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Judgment
A.R. Lakshmanan, J.—The respondent/workmen in both the writ Appeals field W.P. 7508 of 1985 to quash the award of the Industrial
Tribunal, Madras in I.D. 38 of 1983 as published in G.O.Ms. No. 1295 Labour and Employment Department dated September 26, 1984 and
direct the Management of Tac Floor Company and the management of Willam Goodacre and Sons Limited to reinstate the workmen with
backwages and continuity of service.
Tac Floor Company is doing business in manufacturing mat floors and mats. The said company and the management of William Goodacre and
Sons Limited. Alleppey are closely interconnected. On September 4, 1982 Tac Floor Company gave a notice u/s 25-FF of the Industrial Disputes
Act holding that it had transferred the Tac Floor Company Unit with its appurtenances and other facilities excluding mat looms to the 2nd
respondent-Company (William Goodacre and Sons Limited) under an agreement of lease. The services of all the workmen were terminated and
one month''s notice pay in lieu of backwages was offered. The workmen sent a letter protesting against the alleged transfer of undertaking.
According to them, there is no transfer of ownership of the company. It has been alleged that there is only a lease in favour of M/s. William
Goodacre and Sons Limited and there is no transfer of ownership of the management and that both the companies are acting in collusion to put an
end to the services of the workmen. Since there was a dispute between the workers represented by their Union and the management, the matter
was referred for adjudication.
The Tribunal by its order dated August 10, 1984 in I.D. 38/83 held that the denial of employment to the workmen listed in the annexure to the
Government Order under which the dispute had been referred to by the Government of Tamil Nadu to the Industrial Tribunal is in accordance with
law and is therefore, justified and barring the right to get the compensation in terms of Section 25-FF and Section 25 of the Industrial Disputes
Act, 1947, the workmen are not entitled to any other relief. The Government of Tamil Nadu by G.O.Ms. No. 1295/Labour and Employment
Department dated June 2, 1983 had referred the following dispute u/s 10(1)(d) of the I.D. Act, 1947 for adjudication by the said Tribunal. The
dispute is as follows :
Whether the denial of employment to the 149 workmen listed in the annexure on the plea of leasing the factory is justified ? If not, the relief to
which the workmen are entitled ?
Both the companies have filed their counter affidavits, denying the objections made by the workmen. M.Ws. 1 and 2 were examined and
Exhibits M. 1 to M. 35 were marked. The Tribunal has referred to Exhibits M. 1 and M. 2, which are the balance sheet and profit and loss
account statement for the year 1981. Tac Floor Company had suffered a loss of Rs. 7,20,620.08. In the year 1982 again the said company had
suffered as of Rs. 8,14,437.94. In fact, under Ex.M. 3, which is an award passed by the Industrial Tribunal, Madras in a dispute between the Tac
Floor Company and the employees, who were affected by the lay-off declared by the Management, the Tribunal held that the lay-off declared by
the management was for valid ground and therefore, the lay-off was legal. An agreement under which the transfer of management of Tac Floor
Company had been effected to the William Goodacre and Sons India Limited. had come into existence under Ex.M. 5. Under the agreement, the
Tac Floor Company along with the land admeasuring approximately 7 acres. appurtenant thereto inclusive of all machineries but excluding 13 mat
looms had been given to the 2nd Respondent company on a leave and licence basis for a period of 5 years, commencing from September 6, 1982.
The 2nd respondent-Company under this agreement had to pay the 1st respondent-Company a sum of Rs. 1,00,000/- per year as consideration
for the leave and licence. The 1st respondent had undertaken to terminate the services of the workmen and staff employed in the Tac Floor
Company prior to September 6, 1982. Therefore, the Tac Floor Company has retained the right to terminate the leave and licence by giving three
months'' notice to the 2nd respondent-company, if the 2nd respondent commits default in the payment of a lakh of rupees for a continuous period
of two years or more or if the 2nd respondent-company violates any of the terms of the agreement.
The Industrial Tribunal, on a careful consideration of the terms and conditions under which the factory management had been transferred by the
1 st respondent-company to the 2nd respondent-company held that the transaction is a straight one and not motivated as alleged by the workmen.
The Tribunal has also referred to the documentary evidence adduced by the management, which makes it abundantly clear that the Tac Floor
Company right from the year 1979 had not been very flourishing as the quantum of the production has been gradually going down and in the years
1981-82, it had suffered loss and the Board of Directors had felt that it is not a viable unit. In conclusion, the Industrial Tribunal held that the
transfer of management of Tac Floor Company Unit from the 1st respondent-Company to the 2nd respondent-Company is a bona fide transaction
and that the services of the erstwhile employees of the 1st respondent-Company in Tac Floor Company had been terminated long before the
management was physically taken over by the 2nd respondent-company and the transaction attracts the application of Section 25-FF of the
Industrial Disputes Act.
The Writ Petition came up for final hearing before Y. Venkatachalam, J. On November 8, 1995, the learned Judge passed the following order :-
The arguments of both sides are heard.
I have perused the entire materials available on record, particularly with regard to the contents of the affidavit filed by the writ petitioners. Having
seen the entire facts and circumstances of the case on hand, I consider that it is just and proper to remand the 10 matter to the third
respondent/Industrial Tribunal, Tamil Nadu, Madras for giving a fresh disposal according to law after giving opportunity to both sides to let in oral
documentary evidence. In view of my conclusion, I did not touch the details of the facts involved as it amounts nothing but touching the merits of
the main case.
In the result, the writ petition is allowed and the award passed by the third respondent in I.D. No. 38/1983 is hereby set aside and the third
respondent is directed to give a fresh finding after giving opportunity to both sides to let in either oral or documentary evidence. In the
circumstances, there will be no order as to costs.
Aggrieved by the above said order, the management of William Goodacre and Sons Ltd., Alleppey filed Writ Appeal No. 225/1996 and the
management of Tac Floor Company owned by Alleppey and Company filed Writ Appeal No. 1055 of 1987.
We have heard the arguments of Mr. Sanjay Mohan, learned counsel appearing for the appellant in W.A. No. 225 of 1996, Mr. P. Ranganatha
Reddy for M/s. King & Partridge, learned counsel for the appellant in W.A. No. 1055 of 1997 and Mr. V. Selvaraj, learned counsel for
respondents 1 to 8 in both the Writ Appeals.
The order of the learned single Judge was challenged as bad, since the same was passed by the learned Judge without giving any reason as to
why it considered it as a fit case to remit the matter to the Industrial Tribunal for fresh disposal.
As already noticed, the Industrial Tribunal had rendered a finding after considering oral and documentary evidence and has held that the transaction
is a genuine one and that the agreement is not a sham and nominal as alleged. The learned Judge, in his order, did not also indicate as to what error
was apparent on the fact of the records so as to require the Writ Petition being allowed and the matter remitted for fresh disposal. In the absence
of a finding rendered by the learned Judge that the award suffers from error apparent on the face of the records, the Writ Petition ought to have
been dismissed. Ale learned Judge in his order has not expressed any view on the submissions made before him and in the circumstances, it is also
not known to us as to what prompted the learned Judge to allow the Writ Petition and set aside a well considered order by the Industrial Tribunal.
At the time of hearing our attention was drawn to the Minutes of the Proceedings of the Board meeting of Alleppey Company Limited dated May
26, 1982, agreement dated September 2, 1983, counter statement submitted by the management of Alleppey Company Limited dated September
2, 1983 and the counter statement submitted by M/s. William Goodacre and Sons Limited, dated September 2, 1983 and also of the award dated
August 10, 1984 and the order in Writ Petition 7508 of 1985 dated November 8, 1995.
We have carefully considered the above documents and also of the arguments advanced on either side. The Tac Floor Company was an unit
belonging to Alleppey Company Limited, Alleppey, which is a public limited company, whose main business is to manufacture coir products and
sale and export thereof. The said company has a power loom factory separately registered under the Factories Act. It has got separate licence
under the Coir Industries Act. The said factory came into existence in 1974 and commercial production was started in the year 1976.
Unfortunately, the company was not allowed to operate 13 mat looms continuously, as the Government of India and the Coir Board refused to
give necessary permit for the continuous operation of the looms. In order to see that the factory could run as an economically viable unit, it was felt
that 13 mat looms and 25 matting looms should operate simultaneously. The company also had sustained heavy loss in the years 1981 and 1982
respectively. Even though the application for renewal of licence was made in time, licence was not received for matting looms from 1982. The
company came to a situation where the company was unable to continue the work in the factory as an economically viable unit. Because of the
refusal of the Government of India and the Coir Board to allow the operation of the looms and the sharp drop in the orders of the foreign markets,
the company found it not possible to continue the working of the unit.
M/s. William Goodacre and Sons (India) Limited, the appellant in W.A. 225/1996 is a leading company in the coir industry with foreign
contracts in International markets for coir products. Tac Floor Company held negotiations with them and the proposal was made regarding taking
over of the management by them and they expressed their willingness to take over the management of Tac Floor Company units with their own
plan of action and operational methods in an economic manner provided the appellant-company is prepared to settle all the of the labour and staff
without any liability for M/s. William Goodacre and Sons (India) Limited. An agreement was entered into between the two companies. The
management of Tac Floor Company, factory along with appurtenant land and other facilities were transferred in favour of William Goodacre and
Sons (India) Limited on a leave and licence basis with prior approval of the Board of Directors of both these companies. The leave and licence
agreement was executed on September 2, 1982 and under the agreement, the management of Tac Floor Company factory was transferred in
favour of M/s. William Goodacre and Sons (India) Limited for a period of 5 years, commencing from September 6, 1982, on a consideration of
payment of licence fee of Rs. 1,00,000/- per year, subject to the terms and conditions specified in the agreement. In view of the transfer of
management, the management of Alleppey Company gave notices of termination of services of all the workmen in terms of Section 25-FFF of the
I.D. Act. Compensation as provided u/s 25-FFF was tendered to the workmen. The workmen, whose services were terminated were paid one
month''s salary/wages in lieu of notice, compensation at the rate of 15 days wages for each year of service, gratuity as per the rate provided under
the Payment of Gratuity Act. 1972, arrears of salary/wages and bonus by cheque attached to the termination notice. At the time of termination,
there were only 147 workmen in the factory including staff and they were given termination notice individually along with dues payable to them.
Most of the workers accepted the compensation and the terminal benefits. However, the issue was taken up by the Tac Floor Company
Thozhilalar Sangam and an issue was referred for adjudication to the Industrial Tribunal as referred to in paragraph 3 supra.
The workers'' Union contended that Section 25-FF is not applicable as the transfer was not bona fide and transfer was a guise to threaten the
workers to agree to the demands of the management. According to the Union, they should be treated as continuing in employment with the
transferor company. Detailed counter statement was filed by the management denying the allegations. No evidence was adduced for the workmen
before the Industrial Tribunal. Management examined two witnesses to prove their contentions and balance sheet, leave and licence deed etc.,
were produced by the Management as Exhibits.. The labour Court found that the conditions contemplated u/s 25-FF were complied with and
therefore, they cannot have any claim against the transferee management or transferor management. Since the transferor management has
paid/tendered full compensation, there is no further liability. Therefore, the Tribunal held that barring the right to get compensation in terms of
Section 25-FF and Section 25-F of the I.D. Act, the workmen are not entitled to any other relief. Out of 149 workers, only eight workers
individually challenged the award. The grounds in the writ petition were against that there was no valid transfer as transfer was not bona fide and
employees are entitled to re-employment under the transferor company. However, the learned Judge without considering any of the contentions
and without going through the evidence and without a finding that there was an error apparent on the face of the record, or there is an error of law,
mechanically remanded the matter to the Industrial Tribunal for fresh disposal.
It was not contended by the Union that they were not given any opportunity before Industrial Tribunal, Madras for adducing evidence. In the
absence of any procedural infirmity, the learned single Judge is not correct in setting aside the award and remanding the 0 matter to the Industrial
Tribunal, Madras. The entire evidence adduced in the case were considered by the Tribunal, Madras and findings were arrived at considering the
evidence and the pleadings in the case. There is absolutely no justification for setting aside the award of the Industrial Tribunal, Madras, which was
passed in accordance with law.
With regard to the contentions of the Union that the transfer of the management was not bona fide, after considering the entire evidence and
pleadings, the Tribunal found that the transaction was bona fide. The appellant in the grounds of appeal in W.A. No. 1055 of 1997 has stated that
even though some decisions were cited to prove that once Section 25-FF is complied with and compensation paid, workers of the transferor
company have no further claims, none of the decisions were referred to by the learned single Judge. The decisions cited before the learned single
Judge as could be seen from the grounds raised are :
(Workmen of Karnataka Agro Fruits Ltd., v. Karnataka Agro Products Ltd.,) 1992 I LLJ 712 Karnataka High Court;
Workmen of Deccan Sugars Vs. Nava Bharat Ferro Alloys Ltd. and others, Madras High Court;
G.V.M. Reddy Vs. Andhra Pradesh State Road Transport Corporation, Tirupathi, Andhra Pradesh High Court;
(Punjab Land Development Corporation v. Labour Court) 1991 I LLJ 70 Supreme Court;
Anakapalla Co-operative Agricultural and Industrial Society Limited Vs. Workmen, Supreme Court;
Learned counsel for the appellant contended that all the above decisions support the view of the Industrial Tribunal, Madras that once Section 25-
FF is complied with, the employees of the transferor company cannot have any other relief.
At the time of hearing, Mr. Sanjay Mohan, learned counsel for the appellant cited the following decision in support of his contention.
(Spencer Group etc., Union v. Industrial Tribunal); Vol. 89 F.J.R. 728.
It has been held as follows :
Having given our careful consideration to all the above decisions, we have no hesitation in holding that after the advent of Section 25-FF of the
Industrial Disputes Act, there is no scope for invalidating the transfer of the ownership of 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 25-F 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 25-FF of the Act was not attracted. Where the proviso to Section 25-FF of the Act
is attracted and these conditions are satisfied, the workman is not entitled to notice and compensation in accordance with Section 25-F of the
Industrial Disputes Act from the transferor-company. It is needless to point out that if the transfer is mala fide 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 25-FF of the Industrial Disputes 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 invalidating the transfer of ownership or
management of an undertaking, within the meaning of Section 25-FF of the Industrial Disputes Act.
In support of his contention that what was granted is not a Licence, but a lease. Mr. V. Selvaraj learned counsel for respondents 1 to 8 cited.
Khalil Ahmed Bashir Ahmed Vs. Tufelhussein Samasbhai Sarangpurwala,
Qudrat Ullah Vs. Municipal Board, Bareilly, ;
(Ariff v. Jadunath Majumdar) AIR 1931 PC 79;
Sahu Anand Sarup Vs. S. Taiyab Hasan and Others, .
In our opinion, the above judgments have no application to the facts and circumstances of the case. In this case, after tendering compensation
and all retrial benefits and notice pay, the services of 147 workers were terminated. The Industrial Tribunal in the award found that the transfer was
bona fide and provisions u/s 25-FF were complied with and the workmen of the transferor company have no claim barring the right to claim
compensation in terms of Section 25-FF and Section 25-F of the I.D. Act. The above order of the Industrial Tribunal, in our opinion, was correct.
In any event, there is no finding that the evidence was not properly considered or parties, were not allowed to adduce evidence. In view of the
above, remand of the case by the learned single Judge is entirely wrong. Since no infirmity was found out in the award, the learned single Judge in
our opinion, went wrong in remanding the matter. The learned Judge has also omitted to notice that Union did not challenge the award of the
Industrial Tribunal, but only 8 persons challenged the award out of 147 employees. Therefore, substantial number of workers have not challenged
the award. The award has become final and by remanding the matter, no useful purpose would be served and by remitting the matter, the learned
single Judge is only opening a dispute, which was over several years ago. We are fully convinced with the reasoning given by the Industrial
Tribunal. There is absolutely no justification for setting aside the award and remanding the matter. The order of the learned single Judge is,
therefore, set aside.
Both the Writ Appeals succeed and the Writ Petition is dismissed. However, there will be no order as to costs.