointed by the Central Government. Hence, the moo! question is as to whether the Mills is an industry carried on by or under the authority of the Central Government within the meaning of Section 2(a) (i) of the Act.

3. A plain reading of the expressions used while defining the appropriate Government in Section 2(a) (i) of the Act would lead us only to one conclusion and that is, the industry should be an undertaking of the Central Government, or, in other words, it should be an industry run by the Central Government as its own. Primarily, there could be a carrying on of an industry only by the person or entity who owns it. Equally so, an industry could be run under the authority of the person or entity who OWnS it. In the first case, the owner of the industry carries on the same by himself and in the second case, the owner of the industry carries on the same through an authorized person. That is what is meant by the expression 'under the authority of. Hence, a common sense reading of the expressions leaves no room for ambiguity in our mind that the industry must be owned by the person or the enity, before there could be a carrying on either by the owner or 'under the authority of 'the owner. In this connection, we cannot lose-sight of the fact that in respect of an industry carried on by or under the authority of the Central Government, it will be equated to an employer, under the Act though for the purpose of representation, it will be 'the authority prescribed in this behalf or where no authority is prescribed, the head of the department,' Hence, in our view, the crucial test must be to find out as to whether the industry is owned by the Central Government, or in other words a Central Government undertaking.

4. Mr. C. Ramanathan, learned Counsel for the second respondent and Mr. S. Govindasamy, learned Government Pleader for Pondicherry were at pains to impress upon us, relying on judicial precedents, that the Mills could not be equated to a Central Government undertaking or industry. There are judicial precedents, including those of the Supreme Court, throwing light on this aspect and we would like to dwell upon them before we assess the position as to whether the Mills is an industry carried cm by or under the authority of the Central Government. There is one feature which has come into play so far as the Mills is concerned and that is, the steps taken by the Central Government against the Mills under the Industries (Development and Regulation) Act LXV of 1951, hereinafter referred to as Central Act LXV of 1951. A notification under Section 18-AA of Central Act LXV of 1951 had come to be made on 13th April, 1978, under which the first respondent as the authorized person under Central Act LXV of 1951, had been authorized to take over the management of the Mills. Apart from this, it is not claimed that the Central Government held any share in the Mills. The Mills was a company incorporated under the Indian Companies Act. The import and implications of this action have also got to be assessed. There are a few pronouncements of other High Courts, which have dealt with such situations and we shall presently refer to them.

5. In Bharat Glass Works v. State of West Bengal and Ors. : AIR1957Cal347 , Sinha, J., of the Calcutta High Court, dealt with Bharat Glass Works (Private), Limited, 'Glass and Ceramics' industry was mentioned as an item in Schedule I to Central Act LXV of 1951. But, such an industry was not specified by the Central Government under Section 2(a) (i) of the Act as a controlled industry. It was argued before the learned Judge that an industry, which is controlled in the manner laid down by Central Act LXV of 1951 must be held to be carried on under the authority of the Central Government, This argument was repelled by the learned Judge and, relying on the observations of Harries, G. J. in Carlsbad Mineral Water Manufacturing Company Limited v. P. K. Sarkar : (1952)ILLJ488Cal , it was held,. ... a business which is carried on by or under the authority of the Central Government must be a Government business.

It was further observed,. ... For an industry to be carried on by or under the authority of the Central Government, it must be an industry belonging to the Central Government, that is to say its own undertaking.

Sinha, J., left open the question as to whether a controlled industry, where the Central Government has taken over direct management, under Chapter III A of Central Act LXV of 1951 will come within the meaning of an industry carried on by or under the authority, of the Central Government under Section 2(a) (i) of the Act since the point did not specifically arise in that case.

6. In Cantonment Board, Ambala v. State of Punjab and Ors. , a Bench of the Punjab High Court dealt with a case of Cantonment Boards created and regulated by the provisions of the Cantonment Act (Central Act II of 1924) whereby the management of cantonments was placed in the hands of Cantonment Boards. Considering the scope of the creation of the Cantonment Boards by the statute and the powers of the Central Government over the administration of such cantonments through the Cantonment Boards, the Punjab High Court held that the Cantonment Board is, in fact, directly carrying on the work of Government. We must straightway point out that we are not facing such a situation in the present case.

7. In Abdul Rahman Abdul Gafur v. Paul : (1962)IILLJ693Bom , Desai, J., of the Bombay High Court dealt with Mazgaon Dock Limited incorporated under the Indian Companies Act. The Union of India purchased the whole of the share capital. In spite of complete Government control, the learned Judge held, the industry could not be one carried on by or under the authority of the Central Government and it was pointed out that corporations are independent legal entities and they run the industries for their own purposes and even when the Central Government controlled these corporations, the industries are worked under the authority of their own constitutions or charters and that the expression 'under the authority' meant much the same as 'on behalf of. This clearly indicates that the industry as such, must belong to the Central Government as its own undertaking so that it could be stated that the industry is being carried on by or under the authority of the Central Government.

8. In Heavy Engineering Mazdoor Union v. State of Bihar : (1969)IILLJ549SC , the Supreme Court dealt with the case of Heavy Engineering Corporation, one of those Government companies constituted in several places in India and whose constitution and control are regulated by Sections 617 to 620 of the Companies Act, 1956. The entire share capital was contributed by the Central Government and all the shares were held by the President of India and a few officers of the Central Government. The Supreme Court pointed out that in the absence of a statutory provision, a commercial corporation acting on its own behalf, even though it is controlled wholly or partially by a Government department, will be ordinarily presumed not to be a servant or agent of the State; such an inference that the corporation is the agent of the Government may be drawn where it is performing in substance governmental and not commercial functions; and an industry carried on by or under the authority of the Government means either the industry carried on directly by a department of the Government, such as the posts and telegraphs or the railway or one carried on by such department through the instrumentality of an agent. It was also pointed out that where a statute setting up a corporation states that the corporation should be an agent of the State then it could be easily identified as such. Ultimately, the Supreme Court held that the 'appropriate Government' to make the reference under the Act is not the Central Government, but the State Government.

9. In D.P. Kelkar v. Ambadas : AIR1971Bom124 , a Bench of the Bombay High Court dealt with similar expressions as those used in Section 2(a) (i) the Act occurring in Section 32 (iv) of the Payment of Bonus Act XXI of 1965. There, the industrial undertakings were brought within the mischief of Chapter III-A of Central Act LXV of 1951 and notifications under Section 18 A of Central Act LXV of 1951 were made and 'authorised persons' were appointed to take over the management of the industrial undertakings. The provisions of Chapter III-A of Central Act LXV of 1951 were discussed by the Bench of the Bombay High Court and it was opined:

It is clear upon these provisions that the management and control is completely taken away from the directors and substantially from the shareholders and the effective management and control of the Central Government through the authorised controller substituted. It is impossible not to hold in a case like this that the industrial undertaking is being carried on under the authority of the Central Government.

It was brought to the notice of the Bench that under Sub-section (2) of Section 18-E of Central Act LXV of 1951 the application of the Indian Companies Act to such undertakings in the same manner as it applied before the issue of the notifications was preserved The Bench characterised this as more or less chimerical and held that the management and control were taken away by the application of the provisions of Chapter III-A of Central Act LXV of 1951 and they were carried on under the authority of a department of the Central Government.

10. In Hindustan Aeronautics v. The Work-men : (1975)IILLJ336SC , the Supreme Court dealt with a company constituted under Section 617 of the Companies Act, the shares of which were entirely owned by the Central Government and the Central Government had a vital role and control in the matter of carrying on of the industry. The Supreme Court found the case to be identical to the one dealt with by it in Heavy Engineering Mazdoor Union v. State of Bihar : (1969)IILLJ549SC , and reiterated the principles already enunciated by it. The Supreme Court also repelled an attempt to distinguish its earlier ratio on the ground that the earlier case dealt with a Government company carrying on an industry where private sector undertakings were also operating and in the case of Hindustan Aeronautics Limited, the industry is one which the Government alone is entitled to carry on, to the exclusion of the private operators, and the Supreme Court pointed out that this distinction is of no consequence and did not affect in the least its ratio in the earlier care. We must point out that Padmanabhan, J., did refer to this pronouncement of the Supreme Court, but we do not find any support in the pronouncement of the Supreme Court for the following observation (Italics portion alone) found in the order of Padmanabhan, J.:. ... The Supreme Court held that Hindustan Aeronaut ice Limited. is a Government company incorporated under Section 617 of the Companies Act and the shares of the Company are entirely owned by the Central Government which will fall within the meaning of Article 12 of the Constitution of India.

Yet this has not altered the ultimate decision of the learned single Judge.

11. In National Textile Corporation v. Industrial Tribunal (1979) Lab. I.C.1024, a Bench of the Allahabad High Court dealt with a case of taking over of the management of two mills by the Laxmi Ratan and Atherton West Cotton Mills (Taking over of Management) Act, 1976. The provisions of the said Act are more or less similar to the provisions found in Chapter III-A of Central Act XLV of 1951 and the Bench of the Allahabad High Court, after referring to the decision of the Bench of the Bombay High Court, in D. P. Kelkar v. Ambadas (1971) LIC. 429 : A.I.R. 1971 Bom, pointed out that the factors taken note of by the Bench of the Bombay High Court did not alter the legal position as enunciated by the Supreme Court in case of Heavy Engineering Mazdoor Union v. State of Bihar : (1969)IILLJ549SC , In the judgment of the Bench of the Allahabad High Court, the distinction between an industry being taken over and the management of the industry being taken over was rightly stressed. The fact that the two mills had not been nationalised, so that it may be stated that the ownership did vest in the Central Government was also adverted to. In our view, the Bench of the Allahabad High Court rightly declined to accept the temporary assumption of external control of the management of the mills as tantamounting to abrogating the proprietary rights and ownership of the mills, which Continued with them only. The Bench also took note of the fact their neither the Memorandum and Articles of Association of the mills, nor the provisions of the Companies Act stood abrogated altogether. Finally, the Bench held that the industry in respect of the two mills, on account of their management being taken over in accordance with the provisions of the concerned Act cannot be said to be carried on by or under the authority of the Central Government.

12. In P. K. Bhattacharjee v. Machinery Company (1983) 87 C. W.N. 995, Mookerjee, J., of the Calcutta High Court had occasion to deal with the violation of Article 14 of the Constitution of India in respect of termination of services, complained of by the employees of Indian Machinery Company Limited, incorporated under the Indian Companies Act, 1913, in respect of which company a notification under Section 18-A of Central Act LXV of 1951 had come to be made. It is true, there the question arose as to whether by virtue of this notification, the company would come within the meaning of 'an authority' under Article 12 of the Constitution of India. We are obliged to take note of paragraph 8 of the judgment since the view of the learned Judge practically synchronises with our view and it reads as follows:

The provision of Chapter III-A of the Industries (Development and Regulation,) Act, 1951 which have been mentioned in the preceding paragraph, in my view, do not indicate sufficiently 'deep and pervasive State control' so as to constitute an undertaking whose control and management has been taken over under Section 18-A of the Act an instrumentality of the State. The State does not acquire the ownership of such an undertaking but for limited duration assumed management and control of an industrial undertaking which has either failed to comply with the directions issued under Section 16 of the Act or when an industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest. The provisions in Chapter III-A do not provide that the State would be bound to give financial assistance to every undertaking whose management or control may be assumed under Section 18-A. The broad effect of taking over management under Section 18-A would be to remove persons who had been in management of the said undertaking and to assume functions of control and management of the undertaking for limited period. After a notification under Section 18-A expires or is revoked, such management and control would revert back.

By retorting to the process under Chapter III-A of Central Act LXV of 1951, the Central Government does not acquire the ownership of the industrial undertaking. We shall presently advert to the provisions of the said Chapter and express out independent opinion as to their implications.

13. In Workmen, Karnataka Provident Fund Employees' Union v. Additional Tribunal, Gandhinagar (1983) L.I.C. 1523, a Bench of the Karnataka High Court had to construe the expressions occurring in Section 2(a)(i) of the Act to find out as to whether Provident Fund Organisation constituted under the Employees' Provident Funds and Miscellaneous Provisions Act XIX of 1952 would become an industry carried on by or under the authority of the Central Government. The Bench, after analysing the provisions of the statute under which the Provident Fund Organisation got constituted and the nature and character of its activities, held that it is not an industry Carried on by or under the authority of the Central Government.

14. In Central Warehousing Corporation v Delhi Administration (1983) 63 F.I.R. 125, Avadh Behari Rohatgi, J., of the Delhi High Court held that the Central Warehousing Corporation a statutory corporation, whose entire share capital was held by the Central Government and over whose affairs the Central Government had extensive control, is not a servant or agent of the Central Government. The learned Judge pointed out that it is only a commercial Corporation and it is not carrying on any sovereign functions of the Central Government.

15. Apart from the opinion which we have expressed in the first flush after reading the express language used in Section 2(a) (i) of the Act, we find. as per the preceding discussion, that except in the case of D. P. Kelkar v. Ambadas : AIR1971Bom124 , it has been uniformly recognised that the ownership by the Central Government of the industry is the decisive test and not the management, however pervasive and deep it may be. Though it is not claimed in the present case that shares were held by the Central Government in the Mills yet, it will not be redundant totouch upon the principles governing such a situation to give completion to the discussion. In cases of companies and corporations incorporated under the company statutes, the shareholders could never be deemed to be the owners and the fact that the Central Government held the shares will not alter the position. The principle is the shareholders cannot claim that the property of the company is their own and plead that the business of the company is their business in the strict legal sense. Equally so, the control by the Central Government wholly or partially will not lead to the conclusion that the company or the corporation is owned by the Central Government. This power of management could come by conferment through the provisions of a particular statute, but still the Central Government will not automatically become the owner of the industry. If the statute setting up the corporation expressly states that it will be an agent of the Central Government, then, it could be easily identified as such. Hence, in our view, the 'ownership' test is the crucial one and not the 'management' test Once the owership by the Central Government is made out, the carrying on of the industry by itself through its administrative and governmental instrumentality or through any other person .or entity under its authority will not alter the position and it will continue to be an industry carried on by and under the authority of the Central Government within the meaning of Section 2(a) (0 of the Act.

16. Coming to Chapter III-A of Central Act LXV of 1951 we are of the view that the resort to the provisions in the said Chapter leads to nothing but direct management or control of industrial undertakings by the Central Government in certain cases as its very caption indicates. The preamble to Central Act LXV of 1951 states that it is an Act to provide for the development and regulation of certain industries. Chapter III-A was inserted by Act XXVI of 1953 with effect From 1st October, 1953. Section 18-A speaks about the power of the Central Government to assume the management and control of Industrial undertakings in certain cases. By the notification, the Central Government authorises a person or body of persons to take over the management of the whole or any part of the undertaking. Sub-section (2) of Section 18-A states that the notified order shall have effect for such period not exceeding five years as may be specified in the order The proviso gives power for continuance of the notified order for such period not exceeding two years at a time, but not exceeding a total period of twelve year. Section 18-A speaks about power to take over industrial undertakings without investigation under certain circumstances. This is what has been done in the instant case. Sub-section (2) of Section 18-A A states that Sub-section (2) of Section 18-A shall apply to a notified order under Sub-section (1) of Section 18- AA. Sub-section (5) of Section 18-AA states that Sections 18-B to 18-E (both inclusive) shall apply to an industrial undertaking notified in Sub-section (1) of Section 18-AA. Section 18-B delineates the effect of a notified order under Section 18-A : Section 18-C gives the power to the person or body of persons authorised to seek for cancelling or varying any contract or agreement entered into before the notified order under Section 18-A in certain contingencies. Section 18-D stipulates that there shall be no right to compensation for termination of office or contract. Section 18-E (1) imposes certain curbs on the shareholders of the industrial undertaking taken over by the Central Government. Section 18-E (2) specifies that subject to the exceptions, restrictions and limitations by the Central Government, as may be specified in the notification, the Companies Act shall continue to apply to such under-takings. Section 18-F speaks about the power of the Central Government to cancel a notified order under Section 18-A. It is unnecessary for us to go into the intricacies and implications of these provisions for the simple reason, they lay down, adumbrate and amplify only the implications of the taking over of management by the Central Government of industrial undertakings. These powers may be held to be sweeping. All said, the industrial undertaking does not become an undertaking of the Central Government. To serve a particular purpose and for a temporary phase, this management could pervade and maximum period is twelve years and even in between, there is power to cancel the notified order as set put in Section 18-F. Ownership is something more than management. Control, whole or partial, by the Central Government will not make the industrial undertaking, an undertaking of the Central Government itself. There is no dispute before us that the Mills has not come within the mischief of nationalisation under the Sick Textile Undertakings (Nationalisation) Act LVII of 1974. As taken note of by the Allahabad High Court in National Textile Corporation v. Industrial Tribunal (1979) L.I.C. 1024, till the industrial undertaking is nationalised, its ownership could not be stated to have vested in the Central Government. We regret that we cannot fall in line with the thinking of the Bombay High Court in D. P. Kelkar v. Ambadas : AIR1971Bom124 , where over stress has been made only on the managerial aspect rather than the ownership aspect which alone, according to us as well as the other pronouncements referred to above, is the crucial test.

17. For all the reasons expressed by us above to sustain the order passed by the learned single Judge and as a result the writ appeal fails and the same is dismissed. No costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //