1. The Spencer Consumer Products and Services Limited (hereinafter called 'the Company') is a Company incorporated under the Companies Act, 1956, as and from November 28, 1979. It had a factory within the premises of the well-known Spencer and Company at No. 769, Anna Salai, Madras. The Company was engaged in the manufacture of Bakery Products and aerated waters. Due to shortage of water and non-availability of space in the Spencer Complex which was undertaking a huge expansion programme in the name of Spencer Plaza, a decision was taken to shift the aerated water factory to Rajakulam, Chengleputtu - M.G.R. District. There is a settlement under Section 18(1) of the Industrial Disputes Act (I.D. Act) dated September 18, 1989 and pursuant to the terms of the settlement, the company had put up a notice on May 29, 1991 asking the employees of the aerated water factory to report for work at Rajakulam with effect from June 1, 1991. Accordingly, the employees of the aerated water factory reported at Rajakulam with effect from June 1, 1991. On July 10, 1991 the Company entered into an agreement with one Vishwadarshan Distributors Pvt. Ltd. (hereinafter called 'the Purchaser') agreeing to sell the business in the manufacture of aerated water as a going concern including the plant and machinery. The sale agreement provided for the absorption of the employees in the Purchaser Company on the same terms and conditions and also provided for continuity of employment in an uninterrupted manner. It is the case of the Company that as and from July 10, 1991 the employees in the aerated water factory became the employees of the Purchaser. It is not disputed that the employees were receiving salary from the Purchaser and the relationship was smooth until the workmen raised a dispute that there was a change in the conditions of the service. Thereafter, the Purchaser filed an application under Section 25(O) of the I.D. Act seeking permission to close the aerated water factory at Rajakulam. By an order dated December 30, 1991 the Commissioner of Labour refused to grant permission for the closure of the aerated water factory. It so transpired that notwithstanding the above order, the Purchaser refused to provide work to the workmen and did not also pay their wages from December, 1991. A dispute was raised by the workmen and the is Government by G.O. Ms. No. 262 dated April 8, 1993 referred the following issues for adjudication to the Industrial Tribunal.
'Whether the stoppage of work in Vishwadarshan Distributors Pvt. Ltd., Rajakulam from December, 1991 is justified and to what relief the workers are entitled ?'
This dispute was taken up as I.D. No. 37 Of 1993 by the Industrial Tribunal, Madras. It is significant to note that both the company as well as the Purchaser are shown as respondents to the above dispute.
2. The workers had raised another dispute questioning the transfer of aerated water factory by the company to the Purchaser as well as the validity of the transfer of workers to the Purchaser. The Government had rejected the request for the reference in G.O. (D) 315, dated April 3, 1992. After the Government had made the reference in respect of the stoppage of work by the Purchaser, under G.O. (D) No. 262 dated April 8, 1993, the workers represented by their Union again made a request for reference by way of amplifying earlier references so that they could question the transfer of the workers from the company to the Purchaser. This time the Government came to the conclusion that there was a dispute between the parties and therefore made the following reference in G.O. (D) 702, dated October 7, 1993 :
'Whether the transfer of Aerated Water Factory at Rajakulam along with the workers employed therein involving change of conditions of service of the workmen, by the Management of Spencer Consumer Products and Services Ltd., Madras - 2 to the management of Vishwadarshan Distributors Pvt. Ltd. from July 10, 1991 is justified; and to what relief the workers are entitled ?.'
This dispute was taken on file by the Industrial Tribunal as I.D. No. 88 of 1993. In this dispute also both the Company and the Purchaser were arrayed as respondents.
3. The workmen represented by their Union filed a writ petition, W.P. No. 15742 of 1993 seeking the issue of the writ of mandamus to direct the Purchaser to pay the workmen wages from December 31, 1991 being the date when the application for the closure was dismissed by to the Commissioner of Labour. The claim was made under Section 25(O)(H) of the I.D. Act. The writ petition was allowed by K. S. Bakthavatsalam, J. on November 12, 1993. In that writ petition also both the Company and the Purchaser were made parties. Learned Judge made a reference to the pendency of I.D. I.D. Nos. 37 and 88 of 1993 and held that the writ petition was maintainable even though the writ petition sought for directions to a private company on the special facts and circumstances of the case. Turning to the question of relief, Learned Judge recorded the statement of counsel for the workmen Union that the workmen were willing to work at the factory at Rajakulam, gave a direction to the Purchaser to open the factory on and from November 19, 1993 and allow the employees of the workmen Union to continue to work on the same terms and conditions which prevailed before the stoppage of work and if not to pay the wages for the future. Against the said order of the Learned Judge, a writ appeal was filed and Appellate Bench modified the order and directed the Tribunal to dispose of I.D. Nos. 37 and 88 of 1993 within a period of two months and pending such decision also directed the Purchaser to pay one month's wages to the workmen.
4. The Tribunal took up both the Industrial Disputes viz.. I.D. Nos. 37 and 88 of 1993 and recorded common evidence and rendered the following decision :-
'I.D. No. 88/1993
In the result I find that the transfer of the workmen, concerned in this dispute and employed in the Aerated Water Factory from the first respondent to the second respondent is illegal and unjustified. I direct the first respondent to reinstate the workmen concerned in this dispute into service of the first respondent with continuity of service, back wages and other attendant benefits. An award is passed accordingly. No costs.
I.D. No. 37/1993
Though, I find that the stoppage of work by the Vishwadarshan Distributors Pvt. Ltd. is not justified, the workmen concerned in this dispute are not entitled to any relief as against Vishwadarshan Distributors Pvt. Ltd. Since they have been granted relief in I.D. No. 88/93 for reinstatement into the service of the first respondent in I.D. 88/93 i.e. Spencer Consumer Products and Services Ltd. An award is passed accordingly.''
Writ petition, W.P. No. 16423 of 1994 had been filed by the Vendor Company for the issue of a writ of certiorari to quash the award in I.D. No. 37 of 1993 dated May 31, 1994. W.P. No. 16424 of 1994 had been filed by the same Company seeking to quash the award passed in I.D. No. 88 of 1993 dated May 31, 1994. By a common judgment dated March 1, 1995, Learned single Judge has disposed of the writ petitions by giving following directions :-
'(i) In these circumstances, Justice requires that the parties to the dispute be given another opportunity to establish as to whether what was transferred was an 'undertaking' for the purpose of S. 25FF(1). Without disturbing the findings of the Tribunal, that the transfer of the factory was not illegal, but that the transfer of the employees was without their consent, the matter is remitted back to the Tribunal to record its findings as to whether the Aerated Water Factory transferred by the petitioner to the third respondent constitutes an 'undertaking' for the purpose of S. 25FF(I). As the pleadings as they now stand, are inadequate with regard to this question, opportunity is given to the parties to file supplemental statements and also lead evidence on this point. The direction given by the Tribunal in I.D. NO. 88/93 for reinstatement with backwages and consequential benefits is therefore set aside. The findings recorded are not disturbed.
(ii) As regards the Award made by the Tribunal that the stoppage of work by the third respondent with effect from December 1991 was not justified, has not been challenged by any one and that finding is conclusive.
(iii) Without disturbing the finding of the Tribunal that the stoppage of work by the third respondent (Purchaser) was not justified, that portion of the award declining to grant relief to the workmen is set aside.
(iv) The Tribunal shall decide the nature and extent of the reliefs to be granted to the workmen as against the petitioner (Company) and/or the third respondent (Purchaser) in these two I.Ds 88 and 37 of 1993, after recording its finding on the question as to whether the Aerated Water Factory constitutes a separate undertaking for the purpose of S. 25FF. The Tribunal is directed to consider this question and make its award within a period of three months from today. The parties shall file their supplementary statements before the Tribunal within three weeks from today, and adduce evidence on the question immediately thereafter.'
5. Writ Appeal Nos. 243 and 244 of 1995 have been filed by the workers' Union challenging the order of the single Judge in W.P. Nos. 16423 and 16424 of 1994, dated March 1, 1995. Writ Appeal No. 353 of 1995 has been filed by the Vendor Company against the order in W.P. No. 16423 of 1994 relating to I.D. No. 37 of 1993. In all the writ appeals, the Purchaser is shown as the third respondent. We have heard Mr. N. G. R. Prasad for the Workers' Union, Mr. Vijay Shankar, Senior Counsel for the Company and Mr. B. Kumar for the Purchaser. For the purpose of the Judgment in the Writ Appeals, we will hereafter refer the Vendor Company as the second respondent, the Purchaser as the third respondent and the Workers Union as the appellant.
6. Mr. N. G. R. Prasad for the appellants has project his arguments in the following manner :-
(i) Assuming without conceding that what was transferred namely, Aerated Water Factory is itself an undertaking, the transfer of the employees by the second respondent to the third respondent is illegal because no consent was obtained from the employees.
(ii) Section 25FF of the I.D. Act is not at all attracted because what was transferred namely, Aerated Water Factory was only a Department of the Company and not the undertaking itself.
(iii) The workers are entitled to be reinstated in the second respondent Company with all backwages because the transfer itself is illegal.
7. On the other hand, Mr. Vijay Shankar, learned Senior Counsel for the second respondent company argues as follows :-
(i) The question of consent does not at all arise and the consent cannot be read into Section 25FF of the I.D. Act.
(ii) In any event there is implied consent in the instant case and therefore, the transfer is not illegal.
(iii) The Aerated Water Factory which was transferred to the third respondent is by itself an undertaking and therefore, Section 25FF of the Act is clearly attracted.
(iv) The direction of the learned single Judge remanding the case for deciding the question as to whether the Aerated Water Factory was an undertaking or only a Division, is beyond the scope of the reference itself.
(v) The workmen have been well and truly transferred to the third respondent and they had also accepted the same and their relief if any, can be only against the third respondent.
8. Mr. B. Kumar for the third respondent supports the plea of the workmen, on the question that no transfer is valid without consent of the workmen. He also argues that what was transferred was not an undertaking, but only a Department and therefore, Section 25FF of the I.D. Act is not attracted at all. In any event, he supports the direction given by the learned single Judge is that a remand back to the Industrial Tribunal is necessary to decide the question whether what was transferred was an undertaking or a department. On the legal pleas taken by the parties as above, we are of the opinion that a decision on to the following points will effectively solve the dispute between the parties :-
(I) Whether on the facts and circumstances of the case, the transfer of the Company/second respondent to the Purchaser/third respondent is illegal because the consent of the workers was not obtained Whether there was an implied consent given by the workers ?
(II) Was the transfer in question in respect of the ownership or management of an undertaking or not
(III) What is the scope of the reference in I.D. Nos. 37 and 88 of 1993
(IV) Are the provisions of Section 25FF of the I.D. Act satisfied on the facts and circumstances of the case and to what relief are the workmen entitled to
9. Before adverting to the legal position on the question of transfer of undertaking it is just and necessary that we should advert to the facts of the case because ultimately the application of the law will depend upon the facts. While narrating the facts leading to the reference, in I.D. Nos. 37 and 88 of 1993 we have adverted to the fact that M/s. Spencer and Company, a well-known business concern had its activities confined to the premises at No. 769, Anna Salai, Madras. They had the following divisions in their business concern :
b. Aerated Water Factory (Including sales & maintenance)
c. Pharmaceutical Factory
d. House Furnishing Factory
e. RAC Services Division
f. Wholesale and Retail Show Room
g. Administrative Office.
The second respondent Company was incorporated on November 28, 1979. Only Some of the above departments of Spencer and Company were transferred to the Company. As seen from their own affidavit, they are :
'a. Aerated Water Factory
b. Sales Division of Aerated Water Factory
d. Maintenance Division of Aerated Water Factory.'
A careful perusal of the above departments clearly shows that ineffect the second respondent Company took over the Aerated water Section and the Bakery Section. All the workers in the Aerated Water Factory came to be absorbed in the second respondent Company. By an agreement dated September 18, 1989 between the workers Union comprising of about 160 workmen and the second respondent-Company entered into Section 18(1) of the I.D. Act relating to various demands and disputes, it was also agreed to shift the operation of services of the Aerated Water manufacturing Unit from No. 769, Anna Salai, Madras, to Rajakulam. Consequently, a notice was put up on May 29, 1991 directing all the employees to report for duty at Rajakulam with effect from June 1, 1991. Transport facilities were provided to and from the Spencer Factory premises to Rajakulam. It is thus seen that what was transferred to Rajakulam was only the aerated water factory and none of the workers in the other section namely, Bakery were transferred to Rajakulam.
10. The next important fact is the transfer of Aerated Water Factory to the third respondent/Purchaser on July 10, 1991.
11. The sale transaction between the second respondent and the third respondent had been reduced in the form of agreement dated July 10, 1991 and it has been exhibited as a document before the Tribunal as Ex. M. 10. In the Sale deed, it is mentioned that the transferor 'carried on the business, inter alia as Owners of the Aerated Water Factory, the manufacture of inter alia, Aerated Soda, Soft Drinks and non-aerated fruit juices etc. at its factory located at Rajakulam'. Thus, it is seen what was sold was a complete Unit relating to the Aerated Water Factory and it is so described in the document as 'the said manufacturing unit at Rajakulam hereinafter referred to as 'the undertaking'.' The second aspect of the document is that the buyer (third respondent was interested and willing to acquire the undertaking as a going concern. What was sold is described as 'a going concern with assets including plant and machinery, all liabilities and employees'. The Annexure to the document contains a list of assets-plant, machinery and allied equipments, a second list of liabilities and sundry creditors and a third list of employees numbering about 170.
12. Notices were sent to all the employees and a sample notice was exhibited as M. 12, M. 13 and W. 5. The salient features of the notice should be carefully taken note of for the purpose of applying legal principles. While M. 12 is a notice given by the second respondent-Company, M. 13 and M. 14 are notices given by the Purchaser (third respondent). The salient features are :
(i) The Purchaser says in categorical terms that the workers would be 'in our (third respondent) services without any interruption so in your (workmen) services and the terms and conditions of the service under our (third respondent) employment will not in any way be less favourable than those applicable to you immediately before the transfer and we agree that in the event of separation we shall treat that your service has been continuous and has not been interrupted by the transfer.'
(ii) That the Purchaser would abide by the Memorandum of Settlement relating to wages etc. entered into on September 18, 1989.
(iii) Certain exgratia payments and certain other incentives were extended as a gesture If, of a goodwill.
(iv) In the event of the workers' retrenchment the Purchaser had agreed to pay compensation to the worker on the basis that his services were continuous and was never interrupted by the transfer.
13. In response to the above notices the Union wrote back on July 14, 1991 and their objection was only on the following terms :-
(i) The transfer was illegal in accordance with Section 9A of the I.D. Act in that the hours of work had been changed and long hours had to be spent on transfer.
(ii) So-called transfer was illegal under Section 25FF of the I.D. Act.
(iii) That the Union suspected the bona fide of the transfer.
14. On July 17, 1991, the second respondent Company wrote to the Labour Officer giving the facts relating to the transfer of undertaking to the third respondent and also informing the Labour Officer that all the 170 workmen were carrying on their work under the third respondent-Purchaser. Another significant aspect of this letter is that Labour Officer is informed that on the transfer of undertaking only those who were exclusively in the Unit of Aerated Water Factory were transferred and certain other persons who were carrying on other work of the Company and those in the Administrative Office of the Company were not transferred. Again when the Union sent W. 9 dated July 21, 1991 as and by way of reply addressed to the Labour Officer, they only pointed out the legal obligation of the second respondent Company to prove that the transfer was not benami and to show whether the transfer was in accordance with Section 25FF of the I.D. Act. In their written statement dated July 22, 1991, Union reiterated that they suspect the bona fide nature of the transfer and contended that if it was benami transfer, Section 25FF of the I.D. Act would not at all apply. In their letter dated August 1, 1991 (M. 35) addressed to the third respondent it was pointed out that the workers had objected to the transfer of services and that they were receiving the salaries from the third respondent 'under protest'. On August 12, 1991 (Ex. M. 16) the third respondent-Purchaser wrote to the Regional Provident Fund Commissioner seeking the allotment of new Code numbers on the ground that they had purchased the Aerated Water Factory. That trouble was brewing between the third respondent and the workmen, as seen from Ex. M. 37, the letter dated September 29, 1991 addressed to the Inspector of Police as well as the notice dated October 7, 1991 relating to stay-in-strike. On October 30, 1991 the Purchaser gave notice under sub-section (1) of Section 25FFA of the I.D. Act disclosing their intention to close down the undertaking. They sought permission from the Commissioner of Labour, Madras (the Authority prescribed under Section 25O of the I.D. Act) to close down the undertaking under sub-section (1) of Section 25O of the I.D. Act. The same was taken on file as Closure Application No. 5/91 and by an order dated December 30, 1991 the Prescribed Authority rejected the same for the reasons contained in the said order. It has to be kept in mind that this order has become final and the third respondent has not chosen to challenge the said order nor have they obeyed the order by opening the Factory and giving employment to the workmen.
15. Some of the workmen of the third respondent-Purchaser numbering about 50 had filed P.W. case No. 22 of 1992 against the third respondent under the Payment of Wages Act, 1936, claiming payment of wages for their service rendered with the third respondent. However, they allowed the said application to be dismissed for default on July 24, 1992. One other proceeding which has to be noticed is W.P. No. 15742 of 1993 filed by the workers' Union against both the second and third respondents seeking a direction to the third respondent to reopen the Factory because the closure was illegal or in the alternative to pay the workmen the wages due to them. This writ petition was disposed of by K. S. Bakthavatsalam, J. on November 12, 1993 and the operative portion of the Judgment is as follows :-
'I am of the view that a direction is to issue to the third respondent Company to open the factory on or before November 19, 1993 and allow the employees of the petitioner Union to work on the same terms and conditions, when they have been working prior to the stoppage of work according to the learned counsel for the petitioner. If the third respondent Company does not open the factory within the stipulated time as mentioned above, the third respondent has to pay the wages for future.'
We have already noticed the fact that an appeal (W.A. 1354/1993) was filed against this judgment and the Appellate Bench directed payment of one month's wages to the workmen by the third respondent and also directed the Industrial Disputes, I.D. Nos. 37 and 88 of 1993 to be disposed of within a period of two months. There were certain other Civil Suits filed by one or other parties, to which it is not necessary, to make a reference, because they do not have a bearing on the issues before us.
16. It is on the said direction given by the Appellate Bench that a common award was passed 40 on May 31, 1994 against which the second respondent filed writ petitions, W.P. Nos. 16423 and 16424 of 1994. On the learned single Judge setting aside the award and remitting the case for consideration of the question whether the transfer involved was an undertaking or only a Division, the present appeals have been filed.
17. It will now be convenient to take up the legal points framed by us for consideration on the arguments advanced by the respective counsel.
18. POINT-I : Is consent of the workers necessary for transfer of an undertaking from one party to another.
According to Mr. N. G. R. Prasad, learned counsel appearing for the appellants in W.A. Nos. 243 and 244 of 1995, even assuming that the transfer was of the entire undertaking and therefore, referable under Section 25FF of the I.D. Act, so long as there was no consent obtained from the workmen, the transfer itself is illegal and should be totally ignored. Reliance is placed on P. K. P. Bidi Factory v. O. L. Thenge AIR 1970 S.C. 323. A reference to the facts of the said case clearly shows that the said decision will have no application to decide the instant case. In that case the workman concerned who was dismissed from service was employed in the Head Office whereas the claim was made against the Factory/Management. The contention was that they are two different entities. The Head Office and the factory belonged to the same Proprietor. It is in that connection the Supreme Court observed that a contract of employment involving personal service is incapable of transfer. The following observations were relied upon :
'The position in law is, therefore, clear that except in the case of a statutory provision to the contrary, a right to the service of an employer cannot be the subject matter of a transfer by an employer to a third party without the employee's consent.'
In our view, the said judgment has no application at all to the facts of the present case.
19. The next judgment which is strongly relied on by Mr. Prasad is Jawaharlal Nehru University v. Dr. K. S. Jawatkar & ors. : (1989)IILLJ586SC . In that case an employee was selected for the post of Research Assistant in the Department of South Eastern Studies, School of International Studies of Jawaharlal Nehru University at Imphal. In the year 1980, Imphal Centre was transferred from Jawaharlal Nehru University to Manipur University. The Post-Graduate Studies at Jawaharlal Nehru University was declared as ceased. The members of the staff became members of the staff of Manipur University. The Research Assistant who was selected in the Jawaharlal Nehru University was transferred to the Manipur University. The writ petition was allowed and the Research Assistant was deemed to continue in the service of the Jawaharlal Nehru University. However, if the post was surplus, liberty was given to Jawaharlal Nehru University to dispense with the service of the Research Assistant. The decision of the single Judge was upheld by the Division Bench of the High Court. The Supreme Court on appeal held that the Centre of Post-Graduate Studies was set up at Imphal as an activity of the Jawaharlal Nehru University. Therefore, all the employees of the Centre were employees of the Jawaharlal Nehru University. The contract of service entered into by the Research Assistant was only with the Jawaharlal Nehru University. It cannot therefore, be transferred to Manipur University notwithstanding the statutory provisions. The Apex Court observed :
'The position in law is clear, that no employee can be transferred, without his consent, from one employer to another. The consent may be express or implied. We do not find it necessary to refer to any case law in support to this conclusion.'
It has to be remembered that in neither of the above decisions, the question of Section 25FF of the I.D. Act was involved.
20. In Hariprasad v. A. D. Divelkar A.I.R. 1957 S.C. 121 regarding the aim or object of Section 25FF of the I.D. Act it was expressed thus :
'The situation was that any transfer or closure of business and any change of employer or management was judicially held to give rise to a claim for retrenchment compensation, with consequences which might result in a complete industrial deadlock. The legislature could not declare the decisions to be incorrect, but could partially supersede their effect by an amendment of law. These were the circumstances in which S. 25FF was enacted. We agree with learned counsel for the appellants that the aim or object of the enactment was to supersede partially the effect of the aforesaid judicial decisions, at least with regard to the urgent matter of change of ownership or management of a business undertaking which is of quite frequent occurrence, rather than parliamentary exposition of the pre-existing law, the general question of closure of business, of a lesser degree of urgency, was naturally left to be dealt with, if necessary, after the appeals had been disposed of.'
21. It is worthwhile to refer to the decisions cited on behalf of the second respondent also at this stage. Anakapalle co-operative AG. Society v. Workmen 1962 XI LLJ 621 (SC) is an important decision which will go a long way in finding out an answer to the questions raised in these cases. On facts also the said decision is very close to the facts of the present case. The workmen in that case were under the employment of Vizagapatnam Sugar and Refinery Limited. The said Company had been purchased by Anakapalle Co-operative Agricultural and Industrial Society Limited. The workmen claimed reinstatement in the vendor Company. The Tribunal on a reference held that the Society was the successor in interest of the Company and therefore, the demand for re-employment was justified. It was only the Society which was directed to re-employ those who left out of service in accordance with certain directions. One of the arguments before the Apex Court was that the transaction was a purchase of only Plant and Machinery and accessories and not of a going concern or running business. The Apex Court upheld the decision of the Tribunal that the Society was the successor in interest of the vendor Company. In the above context, the Apex Court considered the scope of Section 25FF of the I.D. Act. The origin and genesis of Section 25FF of the I.D. Act were stated thus :
'It was in this spirit that industrial adjudication approached this problem until 1956 when Section 25FF was introduced in the Act. Sometimes, the claim for re-employment was allowed, or sometimes the claim for compensation was considered. But it is significant that no industrial decision has been cited before us prior to 1956 under which the employees were held entitled to compensation against the vendor employer as well as re-employment at the hands of the purchaser on the grounds that it was a successor-in-interest of the vendor.'
The Apex Court proceeded to say,
'It may be relevant to add that this Section conceivably proceeded on the assumption that if the ownership of an undertaking was transferred, the cases of the employees affected by the transfer would be treated as cases of retrenchment to which Section 25F would apply. That is why Section 25FF begins with a non-obstante clause and lays down that the change of ownership by itself will not entitle the employees to compensation, provided the three conditions of the Proviso, are satisfied. Prima facie, if the three conditions specified in the Proviso were not satisfied, retrenchment compensation would be payable to the employees under Section 25F; that apparently was the scheme which the Legislature had in mind when it enacted Section 25FF in the light of the definition of the word 'retrenchment' prescribed by Section 2(OO) of the Act.'
The Apex Court made the position very clear by the following observations :-
'The scheme of the Proviso to Section 25FF emphasises the same policy. If the three conditions specified in the Proviso are satisfied,' there is no termination of service either in fact or in law, and so, there is no scope for the payment of any compensation. That is the effect of the Proviso. Therefore, reading Section 25FF as a whole, it does appear that unless the transfer falls under the Proviso, the employees of the transferred concern are entitled to claim compensation against the transferor and they cannot make any claim for re-employment against the transferee of the undertaking. Thus, the effect of the enactment of Section 25FF is to restore the position which the Legislature had apparently in mind when Section 25FF was originally enacted on September, 4, 1956. By amending Section 25FF, the Legislature has made it clear that if industrial undertakings are transferred, the employees of such transferred undertakings should be entitled to compensation, unless, of course, the continuity in their service or employment is not disturbed and that can happen if the transfer satisfies the three requirements of the Proviso.'
22. In R. S. Madho Ram & Sons (Agencies) v. Its Workmen 1964 I LLJ 366 (SC) the transfer of the employees from the management of a firm consisting of the members of a Joint Hindu Family to a Company formed by the said members was covered by an agreement which completely satisfy the proviso to Section 25FF of the I.D. Act. In that case, it was held that the transfer was not in respect of the entire undertaking but only related to the retail business. In fine, it was held that it was not a transfer of ownership or management of undertaking attracting the provisions of Section 25FF of the I.D. Act.
23. Bennett Coleman & Co (p) Ltd v. P. P. Das Gupta 1969 XI LLJ 554 (SC) is relied on only for the purpose of contending that the fact that the workman continued in the employment of the third respondent Purchaser for about five months and received wages from them would not estop the workman from claiming the relief that the transfer itself is illegal. In Punjab L. D. & R. C. Ltd Etc., Etc. v. P. O., Lab Court, Etc. etc. : (1990)IILLJ70SC the Supreme Court has referred to the Objects and Reasons of the Amending Act 41 of 1956 inserting Original Section 25FF of the Act on September 4, 1956.
The objects and reasons are as follows :-
'Doubt has been raised whether retrenchment compensation under the Industrial Disputes Act, 1947 becomes payable by reason merely of the fact that there has been a change of employers, even if the service of the workmen is continued without interruption and the terms and conditions of his service remain unaltered. This has created difficulty in the transfer, re-constitution and, amalgamation of companies and it is propose to make the intention clear by amending Section 25FF of the Act.'
After the judgment in Hariprasad Shivshankar Shukla v. A. D. Divelkar (Supra) the section was amended by Amending Act 5 XVIII of 1957. The objects and reasons for this Amending Act are as follows :-
'In a judgment delivered on November 27, 1956, the Supreme Court held that no retrenchment compensation was payable under Section 25FF of the Industrial Disputes Act, 1947, to workmen whose services were terminated by an employer on a real and bonafide closure of business, or when termination occurred as a result of transfer of ownership from one employer to another (See AIR 1957 SC 121). This has led and is likely to lead to a large number of workmen being rendered unemployed without any 20 compensation. In order to meet this situation which was causing hardship to workmen, it was considered necessary to take immediate action and the Industrial Disputes (Amendment) Ordinance, 1957 (4 of 1957), was promulgated with retrospective effect from December 1, 1956.'
In our opinion, the objects and reasons above quoted to a large extent explain the scope of Section 25FF of the I.D. Act. Gurmail Singh & others etc. v. State of Punjab & others : (1991)IILLJ76SC is an authority for the proposition that where the transfer is fictitious or benami Section 25FF of the I.D. Act has no application and the workmen can claim continuity of service. In G. V. M. Reddy v. D. M., A. P. S. R. T. C. 1994 II LLJ 861 Andhra Pradesh High Court has examined in detail the scope of Section 25FF of the I.D. Act. It was observed as follows :- at P 864
'The workmen of such undertaking are entitled to only the notice and compensation as provided under Section 25FF of the Industrial Disputes Act, if they do not come within the ambit of proviso to Section 25FF of the Industrial Disputes Act. If the workmen of such transferred undertaking are continued in service by the new employer such workmen so have no right to urge that they continued to be the workmen of the transferor-employer. If such workman feels that his conditions of service under the new employer are less favourable than those applicable to such workman immediately before the transfer, then his right is only to claim the notice-pay and compensation under Section 25FF of the Industrial Disputes Act and he cannot urge that he continued to be the workman of the transferor employer even after the undertaking was transferred to the new employer under whom he worked from the date of transfer ..'
There is one last judgment of the Supreme Court of India which has considerable bearing on the issue involved in this case. It is N. T. C (South Maharashtra) Ltd & ors. v. R. M. M. sangh & ors : (1993)ILLJ954SC . That was a case where a Textile Mill in Bombay was taken over by the National Textile Corporation Limited under the Textile Undertakings (Taking over of Management) Act, 1983. Dealing with the contention that the contract of employment with the workmen came to an end from the appointed day under the said enactment and the argument that compensation was payable under Section 25FF of the I.D. Act, the Supreme Court had to examine the scope of Section 25FF of the I.D. Act. After referring to Hariprasad's case AIR 1957 30 S.C. 121 already cited, the Apex Court examined the proviso to Section 25FF of the I.D. Act and observed as follows :-
'However, such transfer may not in all cases amount to the termination of employment. It was, therefore, necessary to provide as to in what circumstances the transfer by itself would not be considered as termination of employment and the workmen need not be paid the retrenchment compensation. Those conditions have been taken care of by the proviso to Section 25FF. The reading of Section 25FF as a whole, therefore, shows that unless the transfer falls under the proviso, the employees of the undertaking concerned are entitled to claim compensation against the transferor and they cannot make any claim for re-employment against the transferee of the undertaking. In other so words, when the transfer falls under the said proviso, the transfer does not result in the termination of the contract of employment. A reference in this connection may be made to the decision of this Court in Anakapalle Co-operative Agricultural and Industrial Society Ltd v. Workmen (Supra).'
24. Having given our careful consideration to all the above decisions we have no hesitation in holding that after the advent of Section 25FF of the I.D. Act there is no scope for invalidating the transfer of the ownership or management of an undertaking, whether by agreement or by operation of law, on the ground that consent of the workmen had not been obtained. All that the workmen are entitled to, is notice and compensation in accordance with the provisions of Section 25F of the Industrial Disputes Act, if the workman was in continuous service for not less than one year and that too only if the proviso to Section 25FF of the I.D. Act, was not attracted. Where the proviso to Section 25FF of the Act is attracted and those conditions are satisfied, the workman is not entitled to notice and compensation in accordance with Section 25F of the I.D. Act from the transferor Company. It is needless to point out that if the transfer is malafide or benami in character, then the transfer itself will be not only illegal but it will not have effect, in law, and can be ignored. Similarly, if the transfer is not of the undertaking then also Section 25FF of the I.D. Act will not be attracted. The attempt of Mr. N. G. R. Prasad on behalf of the workmen to introduce a theory of consent of the workmen for invalidating a transfer of ownership or management of an undertaking, is, in our view, futile in view of the plethora of decisions cited above. Therefore, on the first point framed by us we hold against the workmen that no consent is necessary for validating the transfer of ownership or management of an undertaking, within the meaning of Section 25FF of the I.D. Act.
25. The subsidiary question whether there was an implied consent on the part of the workmen in accepting the transfer of undertaking by continuing to work under the third respondent-purchaser till the same was closed inspite of an order by the Commissioner of Labour, rejecting permission to close down the factory, can now be considered. On this question, all that we have to do is to refer back to the history of the case and the detailed facts which we have already discussed before taking up the legal issues. We have noticed the fact that both the second respondent Company as well as the Purchaser had given notice to the workers individually making it clear that all the three conditions of the proviso to Section25FF of the I.D. Act were being complied with and the workmen were assured that the same conditions of service will prevail and even the settlement dated September 18, 1989 would be adhered to. No doubt, the workmen sent a reply on July 14, 1991, wherein they disputed only the change in conditions of 15 service under Section 9A of the I.D. Act. and contended that on that account the transfer was illegal. They also suspected the bonafide nature of the transfer. All the subsequent correspondence only show that the workmen never questioned the transfer on the ground that consent of the workmen was not taken before effecting the transfer. It is not disputed that they received the wages but under protest. We are aware of the decisions which categorically hold that in the industrial field the workmen cannot be denied their rights merely because they had acted in a particular manner. The principles of estoppel cannot be applied against the workmen as easily as the principle is applied in civil cases. It is not necessary to cite decisions on that aspect of the case. But what we are at pains to point out is that the workmen never questioned the transfer on the ground that their consent was not taken before the transfer was effected. In none of the letters or objections, to which we have already made a reference, did they point out that the consent of the workmen is necessary before effecting transfer. They questioned only the bona fide nature of the transfer to which we will make a reference a little later. Therefore, it appears to us that the element of consent was never in the minds of the workmen until probably the disputes reach the legal forums. If the third respondent had not sought for closure of the factory and inspite of the refusal to give permission had not illegally refused to give employment to the workmen, probably the workmen would not have questioned the validity of the transfer of undertaking from the second respondent to the third respondent. The relief sought for in W.P. 15742 of 1993 by the appellant-workmen against the Purchaser-3rd respondent, to reopen the factory or in the alternative to pay the workmen wages due to them, was a clear indicator of the fact that the appellant-workmen by their positive conduct did consent to the transfer of the undertaking by the second respondent to the third respondent. In this view of the matter, we hold that by their conduct the workmen had tacitly accepted the change in the management.
26. Therefore, we answer the first point, by holding that consent is not at all necessary for effecting a transfer within the meaning of Section 25FF of the I.D. Act and on the subsidiary question, we hold that the workmen had tacitly submitted themselves to the transfer of management by their own conduct in not only working under the third respondent company, but also agitating their claim for wages from the third respondent.
27. Point-II - Was the transfer in question on July 10, 1991 related to an undertaking within the meaning of Section 25FF of the I.D. Act or not.
On this question we have already referred to the sequence of events by which Aerated Water Factory of the second respondent Company was transferred to the third respondent. We have referred to the fact that the Spencer and Company was having about seven divisions in their business concern. When the second respondent Company was formed on November 28, 1979 we have noticed the fact that four departments were alone transferred to the second respondent, Company. We have noticed the fact that out of four departments all the three departments except Bakery related to Aerated Water Factory. However, when the situs of the factory was shifted from Anna Salai, Madras to Rajakulam,, only the Aerate Water Factory was shifted. It is nobody's case that the Bakery was shifted to Rajakulam. We have also referred to the document dated July 10, 1991 and the Annexures to the document. The document makes it clear that the transfer related to an undertaking and also related to the entire business carried on by the transferor as Aerated Water Factory. It also specifies the fact that the transfer related to the entire manufacturing Unit at Rajakulam. These factual aspects make it clear beyond any reasonable doubt that the entire Aerated Water Factory Unit with all the employees, Plant and Machinery, was sold as a going concern to the third respondent. Mr. N. G. R. Prasad attempted to show that some of the workers transferred to the third respondent did not originally belong to the Aerated Water Factory. He has referred to this contention of the Workers even in G.O. (D) No. 702 dated October 7, 1993, referring the dispute for adjudication. He refers to the evidence of P.W. 1 by name Balakrishnan for buttressing the argument that the transfer was only in respect of a department or division and not the entire undertaking. P.W. 1 says that in the year 1967 he was working in Carbon Di Oxide Plant and transferred to the maintenance Division. Whenever, one Division was closed, Spencer & Company used to transfer the employees to the other division. In the year 1985, he was transferred 20 from the Maintenance Branch to the Aerated Water Factory. He also referred to Ex.P. 6 wherein the second respondent-Company was maintaining a common Muster-Roll providing for inter departmental transfers. The Tribunal has also referred this aspect of the case and points out that M.W. 1 had also admitted in evidence that inter departmental transfers were being made in the second respondent Company. But the Tribunal did not render a finding whether the entire undertaking was transferred or only a part of it was transferred to the third respondent. Learned single Judge refers to the fact that the workmen never pleaded that the Aerated Water Factory was not an undertaking by itself. Learned single Judge also renders a finding that the fact that some of the workers had been transferred earlier would not by itself result in a finding that, what was transferred, was not an undertaking. It is under these circumstances that learned single Judge thought an opportunity must be given to the parties to establish whether transfer related to an undertaking or not. In our considered opinion, the above decision of the learned single Judge is not justified on the facts and circumstances of the case. We are definitely of the opinion that once the Aerated Water Factory was shifted from Anna Salai, Madras to Rajakulam, it was a separate entity by itself and thereafter no transfers took place between the so employees of the Aerated Water Factory at Rajakulam to any of the other departments at Anna Salai, Madras. Therefore, at Rajakulam only the Aerated Water Factory with its Sales and Maintenance Divisions were operating. It is nobody's case that the Bakery Division was also housed at Rajakulam. Therefore, it is idle to contend that the Aerated Water Factory with all its Divisions functioning at Rajakulam was not a separate undertaking by itself. What was sold to the third respondent was this separate undertaking at Rajakulam. In our opinion, it would amount to a misreading of the facts and circumstances of the case, if one were to hold that the Aerated Water Factory at Rajakulam was not a separate undertaking and that it had any link with the other departments of the second respondent Company at Anna Salai, Madras. If one were to lose sight of the basic facts and the sequence of events there is every likelihood of missing the crux of the matter. The parties cannot be allowed to shift their stand according to the trend of the thinking in the legal forums. The parties crossed swords before the Tribunal only on the issue whether consent was necessary or not before effecting a transfer of undertaking and whether stoppage of business by the third respondent was justified or not. In this connection, we once again refer to the reference made by the Government for adjudication. While there is no dispute about the reference in I.D. No. 37 of 1993, the reference in I.D. No. 88 of 1993 is the subject matter of controversy. We have already extracted the dispute which was referred to the Tribunal for adjudication. The dispute that was referred, only related to the validity of the transfer of Aerated Water Factory at Rajakulam along with the workers employed therein by the second respondent to the third respondent was justified or not. There is no doubt a parenthesis clause says that the transfer did involve change of conditions in the service of the workmen. But what was referred to the adjudication is only validity of the transfer. There was no reference at all on the question whether the transfer related to an undertaking as contemplated in Section 25FF of the I.D. Act or not. Therefore, the question of the management, not discharging any onus on their part to prove that it was an undertaking which was transferred, does not at all arise. In any event, when both parties have adduced evidence and when we have noticed the sequence of events, we have no doubt at so all that what was transferred was a separate undertaking at Rajakulam along with employees in the Factory as a going concern.
28. Our decision on face, as above, is amply supported by the judgments relied on by learned counsel for the second respondent. Learned single Judge has also adverted to the fact that the word 'undertaking' has not been defined in the I.D. Act. The introduction of the Clause (ka) in Section 2 of the I.D. Act, defining 'industrial establishment or undertaking', does provide a clue for interpreting the word 'undertaking' in Section 25FF of the I.D. Act. The said definition shows that 'industrial establishment or undertaking' means an establishment or undertaking in which any industry is carried on. Looked from this angle there is no difficulty at all in holding that what was transferred under the document dated July 10, 1991 was indeed an undertaking, because what was being carried on at Rajakulam was an industry. Even in commonparlance the word 'undertaking' is understood as an enterprise. The Aerated Water Factory at Rajakulam was nothing but an enterprise of the Spencer Consumer Products and Services Limited. Therefore, we have no doubt that on the facts and circumstances of the case what was transferred was an undertaking, a separate entity and complete in all aspects as an Aerated Water Factory. In A. S. Productions Agencies v. Industrial Tribunal Haryana : (1979)ILLJ1SC emphasis is laid on a distinct business or commercial or trading or industrial activity to be carried on in a place for the purpose of holding that it is an undertaking. Similarly, in S.G. Chemicals and Dyes Trading Employees Union v. S. G. Chemicals and Dyes Trading Limited and Another 1986 I LLJ 49O (SC) it is laid down that the word 'undertaking' is to be understood in its ordinary meaning and thus construed it means an establishment or undertaking in which an industry is carried on. In Isha Stl. Treatment, Bombay v. Association of Engineering Workers, Bombay & Others : (1987)ILLJ427SC the Supreme Court relied on the earlier judgment in Management of Hindustan Steel Ltd v. The Workmen & Others : 1972CriLJ909 for the purpose of understanding the word 'undertaking' in Section 25FF of the I.D. Act as to connote any work, enterprise, project or business undertaking. They have made it clear that it is not intended to cover the entire industry or business of the employer. Even the closure or stoppage of a part of the business or activities of the employer would in law be covered by the said provision of law. On the second point raised by us, we hold that what was transferred under the document dated July 10, 1991 was indeed an undertaking within the meaning of Section 25FF of the I.D. Act.
29. We do not share the opinion of learned single Judge that a decision on this issue requires a fresh opportunity to be given to the parties, and therefore, justifies a remand of the case. For all the reasons given by us we do not think that there is any scope for such a remand for the purpose of determining whether the transfer document dated July 10, 1991 comprises of transfer of an undertaking or not. We hold that there is no scope for such a decision on the terms of the reference under I.D. No. 88 of 1993 and in any event we hold that what was transferred was only an undertaking attracting the provisions of Section 25FF of the I.D. Act. The second point framed by us as well as the subsidiary point raised by us are also answered in favour of the second respondent.
30. Points III & IV : Scope of reference and the applicability of Section 25FF of the I.D. Act.
We have already dealt with this question while discussing the second point. We have only to reiterate that what was referred under I.D. No. 88 of 1993, was the question as to whether the transfer of the Aerated Water Factory at Rajakulam along with the workers employed therein to the third respondent is justified or not. Neither the question of consent nor the question of the transfer Comprising of an undertaking was in dispute between the parties at the time of reference. However, having regard to the disadvantageous position in which workmen are normally placed, to which also we have made a reference already, we have elaborately considered the question whether such a consent is necessary and whether the transfer related to an undertaking or not. Therefore, if at all, what has to be decided is whether the change in the conditions of the service would impose liability on the second respondent/Company or the third respondent-Purchaser. The second aspect of the case is whether the transfer itself was bonafide or only a benami arrangement between the parties. It has to be remembered that the plea of the workmen was that the transfer was not bonafide and also benami in character. But unfortunately in the course of evidence, no attempt was made to prove the said allegation. Even a careful perusal of the document dated July 10, 1991 shows that it was a real and genuine transfer of undertaking. For a period of five months the workers were in fact working under the Purchaser/third respondent. There are litigations pending between the second and third respondents which also suggest that the transfer of undertaking was true and genuine and could not have been collusive. The Industrial Tribunal has also rendered a finding after referring to the notice issued by the second and third respondents to the workmen immediately after the transfer of undertaking that there was nothing suspicious about the transfer. His findings are
'The Unions had specifically stated that they understand that they are to work under the second respondent at Rajakulam. Therefore, the Unions must have been aware that the industry is going to be transferred to 2nd respondent. It cannot be stated that the transfer of the undertaking is illegal.'
Even Learned single Judge has observed as follows :
'The substantial issue in that reference was justifiability of the transfer of the factory along with the employees. The Tribunal has found that the transfer itself was not illegal. The workmen did not contend nor was any evidence let into the effect that the transfer was benami and despite transfer, the petitioner company continued to run the factory. It must therefore be held that the transfer of the factory was in fact effected and that the management of the factory vests with the third respondent after such transfer. The Tribunal's finding that the transfer was not illegal has to be understood in that sense.'
In fact no argument was advanced before us that the transfer is a make-belief document just to hoodwink the workmen.
31. The second aspect of the reference is whether there were changes in the conditions of the service and if so which of the respondents become liable under Section 25FF of the I.D. Act. We have already noticed the provisions of Section 25FF of the I.D. Act threadbare while discussing the question of consent by the workmen. The plain and simple meaning of Section 25FF of the I.D. Act is that if there is a transfer of undertaking, all the workmen who were in continuous service for not less than one year in the transferor undertaking shall be entitled to notice and compensation in accordance with the provisions of Section 25F of the I.D. Act as if the workmen had been retrenched. But the proviso makes it clear that nothing in the said Section shall apply to the workmen in a case where the transfer provides for three contingencies mentioned in the proviso. In other words, even the question of notice and compensation to the workmen will not arise if the conditions in the proviso are satisfied. In these cases, we have already noticed the fact that both the second and the third respondent had given notice to all the workmen as seen from Exs. W. 5, W.12 and W.13 to which again we have made a reference already. The above notices make it abundantly clear that the three conditions mentioned in the proviso have been strictly adhered to both in the transfer document dated July 10, 1991 as well as the undertaking given to the workmen as per the above notices. Certain extra incentives were also given with which we are not concerned. Therefore, there is absolutely, no difficulty in coming to the conclusion that the workmen had become employees of the third respondent-Purchaser and for any relief with regard to their working conditions they have to look to the third respondent alone. That the workmen understood their position in the said manner is also clear from the fact that they have filed a case P.W. 22 of 1992 before the Deputy Commissioner of Labour, for payment of wages under the Payment of Wages Act, 1936. No doubt, they allowed the said case to be dismissed for default. But there is one other proceeding which makes things clear and that is W.P. No. 15742 of 1993 in which the workmen claimed wages from December 31, 1991 both against the second and third respondents. But what is important is the prayer in the writ petition insisted on the third respondent to comply with the order of the Commissioner of Labour dated December 30, 1991 refusing permission for closure. This conduct of the workmen shows that they by their conduct accepted the transfer of an 'undertaking' to the third respondent and accepted the third respondent as their employer. That being so, it does not lie in their mouth to contend to the contra. We have already noticed the fact that K. S. Bakthavatsalam, J. who beard the writ petitions had analysed the rival obligations of the second and third respondents and gave a direction to the third respondent to open the factory and allow the employees to work in the factory, or else pay the wages to the workmen. No doubt, the order of Bakthavatsalam, J. was modified in W.A. No. 1354 of 1993, but the modification has not affected the stand of the workmen that the third respondent to open the factory and pay the wages which position would emerge only out of consenting to the transfer of the undertaking to the third respondent. Therefore, we hold that Section 25FF of the I.D. Act has been fully satisfied in the sense that the transferor company had relieved itself of its obligations vis-a-vis the workmen. The entire obligation has passed on to the third respondent-Purchaser. There is nothing to show that the transfer is illegal or otherwise liable to be set aside. The arguments of Mr. B. Kumar for the third respondent are no different from the arguments of Mr. N. G. R. Prasad for the workmen. We therefore, hold that the transfer of undertaking was justified and all the obligations with respect to the workmen has passed on to the third respondent-Purchaser.
32. The only additional point was, that the workmen had not challenged the award of the Tribunal in I.D. No. 37 of 1993. In our opinion, since the Tribunal had given relief to the workmen in I.D. No. 88 of 1993 there was no need for the workmen to challenge I.D. No. 37 of 1993. In any event, since we are dealing with the entire award, which was in turn canvassed before learned single Judge, we do not think that such a technical plea will deprive the workmen of their relief against the third respondent. We have already noticed the fact that the application of the third respondent for closure of business had been rejected by the statutory authority under Section 25O of the I.D. Act on December 30, 1991. No evidence was placed before the Tribunal or before us to justify the closure of business on the facts and circumstances of the case.
33. To sum up the various findings given by us and to reduce them to specific reliefs available to one or either of the parties, was observe that there was no justification at all for the remand of the case back to the Tribunal. The findings of the Tribunal in I.D. Nos. 88 and 37 of 1993 being inter-related, are set aside in toto. The order of learned single Judge is also set aside. We answer the two references in I.D. Nos. 88 and 37 of 1993 as follows :
I.D. No. 88 of 1993 : We hold that the transfer of the Aerated Water Factory at Rajakulam along with the workers employed therein from the second respondent-Company to the third respondent as per document dated July 10, 1991 is perfectly justified. The workers are not entitled to any relief as against the second respondent-Company.
(11) I.D. No. 37 of 1993 : We hold that the stoppage of work in the third respondent Company from December, 1991 is not justified. The workmen are entitled to all the benefits under any law for the time being in force as if the undertaking had not been closed down by the third respondent in accordance with Section 25-O(6) of the I.D. Act.
34. The Writ Appeals are allowed in the above terms. There will however, be no order as to costs.