Topic: Anakapalla Co-Operative Agricultural and Industrial Society v/s It's Workmen & Others

Anakapalla Co-Operative Agricultural and Industrial Society v/s It's Workmen & Others
Equivalent citations: 1963 AIR 1489, 1963 SCR Supl. (1) 730 - Bench: Gajendragadkar, P.B., Sarkar, A.K., Wanchoo, K.N., Gupta, K.C. Das, Ayyangar, N. Rajagopala - Citation: 1963 AIR 1489 1963 SCR Supl. (1) 730 - Citator Info : R 1964 SC 645 (13), D 1967 SC1559 (5), F 1968 SC 514 (18), RF 1969 SC 590 (4), E 1974 SC1604 (18,20), RF 1975 SC1639 (8)

Industrial Dispute-Transfer of undertaking-When transferee is successor-in-interest of transferor-Payment    of compensation by transferor-Reinstatement claimed against transferee-Whether claim sustainable-Industrial Disputes Act, 1947 (14 of 1947), ss.25F, 25FF, 25H.

A company, running,a sugar mill was suffering losses every year due to insufficient supply of sugarcane    and wanted    to shift the    mill. The cane-growers formed a cooperative society and purchased the mill. As agreed between the company and the society, the company terminated the services    of the    employees and    paid    retrenchment compensation to them under s 25FF of the Industrial Disputes Act, 1917. The society employed some of the old employees of the    company but did not, employ 49    permanent and    103 seasonal employees out of them.    The dispute arising out of the refusal of the society to absorb    these    workmen    was referred for adjudication. The 'Tribunal, by its award, directed the appellant society to re-employ with continuity of service as many of old employees as were left out in favour    of new employees, aid to re-employ the remaining employees as and when vacancies occurred,    The society contended that    it was not a successor-in-interest of the company and the claim for reemployment was riot    sustainable and that the    services of the employees having,    been terminated upon payment of compensation by the company under s. 251, F no claim could be made against the transferee of the company

Held, that the appellant society was the successor-in- interest of the company. The question as to whether a purchaser of an industrial concern    is a successor-in- interest of the vendor has to be decided on a consideration of several relevant facts such as-, whether the purchaser purchased the whole of the business; was the business purchased is a going


concern; is the business carried on the same or similar as that carried on by the vendors is it carried on at the    same place;    is the business carried on without a    substantial break in continuity; has goodwill been purchased; is    the purchase of all the parts or only of some etc.    The decision of the question depends upon the evaluation    of all    the relevant factors and it cannot be reached by treating    any one of them as of over-riding or conclusive significance. In the present case the society purchased the    concern    for the purpose of manufacturing sugar and carried on the    same business, at the same place without

any appreciable break.

Ramjilal Nathulal v. Himabhai Mills Co. Ltd., (1956) 11 L. L J. 244, New Gujarat Cotton, Mills Ltd. v.' Labour Tribunal, (1957)    11 L.    I,. J. 194 and A n tony D' Souza v.    Sri Motichand Silk Mills, (1954) 1 L. L. J. 793, referred to. Held, further    that the claim of the    employees for    re- instatement was not sustainable. In all cases falling under s.25FF of the Act, if the transfer does not come within    the proviso, the employees of the transferred    concern    are entitled to claim compensation against the transferor    but they cannot make any claim for re-employment    against    the transferee. The employees were not    entitled to    both compensation for termination of service and immediate    re- employment at the hands ,of the transferee. Section 25H was not applicable    to the case as the termination    of service upon transfers or closure is not retrenchment    properly so called. Termination of service with which s.    25FF deals cannot be equated with retrenchment covered by s. 25 F.    The words "as if"    in s.    25FF clearly    distinguish between retrenchment under s.2(00) and termination of service under s.25FF.    Nor could the principles underlying,    s. 25H be applied    to the case.    The general principles of social justice    and fair play did not justify the claim for    re- employment simultaneously with the payment of    retrenchment compensation.

Hariprasad Shiv, Shankar Shukla v. A. D, Divakar, [1957] v.Union of India, [1960] 3 S. C.R. 528 and Indian Hume    Pipe Co. Ltd. v. The Workmen. [1960] 2 S.C.R. 32, referred to.


CIVIL APPELLATE JURISDICTION : Civil Appeal No. 224 of 1962. Appeal    by special leave from the award dated June 6, 1961, of the Industrial Tribunal, Andhra


Pradesh, Hyderabad in Industrial Dispute No. 13 of 1960. C. K.    Daphtary, Solicitor    General of    India, K. Sirinivasamurthi and Naunit Lal for the appellant. B. P.    Maheshwari for respondent No, 1 A.S.R. Chari,    M. K . Ramamurthy, R. K. Garg    and T. S. Venkatraman, for the respondent No. 2.

1962. October 23. The judgment of the Court was delivered by

GAJENDRAGADKAR,    J The principal question which    arises    in this appeal has relation to the scope and effect of s. 25-FF of the Industrial Disputes    Act, 1947 (14    of 1947) (hereinafter called the Act). An industrial dispute between the appellant, Anakapalla Co-operative Agricultural & Industrial Society, and the respondents, its workmen,    was referred by the Governor of Andhra Pradesh. for adjudication to the Industrial Tribunal, Hyderabad, under s. 10(1)(d) of the Act on December 7, 1960. The respondents who were in the employment    of Vizagapatnam Sugar    and Refinery Ltd.. (Hereinafter called the Company) claimed that they    were entitled to re-employment in the said concern which had been purchased by the appellant, and since their demand for    re- employment by the appellant was not accepted by it,    they represented to    the State Government that the    said demand should be adjudicated upon by an Industrial Tribunal.    That is how their demand for re-employment came to    be referred under s. 10(1)(d).

It appears that the    Company was an    old Company which manufactured sugar. Its business, however, did not result in profits,    because    the supply of sugar-cane    was insufficient and the management apprehended that it could not face the losses from year to year, and so, it thought of shifting its business


to Yerravaram in East 'Godavari where 'it anticipated    that the supply of sugarcane was assured this attempt of    the management., however did not succeed because of the local cane growers.    The 'local cane growers decided to form a: cooperative' society' themselves and to purchase the concern of the Company. Accordingly, the appellant    Society    was formed    and 'the sale transaction was effected between    the said concern and the appellant on October 7, 1959. It    was agreed    between    the appellant and the Company that    the Company    should pay retrenchment compensation to    its employees and terminate their services leaving the appellant full freedom to choose its own employees. Accordingly,    Rs. 1,90,000/were paid by the Company to its employees byway of retrenchment compensation. Before the completion of    this transaction, however, the employees had suggested that their Union could itself purchase the concern, but the Union could not manage to effect the proposed sale transaction.    It, however, suggested that the compensation of Rs.1,90,000/- which the Company had to pay to its employees may be credited to the account of the Society and the employees paid the said amount by instalments, but this suggestion was not accepted and as a result of the sale transaction,    the appellant took over the concern and employed such persons as it needed according to the recommendations of    a committee appointed by the appellant in that behalf. It appears    that on the rolls of the Company, there used to be 800 workmen in all ;    of these 329 were permanent workmen,    whereas    471 workmen    joined    the Company as seasonal workmen.    The appellant has employed 678 employees in all, 248 of whom arc permanent and    the rest seasonal employees.    Out of    248 employees who are engaged on a permanent basis, 220 are from amongst the employees of the Company and about 28 have    been newly    appointed. In the result, about 49 permanent employees and 103


seasonal employees of the Company have not been absorbed by the appellant    and the demand which has been referred    for adjudication in the present    proceedings is    that these permanent and seasonal employees should be absorbed by    the appellant.

The appellant    disputed this claim on    three grounds.    It urged that the dispute referred to the adjudication of    the Tribunal was not an industrial dispute and so, the reference was incompetent. This argument was based on the allegation that the Thummapala Sugar Workers Union which had sponsored the present demand was not a representative Union. On    its roll, a very    small number of the    appellant's present employees were shown as members. The bulk of its membership consisted of the previous employees of the Company.    The appellant's employees have formed a separate Union of their own and this latter Union has not only not sponsored    the present    demand, but it seeks to resist it. The Tribunal considered the evidence bearing on this point and held    that the sponsoring    Union was, in law, competent to raise    the present    industrial dispute,    and so, it rejected the appellant's contention about the invalidity of    the reference.

The next contention raised by the appellant was that it    was not a    successor-in-interest of the Company and as such, under industrial law, the claim made by the respondents    for re-employment of the permanent and the    seasonal employees was not sustainable. The Tribunal has held that the appe- llant is a successor-in-interest of the Company and so, it has come to the conclusion that the demand for re-employment of the said specified employees was permissible under    the industrial law.

The last argument raised by the appellant was that it    had already employed a full complement, of the labour force that it needed and so, there was no


scope for the re-employment of any of the workmen on whose behalf the present dispute was raised.    This contention    has been rejected    by the    Tribunal and it has    ordered    the appellant to re-employ as many of the    permanent employees out of 49 as were left out in favour of the new employees and to re-employ the remaining permanent employees as    and when vacancies occur. In regard to the seasonal employees, it made a similar direction.    This    order requires    the appellant to guarantee to the re-employed workmen continuity of service and one-fourth of the back wages. The Tribunal has, however,    held that if the Society has employed    less workers, then only as many old workers should be reinstated as the new workers appointed in their place., In that case, the old workers will be absorbed in the order of seniority. It is    against this order that the appellant has conic to this Court by special leave.

The first question which falls to be considered in    this appeal    is whether the appellant is a successor interest of the Company. The learned Solicitor General contends    that the agreement of sale under which the appellant has arrived on the scene, clearly shows that it cannot be treated as a successor-interest of    the Company.    The terms of    the agreement of sale show that the appellant has left with the Company    a part of its land, its investments to the tune of Rs. 19 lakhs and its liability to the tune of Rs. 27 lakhs. 4,000 bags of processed sugar have also been left with    the Company    at the time of the transaction. Clause 8 of    the agreement provides that the Company will be    entitled to withdraw and appropriate to    itself    all advances,    part payments and deposits made by it either in cash or security and the Society shall have no right over them.    Clause 13 similarly provides that the Company    will pay all    its liabilities, secured and unsecured, determined or to be determined, and the Society will not be liable to pay    the same. Under cl. 11, the godown in which the stocks of sugar were

stored    Was to continue in the possession of ,    the Company free of rent or compensation until the entire"stock    was released gold and delivered. The Company; had also agreed to (terminated the services of its employees on or before October    9,1959. and, cls. 7, which deals with this topic,, has provided, that: whatever, claims are to be paid to such, employees on account,of such termination will be paid; by the Company; The appellant has also    not purchased    the goodwill of the Company. The argument, therefore, is    that though the work    of    the Company was, in a sense, going concern when it was    purchased by the appellant,    the appellant had not purchased the entire concern including the goodwill; and so, it would be inappropriate to describe    the appellant as the successer-in-interest of the Company. In support of his argument, the learned Solicitor-General has relied on the decision of the Labour Appellant Tribunal in the case of.Ramjilal Nathual v. Himabhai Mills Company Ltd. (1). In    that case, the Appellate Tribunal had to consider the effect of two transfers : (1) in favour of    the Himabhai Mills    Company Ltd., and in    favour    of the    New Gujarat    Cotton    Mills Company Ltd. The decision of    the Appellate Tribunal was that the first transfer did not    make the transferee a successor-im-interest, whereas the second one did. In regard to the first transfer, it was found that the transferee    Company had not purchased the transferor Company    as a    going concern    and had not accepted    any liabilities of the old Company and had started a completely new business of its own. On the other hand, under    the second    transfer, the transferee had purchased not only    all the tangible assets of the old Company, but the goodwill which was expressly valued in the sale-deed at a very large sum of Rs. 3 lakhs. It was also found that the transferee Company    carried on the same business    as the transferor Company    in the result, the employees    of the transferor Company in the first

(1) (1956) II L. L. J. 244.


transaction were held not entitled to make a. claim for    re- employment by the transferee Company, whereas a claim made, by the employees of the transferor Company in regard to    the second transfer was held to be sustainable in law.    ,It appears that this decision was challenged by a writ petition before the., Bombay High Court, and the High Court took    the view that in view of the relevant findings recorded by    the Labour    Appellate Tribunal in respect of the    transfer in favour of the New Gujarat cotton Mills Ltd., there would be no justification to interfere under    Art. 226 of    the Constitution, vide New Gujarat Cotton Mills Ltd. v. Labour Tribunal(1).

The learned Solicitor-General has also referred to another decision of the Labour Appellate Tribunal in the case of Antony D'Souza v. Sri Motichand Silk MillS(2).    The question which fell for the decision of the Appellate    Tribunal in that case was whether the purchaser could be    said to be successor-in-interest within the meaning of s. 114 of    the Bombay    Industrial Relations Act, and it was held that    the purchaser was    not a    successor-in-interest,    because    the transaction was a purchase of only plant, machinery    and accessories and not of a going concern or running business. We ought, however, to add that the decision in this case was substantially,    if not entirely, based on the fact that    the workmen of the transferor Company had executed a document in which specific and unambiguous demands had been made which supported the purchaser's claim that the transfer did    not make the purchaser a successor-in-interest of    the vendor. This question was sought to be raised before this Court in the case of    Workmen    of Dahingeapara Tea    Estate    v. Dahingeapara Tea Estate(3 ) as well as in the case of    Keys Constructions Co. (Private) Ltd. v. Its Workmen(4), but on both the occasions, the Court thought    it unnecessary to decide it.

The question as to whether a purchaser of an industrial concern can be held to be a successor-in-interest (1) 1957 11 I. L. J. 194.

(3) A. I. R. (1959), S. C. 1026.

(2) (1954) 1 L. L. J. 793.

(4) A. I. R. (1959) S, C. 208.


of the vendor will have to be decided on a consideration of several    relevant facts. Did the purchaser purchase    the whole of the business ? Was the business purchased a going concern    at the time    of the sale transaction ? Is    the business purchased carried on at the same place as before ? Is the business carried on without a substantial break in time ? Is the business carried on by the purchaser the same or similar to the business in the hands of the vendor ? If there has been a break in the continuity of the business, what is the nature of the break and what were    the reasons responsible for it ? What is the length of the break ?    Has goodwill been purchased ? Is the purchase only of some parts and the purchaser having purchased the said parts purchased some other new parts and started a business of his own which is not the same as the old business but is similar to it ? These and all other relevant factors have to be borne in mind in deciding the question as to whether the purchaser can be said to be a successor-in-interest of the vendor    for the purpose of industrial adjudication. It is hardly necessary to emphasise in this connection that    though    all the facts to which we have referred by way of    illustration are relevant, it would be unreasonable to exaggerate the in importance of    any one of these facts or to adopt    the inflexible rule that the presence or absence of any one of them is decisive of the matter one way or the    other.    If industrial adjudication were to insist that a purchaser must purchase the whole of the property of the vendor concern before he can be regarded as a successor-in-interest, it is quite likely that just an insignificant portion of    the property may not be the subject-matter of the conveyance and it may    be urged that the exclusion of    the said fraction precludes industrial    adjudication from treating    the purchaser as a successor-in-interest. Such a plea, however, cannot be entertained for the simple reason that in deciding this question    industrial adjudication will look at    the substance of the matter


and not be guided solely by the form of the transfer.    What we have said about the entirety of the property belonging to the vendor concern, will apply also to the goodwill which is an intangible asset of any industrial concern.    If goodwill along with the rest of the tangible property has been sold, that would strongly support the plea that the purchaser is a successor-in-interest;    but it does not follow that if    good will has not been sold, that alone will necessarily    The decision of the question must ultimately depend upon    the evaluation of    all the relevant factors and it cannot be reached    by treating any one of them as of over-riding or conclusive significance.

It is in the light of this legal position that the question about the character of the appellant vis-a-vis the vendor company    has to be judged. It would be recalled that    the vendor company sold the concern to the appellant because it was faced with the problem of recurring losses, and so,    the appellant, in purchasing the concern, was not    prepared to have both the advances and the outstandings included in    the sale transaction. The appellant Society has been formed by the local cane growers with the object of manufacturing sugar which would suit each, one of them in turn and so, the purchaser was not particularly interested in including    the goodwill of the Company in the sale transaction.    The exclusion, of 4,000 bags of processed sugar shows that    the purchaser wanted to accommodate the Company in that matter. On the other hand, the appellant has carried on the business of the Company without an appreciable break; the business thus carried on is the same as that of the Company,    the place of business is the same, and. the very object of entering into the sale transaction was to enable the local cane growers to carry on the    business of the Company. Therefore, we    are inclined to take the view    that having regard to all the relevant facts in this case, 740

the Tribunal was right in law in coming to the conclusion that the appellant is a successor in-interest of the Company.

That takes us to the question as to what would be the nature of the    appellants's liability to the employees of    the Company. Before s. 25-FF was introduced in the Act in 1956, this questions considered by industrial adjudication    on general considerations of fair play and social justice.    In all cases where the employees of the    transferor concern claimed    re-employment    at the    hands    of the transferee concern, industrial adjudication first enquired into    the question as to whether the transferee concern could be    said to be a successor-in-interest of the transferor concern. If the answer was that the transferee was a successor in interest in    business, then industrial    adjudication considered the question of re-employment 'in the light of broad principles. It enquired whether the refusal of    the successor to give re-employment to the employees of    his predecessor was capricious and unjustified, or    whether it was based on some reasonable and bonafide grounds. In    some cases, it appeared that there was not enough amount of    work to justify the absorption of all the    previous employees; sometimes the    purchaser concern needed bonafide    the assistance of    better    qualified and    different type    of workers; conceivably,    in some cases,    the purchaser    has previous commitments for which he is    answerable in    the matter    of employment of labour; and so, the claim of    re- employment made by the employees of the vendor concern    had to be    weighed    against the pleas made by the purchaser concern for not employing the said employees and the problem had to    be resolved on general grounds of fair play    and social justice.    In such a case, it was obviously impossible to lay down any hard and fast rules. Indeed, experience of industrial adjudication shows that in resolving industrial disputes from case to case and from time

to time, industrial adjudication generally avoids- as it should-to lay    down inflexible rules because it is of    the ossence,of industrial adjudication that the problem should, be resolved by reference to the facts in each case so, as to do justice to both the parties.    It was in this spirit    that industrial adjudication approached this problem until 1956,when s. 25-FF was introduced in the Act. Sometimes, the claim for reemployment 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 ground that it was a successor-in-interest of the vendor. It was in the background of this broad position which    had evolved out of industrial adjudications that the Legislature enacted    s. 25-FF on September 4,1956. As it was 'then inserted, s. 25-FF read thus :-

"Notwithstanding anything contained in section 25-F, no workman shall be entitled to compensation under that section by reason merely of the fact that there has been a change of employers in any case where the ownership or management of the undertaking, in which he is employed is    transferred whether    by agreement    or by operation    of law, from    one employer to another

Provided that-'

(a) the service of the workman has not been interrupted by reason of the transfer;

(b) the terms and conditions of service applicable to.    the workman    after    such transfer    are not in any way    less favourable to    the workman than those    applicable to    him immediately before the transfer; and

(c) the    employers to whom the ownership or management of    the undertaking is    so transferred is, under the terms of the trans- fer or otherwise, legally liable to pay to the workman,    in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer."

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 s. 25-F would apply. That is why s. 25-FF 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 s. 25-F; that apparently was the scheme which    the, Legislature had in mind when it enacted s. 25-FF in    the light    of the    definition of    the word "retrenchment" prescribed by s, 2(oo) of the Act.

The validity of this 'assumption was,'however,    successfully challenged before' this Court in the    case of Hariprasad Shivshankar Shukla v. A. Divikar(1). In that    case,    this Court Was called upon to consider the true scope and effect of the concept of retrenchment as defined in s. 2 (oo)    and it held that the said definition had to be read in the light of the    accepted connotation of the word, and as such. it could have no wider meaning than the ordinary connotation of the word, and according to this connotation,    retrenchment means the discharge of surplus labour or Staff by    the employer for an reason whatsoever, otherwise    than as a punishment inflicted by way of disciplinary action, and does not include termination of services

(1) [1957] S.C.R. 121.

of all    workmen on a bonafide closure of industry or on change of ownership or management thereof. In other words, the effect of this decision was that though the definition of the    word "retrenchment" may perhaps have included    the termination of services caused by the closure of the concern or by its transfer, these two latter cases could not be held to fall under    the definition because of the ordinary accepted connotation of the    said word. This decision necessarily meant that the word "retrenchment" in s.    25FF had to bear a corresponding interpretation. In that case, the employees of the Barsi Light Railway Company, Ltd.    had made a claim for retrenchment compensation under s. 25-FF against the purchaser of the Railway Co., and the employees of the    Shri Dinesh Mills Ltd. had made a similar claim against their employer on the ground that the Mills had been closed. These claims had been allowed by, the Bombay    High Court and the employers had come to this Court    in appeal. This Court having held that the word "retrenchment" necessarily postulated    the termination of the employees' services on the ground that    the employees    had become surplus, allowed the appeals preferred by the employers    and held that the employees' claim against the purchaser in    one case and, against the employer who had closed his business, it, the other, could not be sustained.    Thus, is a result of this decision, it. was realised that if the object of the legislature in introducing section 25-FF was to enable    the employees of the transferor concern to    claim retrenchment compensation unless the three conditions of the proviso to the said section were satisfied it could not be carried, out any longer. The decision of this Court in    Hariprasad's case(1) was pronounced on November 27, 1956. This decision led to the promulgation of an Ordinance No. 4 of 1957. By this Ordinance, the original s. 25-FF as it was inserted on September 4, 1956, was substantially altered. Section 25-FF' as it

(1)[1957] S.C.R. 121.

has been enacted by the Ordinance reads thus:- "Where the ownership or management of an undertaking is transferred, whether by agree- ment or    by operation of law,, from    the employer    in relation to that undertaking    ,to a, pew employer, every workman, who. has,been in continuous service for not less than,    one year in that undertaking, immediately before such transfer, shall be entitled to notice and :    compensation in accordance,,    with,    the provisions, of s. 25-F, as if the workman    had been retrenched:

Provided    that nothing in this section shall; apply to a workman in any case where there has been a change of employers by reason of    the transfer, if-

(a) the service of the workman has not    been interrupted by such transfer;

(b) the    terms    and conditions    of service applicable to the workman after such transfer are not    in any way less    favourable to    the workman than those applicable to him

immediately before the transfer; and

(c) the new employer is, under the' terms of the transfer or other wise, legally liable to pay to the Workman, in    the event of    his retrenchment, compensation on the basis    that his service has be en continuous and has    not been interrupted by the transfer."

In due course, this Ordinance was followed by Act 18 of 1957 on June 6, 1957: By 'this Act, s. 25 FF as it was enacted by the Ordinance has been introduced in the parent Act.    It would be noticed that the Ordinance came    into force retrospectively    as from December 1, 1956, that is to    say, three 'days after the judgment of this Court was Pronounced in Hariprasad's case (1).

(1) [1957] S.C.R. 121.

The Solicitor-General    contends that the question in    the present appeal has now to be determined not in the light of general    principles of    industrial adjudication., but by reference to the specific provisions of s. 25-FF itself. He argues., and we think rightly, that the first part of    the section postulates that on a transfer of the ownership or management of    an undertaking, the employment of workmen engaged    by the said undertaking comes to an end, and it provides for the payment of compensation to the    said employees because of the said termination of their services, provided, of course, they satisfied the test of the length of service Prescribed by the section. The said part further provides the manner in which and the extent to which    the said compensation has to be paid. Workmen shall be entitled to notice and compensation in accordance with the provisions of S. 25-F, says the section,. as if they had been retrench ed. The last clause clearly brings out the fact that    the termination of the services of the employees does not in law amount    to retrenchment and that is consistent with    the decision of this Court in Hariprasad's case (1).    The Legislature, however,    wanted to provide that    though    such termination may not be retrenchment technically so-called, as decided by    this Court nevertheless the employees in question whose services are terminated by the transfer of the undertaking should be entitled to compensation, and    so, S. 25-FF provides that on such termination    compensation would be paid    to them as if    the said termination    was retrenchment. The words "as if " bring out the legal distinction between retrenchment defined by s.    2(oo)    as it was interpreted by this Court and termination of services consequent upon transfer with which it deals. In other words,    the section provides that though termination of services on transfer may not be retrenchment,    the workmen concerned are    entitled to compensation as if the    said termination was retrenchment. This provision has 'been made for the purpose of calculating the amount

(1) [1957] S.C.R. 121.


of compensation payable to such workmen; rather than provide for the measure of compensation over again, s. 25-FF makes a reference to s. 25-F    for that limited purpose,    and, therefore, in all cases to which s.25-FF- applies, the    only claim which the employees of the transferred    concern    can legitimately make is a claim for compensation against their employers. No claim can be made against the transferee of the said concern.

The scheme of the proviso to s. 25-FF 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 25-FF 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 reemployment against the    transferee of    the undertaking. Thus, the effect of the enactment of s.25-FF is to restore    the position which the Legislature had apparently in mixed when s. 25-FF Was originally enacted on September 4, 1956. By amending s. 25-FF, 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.

In this connection, it is necessary to point out that    even before    s.25-FF    was introduced 'in the Act for the first time, when such questions were considered by industrial adjudication- on general grounds of fair play    and social justice, it does not appear that    employees of    the transferred concern were held entitled to both    compensation for termination of service and immediate re-employment at the hands

of the transferee. The present position which results    from the enactment    of s.25-FF, as amended, is,    therefore, substantially the same as it was at the earlier stage.    It is common ground that if a transfer is fictitious or 'benami' s. 25-FF has no application at all.    In such a case, there has been no change of ownership or management and despite an apparent transfer, the transferor employer continues to be the real employer and there    has to be continuity of service under the same terms and conditions of service    as before and there can be no question    of compensation.

Mr. Chari, however, urges that the present case ought to be government by the provisions of s. 25-H of the Act. This' argument proceeds on    the assumption    that the case of termination of    service resulting from the    transfer of ownership or management of an undertaking to which s. 25-FF applies    is a case of retrenchment properly so-called.    In our opinion, this assumption is clearly not well-founded. The first difficulty in accepting thecorrectness of this assumption is the decision of thisCourt    in Hariprasad's case (1) to which we have already referred. The decision of this Court in that case clearly shows that the    termination of services resulting    from transfer    or closure is    not retrenchment, and it is on the basis of the correctness of this decision    that s. 25-FF as amended has been enacted. Besides, on a    construction of S. 25-FF itself, it is difficult to equate the termination of services with which it deals with retrenchment covered by s. 25-F.    As we    have already    indicated, s. 25-F is referred to in s. 25-FF to enable    the assessment    of compensation payable to    the employees covered by Q. 25-FF.    The clause "as if" clearly shows the distinction between retrenchment under S. 2(oo) and termination of service under s. 25-FF. In    this connection, we may refer to the decision of this Court in M/s.    Hatisingh Manufacturing Co. Ltd. v.' Union    of India(2). In that case,

(1) [1957] S.C.R. 121.

(2) [1960] 3 S. C. R. 528,

this Court had to consider the effect of the words " as    if" occurring in s. 25-FF, and it has been held that by the    use of the words "as if the workmen had been retrenched" under the said section, the Legislature has not sought to place closure    of an undertaking    on the    same    fOOting    as retrenchment under s.25-F. Therefore, the plea that s.25-H applies to the present case cannot be accepted. Mr. Chari then argued that though in terms s. 25-H may    not apply to the present case, the general principle underlying the provisions    of the said section should be    invoked in dealing with the claim made by the respondents against the appellant. His argument is that too much emphasis should not be placed on the identity of the individual employer in dealing    with the present question and be, suggested    that what is important to bear in mind is the identity of    the undertaking which was run by the vendor before and which is run by    the vendee now. If the undertaking is the same, there is no reason why the workman should not be entitled to claim continuity of service in the said undertaking, In    our opinion    this argument is misconceived. , Once we reach    the conclusion that in the case of a transfer of any undertaking the Legislature has by s. 25-FF provided for    payment of compensation to the employees on the    clear and distinct basis that their services have been terminated by such transfer, it is difficult to see how any questions of    fair play or social Justice would justify    the claim by    the resents that they ought to be re-employed by the, appellant. It is true that in cases falling under s. 25-F, workmen    may get retrenchment compensation and they may yet be able to claim re-employment under s. 25-H and in that    sense,    some workmen    may get both retrenchment compensation and    re- employment. That is no doubt the effect of reading s.- 25,F and s. 25-H together. But it must be borne in mind that in the case of retrenchment, the undertaking continues and only 749

some workmen are discharged as surplus and it is the problem of re-employment of this small number of discharged workmen. that is tackled by s. 25-H.    Besides, under    s. 25-H, a discharged workman may not be entitled to    claim    re- employment immediately    after    retrenchment or even soon thereafter. It is only if the employer who discharged    him as surplus requires additional' workmen that his opportunity may occur. In the present case, however, the    position is entirely different. As soon as the transfer is effected under s. 25 FF, all    employees ate    entitled to claim compensation, unless, of course, the case of transfer falls under the proviso ; and if Mr. Chari is right, these workmen who have been paid compensation are immediately entitled to claim re-employment from the    transferee. This double benefit in the form of payment of compensation and immediate re-employment    cannot    be said to be based on    any considerations    of fair play or justice. Fair play    and justice obviously mean fair play and social justice to    both the parties.    It would, we think, not be fair that    the vendor    should    pay compensation to his    employees or,    the ground    that the transfer brings about the termination of their services, and the vendee should be asked to take them back on the ground that the principles of social justice require him to do so. In this connection, it is relevant to remember that the industrial principle underlying the award of retrenchment compensation is, as observed by this Court in the    case of' The Indian Hume Pipe    Co. Ltd. v.    The Workmen (1), " to give partial protection to workmen who are thrown out of employment for no fault of their own, to    tide over the period of unemployment"; and in that    sense,    the said compensation is distinguishable from gratuity. Therefore, if the transferor is by statute required it pay retrenchment compensation to    his workmen, it would be anomalous to    suggest    that the workmen who received compensation are entitled to claim immediate re-employment in the concern at the hands of the transferee.    The contention

(1) [1960] 2. S. C. R. 32.

that in cases of this kind, the workmen    must get retrenchment compensation and re-employment al    most simultaneously    is inconsistent with the very basis of    the concept    of retrenchment compensation.. We are therefore, satisfied that the general principles of social justice    and fair play on which this alternative argument is based, do not justify the claim made by the respondents. In the result, the appeal it allowed and the award is    set aside.    There would be no order as to costs. Appeal allowed.