BOARD OF DIRECTORS OF THE SOUTH ARCOT ELECTRICITY DISTRIBUTION CO. LTD. versus N. K. MOHAMMAD KHAN, ETC.

BOARD OF DIRECTORS OF THE SOUTH ARCOT ELEC· TRICITY DISTRIBUTION CO. LTD.

N. K. MOHAMMAD KHAN, ETC. November 25, 1968 [J. M. SHELAT AND V. BHARGAVA, JJ.]

The Madras Electricity Supply Undertakings (Acquisition) Act 29 of 1954, and Rules thereunder; s. 15 and r. 17-The Industrial DispUll$ A.ct 14 of 1947 ss. 25F, 25FF, ·33C(2)-Electricity company taken over by State Government of Madras-Employees continued in employment under s. 15 and r. 17 under Madras A.ct-Retrenchment compensation to employees, whether payable-Applicability of proviso to s. 25FF of Industrial Disputes Act-Jurisdiction of Labour Court under s, 33C(2).

The appellant Company was taken over by the Government of Madras in exercise of the powers conferred on it by the Madras Electricity Supply Undertakings (Acquisition) Act 1954. All the property and assets of the company became vested in the Madras Government. Under r. 17 of the Madras. Government Undertakings (Acquisition) Rules, 1954 all the staff of the Company employed immediately before the vesting date were retained by the Government and were continued provision.ally for period of 12 months from the date of vesting on the same terms and conditions of service as were applicable to them under the Company immediately before the date of vesting. 1n respect of the future' employ-ment of the workmen by the Madras Government, their conditions of service were to be regulated by s. 15 of the Madras Act and the variouo condition. laid down in r. 17 of the Rules. Subsequently the workmen claimed that they had become entitled to retrenchment compensation under s. 25F read with s. 25FF of the Industrial Disputes Act, 1947 and filed application for computation of the compensation payable to them under s. 33C of the Act, before the Labour Court. Initially the Company was the only opposite party to the applications but later the State of Madras and the Electricity Board of Madras to which the Stale had transferred the undertaking, were also made parties. The Company and the Electricity Board raised certain preliminary objections to the jurisdiction of the Labour Court which did not find favour with that Court. On merits the Labour Court held that the workmen were en-titled to retrenchment compensation under s. 25FF and directed the Company to pay the ' amount. The High Court upheld the Tribunal's orders on merits as well as on the question of jurisdiction. The Com~ pany appealed to this Court. The submissions on behalf of the appellant were : (i) That the Labour Court as well as the High Court were not right in· holding that the conditions laid down in !he' proviso to s. 25FF were not satisfied; (ii) that the applications under s. 33C(2) of the Act were not maintainable because the question whether the workmen were entitled to retrenchment compensation was outside the jurisdiction of the Labour Court which was not competent to decide such disputed queo-. tion; (iii) That the High Comt was wrong in holding that the question whether the liability to pay tpe retrenchment compensation fell on the Company or the State of Madras or the Electricity Board could not be decided by the Labour Court under s. 33C(2) of the Act and had to be decided ·in other appropriate proceedings.

HELD : (i) The conditions of service of the workmen under s. 15 of the Madras Act and under r. 17 were less favourable than their condi-tions of service had been under the company. In the circumstances the re-quirements of cl. (b) of the proviso to s. 25FF were obviously not satisfied and that proviso could not be invoked by the Com-pany for the purpose of defeating the claim made by the workmen nnder the principal clause of that section. Under the principal clause the work-men. became entitled to receive retrenchment compensation in accordance with s. 25F of the Act on fue basis of the legal fiction envisaged that those rights would accrue to them as if the workmen had been retrenched. The Labour Court and the High Court were therefore right in holdin~ thst the workmen were entitled to claim retrenchment compensation in accordance with the provisions of s. 25F of the Act because of the right accruing to them under •· 25FF of the Act. [910 A-CJ

Tue employment under the new employer could only commei;ce from the time when the ownership or the management of the undertaking vested in the State Government; but .simultaneously with that vesting, the workmen had to be deemed to be retrenched from service. The retrench-ment could, therefOre, be deemed to have bee~ made only by the pre-vious employer. Further, it would be the prev10us . employer w~o. would be competent to give the notice in accordan~e with. the provmo!"'. of •. 25F of the Act. In these circumstances the conclus~on was irreststible that the claim under s. 25FF of the Act to compensation accrues to the workmen against the previous employer under whom he was ~ployed until the date of the transfer. In the present case therefore the nght. to receive compensation clearly accrued under s. 25FF of the Act agamst the Company and there was, ther~fore, no difficulty in the Labour Court exercising jurisdiction on that basis. [910 H-911 CJ

(ii) The right which had been claimed by the v~rious '!""rkmen in their applications under s. 33C(2) of the Act, was ngh! which accrued to them under s. 25FF of the Act and was_ an existing right at the . ti'!'• when these applications were made., Tb~ Labour Oourt ~!early had 1un•-diction to decide whether such nght did or did not exist when dealing with the application under that provision. The mere denial of that right by the company cold not take away its jurisdiction, so !hat the order made by the Labour Court was competent. [911 H-912 Al

Chief Mining Engineer, Ew;t India Coal Co. Ltd. v. Rameswar & Ors. [1968J 1 S.C.R. 140, applied.

State of Bikaner and Jaipur v. R. L. Khande/wal, [1968J 1 L.L.J. 589, Punjab National Bank Ltd. v. K. L. Kharbanda, [1962] Supp. 2 S.C.R. 977, Central Bank of India v. P. S. Ra1a3opala11 & Ors., [1964] 3 S.C.R . 140 and Bombay Gas Company Ltd. v. Gopal Bhiva and Ors. [1964] 3 S.C.R. 709, referred to.

(iii) The Labour Court was concerned with the right claimed under the Act. Whether by virtue cf the provisions or the terms of transfer of the und~~aking from the company to the Government or by virtue of the prov1S1ons of the Madras Act, the company was entitled to claim that this liability should be ultimately met by the State Government wu point which did not affect the right of the workmen to claim their com-pensation from the Company and the Labour Court was therefore not required to go into the question when dealing with application under s. 33C(2) of the Act. [912 C-EJ

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2455 and 2540 o[ 1966.

Appeals by special leave from the judgment and order dated June 28, 1962 of the Madras High Court in Writ Appeal No. 113 of 1959 and Writ Petition No. 254 of 1960.

S. V. Gupte, M. Ranganatha Sastri, M. S. K. Sastri and M. S. Narasimhan, for the appellant (in both the appeals).

M. K. Ramamurthi, Shyamala Pappu and Vineet Kumar, for

respondent No. 1 (in both the appeals).

K. N. Mudaliyar, Advocate-General for the State of Madras

and A. V. Rangam, for respondents Nos. 2 and 3 (in both the appeals).

The Judgment of the Court was delivered by

Bbargava, J. The appellant, the South Arcot Electricity Distribution Company Ltd. (hereinafter referred to aE. "the Com-pany"), was carrying on the business of distribution of elec-tricity as Licensee under the Government in South Arcot Dis-trict in the State of Madras. The Government of Madras, in exercise of the powers conferred on it by the Madras Electricity Supply Undertakings (Acquisition) Act. No. 29 of 1954 (here-inafter referred to as "the Madras Act"), took over the appel-lant's undertaking with effect from 1st of June, 1957. The Company chose to be paid compensation on Basis laid down in section 5 ( 1) of the Madras Act, with the result that all the pro-perty belonging to the Company, including the fixed assets, cash, security investments, and the like and all rights, liabilities and obligations as on the date of vesting vested or must be deemed to have vested in the Madras Government. Under Rule 17 of the Madras Electricity Undertakings (Acquisition) Rules, 1954 (hereinafter referred to as "the Rules") framed by the Governor of Madras under the provisions of the Madras Act, all the staff of the Company employed immediately before the vesting date were retained by the Government and were continued provisi-onally for period of 12 months from the date of vesting on the same terms and conditions of service as were applicable to them under the Company immediately before the date of vesting. In respect of future employment of the workmen by the Madras Government, their conditions of service came to be regulated by s. 15 of the Madras Act and the various conditions laid down in r. 17 of the Rules. Subsequently, the employees of the Company numbering 352 claimed that they had become entitled to retren-chment compensation under section 25F read with s. 25FF of the Industrial Disputes Act No. 14 of 194 7 (hereinafter referred to as "the Act") and filed applications for computation of the com-

pensation payable to them under section 33C(2) of the Act before the Labour Court. All these 352 applications were based on an identical claim and were heard by the Labour Court together. Initially, the Company was the sole opposite par~y in these appli-cations, but, later on, the State of Madras was IIIlpleaded as an· other opposite party. In addition, the Electricity Board of Mad-ras to which the State of Madras had transferred the undertak-ing', was also impleaded as an opposite party. The <;ompany contested these applications on various grounds, inter alza plead-ing that there had been no .break in the service of th.e emp.loyees or any change in the condit10ns of therr service to therr detmnent, so that the employees were not entitled tc; cl~im any compen~a­tion. Another plea taken was that the applications were not mam-tainable under s. 33C(2) of the Act, because the Labour Court was not competent to decide the question whether the workmen were entitled to retrenchment compensation when this claim of theirs was not accepted by the Company. It was, in addition, pleaded that, even if the workmen were entitled to any compen-sation, the liability to pay that compensation was not that of the Company, but of the State of Madras or the Electricity Board in view of the provisions of the Madras Act, under which all the liabilities of the Company had vested first in the State of Madras and subsequently in the Electricity Board. The Electricity Board also contended that no liability for payment of retrenchment com-pensation had arisen and that, in any case, there was no obli-gation on the part of the Board to pay retrenchment compensation. The Board supported the Company in the plea that the services of the employees had not been interrupted and that the terms and conditions of service were in no way Jess favourable after the vesting of the undertaking in the State of Madras or the Electri-city Board. It was further pleaded that dispute had arisen bet-ween the Company and the Government under s. 13 ( 1) (b) of the Madras Act as to which of the two was liable to pay retrenchment compensation if at all, and no relief could be given to the em-ployees by the Labour Court until the said dispute was decided in accordance with the provisions of the Madras Act by arbitration. On these pleadings, three preliminary objections were raised, viz., ~1) that the. no~ice wages and retrenchment compensation claimed m the apphcations were not benefits due to the employees within the meaning of s. 33C(2) of the Act; (2) that, as retrenchment came under Chapter VA of the Act, it could only be decided by an Indust_rial Tribunal and not by the Labour Court; and (3) that, havmg regard to the fact that complicated questions of law and fact as to the liability of the Company or the Government or the Board had to be decided, it was not competent for the Labour Court to decide the matter summarily in proceedings under s. 33C(2) of the Act and that the dispute must be decided by civil court. The Labour Court, by an order dated 3rd October, 1958,ov.er-i:uled thes~ preliminary objections and directed that the ap-plications be listed for being tried on merits. The Company, thereupon, filed writ petitions under Article 226 of the Consti-tution in the High Court of Madras numbered as 820 and 842 to 847 of 1958 seeking directions of the Court restraining the Labour Court from enquiring into these applications on merits on the grofi!ld !hat the Labour Court had no jurisdiction to entertain the applica~ons from the employees. learned single Judge of the Court dISmissed the writ petitions holding that the Labour Court had jurisdiction to decide the applications and that the contro-versy between the Company on the one side, and the Govern-ment of Madras and the Electricity Board on the other side as to the party which had to bear the liability will have to be' dis-posed of in proceedings taken separately from these proceedings under ~e Act. Aggrieved by this decision, the Company prefer-red Wnt Appeal No. 113 of 1959 in the Appellate Side of the High Court.

In the meantime, the Labour Court took up the applications for decision on merits and, since common questions were involved in all the applications, one of these applications C.P. No. 81 of 1957 was taken up as test case for disposal by the Labour Court by consent of all parties concerned. The Labour Court, by its order dated 4th February, 1960, held that the workmen concern-ed were entitled to retrenchment compensation in accordance with s. 25FF of the Act, computed the amount due, and passed an order directing the Company to pay the amount.

The Company, thereupon, filed Writ Petition No. 254 of 1960 in the High Court of Madras for quashing this order of the Labour Court. Writ Appeal No. 113 of 1959 and this Writ Petition No. 254 of 1960 were heard together by Division Bench of the High Court which decided them by common judgment and dismissed the Writ Appeal as well as the Writ Petition. The Company then sought leave to appeal to this' Court under Art. 133 of the Constitution. The High Court granted certificate in respect of its judgment in Writ Petition No. 254 of 1960, while rejecting the application for grant of certificate in respect of the same judgment insofar as it had disposed of Writ Appeal No. 113/ 1959. Civil Appeal No. 2540 of 1966 now before us has been filed by the Company in pursuance of that ~ertificate gr.~nted by the High Court. The Company further obtamed from this Court special leave to appeal against the same judgment insofar as it governed Writ Appeal No. 113 of 1959 and in pursuance of that special leave granted by this Court, Civil Appeal No. 2455 of 1966 has been filed. These appeals have been heard by us to-gether and are now to be disposed of by this common judg-ment.

Mr. S. V. Gupte, learned counsel appearing for the Company raised the following three points in his arguments in these two appeals:-

(1) That the Lab.our Court as well as the High Court were

not right in holding that the conditions laid down in the proviso to s. 25FF of the Act were not satisfied and in thus accepting the claim of the workmen to compensation under the principal clause of that section.

(2) That the applications under s. 33C(2) of the Act were not

maintainable, because the question whether the workmen were entitled to retrenchment compensation was outside the jurisdic-tion of the Labour Court which was not competent to decide such disputed question.

(3) That the High Court was wrong in holding that the ques-

tion whether the liability to pay the retrenchment compensation fell on the Company or the State of Madras or the Electricity Board could not be decided by the Labour Court under s. 33C(2) of the Act and had to be determined in other appropriate proceed-ings.

Section 25FF of the Act is as follows :-

"Where the ownership or management of an under-taking is transferred, whether by agreement or by ope-ration of law, from the employer in relation to that undertaking to new 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 section 25F, as if the workman had been retrenched :

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

( a) the service of the workman has not been inter-rupted 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 llmployer is, under the terms of such transf~r or otherwise, !e~ally liable to pay to the work-man, m th~ event ?f his .retrenchment, compensation on the basIS that hIS service has been continuous and has not been interrupted by the transfer."

The principal clause of thls section clearly confers right on every workman, who has been .employed c~ntinuously for not less than one year in any undertaking, to receive retrenchment com-pensation in accordance with the provisions of s. 25F of the A~t as if the workman had been retrenched whenever the ownership or management of the undertaking is transferred, whether by agreement or by operation of law. Consequently, in the present case, the employees, who presented the applications under s. 33C(2) of the Act, clearly became entitled to receive retrench-ment compensation in· accordance with s. 25F of the Act when, under the Madras Act, this undertaking stood transferred to the State Government from the Company. This would be the legal right vesting in the workmen if the proviso does not apply to their cases, and it accrues irrespective of the fact that the work-men had not actually been retrenched. The right under this principal clause is conferred on the basis of the legal fiction that the workmen are to be deemed to have been retrenched unless their services are continued in accordance with the conditions laid down in the proviso. The only question that falls for determina-tion in respect of the first point raised by Mr. Gupte thus, is whether the right which accrued to the workmen under the prin-cipal clause was defeated because of the compliance of the condi-tions laid down in the proviso. The proviso lays down three condi-tions in clauses (a), (b) and (c) each one of which has to be satisfied before it can be held that the right conferred by the principal clause does not accrue to the workman. In the present case, tllere is no doubt that tlle services of tlle workmen had not been interrupted by the transfer, so that condition (a) was clearly satisfied. It 'has, however, been found by the High Court that conditions (b) and (c) of tlle proviso had not been satisfied. In our opinion, it is unnecessary to go into the question whetller condi-tion (c) has or has not been satisfied, because it is very clear iliat condition (b) of the proviso is certainly not satisfied. Under clause (b), the requirement is that the terms and conditions of service applicable to tlle workman after the transfer must not in any way be less favourable than those applicable to him imme-diately before the transfer. On examination of the Madras Act and the Rules, it is manifest tllat the terms and conditions of service of the workmen have not remained as favourable under the State Goverrunent or the Electricity Board as they were when the workmen were employed by the Company. Under clause (1) - of section 15 of the Madras Act, the State Govermnent is given the power to terminate the services of any workman after giving him three calendar months' notice in writing or paying him thr.ee months' pay in lieu of such notice. It has not been shown to us on behalf of the Company that there was any such liability to termination of sevices of these workmen while they were employ-

ed by the Company. In the absence of any special conditions of service, the rights of the wor~en were to. be governed by the provisions of the Act under which the only nght of the Company to terminate the services of these workmen was by retrenchment after complying with the requirements of. s. 25F of the Act. On such termination each workman was entltled not only to one. month's notice ~r wages for one month in lieu of notice, but was also entitled to receive, at the time of retrenchment, com-pensation which was to be equivalent to 15 days' average pay for every completed year of continuous service or an:y part thereof in excess of six months. It does not appear that, if the Govern-ment were to terminate the service of the same workman under s. 15(1) of the Madras Act, the workman would be entitled to the same compensation which he would have received from the Company if he had been retrenched in accordance with the provi-sions of s. 25F of the Act. Thus, clause ( 1) of section 15 of the Madras Act itself introduces condition of service which was less favourable to the workmen than the conditions applicable when they were employed by the Company. Similarly,. clause (2) of s. 15 of the Madras Act lays down the workmen, whose services are retained by the Government, shall be governed by such rules as the Government may, from time to time, make in regard to them. It is clear that, in exercise of his power, the Government can make rules altering the terms and conditions of service of the workmen retained by the Government, and this power can be exercised from time to time. There was no such liability of change of conditions of service of the workmen while they were employed under the Company. If the Company had desired to alter their conditions of service, the Company would have been required to comply with the provisions of either s. 9A of the Act, ors. 10 of the Industrial Employment (Standing Orders) Act No. 20 of 1946. Obviously, the right of the Government of Madras as the new employer under s. 15(2) of the Madras Act to change the conditions of service of the workmen from time to time, in its very nature, alters the conditions of service of the workmen to their disadvantage. Rule 17 of the Rules further shows that im-mediately on the vesting of the undertaking in the State Gdvern-ment, the services of the workmen retained by the Government becomes provisional and the subsequent permanent employment of those workmen in the undertaking is dependent on the condi-tions !aid down i~ that Rule. This liability imposed on the work-men 1s clearly disadvantageous to those workmen who were in the permanent employ of the Company. The same Rule also shows that the employees would not be entitled to bonus or other con-cessions not allowed to the servants of the Government, even if the workmen were !)ntitled to bonus and the concessions from the Company. The workmen also became liable to transfer to any

[1969] 2 S.C.R.

other place or post in the Government Electricity Department de-pending on exigencies of service. These are instances of num-ber of conditions of service which became less favourable to the workmen on their becoming employees of the State Government when the undertaking vested in that Government by transfer from the Company. In these circumstances, the requirements of the proviso to s. 25FF of the Act are obviously not satisfied and that proviso cannot be invoked by the Company for the purpose of defeating the clainl made by the workmen under the principal clause of that section. Under that principal clause, the work-men became entitled to receive retrenchment compensation in accordance with the provisions of s. 25F of the Act on the basis of the legal fiction envisaged that those rights would accrue to them as if the workmen had been retrenched. The Labour Court and the High Court were, therefore, right in holding that the workmen were entitled to claim retrenchment compensation in ac-cordance with the provisions of s. 25F of the Act because of the right accruing to them under s. 25FF of the Act.

In this connection, an additional point urged by Mr. Gupte

was that the principal clause of s. 25FF of the Act does not Jay down which of the two employers mentioned therein is liable to pay the retrenchment compensation and, consequently, where there is dispute between the two employers, an application for computation of the benefit under ~- 25FF of the Act cannot be competently entertained and decided by Labour Court. It ap-pears to us that the language of that principal clause makes it perfectly clear that, if the right to retrenchment compensation accrues under it, it must be right to receive that compensation from the previous employer who was the owner up to the date of transfer. It is implicit in the language of that clause. The clause Jays down that every workman mentioned therein shall be en-titled to notice and compensation in accordance with the provi-sions of s. 25F as if the workman had been retrenched. Obviously, in such case, the date of the deemed retrenchment would be the date when the ownership or management of the undertaking stands transfered to the new employer. In the present case, that date would be the 1st of June, 1957, when the undertaking of the Company was taken over by the Government of Madras under the Madras Act. If the workmen's services are to be deemed to be retrenched on that very date, it is clear that, for purposes of determining who has retrenched the workmen and who is liable to pay the retrenchment compensation, the workmen could not become the employees of the new employer. The c:mployment under the new employer could only commence from the time when the ownership or the management of the undertaking vested in the State Government; but, sinlultaneously with this vesting, the workmen had to be deemed to be retrenched from service. That

retrenchment could, therefore, be deemed to have been made only by the previous employer. Further, it would be that pre-vious employer who would be competent to give the notice in accordance with the provisions of s. 25F of the Act. The notice of retrenchment, which has to be deemed to have become effec-tive on the date of vesting of the undertaking in the State Govern-B ment, could not possibly be given by the State Government. In these circumstances, the conclusion is irresistible that the claim under s. 25FF of the Act to compensation accrues to the work-man against the previous employer under whom he was employed until the date of transfer. In the present case, therefore, the right to receive compensation clearly accrued under s. 25FF of the Act against the Company and there was, therefore, no diffi-culty in the Labour Court exercising jurisdiction on that basis.

So far as the second point is concerned, it is fully answered by our decision in Chief Mining Engineer, East India Coal Co. Ltd. v. Rameswar and Ors.(') where it was held:-

"It is clear that the right to the benefit which is sought to be computed must be an existing one, that is to say, already adjudicated upon or provided for and must arise in the course of and in relation to the rela-tionship between an industrial workman and his em-ployer."

The view was further clarified and affirmed by this Court in State of Bikaner and Jaipur v. R. L. Khandelwal(') where the Court took notice of the decisions of this Court in the case cited above and in Punjab National Bank Ltd. v. K. L. Kharbanda,([3 ]) Cen-tral Bank of India v. P. S. Rajagopalan and Others,(') and Bombay Gas Company Ltd. v. Gopal Bhiva and Others, (') and held:-F

"These decisions make it clear that workman can-not put. forward claim in an application under s. 33.C\2) rn. respect of matter which is not based on an ~x1stmg nght and ~hich ~an J;>e appropriately the sub-iect-matter of an rndustnal dispute only requiring re-G ference under s. 10 of the Act." .

In_ the present .case, we ha".e already indicated, when dealin wit~ the first pom~, tha~ the n~ht, which has been claimed by th~ yano~s workmen m their applications under s. 33C(2) of the Act is nght ~h!ch a?crued to them under s. 25FF of the Act and was an ex1stmg nght at the time when these applications were (1) [1968] 1 S.C.R. 140. (2) [1968] I LL J 589 (3) [1962] Supp. 2 S.C.R. 977. (4) [1964] 3 s.c.R. 14o.

M6_Sl'p. C.l./69-7

made. The Labour Court clearly had jurisdiction to decide whether such right did or did not exist when dealing with the application under that provision. The mere denial of that right by the Company could not take away its jurisdiction, so that the order made by the Labour Court was competent.

The third and the last point raised by Mr. Gupte fails and could not be pressed in view of our decision that the right of the workmen, which has been adjudicated upon by the Labour Court in the applications under s. 3 3C(2) of the Act, was right accru-ing to them against the Company under s. 25FF of the Act. The right having initially accrued under this provision of the law against rhe Company, the Labour Court was clearly justified in computing . the benefit under that right and laying it down that the liability was enforceable against the Company. The Labour Court was concerned with the right claimed under the Act. Whether, by virtue of the provisions or the terms of transfer of the undertak-ing from the Company to the Government, or by virtue of the provisions of the Madras Act, the Company is entitled to claim that this liability should be ultimately met by the State Govern-ment was point which did not affect the right of the workmen to claim their compensation from the Company and the Labour Court was, therefore, not required to go into this question when dealing with applications under s. 33C(2) of the Act.

The appeals, consequently, fail and are dismissed with costs payable to workmen only. One hearing fee. The amount of interest which has accrued on the amount deposited in the Bank will be proportionately payable with the principal to the em-ployees concerned.

Appeals dismissed.

I ...__